Question

Perhaps one of the first key decisions a prospective business owner makes is the mode of entry in the chosen country. Making the correct choice will ensure the integrity of the business not only legally, but financially as well. Accordingly, a detailed understanding of the various modes of entry will provide students with the knowledge needed to properly select the appropriate organization.

Compose a minimum 700-word analysis of the following modes of entry:

• Turnkey Project
• Licensing
• Corporation
• Franchising
• Joint Venture

Address the following in the analysis:

• Discuss and describe the various modes of entry.
• Evaluate the pros and cons associated with each mode of entry.

Answer 1

Foreign market entry is much different, and the entity should be using different strategies for having robust participation. A detailed study about the control they may have and the commitment of resources are to be done carefully. Thus, after analyzing all these factors the business owner should decide which entry suits them.

Turnkey Project

A turnkey project is a common mode of entering into an international business. This could be generally described as a contract, where the entity agrees to fully design a business project for another entity. The project would be only covered when the new business model starts to generate any revenue and is sold to the purchaser.

Eg: Most of the government-owned public facilities are examples of the turnkey project. These are established by a private entity and are later handed over to the government later as a project.

PROS

• This helps to reduce the burden of owners.
• Responsibility is handed over to another one.
• An initial period of a project or business is the most difficult part, thus this stage is handed over by the other with utmost care.
• The timeline would be reduced.
• A rise in price or cost of the project doesn't matter at all, as a deal is made earlier itself.

CONS

• The owner/client would only possess less control.
• They may lose the power of further decision making.
• The budget would be higher than necessary.

Licensing

This is an agreement where the Licensee obtains the right to use a product that is being owned by the Licensee. Even trademark and brands could be licensed. A license agreement discusses every right that a licensee would obtain from the licensor. It also contains the period and terms & conditions.

Eg: Using a popular copyright character for a product.

PROS

• It only needs to start a new business opportunity.
• The risk of both parties is reduced.
• It is the easiest method for entering a foreign market.
• A unique marketing approach could be adopted.

CONS

• The entity should always depend upon the licensor.
• More added competition would be generated.
• The biggest disadvantage is that they possess a time limit.

Franchising

It could be generally treated as an arrangement, where the franchisor grants the right to the franchisee to use their trademark and method of doing business, which is currently well established elsewhere. It is the franchisor, who gives all updates about the business should be run and the introduction of new methods.

PROS

• There would be a reduction in personnel costs.
• No necessity to generate a trademark or brand.
• More recognition from the customers.
• As it is a well-researched method, there would be less risk

CONS

• No space for creativity.
• A less control factor is present.
• A lot of innovation challenges would be faced.

Joint Venture

Its main purpose is to create access to foreign markets. It is a decision made by an entity to team up with their foreign partner. Thus, sharing ownership and other control activities. These associations of entities would help them to achieve profit globally.

PROS

• An opportunity to adopt Technological or Managerial resources from other countries.
• It helps to gain new expertise.
• No need for a long term commitment.
• Risks would be shared.
• New networks could be accessed.

CONS

• Flexibility would be less presented.
• One cannot expect equal involvement.
• Surely, there would be a clash in terms of culture.