Basic strategies for entering foreign markets. Strategies for enterprise entry into the international market

After studying Chapter 4, you will know the main strategies followed by companies participating in international business when selling their products in domestic and foreign markets.

FORMATION OF A COMPANY’S ENTRY STRATEGY INTO FOREIGN MARKETS

International business involves the sale of goods and services not only in the domestic but also in the foreign market. In this case, two options are possible: a) a domestic company seeks to enter foreign markets with its product and b) a domestic company intends to organize the sale of a foreign company’s product on the domestic market. Both of these options involve different strategies or courses of action.

On the one hand, it is easier to organize the sale of foreign products on the domestic market: a Russian company can assess the market potential and carry out appropriate marketing research, make an appropriate proposal to a foreign company, conduct negotiations and, if successful, conclude an agreement on the sale of its products on the domestic market.

In practice, this strategy also faces problems. First of all, it is necessary to find out whether the foreign company intends to organize the sale of its products in Russia, whether there are other distributors of this company’s products in Russia, how strong is the competition among existing distributors, etc.

Example from practice. Company Apple has three distributors in Russia: diHouse(Moscow), Marvel Distribution (St. Petersburg, Moscow), OCS(Moscow). Announcing the signing of an agreement with a new vendor, representatives of Marvel Distribution in 2009 clarified that the preliminary negotiations were not only long, but also complex and multi-stage. “With no other vendor has there been such a detailed exchange of views on how business should be done” (CRN. 2012. No. 7 (384) May 15).

It is much more difficult to enter foreign markets with your products. At the preliminary stage, a number of issues need to be explored. It should be borne in mind that the relationship between the product manufacturer and the buyer does not end with the sale or purchase of his product. It is equally important to organize after-sales service and, if necessary, repair of damaged goods.

Example from practice. Having opened its representative office in Russia in 2007, the company Apple after some time, it took a number of consistent steps to transfer the entire service under its control, today, for example, the company re.Store, like other networks, it does not provide service independently, but transfers devices for repair to those authorized by itself Apple service centers, which, in turn, purchase spare parts from an authorized service distributor (See: interview with E. Butman - founder of the company ECS Group, owning the network re.Store - habrahabr.ru/post/121796).

Penetration into foreign markets can be carried out different ways, including through:

• a) direct export;
• b) creating a joint venture;
• c) selling the right to produce the products of his company to an entrepreneur in foreign country;
• d) making direct capital investments.

Let's look at each of these methods in more detail.

Entering foreign markets through direct export applies to all goods, but can also be used to export most types of services, since consumption of the service usually occurs at the time of its creation. Therefore, the producer of the service must generally be located in a foreign country.

It must be borne in mind that in relation to tourism services, the company makes a profit by receiving payment for sending tourists to a foreign country. From the point of view of the balance of payments for the country, this type of activity is an import, but from the point of view of the tourism company itself, this is the main source of its income.

When exporting goods, it is necessary either to create sales (wholesale and retail) organizations in a foreign country, which is not always economically profitable, or to enter into an agreement with a resident company in a foreign country for which the exported goods are imports. Therefore, the company should strive to interest foreign companies in its products, using all the marketing resources at its disposal.

We think for ourselves. What resources does the company have at its disposal to promote its products in foreign markets? In what ways will the company’s efforts aimed at increasing interest in its products among domestic and foreign consumers be similar and different?

Of course, a campaign to promote your product to foreign markets should be based on an in-depth preliminary study of the question of the degree of possible competitiveness of your company’s products on the international market, taking into account its quality, price, after-sales service, and for complex and large-sized products - ease of maintenance and repair.

It should be borne in mind that the task of searching for firms and companies that can import the products of a given company in transit countries, in particular in Russia, had some specifics. Since the commodity market in these countries was not saturated with imported goods, local firms themselves sought to look abroad for companies whose products they could import.

Quite often, penetration into new markets is accomplished by providing credit to the buyer.

From a company's cost perspective, direct exporting has undoubted benefits, but the disadvantage of this method is that the exporting company loses control over the exported goods, which can result in problems for the company's brand if the importing company organizes inadequate sales and after-sales service. Therefore, the exporter of goods must carry out systematic quality control of goods sold on the foreign market and after-sales service. For this purpose, appropriate terms and conditions may be included in the sales contract.

