modes of entering international business

1. MODES OF ENTERING
INTERNATIONAL
BUSINESS
Presented By:-
Namrta Singh
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TYPES OF ENTRY MODES
Exporting Licensing Franchising
Special
Modes
FDI
Indirect
Exporting
Direct
Exporting
Intracorporate
Transfers
Contract
Manufacturing
Management
Contracts
Turnkey
Projects
Green Field
Strategy
Mergers &
Acquisitions
Joint
Ventures

3. EXPORTING MEANS TO SEND THE GOODS TO
ANOTHER COUNTRY FOR SALE
 Indirect Exporting: It is exporting the product to
foreign country through another domestic company.
 Direct Exporting: It is selling the products to foreign
country directly through its distribution arrangements.
 Intracorporate Transfers: It is selling of products by a
company to its affiliated company in foreign country. 3

4. The domestic
company gives
right or
permission to use
its intellectual
property
i.e.patents, work
methods, brand
name, copyrights,
etc.to a foreign
company for a
specified
payment.
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5. Franchising is a form of licensing.
 Under franchising, an independent
organization called the franchisee
operates the business under the name of
another company called the franchisor.
 Franchisee pays a fee to the franchisor.
Franchisor provides following services
to the franchisee:
 Operating systems
 Trade marks
 Continuous support like – advertisement,
employee training,etc.
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6. SPECIAL MODES:- SOME COMPANIES CANNOT MAKE LONG
TERM INVESTMENTS OR CONTRACTS TO ENTER FOREIGN MARKET.
THEREFORE THEY USE SOME SPECIALIZED MODES-
 Contract Manufacturing: When companies outsource
their part of or entire production and concentrate on
marketing operations.
This practice is called contract manufacturing or
outsourcing.
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7. MANAGEMENT CONTRACTS:
 It is an agreement between two companies.
 whereby one company provides managerial assistance, technical
expertise and specialized services to the second company.
 Agreement is for a certain agreed period in return for monetary
compensation .
 Compensation can be in the form of:
A flat fee
% over sales
Performance bonus based on profitability, sales growth,
production or quality measures
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8. TURNKEY PROJECT:
 A turnkey project is a contract under which a firm
agrees to fully design, construct and equip a
manufacturing/ business/ service facility.
 turns the project over to the purchaser when it is
for operation for a remuneration
 The forms of remuneration includes:
 a fixed price( firm plans to implement the project
below this price)
 payment on cost + basis( i.e.total cost incurred +profit)
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9. Companies to enter the foreign market invest their
money, establish manufacturing and marketing facilities
through ownership and control is called FDI.
The modes of FDI are:
 Greenfield Strategy
 Mergers & Acquisitions
 Joint Ventures
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10. GREENFIELD STRATEGY:
 The term greenfield refers to starting with a virgin
green site and then building on it.
 It is starting of the operations of a company from
scratch in a foreign market.
 It is the mode of FDI without alliances.
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11. MERGERS & ACQUISITIONS:
 A domestic company selects a
foreign company and merges itself
with the foreign company in order
to international business.
 Alternatively, the domestic
company may purchase company
and acquire its ownership and
control.
 example: Coca-Cola entered
Indian market instantly by
acquiring the Parle and its bottling
units. 11

12. JOINT VENTURES:
 Two or more firms join together to create a new
business entity that is legally separate and distinct from its
parents.
 These are established as corporations and owned by the
funding partners in the predetermined proportions.
 Involve the local companies to improve the local image in
the host country & also satisfy the government
requirements regarding joint ventures.
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