Transcript Document 7155301
INTERNATIONAL MARKETS’ ENTRY STRATEGIES
By Elisante Ole Gabriel (Tanzania) Chartered Marketer [email protected]
, www.olegabriel.com
+255-784-455-499 4/30/2020 [email protected] , +255-754 434412 1
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.
There are two major entry Modes: PRODUCTION IN HOME COUNTRY & PRODUCTION IN FOREIGN COUNTRY.
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Introduction Cont…
International Marketers
(you) have to make a multitude of decisions regarding the entry mode which may include: – the target product/market – the goals of the target markets – the mode of entry – the time of entry – a marketing-mix plan – a control system to check the performance in the entered markets 4/30/2020 [email protected] , +255-754 434412 3
Target Market Selection
A crucial step in developing a global expansion strategy is the selection of potential target markets.
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 on each indicator 4. Compute overall score for each country 4/30/2020 [email protected] , +255-754 434412 4
Choosing the Mode of Entry
Decision Criteria for Mode of Entry – Market Size and Growth – Risk – Government Regulations – Competitive Environment – Local Infrastructure – Company Objectives – Need for Control – Internal Resources, Assets and Capabilities – Flexibility 4/30/2020 [email protected] , +255-754 434412 5
Mode of Entry Cont …
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) 4/30/2020 [email protected] , +255-754 434412 6
Exporting
Indirect Exporting – Export management companies Cooperative Exporting – Piggyback Exporting Direct Exporting – Firms set up their own exporting departments 4/30/2020 [email protected] , +255-754 434412 7
Licensing
Licensor and the licensee Benefits: – Appealing to small companies that lack resources – Faster access to the market – Rapid penetration of the global markets 4/30/2020 [email protected] , +255-754 434412 8
Licensing Cont..
Caveats (Alerts/warning signals): – 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 4/30/2020 [email protected] , +255-754 434412 9
Licensing Cont …
How to seek a good licensing agreement: – Seek patent or trademark protection – Thorough profitability analysis – Careful selection of prospective licensees – Contract parameter (technology package, use conditions, compensation, and provisions for the settlement of disputes) 4/30/2020 [email protected] , +255-754 434412 10
Franchising
Franchisor and the Franchisee (e.g IIFT & IFM) Benefits: – Overseas expansion with a minimum investment – Franchisees’ profits tied to their efforts – Availability of local franchisees’ knowledge 4/30/2020 [email protected] , +255-754 434412 11
Franchising Cont …
Caveats (Warnings): – Revenues may not be adequate – Availability of a master franchisee – Limited franchising opportunities overseas – Lack of control over the franchisees’ operations – Problem in performance standards – Cultural problems – Physical proximity 4/30/2020 [email protected] , +255-754 434412 12
Contract Manufacturing (e.g Microsoft)
Benefits: – Labor cost advantages – Savings via taxation, lower energy costs, raw materials, and overheads – Lower political and economic risk – Quicker access to markets 4/30/2020 [email protected] , +255-754 434412 13
Contract Manufacturing Cont …
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 4/30/2020 [email protected] , +255-754 434412 14
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 4/30/2020 [email protected] , +255-754 434412 15
Joint Ventures Cont …
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 4/30/2020 [email protected] , +255-754 434412 16
Joint Ventures Cont …
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 4/30/2020 [email protected] , +255-754 434412 17
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 4/30/2020 [email protected] , +255-754 434412 18
Wholly Owned Subsidiaries Cont …
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 Acquisitions and Mergers – Quick access to the local market – Good way to get access to the local brands 4/30/2020 [email protected] , +255-754 434412 19
Strategic Alliances
Types of Strategic Alliances – Simple licensing agreements between two partners – Market-based alliances – Operations and logistics alliances – Operations-based alliances 4/30/2020 [email protected] , +255-754 434412 21
Strategic Alliances Cont …
The Logic Behind Strategic Alliances – Defend – Catch-Up – Remain – Restructure 4/30/2020 [email protected] , +255-754 434412 22
Strategic Alliances Cont …
Cross-Border Alliances that Succeed: – Alliances between strong and weak partners seldom work.
– Autonomy and flexibility – Equal ownership However, according to Prof. Michael Porter, 90% of SA are destined to fail (A case of BP-AMOCO, 1999) 4/30/2020 [email protected] , +255-754 434412 24
Strategic Alliances Cont …
– Other success 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 » Similar cultures, assets sizes and venturing experience » A shared vision on goals and mutual benefits 4/30/2020 [email protected] , +255-754 434412 25
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 – Mode of entry issues, market knowledge, various economic attractiveness variables, etc.
4/30/2020 [email protected] , +255-754 434412 26
Exiting a Market
Reasons for exit: – Sustained losses – Volatility – Premature entry – Ethical reasons – Intense competition – Resource reallocation 4/30/2020 [email protected] , +255-754 434412 27
Exit Strategies
Assess the Risks of exit
:
– Fixed costs of exit – Disposition of assets – Signal to other markets – Long-term opportunities Guidelines: – Contemplate and assess all options to salvage the foreign business – Incremental exit – Migrate customers 4/30/2020 [email protected] , +255-754 434412 28
STANDARDIZATION Vs. ADAPTATION/DIF’ENTIATION
Finally Standardization means a product is manufactured just for the global market with any degree of responsiveness. The major objective is to take the advantage of economies of scale through cost integration.
On the other hand, adaptation is an approach whereby a product gets some modification to suit individual domestic markets 4/30/2020 [email protected] , +255-754 434412 29
THE END!!!
‘Avoid the exit costs by making a strategic choice of the entry strategies’ There is always a dilemma whether to standardize or adapt. International marketers need to resolve this dilemma continuously. Gabriel E., (2005) in his article ‘
Export
Marketing
Strategies’
gave a discussion on how to handle the dilemma. AND..
Think Global act Local = GLOCALIZATION 4/30/2020 [email protected] , +255-754 434412 30