Different Modes of entry into international business

Exporting, Importing & counter trade

GUIDED BY: PRESENTED BY:

Prof. Dr. NEHA GUPTA SOUMYA RANJAN BEHERA (196)
SOUMYA RANJAN DASH (197)
SOUMYA RANJAN PARIDA (198)
SOUMYA RANJAN PATTANAYAK (199)
SOUMYA RANJAN SAHOO (200)
SOUMYA RANJAN SWAIN (201)
What is International Business

Different modes of entry

Exporting

Advantages and Disadvantages of Exporting

Importing

Advantages and Disadvantages of Importing

Counter Trade

Advantages and Disadvantages of Counter Trade

Case study on Huawei

What is International Business

International business encompasses all commercial activities that take place to

promote the transfer of goods, services, resources, people, ideas, and technologies
across national boundaries.
Different modes of entry

• Exporting
• Licensing
• Franchising
• Contract manufacturing
• FDI
• Strategic acquisition
• Portfolio investment
• Joint ventures
What is Exporting?
Exporting is the process of sending or carrying of the goods abroad, especially for
trade and sales. Exporting is the simplest and most widely used mode of entering
foreign markets.

exporting

Indirect Exporting Direct Exporting

Indirect Exporting Direct Exporting
Direct Exporting
Direct exporting is selling the products in a foreign country directly
through its distribution arrangements or through a host country’s
company.

indirect Exporting

Indirect exporting is exporting the products either in their original form

or in the modified form to a foreign country through another domestic
company.
Advantages of Exporting

 Selling goods and services to a market the company never had before boost sales and increases
revenues.

 By going international companies will participate in the global market and gain a piece of their
share from the huge international marketplace.

 Selling to multiple markets allows companies to diversify their business and spread their risk.

 Capturing an additional foreign market will usually expand production to meet foreign demand.
disadvantages of Exporting

 It takes more time to develop extra markets, and the pay back periods are longer.

 When exporting, companies may need to modify their products to meet foreign country safety
and security codes, and other import restrictions.

 Collections of payments using the methods that are available are not only more time-consuming
than for domestic sales, but also more complicated.

 Finding information on foreign markets is unquestionably more difficult and time-consuming

than finding information and analyzing domestic markets.
What is importing?
Importing refers to buying goods and services from foreign sources and bringing them back
into the home country. Importing is also known as Global sourcing.

Advantages of Importing

Better Profit Good Quality

A Good & Cut Down

Strategic Manufacturing
Decision Cost
 disadvantages of Importing

Outflow of
Currency
Foreign
Risk Exchange

Domestic
Manufacturers Political Risk
are hit
 What is counter trade?
Countertrade is an alternative means to structuring an international sale when
conventional means of payment are complex or nonexistent. 

Barter

Types of Counter Trade

Switch
Offset
trading

Counter
Buyback
purchase
 Exchange of goods or services directly for other goods or services without
Barter- the use of money as means of purchase or payment. Example: One party
trades salt for sugar from another party.

Wheat & Rice

OIL

Switch trading- Practice in which one company sells to another its obligation to make a
purchase in a given country.
Corn
Country - A Country - B
Cotton
Cotton
Country - C
Counter purchase Sale of goods and services to one company in another country by a
company that promises to make a future purchase of a specific product
from the same company in that country.

Concentrates Rubies
PEPSI COLA USSR PEPSI COLA USSR
Rubies Vodka and
Wine
This occurs when a firm builds a plant in a country, or supplies technology,
Buyback equipment, training, or other services to the country, and agrees to take a
certain percentage of the plant’s output as partial payment for the contract.

Plant & Machinery,

Technology Etc.

Payment in Cash
SELLER Goods produced by
BUYER
this plant
 Agreement that a company will offset a hard-currency purchase of an
Offset unspecified product from that nation in the future. Agreement by one nation
to buy a product from another, subject to the purchase of some or all of the
components and raw materials from the buyer of the finished product, or the
assembly of such product in the buyer nation.

Rafale deal between India and Foreign Vendors

Advantages disadvantages

Allows for entry The value

into difficult proposition may
markets. be uncertain.  

Overcomes credit Negotiation

difficulties. complexity. 

It provides a trade
financing alternative Higher
to the countries transaction
having adverse
balance of payments
costs
 CASE STUDY ON HUAWEI

Date- 15th September 1987

Place - Shenzhen, China
 Introduction

Huawei is a private hi-technology company. It is a leading

telecommunication equipment manufacturer in China. In 2005, the
contract sales of
Huawei are USD8.2 billion, of which, nearly 58% (USD4.8 billion) comes
from foreign
markets. Compared with 1999, only less than 4% of the total sales of
Huawei came
from foreign markets. Indeed, Huawei has achieved great success in
internationalization in the past few years.
 A brief summary of Internationalization
In 1997, when its overseas office opened there, Russia was
facing an economic crisis. Many domestic companies had
slowed down their operations due to political and financial
uncertainty. Huawei seized this opportunity and invested in
Russia. However, initially it faced severe difficulties in
attracting orders. Today, the Russian market is among the key
priorities for Huawei. It has 11 offices, R&D and learning
centers throughout the country, and is among the top three
suppliers of smartphones.
 The Foreign Entry Modes Used by
Huawei
• Joint Venture in Russian Market
• Export Entry Mode in South America, Asia and
Africa
• Contractual Entry Modes in North America, West
Europe and Other Countries
• Different Entry Modes for Different Products
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