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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/Export8/4/2019 Foreign Market Entry Mode
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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