Struggling with the limitations of scale, they were wrestling with finding footing in emerging markets as much as protecting ground in developed ones.
One of the first issues confronting an exporter is deciding what markets to pursue. Trade barriers tariffs, as well as standards, regulations, quotas, labeling requirements, etc. If intense competition exists, the exporter may decide to look at smaller markets that may be unattractive for multinationals, but big enough for a small firm.
If the products and designs will not suit the target market, the exporter will need to make changes or choose another market. In addition, other factors to be considered include the degree of foreign intellectual property protection, environmental standards, an understanding of the legal system and how it works, and the comprehensiveness, or lack of, commercial legislation.
The absence of civil, commercial and criminal codes can be a major constraint.
And confusing and burdensome bureaucratic requirements can tie up valuable time. As a result of the effort up to this point, it is not uncommon for the exporter to grow fatigued, give up, or abandon the objective.
There are many strategies from which a company can choose to expand internationally. These include direct exporting, indirect exporting, establishing a joint venture or strategic alliance in a foreign market, acquiring a firm through direct investment, or licensing technology abroad.
The benefits and risks associated with each method are contingent on many factors, including the type of product or service, the need for support, and the foreign economic, political, business, and cultural environment the exporter is seeking to penetrate.
A number of questions must be answered before committing to a particular strategy. Experienced international executives often say the company contemplating international expansion must be very familiar with the environment it is seeking to penetrate and understand how to do business there.
What it will take to be successful, to staff appropriately, integrate distribution, finance operations, and remedy currency risks should be analyzed ahead of time.
A primary concern frequently expressed is the need to know how to terminate an agreement if the arrangement does not work. Additionally, seasoned executives indicate it is essential to determine the potential for political risk and the propensity for business disruption in each country under consideration.
Indirect exporting demands little or no knowledge of foreign markets. The advantages to small- and medium-size firms are that indirect exporting requires less international experience, less commitment of resources, and less risk.
In addition, firms often can enter foreign markets more quickly through indirect exporting. The disadvantages include less control over the marketing of the product, less information about the buyers and generally less profit because of the greater number of intermediaries involved.
These intermediaries include foreign buying agents, brokers and agents, export management and export trading companies, piggyback marketing, and foreign trading companies. Foreign buying agents, also known as commission agents, are locators and purchasers of merchandise for foreign firms or governments.
They are compensated by the foreign entity. Brokers and agents, also known as import-export brokers, act as independent intermediaries who facilitate international transactions by coordinating activities of buyers and sellers of particular products.
Brokers and agents receive commissions based on the value of the transaction. In some instances, a broker or agent will provide documentation, labeling, packaging, and marketing services.
Both export management companies EMCs and export trading companies ETCs serve as indirect exporting intermediaries by providing export-related services. EMCs act as the export department for one or several manufacturers of non-competitive products, pursuing overseas orders in the name of the manufacturer.
A long-term contractual relationship typically exists between the EMC and manufacturer. EMCs may receive a commission based on sales, a combination of retainer plus commission, or they may purchase and mark-up the product for export.
They usually specialize in particular products or country markets and work closely with well-established networks of foreign distributors. They are familiar with the necessary formalities in packaging, documentation and shipping.
ETCs typically act as independent brokers, international distributors or wholesalers, with no long-term obligation to the manufacturer. ETCs take title to the merchandise, paying the manufacturer directly. The most common example is when a manufacturer complements its product line with other non-competing, ancillary products, such as TVs and VCRs.
Foreign trading companies, also known simply as trading companies, were important in the colonial movement and still are important today. They tend to focus on a particular market or product line. Dealing with a trading company is similar to dealing with a domestic distributor.
Terms may include a limited or exclusive territory involving one, several or all foreign countries.Companies that address their organizational weaknesses as they implement growth strategies give themselves an advantage.
Most senior managers pay close attention to the strategic side of growth—the “wheres,” “whens,” and “hows.” Yet many underestimate the importance of organizational factors in translating a growth strategy into reality.
Type or paste a DOI name into the text box. Click Go. Your browser will take you to a Web page (URL) associated with that DOI name. Send questions or comments to doi. Explain how technology can help organizational effectiveness. Relate how technology can propel an organization's global expansion strategies.
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An international expansion strategy comprises market entry strategy including crucial choices in regard to primary markets of focus, determination of target customer and channel strategy, resource allocation, product and service value offerings, brand positioning, and creation of an operating model.
The International Man's Glossary A-Z: colloquialisms, concepts, explanations, expressions, idioms, quotations, sayings and words.