Market entry strategies refer to planned methods that businesses or organizations use to deliver their products and goods in new markets.  There are many marketing strategies that organizations can use when establishing their operations in international or foreign markets.  The choice of a strategy depends on the market that one aspires to enter and the objectives of the organization.  Every strategy has both positive and negative effects and therefore, choosing a strategy decisively is key to ensuring success.  Examples of market entry strategies that can be utilized by an international business during implementation of a global strategy include; direct exporting, partnerships, indirect exporting via distributors, indirect exporting via agents and licensing, franchising and royalties.

Direct exportation is one of the market entry strategies that a business or an organization can use to enter a global market.  This form of market entry involves contacting potential customers in overseas directly and selling to them products or services (Murray, Ju, Gao 2012, p. 50).  This form of direct exportation can take different forms depending on the types of the goods and the business objectives.  With the advancement of internet, it is now possible to transact online business.  Others include trade visits where by business people makes regular visit in abroad market to sell their products.  Another way through which direct exportation can be done is through establishment of an overseas office to manufacture the products locally or sell the products manufactured domestically.

This marketing entry strategy has some positive and negative aspects.  One of the positive aspects of direct exportation is that the owner of the business has the greatest control of the business. The activities of the business are well monitored and controlled and therefore, the business finance is well managed.  Many businesses face a challenge of poor management and this has contributed to collapse of many companies.  Direct exportation where by an office is established in an overseas market allows the owner of the business to have greater control over the distribution and marketing and to have direct contact with the customers.  Therefore, the business receives the opinions or the preferences of the customers and adjusts its strategies (Gielens & Dekimpe 2007, p. 200).  It helps to give the business a competitive edge cover other business, as there is a positive relationship and customer touch is achieved.  Direct exportation as a market entry strategy also provides an opportunity for the business owner to learn about overseas markets before investing in such countries.  In business, carrying out research about the market is important to ensure that one has adequate information about the market and the needs of the markets.  For instance, it allows the business to know various issues such as the legislations of the countries, business environment, target market, among other issues that are of important in ensuring that the business is successful.

Direct exportation has also some negatives regardless of having positives.  One of the negative aspects about direct exportation is that it is an expensive marketing entry strategy.  The business will have to incur huge expenses in terms of distributing the products to the consumers.  In the case that a local office is established, the business will be required to pay rent and other bilks for renting a premise.  Other cost will include payment of wages and salaries to those people that will be recruited to operate the local offices.

Another frequently used market entry strategy is the indirect exporting via distributors.  In this management, the company sells its products and services through a distributor who is in the foreign country.  The distributor then re-sells the products at a certain profit margin to the end users or may sell the products to an additional intermediary.  This form of business is widely practiced by multinational companies such as Coca Cola Company.  A new company, which has an intention of gaining into a new market abroad, can also employ this strategy.  Various advantages are inherent in using this strategy.  One of the advantages is that the company is able to incur less cost in distribution of the products as the distributors meet these costs (Gielens & Dekimpe 2007, p. 196).  The second reason is that the distributors are familiar with the territory and therefore, they can tailor their advertisement and marketing strategies to conform to the needs and expectations of the customers in the specific geographical areas.  Distributors have the ability to handle the sourcing of the buyers and retailers and to distribute the products effectively to the target audiences.  Therefore, this strategy is of benefit to the company since it does not have to be involved in the business at the local levels.  The company does not incur costs related to establishment of a local office in the overseas country hence reducing costs of doing business globally.

On the other hand, this marketing strategy has some negatives.  The business owner has no control over the business operations since processes are managed from a distance and they rely on the distributors for the information on the performance or movement of the products.  This therefore, may lead to mismanagement of the products leading to negative consequences to the company.  For instance, if the distributors, do not communicate effectively to the company about the preferences and opinions of the customers, the  business may face the risk of performing poorly and loosing competitive edge in  the overseas markets.

The third market entry strategy is indirect exporting via agent.  In this market entry strategy, the company uses an in- market representative in procurement and in negotiating for sales.  An agent is a third party that helps in linking the company with the customers.  The agent is paid a certain percentage of the sales as the payment for the services rendered.  A business contemplating to engage in international business can employ this strategy.  This strategy like the other strategies has various advantages and disadvantages that the company or any business person using this strategy needs to be aware of.  Advantages of using foreign agent include that they are experienced and have local contacts and understand thorough the local conditions and regulations.  Every country has its legislations and regulations of conducting business and therefore, using such agents will help the company comply with such legislations without strain (Cayla & Lisa p 2012, p. 38).  Therefore, because they understand local situations, they are in a better position to sell, market, and distribute products to the target audiences.  This therefore, helps the company to sell its products in new territories easily. Furthermore, selling products through agents enables the company to extend its operations in various areas easily because agents are paid on commission basis, and in accordance to their input hence, the company is likely to incur minimal expenses.

