Mario glowik charts_market_entry_strategies_july_2009

Mario Glowik, Market Entry Strategies, First Edition (2009)

Market Entry
Strategies

© 2009 Oldenbourg Wissenschaftsverlag Munich, Germany 1


Qualitative versus
quantitative research
methods
h d



Qualitative versus quantitative research methods
Source: modified from Bungard et al. (2000)

Research Method Advantages
Quantitative Qualitative

▪ quantified research results ▪ flexible research methods

▪ data comparability and transferability ▪ open questions approach allows

▪ data objectivity due to quantified methods background information

▪ statistical and mathematical context ▪ better reflects complex reality

▪ reasonable in cost and time ▪ focus on relevant research issues

▪ more representative due to a larger ▪ contextual validity

sample ▪ exploration of a new topic



Qualitative versus quantitative research methods
Source: modified from Bungard et al. (2000)

Research Method Disadvantages
Quantitative Qualitative

▪ less method flexibility ▪ relatively expensive and time consuming

▪ fixed questions ▪ interviewer’s profound expertise is
interviewer s

▪ proposals allow for limited improvements necessary concerning the topic of research

▪ lack of individual response ▪ no numerical indications possible

▪ limited causation of research results ▪ subjective interpretation of results,

▪ highly quantified data do not reflect which depends on interviewer

specific circumstances in reality



Environmental analysis
y
of the foreign target
market



Elements of the general external (macro) environment of a firm
Source: Modified from Wheelen and Hunger (2004), and Schreyögg (2003)

Economic
•Gross domestic product (GDP) trend
•Unemployment rate
•Wage levels
•Interest rates
•State budget volume/surplus /deficit
•Foreign trade surplus or deficit
•Inflation rates
•Disposable income of consumers
•Stability of currency
•Debt-equity ratio




Technological
•Patents outcomes
•Industry cluster
•Industry innovation and productivity
•Telecommunication (Internet ) infrastructure
(Internet-)
•Government spending on R&D
•Industry expenses for R&D
•Technology transfer from laboratory to market place
•Attitudes toward new technologies, automation, and rationalization
•Country specific industry focus (i.e., electronics, automotive)




Political-Legal
•Market versus central planned economy
•Democracy
•Stability of government
•Protection of capital and intellectual property rights
•Corruption level
•Tax laws/ investment incentives
•Antitrust regulations
•Affiliation to political and economic organizations (WTO)




Sociocultural
•Age distribution of population
•Birth/death and growth rate of population
•Rate of family formations
•Regional shifts in population
•Life expectancies
•Changes in lifestyle
•Attitudes toward minorities
•Education/ illiteracy
•Violence potential of the society




Ecological
•Environment protection laws
•Nature resources and exploitation
•Attitudes towards nuclear energy
•Consumption of bionomical products
Consumption
•Market penetration of genetically engineered food
•Protection of threatened species of animals



Industry environment of a television set manufacturer located in the European
Union in 2008 Source: Adopted from Porter (1999)

Industry Rivalry

Supplier: Danger of new Customer: Threat of technological
g
market entrants: substitution:

▪ Major component ▪ Firms from China, ▪ High quality ▪ Organic Light Emitting
supplier in China, Taiwan and India consciousness and Display
Di l (OLED)
Japan, and S.Korea price sensitiveness

▪ R&D know-how ▪ Market saturation
bundled in Asia in Western Europe

▪ Newly upcoming ▪ Upcoming new
industry cluster in markets in Central
Poland, Slovakia, and Eastern
and Hungary
g y Europe
p



Internationalization
Theories



Relationship of the advantage categories and market entry strategies
Source: Dunning (1980), Perlitz, (2004)

Ownership
O hi Internalization
I li i Location specific
L i ifi
Advantage specific

Entry strategy
Foreign direct Available Available Available
investment
Export Available Available Not available

International contracts Available Not available Not available



Firm and market internationalization degree
Source: Johanson & Mattsson (1988)

