Entry strategies of companies


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these are different entry strategies of companies to go global. also specified the need to go global and the time when the operations should be stopped in an international business,

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Entry strategies of companies

  1. 1. Entry Strategies in International Markets Jostin S Adi shankara Institute of Management and Technology 1
  2. 2. Introduction • The need for entering a foreign market is a strategic management decision. • A firm may enter in overseas markets to prolong product life cycle. Products may be at a decline stage in the home market, but may have growing demand in overseas markets, especially in the least developed countries. 2
  3. 3. Other factors • Saturation in local markets. • Competitors. • New economic grounds. 3
  4. 4. 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
  5. 5. 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
  6. 6. Exporting • Exporting is the process of selling of goods and services produced in one country to other countries. • Export brings in revenue to the firm. 6
  7. 7. Direct export • Direct exports represent the most basic mode of exporting made by a (holding) company. • Direct export works the best if the volumes are small. The main characteristic of direct exports entry model is that there are no intermediaries. 7
  8. 8. Advantages • Control over selection of foreign markets and choice of foreign representative companies • Good information feedback from target market, developing better relationships with the buyers • Better protection of trademarks, patents, goodwill, and other intangible property • Potentially greater sales, and therefore greater profit, than with indirect exporting 8
  9. 9. Disadvantages • Higher start-up costs and higher risks as opposed to indirect exporting • Requires higher investments of time, resources and personnel and also organisational changes • Greater information requirements • Longer time-to-market as opposed to indirect exporting 9
  10. 10. Indirect export • Indirect exports is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign market. 10
  11. 11. Advantages • Fast market access • Concentration of resources towards production • No direct handle of export processes 11
  12. 12. Disadvantages • Higher risk than with direct exporting • Little or no control over distribution, sales, marketing, etc. as opposed to direct exporting • Inability to learn how to operate overseas • Wrong choice of market and distributor may lead to inadequate market feedback affecting the international success of the company 12
  13. 13. • Infosys • Cipla ltd 13
  14. 14. Licensing • A firm in one country allows a firm in other country to use its intellectual property. • The licensee will have to pay royalty to use the property. • Benefits: • Appealing to small companies that lack resources • Faster access to the market • Rapid penetration of the global markets 14
  15. 15. Licensing • Disadvantages : • Licensee may not be committed • Lack of enthusiasm on the part of a licensee • Licensee may become a future competitor 15
  16. 16. Licensing • In India for CoCa Cola the bottling license is given to Hindustan coca cola beverages ltd. • Covers approximately 65% of bottling operations for the Coca-Cola System in India. 16
  17. 17. Franchising • There will be a parent company ,who will allow an independent entity to do business in a prescribed form. • Franchisor and the franchisee • This right allows to use the franchisor’s product, name, production techniques, marketing techniques etc. 17
  18. 18. • Benefits: • Overseas expansion with a minimum investment • Franchisees’ profits tied to their efforts • Availability of local franchisees’ knowledge 18
  19. 19. Franchising • Drawbacks : • Revenues may not be adequate • Limited franchising opportunities overseas • Lack of control over the franchisees’ operations • Problem in performance standards • Cultural problems 19
  20. 20. • Dominos pizza – managed by Jubilant foodworks ltd. • Have rights to operate in India, Bangladesh, Sri lanka, Nepal. 20
  21. 21. Contract Manufacturing • A company does international marketing contract with firms in foreign countries to manufacture, assemble products while retaining the rights to market those products. 21
  22. 22. 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 22
  23. 23. Contract Manufacturing • Drawbacks : • Contract manufacturer may become a future competitor • Lower productivity standards • Issues of quality and production standards 23
  24. 24. 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 24
  25. 25. • Nike has a contract manufacturing for its textiles. The major part of clothing is prepared in Tirupur, India. 25
  26. 26. Joint Ventures • Cooperative joint venture • share revenues, expenses and assets. • both parties are equally invested in the project in terms of money, time, and effort • Benefits: • • • • Higher rate of return and more control over the operations Sharing of resources Access to distribution network Contact with local suppliers and government officials 26
  27. 27. Joint Ventures • Drawback: • 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 27
  28. 28. 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 28
  29. 29. • Bharti Walmart between bharti enterprises and walmart • Sony-Ericsson is a joint venture by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones 29
  30. 30. Mergers and Acquisitions Provides instant access to markets and distribution network. It is a corporate strategy of dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector 30
  31. 31. • 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 31
  32. 32. • The take over of Land rover and Jaguar by TATA is an example. 32
  33. 33. 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. 33
  34. 34. Exiting a Market • Reasons for exit: • Sustained losses • Volatility • Premature entry • Ethical reasons • Intense competition • Resource reallocation 34
  35. 35. Thank You 35