International market entry strategies

1. ENTRY STRATEGIES
1
Course: MBA-I
Subject: MARKETING MANAGEMENT - 1
Unit: IV

2. Prof.SushilIITDSession-VI 2
The Top Five Strategic Reasons for
Outsourcing
1. Improve Business Focus1. Improve Business Focus
2. Access to World-Class Capabilities2. Access to World-Class Capabilities
3. Accelerated Reengineering Benefits3. Accelerated Reengineering Benefits
4. Shared Risks4. Shared Risks
5. Free Resources for Other Purposes5. Free Resources for Other Purposes

3. 3
Overview
1. Target Market Selection
2. Choosing the Mode of Entry
3. Exporting
4. Licensing
5. Franchising
6. Contract Manufacturing
7. Joint Ventures
8. Wholly Owned Subsidiaries
9. Strategic Alliances
10. Timing of Entry
11. Exit Strategies

4. 4
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 firm’s other
marketing-mix decisions.
 Global marketers have to make a multitude of decisions
regarding the entry mode 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 entered
markets

5. 5
1. Selecting the Target Market
 A crucial step in developing a global
expansion strategy is the selection of
potential target markets (see Exhibit 9-1 for
the entry decision process).
 A four-step procedure for the initial screening
process:
1. Select indicators and collect data
2. Determine importance of country
indicators
3. Rate the countries in the pool on each
indicator
4. Compute overall score for each country

6. Chapter 9
Copyright (c) 2007 John Wiley &
Sons, Inc. 6
1. Selecting the Target Market

7. . 7
2. Choosing the Mode of Entry
 Decision Criteria for Mode of Entry:
 Market Size and Growth
 Risk
 Government Regulations
 Competitive Environment/Cultural Distance
 Local Infrastructure

8. 8
2. Choosing the Mode of Entry

9. 9
2. Choosing the Mode of Entry

10. 10
2. Choosing the Mode of Entry

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)
 Company Objectives
 Need for Control
 Internal Resources, Assets and Capabilities
 Flexibility

11. 11
2. Choosing the Mode of Entry
 Mode of Entry Choice: A Transaction Cost
Explanation
 Regarding entry modes, companies
normally face a tradeoff between the
benefits of increased control and the costs
of resource commitment and risk.
 Transaction Cost Analysis (TCA)
perspective
 Transaction-Specific Assets (assets
valuable for a very narrow range of
applications)

12. 12
3. Exporting
 Indirect Exporting
 Export merchants
 Export agents
 Export management companies (EMC)
 Cooperative Exporting
 Piggyback Exporting
 Direct Exporting
 Firms set up their own exporting
departments

13. 13
4. Licensing
 Licensor and the licensee
 Benefits:
 Appealing to small companies that lack resources
 Faster access to the market
 Rapid penetration of the global markets
 Caveats:
 Other entry mode choices may be affected
 Licensee may not be committed
 Lack of enthusiasm on the part of a licensee
 Biggest danger is the risk of opportunism
 Licensee may become a future competitor

14. 14
5. Franchising
 Franchisor and the
franchisee
 Master franchising
 Benefits:
 Overseas expansion
with a minimum
investment
 Franchisees’ profits tied
to their efforts
 Availability of local
franchisees’ knowledge
CaveatsCaveats::
– Revenues may not be adequateRevenues may not be adequate
– Availability of a masterAvailability of a master
franchiseefranchisee
– Limited franchisingLimited franchising
opportunities overseasopportunities overseas
– Lack of control over theLack of control over the
franchisees’ operationsfranchisees’ operations
– Problem in performanceProblem in performance
standardsstandards
– Cultural problemsCultural problems
– Physical proximityPhysical proximity

15. Chapter 9
Copyright (c) 2007 John Wiley &
Sons, Inc. 15
5. Franchising

16. 16
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
 Caveats:
 Contract manufacturer may become a future competitor
 Lower productivity standards
 Backlash from the company’s home-market employees
regarding HR and labor issues
 Issues of quality and production standards

17. 17
6. Contract Manufacturing
(Outsourcing)
Qualities of an ideal subcontractor:
 Flexible/geared toward just-in-time delivery
 Able to meet quality standards
 Solid financial footings
 Able to integrate with company’s business
 Must have contingency plans

