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29 Cards in this Set
- Front
- Back
Global Market-Entry Strategies
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*the need for a solid market entry decision is an integral part of a global market entry strategy.
*entry decisions will heavily influence the firm’s other marketing-mix decisions. |
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Decisions of Global Marketing Management and the entry mode
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*Global marketers have to make a multiple of decisions regarding the entry mode which includes:
-the target product/market -the goals of the target market -the mode of entry -the time of entry -a marketing-mix plan -a control system to check the performance in the entered markets |
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Target Market Selection
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*a crucial step in developing a global expansion.
*you want minimize mistakes of ignoring countries that offer viable opportunities for your product and wasting time on countries that offer no or little potential. |
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4 Step Process of Target Market Selection
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1. Select indicators and collect data-income, economy, disposable income, etc.
2. Determine importance of country indicators 3. Rate the countries in the pool on each indicator-give each country a score 4. Compute overall score for each country-countries with highest overall average are the most attractive. |
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Choosing the Mode of Entry
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*2 classes of decision criteria can be distinguished: internal criteria and external criteria.
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External Criteria for choosing the mode of entry
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*Market Size and Growth-Future market potential
*Risks-instability in the political and economic environment that may impact the company’s business prospects. A liason office. *Government Regulations- trade barriers restrict the entry choice decision *Competitive Environment *Local Infrastrucure-country’s distribution system, transportation network and communication system. |
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5 Market Types of Countries
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1. Platform Countries (Singapore/Hong Kong)- used to gather intelligence and establish a network.
2. Emerging Countries (Vietnam/the Philippines)-goal is to build up an initial presence like a liason office. 3. Growth Countries (China/India)-Many opportunities. 4. Maturing and Established countries (South Korea/Taiwan/Japan)-fewer growth prospects and local competitors are well-entrenched. |
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Internal Criteria for choosing the mode of entry
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*company objectives-corporate objectives are a key influence
*need for control-want to possess a certain amount of control over their foreign operations *internal resources, assets and capabilities-companies with tight resources or limited assets are constrained to low-commitment entry modes such as exporting and importing *flexibility-an attractive entry mode may not be attractive later. |
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Exporting
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*Many companies start with exporting
*Indirect, cooperative or direct exporting. |
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Indirect exporting
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*export management companies (EMC)
*the firm uses a middleman based in its home market to do the exporting. *very little risk is involved *the company has little to no control over the way its product is marketed in the foreign country. |
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Cooperative Exporting
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*piggyback exporting
*the company uses the overseas distribution network of another company for selling its goods in the foreign market |
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Direct Exporting
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*firms set up their own exporting departments
*sells its products via a middleman located in the foreign market. |
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Licensing
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*a contractual transaction whereby the firm—the licensor—offers some proprietary assets to a foreign company—the lisensee—in exchange for royalty fees.
*Benefits: -appealing to small companies that lack resources -faster access to the market -rapid penetration of the global markets *Caveats: -other entry mode choices may be affected. -licensee may not be committed -lack of enthusiasm on the part of the licensee -biggest danger is the risk of opportunism -licensee may become a future competitor. |
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How to seek a good licensing agreement
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*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. |
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Franchising
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*an arrangement whereby the franchisor gives the franchisee the right to use the franchisor’s trade names, etc in a given territory for a specific time period.
*Benefits: -overseas expansion with a minimum investment -fanchisees’ profits tied to their effort -availability of local fanchisees’ knowledge. *Caveats: -revenues may not be adequate -availablility of a master fanchisee -limited franchising opportunities overseas -lack of control over the fanchisees’ operations -problem in performance standards -cultural problems -physical proximity |
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Contract Manufacturing
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*aka outsourcing:the company arranges with a local manufacturer to manufacture parts of the product.
*Benefits: -labor cost advantages -savings via taxation, lower energy costs, raw materials and overheads -lower political and economic risk -quicker access to markets *Caveats: -contract manufacturer may become a future competitor -lower productivity standards -backlash from the company’s home-market employees regarding HR and labor issues -issues of quality and production standards |
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Qualities of an ideal subcontractor
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*flexible/geared toward just-in-time delivery
*able to meet quality standards and implement Total Quality Managemnt *Solid financial footing *able to integrate with company’s business *have contingency plans to handle sudden changes in demand (need to have a backup plan) |
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Joint Ventures
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*prove to be the most viable way to enter foreign markets, especially in emerging markets.
*Cooperative joint venture-agreement to collaborate between partners that does not involve any equity investments. *Equity joint venture-arrangement whereby the partners agree to raise capital in proportion to the equity states agreed upon. *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. *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 |
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Drivers Behind Successful International Joint Ventures
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*pick the right partner
*establish clear objectives from the beginning *bridge cultural gaps *gain top managerial commitment and respect *use incremental approach |
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Wholly Owned Subsidiaries
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*most companies like to enter a market with 100% ownership.
*Ownership strategies can take 2 routes: acquisitions and Greenfield operations *Benefits: -greater control and higher profits -strong commitment to the local market on the part of the companies -allows the investor to manage and control marketing, production and sourcing decisions *Caveats: -risks of full ownership -developing a foreign presence without the support of a third party -risk of nationalization -issues of cultural and economic sovereignty of the host country |
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Acquisitions and Mergers
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Apart of wholly owned subsidiaries
*MNC buys up existing companies *quick access to the local market *good way to get access to the local brands. |
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Greenfield Operations
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Apart of wholly owned subsidiaries
*company is started from scratch *offer the company more flexibility than acquisitions in the areas of human resources, supplies, logisitics, plant layout and manufacturing technology. |
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Types of Strategic Alliances
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*can be based on a simple licensing agreement between 2 partners or can consist of a thick web of ties.
*market based alliances *operations and logistics alliances *operations based alliances |
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The logic behind strategy alliances
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*defend
*catch-up *remain *restructure-rejuvenate the business |
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Cross border alliances the succeed
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*alliances between strong and weak partners seldom work.
*autonomy and flexibility-alliance has own management team and its own board of directors *equal ownership |
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Timing of Entry
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*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. |
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Reasons of Exit
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*sustained losses
*volatility *premature entry *ethical reasons *intense competition *resource reallocation |
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Risks of Exit
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*fixed costs of exit
*disposition of assets *signal to other markets *long-term opportunities |
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Guidelines of exit
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*contemplate and assess all options to salvage the foreign business
*incremental exit *migrate customers |