Degree of internationalization of the market

Low High
Degree of

Internationalization
Low The Early The Late
Starter Starter
of the firm

High The Lonely The
International International
among Others



Internationalization: conceptualization of an entrepreneurial process of behavior in
time
Source: Jones and Coviello (2005)

The Entrepreneur
• Level of innovativeness
• Level of risk tolerance
• Management
competence

The Firm Internationalization Performance
• Organizational structure Behavior • Financial measures
(organic vs. mechanic) (as a function of time) (market success)
• Fingerprint patterns • Non-financial measures
• Profiles
f (organizational learning)
( )



Dimension of time in internationalization concepts research
Source: adapted from Hurmerinta-Peltomäki (2003)

Current research Linear
Events
assumptions on the
unrepeatable
internationalization
process of firms Uniqueness
States

Novelty and
y Subjectivity
j y
surprise

Positive No fixed
direction direction

Rearrangement
Objectivity of given factors
Non-
uniqueness
Events
Events
repeatable

Cyclical
C li l



Typology of new ventures.
Source: Di Gregorio et al. (2008)

Extensive Cross Border IV. International
III. Cross Border
Combination of Resource and Market
Resource Integration
Resources and Individuals Combination

Domestic Combination of II. Accelerated
I. Domestic New Venture
Resources and Individuals International Sales

Domestic Market Extensive Cross Border
Opportunities P
O i i Pursued
d Market C bi ti
M k t Combination
Opportunities Pursued



A summary of principal contents and major limits of the international product life-
cycle theory

Model Representative Principal contents Major limits of the model
scholars of the model
Year of
Publication

Inter-
e Vernon 1966,
 ,  market entryy  U.S.-economy perspective
yp p
national 1972 through export and after WWII
Product FDI depends on the  ignores existence on tariff and
Life- product life-cycle non-tariff trade barriers as well
Cycle
C l position as behavioral aspects
 verification and generalization
difficult
 neglects threat of substitution
g
through upcoming nations and
their industries
 model became almost
obsolete



A summary of principal contents and major limits of the internalization theory

Year of
Publication

Inter- Buckley &  focus on transaction  disregard of ‘follow the customer’
nalization Casson 1976 costs as main impulse phenomenon
Theory based on Coase for foreign market entry  transaction costs are hard to
1937 and hierarchy versus quantify
Williamson market mechanism  limited attention to behavioral
1975
1975  explains MNE
l i aspects (e.g., customer
t ( t
appearance because preferences)
of organizational  ignores impact of entrepreneur
capabilities and market and/or management on firm
imperfections internationalization
 consideration of the  ignores tariff and non-tariff
‘knowledge’ and ‘skill’ barriers, legal aspects, and tax
factors
f t policy [
li [e.g., subsidies] i th t
b idi ] in the target
t
country


A summary of principal contents and major limits of the eclectic paradigm

Year of
Publication

Eclectic Dunning 1979,  consideration of  overlapping ‘conglomeration of
Paradigm
g 1980, 1983,
, , ownership, location,
p, , variables’
1988, 1993, and internalization  hard to make concrete
1994, 1995, OLI elements recommendations for the firm’s
1999, 2000,  multi-causal internationalization strategy
2001 reasons i fl
influence  assumption of a ‘homo
ti f ‘h
the market entry oeconomicus’
strategy of the firm  limitations in analyzing the
influence of tax incentives or
subsidies which influence foreign
direct investment decisions



A summary of principal contents and major limits of the location concepts

Model
M d l Representative
R t ti Principal
P i i l contents
t t Major li it f th
M j limits of the model
d l
Year of
ub cat o 
Publication

