THOUGHTS

Four Barriers You Need to Overcome Before Planning Your International Market Entry Strategies

Oct 26, 2018

The rising rate of globalization is prompting brands across the world to ‘think global’. In the long term, every modern business wants to expand its reach to international markets, which would eventually spike its profit and growth graphs. The lucrative scope of doing business in foreign markets is attracting many ventures, big and small, to explore these opportunities. However, while formulating international market entry strategies, chances are that a company might overlook certain barriers that might prove to be fatal for the business. Here are some of the key barriers that companies must watch out for before formulating their international market entry strategies:

Monopoly in the market

The existence of a monopoly in the market often poses a tough barrier for companies planning to build international market entry strategies for their business. A monopolistic market situation is when one company or a group of companies hold an entire chunk of the market share, making them the primary providers of products/ services in that market. Monopolies often block the entry of other substitutes or competition in the market by using patents and licenses, controlling distribution routes, resources, or suppliers, or by using pricing strategies. If companies entering a new market cannot access an efficient or cost-effective distribution system because incumbent companies have greater control over the distribution networks, the chances of their goods or services being successful is highly unlikely.

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Poor legal aid available

Foreign companies often get poor legal protection in international markets. If a company is unsuccessful in assuring protection of its intellectual property (copyrights, patents, trademarks) and fair and effective dispute settlement mechanisms, sooner or later the business is likely to plunge to losses. Furthermore, in some countries, resorting to legal action over a commercial dispute can be in vain, as neither the law nor the courts tend to favor foreign companies. So, while building the international market entry strategies, it is vital for companies to have a clear understanding of the legal system in the country.

Corruption and other unfair practices

In many countries, though not legally, bribes form an essential factor to speed up the setting up formalities of a business.  Key officials and decision-makers may demand some form of payment to allow a transaction to proceed. While local companies in such countries treat bribes as an everyday business occurrence, foreign companies can even face criminal and civil penalties for paying bribes. This forms a major disadvantage to consider while formulating international market entry strategies.

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Finding reliable local partners

In several foreign countries, there is extreme scrutiny over the international companies venturing into the market. In such cases, it is advisable to include identifying reliable local partners as one of the critical international market entry strategies. However, the lack of experience and enough acquaintance with a new market, foreign companies can find it highly challenging to find trustworthy and competent local partners.

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