GLOBAL MARKET ENTRY STRATEGIES 1

Assignment 2 -- Global Market Entry Strategies for Businesses in

the Consumer Packaged Goods Industry

Kimberly Kelly

St. Petersburg College

GLOBAL MARKET ENTRY STRATEGIES 2

According to the International Trade Association (2016), “Ninety-five percent of the

world’s consumers live outside of the United States”. With that large of a number of potentially

missed consumers, it only makes sense that domestic businesses would want to expand globally.

There are a number of different strategies that a company can utilize to begin its entry into

international markets. Each of these strategies comes along with its own unique set of advantages

and disadvantages.

Exporting, for example, is one of the most commonly used global market entry strategies.

Exporting is when a company sends some, or all of the goods that it produces to another country

for sale. This can be one of the best ways to grow a business. “Companies that export are 17

percent more profitable than those that don't” (ITA, 2016). Some obvious benefits of this method

are increased profits and sales. But these benefits also come with some financial risk. There is

always a chance that the good that is being providing will not be well accepted into the market its

target country.

Another market strategy for entry into international markets is licensing. In this scenario,

the US based business would give an international business the rights to use or sell their product.

A benefit of licensing is that, because the initial company usually produces the goods locally, it

often allows them to avoid tariffs, quotas, or other barriers (Keegan, 2013, p256). Disney is a

good example of this strategy. Their licensing agreements allow Disney merchandise to be sold

all over the world. A downside to licensing is that it is essentially allowing a company to

“borrow” another company’s ideas and resources. This can sometimes lead to strong competitors

(Keegan, 2013, p256).

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A joint venture is also a fairly common global market entry strategy. In a joint venture,

two companies agree to join forces and create a third shared company. In a global survey of 253

different companies, 80 percent of the participants stated that their past usage of joint ventures to

spur growth/optimize product mix, either met or exceeded their expectations (Leroi, 2017). A

joint venture is appealing to companies because it allows them to share the risk; the downside of

this is that they also must share the potential profits and rewards (Keegan, 2013, p260). A joint

venture can be a very effective tool for a domestic company looking to expand internationally.

Many countries tend to be biased and stick to known suppliers (ITA, 2017). Because of this, a

joint venture with a company that is native to the country you are expanding to could be more

successful.

Equity stake and full ownership are two more strategies for global market entry. They are

interesting because the pros of one are the cons of the other, and vice versa. “An equity stake is

simply an investment; if the investor owns fewer than 50 percent of the shares, it is a minority

stake; ownership of more than half the shares makes it a majority” (Keegan, 2013, p263). When

the investor owns 100 percent of the shares, he or she has full ownership. Having full ownership

of a business means that the owner has complete authority on decision making and also complete

claim to all the profits. The downsides to full ownership are often high startup costs and sole

responsibility for any debts (Brown, 2017). Equity stake, on the other hand, allows for less

financial risk at the start, but also means shared rewards, and many times, disagreements

between stakeholders.

In my opinion, exporting would be the best way for a US company that sells consumer

packaged goods, to initiate its entry into the market in South Africa. “According to a World Bank

report, Global Economic Prospects, trade in goods and services is likely to more than triple by
GLOBAL MARKET ENTRY STRATEGIES 4

2030. Over the same period, the global economy will probably expand from $35 trillion in 2005

to $72 trillion” (ITA, 2016). This significant growth is largely caused by countries with newly

developing economies, such as South Africa. Exporting is a good business decision because it

will likely increase the value of a company’s intellectual property as well as increase the value of

the business as a whole (ITA, 2016).

In order to successfully enter the global market, a company will need to consider all of

these options, and more, to find the best fit. Every business is different and comes with a unique

set of wants and needs. It is important to hire someone with intercultural expertise to help make

the decision. The right market entry strategy can help a company to reduce personal liability,

access proper capital investment, lower its tax burden, and avoid unnecessary regulatory

requirements (Brown, 2017).

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References

Brown, B. (2017). Types of Business Organizations – Pros and Cons. Retrieved from <https://

www.equitynet.com/blog/business-organization-types/>

International Trade Administration (ITA). (2016). Export Strategy. Retrieved

from https://www.export.gov/article?id=Strategic-Reasons-to-Export

International Trade Administration (ITA). (2017). South Africa-Market Entry Strategy. Retrieved

from https://www.export.gov/article?id=South-Africa-Market-Entry-Strategy

Keegan, W. J., & Green, M. C. (2013). Global marketing (7th ed.). Boston: Pearson Education.

Leroi, A. & Leung, P. (2017). The Secrets To Successful Joint Ventures. Forbes. Retrieved from

<https://www.forbes.com/sites/baininsights/2017/04/11/the-secrets-to-successful-joint-

ventures/#4e47dab838d1>