Location Tesch 1980  location and  empirical studies about the
Concepts Hill 1998
  demand factors differ relative influence of location
Porter 1999 between countries factors with regards to foreign
 in connection and influence the direct investment decisions are
with traditional competitiveness of problematic to perform
international enterprises  difficult to consider all
trade theories:  firm’s foreign direct relevant factors due to its high
Heckscher-Ohlin investment incentive complexity
1952 depends on country  pays less attention to the
A. Smith 1776 specific location ‘follow the customer’
factors phenomenon



A summary of principal contents and major limits of the diamond model

Year of
Publication

Diamond Porter 1990
   firm  the meaning of competitive
g p
Model competitiveness advantage is empirically hard to
influenced by quantify
country-specific  some model assumptions are
conditions rather speculative
 some firms have  lacks precise recommendations
better prerequisites under which circumstances a firm
for successful g
gains competitive advantage
p g
international business  neglects other countries and
activities than others their impact on the home country
because of home with respect to the firm’s
market surroundings competitiveness and vice versa



A summary of principal contents and major limits of the Uppsala model

Year of

Publication

Uppsala Carlson 1966  due to a lack of  physical distance is perceived
Model
M d l Forsgren &
F foreign
f i market k t differently by operating managers
diff tl b ti
Johanson, knowledge firms  panel focus on large Swedish
Johanson & internationalize firms
Wiedersheim incrementally from
y  restricted to the initial stages of
g
both 1975 physically and internationalization
culturally close foreign  reactive character leaving little
business market to room for entrepreneurial choice
more di t t countries
distant ti  h d t apply f very small fi
hard to l for ll firms
 stepwise and orderly or very large MNE
utilization of outward-
g g
going international
business operations


A summary of principal contents and major limits of the Uppsala model

Year of
Publication

Uppsala ‘psychic distance’  internationalization is not
Model Johanson & is defined in terms always linear and a
Vahlne 1977 of factors such as continuous process, firms
differences in have the opportunity to recall
language, culture
language culture, their foreign engagement
political systems  the concept concentrates on
etc. experimental learning through
 focus on commitment decisions but
experience, ignores imitative learning and
knowledge, and the phenomenon of new
learning ventures born global



A summary of principal contents and major limits of the network approach

f
Year of
Publication

Network Johanson &  assumption that a  empirically hard to test due
Model Mattson firm s
firm’s changing to the complexity of
1988 internationalization international networks and
Kogut & situation their influencing variables
Zander 1993 (international  need for industry-specific
Hohenthal business success insights which is difficult to
2001 or failure) is a result realize from an ‘outsiders
Björkman & of its positioning in perspective’
Forsgren a network of firms
2000 or institutions and
their connections to
each other




f
Year of
Publication

Network Hakansson &  networks are a set  tends to focus on oligopoly
Model Johanson of relationships markets and rather larger firms
2001 between suppliers,  deemphasizes opportunistic
Matthews manufacturers, behavior of the network
2002 merchandisers and partner
customers within  research results (e.g.,
long-term business through case studies) are hard
relations to generalize; predictions tend
 knowledge transfer to be vague
within the networks
has particular
importance




f
Year of
Publication

Network Johanson &  competitive  empirical research tends to
Model V hl 2003
Vahlne advantage through supply ‘spotlights’ of network
spotlights
dynamic structures
capabilities  longitudinally fact finding
fostered in research is expensive and
networks time consuming
 emerging global  further research concerning
economy as ‘firms repositioning in the
networks of network over time’ through
time
interlinked firms longitudinally research
necessary



A summary of principal contents and major limits of the international new venture
(born global), entrepreneurial, and time concepts

Year of
Publication

Inter- Oviatt &  rapid  concepts tend to focus on
national Mc Dougall internationalization small firms
New 1994, 2000 after inception  research tends to focus on the
Venture Jones & fostered by the owner or key decision maker
(Born Coviello 2002
2002, entrepreneur s
entrepreneur’s  model is influenced by
Global), 2005 behavior (risk sociological, psychological and
Entrepren- Zahra et al. awareness, business aspects, which leads
eurial and 2000 innovativeness and to an enormous complexity and
Time managerial lacking systematic
Concepts competence)




