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3SECTION - ECONOMICAL SCIENCES СЕКЦИЯ - ЭКОНОМИЧЕСКИЕ НАУКИ
UDK 339.9
Kidassova Maira
bachelor's degree, Karaganda Economic University of Kazpotrebsoyuz,
Kazakhstan, Karaganda
BUSINESS SCALING STRATEGIES IN INTERNATIONAL MARKETS: ANALYSIS OF EXPANSION AND LOCALIZATION MODELS
Abstract: This article examines the main strategies for entering international markets, including export, franchising, joint ventures, and direct investment, along with their advantages, limitations, and areas of application. Special attention is given to the role of localization as a tool for adapting marketing and products to the cultural, economic, and regulatory specifics of target countries. It provides several examples of successful localization by international brands that adapt their strategies to meet the demands and preferences of local markets. It analyzes the impact of cultural and regulatory factors on brand perception and consumer loyalty.
Keywords: International expansion, localization, market entry strategies, export, franchising, joint ventures, cultural adaptation, consumer loyalty, regulatory factors.
INTRODUCTION
Modern companies often face the necessity of entering international markets to achieve sustainable growth and competitive advantages. Expanding a business globally calls for a thoughtful selection of strategies to mitigate risks and adapt to the cultural, economic, and legal characteristics of target countries. Developing and implementing effective expansion and localization models becomes an important aspect for successful international development.
There are several approaches to expanding business into international markets, including export, joint ventures, licensing, and direct investment. Each of these methods has its strengths and shortcomings, which vary based on the specifics of the company, industry, and geographic region. Successful expansion requires detailed analysis and adaptation of the business model to account for the target market's characteristics.
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Localization is an essential element of an international strategy. It enables companies to account for cultural and linguistic differences in promoting products and services. Effective localization helps create a positive image for the company in the new market and enhances customer loyalty among local consumers. Adapting products, marketing materials, and services to local conditions often becomes a significant factor for success in the process of international scaling.
Alongside growth potential, international scaling presents significant challenges for companies. They need to consider economic, political risks and subtle differences in consumer preferences, legislation, and the competitive environment. Selecting suitable expansion and localization strategies is key to successfully adapting business to international conditions. The aim of this study is to analyze business scaling strategies in international markets, focusing on expansion and localization models and assessing their effectiveness under various conditions. The study's relevance lies in the need to find optimal approaches for sustainable company development in the context of globalization and growing competition in global markets.
MAIN PART. LOCALIZATION AS A TOOL FOR SUCCESS IN INTERNATIONAL MARKETS Companies often face the need to adapt their products and services for different regions to meet the unique needs and preferences of local consumers. Localization is not always about adapting the language or appearance of a product. It is a comprehensive process that encompasses all aspects of marketing, product design, and customer interaction to fully account for the characteristics and preferences of the local market. This approach enables companies to become closer to their target audience and increase customer loyalty. It also strengthens organization's competitive position in new countries and cultures.
Localization of products and marketing is a strategic approach that allows companies to effectively adapt to the characteristics of target regions. It includes modifying the product or service to align with local preferences, adjusting packaging, translating content into the local language, and tailoring marketing materials and advertising campaigns. Product adaptation can focus on meeting functional needs as
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well as accounting for cultural specifics, so that the product or service feels familiar to the target audience (table 1).
Table 1. Methods of adapting products to local markets [1, 2]
Method Application
Ingredient modification Altering ingredients to match local tastes and dietary preferences.
Product size variation Offering product sizes that suit local consumption patterns and affordability.
Local sourcing Using local suppliers for ingredients and materials to reduce costs and support local economy.
Custom packaging Designing packaging that aligns with local aesthetics and consumer expectations.
Localized branding Branding adjustments to better resonate with the local audience.
Adaptation of marketing strategies also plays an important role in localization. Engaging local celebrities, creating special promotions, and integrating into local social media and online platforms help brands gain the trust of local consumers. Marketing that focuses on building an emotional connection with the audience is particularly important in culturally sensitive markets. The American company Nike often incorporates cultural symbols and popular themes to create a close bond with audiences in countries where it already faces significant competition. The brand's «Just Do It» campaign has been adapted to reflect cultural differences in various countries. These adaptations involve aligning the campaign's messaging with local cultural codes to resonate more effectively with the target audience. Such strategies allow the company to capture up to 50% of the global sports market segment and strengthen its position in the modern marketplace [3].
Impact of cultural, economic, and regulatory differences. Localization is impossible without a deep understanding of the cultural, economic, and regulatory characteristics of the target market. Culture plays a key role in brand perception, loyalty building, and purchase decision-making. Countries may differ significantly in religious, ethnic, and moral norms. These aspects can impose limitations on marketing and even on the product itself. Osmetics companies entering the Middle Eastern market adapt their product lines and advertising to respect religious norms and lifestyle preferences related to skincare and beauty. American food companies entering new ISSN 3034-2627 9 https://coldsciencepublisher.com
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markets adapt their recipes to suit local taste preferences, as exemplified by KFC and McDonald's, which offer unique dishes in various countries [4, 5]. In Kazakhstan, KFC has tailored its menu to include items popular among local residents. The menu features traditional meat dishes and spices adapted to the tastes of certain regional consumers. In the United States, McDonald's offers various dishes with popular local ingredients, as well as seasonal items like the «Shamrock Shake» for St. Patrick's Day. These strategies highlight the brand's commitment to cultural celebrations.
