Many companies are turning their attention to overseas areas. However, the overseas journey does not succeed all at once. From just selling goods to deeply taking root overseas, companies must cross many key stages.
Three stages of international development
Companies that go global generally go through three progressive stages. The first stage is product export, relying on agents to sell goods abroad. The company itself does not directly contact overseas customers. The second stage is international operations, where companies set up entities overseas, such as sales companies or offices, to directly provide services to the market. The third stage is globalization, where companies optimize the layout of core functions such as R&D, production, and supply chain on a global scale to achieve the optimal allocation of resources.
The leap from export to internationalization
When the export business develops to a certain scale, the limitations of intermediary channels will appear. Enterprises are unable to obtain first-hand market information, profits are shared by intermediate links, and product iterations also become lagging behind. At this time, building their own overseas organizations becomes an inevitable choice. Directly communicating with customers allows enterprises to quickly respond to local needs, improve brand control, and retain more profits within themselves to accumulate capital for subsequent expansion.
Path 1: Overseas localized production and sales
This common internationalization path for manufacturing companies relies on investment and construction of factories to achieve local production and local sales in the target market. This operation can effectively circumvent trade barriers, reduce logistics costs, and quickly respond to local market demand. Just like when Haier entered the U.S. market in 1999, it chose to build an industrial park in South Carolina, then produced large refrigerators that met U.S. standards, and finally successfully opened up the high-end market.
Path Two: Direct Sales and Personnel Localization
For some complex products or solutions, especially B2B businesses, sending teams directly to develop markets is the key. This method does not rely on middlemen. Instead, company employees directly connect with terminal major customers to deeply understand their needs and provide customized services. This requires companies to have strong cross-cultural management capabilities and a local talent recruitment system to ensure the depth and continuity of services.
Path three: cross-border mergers and acquisitions and capital overseas
Through this kind of acquisition of mature overseas companies, we can quickly obtain their market channels, etc., and also achieve the leapfrog development of the internationalization process. This behavior is a so-called "exchanging capital for time" strategy. Another way of "letting money go out" is to carry out cross-border equity investments and obtain financial returns and strategic synergy by becoming shareholders of overseas innovative companies, rather than directly operating the invested company.
Core Considerations in Path Selection
Which path will be chosen by the company depends on the characteristics of the industry, the form of the product, and the strength of the company. Manufacturing industries that are asset-heavy and have long supply chains often require local production; high value-added, solution-based businesses rely on direct sales and local services; companies with sufficient capital and want to enter quickly may be inclined to implement mergers and acquisitions. At the same time, geopolitical factors, as well as external environmental factors such as host country policies, also have a profound impact on the feasibility and cost of the path.
In your opinion, under the current situation of reshaping the global supply chain and widespread use of digital technology, which internationalization approach is the most critical for Chinese companies to build long-term competitiveness? Please share your views in the comment section.
