Which of the following is the most traditional mode of entering into the foreign market?

Question

Question

This question was previously asked in

SSC CPO 2024 Official Paper-I (Held On: 28 Jun, 2024 Shift 2)

Answer 1

The correct answer is Exporting.

Key Points

Exporting:-

Overview
- Requires minimal financial investment compared to establishing operations in foreign markets.
- Less risky since companies do not have to set up physical operations abroad.
- It allows businesses to test international markets without full commitment to foreign investments.
Types of Exporting:
- Direct Exporting: The company directly sells to customers in a foreign market.
- Indirect Exporting: The company uses intermediaries (like export agents) to sell products abroad.
Advantages:
- Expand market reach while keeping domestic operations intact.
- Easier to exit the market compared to more capital-intensive methods like joint ventures or foreign direct investment (FDI).
Challenges:
- May face tariffs, trade barriers, and transportation costs.
- Requires understanding of local laws and market preferences.

Additional Information

Mode of Market Entry	Investment	Control	Risk	Key Feature
Undertaking Portfolio Investment	Low	None	Low	Investment in foreign securities without management control.
Exporting	Low	Low	Low to Medium	Selling goods/services abroad without setting up operations.
Setting up Fully Owned Manufacturing Facilities	High	Full	High	Full ownership and control of foreign production facilities.
Mergers and Acquisitions	High	Full	High	Quick entry via the acquisition of an existing foreign firm.