Economic factors can also influence localization strategies. Consumer purchasing power, inflation rates, and logistics costs can affect the price of a product and its sales format. In countries with lower income levels, companies often develop more affordable versions of their products or offer simplified, smaller-sized packaging. In Southeast Asian countries, many companies can offer products in smaller packages to make them more accessible.
Regulatory factors also play a significant role, as different countries have unique rules and standards regarding safety, certification, advertising restrictions, and even packaging. Companies operating in international markets must comply with labeling regulations, quality standards, and other regulatory requirements. Different countries can enforce strict standards on product composition, eco-friendly packaging, and advertising. Failure to adhere to these standards may result in fines and lead to decreased consumer trust in the local market.
ANALYSIS OF INTERNATIONAL EXPANSION STRATEGIES
As companies seek growth in today's competitive and globalized economy, many aim to expand their presence internationally. Choosing an appropriate market entry strategy is an important step that influences costs, operational risks, and long-term success. Several main expansion models exist, each with its own advantages and disadvantages.
Exporting is one of the simplest and most common international market entry strategies. In this approach, a company sells its goods or services abroad without establishing a physical presence in the target country. Exporting can be either direct or indirect. In direct exporting, the company actively finds buyers in the other country,
establishes relationships, and manages shipments. Indirect exporting involves intermediaries such as export companies or trade agents who handle interactions with overseas buyers.
Exporting is a relatively low-risk, low-cost strategy compared to other methods since the company does not need to invest in building offices or production facilities abroad. Exporting allows companies to enter new markets quickly and test the demand for their products. Exporting also offers limited control over marketing and distribution since intermediaries or foreign partners may have their own priorities. It carries risks related to currency fluctuations, transportation, and tariffs.
Franchising is a strategy where a company grants the right to use its brand, business model, and know-how to local partners in other countries. This model is commonly used in industries where service standards and brand recognition are important, such as food service and hospitality. Franchisees pay an initial fee and regular royalty payments and are required to uphold the franchisor's standards. Franchising enables a company to scale quickly with relatively low financial investment. The franchise partner assumes primary responsibility for business development at the local level, which reduces operational risks for the company. This approach provides less control for the parent company. This can lead to variations in service or product quality, potentially affecting the brand's reputation. The following model is popular among fast-food chains, cafes, hotel chains, and retail stores. In 2023, franchise establishments in the USA generated an estimated economic output of around $859 billion, and this figure is expected to exceed $890 billion in 2024 (fig. 1).
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Figure 1. Economic output of franchise establishments in USA from 2007 to 2023
with a forecast for 2024, billion dollars [6] A joint venture involves the creation of a new business by two or more companies, with each party contributing capital, expertise, and resources. This approach is especially popular in countries with high barriers for foreign investors, where a local partner helps to adapt to the market's requirements and establish connections.
This model allows partners to share risks and costs, which is especially important when entering complex and high-risk markets. A local partner provides knowledge and contacts that help accelerate adaptation and minimize cultural and regulatory barriers. It also requires a high level of coordination and can be complicated by differences in corporate culture, strategies, and management styles. Disagreements between partners may lead to conflicts and complicate decision-making. Joint ventures are often used in capital-intensive industries such as automotive manufacturing, electronics production, and pharmaceuticals [7].
Direct investment involves creating a branch, production facilities, or offices abroad. This is the most costly and risky method of market entry, as the company establishes a physical presence and takes on responsibility for all operational processes. This model provides the highest level of control and allows the company to fully adapt its strategy to the target market's needs.
Direct investment gives full control over all aspects of the business. It enables flexible adaptation of the product, marketing, and services to local specifics.
Companies can optimize their logistics processes and reduce transportation costs. This approach requires significant financial investment and entails a high level of risk. The company faces additional administrative tasks. It includes hiring, management, and compliance with the target country's legislation. In case of failure, the organization assumes full financial responsibility. Direct investment is popular among large international corporations, such as automotive manufacturers and companies in the IT and high-tech sectors [8].
When choosing an expansion strategy, companies must consider industry specifics, company size, and resources available for international projects. The optimal approach may involve combining several models. It allows for a flexible response to changing conditions in the target country. Strategy selection requires thorough analysis and consideration of the market's cultural, economic, and legal specifics to minimize risks and make the most of opportunities for international development.
CONCLUSION
Successful business scaling in international markets requires a comprehensive approach that includes effective expansion strategies and well-planned localization. The choice between export, franchising, joint ventures, or direct investment depends on the company's characteristics, resources, and the specific market context. Localization helps adapt the product and marketing to local cultural and economic conditions. This approach strengthens competitive advantages and promotes brand reinforcement. Integrating expansion and localization strategies allows companies to minimize risks and fully leverage the opportunities as the globalization offers for sustainable growth and success on the international stage.
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