Answer to Question #315269 in Management for Samuel

Question

There are various ways in which an entrepreneur can become a player in international business and market products internationally. The method of entry into a market and the mode of operating overseas are dependent on the goals of the entrepreneur and the firm’s strengths and weaknesses. As an entrepreneur discuss and present the different modes of entering and engaging in international business. Use theory and practical example to support your findings. 

Answer 1

Some of the modes of entry into international business you can opt for include direct export, licensing, international agents and distributors, joint ventures, strategic alliance, and foreign direct investment. 

Direct exporting involves you directly exporting your goods and products to another overseas market. For some businesses, it is the fastest mode of entry into the international business. 

Direct exporting, in this case, could also be understood as Direct Sales.

In case you foresee a potential demand for your goods and products in an overseas market, you can opt to supply your goods to an importer instead of establishing your own retail presence in the overseas market.

Licensing

Companies which want to establish a retail presence in an overseas market with minimal risk, the licensing and franchising strategy allows another person or business assume the risk on behalf of the company.

In Licensing agreement and franchise, an overseas-based business will pay you a royalty or commission to use your brand name, manufacturing process, products, trademarks and other intellectual properties.

While the licensee or the franchisee assumes the risks and bears all losses, it shares a proportion of their revenues and profits you.

Joint venture

A joint venture is one of the preferred modes of entry into international business for businesses who do not mind sharing their brand, knowledge, and expertise.

Companies wishing to expand into overseas markets can form joint ventures with local businesses in the overseas location, wherein both joint venture partners share the rewards and risks associated with the business.

Both business entities share the investment, costs, profits and losses at the predetermined proportion.

This mode of entry into international business is suitable in countries wherein the governments do not allow one hundred per cent foreign ownership in certain industries.

For instance, foreign companies cannot have a 100 hundred per cent stake in broadcast content services, print media, multi-brand retailing, insurance, power exchange sectors and require to opt for a joint-venture route to enter the Indian market.