Ways in which you can penetrate international markets
There are many ways or methods in which you can enter a foreign market. They include:
- Exporting directly to the international customers or consumers
Major benefits of this method are:
- It is relatively simple and has the lowest risk
- It is the most popular method well understood
- It is easy to use the existing systems. For instance: Using an e-commerce platform as the medium of business
- Business keeps all the profit earned
- Business stays in charge of terms of payment, currency and delivery.
Well, this method has major drawbacks too and they include and let us take a look at them. They include:
- Potentially bureaucratic. As in, the organization of the business looks more complex and rigid.
- There is a risk of non-payment
- Customer service may need changing like for instance in after-sales care they need to learn a foreign language
- It may be affected by tariffs and quotas
- Selling via international agents or distributors
Like any other method of business, this has its benefits and drawbacks too. Let us check on the benefits first. They include:
- Agent or distributors tend to have knowledge of the market and the existing customers. This is good for business since the conversion rate will increase.
- It is cost-effective since commission or distributor margin is a variable cost, not fixed
- It is likely to accelerate international sales in key markets compared to exporting
Its drawbacks include:
- There will always be a loss of some profit margin to the agent or distributor
- Unlikely to be an exclusive arrangement since its hard to trust the agent or the distributor’s effort and commitment
- It is harder to manage the quality of customer service
- The agent or the distributor owns the customer relationship
- Opening an operation overseas
The major benefits of this method are:
- There is a local contact with the customers and suppliers
- The owner experiences the market first hand
- There is direct control over quality and customer service
- It avoids tariffs and quotas
Well, it has its drawbacks too which include:
- There is a significant cost and management of time
- There is a much higher investment
- Need one to understand and comply with local government legal and tax issues
- It is a high risk
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