A preview and summary of different modes of entry is herewith presented.

1. Group Members
• MANDARY Tejusvi Maheshee
• BUROTY Priya Soohashenee
• ARIA NAICK Keshav
• BUNDHOO Tinadevi
• JAGUESSUR Yasthanandsingh

2. Examples in the Business Context
Mode of Entry
? ?

4. Entering a new market is always a risky
business, with a big risk of failure.
Mode of Entry

5. Mode of entry (cont..)
 When a firm is going to explore a foreign
market, the choice of the best mode of entry
will arise in the firm’s expansion strategy.
 The choice of mode for entering a
foreign market is thus a major issue.

7. 3 Main Categories of Mode of Entry
Export
• Direct
Export
• Indirect
Export
Contractual
• Turnkey
Projects
• Licensing
• Franchising
Investment
• Joint
Venture
• Wholly
owned
subsidiary

9. Exporting
 Frequently employed mode of
internationalization.
 One of the simplest and most
common approaches adopted by
firms in their endeavour to enter
foreign markets.

10. Exporting (cont...)
 A simple definition of exporting :
‘An action by a firm to send produced goods
and services from the home country to other
countries.’
 According to Kotler (2000:374)
the normal way to get involved
into a foreign market is through
export.

11. Generally firms export for two reasons:
1. Firms need experiential knowledge
Exporting has the potential to provide
firms with international experience
without their taking high risk or
strong commitment.
2. To expand their sales in order to
achieve economies of scale.

12. Two types of Export
• Producer sells directly to the
importer
• Very little or no knowledge about
the foreign market is needed
Direct
Export
• A firm in the domestic country is used to
do the exporting for the manufacturer
• The sale of a firm’s products in foreign
markets through an export agent
Indirect
Export

13. Direct Export
 This mode gives the company a
greater degree of control over its
distribution channels.

14. Indirect Exporting
This mode is seen as a good
way of gaining knowledge
about a potentially
interesting market.

15. Floreal Knitwear Ltd
 Leading knitwear manufacturer in
the African Sub-Saharan Region
 Second largest woolmark knitwear
supplier in the world.
 Produces men's, ladies, and kids wear
styles over various knitting gauges.

16. The knitwear is exported to renowned European
and US retail organizations.
Major European retailers such as:
- Marks & Spencer
- Next
- George
- Burton
- Celio
- Hema
- La Redoute
- Carrefour

17. Advantage
No high resource commitment in the targeted
country
Inexpensive way to gain experiential
knowledge in foreign markets

18. Disadvantage
※Export, although rewarding, is generally an
expensive activity which require additional
financial resources.

19.  Toyota (Australia)
 One of Australia's leading automotive
companies.
 A leading manufacturer, distributor
and exporter of vehicles
 Market share of 18 % in 2011

20.  Evidence:
2011 export figure of 59,949 units worth
$1.004 billion
http://www.toyota.com.au/t
Established as a truly global company
 Now tackling the challenge of increasing their
export figures to even greater
and unprecedented heights.

21. The recipe for their sustainable export
success is
‘the ability to understand, meet and
exceed the varied expectations of our
overseas customers’
 Export to 13 destinations
worldwide in Middle East, New Zealand
and the Pacific Islands.

22. Advantage
Low-cost strategy to expand sales
in order to achieve economies of
scale

23. Disadvantages
※Hard to control operations abroad
※Provides very small experiential
knowledge in foreign markets

24. 2nd Type of Mode of Entry
Contractual •Turnkey Project
• Licensing
• Franchising

25. Turnkey Projects
 A method for a foreign company to export
its process and technology to other
countries by building a plant in that country.
The company hires a contractor in the
desired country that they want to create an
operation.

26. Turnkey Projects
 The turnkey contractor is responsible
for the
–Design
–Construction
–Installation of a new plant
–Maintenance of the plant ( in some
cases)

27. At the
completion of
the contract, the
foreign company
gives the “key”
to the project
and it is ready
for operation.

28.  Turnkey projects are most typical in
companies that specialize in expensive,
complex production technologies, such as the
- Chemical industry
- Pharmaceutical industry
- Petroleum refining industry
- Metal refining industry

29. Larsen and Toubro Ltd
Source: http://www.ibef.org/download/Larsen_%26_Toubro.pdf

30.  L&T’s engineering and construction
track record consists of successful
implementation of turnkey projects
in major core and infrastructure
sectors of the Indian industry.
http://www.larsentoubro.com/

31. L&T projects in Mauritius
Construction of:
a turnkey 10.8 mn litre-per-day water
treatment plant at Mont Blanc;
70 m-high, 12-storey Cyber Tower, utility
buildings and site development works for
Business Parks of Mauritius Limited;
The Swami Vivekananda
International Convention Centre.

