Contract manufacturing: is the term used to refer to Manufacturing which is outsourced to an external partner, one that specializes In production and production technology.Benefits: Labor cost advantages, Savings via taxation, Lower political and economic risk, Quicker access to Markets. Caveats: Contract manufacturer may become a future competitor Lower Productivity standards, Backlash from the company’s home-market employees Regarding HR and labor issues, Issues of quality and production standards. Licensing:refers to the exchange of rights, to another In exchange for payment. Rights of licensing: Patent covering a product Or process, Manufacturing know-how not subject to a patent, Technical advice And assistance, Marketing Advice and assistance, Use of a trade mark/trade name. Motives for licensing:Licensor Firm will remain technologically superior in its product development, Licensor Is too small to have financial, managerial or marketing expertise for overseas Investment, Product is at end of product life cycle in advanced countries but Stretching product life cycle is possible in less developed countries Opportunity For profit on key components, Government regulations may restrict foreign Direct investment or, if political risks are high, licensing may be only Realistic entry mode.Ben: Appealing to small Companies that lack resources,Faster access to the market,Rapid penetration of the global markets,Caveats: Other entry mode choices may be affected,Licensee may not be Committed,Lack of Enthusiasm on the part of a licensee,Biggest danger is the risk of opportunism,Licensee may become a future competitor. Franchising:the exchange of rights between a franchisor And franchisee, such as the right to use a total business concept including use Of trade marks, against some agreed royalty. Product and trade name franchising, Business format franchising.Benefits:Overseas expansion with a minimum investment, Franchisees’ Profits tied to their efforts, Availability of local franchisees’ knowledge. Caveats: Revenues may not be adequate, Availability of a Master franchisee, Limited Franchising opportunities overseas, Lack of control over the franchisees’ operations, Problem in performance standards and Cultural problems. Joint venture: refers to an equity partnership between two or more partners.The Foreign company agrees to share equity and other resources with other partners To establish a new entity in the target country.-Forms include: Majority,50-50, Minority.-Cooperative joint venture:Collaboration but no Equity-Equity Joint venture.
operations,Problem in performance standards and Cultural problems.