International Market-Entry Strategies

Presented By

J. Mano
10MBAB32
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Introduction
The need for a solid market entry decision is an

integral part of a global market entry strategy.

Entry decisions will heavily influence the firms

other marketing-mix decisions.

Introduction
Global marketers have to make a

multitude of decisions regarding the entry

mode which may include:
the target product/market the goals of the target markets the mode of entry

the time of entry

a marketing-mix plan
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a control system to check the performance in the

Target Market Selection

A crucial step in developing a global

expansion strategy is the selection of potential target markets.

A four-step procedure for the initial screening

process:
1. Select indicators and collect data
2. Determine importance of country indicators
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3. Rate the countries on each indicator

Choosing the Mode of Entry

Decision Criteria for Mode of Entry
Market Size and Growth
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Risk Government Regulations Competitive Environment Local Infrastructure Company Objectives Need for Control Internal Resources, Assets and Capabilities Flexibility

Choosing the Mode of Entry

Classification of Markets:
Platform

Countries (Singapore & Hong

Kong)
Emerging

Countries (Vietnam & the

Philippines)
Growth

Countries (China & India)

Maturing
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and established countries

(examples: South Korea, Taiwan &

Choosing the Mode of Entry

Mode of Entry Choice: A Transaction Cost

Explanation
Regarding entry modes, companies normally face a

tradeoff between the benefits of increased control

and the costs of resource commitment and risk.
Transaction Cost Analysis (TCA) perspective Transaction-Specific Assets (assets valuable for a

very narrow range of applications)

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Exporting
Indirect Exporting

Export management companies

Cooperative Exporting

Piggyback Exporting
Direct Exporting

Firms set up their own exporting

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departments

Licensing
Licensor and the licensee
Benefits:

Appealing to small companies that

lack resources
Faster access to the market

Rapid penetration of the global

markets
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Licensing
Limitations:

Other entry mode choices may be

affected
Licensee may not be committed Lack of enthusiasm on the part of a

licensee
Biggest danger is the risk of opportunism
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Licensee may become a future

Licensing
How to seek a good licensing agreement:

Seek patent or trademark protection

Thorough profitability analysis Careful selection of prospective

licensees
Contract parameter (technology

package, use conditions, compensation, and provisions for the settlement of

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disputes)

Franchising
Franchisor and the franchisee

Master franchising
Benefits:

Overseas expansion with a minimum

investment
Franchisees profits tied to their efforts Availability of local franchisees
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knowledge

Franchising
Limitations:
Revenues may not be adequate Availability of a master franchisee Limited franchising opportunities overseas Lack of control over the franchisees operations

Problem in performance standards

Cultural problems Physical proximity
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Contract Manufacturing
Benefits:

Labor cost advantages

Savings via taxation, lower energy

costs, raw materials, and overheads

Lower political and economic risk Quicker access to markets
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Contract Manufacturing
Limitations :
Contract manufacturer may become a future

competitor
Lower productivity standards Backlash from the companys home-market

employees regarding HR and labor issues

Issues of quality and production standards

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Contract Manufacturing
Qualities of an ideal subcontractor:
Flexible/geared toward just-in-time

delivery
Able to meet quality standards
Solid financial footings

Able to integrate with companys

business
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Must have contingency plans

Joint Ventures
Cooperative joint venture

Equity joint venture

Benefits:
Higher rate of return and more control over the

operations
Creation of synergy

Sharing of resources
Access to distribution network Contact with local suppliers and government officials
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Joint Ventures
Limitations :

Lack of control
Lack of trust

Conflicts arising over matters such as

strategies, resource allocation, transfer

pricing, ownership of critical assets like

technologies and brand names
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Joint Ventures
Drivers Behind Successful International Joint Ventures :

Pick the right partner Establish clear objectives from the

beginning
Bridge cultural gaps Gain top managerial commitment and
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respect

Wholly Owned Subsidiaries

Acquisitions

Greenfield Operations

Benefits:

Greater control and higher profits Strong commitment to the local market on the

part of companies
Allows the investor to manage and control

marketing, production, and sourcing decisions

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Wholly Owned Subsidiaries

Limitations : Risks of full ownership Developing a foreign presence without the support of a third part Risk of nationalization Issues of cultural and economic sovereignty of the host country Acquisitions and Mergers Quick access to the local market Good way to get access to the local brands

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Strategic Alliances
Types of Strategic Alliances
Simple licensing agreements between two

partners
Market-based alliances Operations and logistics alliances Operations-based alliances

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Strategic Alliances
The Logic Behind Strategic Alliances
Defend Catch-Up Remain Restructure

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Strategic Alliances
Cross-Border Alliances that Succeed:
Alliances between strong and weak partners

seldom work.
Autonomy and flexibility Equal ownership

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Strategic Alliances
Other success factors:

Commitment and support of the top of the

partners organizations
Strong alliance managers are the key

Alliances between partners that are related in

terms of products, technologies, and markets

Similar cultures, assets sizes and venturing

experience
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A shared vision on goals and mutual benefits

Timing of Entry
International market entry decisions should also

cover the following timing-of-entry issues:

When should the firm enter a foreign market? Other important factors include: level of

international experience, firm size

Mode of entry issues, market knowledge, various

economic attractiveness variables, etc.

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Exiting a Market
Reasons for exit:
Sustained losses Volatility Premature entry Ethical reasons Intense competition

Resource reallocation

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Exit Strategies
Risks of exit:
Fixed costs of exit Disposition of assets Signal to other markets Long-term opportunities

Guidelines:
Contemplate and assess all options to salvage the

foreign business
Incremental exit Migrate customers
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A generic framework for market entry strategies

There are 2 basic Strategic Frameworks for Market

Entry Strategies which are all dependent on

Product type and the Product Lifecycle.
Waterfall strategy Sprinkler strategy

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A generic framework for market entry strategies

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Management issues with market entry strategies

Uniqueness of product International experience and knowledge of cultural issues Barriers to entry Designing a good business model Is it cheaper to produce locally overseas or to export? Is it better to license to infiltrate more markets faster? Have you insured against non-payment? How to address legal issues or conflicts with partners Have you got a plan for a currency increase?
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Reference
www.austrade.gov.au/Market-entry-

strategies/default.aspx
www.quickmba.com/strategy/global/marketentry/ http://en.wikipedia.org/wiki/Market_entry_strategy http://www.austrade.gov.au/Market-entry-

strategies/default.aspx
http://www.fao.org/docrep/W5973E/w5973e0b.htm business-fundas.com/.../market-entry-strategy-for32

international-busin

Thank You . . .

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