International Entry Strategies and Rapid Growth Arild Aspelund

Senter for entreprenørskap – Truls Erikson Outline The traditional categorization of entry modes –Characteristics in terms of: Resource commitment Control Flexibility Efficiency Hybrid structures –Entry modes under resource constraints and rapid growth The role of social capital –Some examples from Norwegian High Tech Start-Ups

Senter for entreprenørskap – Truls Erikson What are Entry Modes? Often cited in order of commitment and control –Direct Sales / Export Sales –License / Franchise –Agent / Distributor –Sales Office –Joint Venture –Acquisition –Wholly-Owned Subsidiary Hybrid structures can be a combination of any of these, but often includes a partner.

Senter for entreprenørskap – Truls Erikson Entry modes(1) Export Sales –Resource commitmentLow –ControlHigh –FlexibilityHigh –EfficiencyLow License / Franchise –Resource commitmentLow –ControlMedium –FlexibilityMedium to low –EfficiencyHigh

Senter for entreprenørskap – Truls Erikson Entry modes (2) Agent / Distributor –Resource commitmentLow –ControlLow –FlexibilityHigh –EfficiencyMedium to high Sales Office –Resource commitmentMedium –ControlHigh –FlexibilityMedium –EfficiencyMedium

Senter for entreprenørskap – Truls Erikson Entry modes(3) Joint Venture –Resource commitmentMedium –ControlMedium to High –FlexibilityLow –EfficiencyMedium Acquisition –Resource commitmentHigh –ControlHigh –FlexibilityMedium –EfficiencyMedium to High

Senter for entreprenørskap – Truls Erikson Entry modes(4) Wholly-Owned Subsidiary –Resource commitmentHigh –ControlHigh –FlexibilityMedium to High –EfficiencyMedium Hybrid Structures –Resource commitmentLow –ControlLow –FlexibilityCase specific –EfficiencyCase specific

Senter for entreprenørskap – Truls Erikson Some Examples of Hybrid Structures (1) Taken from Gabrielsson and Kirpalani (2004) MNCs acting as system integrators Examples: PC brand makers(e.g. PCs and Logitech) Hardware and software suppliers(e.g. Motorola and Opera Software)

Senter for entreprenørskap – Truls Erikson Some Examples of Hybrid Structures (2) Taken from Gabrielsson and Kirpalani (2004) MNCs distributing complementary products/services, also often called client followership (Bell, Crick and Young, 2004) Examples: Internet providors(Telenor and Norman Antivirus) B2B/C end product supplier(Johnson and Johnson)

Senter for entreprenørskap – Truls Erikson Some Examples of Hybrid Structures (3) Taken from Gabrielsson and Kirpalani (2004) Value net partners; technology and marketing partners Examples: Software developers (e.g. Linux and ez.no) High-end commodities(Italian design)

Senter for entreprenørskap – Truls Erikson Some Examples of Hybrid Structures (4) Taken from Gabrielsson and Kirpalani (2004) Internet as infrastructure: distribution, marketing, customer interaction, and sales Examples: Internet retailers(Amazon or Play.com) Niche oriented commodities(African art)

Senter for entreprenørskap – Truls Erikson Managerial Lessons –There are many examples of entry modes that are not in mainstream marketing textbooks Creativity only limitation! –The “international entrepreneurship – performance” dilemma –Is it safe to rely on channels that you do not own? Examples here are examples of new entry modes – might not be good examples of international marketing development Build alternative channels with higher degrees of control When establishing cooperative structures - make sure you do end up locked in

Senter for entreprenørskap – Truls Erikson Siebel Systems

Senter for entreprenørskap – Truls Erikson Siebel Systems How can you describe Siebel’s business model? –How does it compare to others at the time of the establishment of the venture? How does Siebel use partners for marketing purposes? –Which effects does this have for the firm’s possibilities for growth? –Do you think Siebel could have managed such growth with a different business model where they internalized implementation? In which ways do this business model lay the foundation for a rapid growth?

