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Foreign Market Entry Strategies
Foreign manufacturing
Under certain conditions, many organizations find it inappropriate to distribute their domestic products to foreign markets. Transporting large products is always expensive hence many companies produce their products close to the market.
Additionally, custom charges can also make the products to be less competitive. A countrys preference for their locally produced goods can prevent an organization from entering a foreign market (Benjamin, 2006). Other factors like availability of ready market, less production costs and financial motivation can make a business organization produce its products in the foreign market.
Assembling
This is the cooperation between exporting and foreign production. Organizations locally produce components of its products and transport them to foreign markets where they are assembled as a final product. This strategy is cost effective as companies will spend less money in transporting the components and paying for the custom tariffs. Moreover, local workers can be used to ease the amalgamation of companies in the foreign market.
Licensing
This is another appropriate strategy used by a number of companies when entering a foreign market. The strategy is not only considered to be less risky, but also involves larger tasks for domestic producers.
There is a slight difference between licensing and franchising. In franchising, companies tend to take part in the development and management of the marketing plan. A global licensing firm provides the licensee with patent rights on goods. Consequently, the licensee will be able to manufacture the licensors products and market them within a given boundary (Yenne, 2005).
Foreign public authorities prefer this type of agreement since it comes with a number of technological advancements into their country. Conversely, this strategy can only work for a short duration of time because many foreign companies tend to start their own production after obtaining the know-how.
Joint ventures
Foreign joint ventures are similar to licensing except that most of the international companies in joint ventures are involved in the management of foreign firms. When a foreign company forms partnership with the home-country firm, a new organization is always formed. Therefore, international companies are not only able to manage their operations, but also obtain important information on the local market. In addition, an international company will not be at risk of being taken.
Global Expansion Strategies Used by Different Companies
Intel Corporation
Intel is an international company with its headquarters in America. Besides, the company is considered to be one of the leading producers of motherboard chipset around the world. Intel Corporation used joint venture strategy to enter into various foreign markets. For instance, the company was able to form a joint business enterprise (IM Flash Technologies) with Micron Technology.
IM Flash Technologies produces flash memories which can be used as detachable storages (Alkhafaji, 2001). Consequently, this provided them with a wider market. They are also able to effectively compete in the local and international market with other companies producing similar products.
McDonalds Corporation
McDonalds majorly used franchising strategy to enter into foreign markets. Therefore, they have managed to expand their operations to approximately 120 countries globally. The company has set up policies which the franchisees are expected to obey in their restaurant management.
For instance, McDonalds expect their franchisees to follow their menu, cooking techniques and staffing rules respectively. Consequently, this forms a large section of McDonalds successful strategy. They have also reduced their operational costs while maximizing their profits.
Goya Foods, Inc.
Goya is a food producing company with branches in many countries including America and Spain. It uses foreign manufacturing strategy to enter into the competitive local and international markets. Therefore, they have been able to reduce their transportation costs thus making a lot of profit (Miltenburg, 2005). For instance, they had previously constructed a multimillion distribution center in Doral (Florida). From here, they are able to manufacture their products and distribute them locally to their customers.
The Boeing Company
Boeing is an international aerospace and defense company. This company used joint venture strategy to enter in various foreign markets. Together with Aviation Industries Corporation, they formed Tianjin Composites Company. Consequently, they have obtained important information regarding chinas local market.
The Coca-Cola Company
The Coca-Cola Company used assembling strategy during their global expansion. The company transports some of their unfinished products like syrup to foreign markets. Therefore, the rest of the work (manufacture of containers and addition of water) is done by local bottle companies (Tielmann, 2010).
Nokia Corporation
Nokia succeeded in venturing into foreign market through the application of assembling strategy. The company has assembly plants in various countries including Finland and Mexico. Nokia and Siemens also used a joint venture strategy to enter into foreign markets. For instance, they were able to form Nokia Siemens Networks (NSN) as their joint business enterprise.
Company Which Has Experienced an Evolution of Strategies
The Coca-Cola Company has experienced an advancement of strategies since it started its expansion into the foreign market. Due to high demand, the company decided to change from assembling strategy to foreign manufacturing strategy. Instead of transporting their unfinished products, Coca-Cola Company has set up firms in various countries where they are able to manufacture their own products. Consequently, this was done to reduce high transport costs.
References
Alkhafaji, A. F. (2001). Corporate transformation and restructuring: A strategic approach. Westport, Conn: Quorum Books.
Benjamin, L. K. (2006). Market entry strategies of foreign Telecom companies in India. Wiesbaden: Dt. Univ. Verl.
Miltenburg, J. (2005). Manufacturing strategy: How to formulate and implement a winning plan. New York: Productivity Press.
Tielmann, V. (2010). Market Entry Strategies: International Marketing Management. Munich: GRIN Verlag GmbH.
Yenne, B. (2005). The story of the Boeing company. St. Paul, MN: Zenith Press.
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