Question

Explore your Own Case in Point: identify the appropriate Global Entry Strategy for your Chosen Company After reading this chapter you should be prepared to answer some basic questions about your target company.

2) Does your company have an exit strategy? Recall that exit strategies are to be determined before entry into the foreign market rather than after entry.

Answer 1

Entry Strategies:

There are several ways in which a company can enter a foreign market. Some of them are given as Direct marketing, joint venture, licensing.

There are several factors that will influence the choice of strategy, including such as tariff rates, the degree of adaptation of the product required, marketing and transportation costs. While these factors may well increase the costs, it is expected the increase in sales will offset these costs.

The following strategies are the explained:

Direct Exporting:

Direct exporting is selling directly into the market using in the first instance resources owned by the company. Many companies, once they have established a sales program turn to agents and/or distributors to represent them further in that market.

Agents and distributors work closely with the company in representing interests. They become the face of the company and thus it is important that the choice of agents and distributors is handled in much the same way we would hire a key staff person.

Licensing

Licensing is one of the strategies where a firm transfers the rights to the use of a product or service to another firm. It is a particularly useful strategy if the purchaser of the license has a relatively large market share in the market you want to enter. Licenses can be for marketing or production.

Franchising

Franchising is a process for rapid market expansion, but it is gaining momentum in other parts of the world. Franchising works well for firms that have a repeatable business model (eg. food outlets) that can be easily transferred into other markets.

Two caveats are required when considering using the franchise model. The first is that your business model should either be unique or have strong brand recognition that can be utilized internationally and secondly you may be creating your future competition in your franchisee.

Exit Srategy:

An exit strategy may be executed for exiting a non-performing investment or closing a business that is not generating profits. In this case, the purpose of the exit strategy is to limit losses. An exit strategy may also be executed when an investment or business venture has met its profit objective. Other reasons for executing an exit strategy may include a significant change in market conditions due to a catastrophic event; legal reasons, such as estate planning, liability lawsuits or a divorce; or for the simple reason that a business owner/investor is retiring and wants to cash out.

In the case of a start-up business, good business people always plan for a comprehensive exit strategy in case business operations don’t meet predetermined milestones. If cash flow draws down to a point where business operations are no longer sustainable, and an external capital infusion is no longer feasible to maintain operations, then a planned termination of operations and a liquidation of all assets are sometimes the best options to limit any further losses.

Most venture capitalists usually insist that a carefully planned exit strategy is included in a business plan before committing any capital. Business people may also choose to exit if a very lucrative offer is tendered by another party for the business.