In addition to direct export, there is also export through an intermediary. Intermediaries usually do not fulfill customer orders, but pass them on to the exporter for execution. However, they may assist the exporter in completing transport or export documentation.

In international business, export management companies and export trading companies operate in a number of countries.

Export management companies present the export product to foreign buyers. They conduct all operations necessary for export. Using this form is convenient for small companies that do not have sufficient resources to export on their own. Export management companies charge a fee, but may accept title to the goods in certain cases.

The operations of export trade companies are similar. However, they focus their activities on customer demand. Typically, they take ownership of the goods by paying appropriate compensation directly to the owner of the goods.

In the United States, there is also a form of selling goods abroad called export cooperatives. Their activities are sanctioned by the state. Cooperatives are several companies that produce similar products, such as agricultural products.

Developed countries with market economies also subsidize exports, in particular agricultural products, which has more than once become the subject of complaints from individual countries in the World Trade Organization.

The second way is to create joint ventures. A joint venture is understood as cooperation in the form of the formation of a new legal entity between two or more individuals or legal entities, in which each party shares in the sharing of profits and losses and control of the enterprise. The capital of a joint venture is formed through joint contributions to the capital of the enterprise. Among the reasons for which joint ventures are created is the interest in establishing a partnership with an enterprise that has the capabilities and resources (financial, technical or sales).

Unlike the interaction between companies within the framework of partnerships, which involve a long-term relationship, a joint venture is created for the implementation of a specific project. According to Russian legislation (and the legislation of a number of countries), joint ventures are independent legal entities. However, since in this form of joint economic activity There are features of a partnership, in some cases in foreign practice it is not recognized as a separate legal entity.

Creating a joint venture allows you to solve several problems:

• a) eliminate the factor of possible customs restrictions;
• b) exercise control over the quality of products sold;
• c) obtain all the necessary information about the foreign market, in particular about the system of preferences of local buyers, about local laws, norms and customs.

Foreign companies creating joint ventures with national capital usually bring new technologies and business practices, while the national partner provides the preparation of the necessary documentation and transfers established business contacts to the new joint venture (Table 4.1).

The most important aspect of creating a joint venture is the conclusion of an agreement, which must be carefully and in detail set out legal basis creation of a joint venture.

When deciding to create a joint venture, it is also necessary to take into account negative factors. In particular, great value has strict compliance by the signatories of the agreement with all its terms. As practice shows, not all joint ventures develop successfully. And this may damage the reputation of the parties to the agreement, which will negatively affect the results of economic activity of one or both companies that sign the agreement.

Table 4.1

Characteristics of joint ventures

The issue of development and adoption may also be difficult. management decisions in a joint venture. Emerging problems can develop into intractable conflicts. A striking example Such a conflict is the situation that has developed in the TNK-BP joint venture.

Example from practice. The TNK-BP company was created on a parity basis in September 2003 by the British company BP and the Russian Alfa Group and Access/Renova. But already in May 2008, the conflict that arose between the company’s shareholders became public. One of the problems was disagreement about the company's goals. The Russian side would like to diversify its activities with the help of foreign assets, so the company would be faced with the task of international expansion. In this case, it would become a competitor to BP in world markets. The English partners would like to use TNK-BP exclusively in Russia. Disagreement regarding the choice of partners in Russia and abroad resulted in acute conflict shareholders.

However, establishing partnerships with local companies is a way to penetrate the country's domestic market. Thus, the Swiss company Nestlé in China managed to establish promising cooperation through partnerships with two Chinese companies.

In general, in international business there is a growing trend in the number of joint venture agreements and the conclusion of agreements on the creation of joint ventures.

Another way to enter foreign markets is to enter into production sharing agreements. This type of business is used in the mining industry.

Example from practice. In 2012, the Gazprom Neft company entered through its subsidiary Gazprom Neft Middle East V.V. into two new projects for the exploration and development of hydrocarbon reserves in the format of a production sharing agreement in Iraq. In the block development project Gamian Gazprom Neft will receive 40%. Canadian company Western Zagros, the other party to the agreement (PSA) with a 40% share remains the project operator until the start of main work under the agreement. In the block Shakal, in which Gazprom Neft’s share will be 80%, the company will receive the status of project operator. The Kurdistan Regional Government's share in both agreements is 20%.

