Adela García González MARKETING MANAGEMENT PORTFOLIO MODULE 5 2º SEMESTER

Market Entry Strategies

Module 5 is focus on the market entry strategies and it is the continuation of the previous module, which was focus on the international market selection when it comes to export. In module 4 we learnt the process that firms has to go through in order to enter into international markets. The last step of the process, the selection of the entry strategy in the selected international market, is explained deeply in this module. Once this process has been carried out thoughtfully the firm is able to be present overseas. The agenda of this module was the following: Global Marketing Decision Phase 1.Identify and classify the different entry modes -100 % Internally -100% Externally 2. Explore different approaches to the choice of entry mode -External modes: direct and indirect modes -Intermediate modes: joint venture, startegic alliance, franchising and licensing -Internal modes: hierarchical mode 3. Indentify the factors to consider when choosing a market entry strategy -Factor affecting the entry mode decision (model 9.1) 4. Project- Korsbaek in Sweden

Global Marketing Decision Phase 1. Identify and classify the different entry modes: The firm can decide wheter to manage all the activities and process by itself or by relying on external partners: 100% externalization entry mode: we outsourced our entry mode to another company. We will hand over all the activities to a local company on our behalf, we are not directly involved into the activities. Ex. Distributor 100% internalizing: we in-sourced the entry mode into our company. We do all the activities internally in the company. 2. Explore different approaches to the choice of entry mode EXPORT MODES With export entry modes a firm’s products are manufactured in the domestic market or a third country and the transferred either directly or indirectly to the host market. - Indirect export: the manufacturing company doesn’t take direct care of exporting activities. Another domestic company performs these activities. The manufactures uses independent export organization located in its own country. Disadvantages: little control over how, when, where and by whom the products are sold. Advantages: the least cost and risk of any entry method Types of indirect entry modes: export buying agent, broker, export house, trading companies, piggybacks -Direct modes: the manufacturing company takes care of exporting activities and it is in direct contact with the first intermediary in the foreign target market. It includes export through foreign-based agents and distributors (independent intermediaries).

INTERMEDIATE ENTRY MODES Intermediate Entry modes are vehicles for the transfer of knowledge and skills between partners, in order to create foreign sales. Contract manufacturing: manufacturing is outsourced to an external partner, specialized in production and production technology. Ex. IKEA or Benetton Licensing Agreement: another way in which the firm can establish local production in foreign market without capital investment. It involves more responsibilities for the national firm, since more value chain functions have been transferred to the licensee by the licensor. A written agreement entered into by the contractual owner of a property or activity giving permission to another to use that property or engage in an activity in relation to that property. Franchising: it is a marketing-oriented method of selling business service, often to small independent investors who have working capital but little or no business experience. The franchisor gives the right to the franchisee against payments for the use of the total business concept/system, including trade marks, against some agreed royalty. Joint venture: two or more business agreed to contribute capital and resources for a common project or to create a separate business entity which has its own entity, separate and apart from the participants' other business interests. They form an equity partnership. Each of the participants is responsible for profits, losses and costs.  “two parents create the child” associated with it. The profits are distributed depending on the level of contribution to the joint venture. Unlike a strategic alliance, this one is a non-equity joint venture: An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project, but each company maintains its autonomy while gaining a new opportunity.

HIERARCHICAL MODES The firm completely owns and controls the foreign entry mode. Here the question is where the control in the firm lies. The degree of control that the head office can exert on the subsidiary will depend on how many and which value chain functions can be transferred to the market. Types: Domestic-based sales representatives resides in the home country of the manufacturer or employer, and travels abroad to perform the sales function. More control over sales activities are undertaken than with independent intermediaries. Resident sales representatives/foreign sales brand/foreign sales subsidiary: - Foreign branch: sometime firms find it relevant to establish a formal branch office, to which a resident salesperson is assigned. A foreign branch is an extension and a legal part of the firm. It employs nationals employees as salespeople. Taxation of profits takes place in the manufacturer’s country. - A foreign subsidiary is a local company owned and operated by a foreign company under the laws and taxation of the host country. It purchases the products to sell them from the parent company at a price.

REGIONAL CENTRS ( REGIONAL HEADQUARTERS) Region centres are a group of regions who join all together in order to serve the specialized needs of particular region of the world. ( European Union, NAFTA, ASEAN –Association of the South East Asian Nations) Region centres can transfer some part of the value chain to the region or the entire value chain and at this stage many activities are coordinated across borders and the region has all the necessary function to overcome with local and regional competitors and also it is able to respond to regional customer needs. Region centres need to several subsidiaries in the countries members and a regional headquarter or a “lead country” that has the role of coordinator and stimulator with the reference of a homogeneous product group. The coordination role consists of ensuring three things: -Country and business strategies are mutually coherent. -One subsidiary does not harm another. -Adequate synergies are fully identified and exploited across business and countries. The stimulator role consists of 2 functions: -Facilitating the translation of “global” products into the local country strategies. -Supporting local subsidiaries in their development. -Factors influencing the choice of a lead country: The marketing competences of the foreign subsidiaries The quality of human resources in the countries represented The strategic importance of the countries represented Location of production Legal restrictions of the host countries The country with the best “leading” competences should be chosen for the job as lead country.

3. Indentify the factors to consider when choosing a market entry strategy The model 9.1 shows the most relevant factors to consider when selecting the most accurate and appoppiate entry mode. Each factor is rated with a +, 0 or -, from more internal mode to more external mode. 0 means the firm is between internal and external modes.

PROJECT- KORSBAEK IN SWEDEN Being this module the next step to take in the process represented on module 4, the company chosen for this module is the remaining Korsbaek, with an important difference: Korsbaek in Sweden, since the Swedish market was the result of the market selection process carried out in the previous module. The product of this assignment is a memorandum containing 24 characters, with appendix plus a video of 15 maximum explaining all our findings. Thereby this is the final product…

APPENDIX Table 1

Adela García González Marketing Management Module 5, Second semester