NAME: FATIMA SHAHID

CLASS: BBA-8
EP # 1802013
ASSIGNMENT # 2: STREATEGIES TO ENTER GLOBAL MARKET
1. Foreign direct investment (FDI)
When you invest directly in facilities in a global market, this is known as foreign direct
investment (FDI). To cover costs like buildings, technology, and people, a large sum of money is
required. FDI can be made by starting a new business or buying an existing one. A foreign direct
investment, according to the IMF, occurs when an investor obtains more than a 10% stake in a
company. Anything less than this is considered part of a ‘stock portfolio.'
Types of FDI:
a) Horizontal FDI occurs when money is invested in the same industry in another country. To
put it another way, a company invests in a foreign company that makes similar products. For
example, Nike, a US company, may buy Puma, a German company. Because they are both in
the sportswear sector, they are considered horizontal FDI.
b) Vertical FDI occurs when a company invests within the supply chain but not in the same
industry. To put it another way, a company invests in a foreign company that it may supply
or sell to.
i. For example, Hershey's, a chocolate company based in the United States, may consider
investing in cocoa producers in Brazil. Because the firm is purchasing a supplier, or
potential supplier, in the supply chain, this is known as backward vertical integration.
ii. We then have forwards vertical integration. So, this is where a firm invests in a foreign
company that is further along in the supply chain. For instance, Hershey’s may look to
purchase a share in Alibaba; where it sells its products.
c) An investment in a completely unrelated industry is referred to be conglomerate FDI. In
other words, it has no direct connection to the investor's business. Walmart, a US store,
might, for example, invest in BMW, a German automaker.
2. Exporting
Exporting is transporting goods made in one country to be sold in another. For a variety of
reasons, firms believe exporting to be a low-risk approach. The following are the reasons of
export being less risky:
 First, mature items in a native market may find new growth opportunities elsewhere.
 Second, some businesses believe that exporting existing items is less risky and more
profitable than inventing new ones.
 Third, companies with seasonal domestic demand may opt to advertise their products
internationally to offset the impact of seasonal demand on their revenue streams.
 Finally, some businesses may choose to export since there is less rivalry in other countries.
3. Franchising
Under a licensing agreement, a firm (licensor) provides a product to a foreign firm (licensee) by
granting that firm the right to use the licensor’s manufacturing process, brand name, patents, or
sales knowledge, in return for payment.
Advantage: In this agreement, the licensee gains a competitive edge, while the licensor gains
low-cost access to a new market. Because of a lack of finance, import restrictions, or regulatory
constraints, this is frequently the only way for a company to advertise abroad.
Disadvantages: There are various hazards associated with this procedure. It's usually the least
profitable way to break into a foreign market, and it necessitates a long-term commitment. In
addition, if a licensee (franchise) fails to successfully recreate a licensed product or distributes
licensed products ineffectively, the original product's brand image may be tarnished.
Example: Franchising has allowed Holiday Inn, Hertz Car Rental, and McDonald's to grow into
new markets.

4. Licensing
A licensing model is one in which a corporation sells licenses to other (usually smaller)
businesses to use its intellectual property (IP), brand, design, or business programs. These
licenses are normally non-exclusive, which means they can be sold to a number of different
companies who serve the same market. The licensing company may have influence over how its
IP is utilized under this agreement, but it does not have control over the licensee's business
operations.

5. Joint venture
 A joint venture is a cooperation between two companies, one domestic and one international.
Both partners put money into the enterprise, share ownership, and control it.
 Typically, the foreign partner contributes market knowledge, business connections and
networks, and access to other in-country aspects of the firm, such as real estate and
regulatory compliance.
 Because joint ventures are riskier and less flexible than other alternatives, they need more
commitment from companies.
 In many nations, joint ventures can provide tax benefits, especially where foreign-owned
enterprises are taxed at higher rates than domestically owned businesses.
 Joint ventures can also be multi-national. When two or more company partners join forces to
conduct business in a global territory, this is the most usual scenario.
6. Strategic alliance
Strategic alliance refers partnership of a domestic and foreign country in anything. Like you can
get a partner in a foreign country to simply help with marketing (and receive a cut of profits).
However, if you can find a good partner, you'll be able to grasp your new market lot more
quickly because he or she will know everything about it that you don't.
7. Cartels
A cartel is a grouping of producers that work together to protect their interests. Cartels are
created when a few large producers decide to co-operate with respect to aspects of their market.
Once formed, cartels can fix prices for members, so that competition on price is avoided.
The following are some of the negative effects on consumers:
a) Higher pricing — cartel members can all raise prices at the same time, reducing demand
elasticity for any individual member.
b) Members may choose to hide prices or withhold information, such as hidden costs in credit
card transactions, due to a lack of transparency.
c) Restricted output - like with OPEC's oil quotas, members may agree to limit supply onto the
market.
d) Carving up a market - cartel members may agree to divide a market into regions or
territories in order to avoid competing in each other's territory.