Vous êtes sur la page 1sur 15

McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

CHAPTER

11

Entering Foreign
Markets
McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-1

Key Issues
Which markets to enter? When? What scale?
What ways (modes) do firms use to enter
foreign markets? What are their
advantages/disadvantages?
What is the relationship between strategy and
the choice of entry mode?

McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-2

Enter Which Foreign Markets?


There are 191 member-nations of the UN

(11/02)

Switzerland joined last in 2002

Each ones attractiveness to a particular firm as a


particular market depends on:
The firms objectives
A balance of benefits, costs, and risks

McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-3

Timing of entry: First Mover


Advantages
Preempt rivals; establish strong brand name;
capture demand
Build sales volume; ride down experience
curve ahead of competitors; cost advantage
Create switching costs for that tie customers to
1st movers products
Establish social ties ahead of following foreign
competitors
important in high-context cultures
McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-4

Timing of entry: First-mover


disadvantages; pioneering costs
Time spent to learn dos-donts; competitors can
learn from 1st mover
If 1st mover introducing a new industry, it builds
infrastructure
1st mover trains customers for followers
Break through host countrys adjustment to
foreignness issues
Regulations may change as a result of 1st movers entry
McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-5

Scale of entry
What level of resources to commit?
What level of resources can firm afford to
commit?
A strategic commitment is difficult to reverse
Has a long-term impact
Means that the resources cannot be used elsewhere

1st mover advantages and large scale linked


Small scale entry allows learning at low risk
Entry in small or large potential market may
require the same level of initial resources

McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-6

External or arms-length Modes


of Entry
Firm does business overseas without investing
in assets and human resources in target market
Exports
Sell domestically produced products into foreign markets
through local independent agents or directly to customers
Eliminates costs of establishing manufacturing operations in a
host country
Helps firm learn and achieve economies of scale
May not be economically sound if manufacturing location is not
lowest cost producing
Transportation, tariffs may be problematic
McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-7

External or arms-length Modes of


Entry (Cont.)
Turnkey projects
Special case of exporting for firms that set up
production plants or build facilities for others
The exporting firm builds the facility overseas,
starts it up, turns it over to the host country owner,
and then departs
Oil firms, construction firms, manufacturers

McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-8

External or arms-length Modes


(cont.)
Licensing
Licensor grants rights to licensee for use of
intangible property over a specified period in return
for a fee
Intangible property: patents, inventions, formulas,
processes, designs, copyrights, trademarks
Licensing agreement likely allows licensor quality
assurance rights over actual use of intangible asset
If licensee sells to consumers using the licensors
brand name, the license may also give the licensor
rights to strategic brand control
McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-9

External or arms-length Modes


(cont.)
Franchising
Franchisor, grants franchisee use of intangibles
under the condition that franchisee follow strict
rules of operating the business
Mode of operation is part of the brand image

International strategic alliances

McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-10

Internal Modes of Entry: FDI


Wholly owned subsidiaries
Firms owned 100% by a company in a foreign
country

International joint ventures


Firms that are owned jointly by two or more
otherwise independent firms; most IJVs are
between two firms
One (or more) parent firms are non-resident in
the host market
Ownership % may vary from majority foreign
owned, to 50%-50% owned, to minority owned
by the foreign firm
McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-11

Entry Mode
Advantage
Wholly
Enables global strategic
owned
coordination
subsidiaries Protects technology
Realizes (potentially) location
and experience economies
International Gives access to local partner's
Joint
knowledge
Ventures
Allows sharing of development
costs and risks
May be more politically
acceptable than 100% foreign
ownership
Allows foreign parent do
deploy resources across more
national markets at once
International Similar to international joint
Strategic
ventures
Alliances

McGraw-Hill/Irwin

Disadvantage
High costs and risks
Requires overseas
management skills
May be slower to implement
Loss of control over
technology and managerial
know-how
May impede global
coordination
May make realization of
location and experience
economies more difficult
Sharing of profit "pie"
May be more difficult to
manage than international
joint ventures

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
11-12

Entry Mode
Advantage
Franchising Low financial risk
Relatively low
development costs

Licensing

Exporting

Similar to franchising
Fewer "maintenance"
costs than franchising
Ability to realize
experience curve
economies

McGraw-Hill/Irwin

Disadvantage
Lack of direct control over quality
Successful international franchising
requires considerable start-up and
ongoing presence overseas (cost)
Is likely to impede, make global
coordination costlier than ownership
Growth may be slower depending
on franchisee's intentions
Sharing of profit "pie"
Possible loss of know-how to
potential competitor
Similar to franchising

Transport costs
Trade barriers
Motivation of local agents a
challenge

2004 The McGraw-Hill Companies, Inc., All Rights

Slide
6-15

Decision Framework for FDI


No

Are transportation costs


high?
Yes

No

Is know-how easy to
license?
Yes

Tight control over foreign


ops required?
No

Is know-how valuable and


is protection possible?

No

Export

Yes
FDI

Yes
FDI
Yes

No

McGraw-Hill/Irwin

Import
Barriers?

FDI
License

2004 The McGraw-Hill Companies, Inc., All Rights