Question

1. Of the three modes of entry (FDI, NEM, and Export), recently, NEM of entry is picking up momentum, especially for manufacturing and service sectors.
   1. What makes this mode of entry (NEM) popular since 2000s?
   2. What were the concerns that kept a MNC from choosing this option of entry (NEM) until recent decade?

Answer 1

In a market like licensing, contracting, franshising and other NEM are basically non equity modes of entry

The popularity of thistype of market entry is because of the Advantages of NEM entry as :

• It has the Low entry cost: In foreign country , companies dont to set up the entire units
• Low exit cost
• Low political risk
• Reduction in trading barriers
• Faster implementation in foreign country

Before year 2000 the NEM mode was actually difficult as many countries were very rigid on there rules of providing licenses or allowing franchise to work in their country. Documentation was difficult, taxes associated with such modes were also high in some of the countries.

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