There are many ways for small business entrepreneurs to enter global markets. In the following chart, some of these approaches are depicted. Some of the ways to enter international market are:
Ways to enter international market
1. 100 percent ownership
Total investment in, say, a manufacturing plant abroad represents the strongest commitment that an entrepreneur can make. This kind of investment suggests that a country is politically stable and is open to investment by entrepreneurs from other countries.
2. Joint ventures
This approach makes sense for entrepreneurs who lack the expertise and money to enter a global market. Normally, ownership is shared equally with a local company.
This is the entrepreneur’s most popular method for market entry abroad. It is both the least expensive and the least involved, mostly because responsibility for marketing is left to another company, either domestic or foreign.
If entrepreneurs want to avoid the risks of producing and marketing products in another country, and still benefit, they might consider licensing. The danger here is that entrepreneurs risk losing control over product quality.
Finding Foreign Markets
The small business exporter can distribute products through direct selling or indirect selling methods depending upon the type of products to be soil, the customer’s requirements, and the types of regulations in use in the country where the products are to be sent.
A review of both foreign and existing regulations can be initiated at the local Department of Commerce office.
Figure showing various direct and indirect ways of finding foreign markets
Securing Payments for Export Sales
There are at least six different methods used in securing payment for export sales. A brief word of explanation for each is appropriate here.
1. Letters of Credit
This n the traditional method for handling foreign shipments. The letter of credit is issued by the bank at the buyer’s request in favor of the seller, It promises to pay the received.
2. Sight Drafts
Whoever the seller wishes to retain control of the goods, or title thereto, shipment is made of a negotiable bill of lading.
3. Open Accounts Receivable
If selling to buyers of unquestioned integrity some exporters sell to foreign accounts just as they do for preferred customers in this country.
4. Cash in Advance
This happy state of affairs is seldom available to exporters. Buyers usually object to this method because their capital is unavailable until the merchandise is received and resold. Small sales are still made this way in many cases.
5. Time Drafts
These drafts operate in the same manner as sight drafts except that they are drawn for thirty, sixty, or ninety days in the future.
6. Consignment Sales
Such sales operate the same for export as domestic sales. The merchandise is delivered to the buyer but the title is retained by the seller.
It can be noted that factoring firms exist which specialize in collecting foreign accounts receivable. This method is not recommended in most cases, not only because of the fees involved buy the maintenance of customer goodwill.
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