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Global Marketing

Global Market Entry Strategies

M. Ali Hassan
PCIT

alimba@live.com
Global Market Entry Strategies
• Operational reasons for setting up
overseas manufacture
• Strategic reasons for investing in local
operations
• Methods of overseas production
• Exporting options
• Joint Ventures and Strategic Alliances

alimba@live.com
Operational reasons for setting-
up overseas manufacture
• reduced costs of transportation
• reduced barriers/ quota handicap e.g. Nissan
• some governments demand investment with
market entry e.g. China
• Customers sometimes prefer local
manufacture e.g. Heinz ‘British’?
• Government contracts prefer firms
contributing to the local economy

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• Improved local market information
• local manufacture ensures greater
commitment to international markets
• Faster response and Just-in-time
delivery
Doole, Phillips and
Lowe (1994)

alimba@live.com
Strategic reasons for investing
in local operations
• Gain new business
• demonstrates strong commitment
• persuades customers to change suppliers
• provides better service and more reliability
• Defend existing business
• avoid market restrictions as sales increase,
particularly in single market

alimba@live.com
• Move with established customer
• component suppliers follow customers to
compete with local component suppliers
• Save costs
• labour, raw materials and transport
• Avoid government restrictions to import
certain goods
Doole, Phillips and
Lowe (1994)

alimba@live.com
Exporting
• Indirect
• export houses
• UK buying offices of foreign stores or governments
• complementary exporting
• Direct
• sales to final user
• overseas agencies
• distributors and stockists
• company branch offices abroad
• Degree of involvement v control?

alimba@live.com
Methods of overseas production
• Licensing
• Companies with strong brand or know-how
• e.g. Coca-Cola, Disney
• Franchising
• more of a ‘whole’ package
• e.g.Body Shop, KFC
• Contract manufacture
• bulk items e.g. Nike
• components

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• Joint ventures -
• e.g. Burmah Castrol in S.Korea
• Wholly owned overseas subsidiaries
• Organic growth

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Strategic Alliances
• Strategic alliances can range from loose networking
relationships to very tight contractual relationships
such as joint ventures.
• e.g. ‘code share’ where airlines of a similar type sell
each other’s tickets. There is no co-ownership.
• Types
• technology swaps
• R&D exchanges
• distribution relationships
• Driving forces
• insufficient resources
• High R&D costs
• Concentration of firms in mature markets
• Market access

alimba@live.com
Joint ventures e.g European Airbus.
• Orgs can remain separate, but have a tight legal
relationship.
• Reasons for setting up
• overcome foreign ownership restrictions
• increase speed of entry
• exploit new opportunities, complementary technologies and
management skills
• achieve worldwide presence at lower cost
• Disadvantages
• differences in partner aims and objectives
• equal ownership and different options can slow decision making
• dominance by one partner can lead to resentment in the other
• Large time commitment for education, negotiation and
agreement with partner

alimba@live.com
Mergers
• The identity of each of the merging companies is
subordinated into the identity of the newly
merged organisation, or disappears.
• Benefits include:
– Cutting cost
– Eliminate competition
– Synergy augments mutual strengths
• Case study – Chrysler and Mercedes.

alimba@live.com

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