Entry Modes
Chapter Preview
Chapter 13 - 2
Entry modes:
Risk/Return ratio
Export
Contractual Modes
Investment Modes
Chapter 13 - 3
Developing an Export Strategy
Sales representatives
Distributors
Agents
Export management companies
Export trading companies
Chapter 13 - 5
Avoiding Export Blunders
Chapter 13 - 6
Forms of Countertrade
Chapter 13 - 7
Export/Import Financing
Trade always involves risk:
Pre-Historic Export/Import
Will he pay after I ship the product?
Risk Management:
Will he ship the product after I pay?
Holding a child hostage until
terms of agreement fulfilled
pay?
Licensing
Franchising
Management contract
Turn-key project
Chapter 13 - 9
Licensing
Company owning intangible property (licensor) grants
another firm (licensee) the right to use it for a specified time
+ Finance expansion
+ Reduce risk
Advantages + Reduce counterfeits
– Cumbersome to manage
Disadvantages too many in several nations
– Franchisees lose flexibility
Chapter 13 - 11
Management Contract
– Politicized process
Disadvantages
– Create competitor
Joint Venture
Strategic Alliance
Chapter 13 - 14
Wholly Owned Subsidiary
Facility entirely owned and controlled
by a single parent company
Advantages
+ Day-to-day and ultimate control
+ Coordinate subsidiaries
+ Economies of scale
+ Standardization (products, process,…)
Disadvantages
– Expensive (resource- commitment)
– Ultimate responsibility
– High risk
Chapter 13 - 15
Joint Venture
Separate company created and jointly owned by two or more
independent entities to achieve a common business objective
Forward • Backward • Buyback • Multistage
Advantages Disadvantages
• Reduce risk level
• Penetrate markets • Partner conflict
• Access channels • Lose control
• Protect interests
Chapter 13 - 16
Strategic Alliance
Advantages Disadvantages
Share project cost Create competitor
Tap competitors’ strengths Partner conflict
Gain channel access
Protect interests
Only the Star is still fully-made in Germany by Mercedes-Benz, most other
parts of the car are produced overseas, many (most?) of them by alliance
partners.
Rather than manufacture on their own, most car manufacturers form
alliances with companies that specialize on making tires, windshields,
International Business Management Chapter 13 - 17
electric motors, cables, and other components. This allows for focused use
Forms of Foreign-Market Entry
Cultural environment
Resource availability
Market size
Production and shipping costs
International experience
Copyright and product sensitivity
Expected duration of the project
Chapter 13 - 19
What is the BEST method?
As everything else, it depends on
Chapter 13 - 20
Chapter Preview
Chapter 13 - 21
Selecting and Managing
Entry Modes