1. International Entry Strategies Mikkeli 2005 Compiled by Rulzion Rattray

2. Market Share Drives Profitability. Profit Impact of Market Strategy ( PIMS) Associates 8152438 Market Share Percentage ROI % Adapted from Gale, B.T., (1987), “The PIMS Principles”, Free Press. pp 97

3. Strategic Factors Critical markets Prahalad, & Doz, (1986). –Markets that are profit sanctuaries for competitors –Markets with volume & state of the art customers –Markets with good margins National Competitive Adv. Porter, M.E., (1990). Increasing global levels of FDI. Increasingly competitive world markets

4. 01/10/977Rulzion Rattray UAD Global market participation Global market participation Global Market Share Global balance Globally strategic markets Globalisation Strategy G. Yip Total Global Strategy 1995

5. Additional Location Determinants: Infrastructure –Transportation, Communications, Electricity, Wage rate, Cost of land, Construction cost, cost of raw material. Regulatory/Economic –Cost of bureaucracy –Economic Stability Tax rate: –statutory rate general tax burden –effective rate; rate adjusted for all other factors including subsidies and investment incentives. –Profit repatriation Social & Political: –Political stability, culture & language barriers, government efficiency, corruption, crime levels, cost of pollution control. –Characteristics of local labour; Education, availability, work ethic.

6. Timing of Market Entry Economic Effects of Being an Early Mover High Possible Returns (Advantage) High Uncertainty/Cost (Disadvantage) Market Power: Barriers to followers Technical leadership Product positioning Pre-emptive opportunities: Marketing Early access to resources Brand Recognition Strategic Opportunities: Location selection Low competition Uncertainty: Undeveloped regulations Low government experience New industry Operational Risks: Lack of supply inputs Lack of support infrastructure Unstable market structure Extra Cost: Learning Curve Training cost Anti-immitation costs Adapted from Shenkar, O. and Luo, Y.(2004), “International Business”, John Wiley and Sons, Inc. pp 273.

7. Trade related Entry: Exporting directly or using intermediaries –Terms of payment: FOB, (Free on Board), FOR (Free on rail), FAS (Free along side), CIF (Cost, Insurance & Freight). –Key documentation: L/C (Letter of Credit) an irrevocable L/C usually required. See Shenkar, O. and Luo, Y.(2004), Chap 14 for detailed explanation. Subcontracting; –e.g. Nike in China Countertrade –a form of barter e.g. McDonalds paid for some franchises in Vodka.

8. Transfer Related Entry Here there is some transfer of ownership involved, user buys some rights in product. –Widely used in products with high level of intellectual property rights. International Leasing, e.g. capital intensive products, earth moving/ mining equipment. International Licensing; licence in return for royalty International Franchising; eg. McDonalds Build Operate Transfer: typically large capital and technology based projects, e.g power station

9. FDI Entry Foreign Direct Entry involves greater levels of commitment and risk. –Branch Office; exists as an extension of the parent and has legal liability. Firms often limit liability by use of offshore subsidiaries. –Joint Ventures; cooperative with specified contract. Equity based joint ventures. –Wholly Owned Subsidiary; either by acquiring a fimr or starting a firm from scratch.

10. Continuum of Entry Modes Trade Related Export, Subcontracting, counter trade Transfer Related Leasing, Licensing, Franchising, BOT FDI Related Joint Ventures, Subsidiaries Risk & Return Organisational control and resource commitment Adapted from Shenkar, O. and Luo, Y.(2004), “International Business”, John Wiley and Sons, Inc. pp 284. Continuum of Cooperation

11. Collaborate with your competitors -and win Garry Hamel, Yves Doz & CK Prahalad Horizontal co-operation a window on each others capabilities: –Opportunity to acquire other’s skills and technologies Strategic Alliances: –Competition in another form –Limited life span –Learning from partners of paramount importance Mutual Gain is Possible –Where strategic goals converge but competitive goals diverge –Size & market power of both is modest compared with industry leaders –each partner believes it can learn from the others whilst protecting its own skills Only enter partnership if you can learn!

12. References Contractor F. & Lorange P., 1988, “Cooperative Strategies In International Business”, Lexington Books. Cited in de Wit, B & Meyer, R, Eds. (1994), “Strategy Process, Content & Context, an International Perspective” Pp PP321- 331. de Wit, B & Meyer, R, (1998), “Strategy Process, Content & Context, an International Perspective” 2nd Ed. Gale, B.T., (1987), “The PIMS Principles”, Free Press. Hamel, G. Prahalad, C.K., (1993), Strategy as Stretch & Leverage, Harvard Business Review, vol. 71 no. 2. Hamel G., Doz Y. & Prahalad C.K., 1989, “Collaborate With Your Competitors and Win”, Harvard Business Review Jan Feb. 1989. See De Wit & Meyer PP336-343. Özsomer, A., &. Cavusgil, T.S., (1999),“A dynamic analysis of market entry rates in a global industry: a community ecology perspective ”, European Journal of Marketing, Vol 33 No 11 pp 1038 – 1063. Porter, M.E., (1990), “The Competitive Advantage of Nations”, Free Press, See de Wit, B & Meyer, R, (1998), Pp 773-785. Prahalad, C.K., & Doz, Y., (1986), “The dynamics of Global Competition”, Free Press. See de Wit, B & Meyer, R, Eds. (1998), pp 753-772. Shenkar, O. and Luo, Y.(2004), “International Business”, John Wiley and Sons, Inc. (Available Library) Yip, G., (1995), “Total Global Strategy”, Prentice Hall.