Internationalization may be considered to be a growth strategy. However, very few firms launch into their first international foray by means of an investment in a subsidiary abroad.
For the majority, the first international venture is likely to be exporting, that is to say, their international strategies are at first usually based upon manufacturing in the home market for sales abroad, or distributing their products and service offerings abroad. Typical home-based exporting strategies include:
- Indirect Exporting – This method deploys an intermediary between the manufacturing firm and the foreign market. For example, a home-based export agent or a foreign based import agent;
- Direct Exporting – This cuts out the middle man. When a company has located customers in foreign markets and has gained sufficient knowledge, it may decide to deal with a number of foreign customers directly;
- Know-how Exports – These would include Proprietary Products Brands, Technology Sales and Licensing, Franchising, etc.;
- Service Exports – These can include banking services and insurance services. Many service exports are not therefore undertaken by small firms, but by large institutions.
Not all companies that embark upon export strategies will expand beyond this point. However, some may decide to increase their international involvement by investing directly in expansion overseas. Marketing investments may include:
- Sales promotion subsidiaries
- Warehousing units
- Service units
- Sales subsidiaries
Foreign production strategies may include international subcontracting, either with or without an equity holding, as well as a range of cooperative and joint venture operations in addition to the wholly owned subsidiary. GSA has helped many companies successfully pursue international expansion strategies. Our advisors working with the clients would develop a road map for internationalization by adopting a sequential process, even though it may be one that is in some respects unique to the company. The sequential process may begin with exports, then progress to some sort of contractual agreement or cooperative venture with a foreign party and then eventually to the point of an equity investment in a joint venture or wholly owned subsidiary. Regardless of the changes that may occur in the company as it expands internationally, the internationalization process is usually sequential and GSA will work with the client on a variety of strategies that may be adopted along the way for those that pursue internationalization route.