This presentation is about the various international market entry modes and the barriers.

2. INTERNATIONAL ENTRY MODES & BARRIERS Presented By: SHILPI JAIN Roll No. 0511143908 MBA IIIrd Sem BPIBS

3. THIS PRESENTATION WILL COVER THE FOLLOWING: Criteria for country selection International market analysis Case study on going global Various market entry modes Comaprison of various entry modes Case Study on Disney Barriers to entry

4. INTRODUCTION In today's globalizing world, firms are increasing, looking towards other regions of the world to trade in. What are the steps taken by the executives of these firms before deciding on which market to enter? How do they make sure they make their journey a successful one?

5. Introduction contd. The decision requires an analysis of the aspects of the foreign market. - Whether to go abroad - Which markets to enter - How to enter those markets - Choice of marketing program -Marketing organization

6. Introduction Contd. Criteria for Country selection : 1. Country/market Attractiveness in terms of the following: o Market size o Market growth and need potential in terms of demand 2. Company strength in terms of brand and accessibility 3. When the risk e.g. political is marginal compared to opportunities 4. Customer response 5. Competitive situation

7. Introduction contd. A firm becomes proactive i.e. pulled by the potentials and advantages in the foreign market due to the following reasons: 1. The firms specific advantages in terms of profit 2. The advantage of having a unique brand 3. When a firm possesses technological advantages 4. The availability of resources in the foreign countries 5. Economies of scale 6. Economic and political factors

8. Introduction Contd. A firm becomes reactive i.e. pushed by bad domestic markets when the following is evident: 1. The pressure of domestic competition 2. Poor domestic market due to stagnant or declining sales figures 3. Saturated domestic markets 4. Overproduction

9. INTERNATIONAL MARKET ANALYSIS Your company has to develop a unique design based upon its specific goals and more importantly, its budget and existing capacity. “you cannot do an analysis, if you have nothing to analyze” The bulk of the analysis task is in gathering the information first and then understanding how this information is relevant to your company's specific goals and its circumstances.

10. International Market Analysis Contd. Choosing market to analyze - can consumers and/or end users afford your product or service? or - does the proposed business venture have any real potential for success?

13. International Market Analysis Contd. Type# 2 is bad because it violates simple business principles at best. it could lead to illegal business activities that could have very serious consequences.

14. International Market Analysis Contd. "foreign contact syndrome“ it assumes that the contact has the capability to perform specific tasks that are essential to any international business transaction. No business card - - >> “no problem”! They fool executives

25. Product/service localization issues

29. Case Study (1) : McDonald’s Goes Global Pricing is also a problem, as the purchasing price of a ‘Big Mac’ depends on the exchange rate between the local currency and the U.S. dollar The lesson learned by McDonald’s is that dependence on a single domestic market can be overcome by overseas ventures, but not without a considerable amount of research into the changes that must be made in each culture to make the foreign operation a success.

31. Expansion into foreign markets can be achieved via the following four mechanisms:

32. The Internet - Exporting

33. Licensing - Joint Venture

34. Direct Investment

35. International Agents & International Distributors- Strategic Alliances

37. The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations

39. Online Auction e.g. eBay

41. Agents e.g. Avon Representatives, Oriflame

43. Exporting is the marketing and direct sale of domestically-produced goods in another country

44. There are direct and indirect approaches to exporting to other nations

46. Examples of indirect exporting include:Piggybacking whereby your new product uses the existing distribution and logistics of another business. Export Management Houses (EMHs) that act as a bolt on export department for your company. They offer a whole range of bespoke or a la carte services to exporting organizations.

47. Foreign Market Entry Modes Contd. Trading companies were started when some nations decided that they wished to have overseas colonies. They date back to an imperialist past that some nations might prefer to forget e.g. the British, French, Spanish and Portuguese colonies. Today they exist as mainstream businesses that use traditional business relationships as part of their competitive advantage.

49. Foreign Market Entry Modes Contd. Licensing includes franchising, Turnkey contracts and contract manufacturing 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. Examples include Dominos Pizza, Coffee Republic and McDonald’s.

50. Foreign Market Entry Modes Contd. Turnkey contracts are major strategies to build large plants. They often include the training and development of key employees where skills are sparse - for example, Toyota’s car plant in Adapazari, Turkey. You would not own the plant once it is handed over.

51. Foreign Market Entry Modes Contd. Contract manufacturing firm is that which manufactures components or products for another "hiring" firm. It is a form of outsourcing The practice of utilizing contract manufacturing relies on the manufacturer's ability to drive down the cost of production through economies of scale It also allows the hiring company to obtain the needed components or products without needing to own and operate a factory.