32. Advantages
Seek the economic gains without the
political complications
Earn profits in a foreign country
Possibility to establish a plant

33. Disadvantages
Risk of revealing companies secrets to rivals
Takeover of their plant by the host country
Does not often have any long-term interest
in the country
May create a competitor

34. Licensing
 A key mode of entry for firms targeting
international expansion.
 Defined as
‘ a contractual mode of entry, whereby a
company (the licensor) grants a foreign firm
(the licensee) the rights to use some or all of its
intangible properties (patents, trademarks,
copyrights, etc.).’
Osland; Taylor; Zou (2001)

35. It is to be noted that, a royalty fee is
given to the licensor.

36. Oracle Corporation
An American multinational computer
technology corporation
 Specializes in developing and marketing
hardware systems and enterprise
software products.

37.  Their goal is:
‘ to help organisations optimize their software
investment by enhancing their understanding
of Oracle's licensing practices’.
 They offer their leadership for corporate best
practices by making licensing information
publicly available.

38.  In Mauritius, Oracle’s Licensing partners are:
 Anglo African LTD
 VESL Technologies Ltd
 De Chazal Du Mee Consulting
 STATE INFORMATICS LIMITED
 SOFTPRO N&P
 HAREL MALLAC COMPUTERS LTD

39.  Has licensed its famous trademark to
clothing manufacturers, which have
incorporated the design into their
clothing.
Coca-Cola

41. Advantages
Speedy entry to foreign market
Marketing of the brand
Can be used as a step towards a more
committed mode of entry

42. Disadvantages
• Hard to monitor partners in foreign markets
• Hard to enforce agreements

43. Franchising
A method of business expansion over
the last thirty years
(Eroglu 1992)
 It involves
‘a franchisor firm that undertakes to
transfer a business concept that it has
developed, with corresponding
operational guidelines, to non-domestic
parties for a fee’.

44.  Franchisors are responsible for
 improving the product/service mix,
 policing outlet quality,
 promoting the brand in the host country.
 High level of trust is needed

45. Examples
• Examples of companies that use franchising as a mode of
entry are
– McDonalds,
– Kentucky Fried Chicken,
– Hilton hotels
(Johnson/Beaton (1998), p. 107; Hill/Jones (1998), p. 263).

46. Pizza Hut
 World's largest Pizza Restaurant
Company
– more than 12,000 restaurants
–in over 80 countries
–30 years of experience in building
great franchise partnerships.

47.  The management of Pizza Hut believes
that that each franchise brings
 Unique insights
 Skills
 Experiences from diverse backgrounds.
Source: http://www.pizzahutfranchise.com/

48. Pizza Hut in Mauritius
• Over the past 20 years, the Happy World
Group is the master franchisee in Mauritius
for 'Pizza Hut' in the Casual Dining market
segment.
• Their network of 12 outlets covers all the
towns in Mauritius.

49. Advantages
Speedy entry to foreign market
Requires a moderate resource commitment in
the targeted country

50. Disadvantages
Could damage the firm’s reputation and
image
In this respect, Pizza Hut takes
franchisee recruitment very seriously.
They want a network of successful
partners; seek individuals who have:

51. Source: http://www.pizzahutfranchise.com

52. BATA
 One of the world's leading footwear
retailers and manufacturers
Source: http://www.bata.com/

53. To enter the new foreign markets and expand
on an international level the Bata brand.
Combine opportunity and local markets
knowledge with reliable partners who have a
long term vision.
Share with the new partner our know-how in
the shoe business.
Give the maximum attention to the different
local needs (fashion trends, climate, seasonal
trends, specific needs, usages and customs).
Source: http://www.batafranchise.com/

54. Advantages
Speedy entry to foreign market
Moderate-cost strategy to expand sales in
order to achieve economies of scale

55. Disadvantages
Does not provide experiential
knowledge in foreign markets
High potential for opportunism
High monitoring costs

56. 3rd Type of Mode of Entry
Investment
•Joint Venture
• Wholly
Owned Subsidiary

57. Joint Venture
 Became an important element of
many firms’ international strategies.
 Defined as
‘an enterprise, corporation or
partnership, formed by two or more
companies, individuals, or
organizations, at least one of which is an
operating entity which wishes to
broaden its activities, for the purpose
of conducting a new, profit-motivated
business of permanent duration.’

