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Market Entry Strategies (Direct Exporting (Agents and distributors work…
Market Entry Strategies
Direct Exporting
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Agents become the face of your company so you have to trust they will act as planned, if they do not, it looks bad on your part
Direct exporting is selling directly into the market you have chosen using in the first instance you own resources.
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Licensing
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It is a particularly useful strategy if the purchaser of the license has a relatively large market share
Licensing is a relatively sophisticated arrangement where a firm transfers the rights to the use of a product or service to another firm
Partnering
partners bring local market knowledge, contacts and if chosen wisely customers.
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Partnering is a particularly useful strategy in those markets where the culture, both business and social, is substantively different than your own
Partnering is almost a necessity when entering foreign markets and in some parts of the world (e.g. Asia) it may be required.
Joint Ventures
Joint ventures are a particular form of partnership that involves the creation of a third independently managed company.
Two companies agree to work together in a particular market, either geographic or product, and create a third company to undertake this
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Buying a Company
The company has substantial 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 the most costly and determining the true value of a firm in a foreign market will require substantial due diligence
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This entry strategy will immediately provide you the status of being a local company and you will receive the benefits of local market knowledge
Piggy Backing
This reduces your risk and costs because you are essentially selling domestically and the larger firm is marketing your product or service for you internationally.
If you have a particularly interesting and unique product or service that you sell to large domestic firms that are currently involved in foreign markets you may want to approach them to see if your product or service can be included in their inventory for international markets
It can be challenging to find a product that can fit well with your own and also match the need for it.
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Turnkey Projects
This is a very good way to enter foreign markets as the client is normally 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
A turnkey project is where the facility is built from the ground up and turned over to the client ready to go
Turnkey projects are particular to companies that provide services such as environmental consulting, architecture, construction and engineering
Greenfield Investments
It is certainly 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 ability to access technology or skilled labour.
A greenfield investment is where you buy the land, build the facility and operate the business on an ongoing basis in a foreign market
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Franchising
Franchising works well for firms that have a repeatable business model (eg. food outlets) that can be easily transferred into other markets.
Your business model should either be very unique or have strong brand recognition that can be utilized internationally
Franchising is a typical North American process for rapid market expansion but it is gaining traction in other parts of the world.
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