Unit 6: Strategies for Entering International Markets
The business decision for entering a foreign market may be an easy one, but the process of choosing those markets, as well as selecting entry strategies, is much more complex. The criteria for determining the attractiveness of a market can vary from country to country, and the conditions in each nation that determine which strategy is most desirable can vary, as well. Additionally, companies have to make the decision whether to sell directly into those countries or to use partners or export managers to gain a presence. In this Unit, we will evaluate the elements that help companies evaluate potential markets; we will assess the various strategies available to organizations seeking to go global; and determine the many factors that influence the choices a company will need to make for market entry.
Completing this unit should take you approximately 3 hours.
Upon successful completion of this unit, you will be able to:
- evaluate potential international markets to determine which market to enter;
- assess the different strategies for entering a foreign market, such as exporting, licensing, joint venture, or direct foreign investment; and
- determine the external factors, such as market size and market growth, and the internal factors, such as company objectives and company resources, that influence market entry strategy choice.
6.1: Market Entry Strategies
This video introduces the factors that are important to evaluate when considering foreign market entry. An organization must determine the long-run profit potential of a market, which relates to the competitiveness of its economy and the value the company can create for that marketplace. This video explores the pros and cons of being an early or late entrant into the market and whether a company should invest on a large or small scale. Some of the modes of entry into a foreign market include licensing, franchises, and strategic alliances. We will explore this topic in more detail later.
This page some of the factors used to evaluate the attractiveness of an international market. Some factors will be specific to one business or industry, while others may relate to the market itself. Regulations, logistics, and culture all play a role. Before entering a market, it is essential to pick a mode of entry that integrates these elements into the process.
One of the first steps in deciding on entry into a foreign market is to evaluate its internal and external factors. Internal factors can include the size of the market, the organization's experience, and product differentiation. External factors relate to consumer demographics and demand, trade barriers, and competition. Companies need to determine their acceptable risk, level of desired control, and flexibility to choose between entry modes, such as by creating a subsidiary or using an agent. Watch this video for a closer look at these criteria.
Export, buy a franchise, or form a strategic alliance? These are some of the modes of entry into a foreign market a company can choose from. This section explores the advantages and disadvantages of each, including fast entry but low control, low risk but adherence to regulatory requirements, or known entities but high cost. As you review, think about the different industries you have experience in, and consider which mode of entry might be most suitable for a business in that field.
6.2: Indirect Market Entry
Indirect market entry makes use of third parties to gain a presence in a foreign market. Some of these methods include piggybacking, trading companies, export management companies, and countertrades. Direct sales allow an organization to sell directly into a country, either independently or through an agent or subsidiary. This section describes the various options available to businesses.
When deciding whether to sell directly or indirectly in a foreign market, a company must consider many factors, including its level of resources, its size, and the business and political conditions in the nation. This section explores the different approaches to exporting.
6.3: Direct Market Entry
Direct selling can give an organization greater control over the sales process and more flexibility in revising or changing strategies. This section explores direct selling opportunities in greater depth and the various elements that come into play when making decisions about exporting strategies. While this page is based on Canadian business practices, its concepts and content can be applied to all companies considering global expansion.
Unit 6 Assessment
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.