Foreign direct investment does not only come in the form of production sharing agreements or joint ventures. Creating a subsidiary in a foreign country from scratch or acquiring an existing company allows you to bypass customs barriers, since an enterprise created with the help of direct investment receives resident status. This consideration largely explains why Japanese and South Korean companies opened automobile plants in the United States. The reaction of the American public was also taken into account. Very popular with trade unions in the 1980s. was the slogan "If you sell here, build here"(If you sell here, do it here), since such a policy also made it possible to save jobs. High qualification work force and stable political situation in developed countries with market economies are main reason that direct investment flows from developed countries mainly to other developed countries. Of the accumulated volume of direct investment in 2010 ($19.1 trillion), $12.5 trillion (65%) was direct investment in developed countries with market economies.

In the context of globalization, the scale of mergers and acquisitions has increased. In the mid-1980s. annual volume of announced mergers and acquisitions ( mergers and acquisitions) was at the level of $0.5 trillion, then rapid growth followed and, although in the crisis years of 2002 and 2009. it decreased in 2010 and 2011. it exceeded $3 trillion, and in pre-crisis 2007 it reached $6 trillion.

Countries that attract direct investment count not only on capital inflows, but also on the transfer of new technologies, know-how, modern methods management. And if this circumstance is not dominant for developed countries with market economies, then for developing and transition countries this consideration is in many cases of decisive importance. It is also important for both groups of countries that the influx of direct investment creates jobs. And for countries that have a negative foreign trade balance, the influx of investment can improve the balance of payments.

The share of foreign direct investment in the Russian economy is significantly less than other investments, which are understood as investments that do not fall under the definition of direct and portfolio. These are trade loans, loans from foreign governments guaranteed by the Government of the Russian Federation, other loans (loans from international financial organizations etc.), bank deposits.

Direct investment in advanced sectors of the Russian economy as a whole is small.

In the 2000s. Russian companies actively increased direct investment abroad. According to UNCTAD, in 2000, foreign direct investment by companies amounted to only $20 billion, in 2010 - $433.6 billion. Most often, Russian companies invest in energy, metallurgy and IT. In 2011, the top ten buyers from Russia included TNK-BP, Gazprom Neft, Mechel, LUKOIL, Novolipetsk and Magnitogorsk metallurgical plants.

Licensing is also one of the ways to penetrate foreign markets. This path involves selling the right to manufacture its products to a company in a foreign country.

A special and very common method of licensing is the sale and purchase of a franchise. The essence of this commercial concession is that one party (the franchisor) transfers to the other party (the franchisee) the right to a certain type of business using an established business model for running it. For this right, the franchisee pays the franchisor a fee (royalty). In accordance with this transaction, the franchisee receives the right to act on its own behalf, using the trademarks and (or) brands of the franchisor. The following features of franchising are identified in the literature.

The franchisee must pay some initial fee for the right to become part of the system; the franchisor receives royalties for the use of its trademark; The franchisor provides the franchisee with a system for doing business.

By transferring rights to a franchisee, the franchisor imposes obligations on him to conduct business in accordance with the franchisor's concept. The franchisee receives the right to use the franchisor’s trademark, its know-how, business methods and technology, procedures and other rights to production and (or) intellectual property. At the same time, in accordance with the franchising agreement concluded by both parties, the franchisor provides the franchisee with support in technical issues and in matters of doing business.

One of the most famous franchises is McDonald's. Only 15% of McDonald's restaurants are owned by the McDonald's corporation itself; the rest are owned by national franchisees.

The Russian Franchise Association (RAF) has adopted the RAF Code of Ethics, which sets out the obligations of each of both parties to the franchise agreement.

Example from practice. Among Russian companies, the franchise system is widely used by the 1C company, which is a network of organizations certified by this company to provide comprehensive services for the automation of accounting and office work. Franchisees operate under a single brand and guarantee high quality performing certain services. In 2012, more than 3,300 organizations in the cities of Russia and the CIS countries collaborated with the 1 C company as franchisees.

The cost of purchasing a franchise is 40-50 thousand dollars, but it can be significantly higher.

As for the above-mentioned 1C company, organizing a 1C: Franchisee business requires initial costs of 18,300 rubles. and payment of a quarterly contribution in the amount of 3,000 rubles. To operate, the franchisee must purchase the 1C: Enterprise software product(s) (A/7/?-version) and have at least two implementation specialists certified by 1C.

