Selecting an Entry Mode A firm contemplating foreign expansion must make three b

Question

Selecting an Entry Mode A firm contemplating foreign expansion must make three basic decisions which markets to enter, when to enter those markets, and on E what scale. Once a firm decides to enter a foreign market, the question arises as to the best mode of entry. Firms can use six different modes to enter foreign markets: exporting, turnkey projects, licensing, franchising, establishing joint ventures with a host-Country firm, or setting E up a new wholly owned subsidiary in the host country. Each entry mode has advantages and disadvantages. Roll over each advantage and disadvantage listed on the left to read a description, and then drag it to the corresponding mode of entry in the chart. Exporting Turnkey Contracts Risks and capital investment Costs risks, and Licensing Costs, risks, and profits Franchising Host country and Controls Manufacturing and transportation costs Joint Ventures FDI and foreign country Development cost and operational strategy Wholly-owned Subsidianes Reset

Explanation / Answer

Exporting- Manufacturing and transportation costs

Exporting can help companies save the cost of set up but will increase the manufacturing and transportation costs.

Turnkey Projects- FDI and foriegn country

This is a process where a local company sets a firm and hands it over to the foreign company. It helps in overcoming the restrictions of FDI and the foreign country.

Licensing- Risks and capital investment

Licensing is done where the company sells their rights to another company for a payment. This helps in reducing the risks of the parent company and saves the cost of capital investment.

Franchising- Costs, risks and profits

Franchising is a process of selling the brand in the international market. It saves costs of the setup, reduces risks and increases profits as the product is sold by the brand name and quality assurance.

Joint Ventures- Host country and controls

It becomes easy to work with a jointly owned company in which one of the company is a local company as they have the knowledge of the local laws and policies. Also the costs risks and controls is divided in between the two companies.

Wholly owned subsidiaries- Development costs and operational strategies

These are firms opened at a new place and owns it fully. This help them save the deveopment costs and have control over the operational strategies of the new firm.

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