International marketing: entry modes and the international mix
Firms go abroad through modes that rise in commitment, control and risk, from exporting to wholly owned subsidiaries, and then choose how far to standardise or adapt the mix.
Entry modes (commitment, control and risk rise down the table)
| Mode | How it works | Example |
|---|---|---|
| Indirect exporting | Through home-country intermediaries such as export houses | Small firms selling through merchant exporters |
| Direct exporting | The firm exports itself or through foreign agents and distributors | Amul exporting dairy products |
| Licensing | A foreign firm uses a patent, trademark or know-how for a royalty | Technology licensing deals |
| Franchising | Licensing a whole business format | Domino's entering India through Jubilant FoodWorks |
| Contract manufacturing / management contract | A local firm makes the product, or the firm runs a foreign operation for a fee | Hotel chains managing overseas properties |
| Joint venture | Shared ownership with a local partner | Suzuki entering India through Maruti, a JV with the Government of India |
| Wholly owned subsidiary | Full ownership: greenfield (built new) or acquisition (brownfield) | Tata Motors buying Jaguar Land Rover (2008); Tata Tea buying Tetley (2000) |
EPRG framework
| Orientation | View | Marketing approach |
|---|---|---|
| Ethnocentric | The home country is superior | Same products as at home; exporting |
| Polycentric | Each host country is unique | Adapt for every country |
| Regiocentric | Regions share common traits | Regional strategies, e.g., for ASEAN or the EU |
| Geocentric | The world is one market | Global strategy, adapting locally only where needed |
Keegan's product-communication strategies (1969)
| Strategy | Product | Communication |
|---|---|---|
| Straight (dual) extension | Same | Same |
| Communication adaptation | Same | Adapted |
| Product adaptation | Adapted | Same |
| Dual adaptation | Adapted | Adapted |
| Product invention | New: backward (an older, simpler form) or forward (a new design) | New |
Standardisation vs adaptation
'Think global, act local' (glocalisation) blends the two.
International pricing, place and promotion
- Price escalation: transport, tariffs, insurance and extra intermediaries can push the foreign price far above the home price.
- Transfer pricing: prices charged between units of the same firm in different countries; tax authorities expect arm's-length prices.
- Dumping: selling abroad below the home-market price or below cost; it can attract anti-dumping duties under WTO rules.
- Grey market (parallel imports): branded goods diverted from low-price to high-price countries outside authorised channels.
- Countertrade: barter, compensation (buyback) and offset deals instead of cash.
- Whole-channel concept: seller's headquarters → channels between nations → channels within nations → final buyers.
- Uppsala model (Johanson and Vahlne, 1977): firms internationalise step by step, entering 'psychically close' markets first.
- Lee's self-reference criterion (1966): judging foreign markets by one's own cultural values, a major cause of failure abroad.
NET asks you to order entry modes by risk and control, match EPRG orientations, identify Keegan's strategy in a scenario, and define dumping, transfer pricing and the self-reference criterion.
Typical MCQ: “Which entry mode gives the most control and carries the highest risk?” A wholly owned subsidiary (greenfield or acquisition). Trap: a joint venture shares control and risk with a partner.
Typical MCQ: “Keeping the product the same but changing the advertising message for a new country is which Keegan strategy?” Communication adaptation (product extension with communication adaptation). Trap: dual adaptation changes both product and message.
Entry ladder: 'Every Little Firm Joins World trade': Exporting, Licensing, Franchising, Joint venture, Wholly owned subsidiary; control and risk rise at each step. EPRG: Ego (home), Plural (each host), Region, Globe.