1.
Name:- Junaid Shaikh & Pravin Gaikwad
roll no:– 42 & 13
class:- second year Sem-III
SUBJECT :- international business

2.
Different modes of entry into international markets

3.
Various factors have to be done before entering into
international market
A. Country specific factors:
• Laws & regulations of the country
• Infrastructural conditions
• Property rights & legal framework
• Political factors
• Cultural factors
B. Industry specific factors:
• Entry & exit barriers
• Industrial complexity
• Uncertainty in industrial environment
• Supply and distribution pattern

4.
C. Firm specific factors :
• Resources of the firm
• Technological risk
• Goals and objectives of the firm
• Experience of the firm
D. Project specific factors:
• Size of the project
• Project orientation
• Availability of raw material and labour required for the
project implementation
• Availability of suitable market for the project

5.
Modes of Entry
► 1. Exporting :
► Advantages:
► Limited finance required
► Less Risk
► Forms of Exporting :
► 1.Indirect - Firm sell it’s product through export intermediaries in host
country.
► Advantages:
► Little investment & experience required
► It provides low cost opportunity to test products internationally
► Limitations :
► Feedback from ultimate customers is limited
► Part with higher profit share by commission/margin
► Firm develops little market insights
► Does not develop contacts with overseas buyers

6.
Indirect Exports - Intermediaries
► Agents :
► Don’t take title of goods, get commission & act on behalf
of principal
► Importer’s buying agents e.g. Garments, Handicrafts
► Buying offices : e.g. Wal-Mart, Mark & Spencer
► Merchant Exporter : Buy the goods & take product title for
profit as well as risk
► International Trading Companies : e.g. Mitsubishi, Marubeni,
Samsung
► Trading /Export Houses: e.g. Tata International, STC, MMTC

7.
Direct Exports
► Firm exports goods without help of any market intermediary in
home country
► Advantages:
► Exporter gets more profit
► Firm gets market information first hand
► Firm develops skills for export operations
► Firm establishes own rapport & brand image in foreign market
► Export Agents :
► These agents specialize in few countries & offer services to
many companies
► Local Overseas agents : e.g. SPC, Srilanka
► Merchant Importers : Trader who imports products & sells to
wholesaler
► Distributors : They have contractual agreement with exporter
on long term basis

8.
Outsourcing
 It is a cost effective strategy used by companies to reduce
costs by transferring portions of work to outside suppliers
rather than completing it internally
 It includes both domestic and foreign contracting and also off
shoring (relocating a business function to another country).
 Advantages:–
• Risks sharing
• Reduced costs
• Swiftness and expertise in operation
• Concentration on core process rather than supporting ones

9.
 Disadvantage:-
• Hidden costs
• Lack of customer focus
• Risk of exposing confidential data

10.
International Licensing
► Firm leases the right to use it’s intellectual property i.e brand,
trade mark, copy rights, technology etc to manufacturer in
foreign country
► FMCG MNC’s marketing brands under Licence
► E.g. Unilever, P&G, J&J
► Arrow brand shirts – Arvind Mills
► Disney characters – Modi Co.

11.
International Licensing
Advantages
► Low investment for Licensor
► Low financial risk to
Licensor
► Licensor can study market
without much cost & effort
► Licensee benefits with
less investment on
R&D
► Licensee escapes from
risk of product failure
► Disadvantages
► It Limits market opportunity
for both parties
► Licensee can damage brand
image
► Possibility of
misunderstanding &
break up of agreement
► Costly litigation in break up
► Leakage of trade secrets of
licensee
► Licensee may develop
reputation
► Licensee may become
competitor later

12.
International Franchising
► It is form of licensing but franchisor can exercise more control
over franchised
► Under agreement franchisee pays a fee to Franchisor &
► Agrees to adhere to follow franchisor’s requirements
like operating procedures, customer service, ambience,
product specs etc
► Franchisor provides following services to franchisee:
► Establishing mfg facilities, services facilities, provide expertise,
advertising, corporate image etc
► Allow some degree of flexibility to meet local tastes
► E.g. McDonald, Domino’s, Pizza Hut, KFC

