From this report you will know what are the different modes of entry into foreign market. (Sri- Lanka)

1. Different Modes of Entry to ForeignMarkets:
Foreign market entry strategy is an important strategic decision for international business units.
The choice of foreign market entry strategy is to be made very cautiously as it has long-term
implications and it cannot be easily reversed. The future growth of international business unit
depends upon the right mode of entry into foreign market.1 When selecting the right market entry
mode for your business, there are many factors that need to be taken into consideration including
Marketing objectives: Examine the volumes wish to sell, timescales and coverage of key
market segments. For example, if volumes are expected to be low initially, then setting up own
manufacturing facility would not be appropriate.
Available resources in business: Does business possess sufficient resources to support the level
of planned international business activity?
Suitability of a market entry strategy: Businesses may have to use different market entry
methods for different countries i.e. some countries will only allow a restricted level of imports
but may welcome the business in building manufacturing facilities to provide jobs and limit the
outflow of foreign exchange. Additionally, some market entry methods are questionable on a
practical basis i.e. a possible lack of suitable distributors or agents to sell and service the
product.2
There are some more things that we want to bear in mind that:
1. Market Size and Growth
2. Risk
3. Government Regulations
4. Cultural difference
5. Local infrastructure.
Foreign Market Entry modes:
1. Exporting: Exporting is the most traditional way of entering into foreign market.
Initially, a domestic business unit starts its international business by exporting to one
nation. Gradually, it expands its exports to various nations. Exporting is very useful when
a country has surplus production capacity i.e., its domestic consumption is less than its
production capacity.
2. Licensing and Franchising: In licensing business unit of one country (Licensor) allows
the business unit of other country (Licensee) to use its technical know-how (patents,
trademarks, copyrights, etc.). For this, licensor charges royalty from license for a
stipulated period of time. In most of the nations, the rate of royalty ranges from 5 per cent
to 8 per cent of sales.

2. 3. Contract Manufacturing: In this agreement, business unit of one nation enters into
agreement with manufacturers of other nations to allow them to manufacture the goods at
their own, but right to market these goods is retained by the parent foreign enterprise.
4. Joint Ventures: It is a common strategy for getting an entry into foreign market. In joint
venture, foreign partner makes an arrangement with local unit of other country in which
ownership and management are shared by local unit and foreign partner.
5. Management Contracting: In this arrangement, parent enterprise of one nation sets up
management agencies. Through these management agencies, business units of other
nations are managed without any stake in ownership/capital.
6. Wholly Owned Subsidiaries: Some companies open wholly owned manufacturing units
in other nations. These subsidiary companies are wholly owned by their parent company.
MNCs prefer this route for globalization when they want to have complete control over
manufacturing activities in other nations.
7. Assembly Contracts: In this strategy of entering into foreign markets, foreign partner
provides key components and parts which are assembled in another nation.
8. Third Country Route Location: This strategy of taking entry into foreign markets is used
to take advantage of friendly relations between two nations.
9. Strategic Alliance: Strategic alliance is entered between two business units for achieving
a specific goal e.g., setting up common research and development unit for developing
new technology, providing training to employees of both units.
10. Turnkey Projects: In turnkey project agreements, business unit of one nation agrees to
construct entire plant for the business unit of other country. The business unit which
agrees to construct a plant is known as licensor and the business unit to whom the
completed project is handed over after completion is known as licensee. When initial
construction phase of the project is more complex than the routine operational part, then
turnkey projects are common.2

3. Country Profile of Sri-Lanka:
Geographical Location of Sri Lanka
Sri Lanka is an island country located in Indian Ocean to the south of India and separated from
India by Palk Strait. It is also known as the Island of Serendipity.
Srilanka lies just above the equator between 5°55'N and 9°55' N and between the eastern
longitudes 79°42' and 81°52'. The maximum length and width of Sri Lanka is 435 km and 225
km respectively.
Total area of Sri Lanka is 65610 sq km (Land area: 64740 sq km, Water area: 870 sq km).3
Political structure
Official name: Democratic Socialist Republic of Sri Lanka
Form of state: Executive presidency based on the French model
The executive: The president is the head of state, with executive powers. Elected for a term of six
years by universal suffrage, the president may dissolve parliament at any time once a year has
passed following a legislative election. Following a constitutional amendment, there is now no
limit on the number of terms that a president may serve
National legislature: Unicameral legislature; the 225 members are directly elected for six years
under a system of modified proportional representation
Local government: Under the 13th amendment to the constitution, passed in 1987, extensive
powers have been devolved to nine directly elected provincial councils with a view to meeting
Tamil demands for greater autonomy. The United People’s Freedom Alliance (UPFA), which
rules at national level, dominated provincial council elections in 2011.4

