Entry Modes in International Business

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Consequently, these organizations are trying to reach new consumers to increase their customer base. The second most common motive is the opportunity of producing or offering a service cheaper in another company. This leads to a cost advantage. In addition, the companies can gain advantage in economy of scale and scope. Therefore, they safe production costs by producing a higher amount of their products, which is the third frequently used motive regarding to Nelly and Wach (2014, p.12). All motives are aiming to reduce the cost of production or finding new customers. 3. Forms of International Business By taking a closer look into the different types of international business, it is helpful to first define the two major categories. All types of international business are sub-categories of equity and non-equity entry modes. These are different in their commitment level of spending resources, which is extremely difficult to transfer to other business units. Therefore, to choose the correct entry modes to other countries is one of the most critical strategy decision of a multinational enterprise (Decker and Zhao, 2004, p.1). In addition, the risk as well as the control is a major difference. The equity entry modes require more investments and are therefore riskier. However, the companies using an equity entry mode have more control over the
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