The document discusses different strategies for entering international business, including exporting, licensing, franchising, international alliances, and foreign direct investment. Exporting can be indirect, involving third parties, or direct, with the firm working directly with foreign customers. Licensing involves leasing intellectual property rights to another firm. Franchising is similar but gives the franchisor more control over the franchisee. International alliances include strategic alliances, joint ventures, and cooperative agreements between firms in different countries. Foreign direct investment involves directly investing and setting up operations abroad.

1. Different Strategies of entry
into
International Business
BY
SYED UMAIR
UMAIR SAEED
SADAQAT ALI
MOHSIN
SOHAIL
USMAN ZAKA

2. Different Strategies of Entry
 EXPORTING
-Indirect exporting
-Direct exporting
 LICENSING
 FRANCHISING
International Alliances
-International Strategic
Alliance
-International Joint
Venture
-International cooperative
Alliance
 Foreign Direct Investment

3. Forms of Exporting
Indirect
exporting
Direct
exporting
Passive Exporters

4. Forms of Exporting
Indirect Exporting means that the firm
participates in international business
through an intermediary and does not deal
with foreign customers or markets.
Direct Exporting means that the firm works
with foreign customers or markets with the
opportunity to develop a relationship.
4

5. Indirect & Direct Exporting

6. Indirect Exporting – eg.
 Indirect exporting, which means selling
goods to foreign buyers through third
parties such as export agents, export
merchants, or buying houses. This is an
especially good mode of entry for the novice exporter or
for a manufacturer who lacks country knowledge. China is
a good example. Many exporters do not have the
expertise to enter the Chinese market successfully. But
when they use indirect exporting, they offer their products
through intermediaries who take the product directly to
the markets. This way time to entry in the Chinese market
is shorter and more flexible.
16-
6

7. Indirect Export
includes:
EXPORT MANAGEMENT
COMPANY:
INTERMEDIARY SPECIALIZING
IN PARTICULAR TYPES OF
PRODUCTS OR PARTICULAR
COUNTRIES OR REGIONS.
EXPORT TRADING COMPANY:
INTERMEDIARY SIMILAR TO
EMC, BUT IT USUALLY TAKES
TITLE TO THE PRODUCT
BEFORE EXPORTING.

8. Direct Exporting

9. Direct
Exporting:
MORE AGGRESSIVE
EXPORTING
STRATEGY, WHERE
EXPORTERS TAKE ON
THE DUTIES OF
INTERMEDIARIES
AND MAKE DIRECT
CONTRACT WITH
CUSTOMERS IN THE
FOREIGN MARKETS.

10. Passive
Exporters:
COMPANIES THAT TREAT AND FILL
OVERSEAS ORDERS LIKE DOMESTIC
ORDERS.
• WHEN IT IS ABOUT A PASSIVE
EXPORTER, EVEN WITH
CONSIDERABLE REVENUES COMING
FROM
• INTERNATIONAL SALES, THE
COMPANY MOSTLY ACTS WITH A
FOCUS ORIENTED TO PRODUCTION
MANAGEMENT
• ASPECTS. IN THESE CASES, THE
COMPANY IS NORMALLY AN
OUTSOURCING OF ITS
INTERNATIONAL CUSTOMERS
• AND DOES NOT HAVE THE
CAPACITY TO EXPORT WITH ITS
OWN BRANDS. THE COMPANY IS
MORE
• CONCERNED WITH PRODUCING THAN
COMMERCIALIZING.

11. Exporting
Advantages
Relatively low
financial exposure
Permit gradual
market entry
Acquire knowledge
about local market
Avoid restrictions on
foreign investment
Disadvantages
Vulnerability to tariffs
and Taxes
Logistical
complexities
Potential conflicts
with distributors

12. Licensing
 Licensing is when a firm, called the licensor, leases the
right to use its intellectual property—technology, work
methods, patents, copyrights, brand names, or
trademarks—to another firm, called the licensee, in
return for a fee.
 The property licensed may include:
 Patents
 Trademarks
 Copyrights
 Technology
 Technical know-how
 Specific business skills

13. The Licensing Process

14. Provisions include in License
Agreement
•Effective date of agreement
•Names and addresses of the parties
•The licensed marks
•Territory covered
•Exclusivity or non-exclusivity or some combination
•Goods and/or services
•Duration
•Sublicense provisions (if permitted)
•Quality-control standards and procedures
•Prescribed use of the trademark
•Royalty and other payments
•Termination provisions
•Other terms and condition

15. Licensing –Adv. & Disadv.
Advantages
• Low financial risks
• Low-cost way to assess
market potential
• Avoid tariffs, NTBs,
restrictions on foreign
investment
• Licensee provides
knowledge of local markets
Disadvantages
• Limited market
opportunities/profits
• Dependence on licensee
• Potential conflicts with
licensee
• Possibility of creating future
competitor

16. When to
Choose
Licensing:
• THE PRODUCT
• CHARACTERISTICS OF
THE TARGET COUNTRY
• THE NATURE OF THE
COMPANY

17.  Under franchising, an independent organization
called the franchisee operates the business under
the name of another company called the franchisor.
 In such an arrangement the franchisee pays a fee to
the franchisor.
 Franchising is a form of Licensing but the
Franchisor can exercise more control over the
Franchisee as compared to that in Licensing.
Franchising

18. Franchising Agreements
 Franchisee has to pay a fixed amount and royalty
based on sales.
 Franchisee should agree to adhere to follow the
franchisor’s requirements
 Franchisor helps the franchisee in establishing the
manufacturing facilities
 Franchisor allows the franchisee some degree of
flexibility.
 Eg. McDonalds, Pizza Hut, Burger King

19. Franchising- Adv. & Disadv.
Advantages
• Low financial risks
• Low-cost way to assess market
potential
• Avoid tariffs, NTBs, restrictions
on foreign investment
• Maintain more control than
with licensing
• Franchisee provides knowledge
of local market
Disadvantages
• Limited market
opportunities/profits
• Dependence on franchisee
• Potential conflicts with
franchisee
• Possibility of creating future
competitor

20. When to choose Franchising:
 Newer or unique business models
 A high degree of control
 Brands that are easily identifiable
 Systems that can be easily copied
 Procedures well developed and easy to train
cross culturally.

