International Market Entry Strategies and Drivers
Classified in Economy
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Drivers of International Expansion
Push Factors
- Domestic market maturity or saturation
- Legal restrictions
- Increasing costs
- Unfavorable economic conditions
- Unfavorable demographic changes
Pull Factors
- Corporate philosophy
- Perception of growth opportunities
- Niche opportunities
- Imitation of competitors
- Following the customers
- Technology acquisition
Facilitating Factors
- Accumulation of experience
- Decreasing barriers to international trade
- Enhanced communication technologies
- Managers’ drive and vision
- Learning from other firms’ experience
International Entry Modes
Exporting
Indirect Export
- Foreign buyer/broker:
- Advantages: Simple and cheap; does not require experience.
- Disadvantages: Total lack of control over marketing strategies and market selection.
- Independent agents, specialized companies, export consortiums:
- Advantages: Shared costs, less risk, and more flexibility.
- Disadvantages: May not cover all worthwhile markets; excessive dependency on partners as volume grows.
Direct Export
- Advantages: Higher number of marketing actions and more control over exports.
- Disadvantages: More investment, higher risk, and less flexibility.
Licensing
Includes registered brands, patents, know-how, franchises, and manufacturing/distribution contracts.
- Advantages: Quickness, less costly, and reduced investment.
- Disadvantages: Possible opportunistic behavior of partners; difficulty in maintaining standards.
Joint Venture
A long-term association between companies where control, decision-making, and risk are shared based on capital share.
- Advantages: Shared costs and risks; quick cash flows.
- Disadvantages: Shared control leads to less independence; challenges in partner selection.
Acquisition
Acquisition of existing companies and assets (distribution channels, brands), either 100% or a controlling share.
- Advantages: Full control and quick cash flows.
- Disadvantages: Full costs and risks; high exit barriers.
Greenfield Investment
The firm enters the market using its own resources.
- Advantages: High degree of control; avoids restrictions and inertia.
- Disadvantages: High cost and risk; takes time to recover investment.