Modes

1.
Exporting:
• Meaning: The traditional mode of entering into international business is

Exporting. Exporting is the simplest way to get started in foreign business. As
a result, most businesses begin their global expansion in this manner. The act of
selling goods and services produced domestically in other countries is known
as exporting. Exports are classified into two types:
• Direct exports are transactions in which a company sells its products directly
to a buyer in another country. At this company, you will gain firsthand market
knowledge.
• Indirect exports include hiring a third party's skills to facilitate the transaction.
The fee is the amount charged by the intermediary for its services.
• Advantages:
• Quick market entry.
• Lower initial investment.
• Minimal risk.
• Disadvantages:
• Limited control over distribution.
• Transportation costs.
• Potential trade barriers.
2. Licensing and Franchising:
• Meaning: In this mode of entry, a manufacturer from the home country rents
the right to their intellectual properties, such as technology, copyrights, brand
names, and so on, to a manufacturer from a foreign country. To obtain the
license, you must pay a set fee. Lessees are manufacturers who lease, and
licensees are manufacturers from the country that receives the license.
Essentially, the licensee is purchasing another company's assets (know-how or
R&D). The licensor may grant these rights non-exclusively to a single licensee
or exclusively to one or more licensees.
• Advantages:
• Low financial risk.
• Rapid market entry.
• Leverages local expertise.
• Disadvantages:
• Limited control over operations.
• Risk of brand dilution.
• Dependency on licensee/franchisee.
3. Joint Ventures:
• Meaning: A joint venture (JV) is a business arrangement where two or more

independent companies collaborate and combine their resources to achieve a
specific business goal. In international business, joint ventures often involve
companies from different countries working together to enter a new market,
develop a new product, or pursue a shared business opportunity.
• Advantages:
• Shared risk and costs.
• Access to local partner's knowledge.
• Easier compliance with local regulations.
• Disadvantages:
• Potential conflicts between partners.
• Shared profits.
• Dependency on the partner.
4. Strategic Alliances:
• Meaning: A strategic alliance is a collaborative agreement between two or more
companies to achieve mutual strategic objectives. These partnerships involve
sharing resources, capabilities, and risks while maintaining separate identities.
Strategic alliances can take various forms, including joint research and
development, marketing collaborations, or even shared distribution channels
• Advantages:
• Shared resources and risks.
• Faster market entry.
• Access to complementary strengths.
• Disadvantages:
• Managing diverse organizational cultures.
• Potential conflicts of interest.
• Limited control over the alliance.
5. Wholly Owned Subsidiaries:
• Meaning: A wholly owned subsidiary (WOS) is a business entity where a parent

company owns 100% of the shares. It operates as an independent company with
its own management structure, assets, and liabilities but is entirely owned and
controlled by the parent company
• .Advantages:
• Maximum control over operations.
• Full retention of profits.
• Direct involvement in local operations.
• Disadvantages:
• High initial investment.
• Increased risk.
• Potential cultural challenges.
6. Strategic Acquisitions:
• Meaning: A strategic acquisition refers to the purchase of a company or a

significant stake in another company with the primary purpose of achieving
strategic objectives. Unlike purely financial acquisitions, strategic acquisitions
are driven by the desire to enhance the acquiring company's capabilities, expand
market presence, gain access to new technologies, or achieve other strategic
goals.
• Advantages:
• Rapid market entry.
• Access to an established customer base.
• Acquisition of existing infrastructure.
• Disadvantages:
• High acquisition costs.
• Cultural integration challenges.
• Potential resistance from existing stakeholders.
7. Greenfield Investment:
• Meaning: Greenfield investments are complex market entry strategies that

some companies choose to use. These investments involve buying the land and
resources to build a facility internationally and hiring a staff to run it. Greenfield
investments may subject a company to high risks and significant costs, but they
can also help companies comply with government regulations in a new market.
These investments typically benefit large, established organizations as opposed
to new enterprises.
• Advantages:
• Full control over operations.
• Ability to customize operations.
• Long-term strategic advantage.

• Disadvantages:
• High initial investment.
• Time-consuming process.
• Potential regulatory hurdles.
8. E-commerce and Digital Platforms:
• Meaning: E-commerce and digital platforms involve leveraging online

channels to conduct business activities, including buying and selling goods or
services. In the context of international business, companies use digital
platforms to reach global markets, connect with customers, and facilitate
transactions.
• Advantages:
• Global reach.
• Low entry barriers.
• Cost-effective.
• Disadvantages:
• Cybersecurity risks.
• Regulatory compliance challenges.
• Adaptation to diverse markets.
9. Contract Manufacturing and Outsourcing:
• Meaning: Contract manufacturing and outsourcing involve a business

arrangement where a company delegates certain production or service activities
to external entities. This can include manufacturing of products or outsourcing
of services to third-party suppliers or service providers, often located in
different countries.
• Advantages:
• Cost-effective production.
• Focus on core competencies.

• Flexibility in adapting to market demands.
• Disadvantages:
• Quality control issues.
• Dependency on suppliers.
• Potential intellectual property concerns.
10. Management Contracts:
• Meaning: A company essentially rents out its knowledge or know-how to a

government or business in the form of individuals who enter the foreign setting
and manage the business under management contracts and do contract
manufacturing. This strategy of entering international markets is frequently
used with a new facility after a company has been seized by the national
government or when a business is experiencing difficulties.
• Advantages:
• Access to the expertise of the management company.
• Lower risk for the investor.
• Cost-effectiveness.
• Disadvantages:
• Limited control for the investor.
• Dependency on the management company's performance.
• Potential conflicts of interest.

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1.

• Meaning: The traditional mode of entering into international business is

• Quick market entry.

• Lower initial investment.

• Limited control over distribution.

• Potential trade barriers.

2. Licensing and Franchising:

• Rapid market entry.

• Leverages local expertise.

• Limited control over operations.

• Risk of brand dilution.

• Meaning: A joint venture (JV) is a business arrangement where two or more

• Shared risk and costs.

• Access to local partner's knowledge.

• Easier compliance with local regulations.

• Potential conflicts between partners.

• Dependency on the partner.

• Shared resources and risks.

• Faster market entry.

• Access to complementary strengths.

• Managing diverse organizational cultures.

• Potential conflicts of interest.

• Limited control over the alliance.

5. Wholly Owned Subsidiaries:

• Meaning: A wholly owned subsidiary (WOS) is a business entity where a parent

• Maximum control over operations.

• Full retention of profits.

• Direct involvement in local operations.

• High initial investment.

• Meaning: A strategic acquisition refers to the purchase of a company or a

• Rapid market entry.

• Access to an established customer base.

• Acquisition of existing infrastructure.

• High acquisition costs.

• Cultural integration challenges.

• Potential resistance from existing stakeholders.

• Meaning: Greenfield investments are complex market entry strategies that

• Full control over operations.

• Ability to customize operations.

• Long-term strategic advantage.

• High initial investment.

• Potential regulatory hurdles.

8. E-commerce and Digital Platforms:

• Meaning: E-commerce and digital platforms involve leveraging online

• Low entry barriers.

• Regulatory compliance challenges.

• Adaptation to diverse markets.

9. Contract Manufacturing and Outsourcing:

• Meaning: Contract manufacturing and outsourcing involve a business

• Focus on core competencies.

• Quality control issues.

• Potential intellectual property concerns.

10. Management Contracts:

• Meaning: A company essentially rents out its knowledge or know-how to a

• Access to the expertise of the management company.

• Lower risk for the investor.

• Limited control for the investor.

• Dependency on the management company's performance.

• Potential conflicts of interest.