Question

What are the major ways to enter a foreign market? What should a firm consider when choosing the optimal entry mode? What entry mode would you suggest fpr opening a business in Canada and why?

Answer 1

What are the major ways to enter a foreign market?

The major ways to enter a foreign market are:

• Direct exporting- exporting products to the chosen market
• Licensing- Wherein a firm transfers the rights to another firm to use their products or services
• Franchising- Giving franchisee options to the unique business models such as food outlets (ex- Subway)
• Partnering- Partnering with other firms is a strategy to enter foreign market where the culture and social lifestyle is different than that of the domestic market.
• Joint Ventures- Two companies join together and form a third company to operate in a particular market.
• Buying a company- Companies buy an existing local company to enter the foreign market.
• Piggybacking- If the product is unique, then you can approach a company which already has international market to include the product or service in their inventory.
• Turnkey projects- Projects are undertaken for companies to provide services such as engineering consultancy, construction and architecture.
• Greenfield investment- in this strategy, the company buys a land, builds the facility and operates the business in the facility in the foreign market.

What should a firm consider when choosing the optimal entry mode?

• Cultural factors- Factors such as language, taste preferences, consumer habits, regional values, age/demographic factors influence the choice of the optimal entry mode.
• Economic factors- Per capita income of the citizens, supply and demand of the foreign market, financial factors in the market are factors that needs to be considered when entering a foreign market.
• Political and legal factors- compliance to the laws and government regulations, licensing and seeking permits, taxes and fees, currency conversion rate are important for international marketing decisions.
• Environmental factors need to be considered in entering a foreign market. In other words, weather plays a critical role in manufacturing of food items.
• Products need to be customized to suit the foreign market and this is an important consideration in entering the foreign market.

What entry mode would you suggest for opening a business in Canada and why?

For manufacturing and construction sectors, the best market entry strategy is to join a U.S delegation so that they can participate in Canadian trade shows.

For new companies, joining the U.S commercial service to Canada would be of great help to obtain information and assistance about the market.

The other best market entry strategies would include visiting the market frequently to establish the company’s presence for long-term market success; finding a good partner (partnering) and use of agents.