20/6-Internat'l market entry1 6 International market entry and development  Interrelation between external and internal factors in shaping market entry and development strategy  Factors influencing country/market selection  Alternative methods of entering cross-border markets  The need to configure and co-ordinate key business functions to effect the successful implementation of the chosen entry strategy  How progresive corrective adjustments to market entry strategy result from inadequate business performance  The reason international market entry and development can fail  Market concentration versus market spreading

20/6-Internat'l market entry2 Worldwide International regional International market entry a development Restricted national market scope InternationalisationRetrenchment Phase 1 Phase 2 Phase 3Phase 4 Figure 6.1. The phase model of international business development Restricted national market scope International market entry and development International regional Worldwide competitor

20/6-Internat'l market entry3 Move to international scope Meta trends Industry compet’n International business development Vision, mindset Return to restricted national market scope Organisat’l dynamics Figure 6.2 Developing an international business strategy Internal triggers External tiggers

20/6-Internat'l market entry4 Method selection PerformanceOK? Config. functions Market selection Corrective adjust. Home market External tr. Internal tr. Cross border market? GO ON n n y y

20/6-Internat'l market entry5 INTERNAL triggers EXTERNAL triggers PRO- ACTIVE RE- ACTIVE Table 6.1 External versus internal triggers to change: proactive or reactive? Visionaryleadership Visionary leadership Exploitation of core competencies Opportunity to realize competitive interdependencies Cross-border market opportunities – growth and profits Current level of business performances Internal pressure from disaffected managers Excess capacity Saturation/decline of local/national market Intensity of competition Movement of key customers abroad Entry by cross-border rivals to local/national market

20/6-Internat'l market entry6 Vision/mindsetOrganisational dynamics Intern’l Business Strategy Industry competition Meta trends Market screening and selectionEntry mode Market Entry Stategy Business performance Implementation of market entry strategy Figure 6.3 Generic framework: Market entry and development strategies RATIONAL IRRATIONAL WHAT? HOW?

20/6-Internat'l market entry7 Table 6.2 Alternative decision-making processes to choosing market entry strategies External Characteristics Internal Market entry and development strategy determined external by external factors Strategy strongly influenced by external assessment of market and business opportunities, level of competition, etc. Market entry and development strategy determined internal by internal factors Strategy strongly influenced by power elites in the organisation who control overall direction of the organisation Market selection and entry modes may be based on intuition rather than ’hard’ evidence personal preferencespersonal preferences of chief executive/senior managers Over-emphasis on external factors neglect of internal context neglect ability to implement externally determined strategy Key decision-makers may have an inaccurate view of the external context, leading to the development of an inappropriate strategy for the organisation* Overall decision Key factors influencing the entry decision Nature of the process Potential weaknesses Emphasis tends to be on a highly rational and planned approach

20/6-Internat'l market entry8 Decisions Wrong: significant penalties Investment of managerial time Investments of financial resources Shareholders: loss confidence Opportunities cost Right: benefits No vasted managerial time No vasted financial resources Shareholders increasing support Higher growth path

20/6-Internat'l market entry9 Figure 6.4 The inter-relationships between the elements of the market entry model Market screening and selection Entry mode Business performance Implementation Constant adjustment and iteration!

20/6-Internat'l market entry10 Market screening and selection –Political and economic risks –Cultural diversity or convergence –Product match –Size of market and growth rates –Extent of competition –Scale of entry

20/6-Internat'l market entry11 Product match: Disney US Disney EuroDisney Proven management, marketing strength Family annual holiday Artificial castles Simulated flight over Big Ben Different culture: a little bit childish New business, no experience Day visitors Why? (Loire valley) Why? (London within easy reach) Different culture Economic difficulties in Europe

20/6-Internat'l market entry12 Contextual factors (U=unacceptable/ A=acceptable) Country ACountry BCountry CCountry D Political and economic risks Cultural diversity Specific product- market (rank order) Product match Size of market Expected growth Extent of competition Scale of entry Unweighted total AAAA A A AU Table 6.4 Market selection grid Contextual factors A=acceptable U=unacceptable

20/6-Internat'l market entry13 Entry modes –Degree of control –Resources available –Degree of risk –Speed –Opportunities available –Expected return

20/6-Internat'l market entry14 Classification of entry modes Export entry mode –Indirect –Direct Contract entry mode –Licensing –Franchising Investment entry mode –Independent venture –Acquisition –Joint venture –Strategic alliance

20/6-Internat'l market entry15 Market entry Key factors Weight (1- 10) (1) Value (1-5) (2) Entry option AEntry option B Entry option C Weighted score (1)x(2) Value (1-5) (4) Weighted score (1)x(4) Value (1-5) (b) Weighted score (1)x(b) Degree of control Resource availability Level of risk Speed Expected return Opportunities available Rank order Total weighted score Table 6.6. Entry mode grid

20/6-Internat'l market entry16 Implementation of chosen market entry mode –Marketing –Human resources –Operations –Logistics –Finance

20/6-Internat'l market entry17 Business performance Planned vs. actual performance Reasons for failure –Wrong implementation –Inappropriate market screening and selection –Unforeseen events –Retaliation of indigenous competitors

20/6-Internat'l market entry18 Market screening and selection Review entry strategy Review implementation Entry mode Implemen- tation Business perfor- mance Performance unacceptable Corrective adjustments Figure 6.5 Corrective adjustments to the chosen market entry strategy Review basis for screeening and market selection

20/6-Internat'l market entry19 Market concentration Market spreading Characteris- tics Small number of markets high volume of sales to each Large number of markets, low level of sales to each market (1) external => Factors favoring adoption of the strategy (2) internal => Conditions for gaining high volumes are present High level of potential demand Week, fragmented competitors Concentrate significant resources on a small number of markets Accept higher degree of dependence on key international markets Products in their early or late phase of the product life cycle. Difficult to gain high volume of sales to any of market, due to either low levels of demand or intensity of competition. Company unwilling to over- commit to a single market, and wishes to spread risk of sales instability Potential difficulties Danger of concentrating on unattractive markets, impact of changing levels of economic activity in key markets Unable to achieve significant presence, and loss of potential sales through spreading efforts too thinly

Market entry Key factors Weight (1-10) (1) Value (1-5) (2) Entry JapanEntry Germany Weighted score (1)x(2) Value (1-5) (4) Weighted score (1)x(4) Degree of control Resource availability Level of risk Speed Expected return Opportunities available Rank order Total weighted score Entry mode grid