Year of
Publication

Inter- Sharma &  internationalization  empirical verification is difficult
p
national Blomstermo as a systems  hard to get a standardized and
New 2003 perspective of the structured model
Venture Bell et al. firm, environment and  length of time horizons is
(Born 2003 entrepreneur interpreted differently
Global), Hurmerinta-  success in
Entrepren- Peltomäki international business
eurial and 
2003 is dependent upon
p p
Time Young et al. the embedding of the
Concepts 2003 entrepreneur in cross-
border institutional
structures





Year of
Publication

Inter- DiGregorio et  internationalization  impact of a particular event of
national al 2008
al. is not always a time during internationalization
New Gabrielsson et linear and forward process is difficult to prove
Venture al. 2008 going process but  role of individuals have to be
(
(Born rather highly
g y analyzed in conjunction with
y j
Global), dynamic and cyclical their networks
Entrepren- as a reflection of
eurial and time
Time
Concepts



International market
I t ti l k t
entry modes



E.P.R.G. scheme and marketing concepts
Source: adapted from Wind et al. (1973)

Phase Phase Firm focus Management Marketing
contents policy concepts

Phase 1
Ph Ethnocentric
Eth ti Home
H Ethnocentric
Eth ti Export
E t
market strategy marketing

Phase 2 Polycentric
y Target
g Polycentric
y International
country strategy marketing

Phase 3 Regiocentric Regional Regiocentric Multinational
geographic strategy marketing
focus on
several target
markets
Phase 4 Geocentric Worldmarket Geocentric Transnational
strategy marketing



Market entry decision process

First step: Setting strategic priorities

Four basic strategic determinants

1. Degree of hierarchical control

2. Market entry rapidity

3. Proximity to the market

4. Investment risk




1. Degree of hierarchical control

Are tight or loose control mechanisms for foreign operations required?

The answer should consider issues such as

• protection of intellectual property rights,

• strategic market importance,

• degree of market experience,

• local government regulation, and

• the firm‘s resources (e.g., human or financial).




2.
2 Market entry rapidity

Fast or delayed foreign market entry?

The answer should consider issues such as

• the need to follow a key customer,

• the threat of fast technological product substitution
substitution,

• first mover advantages through a pioneer strategy,

• latecomer advantages through delayed market entry
entry,

• intensity of competition,

• huge investment costs requiring large sales volumes and
volumes,

• the risk of losing control due to hasty entry activity or incorrect partner
selection.




3. Proximity to the market

Is close or distant market proximity necessary?

The
Th answer should consider i
h ld id issues such as
h

• similar or different product design and service expectation of local
customers,

• market volume and growth forecasts,

• transportation lead time and costs (e.g., bulky products),

• desired local image building of the firm,

• socio cultural
socio-cultural issues difficult to evaluate from a distance, and

• foreign government rules (e.g., import tariffs and, investment incentives).




4. Investment risk

Is the firm able to cope with the investment risk?

The
Th answer should consider i
h ld id issues such as
h

• internal and external financial resources,

• dept t
d t to equity ratio,
it ti

• product margin,

• time horizon of expected return on investment,
ti h i f t d t i t t

• expected reactions of local competitors, and

• market forecast (turnover and margins).
k tf t (t d i )



Market entry mode categorization

Second step: Evaluation of market entry alternatives
S d t E l ti f k t t lt ti

1. Contracting (market mechanism)

2.
2 Cooperation (h b id f
C ti (hybrid forms)
)

3. Wholly owned subsidiary (hierarchy)




1. Contracting (market mechanism)

• indirect export (goods and services),
(g )

• direct export (goods and services),

• licensing (intellectual know-how and property rights),

• franchising (business concept),

• contract manufacturing (goods and services),

• management contract (intellectual, engineering and management know-
how), and

• turnkey contract (intellectual, engineering and management know-how).




