The majority of the contractual entry modes used by a company are responses to changes in the environment where a company operates. Alternatively, the contractual entry modes may be proactions on the part of management.
Reactive contractual entry modes are usually responses to attempts by the government of the host country either to restrict the volume of imports from a particular country or to slow down the growth of its own exports. If a country feels that its own industry needs some type of protection to develop (the "infant industry" argument, usually used by the developing countries) or to revitalize itself (an argument used by the U.S. car manufacturers ), it will attempt to limit imports either by increasing the cost of selling the foreign product in its market (tariff barriers) or by imposing or negotiating voluntary quantitative restrictions on the absolute amount of imports ( quotas or other nontariff barriers ).
When this situation arises (or before it arises, if management is being proactive), a firm, in order not to lose the revenue it has been deriving from the exports, will enter into one or a combination of the nine contractual modes listed in Figure 2.2.
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