explain different modes of entry for and international business firm.

DIFFERENT MODES OF ENTRY IN INTERNATIONAL BUSINESS

1. Exports

Export refers to the physical transfer of products and services via a customs port while adhering to the laws of both the country of origin and the country of destination. Direct or indirect exports can be distinguished based on the exporter's involvement. Direct exporters export their products and services under their own names, with the customer sending the money straight to them through the required channels and channels. The term "appropriate channel" refers to both the legal export of goods through a customs port and the remittance through the banking channel in the currency that is quoted in the invoice. Direct exporters receive their products from indirect exporters. They are dependent on direct exporters since they lack knowledge, connections abroad, and labour. Rarely do farmers export wheat by themselves. Craftspeople are unable to make contacts abroad to close deals. As a result, they start exporting indirectly. Although not under their names, their products are sold in other nations. Exporters can be grouped in several ways:

1. They fall into one of two categories: small exporters and large exporters, depending on the size of the company. The current national trade policy offers incentives and facilities to support small and large exporters in various ways who hold status as a result of their success in earning foreign currency.

2. The product lines that are exported are either categorised as a single product or as many product lines, depending on the product lines.

3. They can be categorised as proprietary, partnerships, private limited businesses, or public limited companies depending on their legal status.

4. They are categorised as single-destination exporters or multi-destination exporters depending on the final destination of their exports. Most businesses nowadays operate under the multi-product, multi-location, multi-strategic, and multi-dimensional operations ethos.

5. They fall into two categories: dynamic exporters and occasional exporters, depending on how frequently they export.

2. International licensing

A long-term agreement between the licensor and the licensee for the use of the brand name, marketing, know-how, copyright, work method, and trade mark in exchange for a licence fee is known as an international licence. For instance, the British American Tobacco Corporation (BATS) has granted licences to produce their brand of cigarettes, "555," in several nations. ITC is the authorised producer of "555" in India. Heineken of the Netherlands has an exclusive licence to make and market Pepsi cola in the Netherlands according to a licence agreement with Pepsi. The licensor is only minimally involved in daily operations. Thus, the rewards are also relatively meagre. The territory and the duration are specified in the licencing. The Licensor grants this licence after achieving such a prestigious position internationally. It has a brand command.

3. Franchising

In a form of licencing known as franchising, the franchiser has more influence over the franchisee. The principal component of the product is provided by the franchisor, who also offers the franchisee the following services: TRADEMARKS, first operational systems, PRODUCT & BRANDS.

 Franchises also require business support systems including advertising, personnel training, and quality control. Franchise brands including McDonald's, Dairy Queen, Domino's Pizza, and KFC are well-known. Franchisees for NIIT & Aptech have been selected in China, South East Asia, the Gulf States, and Africa. Operators in the hotel industry with a good reputation include The Hilton and Marriott. The national McDonald's franchisee in India is Jatia's. Franchisees are entirely responsible for on-site investments, Personnel, operations, and promotions. In reality, the franchisor is committed to upholding a standard for high-quality brand logos and emblems around the globe. Yet, the product can be modified according to the sociocultural context of the nation. In Russia and India, McD's sells BEEF BURGERS and VEGAN BURGERS, respectively. 

While the economy is booming, the franchisers will sometimes start the procedure. Franchisees start the process and are required to cover full costs in many underdeveloped countries.

4. Contract Manufacturing

Several businesses outsource their manufacturing and focus mostly on marketing activities. Finding a manufacturing facility to make goods at a reasonable price in any location in the world is known as contract manufacturing. Nike purchases its sporting shoes from several South East Asian factories. Mega Toys sources its products in China. Several multinational corporations with roots in Europe have chosen South East Asia, China, and India as their industrial hubs. There are contract manufacturing agreements between companies like Mark and Spencer, J.C. Penny, Target, and H&M all over the world. Business process outsourcing (BPO) and knowledge process outsourcing are two options that contract manufacturing with a focus on the service sector presents for Indian businesses (KPO). All of the rich countries are now final consumers of goods and services that are outsourced from developing countries.

5. Contract marketing

Even those businesses with great production capabilities might not all be equally competent in marketing. Yet, they might feel at ease interacting with global marketing outlets like TESCO, Maeys, "K" Mart, Wal-Mart, and Spinneys. Some industrial facilities form a marketing arrangement and focus more on producing goods at reduced prices. Thermax, ion exchange, and Supreme Industries have chosen marketing companies in other nations with strong technical support backgrounds. The bulk of technology-based businesses fundamentally needs to find capable businesses with marketing infrastructure to push their goods or initiatives aggressively. Several Indian businesses serve as contract marketers for medical devices, dental supplies, and hearing aids made in Germany. They are required by their contract to meet TARGETS & TERRITORIES.

6. Management contracts

Businesses with a poor degree of management expertise and technology may go to foreign nations for assistance. A management contract is an arrangement between two businesses whereby one business offers managerial and technical help in exchange for just financial remuneration, which may take the form of a fixed fee, a percentage of sales, or a cut of the profits. Such services are provided in developing nations by KLM, Air France, and Delta Airlines. Exxon is a significant player in the Gulf region's oil exploration industry.

