INTERNATIONAL MARKETING MANAGEMENT

SESSION 6:

ALTERNATIVE MODES OF MARKET ENTRY

1

2

EXTERNAL

Country Characteristics

Market size and growth

Political and Economic environment

Market infrastructure

Country Characteristics

Market size and growth

Political and Economic environment

Market infrastructure

Trade Barriers and Government Regulations

Direct trade barriers

Indirect trade barriers

Trade Barriers and Government Regulations

Direct trade barriers

Indirect trade barriers

Product CharacteristicsProduct Characteristics

INTERNAL

Country Selection Strategy

Speed

Sequencing

Country Selection Strategy

Speed

Sequencing

Management Objectives

• Commitment

• Risk Management

Management Objectives

• Commitment

• Risk Management

Mode of Entry

Strategy

MODES OF OPERATION

3

WHOLLY-OWNED SUBSIDIARIES

CONTRACTUAL

EXPORT

Indirect Exports (via agents)Indirect Exports (via agents)

Co-operative Export (shared)Co-operative Export (shared)

Direct Export (own sales org.)Direct Export (own sales org.)

Licensing - FranchisingLicensing - Franchising

Contract Manufacturing AgreementsContract Manufacturing Agreements

AcquisitionAcquisition

GreenfieldGreenfield

Joint Venture/Strategic AllianceJoint Venture/Strategic Alliance

EVALUATING MODES OF OPERATION

4

Based On:

Resource Requirements

FinancialManagerial

Control Over Operations

Contact With End Market

Flexibility

Ability to reallocate resourcesCommitment to other organizations

EXPORTING

5

Indirect Direct

Advantages

Limited commitment

Minimal risk

Flexibility

Better contact

More control

Better sales effort

Limitations

Potential opportunity loss

Lack of control

Lack of contact withmarket

Investment in salesorganization

Commitment to foreignmarket

6

Joint Ventures Franchising Licensing

Advantages

Reduces capital and other resources required

Spreads risk Access to expertise

and contacts in local markets

Limited financial investment

Taps local managerial talent (services)

Improved managerial motivation

No investment Minimal risk Exploit small markets Quick way to obtain entry

Limitations

Potential problems

and conflict between partners

Communication and management problems

Partial control

Often requires

training program for managers

Need for financial and product quality control

Limited returns Builds up potential

competition Restricts future market

development Requires quality and

financial control

CONTRACTUAL AGREEMENTS

7

Acquisition Greenfield

Advantages

Rapid entryAccess to distribution

channelsExisting management

experienceEstablished brand names,

reputationReduces competition

State of the art technology

Integrated production

Operational efficiency

Limitations

Integration with existingoperation

Communication andcoordination problems

Fit with existing business

Investment costNeed to build businessTime delays

WHOLLY-OWNED SUBSIDIARIES

SUMMARY

8

Importance of fit with long-run international expansion strategy

Evaluate mode of operation based on control contact with end-market, and flexibility (as well as cost)

Implications can be long-lasting and lock firm in