According to Buckley et al. Contractual entry modes are defined as long-term non-equity associations between an international company and an entity in a foreign target country that involve the transfer of technology or human skills from the former to the latter (Root, 1994, p. [TITLE] 5 Source: International Business by Rakesh Mohan Joshi (Pg No. 3 Market entry in China as an example. Equity. C. Study with Quizlet and memorize flashcards containing terms like advantage of exporting, Adaptation is often necessitated due to, An example of a third-country national is a and more. entry; contractual entry (involving contractual modes such as licensing, franchising, contract . This case studyThey are governed by a contract that provides the focal firm with a moderate level of control over their foreign partner. Contractual entry strategies in international business Click the card to flip 👆 Cross-border exchanges in which the relationship between the focal firm and its foreign partner is. Oct 26, 2018. , 2) Exporting and foreign direct investing are two common types of contractual entry. Licensing affords new international entrants with a number of advantages: Licensing is a rapid entry strategy, allowing almost instant access to the market with the right partners lined up. Firstly, it needs to determine the goals of the joint venture and align them with the strategic objectives of all the participating entities. The non-equity modes category includes export and contractual agreements. 3. There are several motivations for companies to consider a partnership as they expand globally, including (a) facilitating market entry, (b) risk and reward sharing, (c) technology sharing, (d) joint product development, and (e) conforming to government regulations. A. There are two major types of market entry modes: equity and non-equity. Global Market Entry II - 2nd Midterm Licensing, Investment and Strategic Alliances Learn with flashcards, games, and more — for free. , a leading manufacturing and retail company that designs and develops footwear and apparel, has signed a contract with a particular courier service for managing the delivery process. Disadvantages include loss of control over quality. Step 1: Appraising target markets. (2005). Zhao et al. Transcribed image text: FDI and exporting are the two most commonly used contractual entry strategies, Select one True False. A contract manufacturer (“CM”) is a manufacturer that enters into a contract with a firm to produce components or products for that firm . Learn from your partner (and apply that knowledge within your organization) Study Chapter 5: Entry into Foreign Markets flashcards. two common types of contractual entry strategies relatively inexpensive way for a firm to establish a presence in the market without having to resort to FDI RoyaltyContractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit. These are trade mode, investment mode and contractual entry mode. In this chapter, we address various types of cross-border contractual relationships, including licensing and franchising. Thus, exporting is the cheapest mode available among the rest and is preferable to a business enterprise with little experience of international markets. It is a particularly useful strategy if the purchaser of the license has a relatively large market share in the market you want to enter. The contract also controls the money transfers. 4) Joint Ventures for Service Providers. Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Preview. Driscoll recognized three modes to enter a foreign market: Export entry modes, Contractual entry modes, Investments modes. The advantages and disadvantages of the market entry strategy are as follows: Advantages. international experience. Dynamic, emerging markets in Asia and Latin America, as well as large, stable markets in North. greenfield investment An. Nonequity- based entry strategies offer better protection against country risks and transactional hazards than equity-based strategies but non-equity strategies, such as export and contractual agreements, enable less organizational learning. For many companies, setting up a fully-fledged operation in the new market is a big commitment – but also brings huge advantages. 2. Exporting Contractual Entry Modes Foreign Direct Investment (directly through FDI) Many US cos went Exporting. firm can pursue individually or in conjunction with other entry strategies 4. 1 Each mode of market entry has advantages and disadvantages. political and legal environments. -diversify sales-gain international business experience (low cost, low risk) Developing an Export Strategy: A Four-Step. Contract manufacturing also enables the firm to avoid labour and other problems that may arise from its lack of familiarity with the local. but secures a contract to provide extensive onsite technical and management support. However, SMEs have limited financial and personnel resources ( Brouthers and Nakos, 2004, Nakos and Brouthers, 2002 ). Provide dynamic, flexible choice. Adloonix team takes care of details. Q: In 2008 Time Warner, Inc. Introduction to International Business Venturing Abroad • 1 minute. In international business, choosing the right entry mode is essential to maximize the success of your international expansion. B. Exporting is an effective entry strategy for companies that are just beginning to enter a new foreign market. Learning Objectives. Turnkey projects could be considered especially with significant customers and as a specific type of project marketing as actors through the network of. Market Entry Strategies. Export describes business activities where goods and/or services are sold outside the country in which the major value-added activities took place. 