Imran Fazal FE2409, pp. 42. MAM/Sektionen för Management, 2009.
A firm may enter into the foreign market by different modes. Firm could operate in the foreign country by physical appearance in the host country such as establishing factories and joint venture. In contrast, some mode could be expands in the foreign country while operate from home country such as exporting.
Exporting mode is very common to expand internationally. It required low investment relative to other modes such as joint venture and establishing factories in the foreign country. By applying this mode, a firm could operate through existing business. Through exporting, it is uncomplicated for firm while entering into to the foreign country and withdraws from the foreign country. This key feature provide high flexibility and encourage the businesses to apply exporting mode of entry while initially enter into the foreign market.
Exporting mode of entry is high extent to apply on small scale firms relative to large scale firms. Small firms could take advantage by get in trade with foreign country by low amount of resources. This mode provides great advantage to test the foreign market applying low investments after know-how about the foreign country. The firm could increase their resources commitment, either expand their businesses in the home market or expand in the foreign countries to earn more profit.
Exporting mode discourages large firms firstly, while transfer large quantity of goods from one country to another country to expending high transportation cost. Secondly, some countries applied high taxation and duties for particular product imports and exports. Since, large multinational companies contain enough resources to establishing the factories and joint venture in foreign countries to avoid bearing the heavy taxes and transportation charges.
However, on flexibility point of view; the exporting mode gives similar benefits to both small scale and large scale firms.