Advantages And Disadvantages Of Modes Of Entry

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Because there with the modes exports, a firm must have many bureaucratic things to do with the government.
The export mode does not allow closer control over production, marketing, and other business operations so to get over control a firm must use the mode of JVS.
There is going to be better domestic market information provided by domestic JV partner.
The major benefit of joint ventures is that the contributors of intermediate inputs get a claim on any residuals. This theory implies that international joint ventures would be undertaken when other modes of entry such as direct foreign investments and corporate acquisitions are costlier. (Janakiramanan, 2004)
So, exports and other entry modes can be costlier than JV and this is going to be related to the JVs.
But of course, there is also some kind of disadvantages compared to the exports. The major of disadvantage is a conflict of interest which cannot be found in the modes exports. For instance, issues such as profit shares amount invested, management of the business and marketing strategy can occur if there is no well-structured agreement. The thing is to be careful about the selection of the partner so that the risks are minimized. As said the formulation of the contract is the key …show more content…

But beyond the immediate legal reasons, it makes good business sense to test the concept before franchising it. Joint ventured locations between a franchisor and its future master franchise partner can test such things as customer tastes, location development, staffing, and sources of supply through the “test kitchen” of a jointly owned and operated unit. While the franchisor may give up an immediate development fee and royalty stream it will gain a valuable understanding of the best business practices for transferring a business concept to a new country. (Pearce,

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