Octagona/Internationalization News/What strategy for foreign markets? The importance of the right decision
What strategy for foreign markets? The importance of the right decision

What strategy for foreign markets? The importance of the right decision

TLDR
  • There are three typical paths for entering a foreign market: commercial agreements with agents and distributors, transfer of technology and expertise, and Foreign Direct Investment.
  • I tre percorsi si differenziano per opportunità offerte, livello di impegno finanziario e grado di reversibilità della scelta.
  • Non esiste una strategia d’ingresso in assoluto più efficace: la scelta dipende da obiettivi di crescita, risorse finanziarie, personale, know-how e prodotto.
  • Agents and distributors involve a modest level of involvement and are indicated for non-priority countries or those considered too risky.
  • Gli Investimenti Diretti Esteri, tramite joint venture e M&A, sono la forma di investimento maggiore e puntano a un’espansione strutturata e duratura.

Strategies for entering a new market

Before making a decision, it is therefore necessary to Consider the real business needs to take one of three typical expansion paths in the foreign markets. These pathways differ in the opportunities they can offer, the level of financial commitment, and the degree of reversibility, and specifically are:

Export through trade agreements which include agents and distributors. They may be advisable for exporting to countries considered non-primary or deemed excessively risky because they involve relatively modest levels of involvement/investment;

Transfer of technology and skills: business skills are enhanced by collaborating with counterparts in the target market. These transfer activities give exporting firms the opportunity to increase their profits in foreign markets characterized by significant barriers to entry and therefore difficult to penetrate through more “traditional” forms of commercial entry;

Foreign Direct Investment: are implemented through joint ventures and M&A, and are the major form of investment for companies that want to have a structured and lasting expansion right away.  

Which strategy to choose for foreign markets?

Ultimately, therefore, it can be said that there is absolutely no one strategy for entering a new foreign market that is more effective than another.

The three strategies presented can be complementary, or opposite, depending on the company's growth objectives, its financial resources, personnel, know-how and its product. Each company must choose the best one for itself based on internal assessments that revolve precisely around its characteristics.

Next, we will come to a complete picture, with an analysis that tracks the costs and benefits that a given method of entry may entail.

Entering a foreign market is a great opportunity, an exciting journey that leads to the growth of one's business and culminates in increased sales and profits.

Octagona can confirm this, having contributed to the growth of numerous businesses in 20 years of operation. If you, too, would like to penetrate a new market, but do not know which of the strategies may be the most suitable for your business, then contact us by clicking the button below: we will listen to you to propose the best solution and build a successful export project.

ALSO READ:

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The’approach to the U.S. market: options and strategies

From Kick-Off to Export Plan: how to create a winning internationalization strategy

Frequently Asked Questions

Quali sono le principali strategie di ingresso in un nuovo mercato estero per un’azienda italiana?

Le strategie tipiche sono tre: export tramite accordi commerciali con agenti e distributori, trasferimento di tecnologia e di competenze, Investimenti Diretti Esteri. Si distinguono per opportunità offerte, livello di impegno finanziario e grado di reversibilità. Possono essere complementari oppure alternative, a seconda degli obiettivi e delle risorse dell’impresa.

What is the best strategy for entering a foreign market?

Non esiste una strategia d’ingresso in assoluto più efficace delle altre. La scelta dipende dalle caratteristiche di ogni impresa: obiettivi di crescita, risorse finanziarie, personale, know-how e prodotto. Per questo occorre una valutazione interna e un’analisi dei costi e dei benefici di ciascun metodo di ingresso prima di decidere.

When is it advantageous to export through agents and distributors instead of investing directly in the foreign country?

Conviene soprattutto per Paesi non considerati di primaria importanza o ritenuti eccessivamente rischiosi. Gli accordi commerciali con agenti e distributori richiedono infatti livelli di coinvolgimento e di investimento relativamente modesti, e permettono di testare il mercato senza esporre l’azienda a impegni finanziari elevati e difficilmente reversibili.

What does the transfer of technology and skills constitute as a strategy for internationalization?

Consiste nel valorizzare le competenze aziendali collaborando con controparti presenti nel mercato di riferimento. È una strategia utile nei mercati con significative barriere d’ingresso, difficili da penetrare con forme commerciali più tradizionali, e offre all’impresa esportatrice l’opportunità di aumentare i profitti sui mercati esteri.

What are Foreign Direct Investments and for which companies are they suitable?

Gli Investimenti Diretti Esteri si realizzano attraverso operazioni di joint venture e M&A e rappresentano la forma di investimento maggiore nell’internazionalizzazione. Sono adatti alle aziende che vogliono avere fin da subito un’espansione strutturata e duratura in un mercato estero, accettando un impegno finanziario più elevato rispetto alle altre strategie.

Why is it important to choose the right strategy before entering a foreign market?

Partire con la strategia corretta influenza i risultati attesi dall’impresa sui mercati esteri ed evita errori che possono compromettere seriamente il processo di internazionalizzazione nelle fasi avanzate. Una scelta ponderata, basata su costi e benefici di ogni metodo d’ingresso, riduce il rischio di dover correggere la rotta quando l’investimento è già avviato.

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