2. Cooperation (hybrid forms)

• strategic alliances and

• international joint ventures.

3. Wholly owned subsidiary (hierarchy)

• overseas branch network and

• a wholly owned manufacturing subsidiary.



Market entry modes

• Indirect d direct
I di t and di t export
t

• Overseas branches

• Contract
C t t manufacturing
f t i

• Licensing

• Franchising
F hi i

• Strategic alliances

• International j i t ventures
I t ti l joint t

• Turnkey contracts

• Management contracts
M t t t

• Wholly owned subsidiary



Market entry modes

Indirect and direct export

• export: sale of g
p goods or services outside the country of p
y production

• indirect exports: transactions to a domestic exporting company or to a
domestic branch of a foreign importer

• direct exports: relation with the customer abroad.



Market entry modes

Licensing

• contractual transaction

• there is an owner of knowledge assets (intellectual or industry know how)

• ‘sells the right’ to use the assets

• licensor transfers, but does not give up, the ownership of the know-how
know how

• the licensee

- takes entrepreneurial risks

- undertakes financial investments in facilities for material procurement,

manufacturing, marketing, sa es a d d st but o o t e goods a d
a u actu g, a et g, sales and distribution of the and

services.



Market entry modes

Franchising

• contractual agreement between a franchisor and usually many franchisees

• sales of a proven business concept

• franchisees: typically small business owners

• right to commercialize goods or services under franchisor’s’ established brand name
(market goodwill)



Market entry modes

Franchising

• franchise system combines,

- the advantages of research, and development activities

- and economy of scale potentials offered by the franchisor with the local

geographical knowledge, cultural sensitivity and entrepreneurial talents of the

franchisee



Market entry modes

Contract manufacturing

1. outsourcing components (pre-assembly)

2. finished products (final-assembly)

3. complete manufacturing process (full-assembly)

(original equipment manufacture (OEM))



Market entry modes

Management contracts

• a firm uses some of its personnel to assist a firm in a host country for a certain period of
time against a specified fee

• keep the operations going until local management is trained

• an essential part of management contracts includes the qualifications of personnel in
the host country



Mutual obligations of management contracts
Source: adopted from Foscht / Podmenik (2005)

Management contract
cooperation

Contracting fees Managed
firm firm
know-how
know how



Mutual obligations of management contracts
Source: modified from Foscht / Podmenik (2005)

Contracting firm functions: Managed firm functions:

 management responsibility  payment of fees

 granting entrepreneurial know-how  take over of business risks

 granting operational good-will  input of business objectives: financial,
manufacturing, and human resources
 serving network relations
g
 learning capabilities
 share of experience



Market entry modes

Turnkey contracts
T k t t

• turnkey
t k operation: a company designs, constructs, starts-up a project i a f i country
ti d i t t t t j t in foreign t
(e.g., building of a power plant) and qualifies local personnel

• turnkey operation: attractive for firms with specific engineering and/or complex
technological process know-how

• the BOT (build, operate, transfer): variation of the turnkey operation

• the firm operates the facility for a fixed period of time

• during this operating period, the company earns back the investment, plus a profit



Market entry modes

Strategic alliances

• agreements between two or more participating organizations to strengthen their mutual
competitive p
p position and to fulfill business objectives that are rather long term oriented
j g

• access of strategically relevant resources

• formal difference compared to a j
p joint venture: a strategic alliance is typically a non-
g yp y
equity cooperation (partners do not commit equity) and partner firms remain legally
independent



Market entry modes

Strategic alliances

Main purposes of strategic alliance building

1. strategic alliances facilitate entry into a foreign market (partnership with a local
firm)

2. an alliance, supposing it runs well, is a way to bring together complementary skills
and assets

3. bundle access to similar customer segments

4. establish a technological industry standard



Market entry modes

International joint ventures

• two or more legally independent organizations decide to undertake a common
business and create a new enterprise as a legal entity

