This mode of entry will vary, on ne hand, depending on the degree of control that the company wants to maintain and, on the other hand, depending on the degree of commitment that it wants or can assume with the agents of the new market, such as customers, suppliers, regulators or Competitors.
We can represent in a chart the different input modes that companies can take in their international expansion based on these two variables. In the vertical axis, the degree of control is located and, in the horizontal, the degree of commitment.
Depending on the resources of the company both financial and human resources, trading Global advises in a first stage of the process of internationalization, that the company uses strategies of entry that do not require great resources, nor involve much Risk.
Firstly, export is the easiest and less risky method to start the internationalization of a company towards new markets. Within the export strategy However, it can be differentiated between indirect export, through independent intermediaries (the broker provides experience on distribution, marketing, negotiations, etc. as well as skills Management to manage export and financing agreements) and direct export by establishing own sales channels. In this case the company develops sales channels to come into contact with final buyers in the country of destination, taking charge of the bureaucratic, logistical and financial aspects involved in the export. In this type of direct export, the degree of control and commitment of the company with the country of destination is bigger and requires a clear analysis of the advantages and benefits offered by the country of destination, in addition to a detailed study of the company’s ability to Sarrollar commercial operations in the country of destination
Another of the first strategies options for companies which want to start on the its internationalization are licensing assignments. License contracts are contractual agreements between two companies from different countries, by means of which the assignor company, grants to the foreign company or assignee, the right to use a productive process, a trademark, a patent or other Intangible assets in exchange for an initial fixed payment, periodic or both. In this case, the degree of control and commitment of the assignor company is practically nil, as is the risk, which is why it is a very interesting strategy to begin the process of internationalization. The aspect to be considered in this strategy is that the company must be a holder of intangible assets, which are susceptible to being licensed.
This is the mode of entry through which we have advised to start its internationalization strategy to some Spanish companies as Quality Pascual, through agreements of technology transfer for the manufacture of yogurts without cold chain. Within our SME clients, we often advise this strategy because it does not require a large amount of money and limits the risk, as was the case with Ipronet.
In the early years of the 21st century, Pascual’s quality made the mistake of starting the internationalization strategy with a direct investment in Russia, a country with significant political risk, in order to build a new milk production plant. After an important investment, the Spanish company had to withdraw because the discretion of the Russian authorities and their indications of bribes, did not allow the project to advance. Comerciando Global advised the president to look for one of the first Indian dairy companies to establish a technology transfer agreement to lift a yogurt factory and get in this way at the same time, negotiate the inclusion of the name of pasteurized yogurt in the standard of fermented milks of the Codex Alimentaruis. The president was afraid at that time to return to do business with a company located in a country with high political risk. 10 years later, Quality ascual has decided to start its internationalization following this strategy in other countries with political risk: Venezuela and the Philippines, taking advantage of their contacts with local trusted partners.
Similarly, the franchise consists in a special type of license, according to which, the franchising company provides the franchised company with a product and a standardized system of operations and marketing at the point of sale. The degree of control of the company is limited by the power of the company in the country of destination that is free to generate its own market. This is also a very interesting type of strategy for our franchises.
Joint venture agreements consist of a foreign company and a local-origin company, providing capital or other assets to create a new company in the local business market, sharing ownership and control of the Same. Normally, the foreign company contributes capital and technology, while the local partner contributes capital, knowledge of the local market and access to it.
This is a method of frequent entry especially when the target market offers uncertainty and ignorance and you want to minimize the risks of the operation, taking advantage of the competitive advantages and knowledge of the local market and the language, which can To give an alliance with a local partner. This strategy is also advisable in the case of investments in developing countries, both for their uncertainty and for the fact that many of them require international companies to form joint ventures with the premises under certain conditions . This has been the case of investments in Cuba, where the Castro regime required the formation of joint ventures that would provide funding to the Castro government during the entire period of Fidel Castro’s presidency.
Finally, in the case of establishment in the local market through a direct investment with total control by the company, it can produce in the country of destination by own means, establishing a subsidiary of production, subsidiaries of sales, Delegations, representative offices, R & D centres, etc. The company assumes the highest degree of commitment to the target market and all risk, but its control, does not depend on any third party.
Comerciando Global has developed a diagnosis to study the capacity of the internationalization potential of your company, by which, together with the analysis of the chosen target market, you can advise your company on the best strategy to carry out in its process of internationalization, depending on the particular characteristics and the needs of your company.
