Foreign Market Entry Modes

Please note that the content of this book primarily consists of articles available from Wikipedia or other free sources online. Foreign market entry modes differ in degree of risk they present, the control and commitment of resources they require and the return on investment they promise. There are two major types of entry modes: equity and non-equity modes. The non-equity modes category includes export and contractual agreements. The equity modes category includes: joint venture and wholly owned subsidiaries.Direct exports represent the most basic mode of exporting, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Foreign demand is treated as an extension of domestic demand. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. Direct exporting relies on two principal channels: the foreign distributor channel, and the foreign subsidiary channel. A third, less common channel, is direct contact between the manufacturer and the final buyers in the target market.