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Entry Mode

A. What are some of the basic issues a firm must confront when choosing an entry mode for a new foreign market?

B. What is Foreign direct investment? Elaborate on its three basic forms (3 basic forms are Greenfield investment, Mergers and acquisitions, Horizontal and Vertical direct investment) What are the relative advantages and disadvantages of each of these forms?

C. How does each advantage in Dunning's eclectic theory specifically affect a firm's decision regarding entry mode?

Dunning's theory indicates that a multi-national enterprise will get involved in a foreign direct investment if at least 3 conditions are present. Those 3 conditions are ownership specific advantages, location specific advantages and finally, internalization incentive advantages.

D. Under what conditions should a firm consider a greenfield strategy for Foreign direct investment (FDI)? An acquisition strategy? For instance, If the culture and business climate of the host country is rather difverse from that of the home country, an organization may desire to use the greenfield strategy to enter the new environment.

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A. What are some of the basic issues a firm must confront when choosing an entry mode for a new foreign market?

A firm faces three major issues when choosing an entry mode for a new foreign market:
1) Marketing - which countries, which segments, how to manage and implement marketing effort, how to enter - with intermediaries or directly, with what information?
2) Sourcing - whether to obtain products, make or buy?
3) Investment and control - joint venture, global partner, acquisition?

The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or countertrade, in the case of the latter. More complex forms include truly global operations which may involve joint ventures, or export processing zones. Having decided on the form of export strategy, decisions have to be made on the specific channels. Many agricultural products of a raw or commodity nature use agents, distributors or involve Government, whereas processed materials, whilst not excluding these, rely more heavily on more sophisticated forms of access.

B. What is Foreign direct investment? Elaborate on its three basic forms (3 basic forms are Greenfield investment, Mergers and acquisitions, Horizontal and Vertical direct investment) What are the relative advantages and disadvantages of each of these forms?

Foreign direct investment ...

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