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What Factors Should Companies Focus On When Entering Foreign Markets

What is the purpose of overseas expansion?

Before discussing the timing of overseas expansion, we first need to understand why companies enter foreign markets. In general, companies have three direct purposes of entering overseas markets:

  1. Procurement, including raw materials or finished products. Generally speaking, the most important thing is to find the target product and grasp the pricing, payment terms, and counterparty credit.
  2. Manufacturing, such as opening factories in foreign countries for production. In the process, it will involve a large amount of capital investment or land rent, recruitment of resources, and compliance with local policies and regulations.
  3. Sales (product or service).

The three purposes sometimes coexist and are not mutually exclusive.

How do you enter overseas markets?

When a company considers entering a foreign market, there are four main ways:

  1. Find partners for business agents in other countries;
  2. Establish a joint venture with local enterprises;
  3. Enter new markets through acquisitions or mergers;
  4. Start your own business and build your new factory or business network.

Each of the four methods has its advantages and disadvantages. When considering entering the foreign market, the company will comprehensively decide the timing and manner of entry based on its business objectives, the conditions of the Chinese and international markets, the possible entry methods, difficulty, and complexity.

For enterprises that want to purchase raw materials or products from overseas, the size of the enterprise is not so critical in the choice of the entry opportunity, mainly the entry method, because the market entry operation is relatively simple.

Small-scale enterprises can purchase through intermediary companies. When the enterprises are large in scale, and their products are of strategic importance, or when the purchase amount is enormous, if they operate through the intermediary companies, they may be controlled by others, which is not conducive to the long-term development of the enterprise. Therefore, it is necessary to consider strengthening participation and operating through a wholly-owned joint venture or asset acquisition.

For companies wishing to invest in overseas production or sales, the timing of entering the market is crucial, because it involves not only the continuous investment of a large amount of funds, but also the extension or reorganization of the supply chain, the cultivation and retention of human resources, brand training and Promotion, government relations, supplier relationship training, and maintenance, etc.

The learning cycle of an enterprise is quite long, with high requirements on the capabilities of local leaders, and significant risks and uncertainties. Because of the high initial investment and high risks, it is recommended that small companies avoid direct investment-type entry methods and try their best to help with partners.

How to choose a company destination when entering overseas markets?

How to choose a company's destination when entering overseas markets, you need to consider the following four factors:

  1. Whether the political economy of the place where the foreign investment company is registered is stable. For those who want to register a company overseas or manage personal assets, the first factor to consider when choosing a registration location is political and economic stability, which will directly affect the company's operations and development in the future.
  2. Whether the banking services are comprehensive and convenient. Although most overseas companies can deal with banks around the world, many people still choose to open an account at the company registration place when registering. Therefore, the registration place needs to have comprehensive banking services and be able to use international Bank facilities.
  3. Whether transportation and communications are developed and convenient. An excellent overseas registration place should have a modern transportation network and communication facilities, including sea, land, air, postal, and telecommunication systems, so that enterprises can conduct business more quickly.
  4. Whether the legislation is flexible. The chosen overseas registration location should be modern and flexible, and it should also include low capital requirements, less statutory registration filing obligations, ability to hold a board of directors and shareholder meetings worldwide, issuance of bearer shares, and auditing requirements for accounting records are optional Selection and other characteristics.

Countries, where overseas company registration is generally accessible, are Hong Kong, China, Singapore, the United Kingdom, France, Germany, the United States, offshore islands companies, etc. Because of the conditions and policies for registering a company is different in different countries. Therefore, choosing how to enter the overseas market needs to make corresponding choices for the company registration site according to the development needs of the company.