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Let`s take a closer look at a company`s entry path and its wholly-owned subsidiary in China. Embraer is the largest aircraft manufacturer in Brazil and one of the largest in the world. Embraer has chosen to enter China as the first foreign market in joint venture entry mode. In 2003, Embraer and the Aviation Industry Corporation of China jointly founded Harbin Embraer Aircraft Industry. A year later, Harbin Embraer began manufacturing airplanes. The development of good relations with the regulators of the target countries contributes to the long-term accession strategy. Establishing these relationships may involve keeping people in countries long enough to establish good relations, as a negotiated agreement with a person can collapse if that person returns to headquarters too quickly. Companies that seriously consider international markets as a crucial part of their success would likely view direct export as a tool for market entry. Indirect export is favored by companies that want to avoid financial risks as a threat to their other objectives. Similarly, when Walmart enters a new market, it tries to source foodservice products from local farms near its warehouses. Walmart has learned that the savings it has made through reduced transportation costs and the benefit of being able to be replenished in smaller quantities have more than offset the lower prices it has received from more remote industrial operations. This practice is also a win-win situation for locals who have the opportunity to sell to Walmart, which can increase their profits and make them grow and hire more people and pay better wages.

This, in turn, helps all businesses in the local community.4 Another way to enter a new market is to enter a strategic alliance with a local partner. A strategic alliance involves a contractual agreement between two or more companies that states that the parties involved will work together in a certain way for a certain period of time to achieve a common goal. In order to determine whether the alliance approach is right for the business, the company needs to decide what value the partner could bring to the business in terms of tangible and intangible aspects. The advantages of partnering with a local company are that the local business is likely to understand the local culture, market and opportunities to do business better than an external company. Partners are especially valuable if they have a recognized and reputable brand in the country or if they have existing relationships with customers that the company may want to access. For example, Cisco has entered into a strategic alliance with Fujitsu to develop routers for Japan. As part of the alliance, Cisco chose a co-branding called Fujitsu to leverage Fujitsu`s reputation in Japan for IT equipment and solutions while retaining the Cisco name to capitalize on Cisco`s global reputation for switches and routers.7 Similarly, Xerox has created signed strategic alliances to generate revenue in emerging markets such as Central and Eastern Europe. India and Brazil.8 What happens if a company wants to do business in a foreign country but does not have the expertise or resources? Or what if the target country`s government does not allow foreign companies to operate within its borders unless they have a local partner? In these cases, a company could enter into a strategic alliance with a local company or even with the government itself. A strategic alliance is an agreement between two companies (or a company and a nation) to pool resources to achieve business goals that benefit both partners. For example, Viacom (a leading global media company) has entered into a strategic alliance with Beijing Television to produce Chinese-language music and entertainment programs. [5] The strategic alliance is a type of cooperation agreement between different companies, such as .B. joint research, formal joint ventures or minority stakes.

[33] The modern form of strategic alliances is becoming increasingly popular and has three distinguishing characteristics:[34] An acquisition is a transaction in which a company takes control of another company by purchasing its shares, exchanging the shares for its own or, in the case of a private company, paying a purchase price to the owners. In our increasingly flat world, cross-border acquisitions have increased dramatically. In recent years, cross-border acquisitions have accounted for more than 60% of all acquisitions worldwide. Acquisitions are attractive because they give the company quick and established access to a new market. However, they are expensive, which had put them out of reach in the past as a strategy for companies in the underdeveloped world. What has changed over the years is the strength of the different currencies. Rising interest rates in developing countries have strengthened their currencies against the dollar or the euro. If the acquiring company is located in a country with a strong currency, the acquisition is comparatively cheaper. As Lawrence G. Hrebiniak, a professor at Wharton, explains, “Mergers fail because people pay too much. If your currency is strong, you can get a good deal.

“12 One of the main advantages of turnkey projects is the possibility for a company to set up a factory and make a profit in a foreign country, especially in another country where foreign direct investment opportunities are limited and there is no expertise in a particular field. Exporting is usually the easiest way to enter an international market, and so most companies start their international expansion with this entry model. Export is the sale of goods and services abroad from the country of origin. The advantage of this type of entry is that companies avoid the cost of setting up in the new country. However, companies must have a way to distribute and market their products in the new country, which they usually do through contractual agreements with a local company or distributor. When exporting, the company must think about labelling, packaging and evaluation of the offer according to the market. In terms of marketing and advertising, the company must inform potential buyers of its offers, whether through advertising, trade shows or a local service in the field. The disadvantages of exporting include the cost of transporting goods to the country, which can be high and have a negative impact on the environment. In addition, some countries impose tariffs on incoming goods, which will affect the company`s profits. In addition, companies that market and distribute products under a contractual agreement have less control over these operations and, of course, have to pay a fee to their distributor for these services. In terms of risk mitigation, no company bears the full risks and costs of a joint activity in strategic alliances.

This is extremely beneficial for companies involved in high-risk/expensive activities such as R&D. This is also beneficial for smaller organizations that are more affected by risky activities. Guanxi can be potentially beneficial or harmful. At best, this can help foster strong and harmonious relationships with business and government contacts. In the worst case, it can promote bribery and corruption. Either way, companies without Guanxi won`t achieve much in the Chinese market. Many companies meet this need by entering the Chinese market in cooperation with a local Chinese company. This entry-level option has also been a useful way to circumvent regulations on bribery and corruption, but it can raise ethical issues, especially for American and Western companies that have a different cultural perspective on gifts and bribes. Since the cost of exporting is lower than other entry-level modes, entrepreneurs and small businesses are more likely to use exporting as a way to bring their products to markets around the world.

Even when it comes to exports, companies still face exchange rate challenges. While large companies have specialists who manage exchange rates, small businesses rarely have this expertise. One of the factors that helped reduce the number of currencies that companies have to deal with was the creation of the European Union (EU) and the first step towards a single currency, the euro. From 2011, seventeen of the twenty-seven EU members will use the euro, giving companies with this single currency access to 331 million people.6 An international licensing agreement allows foreign companies, exclusively or not exclusively, to produce a proprietary product for a given period of time in a given market. .