International entry modes


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Criteria for Country selection :
Choosing Product to trade in International markets
Global Product Strategies
Strategy for new product launch

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International entry modes

  1. 1. INTERNATIONAL ENTRY MODES<br />Presented By:<br />AmitKumar<br />Avanika Babel<br />
  2. 2. THIS PRESENTATION WILL COVER THE FOLLOWING:<br />Introduction<br />Criteria for country selection<br />Various market entry modes<br />
  3. 3. INTRODUCTION<br />In today's globalizing world, firms are increasing, looking towards other regions of the world to trade in. <br />What are the steps taken by the executives of these firms before deciding on which market to enter? <br />How do they make sure they make their journey a successful one? <br />
  4. 4. Introduction contd.<br />The decision requires an analysis of the aspects of the foreign market.<br /> - Whether to go abroad<br /> - Which markets to enter<br /> - How to enter those markets<br /> - Choice of marketing program<br /> -Marketing organization<br />
  5. 5. Introduction Contd.<br />Criteria for Country selection :<br />1. Country/market Attractiveness in terms of the following: o Market size o Market growth and need potential in terms of demand<br />2. Company strength in terms of brand and accessibility<br />3. When the risk e.g. political is marginal compared to opportunities<br />4. Customer response<br />5. Competitive situation<br />
  6. 6. Introduction contd.<br />A firm becomes proactive i.e. pulled by the potentials and advantages in the foreign market due to the following reasons:<br />1. The firms specific advantages in terms of profit<br />2. The advantage of having a unique brand<br />3. When a firm possesses technological advantages<br />4. The availability of resources in the foreign countries<br />5. Economies of scale<br />6. Economic and political factors<br />
  7. 7. Introduction Contd.<br />A firm becomes reactive i.e. pushed by bad domestic markets when the following is evident:<br />1. The pressure of domestic competition<br />2. Poor domestic market due to stagnant or declining sales figures<br />3. Saturated domestic markets<br />4. Overproduction<br />
  8. 8. Choosing Product to trade in I.M<br />anything that can be offered to market to satisfy a want or need.<br />They can be physical goods, services, experiences, events, persons, places, properties, organizations, information's & ideas.<br />What are new products?<br />New product line<br />Addition to product line<br />Repositioning to new market segments<br />Improvements/revisions<br />Cost reductions<br />Reason of failure of different foreign companies like Kellogg's, Pizza hut, Mac Donald, Dominos was-<br />Gross overestimation of spending patterns of Indian consumers<br />Gross overestimation of strength of the transnational brand<br />Gross underestimation of the strengths of ethnic Indian products<br />
  10. 10. ETHNOCENTRIC APPROACH<br />Under this approach , companies market the products in various countries in the same way it does domestically.<br />POLYCENTRIC APPROACH<br />Under this approach, the companies customizes the marketing mix to meet the taste, performance and needs of the customers of each international market.<br />REGIOCENTRIC APPROACH<br />Under this approach, the company operating successfully in a foreign country thinks of thinks of exporting other neighboring countries of the host country.<br />At this stage, the concerned subsidiary considers the regional environment ( such as laws, culture, policies etc) for formulating the policies & strategies.<br />
  11. 11. GEOCENTRIC APPROACH<br />Under this approach, the company analyses the tastes, preference and needs of the customers in all foreign markets and then adopts a standardized marketing mix for all the foreign markets.<br />Coca-cola adopted this strategy by selling its popular soft drink with the same content, packaging, branding & advertisement themes worldwide<br />Whirlpool designs a world-washer – small, stripped-down automatic washing machine for Mexico, Brazil & India. However, it modified its product for Indian market to wash the delicate “sarees”.<br />
  12. 12. Global Product Strategies<br />
  13. 13. Strategy for new product launch<br />Waterfall approach<br />Sprinkler approach<br />
  14. 14. STRATEGIC OPTIONS<br /><ul><li>EXTENSION STRATEGY –</li></ul>Same approach as home market<br /><ul><li>ADAPTATION STRATEGY -</li></ul>Makes changes to fit new market requirements<br /><ul><li>INVENTION STRATEGY -</li></ul>Entirely new approach is developed for the new market<br /><ul><li>STANDARDIZATON –</li></ul> Same product, all markets<br /><ul><li>GLOBAL PRODUCTS -</li></ul> Only some aspects of the product is standardized<br />