The limitation of using this market entry strategy is that there is less control of the business as agents operate the business.  Therefore, this long distance and overreliance on agents to get the job done is risky especially if the agents are not active and hardworking in promotion and distribution of the products to the customers.

Another market entry strategy that a company can use when implementing a global strategy is partnership.  Partnership is an agreement whereby a company aspiring to contact business globally may enter in with a local company or business.  This form of partnership takes form of a strategic alliances and joint ventures.  The agreement may vary from one company to another and this may include agreement geared at selling the products, manufacturing and distributing the products among many other agreements.  In joint ventures, a business merges with another established company in specific intended market.  The benefits of a business using these strategies are that it is able to utilize or take advantage of the already established markets.  Therefore, the company will not be able to spend colossal sums of money in carrying out advertising and promotion.  A business is able to acquire skills, resources and finance when entering into a market (Danciu 2009, p. 624).  Acquisition or merger with a local business that is already an established business allows the business to access to wider customer base and helps the business to solve or avoid some of the barriers that are involved in opening up of a new business in new territories.  However, some risks are involved when using this market entry strategy.  One of the risks or limitations is that it requires investments by the company entering into merger.  This initial investment comes from the owner of the business.  Furthermore, another limitation of using this market entry strategy is the problem of trust and honest.  The business partner should be somebody or organization that is reliable and trustworthy to ensure that they work together towards attainment of the desired objectives and goals in the venture.  Many businesses have failed because they have collaborated with partners which they do not share vision.  Therefore, it is advisable that these partnerships before they are entered into, the two parties should have the same vision, which they are aspiring to achieve.

Even though not applicable to all businesses, licensing, franchising and royalties can be good market entry strategies for businesses with a global strategy.  In licensing, a licensing agreement grants authority to another company to use intellectual property of another company or individual.  Therefore, in situations that this agreement is reached, a company has the authority to use available technologies to manufacture and operate another person business brand or model.  On the other hand, royalties refers to a certain percentage of money that is accrued from sales derived from use of the licensed intellectual property.  One of the advantages of using franchise is that it can be used to increase your market share across the world.  The company will also record increased levels of profits.  Market share is increased because, the products will be circulated across the country quickly and the owner of the goods or products will therefore receive high percentage of royalties through increased sale without incurring costs of reproduction and distribution.

On the other hand, this market entry strategy has some cons.  One of the negatives of using this strategy is that the owner losses the ownership of the product.  The owner is therefore entitled to little percentage of the proceeds that comes from the sale of the product.

In conclusion,

Direct exporting, indirect exporting through agents and distributors, franchising and partnerships are some of the international market entry strategies that can be utilized when implementing the global strategy.  In selecting one of the strategies, the most important point to look is to weigh the rewards verses the risks.  For instance, questions of how much will be lost if the market strategy chosen fails should be considered.  It is also important to note that different market entry strategies may be used in different markets.  It is not automatic that a successful market entry strategy applied in one market will translate into another market if adopted.  Therefore, what might be the best strategy in one market may not be appropriate in another market hence, strategies that are able to provide positive impact should be selected.  All the strategies have limitations as well as positives.  Therefore, it is a decision of the company and an individual to weigh and evaluate the best strategy to rely upon.  Before choosing the strategies is better to evaluate the strengths and weakness of the strategies.  Some of the questions to be considered include, how the business is conducted in the sector and the target market, export experience of the company, amount of finances required, after sale services required to support the strategy, degree of control, level of resource commitment, ability to increase capacity, availability of time  to spend traversing the regions,  entry options among many others.

References List

Cayla, J, & Lisa p 2012, ‘Mapping the Play of Organizational Identity in Foreign MarketAdaptation,’ Journal of Marketing, Vol. 76 no. 6: pp. 38-54.

Danciu, D 2009, ‘ The use of the multi-factorial grid in the selection of the entry strategiesof       OMV AG in the Romanian market,’  Annals of the University of Oradea, Economic Science Series, Vol. 18 no.  4, pp. 624-628.

Gielens, K, & Dekimpe, G 2007, ‘The Entry Strategy of Retail Firms into Transition          Economies,’ Journal of Marketing, Vol. 71 no. 2, pp. 196-212.

Murray, J, Ju, M, Gao, Y 2012, ‘Foreign Market Entry Timing Revisited Trade-Off Between        Market Share Performance and Firm Survival,’ Journal of International Marketing, Vol.   20 no. 3, pp. 50-64.

CLICK BUTTON TO ORDER NOW