This mode of entry will vary, on ne hand, depending on the degree of control that the company wants to maintain and, on the other hand, depending on the degree of commitment that it wants or can assume with the agents of the new market, such as customers, suppliers, regulators or Competitors.
We can represent in a chart the different input modes that companies can take in their international expansion based on these two variables. In the vertical axis, the degree of control is located and, in the horizontal, the degree of commitment.
Depending on the resources of the company both financial and human resources, trading Global advises in a first stage of the process of internationalization, that the company uses strategies of entry that do not require great resources, nor involve much Risk.
Firstly, export is the easiest and less risky method to start the internationalization of a company towards new markets. Within the export strategy However, it can be differentiated between indirect export, through independent intermediaries (the broker provides experience on distribution, marketing, negotiations, etc. as well as skills Management to manage export and financing agreements) and direct export by establishing own sales channels. In this case the company develops sales channels to come into contact with final buyers in the country of destination, taking charge of the bureaucratic, logistical and financial aspects involved in the export. In this type of direct export, the degree of control and commitment of the company with the country of destination is bigger and requires a clear analysis of the advantages and benefits offered by the country of destination, in addition to a detailed study of the company’s ability to Sarrollar commercial operations in the country of destination
Another of the first strategies options for companies which want to start on the its internationalization are licensing assignments. License contracts are contractual agreements between two companies from different countries, by means of which the assignor company, grants to the foreign company or assignee, the right to use a productive process, a trademark, a patent or other Intangible assets in exchange for an initial fixed payment, periodic or both. In this case, the degree of control and commitment of the assignor company is practically nil, as is the risk, which is why it is a very interesting strategy to begin the process of internationalization. The aspect to be considered in this strategy is that the company must be a holder of intangible assets, which are susceptible to being licensed.
This is the mode of entry through which we have advised to start its internationalization strategy to some Spanish companies as Quality Pascual, through agreements of technology transfer for the manufacture of yogurts without cold chain. Within our SME clients, we often advise this strategy because it does not require a large amount of money and limits the risk, as was the case with Ipronet.
In the early years of the 21st century, Pascual’s quality made the mistake of starting the internationalization strategy with a direct investment in Russia, a country with significant political risk, in order to build a new milk production plant. After an important investment, the Spanish company had to withdraw because the discretion of the Russian authorities and their indications of bribes, did not allow the project to advance. Comerciando Global advised the president to look for one of the first Indian dairy companies to establish a technology transfer agreement to lift a yogurt factory and get in this way at the same time, negotiate the inclusion of the name of pasteurized yogurt in the standard of fermented milks of the Codex Alimentaruis. The president was afraid at that time to return to do business with a company located in a country with high political risk. 10 years later, Quality ascual has decided to start its internationalization following this strategy in other countries with political risk: Venezuela and the Philippines, taking advantage of their contacts with local trusted partners.
Similarly, the franchise consists in a special type of license, according to which, the franchising company provides the franchised company with a product and a standardized system of operations and marketing at the point of sale. The degree of control of the company is limited by the power of the company in the country of destination that is free to generate its own market. This is also a very interesting type of strategy for our franchises.
Joint venture agreements consist of a foreign company and a local-origin company, providing capital or other assets to create a new company in the local business market, sharing ownership and control of the Same. Normally, the foreign company contributes capital and technology, while the local partner contributes capital, knowledge of the local market and access to it.
This is a method of frequent entry especially when the target market offers uncertainty and ignorance and you want to minimize the risks of the operation, taking advantage of the competitive advantages and knowledge of the local market and the language, which can To give an alliance with a local partner. This strategy is also advisable in the case of investments in developing countries, both for their uncertainty and for the fact that many of them require international companies to form joint ventures with the premises under certain conditions . This has been the case of investments in Cuba, where the Castro regime required the formation of joint ventures that would provide funding to the Castro government during the entire period of Fidel Castro’s presidency.
Finally, in the case of establishment in the local market through a direct investment with total control by the company, it can produce in the country of destination by own means, establishing a subsidiary of production, subsidiaries of sales, Delegations, representative offices, R & D centres, etc. The company assumes the highest degree of commitment to the target market and all risk, but its control, does not depend on any third party.
Comerciando Global has developed a diagnosis to study the capacity of the internationalization potential of your company, by which, together with the analysis of the chosen target market, you can advise your company on the best strategy to carry out in its process of internationalization, depending on the particular characteristics and the needs of your company.