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Operation modes in international markets

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Presentation on theme: "Operation modes in international markets"— Presentation transcript:

1 Operation modes in international markets
Without investments With investments Without local production Trading houses Sales subsidiary Distributors/importers Storage facility Agents Service unit Directly to final customer With local production Licensing and franchising Production unit Contract manufacturing Management contracts Based on Ruijo Luostarinen 1979. © 2018 Taylor & Francis

2 Entry/operation modes
Internal factors Objectives - Sales volume - Market share - Sales growth/pace - Control External factors Customers - Structure - Behaviour Resources - Financial - Management - Capacity Competition - Structure - SW - Competetive climate Competitive advantage - Product - Patent/competencies - Cost position - Raw material Other factors - Culture Legal Political risk - Infrastructure/technology © 2018 Taylor & Francis

3 How to break into existing relationships?
Incumbent vendor Buyer Foreign vendor At introduction Incumbent vendor Buyer Before introduction How to break into existing relationships? © 2018 Taylor & Francis

4 Wholesaler at fish markets
Exporter Japanese importer/ trader Second wholesaler Retailers Processor Restau-rants Wholesaler at fish markets Fish distribution in Japan: how to enter the market? © 2018 Taylor & Francis

5 The trade-offs  their effects
Control Objec-tives Resources Risk Perfor-mance* The trade-offs  their effects * Learning, market and financial performance © 2018 Taylor & Francis

6 Trading house and export agent
Exporter Kunde Trading house Customers Exporter Kunde Export agent Customers Border Trading house and export agent © 2018 Taylor & Francis

7 Agent and distributor/importer
Kunde Agent Customers Exporter Kunde Importer/ distributor Customers Exporter Border Agent and distributor/importer © 2018 Taylor & Francis

8 Direct exports of wholly owned sales office
Kunde Customers Exporter Kunde Sales office Customers Exporter Border Direct exports of wholly owned sales office © 2018 Taylor & Francis

9 Channel selection and costs
Distributor mark-up Price reductions Agent commission Degressive commission Channel costs Sales office Expansion A B C Volume Channel selection and costs © 2018 Taylor & Francis

10 Contract manufacturing and licensing
Exporter Kunde Manufacturing contractee Customers Licensor Kunde Licensee Customers Border Contract manufacturing and licensing © 2018 Taylor & Francis

11 Licensing Know-how /patent Installation Equipment Management R&D
Design Patent protection Training R&D follow-up Equipment Installation Management Know-how /patent © 2018 Taylor & Francis

12 Licensing ++ Licensor Partner Licensee Kunde Customers
Licensing contract Licensor Gradually increasing control Cooperation agreement Border Partner Licensee Capital, local knowledge and management Kunde Customers Licensing ++ © 2018 Taylor & Francis

13 Franchising Brand Installation Marketing Equipment campaigns Interior
Design Trademark protection Training New products Equipment Installation Management Branding Marketing campaigns Interior Systems/ routines Brand © 2018 Taylor & Francis

14 Joint ventures (=blend of different entry modes)
Partner A Joint venture company Partner B Cooperation agreement Licensing contract Capital, local knowledge and management Project and component deliveries Management contract Shares and dividends Border Kunde Customer sales through local Partner B’s network Kunde Customer sales through foreign Partner A’s network Joint ventures (=blend of different entry modes) © 2018 Taylor & Francis

15 How strategic is your alliance??
Traditional cooperation I-country/d-country One market area Technology/capital in exchange of market access Limited to local market Strategic alliances I-country/I-country Involves the Triad R&D against R&D Market access against market access Reduced global competitiveness Partners Market area Transfer of resources and knowledge Consequences of failure © 2018 Taylor & Francis

16 Entry modes in different strategic positions
internationalisation Preparedness for Industry globality Multilocal Global Adult Child The multinational player FDI, sales subsidiaries and (in lesser markets) distributors Global supply system (FDI, J/V, licensing, franchising, sales subs, subcontractors, etc.) exploiting factor conditions in host countries The global market leader Piggybacking, Distributors, agents Direct to customers, Trading houses The careful newcomer Piggybacking, OEM, PB, Licensing, franchising Direct to customers, The bold newcomer Entry modes in different strategic positions © 2018 Taylor & Francis

17 Global supply system Foreign direct investments in production
capacity and sales subsidiaries Component subcontracting Regional hubs (with assembly and/or marketing) R&D in hi-tech centres Licensing/cross-licensing Strategic alliances (also with competitors) Coordination (marketing, global account mgt, cost, quality, taxes etc) © 2018 Taylor & Francis,

18 Control and resources of operation modes
100% owned local production Sales subsidiary Fran- chising Strategic alliances Agent Manage- ment contracts Resources Distri- butor Licen- sing Trading house Operational control Control and resources of operation modes © 2018 Taylor & Francis

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