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Problem

What are the three schools of thought about how firms enter international markets? Describe each in detail.

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Step 1/3

The decision to penetrate a foreign market is among the most challenging of all decisions concerning new markets. A long-term commitment from management is necessary because without it, the entry into the market would fail because the competitors already present in the country in question are frequently fully focused on what is, for them, their domestic market.

Step 2/3

The three schools of thought about how firms enter international markets are as follows:

• Gradual involvement or Uppsala model: The first school of thought, known as the gradual engagement or Uppsala model, contends that enterprises initially engage in international trade by employing low-resource options like licensing or exporting. As the company expands its knowledge and expertise, it adopts more resource-intensive market entrance strategies and increases its risk tolerance.

• Transaction cost analysis: Transaction cost analysis is the foundation of a second strategy. In this strategy, businesses preserve internal tasks they can execute more affordably and contract out tasks they can complete more affordably to other businesses. When making these selections, businesses take into account all costs, such as those associated with handling marketing, manufacturing, sourcing, as well as quality control.

• Location specific factors: These includes micro-geographical features of the site availability of the land, essential utilities, visibility etc.

Step 3/3

As stated, are the three schools of thought about how businesses enter foreign markets.