MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 1 ENTRY STRATEGIES Additional research issues Methods of entry –Advantages –Disadvantages

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 2 Competitor Analysis Strengths and weaknesses –Brand recognition/reputation –Distribution channels and relationships –Knowledge of domestic market –Government Protection –Weaknesses from experience of protection Signaling

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 3 Country Evaluation 1.Country identification 2.Preliminary screening 3.In-Depth Screening 1.Market size 2.Growth rate 3.Competitive intensity 4.Trade barriers 4.Final selection

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 4 Forecasting Basic—share of overall market Build-up—share within segments Analogy to comparable country ahead in the product life cycle Subjective methods (e.g., jury, export pooling, Delphi) Time series and regression (require reliable data!)

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 5 Competitors and Predicted Market Share Identification Foreign vs. domestic Existing vs. potential Direct vs. indirect Likely growth of competitors

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 6 The Reality Exportation and Entry EXPORTS LOCAL MANUFACTURING LOCAL ASSEMBLY LOCAL MARKETING LOCAL PARTNERS HOME COUNTRY OPERATIONS IMPORTS HOST COUNTRY CUSTOMERS EXPORT MANAGEMENT COMPANY LOCAL BUYER

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 7 Entry Strategies FOREIGN MARKET ENTRY MANUFACTURING AT HOME MANUFACTURING ABROAD INVESTMENT ENTRY EXPORTING INDIRECTDIRECT “PIGGY- BACKING” CONTRACTUAL LICENSING/ FRANCHISING CONTRACT MANUF. TURNKEY PROJECTS MGT CONTRACTS OVERSEAS ASSEMBLY/ MIXING JOINT VENTURES ACQUISITION/ SELF-BUILT OTHER DIRECT ENTRY

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 8 Exporting Direct –Sales to foreign Distributors Retailers End customers –Large –Small (e.g., through eBay) Indirect –Sales to export company which handles sales to foreign buyers or distributors “Piggy-backing” (Complementary Exporting) –Two firms exchange exporting services by distributing the other’s product abroad

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 9 Exporting Advantages: –Limited investment; low risk Disadvantages: –Higher unit cost to consumer –Likely lower market share –Limited learning on country market characteristics èPossible preemption by competitors

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 10 Export Tasks Transportation –Negotiation –Coordination between modes and shippers Export licenses and permissions Customs clearing Warehousing Financing –Quotes –Point of transfer (FOB) –Credit Risk assessment/letters of credit –Exchange rate risk Repatriation/ counter- trade

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 11 Export Problems Price escalation Dumping regulations Finding local distribution –Screening –Negotiation After sales support Imitation by importer/failure to learn local market

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 12 Foreign Entry Sequences 1.Indirect exporting and licensing 2.Direct exporting via independent distributor 3.Foreign sales subsidiary 4.Local assembly 5.Local manufacturing

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 13 Entry Barriers Cost of entry Tariff vs. non-tariff Government regulations Market structure –Distribution –Established brands

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 14 Licensing and Franchising Advantages –Low investment –Limited direct exposure –Lower exit costs –Rapid entry –Possible reduction in counterfeiting Disadvantages –Limited control (contract = enforceability!) Quality Promotion Image –Difficulty in terminating relationship

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 15 Overseas Turnkey Projects Firm agrees to set up construction and/or manufacturing project—promised to be in operation form when completed Helps leverage investment made at home if direct competition in the new market is unlikely Some risk in being able to “deliver” –Maneuvering local government regulations and local infrastructure

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 16 Contract Manufacturing Advantages –Faster start –Reduced investment in manufacturing –Ability to take advantage of established manufacturer’s experience and cost structure (experience curve) Disadvantages –“Training” of competitor –Still left with marketing responsibilities  need country presence

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 17 Management Contracts Opportunity for firm to profit on its technology and “know-how” in a market where the firm does not want to enter or face competition from contractee Minimal transfer of assets Must be able to operate in local infrastructure, but contractee and/or government usually has a strong interest in the success of the project

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 18 Direct Entry--acquisitions or “building from scratch” Advantages –Control –Learning about country market –Leverage (may be disadvantage, though) Disadvantages –Large investment; risk –Risk of nationalization/ extortion –May take longer to be successful

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 19 Foreign Assembly/Mixing Motivations –Lower labor local labor costs –Ease of shipping –Local content requirement –Duties/tariffs –Locus of value addition for tax purposes

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 20 Strategic Alliances Distribution Manufacturing Research and development Joint ventures