Entry Modes into Markets of International Marketing

This is the era of financial liberalization and globalization. Along with the advances in information technology which has exponentially increased the speed of people’s communication, this era has given companies all the tools to expand into the international market. Entering foreign markets is very profitable for companies as they can now capture a much bigger market and increase their sales. Economic development in developing countries such as India, Sri Lanka, Vietnam, etc., is advancing the purchasing power of the citizens of those countries and thus making them an attractive destination for western companies. Even companies from developing nations have expanded into western countries by using their financial strength. Since foreign markets are made up of people with different cultures, religions, and likings, companies must adapt their products and marketing strategies on a case-by-case basis.

The foundation of a successful global marketing campaign is laid out by in-depth research of foreign markets. Foreign markets are composed of foreign customers who belong to a foreign culture, thus expecting the same promotion strategies or products will appeal to them is delusional. Hence, research is essential to gauge the requirements and purposes of foreign customers. Brand reputation does wonder to appeal to even foreign customers. A growing domestic brand has a reputation for banking on when entering foreign markets. That is why it was considerably easier for big brands such as McDonald’s, Apple, and Nike to enter foreign markets and gain a large customer base reasonably quickly. Therefore, brand building is one of the prerequisites for successfully capturing foreign markets. Modifying products and promotions are an excellent way to draw the attention of foreign customers. For example, Starbucks offers different types of tea in its branches in China because tea is loved in China. Companies have also to beware if their promotions or products are culturally offensive. Hence, McDonald’s does not offer beef or pork in the Indian market as both are culturally offensive to the Hindu and Muslim diaspora.

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Some of the strategies that companies use to enter the global markets are as follows:

Exporting: This is the simplest method of reaching global markets. A firm produces its goods or services in its domestic country and then exports them to countries where its goods or services are in demand. The exporting company has to deal with problems such as tariff barriers and unfamiliarity with the foreign markets.

Acquisition: In this strategy, a company buys out a significant portion of another already established firm in the foreign market it wants to enter. It is an expensive affair but gives the entering company an established name and a prebuilt marketing network.

Licensing and Franchising: In franchising, a domestic firm gives its intellectual property to a firm from the foreign market, it wants to enter and collects loyalty. Different franchises have different agreements. Licensing consists of a domestic firm permitting a foreign firm to use its intangible properties like trademarks and logos.

Joint Ventures: In this method, companies enter into a joint venture with the companies from the foreign market it wants to join to form a jointly owned company. The companies from the foreign markets provide valuable insights regarding those markets and help in establishing business contacts. For example: In 2015, the one which entered into a joint venture with Tata Motors of India was Fiat Chrysler. The name of the jointly owned company is Fiat India Automobiles Private Limited, and the purpose of the joint venture was to produce more Jeeps.

Offshoring: In this process, a company relocates its business from one nation to another. Usually, the process being offshored is the manufacturing process to developing countries. E.g., multinational corporations such as Nike and Apple offshore their manufacturing process to developing countries because of much lower manufacturing costs in those countries. Manufacturing costs in developing countries are low because cheap and semi-skilled labor is abundant.

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