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can be difficult to surmount (Douglas and Craig, 1995). The purpose of
this section is to investigate the most popular entry modes that are used

in the international market – See Figure 6.1.

6.5.1 Indirect and direct exporting

This is one of the most common modes for initial entry into international
markets. It is practised mainly by small or medium-size companies in the
early stages of internationalisation, with entry into foreign markets being

primarily through exports from a domestic production base. Multinational
companies also rely heavily on export to supply their branches overseas

and to maximise the allocation of resources throughout their international
market. Exporting can take place in different ways. For example, products

can be sold to other countries via distance contracts through trading
companies and export management companies (indirect exporting). This
means that only one transaction takes place, with no intention of

establishing a relationship. Another way of exporting is to use a local agent
or distributor (direct exporting). According to McDonald and Burton (2002,

p. 209) the majority of exporters are:

• Responding to invitations from domestic exporters and foreign firms
to supply equipment

• Responding to unsolicited orders from export agents and buyers for
foreign firms

• Following up potential opportunities drawn to the firm’s attention by
trade associations, government agencies and chambers of commerce

• Exhibiting at international trade fairs

• Merging with, or being taken over by, experienced exporters.

6.5.2 Franchise (direct exporting)

Franchise activity became known in Europe at the beginning of the 1970s
and is now a very popular global strategy. Franchising describes a
diversity of business arrangements in which a parent company grants to

others the right to use its products, technology, services or trademarks and
brand names in a prescribed manner in return for a lump-sum payment