Foreign market entry modes differ in degree of risk they present, the control and commitment of resources they require and the return on investment they promise. There are two major types of entry modes: ❖ Equity and Non-equity modes.
The non-equity modes category includes export and contractual agreements. The equity modes category includes: joint venture and wholly owned subsidiaries.
Exporting is the process of selling of goods and services produced in one country to other countries. There are two types of exporting: direct and indirect.
❖ Direct exports
❖ Indirect exports
Direct exports represent the most basic mode of exporting, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism.
Indirect exports is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign market.
An international licensing agreement allows foreign firms, either exclusively or non-exclusively to manufacture a proprietor’s product for a fixed term in a specific market.Summarizing, in this foreign market entry mode, a licensor in the home country makes limited rights or resources available to the licensee in the host country. The rights or resources may include patents, trademarks, managerial skills, technology, and others that can make it possible for the licensee to manufacture and sell in the host country a similar product to the one the licensor has already been producing and selling in the home country without requiring the licensor to open a new operation overseas. The licensor earnings usually take forms of one time payments, technical fees and royalty payments usually calculated as a percentage of...