8 New Market Entry Strategies for Global Business

Setting the Foundation for Your Market Entry Strategy

International expansion can start a challenging new venture for businesses of any size. Entering overseas markets presents new customers, revenue streams, and competitors to help grow your business. Before you start, explore and find the new market entry strategy that suits your needs.

Why Expand into a Foreign Market? 

You must make your goals clear in an international market entry strategy. By researching and knowing your current customers, you can grow your marketing plan to reach a new audience. Your new marketing campaign will use competitor and market research and adapt products and messages for local language and culture.

Here are some questions to consider when developing your international market entry strategy: 

• What do you want to achieve in the new foreign market? 
• What is the competitive landscape of your industry? 
• What is your budget for your international marketing campaign? 
• What are the risks of market entry?

Which Markets Are You Entering?

An international strategy is an option for many businesses because they can leverage existing capabilities and export abroad. A global strategy features cost efficiencies and can work well for businesses requiring a low need for local responsiveness and localization.

An example is Apple, which sells its products with standardized models and prices. There are few differences between Apple products for marketing strategies across the globe.

No matter what your business sells, it is essential to research and plan the growth of your business. If your business grows too quickly or expands into too many markets at once, you could experience financial, legal, staffing, resource, and supplier problems. Business growth should be sustainable to be successful. Some factors to consider when choosing a market to expand to include:

• Market Size
• Local Competition
• Shipping Cost and Supply Chain
• Government Regulations and Local Laws
• Political, Economic, and Operational Risk

8 Types of International Market Entry Strategies

There are several international market entry strategies to consider when planning. Each strategy has a unique structure and approach depending on how the business is established, maintained, invested in, and run.

Exporting

Exporting involves selling domestically produced goods to another country through a distributor, making it an ideal first step in market expansion with low overhead. It’s a low-risk, highly profitable strategy since you don’t need to create new products for the target market and face less competition abroad. However, scaling without in-country resources and staff can be a challenge for some companies.

Piggybacking

Piggybacking is a quick and cost-effective strategy for entering international markets. It involves partnering with non-competing companies to promote each other’s products or services in their respective home countries. This approach relies on a foundation of trust, as the partner company manages marketing in the foreign market.

Consider piggybacking if your company has contacts in organizations selling abroad. This strategy involves adding your product to their overseas inventory. If an agreement is reached, both parties share profits from sales. Your company can focus on domestic retail while the partner handles international marketing, reducing overseas selling risk. 

Countertrade

Countertrade is a creative approach to facilitate sales between an exporter and a company in a currency-limited country. Instead of traditional currency transactions, countertrade involves trading goods and services. It enables trade in countries lacking import payment capability due to factors like currency scarcity or credit constraints. Companies often consider countertrade to expand into foreign markets, boost sales, nurture customer relationships, overcome liquidity issues, and gain a competitive edge. 

While countertrade offers advantages such as entry into challenging markets and overcoming credit difficulties, it presents challenges like uncertain deal value, time-consuming negotiations, higher transaction costs, and logistical complexities. 

Licensing

Licensing allows others to use your company’s name and intellectual property to sell your product in global markets. A licensee can produce and sell products under your name or offer services using your brand. In exchange, you get royalties or other payments. It can be an effective way of entering a market, especially if you’re a service business that needs a local workforce or your products would benefit from local manufacturing.  

Licensing can harm the brand if the licensee mistreats customers, produces low-quality goods, or markets the product poorly. This can have negative consequences for the brand. The licensee’s treatment of customers, production of low-quality goods, and poor marketing can all contribute to damaging the brand.  

You need to conduct thorough due diligence to find potential partners. Brands that come to the table with detailed research on their target audience are much more likely to solidify essential factors for a successful licensing partnership. 

Franchising

One of the most popular international market entry strategies is the franchising process. Franchising is similar to licensing but requires a lot more heavy lifting. Franchising works well for organizations with a trustworthy and established business model, such as McDonald’s or Starbucks. Businesses that begin franchising should ensure that they earn a good brand name, build on it, and promote it.

Franchising is a contractual international market entry mode as a licensing agreement when an organization wants to enter a foreign market quickly with low risk and resource commitment. In addition to the standard license process, a company will assist in establishing the business with the design, equipment, organization, and marketing support for a contractual partner in the target market.

In return for the franchisor’s services, the franchisee pays a lump sum payment up front and a share of future profits. Through this contractual relationship, the success of the operations is interdependent, but the franchisor gains other advantages from the partnership than the franchisee.

Joint Ventures

A joint venture is a partnership between two companies that may sometimes be domestic and foreign firms. Both invest money, share ownership and control. The foreign partner provides expertise, connections, and access to the new market.

Joint ventures are riskier but allow faster entry into foreign markets. They can offer tax advantages and may be required in some countries.

