We all know giants like Apple, Nike, and Starbucks, but have you ever wondered what the common recipe was for their success? These companies achieved incredible success by entering foreign markets. Are you willing to take your business to newer heights? So, what are you waiting for? Take your business global with these proven foreign market entry modes that will surely set you on the path to victory. Explore the strategies that propelled these brands to international acclaim and discover how you can replicate their success. By understanding and implementing these tried-and-tested foreign market entry modes, your business can achieve remarkable growth and recognition in the global marketplace. These are the five modes of entry into foreign markets:
#1 – Exporting & Importing
The first point on our list of best foreign market entry modes is quite obvious. Exporting and importing are the most used methods entrepreneurs use to enter foreign markets. There are several ways of indulging in import and export activity in a foreign nation; however, there are two preferred methods that you can use:
- Direct Importing/ Exporting: In such modes of entry into international business, you will be responsible for handling all of the necessary paperwork for the shipment and financing of goods and services. Further, you will work directly with foreign suppliers or purchasers.
- Indirect Importing/ Exporting: In this method, a middleman is hired to handle all the paperwork and negotiate with foreign suppliers or customers, and you will have to manage fewer things.
#2 – Contract Manufacturing
Contractual manufacturing, known as international outsourcing, is another method on our list of foreign market entry modes. This method is generally preferred by a business which specialises in producing high-quality products but needs more marketing skills. In this method, you will partner with a foreign company to build certain parts of their products; conversely, that company will use its reputation and market presence to drive sales. How will this help in building a foreign presence? Well, the products made under these contracts are generally not the company’s flagship products. They are doing this for the benefit of their name and providing their customers with more options. Once your products get positive user responses, you can start directly selling
#3 – Licensing
Out of these five modes of entry into foreign markets, licensing enables you to grow rapidly and more easily. Okay, that’s great, but what is licensing? When a corporation (the Licensor) grants a company from another country (the Licensee) the right to use its brand, patent, trademark, technology, copyright, or marketing skills to help sell products, this agreement is called Licensing. The Licensor receives returns based on sales, often as royalties or fees, with government regulations capping these returns at 5% of revenues in some developing nations. For example, local bottlers produce and distribute Pepsi and Fanta worldwide through licensing. The company providing the authorisation is called the Licensor, and the receiving company is the Licensee. You can also have a Cross-licensing, which involves exchanging knowledge, technology, or patents.
Also read The eCommerce Business Owner’s Guide To Going Global
#4 – Franchising
Franchising ranks fourth on our list of foreign market entry modes and is considered one of the most famous modes of entry into international business. It is a unique right or freedom given to the business that purchases the rights of the franchise. Manufacturers employ this modern approach to business to distribute their goods across distant regions. Typically, reputable manufacturers adopt this strategy. The manufacturer’s esteemed reputation inspires people to venture into this business model to generate profits. If you are a company giving business rights, you are referred to as the Franchisor, and you will be referred to as a Franchisee in case of vice versa.
#5 – Joint Ventures
If you have enough capital and a strong presence in the local market, a joint venture will be ranked among the best entry modes into international business. Joint ventures are companies formed when two or more businesses work together for a common goal and mutual benefit. Will your company become a public company after this? No, it’s not necessary. The new commercial entity formed could be private, public, or foreign-owned. These are types of businesses established in international trade where domestic and foreign entrepreneurs retain ownership and management.
Why Stay Local When You Can Go Global?
Taking your business overseas can significantly boost your business and enable you to establish yourself as an international brand. The methods mentioned above are some of the best foreign market entry modes to help you make your dream a reality.