Buying a printing center franchise SUN, which is sold by SUN Franchise Company OJSC, part of the SUN Group of Companies, costs from 3.5 million rubles. (entry fee - 385 thousand rubles, royalties from 10 thousand rubles per month).

Approach to choosing a foreign market.

Analysis of foreign markets.

Strategies for entering foreign markets.

Approach to choosing a foreign market.

Firms become involved in foreign economic activity in two ways: either someone asks to organize sales abroad, for example, another domestic exporter, a foreign importer, a foreign government, or the firm itself begins to think about going abroad. This is due to the fact that its production capacity exceeds the needs of the domestic market or there are more favorable marketing opportunities abroad.

Having compiled a list of possible foreign markets, the company will have to engage in their selection and ranking. Candidate countries can be classified according to the following criteria: 1) market size, 2) market growth dynamics, 3) costs of doing business, 4) competitive advantages and 5) degree of risk. The purpose of the ranking is to determine which market will provide the company with the highest long-term return on invested capital.

The way to promote a company’s product on the world market:

The first way is “do it yourself” (direct). This is the most expensive route, but it allows for the most control. The firm uses the direct method where it develops its own plan and establishes an international sales department to deal with foreign distributors, agents and foreign intermediaries.

Using this method, the company remains responsible for the transportation of its products. Typically, the do-it-yourself method requires a full-time staff of a trained firm manager, a sales representative, and appropriate administrative support.

Another way is “using trading companies” (indirect), i.e. allow intermediary firms to export your goods. This is the fastest and least expensive way to enter the global market, but the firm loses control. This approach means doing business through international trading firms that act as intermediaries. The trading company develops the plan and acts as an international subsidiary of the manufacturing company. These intermediaries usually take responsibility for transporting the goods. These include intermediaries such as GTPs (General trading companies), EMCs (Import-export management companies), and it is also possible to transport goods by road and rail with the help of multinational corporations (MNCs).

Each method has its own advantages and limitations. The firm should not reject any of them until it has conducted a serious analysis. In fact, a mixture of these approaches may be best choice for the company.

When choosing a foreign market, you should combine three parameters as best as possible: the potential and conditions of the new market, the intensity and practical methods of competition, the goals and means of the enterprise. The firm must then determine its own international marketing goals and strategies. Firstly, what volume of foreign sales does it need (a small volume, equivalent to domestic, greater than it). Secondly, in how many countries will it operate? In this case, the main principle should not be the number of markets, but the degree of penetration into each of them. Thirdly, which countries’ markets to enter. The attractiveness of a country depends on the specific product; geographical factors (country size, topographic characteristics, climatic conditions); demographic characteristics (population size, age structure, population composition and density); economic factors (gross domestic product per capita, income distribution), etc.

Having selected promising international markets, the company must analyze and evaluate each of them according to several criteria, including the following: market size; availability; market perception; market stability, possible growth; cost of doing business; competitive advantages; level of risk, etc.

After deciding on the selection of promising markets, the optimal method of entering the market must be determined.

Analysis of foreign markets.

The main factors taken into account when an enterprise enters a foreign market:

Requirements for the product: quality, reliability and packaging;

after-sales service; environmental cleanliness; specification.

Market capacity: saturation, solvency. State intervention: limits and licensing, embargoes, self-limitation of supplies, direct prohibition and restrictions individual species

activities.

Legal environment: commercial or contract law, general legal norms on environmental protection, safety precautions, etc., the procedure for creating a new business, taxation and pricing, labor legislation.

Market monopolization: antimonopoly legislation. Customs procedures: import and export customs duties, non-tariff regulation

General external conditions: geographical, historical, political, economic, cultural.

Competitive conditions: ratio of local and international competitors, unique capabilities of competitors, transport costs, number of buyers, optimal production size, homogeneity of buyers.

There is no universal model of decision-making in the field of international marketing; each decision is determined by a specific (previously studied) market situation, the nature of existing business communications between partners, and very often depends on personal relationships between executives and managers of partner companies.

Stages of decision-making for a company to enter international market.

