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Market Entry Strategies

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Write your pin on the exam (the day of the exam, of course) ... Brand Name (Ford, Acura, Porsche). Also Packaging, quality, styling. Product Standardization ... – PowerPoint PPT presentation

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Title: Market Entry Strategies


1
Market Entry Strategies
  • International Advertising

2
Housekeeping
  • Privacy issues at UF
  • Think of a personal identification number
    (4-digits)
  • SSN, birth date, UF id cant be used
  • Write your pin on the exam (the day of the exam,
    of course)
  • Grades cant be transmitted via email, phone or
    postcard.
  • This week
  • Today Wrap up, Wal-Mart and review.
  • Friday EXAM 1

3
Place (Distribution)
  • Channel concept for intl marketing

Channels within nations
  • Seller

Channels between nations
Sellers HQ for intl marketing
Buyer
4
What Of The Product Can Go Abroad?
  • The product itself (the car).
  • Features (automatic shift, power windows, V8).
  • Brand Name (Ford, Acura, Porsche).
  • Also Packaging, quality, styling.

5
Product Standardization
  • Exactly the same product abroad.
  • Numerous advantages
  • (1) Eliminates duplication of -
  • Research and development costs
  • Product design costs
  • Package design costs
  • (2) Increases potential for economy of scales.

6
Product Adaptation
  • Mandatory Product Adaptation
  • Simply no choice.
  • Government regulations.
  • Discretionary Product Adaptation
  • Examine the consumption patterns.
  • New product development
  • All exports usually require at least one change.
  • Most require at least four or five.

7
Channels Between Nations
  • Market-Entry Strategies
  • Joint Venturing
  • Licensing
  • Management Contracting
  • Contract Manufacturing
  • Joint ownership
  • Direct investment
  • Assembly facilities
  • Manufacturing facilities
  • Export
  • Indirect Export
  • Direct Export

8
Licensing
  • Foreign market (licensee) is granted rights to
  • use of a trademark or patent
  • use of a manufacturing process
  • technical advice
  • marketing skills
  • Licensee produces and markets product.
  • Licensor receives a fee or royalty (of sales
    volume).

9
Pros of Licensing
  • No capital investment .
  • No high transportation costs or high duty rates
    and quotas.
  • No in-depth understanding of foreign market.
  • Entry strategy for markets closed to imports or
    direct foreign investment.
  • Means to test foreign markets without an actual
    outlay of time and money.

10
Cons of Licensing
  • Little control over the licensee or its
    production, distribution, and marketing of the
    product.
  • Less profitable than firms own operations.
  • When license expires, you may have created a
    competitor.

11
Management Contracting
  • Domestic firm supplies management know-how to
    foreign firm willing to invest the capital.
  • Pro () Low-risk means of entry
  • Con (-) Less profits
  • Commonly used in
  • public utilities
  • tourism (hotels, etc.)
  • agriculture

12
Contract Manufacturing
  • Firm contracts for production of product in a
    foreign market and retains control over
    distribution and marketing of goods.
  • Pro () Limited local investment, cheaper labor
  • Con (-) quality, creating your competitor
  • Commonly used in
  • electronics
  • textiles
  • clothing

13
Foreign Assembly
  • Firm produces all or most of products components
    and ships them to foreign market for final
    assembly.
  • Lower transportation costs, usually lower tariffs
    .
  • Creates more jobs in foreign market.

14
Joint Ownership
  • Two or more firms from different countries join
    forces to create a local business and share
    ownership and control of management,
    manufacturing and marketing.
  • Equity can range from 10 to 90 ownership of
    either partner.

15
Example of a Joint Venture
Delek Group Gas Stations Car dealerships
80.5
2 stores in Tel Aviv
Joint Venture
100
Starbucks Coffee International
19.5 (option for 50)
Ownership
16
Pros of Joint Ownership
  • Potential for greater profits compared to
    contract manufacturing or licensing.
  • Entry into countries which do not allow 100
    foreign direct investments.
  • Local partner provides domestic know-how and
    market knowledge.

17
Cons of Joint Ownership
  • Greater investment level, increased risk.
  • Potential for conflict (on marketing mix,
    management, RD, personnel, profits).
  • Decisions may not be mutually beneficial .

18
Channels Between Nations
  • Market-Entry Strategies
  • Joint Venturing
  • Licensing
  • Management Contracting
  • Contract Manufacturing
  • Joint ownership
  • Direct investment
  • Assembly facilities
  • Manufacturing facilities
  • Export
  • Indirect Export
  • Direct Export

19
Direct Investment
  • Firm develops a fully-owned foreign-based
    manufacturing facility.
  • Acquisition is usually the quickest way to move
    to a new market.
  • Establishing a new facility is preferable if no
    local firm is willing to sell.

20
Pros of Direct Investment
  • 100 of profits will be kept.
  • Full control over investment.
  • No possible conflict with local partner(s).
  • Avoid import tariff barriers and quotas (firm
    operates as domestic).
  • Creates jobs for domestic market.

21
Cons of Direct Investment
  • Requires substantial capital and management
    investment.
  • Exposes firm to maximum risk (devalued currency,
    expropriation).
  • Operation in a potential hostile environment
    (exploitation concerns).

22
Channels Between Nations
  • Market-Entry Strategies
  • Joint Venturing
  • Licensing
  • Management Contracting
  • Contract Manufacturing
  • Joint ownership
  • Direct investment
  • Assembly facilities
  • Manufacturing facilities
  • Export
  • Indirect Export
  • Direct Export

23
Export
  • Goods produced in the home market .
  • Two forms of exporting
  • Indirect (Firm works with two forms of
    independent middlemen responsible for the
    distribution process).
  • Direct (Manufacturer works alone).

24
Indirect Export Middlemen Forms
  • Export Management Company (EMC)
  • Acts as export department for manufacturer.
  • Solely purchases the products and distributes.
  • Establishes foreign contacts and develops
    strategies.
  • Often specializes in regions of the world.
  • International Trading Company (ITC)
  • Buys, sells, transports and distributes goods.
  • Assists in developing joint ventures.
  • Provides technical assistance.
  • May even produce goods.

25
Pros and Cons of Indirect Exporting
  • Pros
  • No commitment of time or money to set up an
    overseas sales force.
  • Use of contacts and market know how of
    middlemen.
  • Less amount of risk .
  • Cons
  • Little or no control over the distribution
    process.
  • Little or no control over the message and how the
    product is advertised.

26
Direct Exporting
  • Manufacturer responsible for
  • market research
  • selecting foreign markets, agents or distributors
    to represent firm
  • set product price
  • handle shipping, insurance and export
    documentation
  • coordinate international promotional activities

27
Factors to consider for the Exporter
  • Tariffs and quotas may prevent selling products
    to specific countries.
  • Transportation costs render product
    noncompetitive.
  • Slower response time to local needs.
  • Higher manufacturing costs in home country than
    abroad.

28
Questions for Wal-Mart
  • Explain the reasons why Wal-Mart is able to enter
    other countries.
  • Name Wal-Marts major international competitors.
  • What is the name of the supermarket chain that
    Wal-Mart wants to buy in the UK?
  • List the countries where Wal-Mart has stores
  • List the different market entry strategies that
    Wal-Mart uses
  • (Hint The 3 last questions are NOT answered in
    the case).

29
Wal-Marts market entry strategies
30
Wal-Marts International Sales
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