Businesses today must constantly grow. Activity is more dynamic every day and alliances or purchases are necessary steps in today's positioning strategies. Some growth options are explained below:
In article 9, strategic options to access international markets, some of the options that companies have to access markets around the world were shown. This article examines three forms of alliances with companies and four forms of marketing alliances, to seek positioning in international markets.
Three ways to enter a foreign market
1. Establish the company directly in another country
It is to create subsidiary companies, under total control of a parent company that operate directly in the target market. When a company decides to establish a subsidiary it resorts to an expensive option, but has full control. The entire risk in operations is also assumed.
Generally, the establishment of subsidiaries is only possible with large companies capable of assuming the initial financial costs and the potential risk of failure.
Subsidiary. Only large multinational companies are able to establish operations in other countries fully assuming the costs of mobilization and entering the markets alone.
2. Acquisition of established companies
Another option is to simply buy a company in the same industry in another country and exploit it. In many cases such purchases are difficult due to cultural, organizational and logistical differences.
The parent will maintain near total control and add a new brand to its portfolio of companies. Acquisitions represent very high risks in economic and legal terms, an example of a failure in an acquisition was made by the German carmaker "BMW", on the British company "Rover", the losses were multimillion-dollar and BMW had to resell.
Acquisitions are complex forms of penetration and high risk, but they can bring huge returns.
3. Partner and do business with a partner
Getting a strategic partner and working together is another option. Alliances are complex processes and handle great risk in terms of understanding and logistics. However, allying strategically will always be the least expensive option to enter an international market.
Problems often arise in terms of investment decisions, expectations about returns, and synergy. Control by the power of the company will always be a complex issue and the philosophies of the partner companies are often divergent.
Four forms of marketing alliances to penetrate international markets
Another way to look at collaboration between companies in terms of international penetration is by examining the possibilities of alliances in terms of marketing. Here are the four most common ways to ally.
- Alliances by product: It occurs when a company generates products or brands for another company. Some companies outsource their production so that another company can produce and sell to them. Sometimes companies create alliances to generate complementary services. An example is when a bank generates credits to buy a specific brand from an allied company. Alliances for promotion: It is when a company promotes the services of another. Generally, these alliances seek to generate profits in terms of branding and market recognition. Logistics alliances: It is when a company uses its strategic distribution channels to support another company. One company can do brokerage management for another, can store supplies or can use its distribution network in favor of another in exchange for a payment or commission. Collusion and price agreements: It is when the companies in a sector agree on the setting of prices, discounts, promotions, etc. These agreements are legally complex and are generally observed by the authorities of the countries.
Free competition and a competitive mentality generally go with the policies of the authorities, which is why collusive agreements on prices are illegal in many countries.
