27 March, 2014
Neither companies nor consumers are limited to do business in their home country. Both for companies that just want to export their products and for those that want to open a branch in a new market, there are many important factors to take into account before actually making the move. Among these factors, the knowledge of the local language and culture is important. In this article, written with the help of our Marketing Assistant, Helia Lavassani, we want to talk about entry modes and the barriers a company can have in a target country, including cultural barriers.
There are many different entry modes, all of which have different levels of engagement and risks.
If the market you are trying to reach is both geographically and culturally distant from the home country and you are not 100% sure if it is the right market for you, you might want to make use of low risk entry modes such as agents or distributors, to gain local knowledge and get a better inside feeling of the market. Note, however, that these entry modes imply very little control from your side, so make sure you have the right people around you.
Maybe you are sure about the market and want to enter but do not have the resources to go all in. In that case you might want to look into partnering up with the locals through joint ventures or franchising. These entry modes give you more control over the distribution of your products, but you share the risks with your partners. Again, choosing the right partner is crucial in order to reach your goals.
For companies who have the needed resources and are completely confident in the markets they want to enter, entry modes such as sales subsidiaries or off shoring will be ideal. These entry modes give you full control over your products, the production and the distribution. It is a high risk entry mode as you have to be really sure about the specific markets, but if done right this will give you closeness to the market, which in the end will lead to closeness to your consumers.
Before deciding how you want to enter the new market you have to do a market research, especially for the markets geographically and culturally distant from your home country. When doing research, there are many important factors to look at. Here we will use the PESTEL model as an example of factors you might want to look into:
- Political environment
- Economic environment
- Socio-cultural/demographic environment
- Technological environment
- Ecological environment
- Legal environment
The above model gives you more of an understanding of the environment in the targeted country and what barriers you might meet.
When looking at the cultural environment in any given market you look at language, differences in business ethics, morals, etc. When you want to adapt your products to a new market, a local person will not be enough. Here you will need to look into the localization business. While translation helps you translate documents, websites, labels, etc. to the specific language, localization companies like Jensen Localization consider the cultural aspects as well. Localization companies know the differences in ethics, writing, culture, etc., which are important in order to get close to the market you want to reach. Locals want their products to seem as if they were created just for them, and localizing your products is therefore important to avoid misunderstandings and to reach the costumers the same way as local rivals do.
We hope this article has given you an overall understanding of the different things to consider when reaching new markets. To learn more about the importance of localizing your products, please read our older entry: Why do we need localization?.
At Jensen Localization we work with Marketing and Business Internationalization consultants. Together, we help companies make a successful entry in their target markets by adapting their products to local language and uses. If you want to learn how our language services can be of help to your international business strategies, feel free to contact us.
Communication, Culture, International Marketing, Localization