Direct investment-Foreign Direct Investment (FDI's) risk and profit potential are the highest in the foreign markets.
Type of Entry
Advantages
Disadvantages
Exporting
Fast-entry, low risk
Low control, low local knowledge, the potential negative environmental impact of transportation
Licensing and Franchising
Fast-entry, low cost, low risk
Less control, the licensee may become a competitor, legal and regulatory environment (IP and contract law) must be sound
Partnering and Strategic Alliance
Shared costs reduce investment needed, reduced risk, seen as a local entity
Higher cost than exporting, licensing, or franchising; integration problems between two corporate cultures
Acquisition
Fast-entry; known, established operations
High cost, integration issues with home office
Joint Venture (Launch of a new, wholly-owned subsidiary)
Gain local market knowledge; can be seen as an insider who employs locals; share the cost
High cost, moderate risk due to unknowns, slow entry due to setup time
Foreign direct investment
Directly invest in facilities in a foreign market. It requires a lot of capital to cover costs such as premises, technology, and staff.
High cost, high risk due to unknowns, slow entry due to setup time
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