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Low production costs in the target country encourage

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Unformatted text preview: ountries where competition is judged too strong for both export and equity modes, a company may turn to licensing or other contractual modes (Root, 1994). Target Country Production Factors Root (1994) also states that the quality, quantity, and cost of raw materials, labor, energy and other productive agents in the target country, as well as the quality and cost of economic infrastructure (transportation, communications and port facilities) have an evident bearing on entry mode decisions. Low production costs in the target country encourage some for of local production as against exporting and finally, high costs would militate against local manufacturing. Target Country Environmental Factors Root (1994) argues that the political, economic and sociocultural character of the target country can have a decisive influence on the choice of entry mode and the most noteworthy may be government policies and regulations regarding to international business. Restrictive import policies (high tariffs, tight quotas and other barriers) discourage an export entry mode in favor for other modes. Another environmental factor is the geographical distance. When the distance is great, transportation costs can make...
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