Keegan 7thed- ch08- market entry strategies
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Keegan 7thed- ch08- market entry strategies Document Transcript

  • 1. Global Marketing Management Learning Objectives * To identify criteria for selection of foreign markets. * To appreciate which market entry alternatives are available to companies. * To recognise export activities as a process developing over time. * To understand different entry startegies: sourcing, licensing,investment & ownership Decision Criteria for IB * Political risk * Market access * Factor cost & conditions * Shipping consideration * Country infrastructure * Foreign Exchange Selecting Foreign Markets * ... should be based on a number of criteria: * market-related characteristics * cost-related aspects
  • 2. * the regulatory framework * tariffs, duties & non-tariff trade barriers * the importance of these selection criteria depends upon the industry & the markets taken into account Critical Questions for a Product-Market Profile: The 9 W´s 1.Who buys our product? 2.Who does not buy our product? 3.What need or function does our product serve? 4.What problem does our product solve? 5.What are customers currently buying to satisfy the need and/or solve the problem for which our product is targeted? 6.What price are they paying for the products they are currently buying? 7.When is our product purchased? 8.Where is our product purchased? 9.Why is our product purchased? Market Selection Criteria * 1. Market Potential * 2. Market Access * 3. Shipping Cost & Time * 4. Appraising Level & Quality of Competition * 5. Service
  • 3. * 6. Product Fit A Multi-Stage Selection Process Visiting the Potential Market * ... is essential after assessment & selection of potential market(s) * goals: * to confirm (or contradict) assumptions regarding market potential * to gather additional (primary) data * to develop a marketing plan in co-operation with the local agent or distributor Introduction Organizing for Exports * Organizing in the manufacturer’s country- * In-house Export Organization * External INDEPENDENT Export Organization: Organizing in the Market Economy: * Direct market representation * via wholesalers or retailers or directly to the consumers * Independent representation
  • 4. * independent distributor * Piggyback marketing * distribution through another distributor´s channel
  • 5. Exporting: A Developmental Process Stages of the firm 1. ... is unwilling to export. 2. ... fills unsolicited export orders (export seller). 3. ... explores the feasibility of exporting (may bypass stage 2). 4. ... exports to one or more markets on a trial basis. 5. ... is an experienced exporter to one or more markets. 6. ... pursues country or region focused marketing. 7. ... evaluates the global market potential. All markets, domestic & international, are regarded as equally worthy of consideration. Export-Related Problems * Logistics * Legal procedure * Servicing exports * Sales promotion * Foreign market intelligence Sourcing Decision Factors * Factor costs & conditions * Logistics * Country infrastructure * Political risk
  • 6. * Market access * Exchange rate, availability & convertibility of local money Production Abroad Li c en si ng F r anc hi si ng Man ageme n t C ontr ac ts Equ ity Join t Ve nt ur es Ow ne rs hi p & Str ategi c A ll i anc es 0 0 100 % 1 00 % Con tr ol Ownership
  • 7. Licensing * “contractual arrangement whereby one company (licensor) makes an asset available to another company (licensee) in exchange for royalties, license fees or other form of compensation” * Patent * Trade secret * Brand name * Product formulations Advantages to Licensing * Provides additional profitability with little initial investment * Provides method of circumventing tariffs, quotas, and other export barriers * Attractive ROI * Low costs to implement Disadvantages to Licensing * Limited participation * Returns may be lost * Lack of control * Licensee may become competitor
  • 8. * Licensee may exploit company resources Special Licensing Arrangements * Contract manufacturing * Company provides technical specifications to a subcontractor or local manufacturer * Allows company to specialize in product design while contractors accept responsibility for manufacturing facilities * Franchising * Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies Investment * Partial or full ownership of operations outside of home country * Foreign Direct Investment * Forms * Joint ventures * Minority or majority equity stakes * Outright acquisition
  • 9. Joint Ventures * Company run by two or more partner firms * Risk is shared and different value chain strengths are combined * Influence depends on degree of ownership * Good opportunity to build on local know-how * JV finds greater acceptance by local authorities Joint Ventures * Advantages * Allows for sharing of risk (both financial and political) * Provides opportunity to learn new environment * Provides opportunity to achieve synergy by combining strengths of partners * May be the only way to enter market given barriers to entry Investment via Ownership or Equity Stake * Start-up of new operations * Greenfield operations or
  • 10. * Greenfield investment * Merger with an existing enterprise * Acquisition of an existing enterprise Wholly-owned Subsidiaries/Acquisition * Represents the most extensive engagement abroad * Subsidiary is either established through the creation of a new facility or the acquisition of an existing firm * Company has complete decision power & control * Investor achieves greater flexibility * In many countries majority or 100% ownership by foreign companies is forbidden Market Expansion Strategies * Companies must decide to expand by: * Seeking new markets in existing countries * Seeking new country markets for already identified and served market segments Market Expansion Strategies * Narrow focus: concentrated markets/concentrated countries * Country focus: diverse markets/concentrated countries * Country diversification: concentrated markets/diverse countries
  • 11. * Global diversification: diverse markets/diverse countries Summary * The choice of potential foreign markets must be based on a thorough evaluation of criteria which influence the potential success abroad; eg market potential, market access, or product fit. * Once the potential foreign target market(s) is selected, a company has to decide how to enter this market.