Analysis of the enterprise's activities in the domestic market. At this stage, the following are examined: enterprise size, market share (for each segment), product (range, quality, etc.), level of service (service), sales, distribution, product promotion, price and payment procedure, finance, resources (frames), environment enterprises (suppliers, buyers, banks, government agencies, tax office, etc.)

Analysis of the state of the external market. The point is to identify factors that fundamentally influence choice in the market. These include: A) foreign market potential; B) accessibility of the foreign market; B) receptivity of the foreign market; D) stability of the foreign market.

Market potential is defined as the total market, including existing markets (exploited) and possible markets (not exploited) for a particular product.

The foreign market potential is determined for known and new products as follows:

For well-known goods - according to the amount of existing and/or future demand for similar goods per year;

For new goods - based on the demand for equivalent goods, and if equivalents cannot be found, then from the dynamics of the need that the new goods satisfy.

Availability of the foreign market is a relative value. It is determined taking into account the fact that the potential market is not always accessible due to excessive costs of its development, as well as tariff and non-tariff barriers.

Thus, the analysis of market accessibility includes two levels: the first is determining the reality of penetration as such; the second is the definition of the role that traditional market agents intend to provide to the newcomer. The receptivity of the foreign market is determined through trial sales of goods and services on the foreign market with the aim of subsequent adjustment of the marketing mix.

The stability of the foreign market is determined, first of all, by the political and economic situation in the foreign market (the solvency of the population and enterprises, the possibility of confiscation of property by the state). The analysis also concerns market stability and risks (economic and political). The first sign of instability is the weakness shown by potential clients of the enterprise in terms of solvency and commercial consistency.

Analysis of competition in the foreign market. The purpose of this stage is to determine the competitive advantages and disadvantages of your enterprise in comparison with its main competitors. Competitors in international marketing are divided into two groups: foreign competitors and local market competitors.

Comparison of competitive advantages is carried out according to the following indicators: elements of the marketing mix; personnel (including their qualifications; ability to take risks; corruption); external relations (with banks, government, various associations); technological, production, economic indicators.

Analysis of marketing opportunities and threats. Marketing dangers and opportunities are determined taking into account the situation at the enterprise itself, the external environment of the exporting country and the external environment of the importing country.

From the point of view of the country’s attitude to the development of exports (imports), four strategies can be distinguished:

Insulation;

Protectionism;

Free trade;

Filling a scarce market.

Marketing opportunities for a company to enter international markets are determined by the following indicators: increase in the amount of profit; demand dynamics; increasing the life cycle of goods and services provided; reduction of unit costs per unit of production; increasing prestige and image; availability or stability of government subsidies.

Marketing dangers arise in the following cases: with increasing uncertainty and business risk (due to changes in economic, political factors, competition, etc.); sustainable policy of protectionism by the state on imports; incomparability of international marketing costs with economic results; a decrease in the efficiency of entrepreneurship in the domestic (national) market.

Selection of promising foreign markets. There are two strategies for determining the optimal number of segments in a foreign market:

The ant’s strategy is to gradually conquer individual segments in individual markets, then select the optimal segment, slowly crawl from one segment to another to select the optimal number of them;

The dragonfly strategy is to capture the maximum number of segments and then abandon the less profitable ones in favor of the more profitable ones. This strategy is appropriate when the product life cycle is relatively short and there are no barriers to market penetration. Its main disadvantage is the need for large one-time expenditures of resources.

Development of strategy and tactics of behavior in international markets. In international marketing, due to the high degree of uncertainty in the state of the external environment, the conceptual apparatus and tools of the concepts of strategic planning and strategic marketing are widely used.

Choosing ways for firms to enter foreign markets.

Assessing results and adjusting programs in the field of international marketing. At this stage, the planned quantitative and qualitative performance indicators of firms are assessed and compared with actual ones; the results are taken into account when making decisions.

Strategies for entering foreign markets.

The technology for introducing a company into international markets requires consideration of factors and methods of entering foreign markets, which depend on the development of the product being introduced to the market, and on the development and knowledge of the market.

The main factors that influence the choice of method of entering the foreign market include:

Speed ​​of entry into the market;

Direct and indirect costs;

Flexibility and the ability to take into account the legislation of the country where the market is located in activities on the market;

Level of possible business risk;

Payback period of investments;

The presence of unfulfilled obligations of the company to existing partners, agents and distributors in the case of creating its own distribution network to enter a more attractive market.

