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Foreign Market Entry

In: Business and Management

Submitted By pilicove
Words 456
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Foreign Market Entry Modes
International Business and


Modes of Foreign Market Entry

Management Focus: Tata Group:
Foreign Entry Strategies pp.443-444
Joint Ventures
Wholly Owned Subsidiaries
Mergers & Acquisitions (M&A)


• Advantages
– Avoids the substantial costs of establishing operations in the host country
– Achieve experience curve and location economies

• Disadvantages
– High transportation costs, esp. for bulk products
– Tariffs
– Divided loyalties of local agents


• An arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specific period, in return, the licensor receives a royalty fee from the licensee.
• Intangible property: patents, inventions, formulas, processes, designs, copyrights, and trademarks
• Advantages
– Licensing firm does not need to bear the development costs and risks
– Make use of intangible property that a firm possesses that they do not want to develop itself


• Disadvantages
– Does not give a firm tight control
– Limits a firm’s ability to coordinate strategic moves across countries
– Difficult to control its technological know-how—
Opportunistic Behaviour of Licensee


• Similar to licensing, but franchising involves longer term commitment and insisting strict rules on licensees
• Franchiser assists franchisee to run the business on an on-going basis.
• Franchiser receives royalty payment, which amounts to some percentage of the franchisee’s revenues 6

• Advantages
– Relieved of many costs and risks
– Bearing of costs and risk gives incentive to franchisee to build profitable operations
– Enable service firms to build global presence very quickly and at low costs and...

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