ENTREPRENEURSHIP

Detailed explanation-1: -We’ll examine seven methods by which businesses can engage in international operations: import/export, licensing, franchising, management contracts, joint ventures, and foreign direct investment, either by acquisition or greenfield startup.

Detailed explanation-2: -Exporting entails selling products to foreign customers. Under a franchise agreement, a company grants a foreign company the right to use its brand name and sell its products. A licensing agreement allows a foreign company to sell a company’s products or use its intellectual property in exchange for royalty fees.

Detailed explanation-3: -Unlike exporting, either form of foreign investment exposes home and foreign firms to common country-specific cost shocks, implying a better knowledge of each other’s country-specific shocks. Further, a joint venture allows the firms to learn each other’s firm-specific cost.

Detailed explanation-4: -Contractual forms of entry (i.e., licensing and franchising) have lower up-front costs than investment modes do. It’s also easier for the company to extricate itself from the situation if the results aren’t favorable.