The criteria for choosing a specific technology option for entering a foreign target market may be:

The company's goals regarding the scale of the international business sought, the geographic coverage of markets and the time period allocated for the process of foreign expansion;

Market size, which is characterized by sales volume and asset size:

The company’s product range and the nature of its products (industrial or consumer, expensive or cheap, etc.);

Level of competition abroad.

Along with the above criteria, when choosing a method of introduction to international markets, it is advisable to take into account:

The company’s ability to cover not one, but several markets;

Availability of feedback from the market and consumers of the company’s products;

Development of management potential and its ability to self-learn;

Availability and further development of control over the market and its main characteristics;

Level, dynamics and specific indicators marketing costs abroad;

Durability of activity in the target foreign market and receipt of the planned amount of profit;

Level of investment risks when entering the market;

The composition and amount of costs associated with organizing administrative work;

Qualification of personnel, ability to perform functional duties in a foreign environment;

The occurrence of deviations from expected results in the selected target market, which will require preliminary consideration of measures to overcome such situations.

In practice, even taking into account the listed factors and criteria may not ensure the choice of the best way to enter the market. In such situations, the experience, intuition of the company’s management, image and degree of internationalization of the latter are of great importance.

A number of possible strategies are presented as follows:

A. Production in the country:

1. Indirect (indirect) export:

Irregular export;

Trading companies;

Export-import companies;

Intercompany cooperation.

2. Direct export:

Foreign representatives;

Local agents;

Local distributors;

Trade branch.

B. Overseas production:

Direct investment;

Assembly plant;

Acquisition of companies abroad;

Production contract;

License agreement;

Management contracts;

Industrial cooperation;

Joint venture;

Franchising;

Compensation transactions, barter.

Forms of entry into foreign markets are varied and are associated with very different risks and scales of investment. The considered methods of entering the foreign market are not mutually exclusive. Analysis of the behavior of firms shows that the transition to the international level is a process consisting, as a rule, of many stages. The company starts with indirect export. If the results are favorable, it evolves towards direct export and finally towards production abroad. There is also no need to adhere to a gradual approach to entering the foreign market: export - joint venture - direct investment. Firms that decide on the advisability of such an exit must evaluate alternative exit models and select the most attractive ones in terms of costs and duration of stay in this market.

When choosing a strategy for entering a foreign market, an enterprise has four alternatives. It can choose any one of them or a combination of them in order to achieve its goals and adapt to prevailing market conditions.

Strategies for entering the foreign market include: export, franchising, joint entrepreneurial activity, direct investment.

Export. The most common foreign market entry strategy is export; the other three strategies are more complex. Export is the easiest way to enter a foreign market. Exporting requires the least amount of resources because all marketing functions fall largely on the shoulders of intermediaries. A company can export its goods in two ways. You can use the services of independent international marketing intermediaries (indirect marketing) or carry out export operations yourself (direct export). The practice of indirect export is most common among companies starting their export activities, since it requires less financial resources and is associated with less risk. Such export opens up for the enterprise ample opportunities leaving the market if profits do not meet expectations or the market situation becomes unfavorable. IN in this case the company does business with a broker who is located in the domestic market. The main advantage of this type of export is that the company can avoid all the difficulties associated with delivering goods abroad, tariffs, foreign legislative acts and other similar problems. All these responsibilities are transferred to the intermediary.

Among the shortcomings is the almost complete loss of control over prices and delivery of goods to the foreign market.

Despite the advantages of exporting using specialized brokers, some businesses prefer to export their goods directly to intermediaries located in the foreign market.

The advantageous difference of this type of export is the increased control of the enterprise over the goods exported to the foreign market. The disadvantages include additional costs arising in this case.

Franchising. Franchising, like exporting, is quite simple and effective method entering foreign markets. In this case, the enterprise (franchisor) gives the right to use its production technology, trademark and patent to another enterprise (franchisee) located in the territory of a foreign state.

In addition, the franchisor provides technical support, assistance in organizing marketing activities and, in some cases, staff training. In return, the franchisor receives a fee. The reason for the emergence of the franchising system is the opportunity to enter foreign markets with minimal risk and minimal costs.

