Global Business Management
Companies have four main strategies when entering foreign markets. These entry strategies include exporting, licensing, joint ventures and acquisition, and franchising. Companies entering foreign markets can use either of the four strategies, depending on the prevailing contingencies.
The exporting strategy involves selling of products manufactured in one country to another foreign country, without requiring any manufacturing in the foreign market. This strategy requires a vigorous marketing strategy in the foreign market.
Licensing refers to a foreign operation where a company permits a firm in a foreign country to use its trademarks, manufacturing, processing and skills to operate in the foreign country. Licensing allows a foreign firm to manufacture products that are similar to those manufactured by the licensor.
A joint venture involves a collaboration between a company and a foreign firm where they share the control, ownership, rights, and operations of an enterprise. This strategy helps a company entering the foreign market to understand the local market, reduce risks of investment, and gain access to shared financial capabilities that can use in your ib extended essay. Acquisition refers to a situation where a company fully takes over a foreign firm and owns it within the foreign country.
A company using franchising as an entry mode to a foreign market allows a foreign business entity to associate its business with the company’s name, trademark, sell its products and use the company’s systems and business formats. In return, the foreign business entity pays loyalties to the company. This entry mode reduces the company’s political risks, allows it to expand into multiple markets simultaneously and gain access to the already established distribution channel.
The Coca Cola company uses licensing as a mode of entering foreign markets. The company allows the licensee to use its trademarks and manufacture its products. A good example of the licensing entry mode is in Zimbabwe, where the United Bottlers has permission to make and sell Coke.
McDonald’s is a company with a chain of restaurants around the world. Its success in the foreign markets has been contributed by its insistence on employing locals to manage its restaurants. In the Indian Market, one of its largest markets, the company used joint ventures with two companies namely Connaught Plaza Restaurants Private Limited and Hardcastles Restaurant Private Limited. These joint ventures enabled MacDonald’s to overcome the bureaucracies within the India.
Goya Foods Inc. has been successful in manufacturing, packaging and distributing Hispanic food to various countries in the world. One of its foreign market entry strategies is joint ventures. The company has recently entered into a joint venture Beech-Nut company to produce an authentic product line specializing in baby food. Beech-Nut is owned by a Swiss Company named Hero Group., The company can gain easy access to Swizerland’s market by entering the joint venture.
Intel corporation is a company that manufactures semiconductor chips based in the United States of America. The company does not operate only within the United States but also in other countries. The company uses acquisition as crucial strategy in its foreign market entry. The company acquired Telmap, an Israeli corporation in 2011. Moreover, the company has acquired several other foreign firms such as SySDSoft of Egypt and Infineon’s Wireless Solutions. These acquisitions enable Intel to have easy access to the local markets where the acquired firms operate.
Boeing is an aerospace and defense corporation that manufactures aircrafts as its main products. The company enters the international markets through the export strategy. It exports its products to various countries of the world such as Brazil. The company exports its products directly to its customers who are mainly corporations.
Nokia is a mobile phone manufacturer based in Finland. To enter the international market, Nokia mostly uses acquisitions. These acquisitions were evident from 2003 when Nokia acquired Intellisyc Corporation. Although it acquires other firms as a means of foreign market entry, its has experienced evolution of strategies. Apart from the acquisition, the company has also utilized a joint venture with Siemens as an entry strategy in the international market.