• an equal joint venture: each party contributes the same amount of financial
investment

• a majority joint venture secures control of strategic decisions



Market entry modes

International joint ventures

• same industry and similar value-added activities (horizontal joint venture)

• different stages of the industry value-added chain (vertical joint venture)

• diversified business activities (conglomerate joint ventures)

• Definition of an international joint venture:

- at least one parent organization is headquartered outside the venture‘s
venture s

country operation

- the venture has a significant level of operations in more than one country



Market entry modes

Reasons for instability in international joint ventures

1. opportunistic behavior at least of one partner

2. management redirects strategic focus or changes key objectives

3
3. pa t e s e egot ate co t acts (e.g., on technology transfer or a age e t)
partners renegotiate contracts (e g , o tec o ogy t a s e o management)

4. reconfiguration of the venture‘s ownership and control structures

5. uncertain managerial roles
g

6. diverse cultural backgrounds of the partners

7. relationship with each p
p parent company ( g , limitation of their authority)
p y (e.g., y)

8. lack of mutual trust

9. major technological p
j g product developments not noticed
p



Market entry modes

Overseas branches

• representative office or sales branch in the foreign target markets

• the lowest form of financial involvement in the category of foreign direct
investment.



Market entry modes

Wholly owned subsidiary

• describes an enterprise that owns all of the capital invested abroad such as procurement,
R&D, l
R&D sales, or production f iliti
d ti facilities

• the firm either sets up a new operation (start-up or greenfield) in the foreign target
country or it acquires an established firm

• there are two different types of acquisitions:

- horizontal acquisition: a firm acquires another firm in the same location of the
industry chain

- vertical acquisition: a firm acquires the supplier or distributor



Market entry modes

Wholly owned subsidiary

• acquisitions offer the firm the opportunity to develop capabilities and expertise by
acquiring new knowledge from the acquisition partner

• in contrast to acquisitions the establishment of a firm through a greenfield investment
acquisitions,
(foreign start-up) entails building an entirely new organization



Market entry mode grouping based on four decision determinants

low degree of hierarchical control high
high

low
indirect export contracting
direct export
licenses/franchising
li /f hi i

proxim to the market
apidity

contract manufacturing
mark entry ra

e
management contracts
turnkey contracts
foreign direct

mity
ket

strategic alliances
t t i lli investment
IJV
overseas branch
cooperation network
manufacturing
low

high
plant

low
l investment risk
i t t i k high
hi h



An overview of strategic decision determinants of the market entry modes:
indirect export

Market Entry Degree of Investment Proximity Strategy Potential
entry rapidity hierarchical risk to the recommended for strategic risks
mode control market the firm if

Indirect high low low low  no experience in  dependency on
export
p foreign trade
g agent’s expertise
g p
 rather simple  commission costs
products with  divided loyalties of
rudimental after middleman / agent
sales service  trade barriers
 new market  high
potentials abroad transportation costs
 compensation of in case of bulky
low seasonal sales products
in the home markets
i th h k t



direct export


Direct high low low low  less experience  trade barriers
export
p in foreign trade
g  high
g
 elementary pre- transportation
and after sales costs in case of
service bulky products
 new market  language /
potentials abroad cultural
 compensation of challenges
low seasonal sales  unfamiliar
in the home market
markets environment



licensing
Market Entry Degree of Investment Proximity Strategy Potential strategic
entry rapidity hierarchical risk to the recommended for risks

Licensing high low low low  lack of financial  licensee may damage
or organizational reputation
resources  risk of technology
gy
 technological copy by licensee
fast developing  royalty fees lower
industries than value of
 fast market entry technology transfer
and penetration  limited experience
desired curve/ economies of
 foreign direct scale effects of licensor
investment too  licensee becomes
risky competitor



franchising

entry rapidity hierarchical risk to the recommended strategic risks
mode control market for the firm if

