Entry strategies for international business

1)trade related modes

Among the 3 modes of entry the most desirable are trade related modes. They are
also the traditional methods of entry.
a)exporting: this method has the minimum risk. Easy access and exit are the
advantages. It is when this mode is successful others are tried out.
b) international sub.contract : in this method a domestic firm sub.contracts its
excess manufacturing capacity to a foreign firm. The foreign firm uses this capacity
by supplying the raw materials and other components to this company for
producing the final goods. These goods arebought by the foreign company .
c) management contract: by taking charge of the training of employees and
managing facilities in a more professional ,manner. Foreign firms involve in the
management function of domestic firms .such management contracts include
technical health which help domestic companies to improve their performance . in
the period foreign firms gain entry.
2) transfer related modes
Transfer of ownership from one party to another for a return are the methods
related to this mode. The following are the most important transfer related
strategies.
lnternational leasing the foreign company is always the lessor and the
domesticcompany is lessee. The lessor either transferes new equipment to the
domestic country or purchasing the equipment in the domestic country . this is
how given the domestic company for a specific period of time. The domestic
comp. pays user fee to the foreign company.
Intyernational liscencing the foreign compny permits the use of its
intellectual property by the domestic company for a computation called roughly .
use of patents trade marks copy rights etc. are the part of international
liscencing. Their has now became a very popular entry strategies.
International franchising granting permission for alocal comp. to do business
on behalf of the foreign comp. is franchising. Selling its products using its nature
making of its marketing techniques are methods of franchising. The foreign
company receives payments in the form of a share of profit.
Turnkey operations
foreign firms are entrusted by the domestic or govt. to
design and construct projects in the domestic country. On completion of the
projects the foreign company ..payments upto a certain period by which it
Module 4
Page 1

recovers all its costs. Ownership is how returned to the original personal in the
domestic country after the period is over

With globalization the use of fdi as an entry mode has become very popular.
Different methods are used for such entry
1)branch office
a foreign firm opens a branch office and engages in
activities which are monitored by the parent company.
2) corporative joint ventures
this consist of bilateral arrangements
between 2 firms, 1 local and the other foreign. The foreign firm does not have
much role in the decision making process.
3) equity joint venture this is the most common form of FDI related entry.
Foreign firm conytribute to the equity capital of domestic firms. This enables
them to get control of ownership and actively participating in the decision
making process.
4) wholly owned subsidiaries a foreign firm may start a returns in the
domestic country in which it has 100% ownership . setting up a new project or
acquiring the ownership of an existing project are also methods used for entry

Module 4
Page 2