Going International

1
Going International

• Expanding Your Business Geographically

2
Reasons For Going International

• Open up new markets or windows of opportunity
• Increase sales volume
• Cheaper resources -- material and labor
• Government programs -- tax exemptions,
  interest-free loans, grants
• In line with growth goals
• Importing opportunities

3
Internationalization Strategies

• Exporting (direct or indirect) Maintaining a
  national production base and exporting goods to
  foreign markets
• Licensing Acting as a Licensor and allowing a
  foreign firm to use your technology or produce
  distribute your products
• Franchising Allowing other firms to operate an
  international franchise
• Strategic Alliance / Joint Venture Entering a
  new market outside your home country by allying
  yourself with a foreign firm in that country
• Wholly Owned Subsidiary - Entering a new market
  outside your home country through
• Acquisition strategy by buying up a local firm
  in that country
• Greenfield strategy by starting a completely
  new firm in that country

4
Market Research

• The acceptance/need of the product or service
  must be assessed
• Key factors in determining the attractiveness of
  a foreign market include
• The market size
• Intensity of competition
• Tastes and preferences of the market
• Culture
• Political and economic factors (taxes, quotas,
  tariffs, exchange rate, interest rates,
  inflation, political stability)
• ? Understand the market you are entering

5
Sources Of Relevant Market Information

• Market studies available at most consulting
  firms
• Chamber of commerce
• Export agents
• Banks
• Trade fairs
• Visiting the foreign market

6
Exporting

• The least risky mode of international expansion
• Direct exporting
• Foreign market is selected by the entrepreneur or
  sales person
• Operation is the responsibility of the
  entrepreneur or sales force
• Requires investment and risk
• Indirect exporting
• Involves export agent requires little
  investment minimizes risk
• Sales are responsibility of the agent -- no sales
  office or expertise of the market is required

7
Licensing

• The selling of trademarks, trade secrets,
  know-how or the right to patents for a royalty
• An appropriate strategy for firms who lack the
  knowledge or resources to enter a foreign market
• This strategy has a record of success for small
  business owners
• The drawback is a loss of control over the
  operation (quality control of other firm, stolen
  technology)

8
Strategic Alliance / Joint Venture

• Joint Venture A project carried out by two or
  more firms a new separate company is
  established -- the sharing of control and profit
• Most common in low-wage countries
• Often undertaken when one partner lacks the
  expertise, resources or technology to act alone
• The responsibilities are split in a number of
  ways
• Marketing Alliance/JV one firm is responsible
  for production, the other marketing
• Technical Alliance/JV one firm provides
  technical expertise to the other (i.e. New
  product development, manufacturing, design,
  quality control)
• Partnership there is an equity relationship
  between the parties, both share in the decision
  making

9
Wholly Owned Business

• Acquiring or building (Greenfield) an operation
  in the foreign market
• Provides direct access and control over the
  operation (as well as profits)
• Requires substantial investment and requires a
  detailed understanding of the nuances of the
  market
• Knowledge of laws and regulations on transfer of
  profits is key to success

10
Internationalization Strategies

• Indirect exporting
• Direct exporting
• Licensing
• Alliance/Joint venture
• Wholly owned subsidiary

Less Investment Less Risk
Less Control
Highest Investment Highest Risk
Most Control
11
Guideline For International Business

• Develop competent personnel to handle the foreign
  market
• Ensure the firms internal readiness (capacity,
  infrastructure, capital)
• Do some financial planning
• Research the legal requirements of the market
  (laws, regulations)
• Make an attempt to understand the people involved
  (culture)
• Learn a bit of the language and culture
• Engage an agent -- good for making business
  contacts
• Observe the business customs of the country
• Do not do business abroad on credit