BUSINESS APPLICATION

1. Global Entry Strategies
Presented by: Shashank Choudhary

2. Content
Global Entry Strategy
Major Issues In Global Entry
Political Issues
Rules Of Entry Mode Selection
Benefits Of Going Global
Factors Affecting Modes Of Entry
Global Market Entry Strategy
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3. Global Entry Strategy
 A Global Entry Strategy is the planned method of delivering goods or services to a
new target market and distributing them there. When importing or exporting services,
it refers to establishing and managing contracts in a foreign country.
 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.
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4. Major Issues In Going Global
 Global marketers have to make a multitude of decisions regarding the entry mode
which may include:
(1) the target product/market
(2) the goals of the target markets
(3) the mode of entry
(4) The time of entry
(5) A marketing-mix plan
(6) A control system to check the performance in the entered market
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5. Political Issues
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Political Issues
 Political issues will be faced mostly by the companies who want to enter a country
that with unsustainable political environment
 A political decisions will affect the business environment in a country and affect the
profitability of the business in the country
 Organizations with investments in such opaque countries as Zimbabwe, Myanmar,
and Vietnam have long-term experiences about how the political risk affects their
business behaviors

6. GROUP NO.7 6
Examples of Political issues
1.The politically jailing of Mikhail Khodorkovsky, the business giant, in Russia
2. The "Open-door" policy of China
3.The Ukraine disputed elections resulting in the uncertain president recent years
4.The corrupt legal system in many countries, such as Russia
Contd.

7. GROUP NO.7 7
 There are three different rules of entry based on the statement of Hollensen
1. Naïve rule
2. Pragmatic rule
3. Strategy rules
 Besides these three rules, managers have their own ways to select entry modes
 If the company could not generate a mature market research, the manager tend to
choose the entry modes most suitable for the industry or make decisions by intuition
Rules Of Entry Mode Selection

8. GROUP NO.7 8
1. Naïve rule
 The decision maker uses the same entry mode for all foreign markets
 The companies use this rule as the entry mode selection ignore the differences of
individual foreign markets
 The performance of this selection could not be calculated, because it highly depends
on the luck of the manager
Contd.

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2. Pragmatic rule
 The decision maker uses a workable entry mode for each foreign market
 which means that the manager use different entry modes depend on the time stage
or the business stage
 For example, as the first step to international business, companies tend to use
exporting
Contd.

10. Contd.
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3. Strategy rules
 This approach means that the company systematically compared all of the entry
modes and evaluated the value before any choice is made
 This approach is common in large firms, because the research requires resources,
capital and time
 It is rarely to see a small or medium-sized company use this approach
Contd.

11. Benefits Of Going Global
 More Revenue Streams
A primary motive to become global is to
gain access to new sources of revenue.
Companies that have saturated their
local markets and dried up growth
opportunities close to home can turn to
global expansion to grow their business.
Successful navigation in multiple
national markets provides a much
broader customer base from which you
can generate business.
 Resources and Supplies
Global companies can use capital raised in
other markets for further marketing
and expansion. Plus, global companies
also gain access to new materials and
resources and have the ability to form
strategic alliances around the globe.
This leads to synergy as new
relationships and suppliers are used to
strengthen the global brand.
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12. Contd.
 Market Development
Globalization also provides business some
level of insulation from slumping
performance in one country or region.
In essence, global customer diversity
spreads business risks across a broader
customer base. This means that if the
economy, supply issues, environment or
government regulations in one country
negatively affect the business, it can still
find success in other countries.
 Larger Talent Pool
While creating a strong global work
culture is difficult, global companies
have access to a much greater pool of
talent. Many set up global work
teams where marketing or human
resources employees can collaborate
with colleagues virtually throughout
the company. Having diverse
employees who can interact well
with diverse populations and
business partners is also an
advantage.
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Contd.

