2. 2
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.
4
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.
5
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.
6
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
7
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)
8
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
9
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.
10
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.
12