Entry selection modes are related to the international entry strategies i-e where the foreign investors should

invest their capital, When to invest capital in the country and how to enter in the foreign market

International Entry Strategies

Where: selection modeRegion/city micro/macro variable (to make investment).In micro variable we have to focus on: (1) cost and tax factor i-e cost of raw-material, wage rate, transportation cost and tax rate (2) demand factor i-e size of market either small/large scale market, consider number of customers and local competition (3) strategic factor: i-e investment infrastructure, transportation system, telecommunication system and export policy

When: In which time to enter into the

market

How: how to enter

Definition of ESM: (1) It is a way/method/technique by which target country invest in the foreign market in order to achieve specific goals (2) it is an institutional that makes possible the entry of firms products, technology, human skills, management or other resources into a foreign country

Techniques of ESM:
The ESM are divided into 3 separate categories (1) trade related modes (2) transfer related modes (3) foreign direct investment (FDI) Trade Related Modes are: (a) Subcontracting (b) Counter trade (c) Exporting Subcontracting is the process in which a foreign company provides a local manufacturer with rawmaterials, semi-finished products, sophisticated components or technology for producing final goods that will be bought back by the foreign company EXP:

Two countries X and Y Country X provides raw-materials, capital, equipment etc Country Y provides finished goods X will buy back the finished goods from y and y produce it on commission basis. X will sell out in the market in the name of x, e.g NIKE company of USA. All resources are provided by the x country which is the target country. In this ownership will remains in the target country.

Counter trade: buying and selling process b/w 2 nations with little or no cash Counter trade is broader than barter. Barter is the sub part of counter trade Types of counter trade: (a) barter (b) counter purchases offset (d) buy-back (compensation) (e) switch deal (trilateral trade)

Exporting: the marketing of goods produced in

one country and sell into another country . A firm can either export goods directly to foreign customers or buyers or through export intermediaries export intermediaries .Export intermediaries are third parties that specialize in facilitating imports & export s. Documentation in Exporting: 1 Letter of credit. 2 Bill of landing 3 Bank draft 4 Commercial invoice 5 Insurance certificate 6 Certificate of origin

Terms of price in exporting: FOB: free on board FAS: Free along ship CIF: cost, insurance and freight C&F: cost and freight Transfer Related Modes: I n transfer related modes goods are exchanged with one another and also ownership will be exchanged with one another

Types of transfer related modes: 1.International leasing 2. international lisencing 3. international franchizing 4. build-operate-transfer FOREIGN DIRECT INVESTMENT: FDI related modes involve ownership of property, assets, projects and business invested in host country FDI control overseas operations and economic activities FDI modes are more sophisticated than trade and transfer related modes It involves higher risk and long term contribution than trade and transfer related modes

Types of FDI related modes: (a) Branch office (b) Cooperative joint venture/contractual venture (c ) Equity joint venture (d) subsidiary holding company

Objectives of Entry selection modes: Increase in incremental income Assessment of new markets Attraction towards customers Establishment of goodwill