Market entry strategy
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Market entry strategy Presentation Transcript

  • 1. Module 1
    • Internation Market-Entry Strategies
  • 2. 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 firm’s other marketing-mix decisions.
  • 3. 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
      • a control system to check the performance in the entered markets
  • 4. 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
      • 3. Rate the countries on each indicator
      • 4. Compute overall score for each country
  • 5. Choosing the Mode of Entry
    • Decision Criteria for Mode of Entry
      • Market Size and Growth
      • Risk
      • Government Regulations
      • Competitive Environment
      • Local Infrastructure
      • Company Objectives
      • Need for Control
      • Internal Resources, Assets and Capabilities
      • Flexibility
  • 6. Choosing the Mode of Entry
        • Classification of Markets :
          • Platform Countries (Singapore & Hong Kong)
          • Emerging Countries (Vietnam & the Philippines)
          • Growth Countries (China & India)
          • Maturing and established countries (examples: South Korea, Taiwan & Japan)
  • 7. 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)
  • 8. Carrefour in Japan
  • 9. Exporting
    • Indirect Exporting
      • Export management companies
    • Cooperative Exporting
      • Piggyback Exporting
    • Direct Exporting
      • Firms set up their own exporting departments
  • 10. Licensing
    • Licensor and the licensee
    • Benefits :
      • Appealing to small companies that lack resources
      • Faster access to the market
      • Rapid penetration of the global markets
  • 11. Licensing
    • Caveats :
      • 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
      • Licensee may become a future competitor
  • 12. 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 disputes)
  • 13. Franchising
    • Franchisor and the franchisee
    • Master franchising
    • Benefits :
      • Overseas expansion with a minimum investment
      • Franchisees’ profits tied to their efforts
      • Availability of local franchisees’ knowledge
  • 14. Franchising
    • Caveats :
      • 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
  • 15. 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
  • 16. Contract Manufacturing
    • Caveats :
      • Contract manufacturer may become a future competitor
      • Lower productivity standards
      • Backlash from the company’s home-market employees regarding HR and labor issues
      • Issues of quality and production standards
  • 17. 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 company’s business
      • Must have contingency plans
  • 18. 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
  • 19. Joint Ventures
    • Caveats :
      • 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
  • 20. 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 respect
      • Use incremental approach
  • 21. 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
  • 22. Wholly Owned Subsidiaries
    • Caveats :
      • 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
  • 23.  
  • 24. Strategic Alliances
    • Types of Strategic Alliances
      • Simple licensing agreements between two partners
      • Market-based alliances
      • Operations and logistics alliances
      • Operations-based alliances
  • 25. Strategic Alliances
    • The Logic Behind Strategic Alliances
      • Defend
      • Catch-Up
      • Remain
      • Restructure
  • 26.  
  • 27. Strategic Alliances
    • Cross-Border Alliances that Succeed:
      • Alliances between strong and weak partners seldom work.
      • Autonomy and flexibility
      • Equal ownership
  • 28. 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
        • A shared vision on goals and mutual benefits
  • 29. 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.
  • 30. Exiting a Market
    • Reasons for exit :
      • Sustained losses
      • Volatility
      • Premature entry
      • Ethical reasons
      • Intense competition
      • Resource reallocation
  • 31. 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
  • 32. Thank You