The paper "Advantages and Disadvantages of Exporting, Joint Venture and Wholly-Owned Foreign Direct Investment " is a great example of micro and macroeconomic coursework. There are a number of market entry modes that are available for companies wishing to go international into foreign markets overseas (Koch, 2001). When an organisation has decided to go international, there are a number of options open to it. Examples of entry modes include Exporting, Strategic Alliance, Licencing and Joint ventures to name a few. These entry modes vary on the basis of cost, risk, degree of control and return on investment.
Physical distance today is no longer an issue and internalization is considered a necessity for both large and small organisations when the domestic market is overwhelmed by competition (Cavusgil and Li, 2002). Currently, more and more firms are opting to internationalize more rapidly than ever before. Internalization can be termed as the process through which an organisation develops an international business and becomes comprehensively involved in committing to international operations in predetermined markets. An organisation that chooses to expand and grow its operations by reaching markets that are found beyond its national boundaries makes a decision on the mode of entry to be employed.
With globalization and liberalization, it is not difficult for multinational companies to enter into new markets (Douglas, 2009). The entry of multinational companies into international markets can be found to be beneficial for foreign companies and to the domestic market. These multinational companies are getaway options for new technologies and innovation by making life more tranquil and comfortable. The idea of internalization by foreign multinational companies sounds promising for both the company and the new market but it is not as easy as it sounds (Clark, Pugh and Mallory, 2007).
This is attributable to the fact that every market is different in relation to the economy, political, regulation and policies, technology and culture. This paper will detail out the advantages and disadvantages of exporting, joint venture and wholly-owned foreign direct investment as strategies of doing business overseas. The paper will also give the reasons why some companies use these entry modes while others do not use relevant theories.
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