MODES OF ENTRY

Modes of Entry for Global Expansion

Modes of Entry for Global Expansion

 Introduction

An international strategy is all about the expansion of market, increasing of sale and reduction in the production cost.  Today, we are living in the age of technology and globalization which created a competitive landscape. In this landscape, only those companies can survive which are continuously striving hard. Otherwise, there would be constant threat from the local and global level companies. As companies enter in international market, they develop relationships with customers, suppliers and partners. These relationships also help them to learn the global potential, culture, business environment and strategies. There are various modes of entry for global expansion, but here four modes are discussed e.g. Export ,Strategic Alliances, Licensing,  Acquisitions

             

Outcomes and Opportunities of International Strategy

Identify International Opportunities

Explore Resources and Capabilities

Use the competence for entry

Competitive edge results

 

What are the Incentives to pursue an international strategy?

 One of the main reasons to execute a global strategy is that international markets produce new leads or increase the sale. Another reason for companies to become multinational is to ensure the availability of necessary resources. Some companies are highly dependent upon the availability of raw materials e.g. gas, oil, rubber, bauxite etc. These raw materials are not easily or cheaply available at local market. Other companies want to ensure access to factors or elements of production. Electronic, watches, garments and many other companies are shifting their operations to foreign countries for the sale of low costs. In addition, there is increasing pressure for global integration. This is because of the removal of borders and high demands of products in overseas markets(Nielsen et al 2011, pp. 185-193). Following are some immediate incentives for the international strategy;

 

Expansion of the market: In this global world, almost all companies have the opportunity to expand the size of their potential market. In this regard, companies have to invest in the Research & Development (R&D) department as it can compete with domestic companies. As a rule, larger markets are offering handsome profits and less risk on the investment. This is the reason that companies are heavily investing in those countries that have the talent, scientific knowledge, strong infrastructure, strong educational base and highly populated. However, the market power and size of the company do not guarantee about the future success, although it might have sufficient resources.

Returns on Investment: Large markets are crucial for the significant return on investment, such as equipment, plant and capital. Most of the companies believe that new products become obsolete. So, they apply aggressive marketing strategy in large markets and quickly earn satisfactory profits from invested capital. As they survive, they invest in the R&D and apply international standards which further help them to earn profits.

Economies of scale and learning: when firms are applying international standards, use efficient methods of production and continuously investing in R&D, they bear less cost of production when producing more and more units. Companies are producing more units because of increasing in ...