Answer:
There are several modes of engagement with international markets, including exporting, licensing, franchising, joint ventures, and foreign direct investment. Each mode has its advantages and disadvantages, and the choice of mode depends on a company's goals, resources, and the economic, legal, governmental, political, regulatory, cultural, and other environments in which it operates.
Exporting involves selling goods or services produced in the home country to customers in another country. This mode is often used by small and medium-sized enterprises (SMEs) that do not have the resources to establish a physical presence in foreign markets. For example, Ethiopian coffee producers can export their products to international customers, such as Starbucks.
Licensing involves granting a foreign company the right to use a company's intellectual property, such as patents, trademarks, or copyrights, in exchange for royalties or fees. For example, Coca-Cola licenses its brand to local bottlers in Ethiopia, who produce and distribute Coca-Cola products in the country.
Franchising involves granting a foreign company the right to use a company's business model, brand, and operating system in exchange for fees and royalties. For example, KFC franchises its restaurants in Ethiopia to local partners, who operate and manage the restaurants.
Joint ventures involve forming a partnership with a local company to share resources, risks, and profits in a foreign market. For example, the Chinese construction company, China Communications Construction Company (CCCC), has formed a joint venture with the Ethiopian government to build infrastructure projects in the country.
Foreign direct investment (FDI) involves establishing a physical presence in a foreign market, such as opening a subsidiary or acquiring a local company. FDI allows companies to have greater control over their operations in foreign markets, but also requires more resources and carries more risks. For example, the Chinese telecom company, Huawei, has established a subsidiary in Ethiopia to provide telecommunications services in the country.
In summary, the choice of mode of engagement with international markets depends on a company's goals, resources, and the economic, legal, governmental, political, regulatory, cultural, and other environments in which it operates. Ethiopian companies can use various modes of engagement to expand their operations in foreign markets, depending on their specific circumstances and objectives.