Senter for entreprenørskap – Truls Erikson Example: Siebel Systems - Competition and Marketing Competition –ERP Software Companies, and smaller specialized vendors (about 400) Focus on CRM! –“That is what makes us untouchable” Market channels –Typical order size $1 – $10 million –729 external partners –Alliances Consulting Software Platform Content –Siebel (10-15%), system integration (70%), hardware (10%), content (5%), other software (5%)

Senter for entreprenørskap – Truls Erikson Example: Siebel Systems - The Vision “We are here to build a great company. A company that has achieved the highest levels of customer satisfaction. A great place to work. A good member of the community. A provider of exceptionally high-quality products. A company that carries itself into the marketplace with the highest levels of business integrity and business ethics. A company composed of dedicated, accomplished professionals, committed to the customer. We are here to build a company in which we all can take great pride” Tom Siebel The prime example of how Customer Focus permeates the identity of Siebel Systems!

Senter for entreprenørskap – Truls Erikson Example: Siebel Systems - The Values Core Values: 1.Customer Satisfaction – We regard it as a privilege to serve our customers. We make 100% customer satisfaction our overriding priority. 2.Professional Courtesy – We comport ourselves with the highest levels of business ethics and professional courtesy. 3.Professionalism – We demonstrate the highest levels of professionalism and quality in everything we do. 4.Goal and Action Orientation – In pursuing our objectives, we have a bias for action. “Siebel Systems is the first company where I have seen an excellent performer fired because he ignored the values of the company. Either you play by the rules or you’re out.” Siebel employee

Senter for entreprenørskap – Truls Erikson Example: Siebel Systems - The Sales Organization Legal Services Sales Alliances Finance Professional Services Corporate Marketing Product Marketing

Senter for entreprenørskap – Truls Erikson Example: Siebel Systems - Human Resource Management Mandatory quarterly report of personal objectives Transparent –Generally transparent through mySiebel –Tom Siebel publishes his report for every employee to see through mySiebel 7 days into each quarter, TMT reports personal objectives 15 days into each quarter, middle management reports 21 days into each quarter, all employees have reported

Senter for entreprenørskap – Truls Erikson Example: Siebel Systems - Human Resource Management Customer Satisfaction “We measure customer satisfaction as if it were money” –Quarterly Employee satisfaction –Every 6 months Partner satisfaction –Quarterly Business Performance –Weekly and continually on competition and market movements through Siebel eBusiness Applications Product quality –Internal quality check on Beta Versions, continually on operational products Individual performance –Quarterly

Senter for entreprenørskap – Truls Erikson Example: Siebel Systems - Human Resource Management Employee Relationship Management – ERM – mySiebel Coordination and management of an organization with global dispersion and heavy dependency on external parties is a challenge Value-based management requires channels through which you can communicate corporate visions, values, organization and remuneration Simply speaking, you need an arena where you can tell everybody how it works…

Senter for entreprenørskap – Truls Erikson Example: Siebel Systems - Human Resource Management Bonus awards –Tied to achievements of personal objectives –Sales targets –Customer satisfaction –Also dependent on the performance of other functions Product Marketing on Sales etc. Heavy use of stock ownership and stock options plans –40 % of the company was owned by employees Ranking and discharging the bottom 5 % of employees every 6 month… –Workforce Improvement Initiative

Senter for entreprenørskap – Truls Erikson Siebel Systems Summary and Conclusions Summary –Siebel Systems faces an enormous challenge Extreme growth, 0 to employees in a decade… Globally disperse organization, multicultural Heavily dependent on partner performance –Siebel Systems have developed an organization that has coped with those challenges –They have done so partly by organization, party through values and human resource management The ’alliance-based’ marketing system The values management system The people management system - MySiebels –But in the core, there is a fundament on customer satisfaction that add value to Tom Siebel’s exit…