The type of market entry strategy you choose will depend on your product or service, the results of your research and your objectives in the market. It’s important your strategy for international expansion addresses two criteria: exporting and establishing a local presence.
There are several options to consider regarding exporting as a foreign market entry strategy.
- You can choose direct exporting by selling your products directly to someone in an international market.
- Or, you can choose indirect exporting and sell your products to a third party in your own country, which, in turn, sells your products to an international market.
- You also can indirectly export using buying agents, export management and trading companies, distributors or by piggyback marketing.
The method you choose will depend upon the amount of time, staff and resources you have to distribute and market your product, and the amount of knowledge you have about your international market.
Choosing direct exporting may be a foreign market entry strategy that’s right for your company when you have a unique offering with strong customer appeal and have adapted it to match your targeted international market. When you direct export, you can achieve higher profits without a middleman. Plus, you will gain complete control over your transactions and be able to establish close relationships with your customers.
If entering a new international market poses challenges, such as language barriers, cultural differences or unfamiliar ways of doing business, it may be better to choose indirect exporting via intermediaries who know the local market much better. They can help you find customers, arrange distribution channels, handle documentation, clear your goods through customs and provide after-sales service.
Indirect Exporting Through Buying Agents
One way to indirectly export is to use a buying agent. Buying agents, also known as confirming houses, represent firms in the countries you want to export to that want to buy your product. These agents work on a commission and take orders for your products and forward those orders to you. Your company is responsible for promoting and marketing your products in that country, setting prices, filling the orders, shipping the goods to the customers and collecting payment. You will, therefore, potentially have to bear the credit risk.
Indirect Exporting Through Distributors
You could also indirectly export through a distributor. Distributors buy your product from you and then sell it to end users in another country at a markup that provides them with their profit margin. They handle all distribution, marketing and advertising, and can represent you in all aspects of sales and service. Distributors can represent you either exclusively or non-exclusively, meaning they can purchase and market products similar to yours.
Indirect Exporting Through Management and Trading Companies
Another route to indirect exporting is through management or trading companies. Export management or trading companies can purchase your product outright or take orders for your products and work on commission. They can specialize by product, international market or both. They will handle market research, transportation and advertising. While they can provide immediate and easy access to a market you want to enter, you will typically have less control over sales, brand management and relationship building.
Indirect Exporting Through Piggybacking
Some domestic companies that already have an extensive exporting system and comprehensive international marketing network in place look for other products that complement their lines. If you manufacture such a product, they can make an agreement with your company to sell your product through their international networks.
In this scenario, they would purchase your products and then do all of the marketing and distribution. Your company “piggybacks” on their network to your product to an international market. Piggybacking is often a low-risk type of market entry strategy.