13.
International Franchising
Advantages
► Franchisor enters market
with low investment & risk
► Franchisor gets market
information of host country
► Franchisee starts business
with low risk
► Franchisee gets benefits of
R&D at low cost
► Franchisee escapes risk of
product failure
Disadvantages
► International Franchising
more complicated than
domestic
► Difficult to control Intl
Franchisee
► Limits opportunities for
both parties
► Franchisee can damage
reputation
► Scope for Mutual
misunderstanding
► Leakage of trade secrets

14.
Contract Manufacturing
► To take advantage of lower costs of production, a firm may
sub-contract mfg in a foreign country
► It involves supply of inputs, semi-finished goods, components &
technical know-how to local mfr in foreign country
► Contract mfr limits himself to mfg while marketing is taken care
of by International firm
► A processing fee is paid to foreign based manufacturer
► It is also called outsourcing mfg activity
► E.g. Nike in Thailand, Vietnam
► Electronic items, cellphones – Foxcom
► Private Lables – own Brands
► Indian pharma cos – Sun Pharma with Eli-Lilly
► B.P.O’s – I.T.

15.
Management Contracts
► Firm offers management of technical services to run
production or
service facility, training and management
► E.g. Hotel industry – Taj group manages number of hotels
overseas
► Hyatt manages 216 hotels in 44 countries
► Hospitals – Apollo , Fortis ,
► Monetary compensation may be in the form of :
► A flat fee or
► Percentage over sales or
► Performance bonus based on profitability, Sales growth etc

16.
Turnkey Projects
► It’s a contract under which a firm agrees to fully design, construct
& equip a mfr/business/service facility and turn the project over
to the purchaser when ready for operation in consideration of a
remuneration
► Various types :
► Build & Transfer ( BT)
► Build , Operate & Transfer (BOT)
► Build, operate & Own (BOO)
► E.g. ONGC. L&T, GVK, IRCON, EIL,

17.
Foreign Direct Investment
with Strategic Alliances
► Strategic Alliance is a cooperative & collaborative approach to
achieve the larger goals
► E.g. Star Alliance
► Lifescan – Novo Nordisk
► Ethicon Endosurgery – Karl Storz
► Merck – J&J
► Lipton - Coke

18.
International Joint Ventures
► Firm shares equity & other resources with other partner firms
to form new company in target country
► Benefits :
► Provide access to countries where 100% ownership is
restricted
► Provides access to complimentary strengths of partner firm
► Less investment compared to complete ownership
► Reduce operating & political risks
► Overcomes tariff & non-tariff barriers of host country

19.
International Joint Ventures
► Limitations
► Shared control
► Risk of partner becoming future competitor
► Management problems due to cultural differences
► Difference in goals & objectives of partner firms lead
to conflicts
► Trade secrets, processes, and know-how are often
shared
► Selection of right partner is difficult

20.
Wholly owned subsidiary
► Firm has complete control over its overseas operations with
100% ownership in new entity
► Benefits
► Complete control over its foreign operations
► Trade secrets, proprietary technology remains within the
company
► Limitations
► Require commitment of large financial & operational resources
► High investment & High risk exposure
► Considerable international experience & exposure required
► Challenges :
► Wholly owned Cos are usually not allowed in vital sectors
► Host country Govt puts rigorous conditions & scrutiny
► High vulnerability to criticism by social activists

21.
Greenfield Operations
► Creating production & marketing facilities on a firm’s own
from scratch
► It is recommended where :
► In developing countries right targets for acquisition are not
available
► Small firms don’t possess required finances for acquisition
► Host country offers incentives for foreign investment
► There are regulatory barriers to International acquisition

22.
Mergers & Acquisitions
► It is transfer of existing assets of a domestic firm to a foreign
firm
► It involves transferring management control of assets &
operations of a domestic company to a foreign firm
► Generally mergers occur in friendly settings where two firms
build a synergy
► Acquisitions can be hostile takeovers by purchasing majority
shares of a firm
► Benefits
► Provides rapid expansion of firm’s business. It becomes crucial
when speed of business expansion is important.

23.
► Acquiring firm gets ready access to tangible &
intangible assets of target firm like brand equity,
marketing channels, skilled manpower, patents &
trademarks, technical know-how, process &
management skills that add to operational efficiency.
► Types : Minority , Majority , Full outright stake
► E.g. Mittal Arcelor – largest steel producer
► Tata Steel – Corus
► Tata Motors – Jaguar
► Idea –Vodafone
► Airtel- Tata Docomo
► Mahindra - Ford
► Glaxo – Smith Klime Beecham