7. Joint venture

VENTURE COMES FROM ADVENTURE, which is a synonym for NEW in terms of either market, technology, or environment. A joint venture is when two venture partners enter into a legally binding agreement to launch a project in either their home nation, the host country, or a third country. Both sides agree to share in the risks and the rewards in this situation. For instance, the Taj hotel chain has a collaborative venture to build five-star hotels in Russia. Recently, Mahindra & Mahindra and Renault formed a joint venture to build automobiles. Joint ventures have historically been a dismal failure in big numbers. Every venture begins by promising both venture partners fantastic potential. But, once the operation actually begins, a few functional-level complaints and problems are unavoidable. As a result, both venture partners need to be familiar with all the management, investment, and legal requirements of the nations in which they conduct business. Each person's function should be clearly stated in the business units' operation manuals and guidelines. As a result, a joint venture is nothing more than a "marriage binding" between two partners from diverse backgrounds who have an understanding, dedication, and history of successful collaboration.

8. Collaboration

Collaboration only addresses a subset of the functions, but a joint venture addresses the project as its whole, in terms of money and proportionate partnership commitments. For instance, Kawasaki of Japan and Bajaj Auto have a technological partnership that provides technology for two-wheelers. Ind-Suzuki, Kinetic Honda, and Hero Honda are three other well-known technology partnerships. Collaborations in technology are encouraged by all developing nations. Investors in the US, Japan, Germany, and the UK reaped the benefits of providing technical know-how to underdeveloped countries. By providing instructional methods, the renowned Kellogg Management School has partnered with the Indian School of Business (ISB) in Hyderabad. Similar alliances in finance, human resources, information systems, and strategy are possible. TIE-UP is a frequent acronym for cooperation.

9. Foreign direct investment

Investment is the movement of money from one location to another. Businesses that are frequently engaged in foreign trade invest their capital through ownership and management in bases for manufacturing and marketing. Even if the gains are anticipated after a protracted gestation period, companies like Kellogg, Pepsi, Coca-Cola, and the Hyatt hotel chain are eager to invest. Every growing nation is now establishing tactics by providing a lot of incentives to draw in investors. International businesses use the following techniques: a. To achieve strategic synergies, they govern their activities through subsidiaries. b. Their use of technology, manufacturing know-how, intellectual property rights, and brand recognition gives them control. c. A team or one permanent individual is assigned to oversee daily activities in the country of operation. Direct investment is the most alluring aspect of the operation because it helps to maximise resources in the host nation while also creating jobs and raising the country's standard of living. The exposure of the host nations to cutting-edge technology and high-quality goods is one of the other significant advancements over the past 20 years. Since capital is a valuable resource and is being brought in through investment, it is advantageous for the host nation. The main drawbacks are host country constraints, unclear rules regarding profit repatriation, and the elimination of small and medium-sized businesses as a result of the investor's financial clout. A few South American states, such as Argentina, and a few South East Asian countries, including Indonesia, became victims of the hegemonic pressures of foreign capitalists. They believe that investments could lead to the old colonialism resurfacing. In emerging nations, foreign investment has just really taken off in the last twenty years. Huge foreign investments have begun to flow into developing nations like China, Taiwan, India, Brazil, Argentina, and others. It is very advantageous to both the host nation and the investor if it occurs in specialised industries including infrastructure, mining, maritime technology, and agro-processing.

10. Mergers and acquisitions

In this scenario, the local business chooses a foreign business and merges with it. The ownership is taken over by the foreign corporation. This method of entry provides a significant competitive advantage over alternatives. These businesses expand their global manufacturing footprint and distribution system. By owning Loreto, Proctor & Gamble entered Mexico and quickly rose to the top. In India, Tata Bearing purchased Metal Box. As a result of the low acquisition cost, it is a simple and quick method. The drawbacks include the fact that a. it is a complicated task involving banks, attorneys, bureaucrats, and obviously politicians. b. Acquisitions may be subject to limitations imposed by the host nations. c. The labour issue is a significant barrier to acquisitions, particularly in emerging nations where unemployment is a serious problem. The first purchase of an Indonesian steel mill by the global STEEL-KING L.N. Mittal was a success. There were a tonne more purchases made in Trinidad, Kazakhstan, Hungary, and other places. Hindalco's recent acquisition of Novelis by the Aditya Birla Group company has improved its production synergies and market access for the non-ferrous category on the global market.