Franchising high low low low  economies of  franchisee may
scale realization harm reputation
p
 fast market  partner’s
entry and disagreements
penetration over
desired objectives
 sales of a  foreign partner
business concept selection
instead of a single  financial stability
product or service of the partner



An overview of strategic decision determinants of the market entry mode:
contract manufacturing

Market Entry Degree of Investment Proximity Strategy Potential strategic risks
entry rapidity hierarchical risk to the recommended

Contract medium low- low- medium  cost-  loss of manufacturing
manufac- medium medium competitive
p involvement and
turing markets control
 saving  reputation damage
logistics cost (i.e., quality,
(i e quality working
 expansion conditions)
of capacities  communication
and product complexity
penetration  know-how transfer to
worldwide local firm
 foster new competitor



management contracts

Market entry Entry Degree of Investment Proximity Strategy Potential
mode rapidity hierarchical risk to the recommended strategic risks
control market for the firm if

Management medium medium medium medium  specified  foster potential
contracts managerial
g competitor
p
and/or  countries with
technological uncertain local
expertise governments
 market entry policy and fragile
when local legal environment
government  lack of educated
restrictions staff in the target
expected country



turnkey contract

Market
M k t Entry
E t Degree of I
D f Investment P i it St t
t t Proximity Strategy Potential t t i
P t ti l strategic
entry rapidity hierarchical risk to the recommended for the risks
mode control market firm if

Turnkey medium medium medium medium  specific engineering  lack of qualified
contract and complex human resource
technological
t h l i l pool i th t
l in the targett
process know-how country
availability (i.e.,  relation with host
building of an governments which
environment friendly are usually located
power plant or public in politically and
water distribution economically
and/or cleaning rather fragile
facilities)
) countries



strategic alliance


Strategic medium low- low- medium  bundle of strategic  partner
alliance medium medium resources selection
 mutual  know-how
strengthening of transfer
competitive position  opportunistic
through behavior
complementary  reputation
skills damage
 set of  synergy effects
technological below
industry t d d
i d t standards expectation
t ti



international equity joint venture

Market
M k t Entry
E t Degree of I
D f Investment P i it St t
t t Proximity Strategy Potential t t i i k
P t ti l strategic risks
entry rapidity hierarchical risk to the recommended

Inter- medium medium medium medium  risk sharing  partner selection
national  combined  know-how transfer
equity market entry  opportunistic behavior of
joint  joint activities the partner
venture (e.g., R&D,  unclear ownership
marketing) ) structures create
 economies of confusion
scale  risk of unbalanced
 combination of efforts of the partner firms
complementary  minor synergy effects
resources and  partner firm may y
skills become competitor


overseas branch network

Market
M k t Entry D
E t Degree of I
f Investment P i it St t
t t Proximity Strategy recommended
d d Potential
P t ti l
entry rapidity hierarchical risk to the for the firm if strategic risks
mode control market

Over- low high high high  experience in  unfamiliar
seas international business environment and
branch  large foreign market marketing policies
network  complex products  increased
 differentiation strategy by communication
local service/ consulting
l l i / lti andd
 advanced after-sales coordination
network necessary  investment
 proximity to local volume
customers and their  language and
design and communication cultural
preferences challenges


wholly owned manufacturing plant

Market Entry Degree of Investment Proximity Strategy Potential strategic
entry rapidity hierarchical risk to the recommended for the risks
mode control market firm if

Wholly- low high high high  advanced  unfamiliar
owned experience in environment and
manu- international business work ethics
facturing  local cost  coordination
plant advantage complexity
 subsidies or tax  legal aspects
incentives  investment volume
 large foreign
a ge o e g  language a d
a guage and
market potentials cultural challenges
 heavy and bulky  severe response
products of local firms



Case studies



European television set market 1990-2011 without Turkey and Russia (sales in
million units – 2009 and 2011 are forecasts)
Source: DisplaySearch (2008) and market research by the author