There are a number of advantages of franchising over exporting. Franchising provides greater control over the sale of goods and requires small capital expenditures. Just like exporting, franchising is less risky and gives more flexibility when leaving the market if there is no profit.

If the franchisee does not comply with the terms of the contract, then all the franchisor can do is threaten to terminate the agreement. Finally, if the franchisor decides to terminate the contract, then he may not only lose control, but also create a strong competitor in the foreign market, which will make it difficult for him to independently sell in this market.

Joint entrepreneurial activity. One more general direction entering a foreign market is joining efforts with commercial enterprises in the partner country in order to create production and marketing capacities.

Unlike the two previous strategies, the decision to create a joint venture with a foreign company directly involves the enterprise in the process of managing activities in the foreign market. When creating a joint venture, both companies have control and management rights. A joint venture can be created in two ways.

First, one enterprise can make an investment in another existing enterprise. Second, two or more businesses may merge together to create a new joint venture.

There are several reasons for organizing joint ventures. The most obvious reason is increased control over the production and sale of goods on the foreign market. An enterprise may also decide to take advantage of the specialized knowledge or access to distribution channels that the foreign partner has. Sometimes a joint venture is formed when the government does not encourage foreign enterprises to enter the local market on their own. However, this method of entering foreign markets has a number of disadvantages. Firstly, in this case the risk is much higher than with the first two methods. Disagreements with a foreign partner or restrictions imposed by a foreign government may prevent a business from achieving adequate returns on its investment. Such disagreements often force a company to make compromises. In addition, the creation of joint ventures may prevent a large enterprise from pursuing a unified global marketing and sales policy in all markets.

Direct investment. The most complete form of involvement in activities in the foreign market is the investment of capital in the creation of their own assembly or production enterprises abroad.

Foreign direct investment provides the highest level of control a business can have when entering a foreign market. There are two possible methods of direct investment.

Firstly, an enterprise can create new company us on the foreign market. This method requires the most costs, because the company must create new contacts and sales channels, choose a location for a new company, hire workers, and purchase equipment.

Secondly, an enterprise can acquire an existing foreign company. In this case, the company only needs to make changes to organizational structure foreign company.

Direct investment has a number of advantages over other methods of entering foreign markets. The enterprise can completely determine its marketing and sales policies. This may be especially necessary for large enterprises that seek to conduct common policy in all its markets. This will help more effective price competition, since if goods are produced in the country of sale, then there is no need to incur transport costs, as well as costs associated with tariffs. Finally, the company receives direct contact with its customers on the foreign market and therefore can better satisfy their requirements, which increases its competitiveness. There are also disadvantages to direct investment. Foreign direct investment carries high risks associated with foreign currency devaluation, political instability, market downturns and possible nationalization of assets. Due to large financial investments in a foreign market, the flexibility of an enterprise's policy in relation to this market is reduced.

Bibliographic description:

Nesterov A.K. Strategy for entering the international market [Electronic resource] // Educational encyclopedia website

Strategy for entering foreign markets and features of adaptation of promoted goods to them.

Specifics of international marketing

International marketing is a market management concept, which is based on the principles of organizing the production and commercial activities of an international company, including scientific and experimental development, production, sales, product promotion and after-sales service to foreign buyers. This concept is formed taking into account the existing and future needs of foreign market segments in which the company operates, in order to most fully satisfy the long-term interests of the organization.

WITH practical side international marketing activities can be defined as a system of activities carried out by a company in foreign markets to study, create and satisfy demand for the goods and services offered in order to effectively achieve its goals.

International marketing has its own specific features, which depend on the country in which marketing activities are carried out and the product being promoted to the international market. The relevance of studying the features of international marketing lies in the fact that there are no fundamental differences between domestic and international marketing, however, the specificity generated by the peculiarities of the functioning of foreign markets and working conditions in them gives international marketing features that need to be taken into account by national companies.

To work successfully in foreign markets, you need to resort to more significant and targeted efforts, and more strictly adhere to the principles and methods of marketing than in the domestic market. To do this, you need to resort to more accurate, complex and labor-intensive methods of studying foreign markets, which requires more costs than studying the domestic market. The key to success will be the use of creative and flexible approaches to marketing activities, rather than the use of standard approaches.

Finally, the development and commercial production of new marketable products is fundamental to success in the international market.

