This document discusses various market entry methods for international business, including indirect strategies like exporting, licensing, management contracts, and turnkey operations as well as foreign direct investment strategies. Indirect strategies involve less risk and cost than foreign direct investment but also provide less control. Foreign direct investment options include acquisitions versus greenfield investments, assembly versus manufacturing, and sole ventures versus joint ventures.

1. Market entry methods
1- indirect strategies
2- Foreign direct investment (FDI)
3- Other IM Strategies

2. Indirect
strategy
Exporting
Licensing
Management contract
Turnkey operation

3. Indirect
strategy

4. Indirect
strategy
Export
Exporting of goods & services through various
home-based exporters
Manufacturers’ export agents (sell for
manufacturers)
Export commission agents (buy for overseas
customers)
Export merchants (purchase & sell for own
accounts)
International firms (use the goods overseas)

5. Indirect strategy Export
Advantages:
• Avoids cost of establishing manufacturing operations
Disadvantages:
• Commission to export agents
• Foreign business can be lost if exporters decide to change their sources &
supply

6. Indirect
strategy
Licensing
A company in one country (licensor) enters into a
contractual agreement with a company or person in
another country (licensee) whereby the licensee is
given the right to use something owned by the licensor.

7. Indirect strategy
Licensing
Advantages:
Reduces development costs and risk of
establishing foreign enterprises
Fast market access
Gain local market knowledge
Disadvantages:
 Less control over market & revenues
 Potential problems with licensees

8. Indirect strategy
Management contract
The local investor provides the capital for enterprise, while the international marketer
provides the necessary know-how to manage the company
Ex. Hotel business (Hilton)

9. Indirect strategy
Management contract
Advantages
• Reduces costs & risk of establishing
enterprise
• Emphasis on firm’s expertise
Disadvantages
• Limited profits & market access
• Potential copy right issues

10. Indirect strategy
Turnkey operation
• Contractor agrees to handle every
detail of project for foreign client
• Technology
• Management expertise
• Capital equipment
After trial run facility turnover to
purchaser

11. Indirect strategy
Turn key operations
Advantages
• Can earn areturn on knowledge asset
• Less risky than conventional FDI
Disadvantages
• No long-term interest in the foreign
country
• May create a competitor
• Selling process technology may be selling
competitive advantage as well

12. Foreign direct investment
(FDI) strategies
a) Acquisition vs greenfield
b) Assembly vs manufacturing
c) Sole venture vs joint venture

13. Foreign direct
investment (FDI)
Acquisition vs
Greenfield
• Acquisition
• a form of investment
where an already existing
company is taken over by
an investing firm
• Takes over the assets of
the existing company
• May redesign if
necessary
• Example: purchase of
stock in an already existing
company in an amount
sufficient to confer control
• Greenfield
• Greenfield is the
process of expanding
operations in foreign
market from ground
zero.
• It requires purchase of
local property & local man
power

14. Fore Foreign direct
investment (FDI)
Assembly vs
manufacturing
• Assembly
• Manufacturer exports all or
most of its products in a
“knocked-down” condition.
These parts are put together
to form the complete
product.
• These parts are put together
to form the complete
product in one location /
country for host or other
countries.
• Can be a new-build, or the
company might acquire a
current business that has
suitable plant.
• Manufacturing
• Organizations invests in
plant, machinery and
labor in overseas
market
• Process begins with
acquiring raw materials
and transform it into
finished product
• Can be a new –build, or
the company might
acquire a current
business that has
suitable plant

15. Fore Foreign direct
investment (FDI)
Sole venture vs Joint
venture
Sole venture
• 100% ownership
• Sole venture
• Ethnocentric consideration
(meaning the own culture &
tradition is the main reference
to judge other cultures)
Joint venture
Collaboration of two or
more organization
Share assets, risks &
profits
Equality of partners is not
necessary