After a firm has decided to internationalize, it must select the entry mode and the organizational and contractual arrangements to bring its products and services to the foreign market. This note presents a typology of the different modes, outlining various strategies companies can follow when expanding internationally: exporting, licensing and franchising, and directing investments through wholly-owned subsidiaries and joint-ventures. Each strategy has advantages and disadvantages and should be used based on the end goal of the company. This note includes a simple model that shows the trade-off between control and risk when deciding the type of entry mode to pursue.
Note on Entry Mode
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After reading and discussing the material, students should:
- Identify the reasons why a firm may want to expand globally.
- Discuss the extra expenses involved when a firm expands globally and how to offset those costs.
- Define "entry mode" and the three basic entry modes firms can use when internationalizing.