Now that you have identified the target regional economic zone (Chapter 3) and country where you would like to conduct business, your next step will be to determine the mode of entry into that foreign market. The following questions will assist you in identifying the right strategy:
1) First, determine how much risk you are willing to take in international business (i.e., How much capital can you afford to lose based on a worst case scenario?). As you know, the least risky method of entry overseas will be through export and import business. Exhibit 8.1 will help.2) If your ambition is to generate high returns through international business, you will need to
(a) determine what your company’s competitive advantage is, and (b) identify why you would want to have an overseas operation. To maximize revenue? To minimize cost? Both? Or to diversify risk?
b) Now that you have a good idea of how much risk you are willing to take, and also why you would want to invest in an overseas operation, it is relatively easier for you to deter- mine the entry mode into the international marketplace. Use Exhibit 8.1 to determine your mode of entry abroad.