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Export goods or services are provided to foreign consumers by domestic producers. Export of commercial quantities of goods normally requires involvement of the Customs authorities in both the country of export and the country of import. (Mancha Navarro, 2001) The advent of small trades over the internet such as through Amazon, e-Bay and the like, have largely by-passed the involvement of Customs in many countries due to the low individual values of these trades. Nonetheless these small exports are still subject to legal restrictions applied by the country of export, particularly in respect of strategic export limitations.(Ferrer Trullols, 1993)
There are many market export strategies that a business can follow when setting up in another country. Each has differing levels of risk, legal obligation, advantages and disadvantages. There are four factors that must be taken into consideration when considering a partner in another country are the complementary skills that your company will acquire, which will be able to be used later when doing business again. Another factor is the culture in the other country; if your company's corporate culture is not compatible with the import partner's, there is a high chance of your product not being successful when entering this new market. (Gómez Palacio, 1985) Also when dealing with a new country, you must have compatible goals, that is to say you should set yourself goals that are possible to achieve.
Exporting your Product
There are different ways of exporting your product to another country. One of these ways is to establish a local office in the country in question, which is to say the exporter establishes a local presence through a representative or branch office, rents office space and hires staff, which could be just one person. Advantages of establishing a local office are greater control of marketing and distribution, you have direct contact with customers, there is improved credibility in marketplace with customers, and you have access to local venture capital. (Carroll, 1999)
Nevertheless, there are some disadvantages too, for example sometimes the cost of establishing an office is higher than that of using an agent or distributor. Another disadvantage is that you don't have a local partner with contacts and expertise like in a joint venture.
An example is Corona, and how they export directly to a country sometimes dealing through local offices, which administer the beer and the public relations.
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If a company is interested in going beyond the simple export of goods and services, licensing, you can choose to make a strategic alliance. While direct exporting may be a profitable method of market entry for some businesses, licensing manufacturing rights to your product to a foreign company or setting up a foreign manufacturing alliance may be a viable alternative. (Ippolito, 1994) Strategic alliance partners are often identified through bankers, accountants, business consultants, industry associations and networks, and government contacts. Advantages and disadvantages of a strategic alliance are similar to those of a joint venture.
Examples of strategic alliances are Sony-Ericsson, which joined their strategic advantages so they could maximize their operations in an international market. They did not make a new company, but rather teamed up to join forces.
A market entry option which the exporter and a domestic company in the target country join together to form a new incorporated company is called a joint venture. When going in a joint venture, both parties provide equity and resources to the joint venture and share in the management, profits and losses. The agreement is limited to the life of a particular project, and this option is popular in countries where there are restrictions on foreign ownership, like in China and Vietnam. (Gardner, 1995)
Some advantages of a joint venture with another company are: you acquire competences and skills not available in your home country; you spread the risk of the project over the two companies, not just your own; faster entry and payback are enabled, letting you profit faster than if you did the export on your own; you avoid certain tariff barriers and satisfy local requirements, because your partner company probably knows the culture of the country in question. Nevertheless, a joint venture (and strategic alliance) is sometimes risky.
Some disadvantages of a joint venture as an export strategy are: your company does not have complete control of the management of the agreement; you may disagree with your partner company on new export markets; it can become impossible to recover the capital invested in the transaction, and you and your partner may have different opinions on expected benefits. (Egea, 2005)
Examples of a joint venture is Vitro with Whirlpool, where they formed a new company that used Whirlpool's technology and Vitro's mobility and knowledge of the Mexican market.
Other methods are franchising, doing a merger, and licencing, but those aren't as common as the strategies already explained.
Exporting a product is inevitable when a company wants to expand its business, and there are different market strategies that business can use. Joint ventures, strategic alliances, and local offices are the most common strategies used by companies all over the world, even though they have their advantages and disadvantages. Companies must choose carefully what method they will use, because if they choose incorrectly it can lead to an unsuccessful experience in a new market, and that can mean great losses.
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