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INTERNATIONAL MARKETS’ ENTRY STRATEGIES

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INTERNATIONAL MARKETS ENTRY STRATEGIES By Elisante Ole Gabriel (Tanzania) Chartered Marketer egabriel_at_edenconsult.net, www.olegabriel.com +255-784-455-499 – PowerPoint PPT presentation

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Title: INTERNATIONAL MARKETS’ ENTRY STRATEGIES


1
INTERNATIONAL MARKETSENTRY STRATEGIES
  • By
  • Elisante Ole Gabriel (Tanzania)
  • Chartered Marketer
  • egabriel_at_edenconsult.net, www.olegabriel.com
  • 255-784-455-499

2
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 firms
    other marketing-mix decisions.
  • There are two major entry Modes PRODUCTION IN
    HOME COUNTRY PRODUCTION IN FOREIGN COUNTRY.

3
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

4
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

5
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

6
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)

7
Exporting
  • Indirect Exporting
  • Export management companies
  • Cooperative Exporting
  • Piggyback Exporting
  • Direct Exporting
  • Firms set up their own exporting departments

8
Licensing
  • Licensor and the licensee
  • Benefits
  • Appealing to small companies that lack resources
  • Faster access to the market
  • Rapid penetration of the global markets

9
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

10
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
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

12
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

13
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

14
Contract Manufacturing Cont
  • Caveats
  • Contract manufacturer may become a future
    competitor
  • Lower productivity standards
  • Backlash from the companys home-market employees
    regarding HR and labor issues
  • Issues of quality and production standards

15
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

16
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

17
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

18
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

19
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

20
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21
Strategic Alliances
  • Types of Strategic Alliances
  • Simple licensing agreements between two partners
  • Market-based alliances
  • Operations and logistics alliances
  • Operations-based alliances

22
Strategic Alliances Cont
  • The Logic Behind Strategic Alliances
  • Defend
  • Catch-Up
  • Remain
  • Restructure

23
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24
Strategic Alliances Cont
  • 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)

25
Strategic Alliances Cont
  • 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

26
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.

27
Exiting a Market
  • Reasons for exit
  • Sustained losses
  • Volatility
  • Premature entry
  • Ethical reasons
  • Intense competition
  • Resource reallocation

28
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

29
STANDARDIZATION Vs. ADAPTATION/DIFENTIATION
Finally
  • 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

30
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
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