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Study 1
1. Provide a scenario where a company would enter a foreign market using the following modes of entry. Be sure to provide one scenario for each mode:
Give justification for your choices using the advantages or disadvantages for each mode discussed in course readings.
A company decides the mode to enter a foreign market by taking into consideration factors like transportation costs, trade barriers, political risks, economic risks, other costs etc.
Exporting:
A manufacturing company might choose exporting as a mode of entry to a foreign country because it is easier for them to manufacture at a centralized location and export the products to other nations (Hsu, 2013). For e.g.: Samsung manufactures Chips in Korea and exports it to its assembling and other manufacturing locations or sells it across the world (Cavusgil, 2014). Through this mode companies utilize the low cost labor in certain countries for manufacturing and reduce overall costs. It can also serve strategic purposes.
Licensing:
Under this a licensor grants another entity license to its properties and offers know how of technology, permits to markets etc (Jayachandran, 2013). For e.g.: Coca Cola licenses the rights to manufacture and sell accessories and clothing to other smaller companies. This helps it utilize its intangible property without developing the business for it. But inconsistent product quality may affect image negatively.
Franchising:
In franchising system the company sells its intangible property to franchisor under the abiding of strict rules and policies. For e.g.: McDonalds opens franchises all around the world through franchisors but ensures that they follow regulations. This can be done through limited financial commitment.
Creating a turnkey project:
Companies that are into construction or mining business may choose turnkey mode of completely delivering product where nothing more has to be done (Roberts, 2014). This...