Joint ventures are temporary, dissolve after the project, and can involve unequal contributions. An agreement is crucial, specifying contributions, profits, and responsibilities. Examples include real estate, media, and tech sectors. 

Foreign Direct Investment

Foreign direct investment (FDI) occurs when a company takes controlling ownership in a business entity in another country. With FDI, foreign companies are directly involved with day-to-day operations in the other country. This means they’re bringing money into the investment, knowledge, skills, and technology.

FDI involves creating a lasting relationship with and gaining significant influence in the foreign market. Through FDI, companies can lower production costs and gain access to markets they otherwise may not have been able to do on their own. For the destination country, FDI can be a source of resources and technology and can spur economic growth and development. However, FDI does come with risks for investors and can raise concerns about foreign influence in target countries.

Wholly-Owned Subsidiary

Another way large businesses invest is to set up a wholly-owned subsidiary. A local business is owned by a parent company. It operates under the same brand or a different name chosen by the parent company.  

Creating a subsidiary from scratch is possible. However, it is often easier to purchase a local business rather than starting a new subsidiary. This model has the same pros and cons as direct foreign investment. You have more control on the ground when the parent company manages the subsidiary. 

Green-field Investment

A Green-field Investment is a type of Foreign Direct Investment (FDI) where a company starts operations from scratch in a foreign country. This involves creating new facilities like offices, factories, and distribution centers. Such investments offer control, custom infrastructure, and quality control. They can also receive incentives like tax breaks and bypass trade restrictions. However, they carry higher risks due to substantial investment.

International Mergers and Acquisitions

International Mergers and Acquisitions (M&As) offer the fastest and largest international expansion strategy and is a way to gain greater market power in less time. Market power often influences market share, so large multinational corporations prefer acquisitions to gain that advantage. M&As require the purchase of a competitor, supplier, distributor, or business to capture a competitive advantage in the market.

Acquisitions carry a lower risk than new investments because acquisition results can be more quickly and accurately estimated. Overall, acquisitions are attractive if there are well-established firms in action. However, reaching an M&A can be difficult when trying to merge two different organizational cultures, control systems, and relationships.

Integration is a complex issue, both legally and financially. In addition, firms engaging in an M&A can increase their debt levels, which needs to be a consideration during an international expansion.

Challenges of International Market Entry and the Role of Cultural Intelligence

Expanding into foreign markets offers great potential for growth, but it also presents a range of challenges that businesses must navigate carefully. While there are various strategies for entering new markets, companies must be aware of the obstacles that could hinder success. Understanding these challenges, including the importance of cultural intelligence, is crucial for smooth and effective market entry.

Physical Presence vs. Communication:

Establishing a physical presence in-country helps boost collaboration and operations, but it also adds costs—especially with long-distance shipping and varying tariffs across regions. Efficient communication and logistics are critical to managing these challenges, but they can become complex when dealing with international shipping laws and import fees.

Workforce Considerations:

One key decision is whether to hire locally or send an existing team abroad. This decision impacts workforce dynamics, as international moves may leave vacancies in domestic teams. Balancing local hiring with in-country resources is essential for managing operations efficiently while also adapting to the new market.

This means developing multilingual websites and translated content that is culturally relevant to global audiences. Website translation can be confusing – a partner like MotionPoint can guide you.

Tariffs and Legal Costs:

When entering new markets, businesses must factor in the additional costs that can come from tariffs and legal fees. Countries often impose import fees that increase the cost of doing business internationally. Shipping laws, customs duties, and compliance with local regulations can also add up quickly, affecting overall profitability. Companies must be prepared to account for these financial and legal obstacles when developing their market entry strategies.

Cultural Customer Interaction:

Understanding and adapting to the cultural needs of your target audience is essential for successful market entry. Cultural differences—such as consumer behaviors, language barriers, and etiquette—can greatly influence your marketing and product strategies. Without cultural intelligence, even the best products can fail due to misunderstandings or misinterpretations of local customs. Tailoring your approach to resonate with local consumers ensures that your offerings align with their expectations and avoids costly missteps.

Cultural Intelligence in Market Entry:

Cultural intelligence is vital for success in new markets. It allows businesses to navigate cultural nuances, values, and behaviors effectively. By understanding these elements, companies can create marketing campaigns, products, and communication strategies that build trust, resonate with local consumers, and foster stronger relationships. Cultural intelligence isn’t just about avoiding mistakes—it’s about turning these insights into a competitive advantage that improves your chances of success.

When expanding into new markets, recognizing the importance of cultural intelligence, preparing for logistical and workforce challenges, and accounting for tariffs and legal costs will help businesses thrive and adapt to their international environments.

Bridge the Cultural Gap with Localized Content

Growth-minded businesses aim to expand internationally. MotionPoint offers high-quality website localization technology and services. We adapt your website, documents, videos, and audio to connect with your customers in their language.  

MotionPoint helps you connect with customers and gives your business an advantage to compete globally.