Global Entry Strategy

GLOBAL
Dr. Syed Ferhat Anwar
Course Instructor
International Business
Environment (L301)
Group 11
Fariha Islam RH-1
Moumita Shabur RH-17
Fableeha Bushra Choudhury RH-19
Sayeda Shifat Nazmee RH-63

GLOBAL ENTRY STRATEGY
(GES) DEFINED

FACTORS AFFECTING THE GES
Company size and resources
Experience in using market entry modes (MEMs)
Management risk attitudes
Profit targets
Industry feasibility and viability of MEMs
Market growth rate

RELEVANCE OF MARKET ENTRY BARRIERS IN GES
‘Low entry and exit barriers reduce the risk in
entering a new market, and may make the
opportunity more attractive financially.’

SOURCES OF MARKET ENTRY
BARRIERS

ECONOMIES OF SCALE
PRODUCT DIFFERENTIATION
CAPITAL REQUIREMENTS
SWITCHING COSTS
ACCESS TO DISTRIBUTION CHANNELS
GOVERNMENT POLICY

BENEFITS TO PIONEER:
 Brand Image
 Customer Loyalty
 Technological Barriers
LIMITATIONS TO PIONEER:
 Advantage limited in
case of high tech
products
Example: Pictured phones in late 1970’s

ADVANTAGE OF LATE ENTRANTS
 Lower cost of production than
cost of innovation
 Minimal cost of product usage
and awareness
 Defined market
Example: China, Hong Kong, Taiwan
Bangladesh Telecom Industry: Citycell vs. Grameen Phone

 Moves to Germany in 1998
 American approach failed in German lands
 Wal-Mart's American managers pressured German
executives to enforce American-style management
practices in the workplace.
 German court rules against Wal-Mart
 High labor cost
 Clashes with labor unions
 Labor resisting management's demands
 In 2006 sales of stores to metro retail chain
 Cost of retreat: $1 billion

 Exporting can be defined as the marketing of goods
produced in one country into another
 Traditional form of entry
 Common approach for mature international companies
with strong marketing and relational capabilities

Direct Exporting:
The organization may use an
agent, distributor, or
overseas subsidiary, or act
via a Government agency
Indirect Exporting:
The company sells to a buyer
(importer or distributor) in
the home country, which in
turn exports the product.
Example: Walmart and Sears

 Less risky
 Low investment required relative to other modes of
entry
 The cost of establishing the manufacturing facilities
overseas is minimized
 Learning opportunity
 Reduces the potential risks of operating overseas
 Assists in diversification

 Lack of control and contact
 High transport costs
 Presence of tariff and other barriers
 Very limited learning to the firms about the characteristics
of the imported nation
 Susceptible to exchange rate fluctuations

BANGLADESH’S SUCCESS: 2nd Largest Producer in Garments
Export(USmillion $) Growth (%)
EU countries 14745.39 17.35
USA 5141.38 2.90
Non-traditional
3603.15 21.15
markets
Total 24491.88 13.83

SUCCESS FACTORS:
 Cheap labor
 Government support
 Back to back letter credit
 Compliance to international rules of trading

FAILURE STORY
Ban on Shrimp Exports by EU and Japan
Reason: Contamination in shrimps

 Setting up operations in foreign locations
 Also known as wholly owned subsidiaries

 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
 Assists in learning about the country’s market

 No risk of cultural conflicts
 Cost of financing the import barriers reduced
 Greater knowledge of local market allows the firm
to strategize appropriately to gain more sales

 Most expensive method of entry
 Risks associated with learning to do business in a
new culture
 High political risks of being nationalized
 Continuous investments required for a long time
until returns can be yield
 Risk of management of the local resources
 Political and environmental factors, example
Fujifilm in US

Example
Mercedes production in Pune , India
 Started production in mid 1990s from Pimpri
 In 2007 it acquired 100acres of land in Maharashtra
 In 2009 production started in Pune
 Rs.250 crores of investment
 Dealership in 31 cities of India

Example
Carrefour S.A.:
 French multinational retailer
 Fourth largest retail group
 Failed operations in South Korea
 Failed to understand Korean customers
 Shut down in April 2006
 Sales of stores worth $1.3 billion

A licensed asset may be:
 A brand name
 A company name
 Patent
 Trade secret
 Product formulation

 Enables companies to evade tariffs, quotas or
similar export barriers
 Licensees are granted considerable autonomy
 Licensor retains ownership of intellectual
property
 Costs are usually low, no capital or investment
needed

 Less profitable than other entry modes
 Quality control issues might arrive
 Risk of licensees turning into strong
competitors, even market leaders

Examples of Success
 Calvin Klein
 Disney

Examples of Success
 “Happy Birthday
to you”
 Country example:
China

Examples of Distress
 Apple vs.
Microsoft
 Metallica vs.
Napster
Vs.

