Factors to Consider When Entering an International Market
While assessing the advantages and disadvantages of international markets, there are several factors that are important for a business to consider. The size of the market is a critical factor in deciding whether to enter it. If the market is large enough, it can be worth the risk. The size of the market also reflects the strength of the market segments. For example, in third world countries, there may not be much internet use and a large population of over 60s is computer illiterate. Knowing your potential market demographics is critical for determining whether it is profitable to enter the market.
The size and complexity of the market also influence the entry mode. Large companies may have more options than smaller firms, while smaller businesses may be limited to low-commitment entry modes, such as licensing. PWC is one of four global accountancy firms. While small companies often favor acquisitions over licensing, there is no single entry mode that is the best for each company. It’s important to analyze the market before choosing an entry mode, so that your business is as effective as possible.
Internationalization involves different entry modes for SMEs and large multinational corporations. MNCs often use the franchising or WOS route, while SMEs choose the low control route, such as international sales agents or the internet. The speed of changes in the market may make it difficult to predict whether an entry mode will work. However, inseparable service firms may opt for high-control entry modes, such as franchising.