Strategies for Reaching Global Markets: Examples & Types

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  • 0:07 Several Strategies
  • 0:37 Exporting, Licensing…
  • 2:09 Joint Ventures and…
  • 3:37 Foreign Direct…
  • 5:18 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
In 2013, the global market had over seven billion potential consumers with needs and wants to be fulfilled. In this lesson, you'll learn about strategies businesses can use to tap this immense market.

Several Strategies

Meet Alexander. He's the CEO of a small tech company in the United States with a mandate from his board of directors to enter the global market and conquer it. Alexander has several different weapons in his arsenal that can be used effectively, depending upon the situation at hand. These include exporting, licensing, franchising, joint ventures, strategic alliances, foreign subsidiaries and foreign direct investment. Let's take a look at each.

Exporting, Licensing and Franchising

Alexander's company has already gotten its feet wet in the waters of the international market through exporting its goods to several different countries. Exporting is the process of transporting a good over international borders for trade or sale.

Some of the products that Alexander's company sells include proprietary software. Alexander's company does not sell the software but rather grants a license for its use. Note that an intellectual property right license does not give the holder ownership rights to the intellectual property, but merely the right to use it.

Exporting and licensing are probably the first steps many businesses take into the global marketplace.

Alexander can go a little deeper into the sea of the global market through franchising. A franchise is a contractual arrangement between one party, called the franchisor, and another party, called the franchisee. The franchisor grants the franchisee the right to use the franchisor's names, trademarks, business processes and products, usually within a specified territory. McDonald's is probably the most well-known franchise.

Alexander may decide to offer franchises to companies or entrepreneurs to gain a foothold in a foreign market. Of course, granting a franchise means giving up a degree of control and requires a solid legal system in the foreign market that will enforce the provisions of the franchise agreement.

Joint Ventures and Strategic Alliances

Alexander can start to get his company more directly involved in foreign markets through joint ventures and strategic alliances. A joint venture is a temporary business association for profit between two or more individuals or businesses that is governed by a joint venture agreement. Each co-venturer remains independent of each other.

Alexander, for example, may have his company team up with a local company in a foreign market for a temporary project, such as construction of a fiber optic network. Once the fiber optic network is complete, Alexander's company and its co-venturer will part ways.

Alexander may also decide to form strategic alliances. A strategic alliance is a business relationship between two or more businesses that allows them to collectively achieve certain goals that neither could achieve on its own. Like a joint venture, each party to a strategic alliance maintains its independence but shares the benefits and control.

For example, a small startup tech company may not have the knowledge and resources to enter the telecommunications industry, and Alexander's company may be prohibited from starting a telecommunication company in the market because local regulations require a local partner. However, if the local startup and Alexander's company form a strategic alliance, they can pursue the telecommunications market together.

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