international marketing management_foreign market entry strategies

7/28/2019 International Marketing Management_foreign Market Entry Strategies

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International Marketing

23RDF

EB.2013

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Foreign Market Entry Strategies


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Overview1. Target Market Selection

2. Choosing the Mode of Entry

3. Exporting

4. Licensing

5. Franchising6. Contract Manufacturing

7. Joint Ventures

8. Wholly Owned Subsidiaries9. Strategic Alliances

10. Timing of Entry2


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Introduction The need for a solid market entry decision is an integral part of a

global market entry strategy.

Entry decisions will heavily influence the firms other marketing-mix decisions.

Global marketers have to make a multitude of decisions

regarding the entry strategy 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 enteredmarkets 3


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1. Selecting the Target Market

A crucial step in developing a global expansionstrategy is the selection of potential targetmarkets

A four-step procedure for the initial screeningprocess:1. Select indicators and collect data

2. Determine importance of country indicators

3. Rate the countries in the pool on each

indicator4. Compute overall score for each country

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Decision Criteria for Mode of Entry: Market Size and Growth

Risk

Government Regulations

Competitive Environment/Cultural Distance Local Infrastructure

.

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Classification of Markets:

Platform Countries (Singapore & Hong Kong)

Emerging Countries (Vietnam & the Philippines)

Growth Countries (China & India)

Maturing and established countries (examples:

South Korea, Taiwan & Japan)

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3. Exporting

Indirect Exporting Export merchants

Export agents

Export management companies (EMC)

Direct Exporting Firms set up their own exporting departments

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4. Licensing

Benefits:

Appealing to small companies that lack resources

Faster access to the market

Rapid penetration of the global markets disadvantages:

Other entry mode choices may be affected

Licensee may not be committed

Lack of enthusiasm on the part of a licensee

Licensee may become a future competitor

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5. Franchising

Benefits:

Overseas expansion with a

minimum investment

Franchisees profits tied totheir efforts

Availability of local

franchisees knowledge

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disadvantages :

Revenues may not be adequate

Availability of a master

franchisee Limited franchising

opportunities overseas

Lack of control over the

franchisees operations

Problem in performancestandards

Cultural problems

Physical proximity


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6. Contract Manufacturing (Outsourcing) Benefits:

Labor cost advantages

Savings via taxation, lower energy costs, raw materials, and

overheads

Lower political and economic risk

Quicker access to markets

disadvantages:

Contract manufacturer may become a future competitor

Lower productivity standards Backlash from the companys home-market employees

regarding HR and labor issues

Issues of quality and production standards10


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7. Expanding through Joint Ventures

Cooperative joint venture

Equity joint venture

Benefits:

Higher rate of return and more control over the operations Creation of synergy

Sharing of resources

Access to distribution network

Contact with local suppliers and government officials

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7. Expanding through Joint Ventures

disadvantages: 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

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8. Entering New Markets through

Wholly Owned Subsidiaries

Acquisitions

Greenfield Operations

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

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8. Entering New Markets through

Wholly Owned Subsidiaries

Acquisitions and Mergers Quick access to the local market

Good way to get access to the local brands

Greenfield Operations Offer the company more flexibility than acquisitions in the areas

of human resources, suppliers, logistics, plant layout, and

manufacturing technology.

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9. Creating Strategic Alliances

Types of Strategic Alliances Simple licensing agreements between two partners

Market-based alliances

Operations and logistics alliances

Operations-based alliances

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10. 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

Also, the broader the scope of products and services

Mode of entry issues, market knowledge, various economic

attractiveness variables, etc.

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