1

Modes of Entry
in International
Business
Presented by
Swastika Budhathoki (207025)
2

Table of Contents

1. Introduction
2. Different modes of entry in international business
85%
3. Conclusion
3

International Business

• Purchase and sale of goods and services

• Includes consumer goods, raw materials, food,
machinery, etc
4

International Business

Modes

Manageme
Franchisi
Exporting Importing FDI Licensing nt
ng
Contracts

Turnkey
Joint
Operation
Ventures
s
Exporting and Importing

• Selling goods and services-Exporting ● Purchasing goods and services-

Importing
• The export includes ● The import includes

• Indirect exports ○ Import brokers

• Direct exports
Foreign Direct Investment

● An ownership stake in a foreign country,

● Types of FDI;

○ Horizontal FDI: A company establishes the same type of business

operation in other countries,

○ Vertical FDI: A company establishes a complementary business in

other countries.

More than $1.8 trillion of foreign direct investments were made in 2021.
Licensing
● A company (the licensor) grants rights to intangible property to another
company ( the licensee) to use in a specified geographic area for a
specified period.
● In exchange, the licensee ordinarily pays a royalty.
● Licensing agreements may be used for patents, copyrights, trademarks,
and other intangible property.
● Has an economic motive
● Eg. Disney
Franchising

● A business agreement between a franchisor and a franchisee

● More complicated business relationships and agreements than licensing
● Owner of a business: Franchisor
● Key point; They offer the same products and services
● Eg. McDonald, Subway, Pizza Hut, etc
Management Contracts

● Management contracts are means by which a company may transfer talents

by using part of its management personnel to assist a foreign company for a
specified period for a fee.
● Primarily used when the foreign company can manage better than the owners
● Eg, British Airport Authority has contracts to manage airports in Indianapolis
(U.S) , Naples (Italy), and Melbourne (Australia)
Turnkey Operations

● Type of collaborative arrangements in which one company contracts with

another to build complete, ready-to-operate facilities
● Related to industrial equipment manufacturing and construction companies,
● Eg. China State Construction Engineering and Shanghai Construction Group
have worked on a subway system in Iran, a railway line in Nigeria, and many
more,
Joint Ventures

● A type of ownership sharing popular among international companies is the

joint venture, in which more than one organization owns a company.
● When more than two organizations participate, the joint venture is sometimes
called a consortium
● Eg. Samsung and Spotify, Ford and Toyota
Conclusion

● Problems occur in collaborative arrangements because of different levels of

importance in venture

● To minimize the problems, management constantly needs to assess the other

company’s work, and choose partners wisely.

References
● https://www.workspan.com/blog/strategic-alliance-definition/

● https://www.nerdwallet.com/article/small-business/franchising-vs-licensing

● https://www.investopedia.com/terms/f/fdi.asp

● https://nepaltradeportal.gov.np/web/guest/data-visualization

● https://www.tonyrobbins.com/business/what-is-a-joint-venture/

● https://d-nb.info/972021507/34
● Daniels, J.D., Radebaugh L.H., Sullivan D.P., Salwan P, (2011). International Business Environments and
Operations, Dorling Kindersley (India) Pvt.Ltd, licensees of Pearson Education in South Asia, Twelfth
Edition
● Google Images