1. Global Marketing Management
Masaaki Kotabe & Kristiaan Helsen Third Edition John Wiley & Sons, Inc., 2004
Chapter 9
Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

2. Global Market-Entry Strategies
Chapter 9
Global Market-Entry Strategies
Chapter 9
Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

3. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
Chapter Overview
1. Target Market Selection
2. Choosing the Mode of Entry
3. Exporting
4. Licensing
5. Franchising
6. Contract Manufacturing
7. Joint Ventures
8. Wholly Owned Subsidiaries
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

4. Chapter Overview (contd.)
9. Strategic Alliances
10. Timing of Entry
11. Exit Strategies
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

5. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
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.
Global marketers have to make a multitude of decisions regarding the entry mode which may include:
(1) the target product/market
(2) the goals of the target markets
(3) the mode of entry
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

6. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
Introduction (contd.)
(4) The time of entry
(5) A marketing-mix plan
(6) A control system to check the performance in the entered markets
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

7. 1. Target Market Selection
A crucial step in developing a global expansion strategy is the selection of potential target markets (see Exhibit 9-1 for the entry decision process).
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 in the pool on each
indicator
4. Compute overall score for each country
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

8. 2. Choosing the Mode of Entry
Decision Criteria for Mode of Entry (see Exhibit 9-12):
Market Size and Growth
Risk
Government Regulations
Competitive Environment
Local Infrastructure
Classification of Markets:
Platform Countries (Singapore & Hong Kong)
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

9. 2. Choosing the Mode of Entry (contd.)
Emerging Countries (Vietnam & the Philippines)
Growth Countries (China & India)
Maturing and established countries (examples: South Korea, Taiwan & Japan)
Company Objectives
Need for Control
Internal Resources, Assets and Capabilities
Flexibility
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

10. 2. Choosing the Mode of Entry (contd.)
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)
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11. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
3. Exporting
Indirect Exporting
Export management companies
Cooperative Exporting
Piggyback Exporting
Direct Exporting
Firms set up their own exporting departments
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12. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
4. Licensing
Licensor and the licensee
Benefits:
Appealing to small companies that lack resources
Faster access to the market
Rapid penetration of the global markets
Caveats:
Other entry mode choices may be affected
Licensee may not be committed
Lack of enthusiasm on the part of a licensee
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13. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
4. Licensing (contd.)
Biggest danger is the risk of opportunism
Licensee may become a future competitor
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)
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14. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
5. Franchising
Franchisor and the franchisee
Master franchising
Benefits:
Overseas expansion with a minimum investment
Franchisees’ profits tied to their efforts
Availability of local franchisees’ knowledge
Caveats:
Revenues may not be adequate
Availability of a master franchisee
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15. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
5. Franchising (contd.)
Limited franchising opportunities overseas
Lack of control over the franchisees’ operations
Problem in performance standards
Cultural problems
Physical proximity
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

16. 6. Contract Manufacturing
Benefits:
Labor cost advantages
Savings via taxation, lower energy costs, raw materials, and overheads
Lower political and economic risk
Quicker access to markets
Caveats:
Contract manufacturer may become a future competitor
Lower productivity standards
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

17. 6. Contract Manufacturing (contd.)
Backlash from the company’s home-market employees regarding HR and labor issues
Issues of quality and production standards
Qualities of an ideal subcontractor:
Flexible/geared toward just-in-time delivery
Able to meet quality standards
Solid financial footings
Able to integrate with company’s business
Must have contingency plans
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18. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
7. 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
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

19. 7. Joint Ventures (contd.)
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
Drivers Behind Successful International Joint Ventures :
Pick the right partner
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

20. 7. Joint Ventures (contd.)
Establish clear objectives from the beginning
Bridge cultural gaps
Gain top managerial commitment and respect
Use incremental approach
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

21. 8. 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
Caveats:
Risks of full ownership
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

22. 8. Wholly Owned Subsidiaries (contd.)
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
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24. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
9. Strategic Alliances
Greenfield Operations
Offer the company more flexibility than acquisitions in the areas of human resources, suppliers, logistics, plant layout, and manufacturing technology.
Types of Strategic Alliances
Simple licensing agreements between two partners
Market-based alliances
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

25. 9. Strategic Alliances (contd.)
Operations and logistics alliances
Operations-based alliances
The Logic Behind Strategic Alliances
Defend
Catch-Up
Remain
Restructure
Cross-Border Alliances that Succeed:
Alliances between strong and weak partners
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27. 9. Strategic Alliances (contd.)
seldom work.
Autonomy and flexibility
Equal ownership
Other factors:
Commitment and support of the top of the partners’ organizations
Strong alliance managers are the key
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

28. 9. Strategic Alliances (contd.)
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
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29. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
10. 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.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

30. 10. Timing of Entry (contd.)
Reasons for exit:
Sustained losses
Volatility
Premature entry
Ethical reasons
Intense competition
Resource reallocation
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31. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
11. Exit Strategies
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
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

32. Copyright © John Wiley & Sons, Inc. 2004
Chapter 9
Kotabe & Helsen's Global Marketing Management, Third Edition, 2004