4. Economyand Trade relatedinformation:
Services is the largest sector of the Sri Lankan economy, contributing to about 60% of GDP.
Information technology, financial services and telecommunications are the main growth sectors,
with double-digit growth reported in 2015. The industry sector accounts for about 26% of GDP.
While sectors such as machinery and electricity have experienced decent growth in recent years,
other sectors are facing challenges. Textiles and apparel, an important economic pillar, is
stagnating. Besides, mining and construction sectors are suffering from delays in infrastructure
projects. Agriculture contributes to only 8% of GDP, yet it employs about one-third of the
country’s workforce.
Colombo along with the Western Province is Sri Lanka’s economic core, accounting for about
40% of GDP. In early 2016, the government announced the “Megapolis” project to boost
development in this region, with a view to bringing Colombo on par with other major Asian
cities. Finance, logistics, science and technology are the key industries under this initiative.
Investment Policy
In order to promote FDI, the Sri Lankan government has set up the Board of Investment (BOI),
which currently manages 12 industrial parks and export processing zones (EPZs) in the country.
Tax incentives and duty-free facilitation are given to qualified foreign investors. There are nine
key investment sectors identified by the government and special incentives are given to foreign-
invested enterprises in these sectors, namely, tourism and leisure, infrastructure, knowledge
service, utilities, apparel, export manufacturing, export services, agriculture and education.5
Economy size of Sri Lanka:
With an economy worth $80.591 billion (2015) ($233.637 billion PPP estimate),[1] and a per
capita GDP of about $11,068.996 (PPP), Sri Lanka has mostly had strong growth rates in recent
years.The Sri Lankan economy has seen robust annual growth at 6.4 percent over the course of
2003 to 2012, well above its regional peers. In GDP per capita terms, it is ahead of other
countries in the South Asian region. Since the end of the three-decade civil conflict, Sri Lanka is
now focusing on long-term strategic and structural development challenges as it strives to
transition to an upper middle income country.6

5. Exports and Imports of Sri Lanka:
Exports:
Sri Lanka is the 87th largest export economy in the world and the 115th most complex
economy according to the Economic Complexity Index (ECI). In 2014, Sri Lanka exported
$11.5B and imported $21.4B, resulting in a negative trade balance of $9.8B. In 2014 the GDP
of Sri Lanka was $78.8B and its GDP per capita was $11.1k.
The top exports of Sri Lanka are Tea ($1.38B), Non-Knit Women's Suits ($594M), Other
Women's Undergarments($580M), Knit Women's Undergarments ($536M) and Knit Women's
Suits ($475M), using the 1992 revision of the HS (Harmonized System) classification. Its top
imports are Refined Petroleum ($2.58B), Planes, Helicopters, and/or
Spacecraft ($2.28B), Crude Petroleum ($1.23B), Cars($800M) and Light Rubberized Knitted
Fabric ($592M).
Imports:
In 2014 Sri Lanka imported $21.4B, making it the 74th largest importer in the world. During the
last five years the imports of Sri Lanka have increased at an annualized rate of 16.8%, from
$9.8B in 2009 to $21.4B in 2014. The most recent imports are led by Refined Petroleum which
represent 12.1% of the total imports of Sri Lanka, followed by Planes, Helicopters, and/or
Spacecraft, which account for 10.7%.7
Figure:1.1

6. Figure:1.2
Appropriate Mode of Entry into Srilanka:
There are some modes of entry into any international market. The main modes of entry into
international market are exporting, import, FDI, joint venture. But all of these modes is not
suitable for entry any country market. If we discuss what is the best modes of entry
into srilankan market. We can say that FDI is best modes of entry into srilankan market.
Because there are some important reason for entry into srilankan market by FDI
Geographical advantage:
1. Situated at the crossroads of major shipping routes connecting South Asia, Far East,
Pacific, Europe and America.
2. Sri Lanka is strategically located next to the fast growing Indian sub-continent with close
proximity to Southeast Asia and the Middle East
3. well equipped seaport and airport
4. Sri Lanka is connected to the SEA-ME-WE III and IV (South East Asia – Middle East –
Western Europe) fibre optic communication backbone with over 11 communication
satellites orbiting above the south of the country.
Economical advantage:
1. Maintaining strong GDP growth rates consistently in the past 4 years
2. Recently graduated to the middle-income country category
3. Natural Resources : scenic beauty, wild life, beaches, fishery, gems, fertile soil,
forestry

7. 4. The economic reforms of 1977 towards an outward oriented strategy created a
new investment environment based on market principles. Today, Sri Lanka
ranked as the most liberalized economy in South Asia.
Political advantage:
1. The Government revoked the licences of some casinos and established a special tax on
profits
2. Politically stable
3. Attractive Tax and Other Incentives
Attractive Business Environment & Government Policies
1. Most liberalized economy in South Asia
2. Open market Free Economic policies
3. Foreign investors are allowed 100% ownership of their investment
4. The biggest rise in tourism this year has been from Chinese visitors with year-over-
year increases in excess of 100% on a monthly basis.
Modern Infrastructure
1. Most advanced telecommunication infrastructure in South Asian region. Four fixed line
and five mobile operators
2. High mobility road network and an ambitious freeway construction plan
3. Largest port in south Asia and many deep water ports around the country
4. fully develop industrial park
Government facility to attract FDI
1. Board Of Investment( B.O.I.) establishExportProcessingZones,withthe objective of enhancing
inflowof foreigndirectinvestmentstoSri Lanka
2. Where the governmentprovidesmanybenefitstoattract foreigndirectinvestment..Suchas
land,approvals,identification,rental factoriesandspace etc.
3. its tourist potential (which is yet to be fully developed) are factors that are attractive to
foreign investors
4. Sri Lanka’s Board of Investment (BOI) aims to attract USD 5 billion of FDI over the
next three years.

8. 5. In order to attract more FDI, Sri Lanka aims to hold trade fairs in major capital cities
6. The safety of foreign investment is guaranteed by the Constitution.
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9. https://en.portal.santandertrade.com/establish-overseas/sri-lanka/investing-3
http://opportunitysrilanka.com/wp-content/uploads/invest-in-sl-boi.pdf
http://vistacapital.org/why-invest-in-sri-lanka/