If you are planning on doing business overseas, you should be aware of the different global entry strategies. These strategies include Joint ventures, licensing and outsourcing. However, it is important to keep in mind that these strategies will all involve risks, and the most risk-prone strategy will be the one that best fits your firm’s unique needs.
Licensing
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The decision to go international may be a tough one to make, especially if your business isn’t already well established in your home country. For a start, a company can either acquire a foreign subsidiary or hire an independent distributor. But it’s a tricky business if you don’t have the resources to support a large foreign operation. If you do decide to go the route of international expansion, you’ll need to choose a strategy that’s suited to your unique circumstances.
There’s a plethora of factors to consider, including financial and human resources. These decisions have a direct impact on how successful your venture will be. It’s also important to consider the type of partners you’ll want to do business with. Some partners can be beneficial and others can prove to be a drag on your budget. Likewise, if you’re planning to operate in an emerging market, you’ll need to be wary of the local competition. A foreign country is likely to have more competitors than you have chums, so you’ll need to be a competitive player from the get-go.
One of the best things about being an entrepreneur is the ability to pick and choose the companies you partner with. To do this, you’ll need to be a savvy consumer of social media, attend tradeshows and conferences, and keep a watchful eye out for deals and offers. This will ensure that you’ll be able to reap the benefits of doing business with your chosen partners. Among other things, it can also help you to better understand your customers’ needs and desires. Of course, you won’t be able to control all of these factors, so it’s up to you to make a well-informed decision.
As with any major investment, you’ll need to consider whether it’s the right time to go global. This can be a confusing task if you don’t have a clear understanding of the industry you’re in. Thankfully, the Internet has a wealth of information on the subject.
Outsourcing
One of the first things to do when embarking on a global expansion quest is to decide on a viable path to follow. In the process of devising a strategy, marketers are confronted with a myriad of options. These range from naive entry via cheap and cheerful foreign labor to the more involved approach of establishing footholds in the most exotic locales. Choosing the right fit is key to a successful venture. This entails an assessment of the competition as well as the state of the economy. Using this information to your advantage, one can be on the apex of the global trading cycle. Getting the most bang for your buck can be a daunting task.
Luckily, there are many viable paths to global success. Among them, outsourcing is not for the faint of heart. But if done right, it can spell big wins for both you and your clients. Having said that, it is also a minefield. Nonetheless, a good strategy can help to alleviate some of the associated pains. Moreover, it is a proven means of achieving the elusive scalability and resiliency required to sustain such a mission.
Joint ventures
There are numerous options available for companies looking to enter international markets. These include: licensing, acquisition, partnering and strategic alliances. Each has its own advantages and disadvantages. The question of what path to take depends on the company’s goals, resources, and risk tolerance.
Licensing is a market entry strategy that enables a company to gain experience in a new market without committing to a long-term investment. However, it requires extensive planning and investigation. Moreover, it involves policing and implementation. It is similar to a franchise operation. In the case of licensing, a company can purchase into a partner’s business or buy shares of stock.
Joint ventures are a more complex form of market entry. They involve two or more companies working together, with each sharing profits and losses. Typically, a joint venture lasts a few years. Many countries offer tax advantages for these businesses. Nevertheless, establishing a wholly owned subsidiary can be expensive.
When the objectives of a firm and its partners are aligned, a partnership is a desirable entry mode. This allows the firms to share costs, access distribution channels, and facilitate technology sharing. Unlike licensing, joint ventures require greater commitment and require a thorough understanding of the market and business environment.
Strategic alliances allow firms to combine their resources to perform business in a global market. Although the benefits are shared, the risks associated with entering a new market must be considered carefully.
The main considerations when deciding on an international market-entry strategy are risk, cost, and control. While the first two factors may be obvious, they can be difficult to assess.
A wholly owned subsidiary enables a company to compete more aggressively overseas. But it also requires a large investment. Moreover, it may require the hiring of consultants and host-country nationals. Furthermore, there is the possibility of repatriation of earnings, which must be carefully monitored.
For companies that are unable to invest in a wholly owned subsidiary, licensing is an effective alternative. The risk involved in this approach is less than that of a joint venture. But the process can be a lengthy one.
Smaller firms often only export in response to an unsolicited overseas order
Smaller firms are often torn between pursuing discrete sales and long-term commitments, and they must be aware of robust export marketing strategies. They must also learn how to assess global market conditions, and invest time and resources to adapt to dynamic changes. As a result, their decision-making process is much larger than it is for domestic markets. Moreover, they may have less control over key resources, such as human and financial capital, which might limit their ability to engage in relational exchanges with buyers.
One of the most common choices of small exporters is to respond to unsolicited overseas orders. This strategy is a logical choice because it is perceived as a low-risk, low-cost approach to international business. However, while responding to unsolicited orders can be effective, it requires the small firm to be flexible. Unlike larger enterprises, they do not have the resources to establish channel relationships and to engage in relational exchanges.
Some small firms, however, choose to engage in casual exchanges, which do not require the same levels of commitment. These types of exchanges are characterized by frequent communication between the two parties. Although these forms of exchange do not involve contractual obligations, they still require substantial investments. In addition, these exchanges do not require a strict commitment constraints, such as a commitment for a certain number of orders or a fixed delivery day. Moreover, they are guided by a mutual understanding of the non-binding relationship, rather than a strict commitment constraint.
For these reasons, they seek to enhance flexibility and meet customer requirements. Furthermore, they can expand their product portfolio and fill market voids. Nonetheless, they are also confronted with intense competition from larger firms. To survive, they must also seek to differentiate themselves from their competitors, and gain competitive advantage. Ultimately, their choice of exchange modalities is determined primarily by economic considerations. It is therefore important for them to consider all of the factors involved in their decision. But while choosing one mode over another, they should be careful to avoid pitfalls, such as losing important contacts or making a wrong decision.
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