Global Market Entry
Overcoming the Liability of Foreignness
The liability of foreignness is the primary challenge of entering and succeeding in overseas markets. It is the inherent disadvantage foreign firms experience in host countries because of their non-native status. There are two ways this liability can emerge:
Different formal and informal institutions govern the rules in different countries. Local firms are familiar and versed with these, whereas foreign firms need to learn the rules quickly to run their business effectively. However, some of the rules can be in favour of local firms.
Typically, in the era of globalization, consumers are expected to not discriminate against foreign firms. However, international firms are regularly discriminated against, either formally or informally.
With these significant circumstances and odds, how do foreign firms crack new markets? The solution is to deploy overwhelming resources and capabilities so that, after offsetting the liability of foreignness, there is still some competitive advantage.