Companies must examine various options to attract and conquer external markets.
In today's world, companies must attack international markets aggressively, but at the same time safely, limiting their exposure to international risk.
The volatility of the markets and in some cases the uncertainty make international expansion decisions a matter of great importance for business development. In this review, the nine options that companies currently have to make a penetration of international market.
Penetration by: Export, Licensing, Franchising, Participation, Consortium, Maquila, Administrative contracts, Acquisition, Joint Venture…
Here is a brief overview of each of the options that companies have to access international markets:
1. Export:
It is the simplest form of international penetration, is that the company produces outside its sales destination and sends it for sale. Obviously, any export must exceed legal requirements for the normal development of activities, and must comply with the policies of the destination countries.
Generally factors such as transportation or distribution determine the viability of an export
2. Licensing:
It consists of granting legal rights (patents, trademarks, processes) to companies abroad that are interested in exploiting the market niche. Licensing is the surest mechanism for international penetration, but at the same time it is generally the least profitable.
It is important that any type of strategic alliance takes into account cultural, socioeconomic and legal factors to generate a successful model of international penetration in company
3. Franchising:
It is the granting of a fixed package of products and production systems under the license model. The contractor contributes market knowledge and participates in management, while the franchise owner contributes his brand and business model.
Note: to expand the franchise theme see the article Franchising: a tool for corporate expansion
4. Participation:
It consists of sharing the management of the collaborating companies abroad. Accessing the strengths of the partner who is abroad and their previous knowledge and experience. It is to base the activities of the company that wants to expand with companies abroad to manage its distribution and marketing.
5. Consortium:
It is similar to participation, but generally involves many participants and large amounts of resources. Consortia are generally generated when no company has reached the target market.
6. Maquila and own manufacturing:
It involves production in the target market, it is the form of greatest penetration risk but generally the most profitable, as is logical, to create companies abroad the return on investment must be very high to recover costs in the medium term.
7. Administration contract:
Basically it consists of subcontracting the external management of the company in exchange for fees and incentives for results. It occurs when the company that wants to penetrate a foreign market does not want to use part of its resources in external administration.
8. Acquisitions and mergers:
It consists of buying "twin" companies abroad and using them as a catapult of international insertion. It implies total control of the purchased company and complete logistical capacity to assume its management. It also implies high irrigation, accompanied by high profitability.
9. Joint Venture:
It is basically when two or more partners start from scratch in models based on entrepreneurship and creation of new companies with operations abroad.
This model of international penetration occurs when environmental, political or legal conditions allow business to be done more easily in the destination country.
An example: A company that bases its development on nuclear energy can find a country where it is allowed to carry out its experiments without legal limitations.
Generally, the largest companies will use maquila, consortium or acquisition options, and the small ones will have to make simple exports, or contracts, in which capital penetration decisions play a fundamental role.
