Choosing the Best Market Entry Option
by Gena Terranova, on Nov 29, 2016 9:44:22 AM
For companies entering into foreign markets, the most important part is to make sure you do your diligence on the various options available. Getting off on the right foot is critical, in most cases, you only have one chance to get it right.
Based on the size of your requirements, complexity, brand recognition, stakeholders desires, and appetite for risk, many options prevail. In terms of market entry, a partial list of options include:
- Enter a joint venture
- Build operate transfer (BOT)
- Dry lease
Today’s trend for some large corporations that have had prior positive outsourced or 3rd party relationships is now moving to captive operations or global in-house contact centers (GICC’s). These include companies such as Capital One, Wells Fargo, AMEX, Deutsche Bank, Telstra, DELL, to name a few.
An even bigger trend today are multi-national organizations setting up share service centers. Companies, like Nestles, Shell, Chevron, Goodyear, Bayer, P&G, HP, Phillip Morris, Samsung, Mondelez, and countless others.
Let’s take a quick review of some of the pros & cons of each option and driving factors for pursuing various options.
Build model (Captive) – used by both corporations and outsource providers
- The build model is similar to building your own offshore center, following a do-it-yourself approach; using another jargon, a CAPTIVE center
- Firms in general primarily choose the captive route to ensure end-to-end control of operations.
- A captive strategy not only ensures better capability transfer and investment controls but also facilitates greater cultural alignment between the entities. This being said, the BUILD strategy can ensure better quality as firm’s parent entity has greater control.
Build operate transfer model
- BOT is the best option for a company if it wants to have its own captive center, but does not possess the local expertise or extensive resources necessary to set up its offshore operations using a do-it-yourself approach.
- The BOT model involves the company engaging a third-party expert to set-up the local entity, resource it, run it for a specified timeframe, and then transfer it back to them. Thus, the company takes over the turnkey development center tailored to its specific needs.
- This model allows for mitigation of initial risk and potential cash preservation while working towards a more long term captive strategy. BOT partners are getting more difficult to locate.
Dry lease or co-sourcing model – seat leasing
- The dry lease model, more commonly known as seat leasing is a hybrid model of do-it-yourself approach from a labor and management perspective and taking advantage of an existing facilities infrastructure.
- Basically, your firm will only provide the manpower that will handle/manage its offshore center. Important necessities like location, office equipment, workstations (chairs / tables), and every other thing related to the physical center will be provided by the partnering company.
- In most cases, this is an existing 3rd party provider that either has an excess or underutilized capacity or a provider that has built this capability into their overall business model.
- In this model, you would most always have a partnering relationship with the facility provider and no opportunity to acquire assets.
- Outsourcing is a market entry strategy that leverages the expertise and critical mass of proven service providers.
- Outsourcing allows companies to enter the market with minimal risk and financial exposure and provides for fast start-up.
- Outsourcing to a qualified 3rd party provider represents the bulk of the BPO / call center work being performed in the Philippines. Of the over 1,000,000 call center seats, roughly 70% are outsourced.
Selecting your market entry strategy is often times based on Risk and Investment Tolerance as illustrated in the diagram below.
The table below shows the approximate time to get started once the contract to get started are finalized.
Below are a few of the benefits If you are considering to establish operations in the Philippines.
Guidance and support
Regardless of your approach for market entry, the best advice is to seek out local market expertise. Whether it is site selection, assessing tax incentives or pursuing the right outsource partner to name a few. Selecting the right subject matter expert to guide you will help mitigate risk and save both time and financial resources.
Global Experience, Local Expertise
TeleDevelopment Services has a deep understanding of the laws, regulations, financial, and reporting requirements of different countries where its customers do business. It is equipped with the best knowledge and expertise to help you achieve your business goals.
Whether you are an IT-BPM Company beginning to enter new markets, or an existing organization searching for the best talents, to enhance execution of your manpower or the entire operations to go for proficiency, augment profitability, and to jump in front of the opposition, TeleDevelopment Services (TDS) can work work hand-in-hand with you in taking your business to the next level.