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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

19. 19
7. Expanding through Joint Ventures
 Caveats:
 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

20. . 20
7. Expanding through Joint Ventures
 Drivers Behind Successful International Joint Ventures :
 Pick the right partner
 Establish clear objectives from the beginning
 Bridge cultural gaps
 Gain top managerial commitment and respect
 Use incremental approach
 Create a launch team during the launch phase:
 (1) Build and maintain strategic alignment
 (2) Create a governance system
 (3) Manage the economic interdependencies
 (4) Build the organization for the joint venture

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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

22. . 22
8. Entering New Markets through
Wholly Owned Subsidiaries Caveats:
 Risks of full ownership
 Developing a foreign presence without the
support of a third part
 Risk of nationalization
 Issues of cultural and economic sovereignty of
the host country

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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.

24. 24
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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9. Creating Strategic Alliances
 The Logic Behind Strategic Alliances
 Defend
 Catch-Up
 Remain
 Restructure

26. . 26
9. Creating Strategic Alliances

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9. Creating Strategic Alliances
 Cross-Border Alliances that Succeed:
 Alliances between strong and weak
partners seldom work.
 Autonomy and flexibility
 Equal ownership

28. . 28
9. Creating Strategic Alliances
 Other factors:

Commitment and support of the top of the
partners’ organizations

Strong alliance managers are the key

Alliances between partners that are related in
terms of products, technologies, and markets

Have similar cultures, assets sizes and
venturing experience

Tend to start on a narrow basis and broaden
over time

A shared vision on goals and mutual benefits

29. Developing global marketing
strategies
 Product strategies
 Promotion strategies
 Pricing strategies
 Place strategies

30. SameSame
ProductProduct
One Product
One Message
One Product
One Message
Product
Adaptation
Product
Adaptation
Message
Adaptation
Message
Adaptation
Product
Invention
Product
Invention
SameSame
MessageMessage
ChangeChange
MessageMessage
ChangeChange
ProductProduct
Product and Promotion Strategies for
Global Marketing

31. Pricing Strategy
 Hurts the local businesses
 Gray Market or
Parallel Importing –
(individuals)
 Dumping – (companies)

32. Pricing Strategy
Countertrade - a form of trade in which
the payment for goods and services is in
the form of other goods and services
Hurts the local governments

33. Protectionism
Protectionism is the practice of shielding
one or more industries within a country’s
economy from foreign competition
through the use of tariffs or quotas.
Protectionism is the practice of shielding
one or more industries within a country’s
economy from foreign competition
through the use of tariffs or quotas.

34. Multidomestic Marketing
Strategy
A multidomestic marketing strategy is
used by multinational firms that have as
many different product variations, brand
names, and advertising programs as
countries in which they do business.
A multidomestic marketing strategy is
used by multinational firms that have as
many different product variations, brand
names, and advertising programs as
countries in which they do business.

35. Global Marketing Strategy
A global marketing strategy is used by
transnational firms that employ the
practice of standardizing marketing
activities when there are cultural
similarities and adapting them when
cultures differ.
A global marketing strategy is used by
transnational firms that employ the
practice of standardizing marketing
activities when there are cultural
similarities and adapting them when
cultures differ.

36. Global Brand
A global brand is a brand marketed under
the same name in multiple countries with
similar and centrally coordinated
marketing programs.
A global brand is a brand marketed under
the same name in multiple countries with
similar and centrally coordinated
marketing programs.

37. A gray market is a situation where
products are sold through unauthorized
channels of distribution. Also called
parallel importing.
A gray market is a situation where
products are sold through unauthorized
channels of distribution. Also called
parallel importing.
Gray Market

38. Dumping is when a firm sells a
product in a foreign country below
its domestic price or below its actual cost.
Dumping is when a firm sells a
product in a foreign country below
its domestic price or below its actual cost.
Dumping

39. The impact of environmental
forces on global marketing.
 Economic environment.
 Political environment.
 Social and cultural environment.
 Legal and regulatory environment.
 Technological environment.

40. REFERENCES
 wweb.uta.edu/insyopma/prater/Chap
%203%20Entry%20Strategies.ppt
 PHILIP KOTLER (BOOK- MARKETING
MANAGEMENT CHAPTER-13)
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