INTERNATIONAL MARKETS’ ENTRY STRATEGIES

INTERNATIONAL MARKETS’ ENTRY STRATEGIES
By Elisante Ole Gabriel (Tanzania) Chartered Marketer 11/27/2018 ,

egabriel@mzumbe.ac.tz , +255-754-434412
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. 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

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) 11/27/2018 ,

Exporting Indirect Exporting Export management companies Cooperative Exporting Piggyback Exporting Direct Exporting Firms set up their own exporting departments 11/27/2018 ,

Licensing Licensor and the licensee Benefits: Appealing to small companies that lack resources Faster access to the market Rapid penetration of the global markets 11/27/2018 ,

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 11/27/2018 ,

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) 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

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 11/27/2018 ,

Strategic Alliances Types of Strategic Alliances Simple licensing agreements between two partners Market-based alliances Operations and logistics alliances Operations-based alliances 11/27/2018 ,

Strategic Alliances Cont …
The Logic Behind Strategic Alliances Defend Catch-Up Remain Restructure 11/27/2018 ,

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) 11/27/2018 ,

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 11/27/2018 ,

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. 11/27/2018 ,

Exiting a Market Reasons for exit: Sustained losses Volatility Premature entry Ethical reasons Intense competition Resource reallocation 11/27/2018 ,

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 11/27/2018 ,

STANDARDIZATION Vs. ADAPTATION/DIF’ENTIATION
Finally STANDARDIZATION Vs. ADAPTATION/DIF’ENTIATION 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 11/27/2018 ,

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 11/27/2018 ,

INTERNATIONAL MARKETS’ ENTRY STRATEGIES

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INTERNATIONAL MARKETS’ ENTRY STRATEGIES

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