This presentation describes modes of entry in International Market for businesses. Various types of modes has been explained from International business expansion point of view.

1. Modes of Global Market entry
Sub: International Marketing
By-
Lovekshitij Suryavanshi

2. 3 Rules
• A company aims to enter in foreign Market must
have a concrete strategy
• Naïve Rule – Company uses same entry mode for
all foreign markets
• Pragmatic rule - Company uses a workable entry
mode for each market.
These kinds of companies start with low risk entry
modes.
• Strategy Rule – Alternative decision modes are
compared and evaluated before decision is made.

3. Types of Entry Mode - Export Mode
• Products of company are manufactured in the
domestic market or a third country and then
transferred directly or indirectly to the host
market.
• While establishing export channels company
decides role and functions.
• Major Export Types
- Indirect Export
- Direct Export
- Co-operativite Export

4. Indirect Export
• Product Manufacturing company do not
export products directly.
• Domestic Export House or Trading Company
export products manufactured by company.
INDIA
Company AManufacturer
Export House / TC
USA
Host Company

5. Direct Export
• Product Manufacturing company export
products directly without any third party.
• Involved in documentation, delivery, pricing etc.
• Manages agents and distributers.

6. Co-operative Export
• Two or more companies involve in collaborative
agreements to produce products to export.
• Small firms do not achieve sufficient scale
economies in manufacturing because of size of
local market or inadequacy of management.
• E.g: Bulk export, research, joint manufacturing
etc

7. Types of entry mode - Intermediate
Entry Mode
• No full ownership involved
• Ownership shared between parent company
and local partner
• Types of Intermediate entry mode
- Licensing
- Franchising
- Contract Manufacturing
- Joint Ventures

8. Licensing
• It is an arrangement wherein the licensor gives
something of value to the licensee in exchange
for certain performance and payments from the
licensee.
• A formal permission or right offered to a firm or
agent located in host country to use a home
firm’s proprietary technology resource in return
for payment.
• Another way for firm to establish local production
in foreign markets without capital investment.

9. • Licensing may include
- Patent for product or process
- Technical advice and assistance
- Marketing advice and assistance
- Use of Trademark and name
• E.g: GSK, biocon, Quick Heal

10. Franchising
• An independent organization operates the
business under the name of another company
• Franchisee pays fee to the franchisor
• Franchisee owns right to use trade marks,
systems, operating function, employee
training etc .

11. Types of Franchising
• Product & Trade Name Franchising
- Dealer use Trade Name & Trade Mark
e.g: Dominos (Jubilant Food Works )
• Business Format Franchising
- Franchisor transfer package
- Package contains Trade marks/name,
copyright, designs, patents, trade secret etc.
e.g: Who Wants to be Millionaire -> KBC

12. • Advantages
- low risk, low entry cost
- Quick development in International Market
- Precursor to FDI in foreign market
• Disadvantages
- High cost of creating international brand
-Problem with local legislation
- Risk of International reputation

13. Contract Manufacturing
• Company do business in foreign market with
responsibility for production to local firm
• e.g: IKEA, Danone
• Advantages:
- low risk
- no huge investment in foreign market
- avoids transfer-pricing problems
• Disadvantages
- hard to find reliable manufacturer
- contractor could become competitor
- Quality control become difficult

14. Joint Venture
• Two or more firms join together
• Legally separate new business entity
• Shared ownership
e.g: Sistema Shyam TeleServices (MTS)
Alcatel – Lucent
Bharati Walmart
• Advantages:
- less costly than acquisitions
- shared risk of failure
• Disadvantages:
- Large investments of resources
- cultural differences may result in management
differences

15. Types of Entry Mode - Hierarchical
• Company completely owns & control foreign
entry
• Investment mode
• New set-up in host country is fully own
subsidiary by parent company.
• 2 Types
- Merger or Acquisition
- Green Field

16. Merger or Acquisition
• Domestic company merge with foreign company to
enter in Int’l market
• Domestic company may acquire/purchase foreign
company
• e.g: Nokia (Fin)- Siemens (Ger)
data n/w & telecommunication division
• Advantages:
- Immediate grab of market share
- Less time & quick to execute
• Disadvantages:
- tedious task (bankers, lawyers from both countries)

17. Green Field Strategy
• Set-up operations in foreign market from zero
• Purchase local property & man power
• e.g.: Mercedes – Benz production in Pune
Volkswagen India
• Advantages:
- Control of operations
- No risk of loosing technical competence to
competitor
• Disadvantages:
- Lengthy process from scratch
- Pre research is time consuming

18. Thank You!!
Email: lovesuryavanshi@gmail.com