Modes of entry to the International Business
1. Exporting-- Exporting is the most traditional method of entering into foreign market which refers to the sale of goods/services produced by a company based in one country to customers that reside in a different country. Exports deal with physical movement of goods and services from one place to another.
2. Complementary Exporting/Piggy Backing-- Complementary exporting involves collaborative agreements with other firms wherein distribution channels of another firm (known as carrier) are used by the domestic company (known as rider) to make its product available in the overseas market. This is also known as piggy backing.
3. Co-operative Export- Firms involved in collaborative agreement with other firms to produce products to export. As small firms have insufficient resources, lack of adequate management or less market resources available, they do not achieve economies of scale in manufacturing. That's why by cooperating with each other these firms achieve higher economies of scale.
4. Manufacturing Abroad– this is the most common and easiest way to enter into international business. Under this strategy goods are produced in the foreign country itself where they have to be actually sold. Moreover this method is more suitable for the firms where home currency is strong as compared to the foreign currency. As manufacturing abroad in such a country will reduce the cost of production and will help the firm to gain maximum efficiency.
5. Investment entry mode– This mode is selected when social economic and political environment in the foreign country is conducive for such Investments in this mode company invest funds in the foreign country besides using its on technology managerial expertise and risk bearing capacity investment entry mode may be selected for those countries where factors a production like land, labor are available in abundance and at cheaper rates and the physical infrastructure is well developed. Various methods used in this mode like wholly owned subsidiaries, assembly operations, joint ventures, strategic Alliance, green field and brown field investments, merger and acquisitions.
6. Counter Trade– Counter trade is bilateral agreement between two firms of different countries where in one business unit import goods from a second firm in another country on the condition that the second firm will also import goods of the same value from the first firm.