MODES OF ENTRY IN

INTERNATIONAL
MARKETS
 FRANCHISING
• Franchising: It is a system of business that has grown steadily in the last 50 years
and is estimated to account for more than one-third of the world's retail sales.
Franchises range from the ubiquitous McDonalds to lawn mowing services such as
Mr.Green, valet services, medical and dental services, to book keeping services
and even to services helping us to prepare our tax forms. Franchising is not
restricted just to fast food outlets and gardening contractors. There are now
franchises for mentoring managers and sports people and franchises for internet
shopping. 'Franchising' is a term which can be applied to just about any area of
economic endeavour. Franchising encompasses products and services from the
manufacture, supply for manufacture, processing, distribution and sale of goods,
to the rendering of services, the marketing of those services, their distribution and
sale. Franchising may be defined as a business arrangement which allows for the
reputation, (goodwill) innovation, technical know-how and expertise of the
innovator (franchisor) to be combined with the energy, industry and investment of
another party (franchisee) to conduct the business of providing and selling of
goods and services.
 EXPORTING
• Exporting: Exporting goods from a corporation's home country to other
nations can be a solid starting point for global expansion. Exporting
allows companies to introduce their brands and products to foreign
markets with minimal or no direct investment in each country. Service
businesses can find this option more challenging unless they perform
services over the internet. Licensing agreements allow foreign
companies to sell or represent your brands in their home markets,
achieving the same kind of product introduction that exporting
provides, but with a different set of risks. While exporting and licensing
can open doors around the world, corporations must take further steps
to truly achieve global expansion goals.
 LICENSING
• Licensing: It is defined as "the method of foreign operation whereby a firm
in one country agrees to permit a company in another country to use the
manufacturing, processing, trademark, patent know-how or some other
skill provided by the licensor". The licensee pays a fee in exchange for the
rights to use the intangible property/trademark. Coca Cola is an example
of licensing. Licensing involves little expenses and involvement. The only
cost is signing the agreement and policing its implementation.
• Reasons for Licensing:
✓Licensing is lower cost and can be done quickly
✓Business goals often can be met
✓Existing Businesses as Potential Licensees
✓Much Less Work on Daily Basis
✓Avoid Complex Government Regulation
✓Licensing More Effective in Difficult Economic Times
 CROSS BORDER MERGERS &
ACQUISITIONS
• Merger- “It involves combination of all the assets, liabilities, loans, and
businesses (on a going concern basis) of two (or more) companies
such that one of them survives.”
❖ Merger is primarily a strategy of inorganic growth.

❖ Example:
India’s largest private sector corporate entity Reliance Industries
Limited (RIL) is indeed a result of many mega mergers of group
companies into RIL.
CROSS BORDER MERGERS & ACQUISITIONS
• Merger: A merger refers to the absorption of one firm by another, i.e., the
acquiring firm retains its name and its identity, and it acquires all of the
assets and liabilities of the acquired firm. The acquired firm ceases to exist
as a separate business entity. The merger of Tata Oils Mills Company
Limited with Hindustan Lever Limited is an example of absorption.

• As opposed to this, in a consolidation, a new firm is created; both the

acquiring and the acquired firm terminate their legal existence and
become part of a new firm. Here, the distinction between the acquirer
and the target firm is not crucial. HCL Ltd., was formed after consolidation
of Hindustan Computers Limited, Hindustan Instruments Limited, Indian
Software Company Limited and Indian Reprographics Limited
CROSS BORDER MERGERS & ACQUISITIONS
Acquisition
Acquisition is an attempt or a process by which a company or an
individual or a group of individuals acquires control over another
company called ‘target company’.
Acquiring control over a company means acquiring the right to
control its management and policy decisions.

It also means the right to appoint (and remove) majority of the

directors of a company.

In acquisition, the target company’s identity remains intact.

Cross Border Merger and acquisition is when a domestic company is

either merger or acquiring a company of other nation
 STRATEGIC ALLIANCE
• Strategic Alliance: A Strategic Alliance is a term used to describe a variety of cooperative
agreements between different firms, such as shared research, formal joint ventures, or minority
equity participation. The modern form of strategic alliance is becoming increasingly popular and
has three distinguishing characteristics. 1. These are frequently between firms in industrialized
nations. 2. The focus is often on creating new products and/or technologies rather than
distributing existing ones. 3. They are often only created for short term durations

Advantages of a Strategic Alliance:

• Technology Exchange
• Global Competition
• Industry Convergence
• Economies of Scale and Reduction of Risk
• Alliances as an Alternative to Merger
 STRATEGIC ALLIANCE
Disadvantages of Strategic Alliances:

• The Risks of Competitive Collaboration: The benefits of this alliance may cause
unbalance between the parties, there are several factors that may cause this
asymmetry:
• The partnership may be forged to exchange resources and capabilities such as
technology.
• Using investment initiative to erode the other partner's competitive position.
• Strengths gained by learning from one company can be used against the other.
• Firms may use alliances to acquire its partner.
 JOINT VENTURE
• Global strategic partnerships (or Joint Venture): In a global strategic partnership, two or
more firms from different countries work as a team. They pool their resources or skills to
provide better products or services. Furthermore, they reach a broader audience
through collaboration. Firms engage in global strategic partnerships because they
believe the partnership will lead to synergy, which means increased economic benefits.

• a) Creating a Separate Entity In a global strategic partnership, two or more parties might
create a separate legal entity that they co-own: This is called an equity joint venture.
Each party might own the same percentage of the company, or they might divide the
ownership so that one partner owns the majority of the company. For example, two
parties could own 50 percent each, or four parties could own 25 percent each;
alternatively, one party could own 60 percent and the other could own 40 percent.
 JOINT VENTURE
• b) Starting a Cooperative Joint Venture Rather than create a separate legal entity, the
firms could simply partner for a designated period of time: This is called a cooperative
joint venture. Through this partnership, they can take advantage of marketing
conditions that increase demand for a service they can offer together. Firms also
pursue research and exploration together through this type of agreement. The parties
draw up a contract outlining each party's responsibilities and how much of the profits
each party receives.
 INTERNATIONAL DISTRIBUTORS &
AGENTS
• Please refer to HBR article shared:

“Seven Rules of International Distribution”