21. Difference between
Licensing & Franchising:
Franchising Licensing
Governed by Securities law Contract law
Registration Required Not required
Territorial rights Offered to franchisee
Not offered; licensee can sell similar
licenses and products in same area
Support and training Provided by franchiser Not provided
Royalty payments Yes Yes
Use of trademark/logo
Logo and trademark retained by
franchiser and used by franchisee
Can be licensed
Examples
McDonalds, Subway, 7-11, Dunkin
Donuts
Microsoft Office
control
Franchiser exercise control over
franchisee.
licensor does not have control over
licensee

22. International Alliances

23. International Strategic Alliance
Agreement between two or more firms from different countries to cooperate
in any value chain activity from R&D to sales
Examples:
 Apple
 According to "An Overview of Strategic Alliances," Apple has partnered with
Sony, Motorola, Phillips, and AT&T in the past. Apple has also partnered
more recently with Clearwell in order to jointly develop Clearwell's E-
Discovery platform for the Apple iPad. E-Discovery is used by enterprises and
legal entities to obtain documents and information in a "legally defensible"
manner, according to a 2010 press release.
 Starbucks partnered with Barnes and Nobles bookstores in 1993 to provide
in-house coffee shops, benefiting both retailers. In 1996, Starbucks partnered
with Pepsico to bottle, distribute and sell the popular coffee-based drink,
Frappacino. A Starbucks-United Airlines alliance has resulted in their coffee
being offered on flights with the Starbucks logo on the cups and a partnership
with Kraft foods has resulted in Starbucks coffee being marketed in grocery
stores.

24. International Joint Venture
 An agreement where two or more firms from different countries have
an equity (for ownership) position in a new separate country.
 Mitsubishi Heavy Industries, having been concerned entirely with
engineering, while the Mitsubishi group's own trading company handled all its
marketing, first entered joint ventures with Caterpillar Tractor and then Borg-
Warner to market earth-moving equipment and industrial refrigeration
equipment, respectively. In the US Mitsubishi Heavy Industries thus benefited
from its partners' expertise in marketing and after-sales service. Now, the
motor vehicles division of Mitsubishi having been formed into a separate
company, a joint venture ha's been set up with Chrysler in which the latter
began with 15 per cent participation and an option to increase this to 35 per
cent. Not only is the company currently exporting some 4,000 units a month to
America, but sales in Japan have also increased greatly.

25. International Cooperative Alliance
 An agreement for cooperation between two or more companies
from different nations that does not set up a legally separate
company.
 The largest share of revenue from the Global 300 is France, which
generates 28 per cent. This is followed by the United States (16%);
Germany (14%); Japan (8%); Netherlands (7%); United Kingdom (4%);
Switzerland (3.5%); Italy (2.5%); Finland (2.5%); Korea (2%); and
Canada (1.75%)
 ICA include Agriculture/Forestry, Banking/Credit Unions,
Consumer/Retail, Insurance, Workers/Industrial, Health and Utilities
and 'Other' category
 Eg. Renault and Ford are making vans for commercial purposes in EU.

26. When to choose Strategic
Alliances
 The local partners knowledge of their
market
 Local Govt. regulations and requirements
 Sharing risks among partners
 Sharing technology
 Economies of scale

27. Benefits of Strategic Alliances
 Many complicated issues are solved through alliances
 They provide the parties each other’s strengths
 Helps in developing new products with the interaction of 2
or more industries
 Meet the challenges of technological revolution.
 Managing heavy outlay
 Become strong to compete with a multinational company.

28. Foreign Direct Investment
 Companies enter the international market
through FDI , invest their money, establish
manufacturing and marketing facilities through
ownership and control.
 Greenfield strategy- the term Greenfield refers
to starting of the operations of a company from
scratch in a foreign market.

29. Example of FDI (Telecom Sector
Pakistan)
 Major FDI in telecommunication sector of Pakistan has been come
from cellular companies like Mobilink, Paktel, PakCom, Warid and
Telenor. Paktel and PakCom, (Malaysian based) entered in Pakistan in
1990, Mobilink (Egypt based) in 1994, Telenor (Norway based) and Warid
both in 2005.

30. Top countries for FDI

31. Pakistan among top 10 in ASIA

32. Advantages of FDI
 Advantages
 Infrastructure & Technology transfer
 Employment in the country
 Consumer benefit
 Increase in saving and Investment

33. Disadvantages of FDI
 Disadvantages of foreign direct investment
 Foreign direct investment can sometimes hinder domestic investment, as it focuses
resources elsewhere.
 Occasionally as a result of foreign direct investment exchange rates will be affected,
to the advantage of one country and the detriment of the other.
 Foreign direct investment may be capital-intensive from the investor’s point of view,
and therefore sometimes high-risk or economically non-viable.
 The rules governing foreign direct investment and exchange rates may negatively
affect the investing country.
 Investment in certain areas is banned in foreign markets, meaning that an inviting
opportunity may be impossible to pursue.

34. Considerations while entering
foreign market
 Company capabilities
 Local govt. regulations
 Cultural & demographic distance
 Political & Financial risks
 Need for control