58.  Commonly used by firms to as a means of
Competing multi-domestic or
Global competitive arenas
(Porter & Fuller 1986; Harrigan 1988).
Motives for Joint Venture

59. New Markets Take existing
products to
foreign markets
To diversify into
new business
Existing Markets To strengthen the
existing business
To bring foreign
products to local
market
Existing Products New Products

60.  Joint venture is associated with providing
access to :
resource and market,
technology transfer,
reduce political risk and
help to improve the firms competitive
position.
(Bradley 2005:249)

61. Apollo Hospitals Group
 The largest healthcare group in Asia
 With more than 7,500 beds in 43
hospitals
 16 million patients from 55 countries

63. The hospital is
– equipped with the latest technology and high
end medical equipments.
– poised to deliver advanced tertiary care of
international standards to Mauritian people as
well as tourists

64. Advantages
Technology sharing and joint product
development
Reduce political and economic risks as a
result of the involvement of the native
partner

65. Disadvantages
Mistrust over proprietary knowledge
Performance ambiguity - how to split
the pie

66. Toyota Mauritius
Toyota
Tsusho
Corporation
Beechand
Company
Toyota
Mauritius

67.  Continuously worked to contribute to the
sustainable development of society
HOW?
 Through provision of innovative and high-
quality products and services that lead the
times.

68. Advantages
Partners are able to learn from one
another while limiting access to their
own proprietary skills
‘Toyota Mauritius now combines its
experience in the local market and the
know-how of a global network to
reinforce its position in the local
market.’
Source: http://www.toyotamauritius.com

69. Disadvantages
Lack of parent firm support
Performance ambiguity - how to split the
pie

70. Wholly Owned Subsidiary
 The firm owns 100 % of the stock
Keegan and Schlegelmilch (2001)
 The most expensive method form of
market entry
 Requires the greatest commitment
in terms of management and
resources

71. Two options
Wholly Owned
Subsidiary
Greenfield
Investment
Acquisition

72. Greenfield Investment
 Building an entirely new subsidiary
in a foreign country from scratch to
enable foreign sales and/or
production.
The parent firm has decided to clone
its strategy and structure in the
foreign plant

73. HOW?
 By transferring its
technology,
supply chain
organizational structure, and
Corporate culture.
(Hennart and Park 1993)

74. Acquisition
 Combining two companies from
different countries to establish a new
legal entity.
 Acquisition of a local firm’s assets by
a foreign company.
 Both local and foreign firms may
continue to exist.

75. Acquisitions v/s Greenfield Investment
 Firms with weak competitive advantage
tend to use acquisitions while
 Those with strong competitive
advantages prefer Greenfield investments
to transfer their advantages to foreign
markets .
Hennart and Park (1993)

76. Indian Oil Corporation
 India's flagship national oil company
 Set up subsidiaries in Sri Lanka,
Mauritius and the United Arab Emirates
(UAE)
 Scouting for new business
opportunities in the energy markets of
Asia and Africa

77. Indian Oil (Mauritius) Ltd (IOML)
 A wholly owned subsidiary company of Indian
Oil Corporation Ltd
 The third largest petroleum company in
Mauritius.
 Holds an overall market share of 24%
 Competes with other multinational companies
present in Mauritius for over five decades.

78. Advantages
 Provides high experiential knowledge
in foreign markets
 Low level of conflict between the
subsidiary and the parent firm
 Able to control operations abroad
 Does not have the problem of
integrating different cultures,
structures, procedures, and
technologies

79. Disadvantages
Could not rely on pre-existing relationships
with customers, suppliers, and government
officials
Potential difficulty in accessing existing
managers and employees familiar with local
market conditions

80. Oracle
 Enlarged its share of the software
market through a number of high-
profile acquisitions.
 Oracle seeks to:
 strengthen its product offerings,
accelerate innovation,
meet customer demand more
rapidly
expand partner opportunities.

81. Oracle Acquisitions
Oracle's Mergers and Acquisitions philosophy
‘its consistent commitment to customer service
and product support while achieving its
financial return objectives and creating value
for its shareholders.’
Source: http://www.oracle.com/us/corporate/acquisitions

82. Advantages
Low risks of technology appropriation
Access to existing managers and
employees familiar with local market
conditions
Could rely on pre-existing
relationships with customers,
suppliers, and government officials

83. Disadvantages
Managers of acquired foreign subsidiaries
may have a weak attachment to the parent
firm

84. CONCLUSION

85. The selection of a market entry mode is a
critical decision
Firms seek to expand geographically due to
 Convergence of technology
 Emergence of alternative communication
structures
Increased competitive arena in which they
operate

86.  Be proactive rather than reactive in
their approach to internationalisation
Findings from our assignment:
 no best way to enter a foreign
market
the mode of entry may differ from
one country or region to another

87. Oracle
Licensing
Acquisitions
Greenfield
Investment

88. Life Insurance
Corporation
Joint Ventures
Greenfield
Investment

89. Toyota
Corporation
Export
Joint
Ventures
Greenfield
Investment

90. Apollo Group
Hospitals
Franchising
Joint Ventures
Greenfield
Investment

91. If You have any question