VARIOUS MODES OF ENTRY

INTO INTERNATIONAL
BUSINESS

Exporting

The termexportmeans shipping in the goods

and services out of the jurisdiction of a country.

Involvement of the customs authorities .

Types of Exporting

Direct Exporting

Firm works with foreign customers

or markets

Indirect Exporting

Participation in international
business through an intermediary

Takeovers
The purchase of onecompany(thetarget)
by another (theacquirer, orbidder).
A takeover also functions on different levels

Types of Takeover

Friendly takeovers

A "friendly takeover" is an acquisition which is

approved by the management.

Hostile takeovers
A "hostile takeover" allows a bidder to take over
a target company whosemanagementis
unwilling to agree to amergeror takeover.

Continued

Reverse takeovers

A "reverse takeover" is a type of takeover where a

private company acquires a public company.

Backflip takeovers

A "backflip takeover" is any sort of takeover in

which the acquiring company turns itself into
asubsidiaryof the purchased company.

Greenfield Strategy
The term Green Field Investment" refers to
a project where a company builds the
entirely of its operations in a foreign market
starting from scratch.
Own specifications, Employees are trained
to company standards and fabrication
processes enables tight control.

Continued...
Without the help of another business which is
already present in market.
A firm therefore has full control over the
operations of its Greenfield Venture.
The costs and risks are high because to set up
a new business operation in a new country.
There is need to acquire knowledge and
expertise regarding the local market and build
various stakeholder relationships which adds to
the cost as well as exposes the firm to various
risks.

Turnkey Project
A turnkey project is a project under which a
firm agrees to fully design, construct and
equip a manufacturing/business/service
facility and turn the project over to the
purchaser when its ready for operation, for
a Remuneration.
The term "turnkey" is based on the concept
of only needing to the turn the key to unlock
the doors to begin operations.

Continued...

A turnkey business is an arrangement

where the provider assumes responsibility
for all required setup and ultimately
provides the business to the new operator
only upon completion of the mentioned
requirements.

Licensing

Licensor

Licensee

Licensing process

International Licensing
To enter in new market.
Closed by trade restriction
Expand without too much risk and capital
investment.
Lower income compared to other modes of
international expansion.
Ex:
Coca cola licensing for brand
protection
John Deere to leverage its dealer
network
Apple operate on brand licencing

Advantages and Disadvantages

Franchising

Under franchising an independent organization called the franchisee

operates the business under the name of another company called the
franchisor
under this agreement the franchisee pays a fee to the franchisor
The franchisor provides the following services to the franchisee:
Trade marks
Operating System
Product reputation
Continuous support system like advertising , employee training,
reservation services quality assurances program etc.

Franchising System:
FRANCHISOR

FRANCHISEE
FEE

Encashes on
past and
present
efforts
SELECT

FRANCHISEE

Invest in all
the
resources

Example

McDonalds Corporation
At the time of publication, this international quick-service restaurant
company has over 75 percent of its worldwide restaurants independently
owned.
Business owners can purchase a new or existing restaurant.
An initial down payment is required, and the rest of the cost can be
financed for up to seven years.
During the terms of the franchise agreement, ongoing fees include rent and
service fees.
Some of the qualities the company is looking for in a franchisee are
business experience, an acceptable credit history, willingness to complete
the company's comprehensive training program and sufficient liquid assets
to invest in the business.
McDonald's franchise in India is with Hardcastle Restaurants Pvt. Ltd in
West and South and Connaught Plaza Restaurants Private Limited in North
and East.

Mergers

Two Companies come together to form a

new entity

Types of Mergers
Horizontal Merger
Vertical Merger
Conglomeration

Acquisition

One company takes over another & clearly

establishes itself as the new owner

E.g : Tata Motors acquired Jaguar Cars and

Land Rover

Contract Manufacturing

Contract manufacturing is outsourcing

entire or part of manufacturing operation

E.g. : The iPad and iPhone which are product

from Apple are manufactured in China by
Foxconn, Hance Foxconn is a contract
manufacturer and Apple benefit from a
lower cost of manufacturing devices