38467014 marketing-ppt
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  • 1. INTERNATIONAL MARKET SELECTION AND ENTRY by
  • 2. Pressures for Cost Reduction and Local Responsiveness • Pressures for cost reductions – Global competitors seek to minimize unit costs through location economies . – In commodity-type product industries, intense price competition. • Pressures for local responsiveness arise from: – – – – Differences in local consumer tastes and preferences. Differences in infrastructure and traditional practices. Differences in distribution channels among countries. Host government economic and political demands.
  • 3. Four Basic Strategies
  • 4. Strategic Choice • International strategy – Create value by transferring skills and products abroad. • Multidomestic strategy – Maximize local responsiveness (taste& preference)by customizing products and marketing strategy for local markets. • Global strategy – Pursue low-cost status, offer standardized global products. • Transnational strategy – Use global learning to achieve low-cost status, differentiation, and local responsiveness simultaneously.
  • 5. The Advantages and Disadvantages of Different Strategies for Competing Globally Strategy Advantages International • Transfer of distinctive • Lack of local competencies to responsiveness • Inability to realize location foreign markets Multidomestic Disadvantages economies • Failure to exploit experience-curve effects • Ability to customize • Inability to realize location product offerings and economies marketing in accordance • Failure to exploit with local responsiveness experience-curve effects • Failure to transfer distinctive competencies to foreign markets
  • 6. The Advantages and Disadvantages of Different Strategies for Competing Globally Strategy Advantages Disadvantages Global • Ability to exploit experience-curve effects • Ability to exploit location economies • Lack of local responsiveness Transnational • Ability to exploit experiencecurve effects • Ability to exploit location economies • Ability to customize product offerings and marketing in accordance with local responsiveness • Reaping benefits of global learning • Difficulties in implementation because of organizational problems
  • 7. Entry Strategies
  • 8. Where are we in the strategy? Uncontrollable Culture Political & Legal Environment Marketing Research Economic Controllable Segmentation and positioning Planning Competitive Analysis We are here! Organising/ Restructuring Promotion s Market Entry Strategy Logistics and Distribution Products & Services Pricing
  • 9. Basic Entry Decisions • Which foreign markets? – Politically and financially stable – Developed and developing nations – Free market systems • Timing of entry – Pioneering costs versus first-mover advantages. • Scale of entry and strategic commitments – Scale of entry affects the nature of competition in the national market. Implications of risks and benefits must be weighed carefully.
  • 10. Selecting Market Entry • Overview – – – – – – – – Must decide what country to enter Must allocate the right resources Decide what to sell Decide where to sell Select the criteria for decision making Seek an acceptable equity share Acquire the right fit Design an exit strategy
  • 11. Determinants of Entry Strategy • Degree of contact with foreign market desired – no contact - export intermediary – some contact - foreign import intermediary – high contact - subsidiary, FDI, etc. • Determined by: – market potential – firm’s capabilities and experience – managerial commitment to export, market and risk tolerance
  • 12. Basic Entry Decisions • Which foreign markets? – Politically and financially stable – Developed and developing nations – Free market systems • Timing of entry – Pioneering costs versus first-mover advantages. • Scale of entry and strategic commitments – Scale of entry affects the nature of competition in the national market. Implications of risks and benefits must be weighed carefully.
  • 13. The Choice of Entry Mode • Exporting • Licensing • Franchising • Joint Ventures • Wholly Owned Subsidiaries
  • 14. Choice of International Entry Mode Exporting Common way to enter new international markets. No need to establish operations in other nations. Establish distribution channels through contractual relationships. May have high transportation costs. May encounter high import tariffs. May have less control on marketing and distribution. Difficult to customize product.
  • 15. Foreign production • Licensing – no physical asset exposure • though IP risk remains License Licensor Licensee (domestic manufacturer) (O/S Manufacturer) Owns IP Qualcomm Manufacture & sell Royalties & fees 1 to 15% Ericsson uses CDMA technology in headphones
  • 16. Choice of International Entry Mode Licensing Firm authorizes another firm to manufacture & sell its products Licensing firm is paid a royalty on each unit produced and sold. Licensee takes risks in manufacturing investments. Least risky way to enter a foreign market. Licensing firm loses control over product quality & distribution. Relatively low profit potential. 9-16 © 2006 by Nelson, a division of Thomson Canada Limited.
  • 17. Franchising Franchisee Franchisor (Country B) (Country A) Owns IP Royalties & fees Master Franchisor Local entrepreneurs Examples Trade name Trade mark Business Models (marketing plan) Operating manuals Standards Training Quality monitoring •Subway •World Gym Fitness Limited time •Mailboxes etc. Limited territory
  • 18. • Franchising – A specialized form of licensing where the franchiser sells intangible property (usually a brand or trademark). – The franchisee agrees to follow the strict rules and business plans of the company
  • 19. Joint Ventures Firm C Firm A Home country 50% 50% New entity in host country - both have equity Firm B Host country Contribution Contribution •Technology •Manufacturing expertise •Distribution network •Labour •Finance •Local market knowledge •E.g. McDonald’s
  • 20. • Joint Venture – Separate corporations come together to form a new corporate entity – Two or more companies have an ownership stake, but combine resources for mutual benefit – Sharing knowledge can be dangerous for the companies involved
  • 21. Problems with joint ventures • lack of legal structure – e.g. PRC, no accounting standards – poor proprietary rights • lack of trust – mutual conflicts – resource allocation • access to technology • profit sharing problems
  • 22. Choice of International Entry Mode Acquisitions Enable firms to make most rapid international expansion. Can be very costly. Legal and regulatory requirements may present barriers to foreign ownership. Usually require complex and costly negotiations. Potentially disparate corporate culture. 9-22 © 2006 by Nelson, a division of Thomson Canada Limited.
  • 23. Choice of International Entry Mode New Wholly-Owned Subsidiary – Greenfield Venture Most costly & complex of entry alternatives. Achieves greatest degree of control. Potentially most profitable, if successful. Maintain control over technology, marketing and distribution. May need to acquire expertise & knowledge that is relevant to host country. Could require hiring host country nationals or consultants at high cost.
  • 24. Strategic Competitiveness Outcomes International diversification facilitates innovation in the firm. Provides larger market to gain more and faster returns form investments in innovation. May generate resources necessary to sustain a large-scale R&D program. Generally related to above-average returns, assuming effective implementation and management of international operations. International diversification provides greater economies of scope and learning.
  • 25. Exit and Re-entry Strategies • Consolidate operations – reduce plant, close operations – consolidate operations • Ford: Closing plant in UK • GM: closed plant in UK • Sterile : closed plant in tuticorin • Re-entry – acquisition: • e.g., Coke acquired Parle (repurchased of Indian bottler/distributor)