Choosing your entry mode
In the last post, I wrote that companies that operate internationally are more stable, more innovative and better equipped to make a lasting impact. Many firms, who do not operate internationally yet, know this. Therefore, they want to create an internationalization strategy. An internationalization strategy a strategy through which a company sells its goods and/or services outside its home market.
It takes time and involves risks, aspects that companies find challenging. But although making the right choice in your organization’s internationalization process can be tricky, finding the right area, marketing, and organizational structure can be the key difference between scaling up or be left behind.
- Are you ready?
- If so, choose the right market. Which region, country, the market should the company choose to focus on.
- If the company has made its choice for one country, region or market the question arises: how does it relate to the strategy for the home market, where the company is already active.
- If this is clear to the company, it needs to organize the entry mode process and make the right choices for your company.
For companies that have made the decision they want to internationalize, there are several ways in which they can expand their operations across borders. The most common are:
- Licensing (and Franchising):
- Strategic Alliances:
- Joint ventures
- Foreign Direct Investments:
All factors surrounding the choice of entry mode depend on the nature of the firm (its internal environment, with elements such as company size, maturity of the company, R&D profile, and marketing intensity) and its external environment (market size and potential, competitors distance, cultural and political differences, etc.) The entry mode is influenced by a variety of factors, the degree of control versus risks (both internal and external) as well as the commitment of the company to allocate resources. Driscoll (1995) believes that “a diverse range of situational influences that could bear on a firm’s desire for certain characteristic of mode choice”. Dissemination risk refers to the extent to which a firm’s know-how will be expropriated by a contractual partner.Resource commitment refers to the financial, physical and human resources that firms commit to a host market.
|Licensing (and Franchising)||Medium||High dissemination risks, lower systemic risk||Low|
|Foreign Direct Investments||Medium/High||High (depending on the entry country)||High (also, depending on the entry country)|
DLA Consulting will support you at every level of your internationalization process. We are connected globally and can identify and mitigate the risks (political, economic, and management risks) your company faces when it decides to internationalize. If you want to know more about our activities, please visit our website or send me a message email@example.com
 There are some other forms of entry mode as well. See: