Note on Entry Mode

by: Robert E. Kennedy

Publication Date: April 8, 2009
Length: 8 pages
Product ID#: 1-428-587

Core Disciplines: International Business, Strategy & Management

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Teaching Note

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After a firm has decided to internationalize, it must select the entry mode and the organizational and contractual arrangements to bring its products and services to the foreign market. This note presents a typology of the different modes, outlining various strategies companies can follow when expanding internationally: exporting, licensing and franchising, and directing investments through wholly-owned subsidiaries and joint-ventures. Each strategy has advantages and disadvantages and should be used based on the end goal of the company. This note includes a simple model that shows the trade-off between control and risk when deciding the type of entry mode to pursue.

Teaching Objectives

After reading and discussing the material, students should:

  • Identify the reasons why a firm may want to expand globally.
  • Discuss the extra expenses involved when a firm expands globally and how to offset those costs.
  • Define "entry mode" and the three basic entry modes firms can use when internationalizing.