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29 Cards in this Set

  • Front
  • Back
Global Market-Entry Strategies
*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.
Decisions of Global Marketing Management and the entry mode
*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
Target Market Selection
*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.
4 Step Process of Target Market Selection
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.
Choosing the Mode of Entry
*2 classes of decision criteria can be distinguished: internal criteria and external criteria.
External Criteria for choosing the mode of entry
*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.
5 Market Types of Countries
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.
Internal Criteria for choosing the mode of entry
*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.
*Many companies start with exporting
*Indirect, cooperative or direct exporting.
Indirect exporting
*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.
Cooperative Exporting
*piggyback exporting
*the company uses the overseas distribution network of another company for selling its goods in the foreign market
Direct Exporting
*firms set up their own exporting departments
*sells its products via a middleman located in the foreign market.
*a contractual transaction whereby the firm—the licensor—offers some proprietary assets to a foreign company—the lisensee—in exchange for royalty fees.
-appealing to small companies that lack resources
-faster access to the market
-rapid penetration of the global markets
-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.
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.
*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.
-overseas expansion with a minimum investment
-fanchisees’ profits tied to their effort
-availability of local fanchisees’ knowledge.
-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
Contract Manufacturing
*aka outsourcing:the company arranges with a local manufacturer to manufacture parts of the product.
-labor cost advantages
-savings via taxation, lower energy costs, raw materials and overheads
-lower political and economic risk
-quicker access to markets
-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
Qualities of an ideal subcontractor
*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)
Joint Ventures
*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.
-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.
-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
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
Wholly Owned Subsidiaries
*most companies like to enter a market with 100% ownership.
*Ownership strategies can take 2 routes: acquisitions and Greenfield operations
-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
-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
Acquisitions and Mergers
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.
Greenfield Operations
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.
Types of Strategic Alliances
*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
The logic behind strategy alliances
*restructure-rejuvenate the business
Cross border alliances the succeed
*alliances between strong and weak partners seldom work.
*autonomy and flexibility-alliance has own management team and its own board of directors
*equal ownership
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.
Reasons of Exit
*sustained losses
*premature entry
*ethical reasons
*intense competition
*resource reallocation
Risks of Exit
*fixed costs of exit
*disposition of assets
*signal to other markets
*long-term opportunities
Guidelines of exit
*contemplate and assess all options to salvage the foreign business
*incremental exit
*migrate customers