13. Factors Affecting Modes Of Entry
 External Factors:
1. Market Size: An international marketer has to keep in mind when selecting an entry
mode. Countries with a large market size justify the modes of entry with long-term
commitment requiring higher level of investment
2. Market Growth: Most of the large, established markets, such as the US, Europe, and
Japan, has more or less reached a point of saturation for consumer goods such as
automobiles, consumer electronics. Therefore, the growth of markets in these countries
is showing a declining trend
3. Government Regulations: The selection of a market entry mode is to a great extent
affected by the legislative framework of the overseas market. The governments of most
of the Gulf countries have made it mandatory for foreign firms to have a local partner
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14. Contd.
4. Level of Competition: Presence of competitors and their level of involvement in an
overseas market is another crucial factor in deciding on an entry mode so as to
effectively respond to competitive market forces
5. Physical Infrastructure: The level of development of physical infrastructure such as
roads, railways, telecommunications, financial institutions, and marketing channels is a
pre-condition for a company to commit more resources to an overseas market
6. Level of Risk: From the point of view of entry mode selection, a firm should evaluate
the following risks:
a) Political Risk: Political instability and turmoil dissuades firms from committing more
resources to a market.
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15. Contd.
b) Economic Risk: Economic risk may arise due to volatility of exchange rates of the
target market’s currency, upheavals in balance of payments situations that may affect
the cost of other inputs for production, and marketing activities in foreign markets.
International companies find it difficult to manage their operations in markets wherein
the inflation rate is extremely high.
c) Operational Risk: In case the marketing system in an overseas country is similar to
that of the firm’s home country, the firm has a better understanding of operational
problems in the foreign market.
7. Production and Shipping Costs: Markets with substantial cost of shipping as in the
case of low-value high-volume goods may increase the logistics cost.
8. Lower Cost of Production: It may also be one of the key factors in firms deciding to
establish manufacturing operations in foreign countries.
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16. Contd.
 Internal Factors:
1. Company Objectives: Companies operating in domestic markets with limited
aspirations generally enter foreign markets as a result of a reactive approach to
international marketing opportunities
2. Availability of Company Resources: Venturing into international markets needs
substantial commitment of financial and human resources and therefore choice of an
entry mode depends upon the financial strength of a firm.
3. Level of Commitment: In view of the market potential, the willingness of the company
to commit resources in a particular market also determines the entry mode choice.
Companies need to evaluate various investment alternatives for allocating scarce
resources
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17. Contd..
4. International Experience: A company well exposed to the dynamics of the
international marketing environment would be at ease when making a decision
regarding entering into international markets with a highly intensive mode of entry
5. Flexibility: Companies should also keep in mind exit barriers when entering
international markets. A market which presently appears attractive may not necessarily
continue to be so.
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18. Global Market Entry Strategies*
Trade Related Contractual Investment Entry
Exporting
Indirect
Piggy-
Backing
Direct
Management
Contracts
Franchising
Turn Key
Projects
Licensing
Contract
Manufacturing
Joint
Venture
Mergers &
Acquisitions
Foreign
Direct
Investment
Over Seas
Assembly
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GROUP NO.7 *Source: International Business by Rakesh Mohan Joshi(Pg No.443)
Strategic
Alliance
Wholly
Owned
Subsidiaries
Countertr
ade

19. Trade Related
Entry

20. Exporting
 Exporting is the most traditional and well established form of operating in foreign markets.
 Exporting can be defined as the marketing of goods produced in one country into another. Whilst no
direct manufacturing is required in an overseas country, significant investments in marketing are
required.
 The tendency may be not to obtain as much detailed marketing information as compared to
manufacturing in marketing country;
 Exporting commonly requires coordination between four players –
 Exporter
 Importer
 Transport provider
 Government
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21. Methods of exporting
Direct Exporting
In direct exporting the
organisation may use an
agent, distributor, or
overseas subsidiary, or act
via a Government agency.
The exporter's task is to
choose a market, find a
representative or agent,
set up the physical
distribution and
documentation, promote
and price the product.
Indirect Exporting
Indirect export is the
process of exporting
through domestically
based export
intermediaries. The
exporter has no control
over its products in the
foreign market.
Piggy-Backing
This means using a
company with an
established export
distribution system to sell
your product as well as its
own.
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22. Methods Of Direct Exporting
Agents
A representative that
assists a business in
transporting and/or
selling their products in
a foreign country.
An export agent might
be paid a sales
commission by the
company they represent
or have distribution
rights for a product
within a specified region.
Overseas Distributors
Overseas distributors buy
your goods from you and
then sell them on in an
overseas market.
Distributors may expect
heavy discounts and a long
period of exclusivity, so you
need to research and choose
one with proven experience
in your target market.
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Foreign Retailers
A company may also sell
directly to a foreign
retailer, although in
such transactions,
products are generally
limited to consumer
lines.. Many large
retailers maintain
overseas buying offices
and use these offices to
sell abroad when
practicable.

