Global Market Entry Modes Chapter 8
Global Market-Entry Strategies (Chapter 8)
1. Target Market Selection
A four-step procedure for the initial screening process:
2. Choosing the Mode of Entry
Decision Criteria for Mode of Entry:
3. Exporting
Indirect Exporting
Cooperative Exporting
Direct Exporting
Export management companies
Piggyback Exporting
Firms set up their own exporting department
BENEFITS
CAVEATS
4. LICENSING
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 a licensee
Biggest danger is the risk of opportunism
Licensee may become a future competitor
5. FRANCHISING
Overseas expansion with a minimum investment
Franchisees’ profits tied to their efforts
Availability of local franchisees’ knowledge
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
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
7. JOINT VENTURES
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
8. WHOLLY OWNED
1. Target Market Selection
A four-step procedure for the initial screening process:
2. Choosing the Mode of Entry
Decision Criteria for Mode of Entry:
3. Exporting
Indirect Exporting
Cooperative Exporting
Direct Exporting
Export management companies
Piggyback Exporting
Firms set up their own exporting department
BENEFITS
CAVEATS
4. LICENSING
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 a licensee
Biggest danger is the risk of opportunism
Licensee may become a future competitor
5. FRANCHISING
Overseas expansion with a minimum investment
Franchisees’ profits tied to their efforts
Availability of local franchisees’ knowledge
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
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
7. JOINT VENTURES
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
8. WHOLLY OWNED