What are the issues that companies are facing when enterin foreign markets?
When a company wants to go global, it has to face different issues at different levels. Indeed, usually you cannot enter a market in another country without doing research on the market you want to enter. Going global can be risky and it requires a lot of capital. You have to research about laws, tariffs on trade, barriers, taxes, quotas or any other element that could be an issue in your way to foreign market. The company should also be aware of the differences in cultures, habits or religion of the target country. And of course, the usual market research in order to see if foreign customers would buy the product is also required.
After being well informed about the country you’re entering, the company has several choices on how to enter the foreign market. Indeed, there are three main market entry methods and many subcategories included.
The simplest method is exporting. Usually when companies are using this method, only little modification occur. We can distinguish two types of exports: the direct one and the indirect one. The main difference between the two is that with the direct one the company works through independent international intermediaries whereas with the direct marketing the company handles their own exports.
Another market entry method is joint venturing. The company introduces the new product by joining companies that are already set in the target country. There are four types of joint venture: licensing, contract manufacturing, management contracting, and joint ownership. A relationship between companies is created.
The last market entry method is the direct investment. This is the method with the most involvement. With this method companies base their assembly lines or manufacturing facilities in the target country.
Once again to facilitate the understanding I’m going to take an example. This example will highlight the significance of all the word required to enter a foreign market.
MacDonald is one of the most global companies in the world so apparently all restaurants seem to be the same. But I had the opportunity to travel in different part of the world and I noticed that even if the name and the atmosphere inside is the same (same color, same furniture) the menus are different. When MacDonald entered foreign markets they should have done researched on customers and they found out that food habits are different. That’s why they are trying to adapt their food to the market they enter. For example, most burgers are vegetarian in India because Hindus don’t eat as much meat as the Americans (the religion is here involved).
Imagine they didn’t do so what do you think would happen? I personally think that they would have failed and then saw what was wrong and changed it really quick.