Modes of Foreign Market Entry | Licensing vs Exporting

Globalisation has provided a lot of benefits to international trade and business practices. A business can now easily make a mark by entering a new market by expanding its services, people, and identity. Expanding does not just give you a hard time for a while but it also gives you various opportunities to earn huge profits. Let us take a look at the different modes that a business can take an entry to a foreign market.

Different modes of Entry

Licensing

Licensing comprises of franchising, contract manufacturing as well as Turnkey contracts. It assists in forming contractual agreements. Students who are pursuing International Business and other management courses should be able to understand about licensing as well as strategic decision-making.

Exporting

Exporting is one of the easiest ways to enter an international market. It begins by selling products and services to people in a foreign country and then these get outsourced from the home country.

Partnerships and Strategic Alliances

The following method under modes of foreign market entry is considering partnerships as well as forming strategic alliances with a local partner. If we take a look into strategic alliances, it involves a contractual agreement where two or more parties cooperate in a certain way for a specific time that moves toward a common purpose plan.

Acquisitions

An acquisition gains control of another firm by paying the owners a purchase price or by purchasing its stock as well as exchanging the stock for its own. Acquisitions are a strong way of having established and quick access to a new market.

Wholly Owned Subsidiary

The process of developing a new and wholly-owned subsidiary is a bit complex but it gives you full control and has the ability to provide above-average returns.

Let’s take a look at the two most essential modes of entry - Licensing vs Exporting.

Licensing vs Exporting

The purpose of writing this section is to explain all the differences between Licensing and Exporting that can give you a clear idea about the various concepts.

Licensing

Licensing is the primary mode of making an entry towards the international market. This is where you get recognition where your own organisation charges a nominal amount against the use of its technology, expertise as well as the brand.

Franchising is another form of taking a license where you get involved with an organisation by taking its brand as well as the concepts. In most of the facets, they are required to be operative in an overseas market (franchisee). Some of the examples include Domino's Pizza, McDonald’s, Starbucks and many more.

Turnkey contracts are involved with a specific set of strategies to build large plants. It often includes building the skills of employees by undertaking training and development sessions within the organisation.

Exporting

There can be many approaches to export to foreign markets: Direct and Indirect. Direct exporting is easy as the organisation itself commits to market its products and services to outside markets on its behalf. While on the other hand, indirect exporting works by employing a home country agency who would get your products into the overseas market.

If you are studying relevant courses in Business Management or International Business, then it is important that you have a clear idea of such concepts. To gain a victory over these concepts, you can speak to the experts who provide International business assignment help.

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