Foreign Market Entry Strategy and Rules
A market entry strategy is the intended process of delivering goods or services to a intention market and distributing them there. There are multiplicities of ways in which a business or organization can come into a foreign market. No one market entry strategy moving parts for all international markets. Direct exporting may be the majority suitable plan in one market while in another you may require setting up a joint venture and in another you may well license your manufacturing. There will be a number of factors that will manipulate your selection of strategy, including, but not limited to, tariff rates, the degree of adjustment of your manufactured goods required, marketing and transportation costs. The following strategies are the main entry options open to you.
Licensing is a comparatively complicated agreement where a firm transfers the privileges to the use of a product or service to another firm. It is a principally helpful approach if the buyer of the license has a moderately big market share in the market you want to enter. Licenses can be for marketing or production.
Franchising works well for firms that have a repeatable business model (eg. food outlets) that can be simply transferred into other markets. Two caveats are required when considering using the franchise model. The first is that your business model should either be very unique or have strong brand recognition that can be utilized internationally and secondly you may be creating your potential competition in your franchisee.
Direct exporting is selling openly into the market you have selected using in the first occurrence you own resources. Many companies, once they have established a sales program turn to agents and/or distributors to represent them further in that market. Agents and distributors work closely with you in representing your interests.
Partnering is nearly an obligation when entering foreign markets and in some parts of the world (e.g. Asia) it may be required. Partnering can take a diversity of forms from an easy co-marketing arrangement to a sophisticated strategic alliance for manufacturing. Partnering is a above all helpful policy in those markets where the culture, both business and social, is substantively different than your own as local partners bring restricted market knowledge, contacts and if selected cleverly consumers.
Joint ventures are a exacting form of partnership that involves the formation of a third independently managed company. It is the 1+1=3 process. Two companies agree to work together in a particular market, either geographic or product, and create a third company to undertake this. Risks and profits are usually shared equally. The best example of a joint venture is Sony/Ericsson Cell Phone.
Buying a Company
In some markets buying an existing local company may be the majority suitable entry strategy. This may be because the company has considerable market share, are a direct competitor to you or due to government regulations this is the only option for your firm to enter the market. It is certainly the most costly and determining the true value of a firm in a foreign market will require substantial due diligence.
Turnkey projects are exacting to companies that offer services such as environmental consulting, architecture, construction and engineering. This is a exceptionally fine way to enter foreign markets as the client is usually a government and often the project is being financed by an international financial agency such as the World Bank so the risk of not being paid is eliminated.
Greenfield investments necessitate the greatest involvement in international business. A greenfield investment is where you buy the land, build the facility and operate the business on an ongoing basis in a foreign market. It is positively the most costly and holds the highest risk but some markets may require you to undertake the cost and risk due to government regulations, transportation costs, and the aptitude to admittance knowledge or expert labor.
More Information: http://www.tradestart.ca/market-entry-strategies