Selecting an Entry Mode

A firm contemplating foreign expansion must make three basic decisions: which markets to enter, when to enter those markets, and on what scale.

Once a firm decides to enter a foreign market, the question arises as to the best mode of entry. Firms can use six different modes to enter foreign markets: exporting, turnkey projects, licensing, franchising, establishing joint ventures with a host$-$country firm, or setting up a new wholly owned subsidiary in the host country. Each entry mode has advantages and disadvantages.

Roll over each advantage and disadvantage listed on the left to read a description, and then drag it to the corresponding mode of entry in the chart

Firm is relieved of many of the costs and risks of opening in a foreign market but is inhibited from being able to take profits out of one country to support competitive attacks in another:

Costs, risks, and profits

Development cost and operational strategy

Exporting

Turnkey Contracts

Franchising

Manufacturing and transportation costs

Risks and capital investment