  15. 15. OPTION 1.<br />PRODUCT EXTENSION – COMMUNICATION EXTENSION<br />Product Strategy Communications Strategy Highlight<br />Extension Extension Standardized product with same<br /> communications strategy across the<br /> globe.<br /> - This strategy is Cost effective<br /> - Allows for greater economies of <br /> scale<br /> - Rarely used for consumer type <br /> products except soft drink and some luxury type goods<br /> -Used mainly for industrial type<br /> products<br />
  16. 16. OPTION 2.<br />PRODUCT EXTENSION – COMMUNICATION ADAPTATION<br />Product Strategy Communications Strategy Highlight<br />Extension Adaptation Standardized product with different<br /> communications strategies across the<br /> globe.<br /> - Cost effective because communications adaptation is<br /> less expensive than the tailoring<br /> product to a local market.<br /> - Can be used for consumer type products eg. Bicycles<br />
  17. 17. OPTION 3.<br />PRODUCT ADAPTATION - COMMUNICATION EXTENSION<br />Product Strategy Communications Strategy Highlight<br />Adaptation Extension Changes made to the product, same communications strategy across the globe.<br /> - Product formulations are changed<br /> without consumers knowing it. E.g.<br /> detergents <br /> - Entails research, development<br /> expenses and tooling costs.<br /> - Do not allow for economies of scale<br /> to the extent possible under an product extension strategy<br /> - savings can be realized from the creation of a single communications strategy<br />
  18. 18. OPTION 4.<br />PRODUCT ADAPTATION - COMMUNICATION ADAPTATION<br />Product Strategy Communications Strategy Highlight<br />Adaptation Adaptation Dual adaptation: Changes made to the product, changes made to communications strategy <br /> - Recognizes the socio-cultural<br /> differences from country to country<br /> -To make this option profitable, the foreign market or markets need to be of sufficient volume<br /> - Calls for extensive research and development expenses and tooling costs<br />
  19. 19. OPTION 5.<br />PRODUCT INVENTION<br />Product Strategy Communications Strategy Highlight<br />Invention Develop new communications Usually redesigning of an original product at a lower level of<br /> complexity. <br /> - Recognizes the socio-cultural<br /> and economic differences from country to country<br /> -Leads to more purchases as a result of the reinvention of the product<br />
  20. 20. STANDARDIZATION vs ADAPTATION<br />Factors encouraging product standardization:<br /><ul><li>Economies of Scale in:
  21. 21. Production
  22. 22. Marketing/communications
  23. 23. Research & Development
  24. 24. Stock Holding
  25. 25. Easier management and control
  26. 26. i.e. familiarity
  27. 27. Homogeneity of markets
  28. 28. i.e. markets available without adaptation
  29. 29. e.g. Denim jeans</li></li></ul><li>STANDARDIZATION VS ADAPTATION contd…<br /><ul><li>Cultural insensitivity
  30. 30. (except industrial & agricultural products)
  31. 31. Where “made in” image is important
  32. 32. e.g. France for perfumes, Sheffield for stainless steel
  33. 33. For a firm selling a small proportion of its output overseas, the incremental costs may exceed the incremental sales value
  34. 34. Consumer mobility for travellers/tourists for example standardization is expected in certain products:
  35. 35. Camera film
  36. 36. Hotel Chains</li></li></ul><li>STANDARDIZATION VS ADAPTATION contd…<br />Factors encouraging adaptation/modification<br /><ul><li>Voluntary factors influencing product adaptation in I.M
  37. 37. Consumer Demographics
  38. 38. Culture
  39. 39. Local custom & Tradition
  40. 40. Condition of use
  41. 41. Price
  42. 42. Mandatory Modification:
  43. 43. Normally involves either adaptation to comply with government requirements or
  44. 44. Unavoidable technical changes
  45. 45. Example: Car manufacturer</li></li></ul><li>STANDARDIZATION VS ADAPTATION contd…<br /><ul><li>Legal requirements can include:
  46. 46. Specified exhaust emission levels (HSE Laws & strict emission standards)
  47. 47. Local components (economic law)
  48. 48. Technical requirements such as:
  49. 49. Modification of heating/cooling systems for different climates
  50. 50. Engine modification to use locally available fuels
  51. 51. Packaging & Labelling regulations
  52. 52. Measurement system
  53. 53. So packaging size, weights, and measures of products will be modified
  54. 54. Standards of electric current
  55. 55. India- 220 volt 50 Hz
  56. 56. U.S- 110-120 Volt 60 Hz
  57. 57. So electric equipments should be modified</li></li></ul><li>FOREIGN MARKET ENTRY MODES<br /><ul><li>A mode of entry into an international market is the channel which your organization employs to gain entry to a new international market
  58. 58. Expansion into foreign markets can be achieved via the following mechanisms:
  59. 59. The Internet - Exporting
  60. 60. Licensing - Joint Venture
  61. 61. Direct Investment
  62. 62. International Agents & International Distributors</li></ul>- Strategic Alliances<br />
  64. 64. Foreign Market Entry Modes:Export <br /><ul><li>Exporting
  65. 65. Exporting is the marketing and direct sale of domestically-produced goods in another country
  66. 66. There are direct and indirect approaches to exporting to other nations
