Richard Adam: Foreign Market Entry Strategies

THRosenheim,UniversityofAppliedSciences,CampusBurghausen,
GuestLectureNov.27,2019
ForeignMarketEntryStrategies
RichardAdam

1. Strategy Overview
2. Market Entry Issues
3. Market Entry Strategies
3.1. Overview
3.2. Manufacturing at Home
3.3. Manufacturing Abroad
3.4. Investment Entry
4. Summary
Reflection Exercise
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1.StrategyOverview
Corporate Strategy
 Mission, Product/Market combination, value chain for the
company, business model
Business Strategy
 Vision, Positioning in relevant markets, competitive advantages
Functional Strategy
 Operational consequences for Marketing, HR, Production,
Financing, Distribution

1.StrategyOverview
Strategic Leadership
 → do the right thing (effectiveness)
Operational Leadership
 → do things right (efficiency)
Market entry strategy is the planned method of delivering goods or
services to a target market and distributing them there

1.StrategyOverview
Reasons for Foreign Market Entry
 Company wants to expand a larger customer base
 Reduce dependence on domestic market
 To counter-attack global competitors
 Foreign market has higher profit opportunities
 To increase the size of potential markets
 Extend a product life cycle

2. MarketEntry Issues
Issues for Foreign Market Entry Decisions
An organization willing to “go international” faces 3 major issues
 • Marketing –Which countries, which segments, how to manage,
how to enter, with what information, time to market
 • Sourcing –Whether to make or buy the products
 • Investment & Control – JointVenture, Global Partner,
Acquisition

Marketing Approaches
 EthnocentricApproach : companies market their products in
various countries same way as they do it domestically
 PolycentricApproach : company gives an equal importance to
every country’s domestic market, as every market need to be
addressed in an individual way
 RegiocentricApproach : segmentation of the markets is fulfilled
on the basis of similarities in terms of regions.
 Geocentric Approach (global approach): favors neither home
country nor foreign countries where the company operates

3.
Market Entry
Strategies
3.1.Overview

3.
Market Entry
Strategies
3.2.
Manufacturingat
Home
Export
 Direct:The organization takes charge of shipping and distribution
of goods to the foreign market (end consumer, agent)
 Indirect: Organization uses a middleman or intermediary to
integrate the goods into the market (export company, retailer,
distributor)

3.
Market Entry
Strategies
3.2.
Manufacturingat
Home
+ /- Export
+ Manufacturing is home based, less risky than
overseas based
+ Gives an opportunity to ‘learn’ overseas markets before
investing in bricks and mortar
+ Reduces the potential risks of operating overseas.
- one can be at the "mercy" of overseas agents

3.
Market Entry
Strategies
3.3.
Manufacturing
abroad
Contractual
Licensing
 The granting of permission to use intellectual property rights such
as technology, patents, trademarks.
+ profitability with little investment
+ faster access to international markets
+ appealing to small companies with little resource
- lack of control
- licensee may become a future competitor

3.
Market Entry
Strategies
3.3.
Manufacturing
abroad
+ /- Licensing
+ Good way to start in foreign operations and open the door
to low risk manufacturing relationships
+ Capital not tied up in foreign operation
+ Options to buy into partner exist
- Limited form of participation - to length of agreement,
specific product, process or trademark.
- Requires considerable fact finding, planning, investigation
and interpretation.

3.
Market Entry
Strategies
3.3.
Manufacturing
abroad
Contractual
Contract Manufacturing
 The outsourcing of parts of the manufacturing process of a product to
a third party
 Production of goods by one firm, under the label or brand of another
firm
 Contract manufactures may provide such services to several (even
competiting) firms based on their own or the customer´s
specifications, formulas or design
Piggybacking
 Process of supplying a good or service to a larger company in your
domestic market that will then in turn sell its finished product
internationally. May not provide direct entry into a foreign market it
does allow to expand sales to the international market without having
to accept the risk or the cost of establishing a foreign market
presence.

3.
Market Entry
Strategies
3.3.
Manufacturing
abroad
+ /- Contract Manufacturing
+ Frees the company from risks of investing in foreign
countries.
+ Does not have to commit resource for setting up
production facilities.
- Less control over manufacturing process.
- Risk of developing potential competitors.

3.
Market Entry
Strategies
3.4.
InvestmentEntry
Strategic Alliances
 A strategic alliance is an agreement between two or more parties
to pursue a set of agreed upon objectives needed while remaining
independent organizations
 In other words, two or more company jointly share resources &
distinctive-competency to achieve some business goal
 There is no ownership right of other’s firm

3.
Market Entry
Strategies
3.4.
InvestmentEntry
JointVenture
 Two or more firms join their hand to form a separate independent
organization for the strategic purpose of executing particular
business
 Each partner retain its own corporate identity
 The agreement for a fixed time period
 JV-entity is managed by a separate management team
 Active role of both the partner-firm in JV’s

3.
Market Entry
Strategies
3.4.
InvestmentEntry
+ / - JointVentures
+ Sharing of RISK.
+ Access to distribution network
+ Sharing of resources
+ Global market access
+ Joint financial strength.
+ May be only means of entry in some countries.
- Partners do not have full control of management.
- Partners may have different views on expected benefits.

3.
Market Entry
Strategies
3.4.
InvestmentEntry
Mergers & Acquisitions
Merger
 A merger is a deal to unite two existing companies into one new
company
 Owners of each pre-merger firm continue as owners, and the
resources of the merging entities are pooled for the benefit of the
new entity
Acquisitions
 is an act of acquiring effective control over asset and management
of other company
 A new company does not emerge from an acquisition; rather, the
smaller company is often consumed and ceases to exist, and its
assets become part of the larger company

3.
Market Entry
Strategies
3.4.
InvestmentEntry
+/- Mergers & Acquisitions
+ Increasing the market power.
+ Acquisition ofTechnology.
+ Optimum utilization of Resources.
+ Minimization of Risks.
+ Tax Benefits
- Potential problems such as old plant, obsolete technology
or demoralized labor (‚Brownfield investment‘)
- Potential lack of experience & expertise to manage the unit
taken over if it is an entirely new field.

3.
Market Entry
Strategies
3.4.
InvestmentEntry
Greenfield Investment or Foreign Direct Investment
 A type of venture where finances are employed to create a new
physical facility for a business in a location where no existing
facilities are currently present
 Under this method, organizations obtain greater control over
operations and higher profits since there is no ownership split
agreement
 Requires large investments and faces higher risks
 Greenfield investment means using funds to build an entirely new
facility
 This approach entails full control and no risk of cultural conflicts

4.Summary
 Some ways of market entry are less risky, some are more complex.
However, there is no approach that fits every market, every
product and every company and each combination of these
aspects, also considering time to market.
 Market entry needs an efffort of fact finding, assessment and a
series of strategic and operational decisions.
 Certainly, the entry strategies are no chronological pattern where
you start with the less demanding and work your way step by step
by increasing comittment.

Reflection
Excercise
Frameworkaccording
Porter`s ‚Five Forces‘

Contact
RichardAdam
 contact@trendtransfer.asia
 www.trendtransfer.asia
Stay tuned on LinkedIn:
 https://www.linkedin.com/in/ceotourismdevelopmentb2b
See further presentations:
 https://www.slideshare.net/RichardAdam6

Richard Adam: Foreign Market Entry Strategies

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