INTERNATIONAL

BUSINESS
 PRESENTED TO:
MISS ZAINAB
 PRESENTED BY:
 USSAMA TAYYAB , B-13038
 SHERIN SEHAR , B-13298
 M.ASAD NASIR , B-13039
 OMER TARIQ , B-13012
 ENTRY MODES

 There are six different modes to enter foreign firm

 EXPORTING
 TURNKEY PROJECTS
 LICENSING
 FRANCHISING
 JOINT VENTURES
 WHOLLY OWNED SUBSIDIARIES
 1.) EXPORTING

 Many manufacturing firms begins their global

expansion as exporters.
 Exporting have some advantages as well as
disadvantages.
 ADVANTAGES AND
DISADVANTAGES
 ADVANTAGES:  DISADVANTAGES
 Avoids manufacturing :
cost.  High transport cost.
 Exporting may helps a  Tariff can make
firm to achieve exporting barriers
experience curve and uneconomical.
location economies.  May compete with low-
 E.G: Japanese cost location
automobiles made manufacturers
inroads into U.S
markets.
 2.) TURNKEY PROJECTS

 Contractor agrees to handle every detail of project for

foreign client.
 At completion of contract, the foreign client is handed
the “key” to the project
 Most common in process technology industries
• chemical
• pharmaceutical
• petroleum refining
• metal refining
 ADVANTAGES AND
DISADVANTAGES
 ADVANTAGES:  DISADVANTAG
 A means of exporting ES:
process technologies
 No long-term interest in
 Can earn a return on the foreign country
valuable knowledge
assets
 May create a competitor
 Can overcome FDI
 Selling process
restrictions technology may be
selling the firm’s core
 Less risky than competency and
conventional FDI competitive advantage
 3.) LICENSING

 Agreement where licensor grants rights to intangible

property to another entity (licensee) for a specified
period, in return for a royalty fee.

 Intangible property may be:

 patents,
 inventions
 formulas
 processes
 designs,
 copyrights
 trademarks
 ADVANTAGES AND
DISADVANTAGES
 ADVANTAGES:  DISADVANTAGES
 Firm does not bear the :
development cost and
risk.
 Lack of capital to
operate in foreign
market.
 Prohibits from doing so
by barriers to
investment.
 4.) FRANCHISING

A specialized form of licensing in which the franchiser

sells intangible property to the franchisee and insists
on rules for operating the business.

 Tends to involve longer term commitments than

licensing.
 Franchisor often assists the franchisee to run the
business on an ongoing basis
 Primarily in the service sector
 E.G McDonald’s, warid telecom etc
 ADVANTAGES AND
DISADVANTAGES
 ADVANTAGES:
 Reduces cost and risk to
enter in a foreign market
 Creates profitable
operations quickly.
 A firm can quickly build
global presence quickly.
 E.G McDonald’s
 DISADVANTAGES
:
 Quality control.
 Profit taken by the
parent company.
 Only services firm do
franchising not the
manufacturing firms.
 5.) JOINT VENTURES

 Establishing a firm that is jointly owned

by two or more otherwise independent firms.
 Typical ownership is 50/50…but not always
 Having 50% or more does not necessarily mean that
you have “control” of the joint venture
 E.G Sony Ericsson
 ADVANTAGES AND
DISADVANTAGES
 ADVANTAGES:  DISADVANTAGES
 Benefit from local :
partner’s knowledge of  Risk giving control of
market technology to partner
 Share costs and risks  Limits ability to engage
with partner in coordinated global
 Reduce political risk strategy
 Overcome investment  Shared ownership can
barriers lead to conflict over
goals and control
6.) WHOLLY OWNED SUBSIDIARIES
 The firm owns 100 percent of the stock and
establishes their presence via a greenfield venture or
an acquisition of an existing firm.
 ADVANTAGES AND
DISADVANTAGES
 ADVANTAGES:  DISADVANTAGES
 No risk of losing control :
of core competency or  Bear full cost and risk of
technology to a foreign market entry
competitor.  Lack of local knowledge
 Tight control over • culture and consumer
operations in different
countries. • competition and
consumers
 Helps realize learning
curve and location • politics and laws
economies.
CORE COMPETENCIES AND ENTRY
MODE
 Optimal entry mode partly depends on the nature of
the firm’s core competency.
 TECHNOLOGICAL  MANAGEMENT
KNOW-HOW: KNOW-HOW:
 licensing and joint  franchising and
venture should be subsidiaries (joint
avoided to reduce ventures) with
risk of losing control over the
technology operations to
 wholly owned protect brand
subsidiaries equity
overcomes this
risk
 exceptions to this
rule exist
 PRESSURS FOR COST REDUCTION
AND ENTRY MODES
 The greater the pressures for cost reductions, the
more likely a firm will pursue a combination of
exporting and wholly owned subsidiaries
 Wholly owned subsidiaries are generally preferred by
firms that are pursuing global standardization or
transnational strategies