WHAT IS INTERNATIONAL BUSINESS? – ENTERING OVERSEAS MARKETS part 14

the article on entering international markets continues, part 14

STRATEGIC ALLIANCES: An often-overlooked mode of entry is the strategic alliance. This is typically a business relationship where similar companies combine efforts to get a better price on materials, perform research and development, collaborate on marketing or distribution, or seek new business. A good example of a strategic alliance took place in 1997 between Intel, Motorola, and Advanced Micro Devices. The three separate corporations formed a not-for-profit company called Extreme Ultraviolet in order to collaborate on R&D.

Strategic alliances aim to achieve advantages of scale, scope and speed, increase market penetration, increase competitiveness, enhance product development, develop new business opportunities and markets, increase exports and reduce costs.

The main drawback of any strategic alliance is the potential for the alliance to be taken over by one of the partners. Since the partners are most often competitors, there is always a chance that the alliance will break up in the end.

Entering or expanding in a foreign market can obviously be accomplished through a wide variety of different options. A mode of entry should be selected only after analyzing each alternative and comparing it to others.
1) The quantity of resource commitment required,
2) The amount of control and
3) The level of technology risk

Are the three basic differentiating characteristics between the modes of entry.

In general, exporting requires the least amount of resources and allows for the lowest level of control. Wholly owned subsidiaries, on the other hand, require the most resources but allow for the most control. As far as technology risk is concerned, exporting is the least risky while licensing is generally the most risky. It is apparent that not every mode of entry will work for every situation. A company looking to enter a foreign market should look at the experiences of other companies in similar markets to try and gain some insight as to the best alternative. During the process and additionally, after the choice of entry has been made, the company should definitely enlist the help of a professional such as an international marketer to insure the best possible strategy is carried out. The most control is usually what is sought, however, control can be expensive.

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