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Global Market Entry Strategies

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Operational reasons for setting-up overseas manufacture. reduced costs of transportation ... local manufacture ensures greater commitment to international markets ... – PowerPoint PPT presentation

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Title: Global Market Entry Strategies


1
Global Market Entry Strategies
  • Operational reasons for setting up overseas
    manufacture
  • Strategic reasons for investing in local
    operations
  • Methods of overseas production
  • Exporting options
  • Joint Ventures and Strategic Alliances

2
Operational reasons for setting-up overseas
manufacture
  • reduced costs of transportation
  • reduced barriers/ quota handicap e.g. Nissan
  • some governments demand investment with market
    entry e.g. China
  • Customers sometimes prefer local manufacture e.g.
    Heinz British?
  • Government contracts prefer firms contributing to
    the local economy

3
  • Improved local market information
  • local manufacture ensures greater commitment to
    international markets
  • Faster response and Just-in-time delivery
  • Doole, Phillips and Lowe (1994)

4
Strategic reasons for investing in local
operations
  • Gain new business
  • demonstrates strong commitment
  • persuades customers to change suppliers
  • provides better service and more reliability
  • Defend existing business
  • avoid market restrictions as sales increase,
    particularly in single market

5
  • Move with established customer
  • component suppliers follow customers to compete
    with local component suppliers
  • Save costs
  • labour, raw materials and transport
  • Avoid government restrictions to import certain
    goods
  • Doole, Phillips and Lowe (1994)

6
Exporting
  • Indirect
  • export houses
  • UK buying offices of foreign stores or
    governments
  • complementary exporting
  • Direct
  • sales to final user
  • overseas agencies
  • distributors and stockists
  • company branch offices abroad
  • Degree of involvement v control?

7
Methods of overseas production
  • Licensing
  • Companies with strong brand or know-how
  • e.g. Coca-Cola, Disney
  • Franchising
  • more of a whole package
  • e.g.Body Shop, KFC
  • Contract manufacture
  • bulk items e.g. Nike
  • components

8
  • Joint ventures -
  • e.g. Burmah Castrol in S.Korea
  • Wholly owned overseas subsidiaries
  • Organic growth

9
Strategic Alliances
  • Strategic alliances can range from loose
    networking relationships to very tight
    contractual relationships such as joint ventures.
  • e.g. code share where airlines of a similar
    type sell each others tickets. There is no
    co-ownership.
  • Types
  • technology swaps
  • RD exchanges
  • distribution relationships
  • Driving forces
  • insufficient resources
  • High RD costs
  • Concentration of firms in mature markets
  • Market access

10
Joint ventures e.g European Airbus.
  • Orgs can remain separate, but have a tight legal
    relationship.
  • Reasons for setting up
  • overcome foreign ownership restrictions
  • increase speed of entry
  • exploit new opportunities, complementary
    technologies and management skills
  • achieve worldwide presence at lower cost
  • Disadvantages
  • differences in partner aims and objectives
  • equal ownership and different options can slow
    decision making
  • dominance by one partner can lead to resentment
    in the other
  • Large time commitment for education, negotiation
    and agreement with partner

11
Mergers
  • The identity of each of the merging companies is
    subordinated into the identity of the newly
    merged organisation, or disappears.
  • Benefits include
  • Cutting cost
  • Eliminate competition
  • Synergy augments mutual strengths
  • Case study Chrysler and Mercedes.
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