When it comes to internationalization, it is common to hear about two basic strategies regarding the access to foreign markets. One of them is concentration. The business focuses its forces in specific markets aiming at achieving a constant and growing sales volume. The second strategy is diversification, meaning the use of company resources to sell in a bigger number of markets without achieving a significant importance in the market share of each market.
Which are the advantages of concentration?
Concentration allows the enterprise to gather and analyse more information about the markets chosen during the evaluation of internationalization. This helps to offer a personalized product, different from the others in the market. It usually translates to a better acceptation of the product or service that the enterprise can provide, in short and medium to long term.
Due to the reduction of countries in which the enterprise should focus its forces, the costs of keeping its activity are lower. This is, without any doubt, a big attraction to companies that depend, to a large extent, on the fact that their logistical and administrative costs do not increase drastically.
Nevertheless, it will be necessary to spend more recourses in promotion and marketing of the products or services that the enterprise wants to commercialise in its target markets. This is a factor that does increase the cost of its activity if the enterprise decides to choose this strategy.
Which are the advantages of diversification?
If concentration gives the opportunity to know more information about the target countries, diversification helps to gather more information regarding global markets. This allows the enterprise to compare different markets. This comparison can be used to make decision in the future about which country is more appropriate to invest their resources.
This also reduces the level of dependence to an individual market and enables the enterprise to have a better control of risk and losses, since the enterprise can stop investing its resources in a country that is not suitable anymore and place them in another market with better long-term expectations.
Finally, as the enterprise does not invest all its resources in a limited number of markets, there is not a direct conflict with competing companies in each national market. This is because the benefits do not depend completely on the results obtained in a national market. The results of its business activities are valued on a broader level.
How do we work in Humanity Internacional?
In Humanity Internacional, we analyse cautiously the situation of your enterprise and choose a strategy that does not need to be specifically concentration or diversification. Both options have its advantages and disadvantages, as you have been able to observe. The key of our work lies in offering a personalized service, suited to your needs and the ones of your enterprise, in order to internationalize you in the markets that can give you better results. If you are interested in knowing more, please contact us.