Selecting and Managing Entry Modes
Selecting and Managing Entry Modes
Selecting and Managing Entry Modes
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Discuss the essential aspects of exporting
Define each form of countertrade Explain each type of export/import financing
Step 2
Match needs to abilities
Step 3
Initiate meetings
Step 4
Commit resources
Forms of Countertrade
Barter
Direct exchange without money
Counterpurchase
Sale to a country in return for promise of future purchase from it
Offset agreement
Offset a hard-currency sale to a nation with future hard-currency purchase
Switch trading
Sale by a company of obligation to purchase from a country
Buyback
Export of industrial equipment in return for products the equipment produces
High-Risk Approaches
Advance payment
Importer pays exporter for merchandise before it ships
Open account
Exporter ships merchandise and later bills importer
Documentary Collection
Bank acts as intermediary without accepting financial risk
Draft (bill of exchange)
Document that orders importer to pay exporter a specified sum of money at a specified time
Bill of lading
Contract between exporter and shipper specifying destination and shipping costs for merchandise
Letter of Credit
Importers bank issues a document stating that the bank will pay the exporter when exporter fulfills documents terms
Irrevocable Revocable Confirmed
Licensing
Company owning intangible property (licensor) grants another firm (licensee) the right to use it for a specified time
Advantages
Finance expansion Reduce risk Reduce counterfeits Upgrade technologies
Disadvantages
Restrict licensors future Reduce global consistency Lend strategic property
Franchising
Company (franchiser) supplies another (franchisee) with intangible property over an extended period
Advantages
Low cost and low risk Rapid expansion Local knowledge
Disadvantages
Cumbersome Lost flexibility
Management Contract
Company supplies another with managerial expertise for a specific period of time
Advantages
Few assets risked Nations finance projects Develops local workforce
Disadvantages
Personnel at risk Create competitor
Turnkey Project
Company designs, constructs and tests a production facility for a client
Advantages
Firms specialize in core competency Nations obtain infrastructure projects
Disadvantages
Politicized process Create competitor
Disadvantages
Expensive High risk
Joint Venture
Separate company created and jointly owned by two or more independent entities to achieve a common business objective
Disadvantages
Partner conflict Lose control
Strategic Alliance
Entities cooperate (but do not form a separate company) to achieve strategic goals of each
Advantages
Share project cost Tap competitors strengths Gain channel access Protect interests
Disadvantages
Create competitor Partner conflict