18 Questions
What is the main advantage of direct export?
Greater control over export operations
Why might a company choose indirect export over direct export?
Lack of necessary infrastructure for direct exporting
What does indirect export involve?
Selling products/services to an intermediary in the domestic market
Who is responsible for logistics and transportation in indirect export?
Intermediary in the domestic market
What is a disadvantage of direct export?
Increased workload
How does indirect export benefit companies?
Intermediary takes care of export process
What are the advantages of brownfield investment?
Lower staffing and training costs, existing approvals and licenses, cost-effective compared to greenfield investment
What are the disadvantages of brownfield investment?
Major upgrades may be required, operational inefficiencies if facility cannot be adapted
What determines the entry mode for a firm in international business transactions?
Various factors such as cost, resources, market conditions, and strategic objectives influence the entry mode decision.
What are the advantages of indirect export?
Access to local market knowledge, reduced financial risk, lower investment costs
What are the disadvantages of direct export?
Higher financial risk, need for significant investments in infrastructure and marketing
How can brownfield investments be more cost-effective than greenfield investments?
If the facility is already fit for use, does not require major modifications, or can be utilized without significant upgrades.
What are the advantages of indirect export?
Advantages of indirect export include leveraging expertise and networks of intermediaries, and smaller financial risk.
What are the disadvantages of direct export?
Disadvantages of direct export include lower profit margin, dependence on commitment of the partner, and lack of full control over foreign sales.
Define countertrade in international trade.
Countertrade is a type of international trade where goods and services are exchanged between countries without using cash or financial instruments.
Why might a company opt for indirect export?
A company might choose indirect export to benefit from intermediary expertise and networks, and to reduce financial risk.
What risk is associated with indirect export?
One risk of indirect export is the dependence on the commitment of the intermediary.
How does indirect export help companies with limited resources?
Indirect export assists companies with limited resources by allowing them to access the expertise and networks of intermediaries.
Study Notes
Entry Modes
Direct Export
- Direct export allows companies to establish a direct relationship with customers in the foreign market
- Advantages:
- Greater control over export operations
- Better communication with customers
- Increased profit
- Disadvantages:
- Increased workload
- Limited market knowledge
Indirect Export
- Indirect export involves selling products or services to an intermediary in the domestic market, who then resells them in the foreign market
- Examples of intermediaries include trading companies, wholesalers, or EMCs (export management companies)
- Advantages:
- Beneficial for companies with limited resources or experience in international business
- Smaller financial risk
- Disadvantages:
- Lower profit margin
- Dependence on commitment of the partner
- Not a full control of foreign sales
Countertrade
- Countertrade is a type of international trade that involves the exchange of goods and services between two countries
- Instead of paying with cash or financial instruments, buyers offer goods or services in exchange for desired products or services
Foreign Direct Investment (FDI)
- Advantages of Brownfield Investment (BI):
- Lower staffing and training costs
- May include existing approvals and licenses from the government or regulators
- Can be a cost-effective option compared to greenfield investment
- Disadvantages of BI:
- Facility or infrastructure may require major upgrades, increasing foreign investment cost
- Operational inefficiencies if the facility cannot be adapted to new production needs
Learn about direct export as an entry mode in international management, including the advantages it offers to companies. Explore the ways companies can establish a direct relationship with customers in foreign markets.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