In the context of the globalization process of the modern economy, everything larger number companies strive to develop foreign markets, thereby establishing leading positions in their industry. Business entry to international arena allows you to attract new customers, reduce the risk of losses, increase the competitiveness of the enterprise and increase its capitalization.

Prerequisites for a company to enter a foreign market

The entry of an enterprise into foreign markets is an important strategic decision. Its adoption is influenced by a number of reasons, including:

• the desire to increase profits and ensure business growth in a domestic market oversaturated with similar products;
• the desire to increase competitiveness through key competencies (know-how, unique technologies, system of relationships with clients, etc.);
• the ability to minimize the risk of losses during a crisis due to the presence of the enterprise in foreign markets.

As a result, the level of business capitalization and its stability in relation to external factors (actions of competitors, legislative measures, etc.) increases.

Making a decision to organize a business in another country is preceded by an analysis of the current situation and development prospects of the company, which is expressed in the following questions:

• Time? The question concerns not only the desire to get ahead of competitors or become their follower, but also the real capabilities of the company, the presence of favorable conditions for the development of new economic territories.
• Scale? Depending on the available resources, the scale of entry is determined: an aggressive strategy of mass capture or a gradual expansion of market presence.
• Market? The most attractive market segments for the enterprise are established (in accordance with costs, risks, expansion prospects). Thus, the enterprise lays the foundation for determining the desired exit strategy and developing specific marketing activities to achieve its business goals.

Choosing a Strategy

The choice of expansion method is influenced by the size of investment, degree management control behind the process and serving the market. There are three main groups of strategies that allow an enterprise to develop new areas:

• Export activities– production of a product in the main market and its supply for sale in other countries:
  • direct export – direct contracts are concluded with foreign intermediaries, the manufacturing company undertakes the search for partners, preparation of documentation, certification, etc.;
  • indirect export - in the domestic market an agreement is concluded with an intermediary who is responsible for selling the product to the foreign market and has its own network of dealers;
  • joint export - direct supplies are established by joining forces with other enterprises (with insufficient production scale or limited resources).

  Exports often play the role of a “reconnaissance” tool for a business, allowing it to “test” the viability of a product in a new market and the interest of the consumer. The advantage of exporting is insignificant costs and risks, the disadvantage is the low level of control over the activities of intermediaries.

• Mediation – establishing interaction with a trading partner company on a foreign market while sharing responsibility and control:
  • licensing is the transfer of the right to use technology, a patent, etc. to a foreign company. The advantage of licensing is the low level of costs for organization and control, the ability to set its own strict conditions for conducting activities. Minus – difficulties in exercising control, loss of uniqueness;
  • franchising - transferring to an intermediary a franchise - the right to conduct business under one's own brand. The difference from licensing is that it imposes more stringent requirements on the intermediary, its dependence on the parent organization, and a limited scope of application;
  • contract manufacturing - setting up production on the territory of another country while retaining the functions of marketing, distribution, etc. for the parent company. The advantage of the method is the retention of the most important management functions, insignificant costs for setting up production, and the absence of problems with adapting the cost of the product to market conditions. Disadvantage: difficulties in finding competent partners and transferring high-tech production, the risk of borrowing intellectual resources (technologies, etc.);
  • joint venture - the creation by several enterprises of companies with common income, responsibility and risks. Plus – mastering new technologies and knowledge, bypassing entry barriers in a highly competitive market. Disadvantage: high costs, risk of conflicts with partners.
• Hierarchical business structure– creation of your own company in a foreign market as a branch or independent enterprise:
  • creating a business from scratch - expanding the company through the construction of a new production facility. Plus – minimal risks while maintaining maximum control. Disadvantage: high financial and time costs;
  • acquisition - gaining control of a foreign company through the purchase of a controlling stake or merger. Plus – reducing competition, gaining a certain market share. The downside is the dependence on the professionalism of specialists and the need for comprehensive knowledge in the field of legislative restrictions.

A possible criterion for classifying strategies is the type and level of management risk: the risk of loss of control over know-how and main functions (production, marketing, etc.), as well as a conflict of interests and strategies between the parent and transnational companies.

Regardless of the chosen strategy, a company’s entry into the international market is preceded by detailed research, the development of effective marketing concepts and the search for reliable partners. These steps can make all the difference to your business's success in the new environment.