A firm’s global entry strategy can be different depending on its target market. For example, BMW manufactures automobiles and motorcycles, and has a manufacturing plant in Spartanburg, South Carolina, United States. BMW has three global product strategies, which can be chosen depending on the needs of the target market. Of these strategies, direct investment requires the largest investment, but it also carries the highest risk. If the firm fails to achieve the desired results, the initial investment can be lost.
Piggybacking is a global entry strategy that involves two or more non-competing firms that are in business together. It requires relatively small capital and a high degree of trust. In addition, the partner company can control marketing efforts abroad. But there are a number of risks associated with piggybacking.
A common approach involves purchasing a local company’s products and services and piggybacking off of their international network. In this strategy, a company pays another company to add its product to its overseas inventory, which is then sold by the local company. In return, the two companies split the profit from each sale. This is a risk-controlled way to enter a new market.
Another strategy involves creating a joint venture with a foreign company. Joint ventures have lower risk than individual companies but can lead to imbalanced involvement between companies. However, joint ventures can work well if the two companies can agree on fair processes. In some cases, joint ventures result in higher profits than joint ventures.
Using a third party to deliver products and services in a foreign market is another way to enter a new market. Using another company’s products or services to sell them in a foreign market lowers the risks involved and lowers the costs. Furthermore, partnering with an international company can also boost your brand recognition.
This international strategy helps a firm take advantage of its existing capabilities and export to new markets. This strategy offers cost efficiencies and is a good choice for firms that have few local needs. An example is Apple, which sells standardized products and has minimal differences in marketing strategies around the world.
One of the biggest risks in outsourcing as a global entry strategy is that the business will be uncompetitive in the global marketplace. While leveraging offshore resources may be attractive for short-term profits, it can have long-term negative consequences. Specifically, outsourcing to third parties can reduce the company’s ability to innovate, and it can make it more dependent on external suppliers.
One of the most important concerns in outsourcing arrangements is the confidentiality of information. This includes information about employees, customers, and contractors. In Canada, the federal Personal Information Protection and Electronic Documents Act (PIPEDA) promulgates a comprehensive regime for the protection of personal information. PIPEDA addresses personal information used for commercial purposes, and it will be a relevant Canadian statutory constraint if outsourcing takes place internationally or across provinces.
Using outsourcing as a global entry strategy is not a good choice for all companies. A multinational company may be unable to keep a competitive edge in the global market if it cannot control the quality of the products it is outsourcing. In addition, outsourcing may not be an effective way to maintain consumer confidence.
Outsourcing is not without its benefits. While global entry strategies have become fashionable in the 1980s, many companies are finding it difficult to manage globally scattered operations. Ultimately, outsourcing can result in significant costs and limitations, and companies should carefully consider the risks and benefits of outsourcing before deciding to embark on this path.
While the risk is high, outsourcing can also be very effective, and it can give companies a competitive edge and reduce the risk of operating an ineffective IT department. It can also save a company capital for other investments and allow it to focus on its core business. Outsourcing can give a company greater flexibility and agility, and it can also improve its overall quality of service.
One of the most common strategies for entering foreign markets is establishing a joint venture. In a joint venture, two companies agree to jointly market a certain product or service. Profits and risks are typically shared. An example is the Sony/Ericsson cell phone joint venture.
Another strategy is to build a wholly owned subsidiary in another country. While this can be a costly and complex process, it provides maximum control and high potential for above-average returns. However, it requires a large upfront investment and a thorough understanding of local business conditions.
When choosing a global entry strategy, it is important to determine which is best for your business. You will want to decide which strategies have the lowest degree of risk. For instance, you may want to focus on entering large markets with relatively low competition. However, this can be risky if you fail to make an impact in the market. This is why some clients choose to avoid aggressively competing markets, like Turkey or Germany. Choosing the most advantageous global entry strategy depends on a variety of factors, including the stage of your business and the barriers to entry in those markets.
If you already have contacts in the foreign market, you may consider piggybacking. Piggybacking involves asking an overseas company to market your product or service in exchange for a share of the profit. This strategy is often attractive to new entrants as it enables the international partner to focus on domestic retail.