International Market – Entry Strategies Market – Entry Strategies Hitt
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International Market – Entry Strategies Market – Entry Strategies Hitt
International markets increase the size of firms potential markets and their sales revenue. When they sell more products abroad, these firms gain greater economics of scale, which, in turn, increases their potential profit. Firms can also gain access to special resources (e.g., lower-cost labor, valuable raw materials) in some international locations that can help them become more competitive in global markets. These are referred to as location advantages.
As stated earlier, countries vary in their institutional environments and cultures. Thus, the attractiveness of countries markets also varies. This is because the better understand these environment and thereby take less risk entering these markets.
Exporting Market – Entry Strategies Hitt
The most common way of entering international markets is by exporting goods. This is especially true for smaller firms and for firms initially entering into foreign markets, Exporting involves manufacturing product in a firms home country and shipping them to a foreign market. It is a popular entry strategy because of the lower capital requirements and risks.
Licensing Market – Entry Strategies Hitt
Licensing arrangements allow a local firm in the new market to manufacture and distribute a firms product. Usually, the licensing contract provides the specifications to maintain quality and the quantity to produce and sell along with the royalty percentages on the sales. In these cases, the licensor has low costs and takes little risk; the licensee takes the major risks. Yet, licensing is unlikely to produce major returns for the licensor unless the potential sales in the new market are large.
Creating Strategic Alliances Market – Entry Strategies Hitt
The most popular strategy for international expansion has become strategic alliances. Strategic alliances are cooperative arrangements between two firms in which they agree to share resources to accomplish a mutually desirable goal. Strategic alliances allow firms to share the costs and risks of entering new markets, and they provide the opportunity for firms to access resources they do not have. As such, it also allows them to sometimes learn new capabilities from their partners. In this way, alliances can contribute to a firms ability to maintain or increase its competitiveness in global markets.