23. Contd.
Direct Sales To End Users
A business may sell its products or
services directly to end users in foreign
countries. These buyers can be foreign
governments; institutions such as
hospitals, banks, and schools; or
businesses. Buyers can be identified at
trade shows, through international
publications, or through government
contact.
Counter Trade
Countertrade means exchanging goods or
services which are paid for, in whole or
part, with other goods or services, rather
than with money. A monetary valuation
can however be used in countertrade for
accounting purposes. In dealings between
sovereign states, the term bilateral
trade is used.
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24. Methods Of Indirect Exporting
Export
Management
Companies (EMCs)
These are similar to
ETCs in the way that
they usually export for
producers. Unlike ETCs,
they rarely take on
export credit risks and
carry one type of
product, not representing
competing ones. Usually,
EMCs trade on behalf of
their suppliers as their
export departments
Export Trading
Companies (ETCs)
These provide support
services of the entire export
process for one or more
suppliers. Attractive to
suppliers that are not
familiar with exporting as
ETCs usually perform all the
necessary work: locate
overseas trading partners,
present the product, quote on
specific enquiries, etc.
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Export merchants are
wholesale companies that
buy unpackaged
products from
suppliers/manufacturers
for resale overseas under
their own brand names.
The advantage of export
merchants is promotion
Export Merchants

25. Direct exporting
Advantages
 Control over selection of foreign
markets and choice of foreign
representative companies
 Good information feedback from target
market
 Better protection of trademarks,
patents, goodwill, and other intangible
property
 Potentially greater sales, and therefore
greater profit
Disadvantages
 Higher start-up costs and higher risks
as opposed to indirect exporting
 Requires higher investments of time,
resources and personnel and also
organizational changes
 Greater information requirements
 Longer time-to-market as opposed to
indirect exporting
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26. Indirect exporting
Advantages
 Fast market access
 Concentration of resources towards
production
 Little or no financial commitment.
 Low risk exists for companies who
consider their domestic market to be
more important.
 Export management is outsourced,
alleviating pressure from management
team
 No direct handle of export processes
Disadvantages
 Little or no control over distribution,
sales, marketing, etc. as opposed to
direct exporting
 Wrong choice of distributor, and by
effect, market, may lead to inadequate
market feedback
 Potentially lower sales as compared to
direct exporting
 Export partners that incorrectly select a
specific distributor/market may hinder
a firm's functional ability
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27. Piggy Backing
Advantages
 You don’t have to have international
experience yourself
 Will gain fast entry to the international
market
 Will have little or no increased financial
commitment.
Disadvantages
 Having only a low level of control
 Choosing the wrong market and the
wrong distributor
 Receiving inadequate market feedback
 Achieving potentially lower sales
 Erosion of your brand.
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28. Contractual
Entry