53. risk/reward sharing

54. technology sharing

55. joint product development

57. The partners' size, market power, and resources are small compared to the industry leaders; and

59. Mistrust over proprietary knowledge

60. Performance ambiguity - how to split the pie

61. Lack of parent firm support

62. Cultural clashes

64. Foreign Market Entry Modes Contd. involves the transfer of resources including capital, technology, and personnel through the acquisition of an existing entity or the establishment of a new enterprise The key benefit is that your business becomes localized - you manufacture for customers in the market in which you are trading downside is that you take on the risk associated with the local domestic market

66. Foreign Market Entry Modes Contd. Agents are a low-cost, but low-control option They tend to be expensive to recruit, retain and train Distributors are similar to agents, with the main difference that distributors take ownership of the goods

69. Research and Development (R&D) arrangements

70. Distribution alliances e.g. iPhone was initially marketed by O2 in the United Kingdom

71. Marketing agreementsSeveral streams of thought are discernible in the discussion of cooperative or collective strategy

72. Foreign Market Entry Modes Contd. alliance has been considered as a strategy of behavior contrasted with competitive strategy “if you can’t beat ‘em, join ‘em.” alliance has been posited as a systematic response to promote areas of common interest between two firms alliance has been theorized as a particular value system with emphasis on humanism and fairness.

74. 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.

76. Case Study: The case of EuroDisney There are many factors in the site selection decision, and a company carefully must define and evaluate the criteria for choosing a location. if a company has been successful in the past, as Disney had been with its California, Florida, and Tokyo theme parks, future success is not guaranteed, especially when moving into a different country and culture

77. BARRIERS TO INTERNATIONAL BUSINESS

79. Companies must, for example, take language factors into account when making adjustments in packaging, signs, and logos

80. Pepsi-Cola is exactly the same product whether it is sold in Seattle or Moscow, except for the lettering on the bottle

82. Barriers To International Trade Contd. Consider the implications of this cultural difference for U.S. firms selling food products in European markets First, large American supermarkets are not the norm in many parts of Europe Second, people who shop daily do not need large refrigerators and freezers

86. A quota restricts the number of products of a certain type that can be imported into a country

87. By reducing supply, the quota raises the prices of those imports

88. For example, Belgian ice cream makers can ship no more than 922,315 kilograms of ice cream to the United States each year

90. Barriers to International Trade Contd. The United States has embargoes against Cuba, Iraq, Libya, and Iran U.S. firms are forbidden from investing in these countries, and products from these countries cannot legally be sold on American markets

93. Firms that import women's athletic shoes pay a flat rate of 90 cents per pair plus 20 percent of the price of the shoesA subsidy is a government payment to help a domestic business compete with foreign firms

94. Barriers To International Trade Contd. They lower prices of domestic goods rather than raise prices of foreign goods Many European governments subsidize farmers to help them compete with U.S. grain imports. Quotas and tariffs are imposed for a variety of reasons The U.S. government aids domestic automakers by restricting the number of Japanese cars that can be imported into this country

95. Barriers to International Trade Contd. National security concerns have prompted the United States to limit the extent to which certain forms of technology can be exported to other countries (for example, computer and nuclear technology to China) Italy imposes high tariffs on imported electronic goods to protect domestic firms A Sony Walkman costs almost $150 in Italy, and CD players are prohibitively expensive

97. Barriers to International Trade Contd. the U.S. government requires the U.S. Air Force to buy all its planes from U.S. manufacturers Critics cite protectionism as a source of friction between nations. They also charge that it drives up prices by reducing competition Protectionism can sometimes take on almost comic proportions

98. Barriers To International Trade Contd. Neither Europe nor the United States grows bananas. A disagreement flared up when the EU imposed a quota on bananas imported from Latin America, a market dominated by two large U.S. firms, Chiquita and Dole in order to help firms based in current and former European colonies in the Caribbean. To retaliate, the United States imposed a 100-percent tariff on certain luxury products imported from Europe, including Louis Vuitton handbags, Scottish cashmere sweaters, and Parma ham.

100. Barriers To International Trade Contd. Both China and India currently require that a foreign firm wishing to establish a joint venture with a local firm must hold less than 50 percent ownership in the partnership, with the local partner having the controlling ownership stake

102. Barriers To International Trade Contd. Sometimes, a legal, even an accepted business practice in one country is illegal in another In some South American countries, for example, it is sometimes legal to bribe business and government officials

103. THANKS FOR LISTENING TO ME PATIENTLY! Presented By: SHILPI JAIN Roll No. 0511143908 MBA IIIrd Sem BPIBS

104. ANY QUESTIONS?? Shilpi