5 Explain the advantages and disadvantages of franchising. Why franchising is the best market entry strategy? The most common advantages of franchising are that it capitalises on an already successful strategy, the franchisee generally has local knowledge, it's less risky than equity based foreign entry modes, and the franchisor isn't exposed to risks associated with the foreign market (Alon, 2014). Terms in this set (17) Contractual entry strategies in international business. It also depends on the presence of local and international competition, on regulation. These same reasons make exporting a good strategy for small and midsize companies that can’t or won’t make significant financial investment in the international. Essentially franchising as a contractual entry mode can be described as a type of licence agreement which means that an organization wants to enter a foreign market quickly with a low degree of risk and. There are two major types of market entry modes: equity and non-equity. All tutors are evaluated by Course Hero as an expert in their subject area. View Test prep - 8793_MAN3600_Test_4 from MAN 3600 at Florida State University. Question: Question 17 Not yet answered Contractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Firms can pursue them independently or in conjunction with other entry strategies 4. - negotiate a formal agreement. . The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of. -Decide on the type of ideal partner. Beyond importing, international expansion is achieved through exporting, licensing arrangements, partnering and strategic alliances An international entry mode involving a contractual agreement between two. Since the focal firm partners with a local firm, it may be able to shield some. Contractual entry strategies are a common method of entry for firms seeking to expand their operations into international markets. Contract Manufacturing. Provides access to new markets. A low-cost exit from industries (A new entrant can form a. Foundation Concepts • Contractual entry strategies in international business: Entering a formal agreement with a distributor, joint venture firm, or other partner abroad - Often involves granting permission to a foreign partner to use intellectual property • Intellectual property: Ideas or works created by firms or individuals, such as patents, trademarks,. Exporting is the most popular foreign entry strategy and can become an international learning experience. 1 Joint VentureIn this study, international entry mode choice is examined in a franchise setting. , 3) Patents provide inventors the right. Lower costs in the form of cheaper labor or raw materials, foreign government investment incentives, freight savings, & the opportunity to improve the company image are the factors that would most likely lead a. Strategic Management Chapter 7. This research process involves legal counsel and international distributors. Global Entry Strategy A Global Entry Strategy is the planned method of delivering goods or services to a new target market and distributing them there. Study with Quizlet and memorize flashcards containing terms like ________ are partnerships between two or more firms that decide they can better pursue their mutual goals by combining their resources as well as their existing distinctive. Disadvantage: no intern-al knowledge of the market. 1. A) franchise contract is more specific and usually longer in duration. 4) Joint Ventures for Service Providers. Market small, might export or contractual entry. Disadvantages. These modes of entering international markets and their characteristics are shown in Table 6. Together, these strategies will streamline the entire contract lifecycle and result in numerous and significant. Besides, licensing is often adopted in view of environmental factors, such as country entry barriers, to curb product piracy and counterfeiting, and for expanding into countries where the market size is not large enough to justify higher investments. Exporting is an effective entry strategy for companies that are just beginning to enter a new foreign market. , 2016). 3. (2004) differ between ownership-bas ed entry modes (OBEs) and contract based modes (CBMs). The contractual arrangements ( CA ) mode of entry is in most cases a stepping stone to international production. 1 “International-Expansion Entry Modes” (Zahra et al. The non-equity modes category includes export and contractual agreements. and more. - By utilizing various contractual entry strategies, Warner is able to generate royalties. Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Licensing and franchising are examples of transfer-related market entry strategies. Contractual obligations mainly depend on the entry mode. _____ represent(s) a market entry strategy whereby one company permits a foreign company to make use of its patents. Contractual entry strategies in international. They typically include the exchange of intangibles and services. Terms in this set (17) Contractual entry strategies in international business. There are five basic options available: (1) exporting, (2) creating a wholly owned subsidiary, (3) franchising, (4) licensing, and (5) creating a joint venture or strategic alliance (Figure 7. Chapter 16 pg. This loss occurred predominantly because Time Warner took a charge for asset impairments of $24,309 million, ($24. Doing Business in Emerging Markets: Entry and Negotiation Strategies Milind R Agarwal , Pervez Ghauri , Tamer Cavusgil There are many texts available on International Business, but only a few provide a. Contractual entry strategies in international business Cross-border exchanges where the relationship between the focal firm and its foreign partner is governed by an explicit. The contract manufacturer will quote the parts. C) licensing contract covers more aspects of operations. [1] 1. GLOBAL MARKET ENTRY STRATEGIES 2 LEGO Global Market Entry Strategies 1. Who are the experts? Experts are tested by Chegg as specialists in their subject area. , contract based entry strategies are a _____ mode. A) fails to specify the type of product that must be purchased. Direct exporting allows consumers or businesses in new markets to easily buy your products wholesale, where you handle the shipping. The findings, however, are very mixed, especially with respect to transaction-cost-related factors in determining the ownership-based entry mode choice. Which of the following is most likely a disadvantage to firms who use exporting as an entry strategy? high risk of low sales due to fluctuations in exchange rates. The different approaches of market-entry can be further classified on the basis of the equity or non-equity requirements of each approach. This kind of ‘greenfield’ investment – ‘greenfield’ meaning. 38 terms. Licensing allows another company in your target country to use your property. Licensing. The company contracts a firm in the foreign market to assemble or manufacture the products but they still have the responsibility for marketing and distribution of the products according to Root (1994:113); Albaum & Duerr (2008:380). Harry Potter and the Wonderful World of Licensing. 82. that foreign market entry strategies usually accord with the sequential stages of Exporting, Competitive alliances, Acquisition /foreign direct investment. Zhao et al. , visiting the country; importance of relationships to finding a good partner; use of agents. Now, let’s look at 9 proven international market entry strategies. Wu & Zhao 186 foreign market entry decision framework, which identifies export, contractual and investment as the main foreign market entry modes. 9 Types of Foreign Market Entry Strategies. 1 China Greenfield Investment Strategy. Create flashcards for FREE and quiz yourself with an interactive flipper. If well implemented, these strategies will help a construction project be successful and experience fewer contractual disputes. Contractual entry strategy _____ in international business refer(s) to a cross-border exchange in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. 4 Entry Strategies of Multinational Corporations into New Markets. MKT 305-100- International Market Entry Strategies. One of the advantages of direct exporting for company include more control over the export process. Unique aspects of contractual relationships They are governed by a contract that provides the focal firm with moderate level of control over the foreign. Exporting is the direct sale of goods and / or services in another country. The difference between a franchise contract and a licensing contract is that a. For courses in international business. 7. Governed by a contract that provides the focal firm with a moderate level of control over the foreign partner. Some companies use direct exporting, in which they sell the product they manufacture in international markets without third-party involvement. Contractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. The equity modes category includes joint ventures and wholly owned subsidiaries. The Coca-Cola Company is the world’s largest beverage company. 1. drive early entrants out of the market. decide on the target product/market. How you enter a foreign market is highly dependent on your company’s capabilities and strategy, as well as on your target market. Offers you a passive source of income. , wireless telecommunications). Market entry strategies refer to a company’s goals, plans and decisions in regard to which market to enter, when to enter and how to enter (taking into account. market entry strategy: right to adopt entire business system. 1 (EUR one33. (2017) foreign market entry modes are a structural agreement that makes a firm able to do their business activities in the international market. Try it freeVerified Answer for the question: [Solved] Before undertaking contractual entry strategies abroad, management _____. Study with Quizlet and memorize flashcards containing terms like ________ is defined as a contractual arrangement whereby one company makes a legally protected asset available to another company in exchange for some form of compensation. A firm wishing to expand into foreign markets can use contractual entry strategies, foreign direct investment, and exporting, among other strategies. Contractual entry strategies in international business Cross-border exchanges where the relationship between the focal firm and its foreign partner is governed by an explicit contract. The quality of its production, the ability to adapt to the preferences of buyers and a meticulous licensing strategy are the main factors that have led to the firm's remarkable success in the U. The franchisor exercises enormous control over the franchisee’s business regarding the quality of service provided, marketing and selling strategies, etc. Exporting is an effective entry strategy for companies that are just beginning to enter a new foreign market. Direct Investment. d. The choice of foreign country markets and the selection of corresponding market entry strategies belong to classical questions in the international business research, which – despite their high relevance for business success – have not yet been consistently solved. Contractual entry strategies 2. 