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Internationalization: the five strategies for bringing your company abroad

20/12/2019

As we discussed in a previous article, when you want to internationalize your business you need to choose a precise strategy. You have to be clear about the specific business of your company and know the characteristics in the market segment in which you want to operate. To take you on this journey, we have selected the five main strategies for bringing your company abroad. Read on and find out more!

1. Choose the Export

The most common strategy to internationalize a company is undoubtedly the export of goods. The company can be directly involved in the process (direct exports) or have a commercial intermediary that negotiates and distributes its product abroad (indirect exports).
Indirect exports are the least demanding but also the most precarious of all internationalization strategies. Precisely because they do not relate directly to the outlet market or the final consumer as opposed to direct exports, which involve a higher level of involvement, especially in financial terms.

2. Opt for Foreign direct investments (FDI)

Acquire a company abroad. Another strategy to reach the foreign market is the direct investment in the partial or total acquisition of a company that already operates abroad (brownfield investment). Despite the high costs, this alternative can be enjoyable to reduce the risks of entering a new country: investing in a company that already operates abroad minimizes the risk of implementation. It can rely on the skills and know-how of the existing business.
Open a new branch. Another type of direct investment is the opening of a consortium or subsidiary abroad (greenfield investment). The creation of a new company to carry out commercial activities abroad indeed represents a more significant investment than the acquisition of an existing unit, since it is the opening of a new branch.

3. Adopt a Licensing strategy

Licensing is an international agreement in which two or more parties agree that the licensee, subject to payment of royalties, can use the licensor's proprietary resource for a specified period.
In this strategy, internationalization takes place with the help of an entrepreneur outside the country, taking advantage of its image to establish a partner in the new market. The main disadvantage is that a foreign company is not part of the parent company. Therefore, there is a risk that the licensee will become a competitor if the license agreement expires.

4. Set up a Franchising

In franchising (or commercial affiliation), the company chooses to be an affiliate (franchisee), having to pay a fee to the franchisor. The franchisee is authorized to sell products and services, use the franchise format, and the business system.
Companies that choose to franchise as an internationalization strategy must follow the franchisor's quality, price, and advertising standards. Those who opt for this strategy believe they can succeed in the international market using someone else's brand and operating according to their systems and methods.

5. Build a Joint venture with a company

A Joint venture is an association between two or more companies for a given period with a common purpose, in which the partners share capital, management, profits or losses, and know-how.
This strategy can be interesting to internationalize a company with the support of a partner who already knows the foreign market.

Now that you know the main internationalization strategies, you can orient yourself in the world of exports with more skills. Do you need contacts to approach the leading markets in the world? Join WTC, and you will succeed on this journey!