  67. 67. Direct exports represent the most basic mode of exporting, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. </li></li></ul><li>Indirect and Piggybacking<br />Indirect exports is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign market.<br />Examples of indirect exporting include:<br />Piggybacking whereby your new product uses the existing distribution and logistics of another business.<br />Export Management Houses (EMHs) that act as a bolt on export department for your company. They offer a whole range of services to exporting organizations.<br />
  68. 68. Providing offshore services<br /><ul><li>Offshoring : Relocation by a company of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting.</li></li></ul><li>Internet…………..<br /><ul><li>The Internet
  69. 69. The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations</li></ul>New Internet Companies:<br /><ul><li>New online retail brand e.g. Amazon,
  70. 70. Online Auction e.g. eBay
  71. 71. New online manufacturer brand e.g. </li></li></ul><li>International Licensing:<br /><ul><li>Licensing</li></ul>Licensing essentially permits a company in the target country to use the property of the licensor<br />Such property usually is intangible<br />The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance.<br /> Intangible property includes patents, inventions, formulas, processes, designs, copyrights, and trademarks<br />
  72. 72. Franchising….<br />Franchising involves the organization (franchiser) providing branding, concepts, expertise, and infact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser.<br /> Examples include Dominos Pizza, Coffee Republic and McDonald’s.<br />
  73. 73. Franchising….<br />Franchising Compared to licensing:<br />Franchising agreements tends to be longer and the franchisor offers a broader package of rights and resources<br />Licensing agreement involves things such as intellectual property, trade secrets and others while in franchising it is limited to trademarks and operating know-how of the business<br />
  74. 74. Turnkey Project<br />In a turnkey project, the contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel <br /> Example, Toyota’s car plant in Adapazari, Turkey.<br />
  75. 75. Contract manufacturing<br />Contract manufacturing firm is that which manufactures components or products for another "hiring" firm. It is a form of outsourcing<br /><ul><li>Foreign Direct Investment/ Overseas Manufacture / International Sales Subsidiary</li></ul>A business may decide that none of the other options are as viable as actually owning an overseas manufacturing plant i.e. the organization invests in plant, machinery and labor in the overseas market<br />
  76. 76. Joint venture<br /><ul><li>Joint Venture</li></ul> Two or more firm join together to create a new business entity that islegally separate and distinct from its parents. <br /> It involves shared ownership.Various environmental factors like social , technological economic andpolitical encourage the formation of joint ventures. <br /> It provides strength in terms of required capital. <br />There are five common objectives in a joint venture: <br /><ul><li>market entry
  77. 77. risk/reward sharing
  78. 78. technology sharing
  79. 79. joint product development
  80. 80. conforming to government regulations</li></li></ul><li>Wholly owned subsidiary<br />A wholly owned subsidiary includes two types of strategies: Greenfield investment and Acquisitions.<br />Greenfield investment is the establishment of a new wholly owned subsidiary. <br />Acquisition has been increasing because it is a way to achieve greater market<br />Acquisition is lower risk than Greenfield investment because of the outcomes of an acquisition can be estimated more easily and accurately<br />
  81. 81. Foreign Market Entry Modes ....<br /><ul><li>International Agents and International Distributors</li></ul>Agents are individuals or organizations that are contracted to your business, and market on your behalf in a particular country<br />They rarely take ownership of products, and more commonly take a commission on goods sold.<br />Agents usually represent more than one organization<br />
  82. 82. Foreign Market Entry Modes Contd.<br /><ul><li>Strategic Alliance</li></ul>A strategic alliance is a term that describes a whole series of different relationships between companies that market internationally<br />Essentially, Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate.<br />
  83. 83. Foreign Market Entry Modes .<br />Examples:<br /><ul><li>SAIL and TATA Steel: SAIL signed an agreement with Tata steel for joint development of coal blocks
  84. 84. Xerox and Fuji: These two multinational giants, located in U.S. and Japan, respectively, joined hands to explore new markets in Europe and in Pacific Rim countries.
  85. 85. AT&T, IBM, Motorola, and Loral: A giant alliance between AT&T, IBM, Motorola and Loral was formed to develop an advanced computer chip manufacturing technology</li></li></ul><li>
  86. 86.
  87. 87. ANY QUESTIONS??<br />