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6 major business entry modes - Coggle Diagram
6 major business entry modes
EXPORTING
DISADVANTAGES
high transport cost and tariffs
agents in other country may not act in exporter's best interest
might have lower local manufacturing location
ADVANTAGES
avoid cost for local manufaturing operation
achieve experience curve and location economies
CHARACTHERISTIC
A Commonly first step adapt by copanies
Their products and/or services are successful domestically
Their products and/or services are unique in one or more ways.
Their products and/or services are competitively priced
TURNKEY PROJECT
DISADVANTAGES
no long terim interest in foreign country
create a competitor
selling competitive advantage to competitor
charectheristic
the contractors handle every details of the project for a foreign client, including training
at completion, the foreign client take over the complete plant
commonly performed by industrial equipment, construction and consultant company
performed for governmental company
ADVANTAGES
earn economic returns from know-how required to assemble and run technological process
less risky than conventional FDI
LICENSING
CHARACTHERISTIC
Licensor give the right for intangible property to the licency
limited period of time
licensor receives royalty
patent, invention, trademark, copyright
ADVANTAGES
no development cost
avoid barriers to investment
capitalize on market without development new
DISADVANTAGES
doest habe tight control
ability to coordinate strategic moves across countries limited
assets could be lost
FRANCHISING
charectheristic
franchisor sells intangible property, franchisee has to abide by strict rules how to run the business
advantages
avoid cost and risk opening a foreign market
quickly build global presence
disadvantages
inhibit the firm's ability to take profit out of one country.
hard to detect poor quality of franchises
JOINT VENTURES
CHARACTHERISTIC
owned by 2 or more independent firms
same country in foreign market
foreign with local
different countries at 3rd country market
private company and local gov company
private company and gov-owned company at 3rd country
mostly 50:50 partnership
Advantatage
benefit from local knowledge
cost and risk are shared
satisfy political consideration
Disadvantages
risks giving technology to its partner
tight control to realize experience curve
conflicts and battle for control
WHOLLY OWNED SUBSIDIARY
characteristic
own 100% stock
advantages
reduce risk of losing control over core competitor
tight control over operation in diff countries
required to realize location and experience curve economies
disadvantages
bear the full cost and risk
