By Bob Northgate
Modern companies need to plan for growth and survival in the globalized world of business competition. Some will choose to conduct business from home taking on competitors in the safety of their domestic market. Other companies will decide to go international operating from both domestic and foreign markets.
In order to do this the latter will have to make use of entry strategies to sustain their presence in foreign market. An entry strategy is a process of deciding on the direction of a company’s international business by combining reason with empirical knowledge.
Choosing the right entry mode
Managers must decide on the correct entry mode for a particular product/ country, this is done by following on of three rules:
1. The Naive rule – whereby managers use the same entry mode for exporting to all their target countries, by far the riskiest option since managers can end up using an inappropriate entry mode for a particular foreign country or forsake promising foreign markets
2. The Pragmatic rule – whereby managers start by assessing export entry and change their entry strategy accordingly, this saves time and effort yet ultimately fails to bring managers to the appropriate mode
3. The Strategy rule – whereby managers use right entry mode as a key to the success of their foreign entry strategy, making systematic comparisons of all entry modes. It is the most complicated method yet results in better entry decisions.