40

35

30
M on TV Units

25
hipments

20
Sh
illio

15

10

5

0
1990 1998 2003 2005 2007 2009 2011
CRT 28 36 37 26 10 3 0,5
PDP 0 0 0,4 2 3 5 6
LCD 0 0 1 9 26 34 38
Projection 0 0,5 0,3 0,3 0,1 0 0
OLED 0 0 0 0 0 0,1 1

Year



East European television set market volume including the non-Asian part of Turkey
and Russia segmented by major technologies in million units (2007 record and
2008-2012 forecast)
Source: Di l S
S DisplaySearch, 2008
h

Million Units
20
18
16
14
12 PDP TV
10 LCD TV
8 CRT TV
6
4
2
0
2007 2008 2009 2010 2011 2012



Conglomerate diversification structure of Samsung (status April 2008)
Source: Author based on various company documents, verified by Park, N.

Samsung Group
Chairman:
Mr. Lee
Chairman
Office

Machinery &
M hi Electronics
El t i Trade
T d & Financial
Fi i l Nonprofit
N fit
Chemical Industries Industries Services Services Organizations



Strategic business units of Samsung
Source: Author based on various company documents (status April 2008)

Machinery &
Chemical Industries

Samsung
S Samsung
S Samsung
Sams ng
Samsung Samsung Total Samsung
Heavy Fine BP
Techwin Petrochemicals Petrochemicals
Industries Chemicals Chemicals




Electronics
Industries

Samsung
S Samsung
S Samsung
S Samsung
S Samsung
S Samsung
S
Electronics SDI Electro- Networks Corning SDS
Mechanics Precision Glass




Trade &
Services

The Shilla
Th Shill
Samsung Samsung Cheil Samsung Cheil S1
Hotel &
Corporation Engineering Industries Everland Communications Corporation
Resorts




Financial
Services

Samsung
S Samsung Fi
S Fine Samsung
S Samsung
Sams ng
Samsung Samsung
Life & Marine Investment Card Venture
Securities
Insurance Insurance Trust Investment




Nonprofit
Organizations

Samsung
S Samsung
S Samsung
S
Samsung Samsung HR Samsung
Economic Advanced Welfare Samsung Samsung
Medica Development Foundation
Research Institute of and Ho-Am Lions Press
Center Center of Culture
Institute Technologygy Foundation



Samsung Group net sales 1999-2007 (2007 forecast)
Source: Annual Reports

Samsung Group - Net sales
200
lars

150
lion Doll

100
Bill

50

0
1999 2000 2001 2002 2003 2004 2005 2006 2007

Year



Samsung Group net income 1999-2007 (2007 forecast)

Samsung Group - Net income
15
lars

10
0
Billion Doll

5

0
1999 2000 2001 2002 2003 2004 2005 2006 2007

Year



Samsung Electronics net sales 1999-2007

Samsung Electronics - Net sales
150
125
lars

100
llion Doll

75
50
Bil

25
0
1999 2000 2001 2002 2003 2004 2005 2006 2007

Year



Samsung Electronics net income 1999-2007

Samsung Electronics - Net income
15
ars
lion Dolla

10

5
Bill

0
1999 2000 2001 2002 2003 2004 2005 2006 2007

Year



Organization of Samsung Electronics

Samsung
Electronics
Division

Samsung
S Samsung
S
Samsung Samsung Samsung Samsung
Electro Corning
SDI Electronics SDS Networks
Mechanics Precision Glass



Strategic Business Units of Samsung Electronics

Samsung Electro Mechanics

• Electronic Components

Samsung Corning Precision Glass

• Printed circuit board for TFT-LCD

• Cathode Ray Glass Tube Bulb and Colored Glass for TFT-LCD
Tube, TFT LCD


Mario glowik charts_market_entry_strategies_july_2009

Mario glowik charts_market_entry_strategies_july_2009

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