11. Take-overs

To become a leader in the industry and ensure success, a corporation will use this technique to find a healthy unit with a strong brand name and network and place it under the control of another unit. Competition is inevitable since there can be a lot of parties vying to take over a well-known business. There can be only one victor, and that person or thing must put up with conflict. As a result, the procedure is known as a "hostile takeover," and the victor is referred to as a "takeover tycoon." The Hindujas' acquisition of Ashok Leyland and Unilever's acquisition of Brook Bond and Lipton are two well-known instances. There are several levels of the takeover, including corporate takeovers, business takeovers, product takeovers, and brand takeovers. Several company success stories have been created via takeovers in the past. For instance, Unilever's acquisition of Brook Bond and Lipton strengthened its position as a pioneer in the Indian tea market. Always more expensive than acquisitions, takeovers have a higher chance of succeeding.

12. Turnkey projects

A contract where a business is totally involved from conception to execution is known as a turnkey project. It includes everything from the provision of labour, funds, and construction of the facility through its installation, commissioning, and trial operation. Either a fixed price is paid to the turnkey project contractors, or the cost plus profits are paid over time. Currently, turnkey projects are carried out for infrastructure including power plants, airports, refineries, railway lines, motorways, and dams. Turnkey contractors for international projects include Bechtel, Brown Bovery, Hyundai, Mitsubishi, L&T, and Daewoo. Depending on the extent of engagement and responsibility, they may use names like BOT (Build, Operate, and Transfer) or BOOT (Build, Own, Operate, and Transfer). Each time a turnkey project contractor can save money on supplies, labour, or time, all of these factors contribute to increased profitability.

13. Countertrade

Foreign exchange is required for transactions in each of the aforementioned operations. The provider receives payment in foreign currency for exports. Profits from joint enterprises are split in foreign currency. The licence cost for international licencing is paid in foreign currency. Obtaining payments in foreign currencies is a problem that many global corporate companies are currently facing. The great majority of nations lack the required foreign exchange reserves to send money abroad. They are still able to participate actively in global trade, nevertheless, thanks to countertrade arrangements. In the lack of a nation's foreign exchange reserves, countertrade emerged. Even when a country has foreign exchange reserves, it occasionally refuses to pay. This resistance will prevent the money from being repatriated. The best course of action is to engage in counter-trade activities. Three categories can be used to categorise illicit trade: 1. Totally Barter 2. Repurchase 3. Counter Buying. Simple barter Under this system, the bilateral trade of commodities and services between two countries is determined by the negotiating power of each nation. Deals can be reached between a country with excess products and one where there is a scarcity of the same things. A distinct range of goods that are in low supply in the first nation can be in excess in the second country at the same moment. As a result, both nations can trade goods by agreeing on a price in advance for a specific time. This ancient method, which was common throughout the time of the ancient civilizations, is still in use today. Mohenjadaro and Harappa received their wood for marine use from the Indus Valley. With sophisticated pre-fixation of value, the same practice has reappeared. According to its definition, pure barter is "the reciprocal exchange of goods and services between two countries based on their respective bargaining capacities so that both countries benefit."

 A buyback is a contract whereby the representative from the home country establishes a project in the host nation, which lacks the foreign exchange reserves to completely reimburse the supplier for the project. The project's total cost is split between payment in foreign currency and payment in kind. Typically, the home country representative acquires the project's final result for a relatively cheap price. To increase the profit margin, this might be offered in the home nation or even redirected to a third country. As many turnkey project contractors earn more from selling the finished product anywhere in the globe at a larger margin, buyback agreements have grown in popularity. Projects are established by Bharat Heavy Electricals (BHEL) in different nations. It receives payment in foreign currency to some extent. Tankers from the host nation are taken back and sold in any other nation for the remaining sum, as well as being brought back to India for a greater price. Such agreements make it possible for domestic enterprises to quickly get worldwide visibility. As the project is situated there and is controlled by the host nation, it ultimately benefits that nation.

 A technique involves supplying product X to nation B through counter buy by firm A from country A. When nation B has an excess of product Y, it makes up for it by selling it to firm A, which finds a market for it in, say, country C. A country D that has access to enough foreign currency to pay for it purchases product Z from country C. One nation D has paid country C, and country A will next receive a payment that was sent through firms B and C. As a result, purchases are made in opposition to supply until a nation with adequate foreign exchange reserves is identified. The exchange. Utilizing this system, numerous multinational corporations profit greatly at every stage. For instance, Pepsi International sends rice from India to South Africa. Steel that is equal to the amount of rice collected is purchased from South Africa and sent to Ghana. It buys a comparable amount of coffee and cocoa from Ghana and sells them to Canada, which has foreign exchange reserves to pay for them. The corporation can do normal tasks in the Far East by delegating one representative or employee, such as Majuko, Mitsubishi, and Marubeni Company. With the counter-purchase mechanism, the conventional economic theory of international interdependence has been completely revised. Nowadays, a government does not necessarily need to maintain adequate foreign exchange reserves to do commerce with other nations. One can continue trading even without foreign exchange reserves. The model on the next page illustrates the advantages a successful transaction has for both the home nation and the host country. Everyone may conduct business with any nation now. In the past, the use of foreign currency as a means of trade dominated all nations. Few nations with foreign exchange reserves can easily participate in international trade because of the counter-purchase system.