Global Market Entry Strategies

Topics: Joint venture, License, International trade Pages: 5 (852 words) Published: November 17, 2013
Chapter 9: 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. Global marketers have to make a multitude of decisions regarding the entry mode, which may include: (1) The target product/market

(2) The goals of the target markets
(3) The mode of entry
(4) The time of entry
(5) A marketing-mix plan
(6) A control system to check the performance in the entered markets 1. 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 in the pool on each indicator
4. Compute overall score for each country
2. Choosing the Mode of Entry
Decision Criteria for Mode of Entry:
Market Size and Growth
Risk
Government Regulations
Competitive Environment/Cultural Distance
Local Infrastructure
Classification of Markets:
Platform Countries (Singapore & Hong Kong)
Emerging Countries (Vietnam & the Philippines)
Growth Countries (China & India)
Maturing and established countries (examples: South Korea, Taiwan & Japan) Key criteria for choosing entry modes:
Company Objectives
Need for Control
Internal Resources, Assets and Capabilities
Flexibility
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) 3. Exporting
Indirect Exporting
Export merchants
Export agents
Export management companies (EMC)
Cooperative Exporting
Piggyback Exporting
Direct Exporting
Firms set up their own exporting departments
4. Licensing
Licensor and the licensee
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 a 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) 5. Franchising
Franchisor and the franchisee
Master franchising
Benefits:
Overseas expansion with a minimum investment
Franchisees’ profits tied to their efforts
Availability of local franchisees’ knowledge
Caveats:
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
6. Contract Manufacturing (Outsourcing)
Benefits:
a. Labor cost advantages
b. Savings via taxation, lower energy costs, raw materials, and overheads c. Lower political and economic risk
d. Quicker access to markets
Caveats:
e. Contract manufacturer may become a future competitor
f. Lower productivity standards
g. Backlash from the company’s home-market employees regarding HR and labor issues h. Issues of quality and production standards
7. 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
Caveats:
Lack of control
Lack of trust
Conflicts arising over matters such as strategies, resource allocation, transfer pricing, ownership of critical...
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