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Articles::  Ways To Venture Abroad
There are many strategies you can adopt when setting up or expanding overseas. The key is to remain flexible and choose what will be most effective for your needs.
Overview
  • It is important to have a sound market entry strategy that organises your entry and exit plans, and communicates your plans to other key parties like your investors.
  • A good market entry strategy should look at items such as
    • potential markets by geography and industry
    • distribution channels
    • positioning and branding
    • costs and benefits of market entry options
    • operational support
    • potential candidates for management, partners and agentsyou are looking for business opportunities in new markets
Joint Ventures (JVs)
  • You can enter a foreign market by forming a JV with a foreign company. A JV is a strategic alliance. Usually, all parties contribute equity and share in the profits, losses and control of the JV.
  • JVs can be for one specific project or for an ongoing business relationship (e.g. the Sony-Ericsson partnership).


Advantages
  • Forming JVs is a popular strategy when venturing abroad because it combines the expertise of the foreign company and the market of the local company.
  • A JV also shares the costs and risks of venturing into a new country. In fact, JVs are sometimes the only permitted way to penetrate a market, as some countries impose having a local partner as a market-entry criterion.


Distribution Channels
  • In distribution, instead of setting up offices overseas, owners extend the reach of their brand by using distribution channels to deliver their products and services to customers overseas.
  • There are different types of distributions channels. You may:
    • sell your products and services through a retailer
    • distribute your products and services through a wholesaler
    • use a combination of channels
  • In distribution, you need to consider important factors, including:
    • whether the distribution is exclusive, selective or extensive
    • number of members in the channel and level of control of each member
    • physical distribution and logistics (e.g. storage of products)
    • availability of product or service
    • how costs are shared among members (e.g. advertising)

Advantages
  • Distribution is one of the simpler ways of venturing abroad. You export your goods through retailers, wholesalers and agents.
  • AThere is no need to set up a presence in the foreign company although some companies do set up branch or representative offices to increase their presence in the market or offer support and services.

Franchising
  • You can also franchise your business to a foreign company. In franchising, you (the franchisor) sell the rights to use the business name, brand and method of doing business to a franchisee in exchange for a fee.
  • There is usually a franchise contract that states what the franchisee is allowed to use, what support the franchisor will provide, the fees, and terms and conditions.

Advantages
  • Franchising is a quick and often profitable way to expand a business. You can build your brand overseas without having to handle the day-to-day operations of each outlet. Through franchising, you can also increase your distribution with minimal financial commitment.
  • However, the downside for franchisors is the lack of control over operational matters. A franchisee that provides sub-standard goods and services or fails to promote the brand correctly could weaken your brand name.
  • Some local household names that have successfully expanded overseas in a short period of time using franchising are BreadTalk, Osim, Bee Cheng Hiang and Kinderland.

Licensing
  • You can licence your Intellectual Property Rights (IPR) to companies in overseas markets. IPRs include patents, copyright and trademarks.
  • Licensing is giving someone the right to use your IPRs for certain purposes. For instance, if you have developed a software programme, you can licence it to foreign companies to use, sell and market.
  • The different types of licensing include:
    • General Intellectual Property Licensing
      e.g. Disney cartoon characters on apparel, watches and confectionary
    • Technology Licensing
      e.g. transfer of high-tech expertise and operating techniques, and software licensing
Advantages
  • As a licensor, this is an effective method to venture overseas because:
  • it helps you extend the usage of your technology or IPR to more applications
  • it helps you establish your technology as the accepted standard and leader in other markets
  • To ensure that you can adopt licensing as your strategy, you need to consider many factors. Some of them are:
    • ensure your IPR is properly registered and protected
    • decide which products or parts of products should be licensed
    • engage professional help in structuring your licence agreements, especially when it involves international tax laws and licence territories



Branch Offices and Subsidiaries
  • You can also set up a branch office or offshore subsidiary in a foreign market.
  • The difference between the two is that the branch office forms part of the main company. The offshore subsidiary is a legal entity in its own right, with its own management, costs, and profits and losses.


Advantages
  • Branch offices and subsidiaries require a lot of financial investment as it involves the setting up of a new office overseas.
  • Businesses usually choose this method when they want to make a big impact on the market. By setting up an office, they are able to offer a full range of products and services including sales, marketing and product development.
  • Unlike the other methods of entering a market, setting up a presence gives you full control over your products, services and brand.
  • Most businesses start with branch offices and later convert them into subsidiaries for tax purposes. To understand this better, please consult your tax advisor.
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