29. Contractual Manufacturing
Contractual entry modes are better suited to intangible products
Since some products are intangible, companies can use a variety of
contractual entry modes to market to market highly specialized assets
and skills in international markets
It Includes Licencing, franchising, manufacturing contracts, turnkey
projects etc.
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30. Methods Of Contractual Manufacturing
Franchising
It is a system in which semi-independent
business owners (franchisees) pay fees and
royalties to a parent company (franchiser)
in return for the right to become
identified with its trademark, to sell its
products or services
Manufacturing
Manufacturing is a contractual mode of
market entry that can give your brand
and company local manufacturing cost
advantages whilst you still retain
marketing, sales and distribution rights
and responsibilities for your brand
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31. Contd.
Licensing
Licensing is the contractual granting of
intellectual property rights which could be
in the form of technology, patents, or
trademarks to brand usage. It is a low
cost of entry mode and may lead to
possible further direct investment with
licensees down the line
Management contracts
Here, one company provides another
company with managerial expertise for a
specified period of time. Sectors that
commonly use management contracts are
utilities services
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32. Contd.
Turnkey Projects
A turnkey project refers to a
project when clients pay
contractors to design and construct
new facilities and train personnel.
A turnkey project is a way for a
foreign company to export its
process and technology to other
countries by building a plant in
that country.
Strategic Alliance
• A strategic alliance is an agreement
between two or more parties to pursue a
set of agreed upon objectives needed
while remaining independent
organizations. Partners may provide the
strategic alliance with resources such as
products, distribution channels,
manufacturing capability, project
funding, capital equipment, knowledge,
expertise, or intellectual property.
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33. Franchising
Advantages
 Low political risk
 Low cost
 Allows simultaneous expansion into
different regions of the world
 Well selected partners bring financial
investment as well as managerial
capabilities to the operation
Disadvantages
 Maintaining control over franchisee may be
difficult
 Conflicts with franchisee are likely, including
legal disputes
 Preserving franchisor's image in the foreign
market may be challenging
 Requires monitoring and evaluating
performance of franchisees, and providing
ongoing assistance
 Franchisees may take advantage of acquired
knowledge and become competitors in the
future
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34. Manufacturing
Advantages
 Saving in capital expenditure
 Reduced upfront risk associated
 Two-way technology transfer and
learning
 Intellectual property around your
product composition or manufacturing
process
Disadvantages
 Communication Barriers
 Dependence on Suppliers
 If suppliers make poor choices, it could
result in higher costs, declining product
quality and inefficient production
practices
 The reputation of a company and its
brands can be damaged by sending
production abroad
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35. Licencing
Advantages
 Obtain extra income for technical
know-how and services
 Reach new markets not accessible by
export from existing facilities
 Quickly expand without much risk and
large capital investment
 Pave the way for future investments in
the market
 Retain established markets closed by
trade restrictions
Disadvantages
 Lower income than in other entry
modes
 Loss of control of the licensee
manufacture and marketing operations
and practices leading to loss of quality
 Risk of having the trademark and
reputation ruined by an incompetent
partner
 The foreign partner can also become a
competitor by selling its production in
places where the parental company is
already in
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36. Management Contracts
Advantages
 Benefit from hiring a contract
management company to handle the
day-to-day details of your company
 Responsibilities you can turn over to the
management team
 expertise of an entire management team
that usually brings to the table
experience in a number of management
areas, such as employee tax codes,
marketing and accounting.
Disadvantages
 Loss of privacy issue and rise of
confidential disputes. These contracts
make the business expose to ethical
breaches, fraud and public exposure
 Management contract companies have
the information of the business finance
also. This puts the business in a
vulnerable position
 If a country is going through a political
or social turmoil, the managers life is
put at a risk to carry on the business in
such a situation
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37. Turnkey Projects
Advantages
 Possibility for a company to establish a
plant and earn profits in a foreign
country especially in which foreign
direct investment opportunities are
limited and lack of expertise in a
specific area exists
 Industrial companies that specialize in
complex production technologies
normally use turnkey projects as an
entry strategy
Disadvantages
 Risk of revealing companies secrets to
rivals
 Takeover of their plant by the host
country
 Entering a market with a turnkey
project can prove that a company has
no long-term interest in the country
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38. Strategic Alliance
Advantages
 The partnerships allow the involved
companies to offset their market
exposure.
 Using the partner´s distribution
networks in combination with taking
advantage of a good brand image can
help a company to grow faster
 Partnerships can help to lower costs,
especially in non-profit areas like
research & development.
Disadvantages
 In a Strategic Alliance the partners
must share resources and profits and
often skills and know-how. This can be
critical if business secrets are included
in this knowledge
 Focusing and committing is necessary to
run a Strategic Alliance successfully but
might discourage from taking other
opportunities
 Sometimes the decision powers are
distributed very unevenly
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39. Investment
Entry

