Amar KJR NayakIBXIMB

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Amar KJR Nayak/IB/XIMB
Foreign Market Entry Axelsson and
Johanson   Internationalization of the firm
means that the firm establishes and develops
network positions in foreign markets
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• Kommundata in Middle East

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Amar KJR Nayak/IB/XIMB
Case 1 Early Entrant
Kommundatas Entry into the Middle East

• Kommundata (KD) AB is a software company
• Specialized in services for the Swedish public
  sector
• 1200 employees about 500 programming engineers
  systems analysts
• A major supplier of services to the domestic
  sectors
• In 1981 one person was made responsible for the
  companys international operation

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Amar KJR Nayak/IB/XIMB
The Entry Process
First contact from Middle East came from
Dubai   Was transmitted by a representative of AB
Teleplan(TP), a Swedish consultancy company with
representation in Dubai   Do HMS wanted to build
an information system through TP TP contacted KD
for the software   KD thought that local
representation was important to make
progress   KD discovered the consequences of
using hardware of different companies on local
business
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Amar KJR Nayak/IB/XIMB
The Entry Process

• It discovered the network of some Arab
  businessmen top government offices. Ex. The
  Director General of medical care in Dubai was
  found to have his own group of companies, GW
•  
• Discovered the role of middlemen of various kinds
• The project was completed on time
•  
• TP got a new project from the police in Oman
•  
• KD also got an order from the Ministry of Public
  Health in Kuwait

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Amar KJR Nayak/IB/XIMB
The Entry Process

• KD developed a rapport with the manager of G W,
  and he helped KD get the turnkey project of
  setting a laboratory system business in 1985
•  
• Another local representative was needed and so
  Kuwait Computer Company was set up
• KD got more local contacts subsequently

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Amar KJR Nayak/IB/XIMB
Comments

• Early starters have few and rather unimportant
  relationships with firms abroad
• The links are equally weak for other firms in the
  production or services
• Firm has little knowledge about foreign markets
• Therefore KD oriented itself to the existing
  network
• It did not abandon the network built with TP

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• Characteristics of KV Nature of US Pharms
  industry?

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Amar KJR Nayak/IB/XIMB
Case 2 A Late Starter
KABI Vitrums Entry into the US
A medical company (Part of Procordia
Corporation) 2000 employees (1955), 600 employed
abroad, Turnover 1.5 billion SEK No. of
business 4 (Nutrition, Haemotology, Peptide
Pharma) Each business area had its own
marketing, RD Accounts
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Amar KJR Nayak/IB/XIMB

• Case of Intra lipid (a fat emulsion for
  intraveneous use for people who cannot digest
  food from stomach)
• Tried to enter US in 1967
• Contacted the best scientists, surgeons medical
  specialists in US
• Visited exhibitions and symposia to introduce
  intralipid
• Found agents in US

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Amar KJR Nayak/IB/XIMB
The Entry Process
Medical companies were not very receptive people
should starve before surgery Cutter Laboratories
showed some interest Intralipid was accepted for
sales by FDA (1975) Kabi Vitrum began to export
Intralipid to Cutter Labs The perception of
starving patients before surgery
changed Production of intralipid started in
North Carolina (1979) Joint Venture with Cutter
Labs
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Amar KJR Nayak/IB/XIMB
The Entry Process
Some problems in the joint venture Expiry of
patent in 1981 A number of US Japanese entered
the business in 1981 Market share from 15 to
7.8 Cutter withdraw from the joint venture
(1984) Kabi Vitrum bought out the share of
Cutter
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Amar KJR Nayak/IB/XIMB
The Entry Process
After the acquisition, the American manager was
replaced by a Swede. Intensive price
competition, withdrawal of product
Crescormon Baxter Travenol had an agreement to
run production unit and the whole sales force
and bought Intralipid. (1986). Disinvestment was
cheap and sales turned upwards.
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Amar KJR Nayak/IB/XIMB
Comments

• Size of the firm was vital
• Highly specialized product Need in an
  internationalized market
• Attract important actors to the network timing
  was good
• Comparative disadvantage - loss of market
  knowledge

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Amar KJR Nayak/IB/XIMB
Case 3 An international Among Others Scanias
Entry into Australia

• Scania is the biggest of three divisions within
  Saab-Scania-AB
• Products heavy trucks, buses and industry
  marine engines
• Established its first foreign operation in
  Brazil, 1957
• Represented in 80 country markets
• Entered Australia in 1970s

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Amar KJR Nayak/IB/XIMB
The Entry Process

• 25 competitors in Australia
• Major customers- Oil companies transport firms,
  fleet owners single truck owners
• Customers wanted to assemble their own cars using
  components from all possible suppliers
• Clyde industries appointed as general agent
  1971 in Sydney
• Only 38 trucks in the first year
• Agreement with Clyde was terminated

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Amar KJR Nayak/IB/XIMB
The Entry Process
Moved to Melbourne, appointed a Chairman of the
Board who had lots of industry contracts and a
good social reputation An Australian Manager was
appointed create trust (1972) Oil crisis,
more problems, communication problem. A Swedish
Manager was appointed Communication was improved
and network developed. Truck of the year Award
(1983, 84) 5th largest truck sales (1985)
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Amar KJR Nayak/IB/XIMB
Comments

• Both firm environment are highly
  internationalized
• Marginal changes in extension and penetration
• Use production capacity to obtain sales abroad
• Access to and influence over external resources
  worldwide

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Summary Generalization
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Amar KJR Nayak/IB/XIMB

• A firm can internationalize
• in different ways
•  
• New Country-based network International
  Extension
• Expanding Existing Network Penetration
•  
• Coordination in many nations International
  integration

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Amar KJR Nayak/IB/XIMB

• Factors that differentiates the nature of
  internationalization
•  
• Degree of internationalization of the firm
• Degree of internationalization of the market
  (the production net)

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Amar KJR Nayak/IB/XIMB

• Based on these factors, firms may be identified
  as
• Early Starter
• Late Starter
• Lonely International
• International among others

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Amar KJR Nayak/IB/XIMB
Types of Firms
High
Degree of Internationalization of the firm
Low
High
Low
Degree of Internationalization of the market (the
production network)
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Amar KJR Nayak/IB/XIMB

• Foreign Market Entry Decision
•  
• General Criteria for evaluation 
•  
• The choice of target product / market
• The objectives and goals
• The choice of an entry mode to penetrate
• The marketing plan to penetrate
• The control system to monitor performance
• Contd..

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Amar KJR Nayak/IB/XIMB
 General Criteria for evaluation 

• The Target Customers (who, where, when, why, how)
• The Macro Environment (geography, political,
  social-economic)
• Government Regulations (tariffs, labeling,
  patents/trademarks)
• Competition (price, performance, design, service,
  etc.)
• Companys Product (product attributes market
  expectation)

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Amar KJR Nayak/IB/XIMB
Criteria under Network Approach
Who are the actors? (customers, suppliers,
competitors, public agencies) What are the
relative positions of the actors? (roles,
power) What are the relations of the local firm
to actors in the potential country market?
(direct, indirect) How can resources of other
actors be mobilized in support of market entry?
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Amar KJR Nayak/IB/XIMB
Final Comments on Nature of Foreign Market Entry
Process
Not an event, but a process Takes considerable
amount of time Not controlled by any singer
actor Involve genuine trial and error learning
process A set of connected learning process
through network building
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Amar KJR Nayak/IB/XIMB
Issue of Critical Importance
Orienting Positioning Timing
LEARN BY DOING
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ut/scaniahistory/