3) Franchising Services. " Questions 15-1. Contractual Modes of Market Entry. While the pandemic has led Indian companies to work more frequently with global partners in virtual environments, it remains to be seen whether this is a permanent shift in business practices. Contract Manufacturing: Definition, Meaning, Advantages, Examples. Other Contractual Entry Strategies. all of the above e. Therefore, it leads to greater success in the global market. Bibliography. A modern approach to international business. Coca-Cola. A strategic alliance involves a contractual agreement between two or more enterprises stipulating that the involved parties will cooperate in a certain way for a. 10-14Study with Quizlet and memorize flashcards containing terms like Contractual entry strategies, Characteristics of contractual relation, Intellectual property and more. Barkema, Bell and Pennings (1996) suggest that low commitment entry strategies may be preferred to. This chapter addresses common motives for international expansion as well as the advantages and disadvantages of a variety of international market entry strategies. 3) Franchising Services. Complete Guide. chapter 12 IBM 300. Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Question: Briefly compare and contrast the four market entry strategies which are Exporting, contractual agreements,strategic alliances, and direct foreign investment. Study with Quizlet and memorize flashcards containing terms like ________ is defined as a contractual arrangement whereby one company makes a legally protected asset available to another company in exchange for some form of compensation. We would like to show you a description here but the site won’t allow us. Licenses can be for marketing or production. Licensing or Franchising partner has knowledge about the local market. Define and distinguish the following contractual entry strategies: turnkey projects, build-operate-transfer, management contracts, and leasing. Exporting The most commonly used entry strategy that is both profitable and of low risk is based on the sale of product directly in the focused market with no. The decision of entry mode strategy is the most critical decision in international expansion. Joint venture. licensing vs franchising. -Firms. Easing entry and exit of companies through: A low-cost entry into new industries (a company can form a strategic partnership to easily enter into a new industry). Respective advantages and disadvantages will be analyzed. Governed by a contract that. In this section, we will explore the traditional international-expansion entry modes. a majority-owned (e. Study with Quizlet and memorize flashcards containing terms like What entry strategy gives a firm the right to manufacture another firm's product or use its trademark for a royalty fee?, What form of business ownership is a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name and sell a. ). dollar is 0. The alliances often advance common goals, secure common interests, or leverage resources and. 3. It’s a low-cost, low-risk option compared to the other strategies. The international business and marketing literature classify entry modes for international business operations into the following categories based on the risk-return trade-off, degree of control, and resource commitment: exporting, contractual agreements, wholly owned subsidiaries and strategic alliances. Intellectual property. International Marketing (OCEAN591) 19 Documents. Joint venture. Licensing is a contractual agreement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation. give later entrants a cost advantage over early entrants. 4 explains the contractual entry modes. Clear direction: Market entry strategies require market research about exporting guidelines, foreign tariffs, and more. In addition to the standard license process, a company will assist in establishing the business with the design, equipment, organization, and marketing. The contract. Licensing. Contractual entry strategies in international business. com A) It is a more visible strategy than FDI and draws a lot of criticism from the local market. These same reasons make exporting a good strategy for small and midsize companies that can’t or won’t make significant financial investment in the international. Introduction In a world where there is intensive competition, Adopting an activity based on the only domestic market. Kogut and Zander ~ í99 ï give the addition to these two FDI strategies: the transaction market entry of licensing. It is one of the firms’ most important decisions when entering new markets. a majority-owned (e. 6 Joint Ventures VIII. LEGO says it is determined to secure a fair share, without com- promising its mission: to "redefine play and re-imagine learning. , reported a net loss of $13. What are the four steps in developing a successful export strategy? (1) Identify potential markets (2) Match needs to abilities (3) Initiate meetings (4) Commit resources. Exporting is the direct sale of goods and / or services in another country. Foundation Concepts • Contractual entry strategies in international business: Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. As shown in Figure 9. View Sample Solution. The global monetary value of licensed toys and games is expected to grow annually at the rate of 2-3% until 2020. What is contractual entry mode? Two common types of contractual entry strategies are licensing and franchising. We reviewed their content and use your feedback to keep the. Franchising. Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. g. Companies need to have a strategy to enter world markets. 1. Customers pay the amount as they view its items as great value (Ivarsson & Möller, 2017). Entering International Markets Entering foreign markets requires an analysis that examines each of the five major global entry strategies and their associated risks and rewards. 2. Each mode of market entry has advantages and disadvantages. -Choose going in alone or collaboration. Contractual Modes of Market Entry. In the. contractual agreements. A) should bribe government officials to ensure protection of intellectual property B) should register patents and copyrights with local governments C) should keep information about intellectual property confidential from all franchisees in. Which statement about cross-border contractual relationships is FALSE?. Key marketing strategy #1: LEGO’s phenomenal market entry strategy. g. . Jeannet and Hennessy (2001) use control, asset level, variable costs. Licensing concerns a product rights or the method of production marketing the product rights. LO 4: Licensing, Franchising, & Other Contractual Strategies 14 Contractual entry strategies in international business Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Contractual modes involve the use of contracts rather than investment. Contractual modes involve the use of contracts rather than investment. 102) 67) Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time? A) franchising B) licensing C) management contract D) strategic alliance. The simplest form of entry strategy is exporting using either a direct or indirect method such as an. Each mode of market entry has advantages and disadvantages. First, we contribute to international market entry research by identifying reciprocity as a non-contractual mode that has been largely ignored in. 2. Study with Quizlet and memorize flashcards containing terms like 1) Contractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Ideas or works created by individuals or firms, including discoveries and inventions; artistic, musical, and literary works, and words. Export describes business activities where goods and/or services are sold outside the country in which the major value-added activities took place. Advantages and disadvantages of franchising Foundation ConceptsFurthermore, disputes between franchisors and franchisees regarding contract terms, territorial rights, or intellectual property issues can arise and negatively impact the relationship (Cavusgil et al. Firstly, they can provide a low-risk entry point into a new market without exposure to the risks. Licensing and franchising are especially salient contractual entry strategies. As it becomes evident from the definition, the transfer of the right of use is arranged in a license contract. Entry mode has been defined as an institutional arrangement for organizing and conducting international business transactions, such as contractual transfers, joint ventures, and wholly owned operations (Root 1987). decide on the goals of the target markets. Abstract. Contractual entry 3. Licensing is a relatively sophisticated arrangement where a firm transfers the rights to the use of a product or service to another firm. 2 Franchising. Ideas or works created by firms or individuals, such as patents, trademarks, and copyrights. 2. A. Foundation Concepts • Contractual entry strategies in international business: Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. ‘Market’ in this case may refer to a market segment, domestic or international. Using a central platform to manage the entire process and analyze data can improve contract workflows. cross-border exchanges where the relationship between the focal firm and its foreign partner is governed by an explicit contract. Types of Contractual Relationships Licensing An arrangement in which the owner of intellectual. , 2) Exporting and foreign direct investing are two common types of contractual entry strategies. Franchising. Step-By-Step Solution. How does LEGO generate royalties by using contractual entry strategies? LEGO is the leading toy manufacture within the building-block toy industry with 85% market share globally. Source. Licensing, Franchising and. Direct exporters often sell directly to a consumer (B2C), a business (B2B), or a distributor in a foreign country. Exporting is an effective entry strategy for companies that are just beginning to enter a new foreign market. moderate level of control over the foreign partner 2. The investment entry mode is the one that requires the most commitment on the part of a company, in terms of both management time and financial and human resources. In the context of foreign market entry strategies, the advantages of _____ are most apparent when capital is scarce, import restrictions forbid other means of entry, a country is sensitive to foreign ownership, or patents and trademarks must be protected against cancellation for nonuse. 