Modes of Foreign Entry

In the long run, all research on Entry nodes is still limited to major manufacturing companies. Selection of overseas markets and selection of entry model will greatly influence the performance of a specific company. Entry mode can be defined as an organization of an organization that operates overseas and conducts business, such as contract transfer, joint venture and fully owned business (Anderson, 1997). Internationalization is part of a strategy for companies and organizations to move business across borders (Melin, 1992).

The overseas market entry model is a channel for companies to enter products, human skills, management, technology and other resources to foreign countries. For companies planning to do business overseas, choosing a market entry model is an important strategic decision. There are many definitions of various input modes. Hedman (1993) classifies entry models as indirect, direct, and export options. However, since Hedman's model does not regard a joint venture as an entry model, other authors such as Jeannet & Hennessey, 1988; Root 1994b; Ross, 1995 identified it as an entry mode. The joint venture is presented under heading 4.3.4.

Many literatures have examined various entry modalities for entry into overseas markets and determinants of entry patterns adopted by multinational companies. Cross (2000) categorizes these entry modes into two broad categories, non-stock models and stock models, and explains how extensively multinational companies are committed overseas in internationalization strategies. According to him, the non-equity model of foreign capital entry includes companies that have contracted their own technical knowledge with a host country company under some form of contract. Classified in this category are licenses, franchise, management contracts and technical service contracts. The low ability to overcome barriers to trade and investment and manage licensees is recognized as the strengths and weaknesses of the non-stock entry model. Foreign capital model is to directly manage the company's business, product quality, resources and overseas market technology.