How you enter your new market will be determined by the nature of your product and/or service, and the conditions and requirements of your chosen market segment and location.

Exporting strategies

Direct strategies

When you sell directly to end-users, you eliminate the middlemen making it easier to customise your market entry strategy to reflect the market conditions you may face.

Sales can be made directly between you and end-users, or they can be made through local sales representatives who promote your product and/or service without taking ownership. You can use a distributor to sell your products directly to buyers.

When you sell directly to end-users, you'll be responsible for:

  • market research
  • marketing
  • distribution
  • warehousing and delivery of your product and/or service
  • customer and after-sales service
  • sales order, and billing.

Indirect strategies

When you sell indirectly to end users, exports are not handled directly by the manufacturer or producer, but through intermediaries such as agents, export management and trading companies.

In most cases, the exporting process is simplified and export management companies are usually responsible for:

  • providing market information
  • appointing sales representatives in the importing country
  • devising promotional strategies
  • organising shipping
  • export documentation

Export trading companies usually provide support services such as distribution, warehousing, shipping, billing and insurance.

Countertrade

A countertrade is a form of exporting where goods and services are paid for in full, or in part, with other goods and services.

Selling online

There are a few different approaches to selling online. You can:

  • set up your own website in the export destination country which incorporates an online store, known as Business-to-Consumer
  • sell your product wholesale to major eCommerce sites, which will then manage the marketing, sales and distribution to customers, known as Business-to-Business
  • set up an online store within a major eCommerce site, known as Business-to-Consumer
  • sell your product through a third-party store or online supermarket, known as Business-to-Business-to-Consumer.

Contractual entry modes

Licensing

Licensing allows an individual or a company that owns intangible property (such as copyright or a trademark) to grant another party the right to use that property for a specified period of time, and under specified conditions. Payment is received in the form of royalties.

ProsCons
Can reduce risk and be an effective way to finance international expansion. Your licensing agreement may restrict any future activities, or reveal information to a possible future competitor.

Franchising

Franchising is when the owner of the business providing a product and/or service (the franchiser) assigns to independent people (the franchisees) the right to market and distribute the franchiser's products and/or service, and to use the business name for a specified period of time, and under specified  conditions.

ProsCons
It's a low-cost, low-risk mode of entry into new markets allowing you to use the cultural knowledge and know-how of local managers. As a franchiser, you're obliged to continue to support the franchisee after the initial one-time transfer of property is complete.

Investment entry modes

Joint ventures

A joint venture is when a separate company is created, and jointly owned by two or more independent entities to achieve an objective.

ProsCons
Can be a good way to penetrate international markets while reducing risk. There's always the possibility of conflict between partners, and potential loss of control by one of the parties.
Can allow you to access the international distribution network of the entities you've partnered with.  

Strategic alliances

A strategic alliance is when two or more entities cooperate to achieve a strategic goal. Depending on the goals, alliances can be formed between a company and its suppliers, customers, or even its competitors in some instances, for short, medium or long-term periods.

ProsCons
You can share costs and utilise member strengths. There's risk of conflict between partners, not to mention the creation of a future local or international competitor.

Wholly owned subsidiaries

A wholly owned subsidiary is a company that is completely owned and controlled by a single parent company.

ProsCons
You have complete control over the day-to-day operations in markets overseas, while at the same time acquiring valuable processes and technologies. It requires substantial resources, so the exposure to risk is high.

Useful resources