Market entry strategy:
Making the ‘‘right’’ entry decisions heavily impacts the company’s performance in global markets. Granted, other strategic marketing mix decisions also play a big role. A major difference here is that many of these other decisions can easily be corrected, sometimes even overnight (e.g., pricing decisions), while entry decisions are far more difficult to redress. We can hardly overstate the need for a solid market entry strategy. Entry decisions heavily influence the firm’s other marketing mix decisions. Several interlocking decisions need to be made. The firm must decide on: (1) the target product/market, (2) the corporate objectives for these target markets, (3) the mode of entry, (4) the time of entry, (5) a marketing mix plan, and (6) a control system to monitor the performance in the entered market. It starts with the target market selection decision. We then consider the different criteria that will impact the entry mode choice. Following that, we will concentrate on the various entry strategy options that MNCs might look at. Each of these will be described in some detail and evaluated. We will then focus on cross-border strategic alliances. The final two questions that we consider deal with timing-of-entry and divestment decisions
Target market selection:
A crucial step in developing a global expansion strategy is the selection of potential target markets. Companies adopt many different approaches to pick target markets. To identify market opportunities for given product the international market usually start off with a large pool of candidate countries (say, all central European countries). To narrow down this pool of countries, the company will typically do a preliminary screening. The goal of this exercise is twofold: you want to minimize the mistakes of (1) ignoring countries that offer viable opportunities for your product, and(2) wasting time on countries that offer no or little potential. Those countries that make the grade are scrutinized further to determine the final set of target countries. The following describes a four-step procedure that a firm can employ for the initial screening process. Step 1: Indicator selection and data collection. First, the company needs to identify a set of socioeconomic and political indicators it believes are critical. The indicators that a company selects are to a large degree driven by the strategic objectives spelled out in the company’s global mission. Colgate-Palmolive views per capita purchasing power as a major driver behind market opportunities. Starbucks looks at economic indicators, the size of the population, and whether the company can locate good joint-venture partners.4When choosing markets for a particular product, indicators will also depend on the nature of the product. P&G chose Malaysia and Singapore as the first markets in Asia (ex-Japan) for the rollout of Febreze, a fabric odor remover. Not only were both markets known for ‘‘home-proud’’ consumers but people there also tendto furnish their homes heavily with fabrics. A company might also decide to enter a particular country that is considered as a trendsetter in the industry. Kodak, for example, re-entered the digital camera market in Japan precisely for that reason. As the president of Kodak Japan put it, ‘‘what happens in Japan eventually happens in the rest of world. Information on socioeconomic and political country indicators can easily be gathered from publicly available data sources typically, countries that do well on one indicator (say, market size) rate poorly on other indicators (say, market growth). For instance, India’s beer market is growing rapidly at 14 percent a year but its per capita consumption of one liter per year is still a small fraction of the world average of 22 liters. Somehow, the company needs to combine its information to establish an overall measure of market attractiveness for these candidate markets. Step 2: Determine the importance of...
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