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The decision of how to enter a foreignmarket can have a significant impacton the results.

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Common Market Entry Modes

Joint VentureCompany

Licensing

Acquisition

Joint Venturing

Local Firm

New Subsidiary

Company

Green Field Entry

HOME COUNTRY HOST COUNTRY

Export

MNE

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World Market

Principal Motives for Intl Expansion

Locations

Economies

Economiesof Scale

Economiesof Scope

To seek lowerproduction factor

costs

To expand sales andproduction volume

To exploitproprietary assets

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There are two major types of entrymodes: equity and non-equity modes.

The non-equity modes categoryincludes export and contractualagreements. The equity modes categoryincludes: joint venture and wholly

owned subsidiaries.

http://en.wikipedia.org/wiki/Exporthttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/Wholly_owned_subsidiarieshttp://en.wikipedia.org/wiki/Wholly_owned_subsidiarieshttp://en.wikipedia.org/wiki/Wholly_owned_subsidiarieshttp://en.wikipedia.org/wiki/Wholly_owned_subsidiarieshttp://en.wikipedia.org/wiki/Wholly_owned_subsidiarieshttp://en.wikipedia.org/wiki/Wholly_owned_subsidiarieshttp://en.wikipedia.org/wiki/Wholly_owned_subsidiarieshttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/Export

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Licensing

Licensing is where your own organization charges a fee and/or royalty forthe use of its technology, brand and/or expertise.

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Licensing Agreement

Local Firm

Licensing of TechnologyHOME COUNTRY HOST COUNTRY

MNE

Fees and Royalties

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When Is Licensing Appropriate?

Well codified knowledge

Strong property rights regime

Location advantage

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An international licensing agreement allowsforeign firms, either exclusively or non-

exclusively to manufacture a proprietorsproduct for a fixed term in a specific market.

In this foreign market entry mode, a licensorin the home country makes limited rights or

resources available to the licensee in the hostcountry.

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Advantages and reasons to uselicensing

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.

Obtain extra income for technical know-how andservices

Reach new markets not accessible by export fromexisting facilities

Quickly expand without much risk and largecapital investment

Pave the way for future investments in the market

Retain established markets closed by traderestrictions

Political risk is minimized as the licensee isusually 100% locally owned

Is highly attractive for companies that are new ininternational business.

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Disadvantages and reasons

.

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Lower income than in other entry modes.

Loss of control of the licensee manufacture and

marketing operations and practices dealing toloss of quality.

Risk of having the trademark and reputationruined by a incompetent partner.

The foreign partner can also become a competitorby selling its production in places where theparental company is already in.

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MORE ABOUT LICENSING Licensing essentially permits a company in the

target country to use the property of the licensor.Such property usually is intangible, such astrademarks, patents, and production techniques.The licensee pays a fee in exchange for the rightsto use the intangible property and possibly fortechnical assistance.

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THANK YOU