40. Methods For Investment Entry
Overseas Assembly
The U.S. Bureau of Labor Statistics (BLS)
defines outsourcing as "the movement of
work that was formerly conducted in-
house, by employees paid directly by a
company, to a different company."
Foreign Direct Investment
Broadly, foreign direct investment
includes "mergers and acquisitions,
building new facilities, reinvesting profits
earned from overseas operations and
intra company loans". In a narrow sense,
foreign direct investment refers just to
building new facility, a lasting
management interest (10 percent or more
of voting stock) in an enterprise operating
in an economy other than that of the
investor
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41. Contd..
Mergers & Acquisition
Mergers and acquisitions (M&A) are
transactions in which the ownership
of companies, other business
organizations or their operating units are
transferred or combined.
A merger is a legal consolidation of two
entities into one entity
An acquisition occurs when one entity
takes ownership of another
entity's stock, equity interests or assets.
Joint Venture
A joint venture (JV) is a business entity
created by two or more parties, generally
characterized by shared ownership,
shared returns and risks, and shared
governance. Key elements of a joint
venture's design include: 1) the number of
parties; 2) the geographic, product,
technology and value-chain scope within
which the JV will operate; 3) the
contributions of the parties; 4) the
structural form
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42. Contd.
Wholly Owned Subsidiary
A wholly owned subsidiary includes:
Greenfield investment and Acquisitions
Greenfield investment is high risk due to
the costs of establishing a new business in
a new country.
Acquisition has been increasing because it
is a way to achieve greater market power
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43. Wholly Owned Subsidiaries
Advantages
 Wholly-owned subsidiary reduces risk
over losing control when there is
technological competence.
 Give firm tight control over operations
in country- engage in strategic
coordination with profits.
 Can realize location & experience curve
economies – centrally determined
decisions
Disadvantages
 Most costly method of market Entry.
 Risk associated with learning to do
business in a new culture
 By applying acquisitions, some
companies significantly increased their
levels of debt which can have negative
effects on the firms
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44. Overseas Assembly
Advantages
 It ensures lower cost because of the
availability of cheap overseas labor ,
land, etc.
 Outsourced labor -- especially overseas
labor -- often includes technically
skilled, highly educated and
multilingual workers
Disadvantages
 Security is also generally less certain
overseas than in the U.S., sometimes
significantly so. Crime, terrorism,
corruption and political instability can
all cut into your bottom line.
 Outsourcing your production,
particularly overseas, usually means
that you cede a certain amount of daily
control to your contractor.
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45. Foreign Direct Investment
Advantages
 Foreign direct investment can stimulate
the target country’s economic
development, creating a more conducive
environment
 Foreign direct investment creates new
jobs, as investors build new companies
in the target country, create new
opportunities.
 One big advantage brought about by
FDI is the development of human
capital resources
 Can receive tax incentives
Disadvantages
 As it focuses its resources elsewhere other
than the investor’s home country, it can
sometimes hinder domestic invest
 Because political issues in other countries
can instantly change, it is very risky.
 It can affect exchange rates to the
advantage of one country and the
detriment of another.
 Political changes can also lead to
expropriation, which is a scenario where
the government will have control over
your property and assets. 45
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46. Mergers & Acquisition
Advantages
 Obtain control over the acquired firm
such as factories and brand names
 Integrate the management of the firm
into its overall international strategy
 Another advantage is Synergy, that is
increased value efficiencies of the new
entity
 Economies of scale is formed by sharing
the resources and services
Disadvantages
 As a result of M&A, employees of the
small merging firm may require
exhaustive re-skilling.
 Merging two firms that are doing
similar activities may mean duplication
and over capability within the company
that may need retrenchments.
 Increase in costs might result if the right
management of modification and also
the implementation of the merger and
acquisition dealing are delayed.
 The merger and acquisition (M&A)
reduces flexibility. 46
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47. Joint Venture
Advantages
 Entering related businesses that
previously presented high barriers to
entry.
 Gaining access to expertise without the
need to hire more staff.
 Leveraging existing technologies and
patents developed by other companies.
 Sharing the risk of high-leverage, but
uncertain ventures.
 Establishing a presence in new,
untapped markets, including
international opportunities.
Disadvantages
 Setting unrealistic objectives that may
not be completely clear in advance and
not aligned to a common goal.
 Coping with differing cultures,
management styles, and working
relationships that prevail in each
company.
 Managing communication with senior
managers and employees in both
companies
 Making poor tactical decisions
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48. 48
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