International Market Entry Strategies

The following are some of the important strategies

 

Joint ventures

A joint venture is a strategic alliance where two or more parties, usually businesses, form a partnership to share markets, intellectual property, assets, knowledge, and profits. A joint venture differs from a merger, in the sense that there is no transfer of ownership in the deal.

For example, Best Price Modern Wholesale is a joint venture between WalMart and Bharti Enterprises. American retail giant Wal-Mart chose this route to enter the Indian market.

 

Strategic alliances

A strategic alliance is formed when two or more businesses join together for a set period of time. The companies, generally, are not in direct competition, but have similar products or services that are directed towards the same target group.

For example, Tata Motors and Fiat entered into a strategic alliance to cooperate in areas like research and development, and marketing.

 

Direct investment

Through Foreign Direct Investment a firm invests directly in facilities to produce and/or market a product in a foreign country. For example, in the early 1980’s, Honda, a Japanese automobile company, built an assembly plant in Ohio and began to produce cars for the North American market.

These cars were substitutes for imports from Japan. Once a firm undertakes FDI, it becomes a Multinational Enterprise (The meaning of Multinational being “more than one country”).

 

Contract manufacturing

Contract manufacturing is a process that establishes a working agreement between two companies. As part of the agreement, one company will custom produce parts or other materials on behalf of their client.

In most cases, the manufacturer will also handle the ordering and shipment processes for the client. As a result, the client does not have to maintain manufacturing facilities, purchase raw materials, or hire labour in order to produce the finished goods.

 

Franchising

Franchising is basically a specialised form of licensing in which the franchiser not only sells intangible property (normally a trademark) to the franchisee, but also insists the franchisee to abide by strict rules with respect to how business is done.

The franchiser will also often assist the franchisee to run the business on an ongoing basis. While licensing works well for manufacturers, franchising is often suited to the global expansion efforts of service and retailing. McDonald’s, Tricon Global Restaurants (the parent of Pizza Hut, Kentucky Fried Chicken, and Taco Bell), and Hilton Hotels have all used franchising to build a presence in foreign markets.

Sarav Author

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