Global Market Entry Strategies Explained






Hi guys mark here is Walter's world and today we're going to talk about his global entry strategies. Basically, how do we start selling our products abroad and we're going to look at some of the main ways that companies do go abroad and some of the main differences between these is how much risk your company is willing to take and how much control you're willing To give away now, the first one after when I talk about is exporting and the thing is exporting is when you make your product in your home country and you ship it abroad. Now, what's great about exporting is hey, I'm limiting my risk. I make it here at home, I'm not putting up foreign subsidiaries abroad. I just have limited financial risk now also I am getting to the other market. So there's two really good things, but there are some bad things and I've had my lovely Italian friend here to help me out. So I have my Italian friend here see real time with his Venice shirt and everything. Now the thing is one of the bad things about exporting is once you ship it, you lose complete control. Now I can talk to my time friend here and we could have some agreements, but I still can't control everything he does so I have my play-doh. I'M shipping to Italy now I'm giving it to him over there and I'm hoping it's going to be great, now he's playing with it nicely and he's probably gon na help sell it stuff, like that, that's great, but you can't always control that because what's he doing, Oh no he's tearing it up, he's messing it up, and that can't happen because since you lose control, you don't know what they're going to do with your products. So that's one of the first: that's a person exporting so I'm going to thank my Italian counterpart cannot see me Lee Lee. Ah, molto bene and next we talk about now. The second one I want to talk about is franchising. Here you make an agreement between the franchisor and the franchisee, okay and basically, if McDonald's, what they do is they say who wants to be a franchisee McDonald's franchise and they go to different countries and they find locals that will put the money up now. What does that do one? It lowers the financial risk for McDonald's, because someone else is paying the startup cost too. It gets them local knowledge, because if someone to think that McDonald's would work in that country, you wouldn't pay it. So you get the local knowledge you get to be in the new country, you're, really reducing your risk and then for the people actually being the franchisees they get to have the management knowledge they get to have the market. They get the brand all the secret sauces and all those things they get those it's really helpful now the problem is, are the cons. One thing is again you're having less control, and so you want to make sure that your franchise agreement is very. You know clear. What'S what you can and cannot do? Another thing is you're limited in there like McDonald's, the u.s. is limited, the amount of money it can make because a franchise agreement may say we get 10 % of profits or 30 % of profits. But if it turns out that that and the franchise in Germany becomes so popular, it actually makes more money than the US you're still unlimited, that 10 % like oh, I could be making so much more okay, so those are some of these to the franchising. Next, what you have is a strategic alliance here you have two companies from two different countries working together. Now the thing is they're not buying equity they're, not putting money into each other they're just kind of working together. So if I mean it right now say the University of Illinois decides to do a program with the Technical University of Lisbon. Now they're not going to buy each other schools or put money into it, but they'll work together. So the Portuguese university can have better success in the US, and the u.s. University can have better success in Portugal and so what they do is they help each other out. So it's very nice because one of the pros you get local help too you're kind of working together to learn from each other, so you're getting free information, all kinds of really good stuff. Now the bad side of it is sometimes these strategic alliances. You may be giving too much information away and might be creating or helping out a rifle. So it is one of these kind of give-and-take things, but a lot of times. It works out well because we all learn from each other okay. But if you wanted to go one step further and take more financial risk this, when you start investing in each other, that's when you have a joint venture. Okay, a joint venture is when two companies say hey. You know what I'm gon na we're going to work together when I sign a contract but money into each other. One of the more famous ones that I like to talk about is Sony Ericsson, mobile phones, Sony big-time in electronics, Ericsson big-time in mobile phone communication, and they saw that hey we're, not our phones aren't doing so well in the market. So, let's team up so thanks. Dr edges, that we can team up and pool our resources, so we can find others that better, you know, resources or competencies than us. We can work with them and they can help us out now. The thing is: is it also you're splitting the risk is now just not me being Ericsson by myself or the market is Sony Ericsson together, so we're cutting down our financial risk and we're abusing each other's competencies to help boost our stuff? So, hey that's good stuff, but the bad thing is: if ours, you know, if our agreement goes south or sour, we might, you know, be given against like strategic lines, we're going to be giving away too much information. We might be creating a competitor, and this is an issue that a lot of companies face when they're going to international markets, because some countries require that you do a joint venture. You cannot control everything you want, you had to find a local partner, and that could be one of those things. I know I might be created a potential. You know competitor now, the fifth one I want to talk about the last one is direct investment, sometimes called foreign direct investment. This is when you actually put your own money in there. You go in and do it a hundred percent for 100 percent auto-ship. So you have 100 percent of the control, but you also have 100 percent of the risk because going to that new market, if you don't know, if it's going to work and it fails, you lose everything because you're not sharing the risk with anybody. Okay, so the thing is this is one of the good things is hey. We get all the profits, so if it goes well, it all comes to us. I don't just share with anybody also with intellectual property, I'm not worried about losing my intellectual property to a potential to come competitor, because I'm it's me I own it off, so I keep control of it now. The bad side of that is that you do take on a lot more risks. You have to do a lot more, assessing on that global market. So what you want to do is you watch our video on assessing global markets and they'll. Give you a better idea of you know: should we do foreign direct investment or maybe franchise, these kind of things? Okay, so that gives you a rough idea of five main ways that companies go abroad, one exporting we make it in our home country and we just ship it abroad and you know very, very low risk, because it's just what I share abroad, I can lose and Low control, though, because we don't know what, as once, I set it away. Second one you have is franchising, we sign an agreement and I give away my trade secrets to these guys and they give me a cup of profits back in another country. The next one is a strategic alliance where I work with a competitor in another market, or I work with someone another markets. We learn from each other, okay, but we don't put any equity, it's wrapped, tied together by money, strings, okay and then, if you want actually tie yourselves together by strings, you have it's called a joint venture where the two firms come together and you know they share Risk and they share, rewards and make sure your controllers share ideas. Those things there and the last one is direct investment where, as you put all you put your own money and you take 100 percent of the risk and you have 100 percent of the control. So you get everything that comes that way, so I hope that helps you understand the basic. You know five market entry strategies for global markets. If you have more questions on marketing a global market on global entry strategies, please leave us a comment down below. I will help you subscribe and like this video and hopefully we'll see you around the world bye, Oh God, yeah nope,

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