1) Selling Consultancy Services. Secondly, it should involve detailed market analysis to understand the competitive landscape and potential challenges. Some strategies also work better with certain types. In general, the implementation of an international development strategy is a process achieved. Ideas or works created by firms or individuals, such as patents, trademarks, and copyrights. Marketing91. -They typically include the exchange of. Foreign licensing is a simple way of getting involved in international marketing. Registration: Not necessary: Mandatory: Training and support: Not provided: Provided:. Available under Creative Commons-ShareAlike 4. Market entry case examples to learn from. Owen learns that the first step in developing a successful export strategy is _____. Exporting is the most popular foreign entry strategy and can become an international learning experience. 4. S. More than a third of the sales of toys and non-electronic games worldwide are generated through licenses. The rising rate of globalization is prompting brands across the world to ‘think global’. Contractual entry modes are distinguished from export modes because they are primarily vehicles for the transfer of. Firms move to new markets to grab the growth opportunities prevailing in different markets. 1. intellectual property. 2. 3. Step 2: Determining market feasibility. Process. Explain what steps a firms should take to launch a collaborative venture with a foreign partner successfully. 2. The. 26 terms. , 75 percent) joint venture is a contractual entry mode strategyA solid joint venture entry strategy should encompass several important elements. independently or in conjunction with other foreign market entry strategies (exporting/FDI) 4. Firstly, it needs to determine the goals of the joint venture and align them with the strategic objectives of all the participating entities. Different entry modes differ in three crucial aspects: The degree of risk they present. Acquisition is also a good strategy when an industry is consolidating. Fresh features from the #1 AI-enhanced learning platform. How does LEGO generate royalties by using contractual entry strategies? In answering this question you should understand the role of royalties within an organization. 6. With the export strategy the marginal cost of firm E is higher due to. Study with Quizlet and memorize flashcards containing terms like In global market entry, all of the following are entry decisions that must be made by management before entering an international market EXCEPT: a. 18. ,The study has identified the knowledge gap concerning suitable contract risk management strategies available for implementation to effectively prevent any contract parties from losing money, time and. g. Trademark. Management contracts are increasingly popular among owners. It is important as a marketer that you understand the level of risk involved in each and are able to identify which strategy firms are currently using Firms looking to. 4. Firms can pursue them independently or in conjunction with other entry strategies. The theory presented argues that as institutional voids in a firm’s host country escalate, the firm sets. Licensing. Market entry strategies refer to a company’s goals, plans and decisions in regard to which market to enter, when to enter and how to enter (taking into account opportunities, threats and customer needs). Licensing is an arrangement by which the owner of intellectual property grants another firm the right to use that property for a specific time period in exchange for royalties or other compensation. lacks the resources to make a significant commitment to the market. As a current or aspiring contract manager, learning about the contract management process. 14). 5) Hiring a Sales Representative. Direct exporting. Market entry strategies refer to a company’s goals, plans and decisions in regard to which market to enter, when to enter and how to enter (taking into account opportunities, threats and customer needs). A) Cooperative strategies B) Entry strategies C) Options strategies D) Competitive strategies and more. Contractual entry strategies 2. reduce local perceptions of the focal firm as a foreign enterpriseStrategic Alliance: A strategic alliance is an arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project. 1 Explain the different kind of contractual entry strategies Huawei may follow. Let’s look at the two main contractual entry modes, licensing and franchising. 2 Understand licensing as an entry strategy. The non-equity modes category includes export and contractual agreements. Explain what steps a firms should take to launch a collaborative venture with a foreign partner successfully. is a distinctive design or symbol that identifies a product or service. We define franchising as a strategy mainly used by service companies, that allows the franchisee to use a business model, processes or brand name for a fee, to conduct. Pre-entry market evaluation and formulating a market entry strategy. The classes are (1) export entry modes, (2) contractual entry modes, and (3) investment entry modes (Root, 1998). Advantages of Licensing and Franchising. S. Licensing. Direct investment.