Another example of licensing is Microsoft Office. Other resources The , and the also have excellent resources for entrepreneurs interested in exporting and international expansion. Each method is unique and can assist organizations with reaching their expansion goals. Joint Ventures Joint ventures are a particular form of partnership that involves the creation of a third independently managed company. Whilst most developing countries are hardly in stage one, they have within them organisations which are in stage three.
In this case, Busy Tech would need to purchase land in a foreign country, build a new manufacturing facility, and continually operate in the foreign market. In this form of barter, each party agrees in a single contract to purchase a specified and usually equal value of goods and services. The challenge is to choose the right strategy by considering corporate strategy, tariffs, transportation costs, product localization needs, and marketing needs. One of the best ways to pre-empt these differences is to check the cultural dimensions of the nation outlined in the work of Professor Geert Hofstede. Countertrade By far the largest indirect method of exporting is countertrade.
There are many reasons businesses look for international expansion, but before all of that, you will first need a strong market entry strategy. Country-to-country variations in host government policies and trade requirements. Typically, products with a longer product life-cycle or in the maturity phase would follow a Waterfall Strategy, for expansion into new markets. Busy Tech quickly realizes that they have several options, each fit for a variety of business scenarios. Today, many companies have global presence, be it ones that were established 100 years back or recent start-ups. It often requires establishing and further managing contracts in a new foreign country.
Another way of looking at it is by identifying three basic business strategies: stage one - international, stage two - multinational strategies correspond to ethnocentric and polycentric orientations respectively and stage three - global strategy corresponds with geocentric orientation. While this is a more risky strategic framework for entering new markets, typically it is more suitable for products with a shorter life cycle like Technology products or are at the Introduction and Growth Stage of the Product Life Cycle. Costs include search and bargaining costs. This tactic is useful and often utilized when political restrictions are involved or companies are lacking the necessary funds or resources. Alternatively, if exchange is being organised at national government level then the seller agrees to purchase compensatory goods from an unrelated organisation up to a pre-specified value offset deal. Foreign production Besides exporting, other market entry strategies include licensing, joint ventures, contract manufacture, ownership and participation in export processing zones or free trade zones.
In marketing products from less developed countries to developed countries point iii poses major problems. Decisions in the marketing area focus on the value chain see figure 7. Whilst no direct manufacturing is required in an overseas country, significant investments in marketing are required. When setting up a legal entity seems too risky or you would like to test the market first, outsourcing is your way out. For instance, Spotify was launched recently around eight years back, but today has more than 140 million active users spread across the globe. The following strategies are the main entry options open to you. Businesses may have to use different market entry methods for different countries i.
If you choose that path, make sure your strategy includes a unique value proposition for the distributor. Licenses can be for marketing or production. You first have to convince the firm that your product is right for them. It can be used to circumvent import quotas. How did they approach the new market? Variations in market growth rates from country to country and important country-to-country differences in consumer buying habits and buyer tastes and preferences. The full delivery network for global markets is summarized in the graphic below:.
Partnering Partnering means that two or more people will work together to enter a new market. They become the face of your company and thus it is important that your choice of agents and distributors is handled in much the same way you would hire a key staff person. In the European winter prices are much better, but product competition remains. This market entry strategy can be perfect for new companies who cannot afford to take risks. Entering into a foreign market is like discovering new territory for business owners. Be sure to focus on long-term relationship building in your new market—and again, be patient. Cunningham 1 1986 identified five strategies used by firms for entry into new foreign markets: i Technical innovation strategy - perceived and demonstrable superior products ii Product adaptation strategy - modifications to existing products iii Availability and security strategy - overcome transport risks by countering perceived risks iv Low price strategy - penetration price and, v Total adaptation and conformity strategy - foreign producer gives a straight copy.
It will also need to consider how to find and select partners in overseas countries, as well as how to investigate the freight and communications options available. Here are six steps you can follow to build a winning market entry strategy and start exporting into previously unknown territory. It is also easier for the firms to hire agents or distributors who will take care of exporting and promoting the new product in the new market. . Starbucks would still gain a profit from its product but the initial margin would be much less than it is in the United States to accommodate the norms in the foreign country.