The business world of today calls for expanding sales and profits in order to achieve ever-increasing earnings. Business owners and managers must look for any available opportunities to keep their market share and expand into new markets. What happens when their local market becomes saturated? The savvy leader is inclined to search abroad for any and all potential new markets for their product or service. New markets offer the possibility of increasing total revenue and/or decreasing the costs of goods sold, thereby increasing profits. Entering new markets may also allow a company to follow its existing customers abroad, attack competitors in their home markets, guarantee a continued supply of raw materials, acquire technology or ingenuity, diversify geographically, or satisfy the stockholder’s desire to expand.
In many cases, with many companies, it is survival. There simply isn’t enough domestic demand to keep many firms in business, without going overseas.
Once management has made the decision to expand and has determined the target market or markets, the next question is obviously, “how”. Selecting a mode for entering or expanding in a foreign market is one of the most crucial strategic decisions that can be made by a company. Weighing all factors and choosing the proper mode of entry can result in huge competitive advantages, while making a poor decision can lead to the demise of the company.
Often, international people without the knowledge base or the necessary contacts are tasked with “going international.” 99% of the time, they will fail.
Foreign market penetration can be done by a variety of different methods; each possibility should be assessed before the process begins.
Following is a comprehensive list of various modes of entry that can be utilized when entering or expanding in a foreign market.