Question

identify two multinational companies and discuss their entry modes into the global market.

Answer 1

There are various modes for enter into the global market:

1. Indirect exporting

2. Direct exporting

3. Licensing

4. Franchising

5. Joint venture

6. Direct Investment

Example:

1. McDonald's: Mode of entry into global market is Franchising. Franchising is a type of license agreement where package of services are offered by the Franchiser to the Franchisee in return for the payment. There are two types of franchising i.e. product and trade name franchising and business format franchising. Example of product and trade name franchising is Pepsi Cola and McDonald is business format franchising.

2. Sony Ericson is an example of Joint Venture. There are two types of Joint venture i.e. Contractual and Equity joint venture. In contractual Joint venture two or more than two firms enter into an agreement to share the cost of an investment, the risks and the long term profit. Sony Ericson is a contractual joint venture.

While in Equity joint venture, a new company is formed in which the foreign and local companies share ownership and control.