When is a Business “Franchisable”?
 It needs to be credible
 It needs to be unique
 It needs to be teachable
 It needs to provide an adequate return

 Established brand and customer base
 Business support, training and
assistance from franchiser
 Reduced risk

 Large initial cost
 Royalty payments
 Limited flexibility and scope of creativity

Examples of Success
 McDonald’s

Examples of Success
 7-Eleven
 The Body Shop
 Country
Example: USA

Examples of Distress
 Quiznos
 Golf

Other Types of Franchises
 Social Franchises
 Event Franchises
 Third Party Logistics

COMPARISON CHART
Franchising Licensing
Governed by Securities law Contract law
Registration Required Not required
Territorial Rights Offered to franchisee Not offered; licensee can
sell similar licenses and
products in same area
Support & Training Provided by franchiser Not provided
Royalty Payments Yes Yes
Use of
Trademark/Logo
Logo and trademark
retained by franchiser and
used by franchisee
Can be licensed
Control Franchiser exercises control
over franchisee
Licensor does not have
control over licensee

 An enterprise in which two or more investors share
ownership and control over property rights and operation
 A cooperative joint venture is an agreement for the
partners to collaborate but does not involve any equity
investments. Example: Cisco

 Allows for sharing of risk (both financial and political)
 Sharing of resources
 Provides opportunity to learn new environment
 Provides opportunity to achieve synergy by combining
strengths of partners
 May be the only way to enter market given barriers to
entry
 Access to distribution network
 Contact with local suppliers and government officials

 Lack of control
 Requires strong coordination
 Partner may become a competitor
 Collision of cultures
 Conflicts arising over matters such as strategies,
resource allocation, transfer pricing, ownership of
critical assets like technologies and brand names

Example
Case of Sony Ericsson

Factors that led to Failure:
1. Lack in communication and coordination
2. Lack in dominant control of one party over the other
3. Sony needed to achieve what Apple had
4. The consumer-focused cellphone business ran contrary
to Ericsson's engineering-heavy, business-to-business
focus

 Coalition of two or more organizations to achieve
strategically significant goals that are mutually beneficial
 Examples include
• Shared manufacturing
• Research and Development (R&D) arrangements
• Distribution alliances
• Marketing agreements
 Strategic Alliances are non-equity based agreements i.e.
companies remain independent and separate

 Shared risk
 Shared knowledge
 Opportunities for growth
 Speed to market
 Complexity
 Costs
 Access to resources
 Access to target markets
 Economies of scale

 Creating a competitor
 Uneven alliances with minority share
 Foreign confiscation
 Risk of losing control over proprietary information
 Coordination difficulties

Example
Hewlett Packard & Walt Disney

Reasons for Success:
1. Alliance was well negotiated and structured
2. Solid planning and manageable expectations
regarding implementation
3. Coordinating brand exposure, joint marketing and
customer experience

 A corporate action in which a company buys most, if
not all, of the target company's ownership stakes in
order to assume control of the target firm

 Can quickly position a firm in a new business
 Less time to establish presence
 Takes a potential competitor out of the market
 Lower risk than Greenfield Investments

 Expensive way to enter a market
 Likelihood of overbidding
 Not all bundles of assets and capabilities are of
interest to the acquirer
 Costly
 Integrating an acquired company into a corporation is
challenging

Example
Daimler-Benz AG and Chrysler

Reasons behind Failure:
 Cultural clash
 Attitude to hierarchy was different
 Coordination problems
 Heavy competition from non-US brands in
the US auto market
 Issue of trust

FOREIGN DIRECT
INVESTMENT (FDI) AND GES

FDI figures reflect investment flows out of the home country as
companies invest in or acquire plants, equipment, or other assets
Foreign investments may take the form of minority or majority shares
in joint ventures, minority or majority equity stakes in another
company or outright acquisition
A company may choose to use a combination of these entry strategies
by acquiring one company, buying an equity stake in another, and
operating a joint venture with a third

 A type of project that is constructed so that it could be sold
to any buyer as a completed product
 Contractor agrees to deliver every detail of the project to
a foreign client, including the training of operating
personnel
 Upon completion of the contract, the foreign client
receives the "key" to a plant ready for its overall
performance

 Allows for a means of exporting process technology
 Less risky than conventional strategies
 Economic benefit
 Applicable for technology based firms

 The firm has no long term interest in the country
 Firm can take minority equity interest in company
 Inadvertently creates competition

Example
PACIFIC RESOURCES INTERNATIONAL

 Involves taking advantage of a channel to an
international market rather than selecting the country-market
in a more conventional manner
 The most common form of piggybacking is to
internationalize by serving a customer who is more
international than the vendor firm

 Low risk method of beginning export operations for
the rider
 Focused selling to the appropriate market segments
 Advantage for the rider is that he has the chance to
gain market knowledge and expertise through the
carrier

 Company leaves control of products to intermediary
 Loss of control of product in the long run
 Competitive advantage left open for the carrier to
examine
 Finding a suitable partner is difficult

UNCONVENTIONAL
ENTRY STRATEGIES

Bangladesh’s Military Activities Overseas
 1991 - Operation Desert Storm; and the world's largest
contributor (10,736) to UN peacekeeping forces
 2007 - Major deployments in Democratic Republic of Congo,
Liberia, Sudan, Timor-Leste and Côte d'Ivoire
 2013 - second highest number of total personnel to United
Nations Peacekeeping Operations; with (1,830 police, 73 UNMEM
and 6,605 troops) attached to various UN peacekeeping forces
worldwide

India-Bangladesh
 India and Bangladesh have signed a Cultural Exchange
Program (CEP) for the years 2010-2012
 Both sides are to exchange the visits of scholars/academicians
in the field of art, culture and literature and also dance, music,
theatre, Jatra groups, art exhibitions, mime shows, performing
art groups, exhibitions and other cultural events to meet the
local demands for exposure to each other’s rich cultural
tradition

BRAC
 Works for economic development, education, public health, social
development and disaster relief
 Apart from Bangladesh, BRAC is present Afghanistan, Pakistan, Sri
Lanka, Uganda, Tanzania, South Sudan, Sierra Leone, Liberia,
Haiti and The Philippines
 It has successfully crossed national boundaries with its
unconventionally beneficial development works

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