Transcript ch11 Hollensen - Warsaw School of Economics

Svend Hollensen
GLOBAL MARKETING
4th Edition
Lecture by Ewa Baranowska-Prokop, Ph.D.
Intermediate entry modes
Lysholm’s Linie Aquavit
is exported to Sweden,
Norway, Denmark,
Germany,
and the US
Source: http://linie-aquavit.com
Hollensen, Global Marketing 4e, © Pearson Education 2008
10-2
Lysholm Linie Aquavit:
A case study
 What are the advantages for Arcus of
having distributors as part-owners?
 What should be Arcus’ main criteria for
selecting new distributors or cooperation
partners, for Linie Aquavit in new market?
 Would it be possible to pursue an
international branding strategy for Linie
Aquavit?
Requires web access
Hollensen, Global Marketing 4e, © Pearson Education 2008
10-3
Learning objectives
Describe and understand the main
intermediate entry modes
Discuss the advantages and
disadvantages of the main intermediate
entry modes
Explain the different stages in joint-venture
formation
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-4
Learning objectives (2)
Explore the reasons for the ‘divorce’ of the
two parents in a joint-venture constellation
Explore different ways of managing a joint
venture/strategic alliance
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-5
Figure 11.1
Intermediate modes
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-6
What is this?
_____ is the term used to refer to
manufacturing which is outsourced to
an external partner, one that specializes
in production and production
technology.
Contract manufacturing
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-7
Factors encouraging
foreign market production
Desirability of being close to foreign customers
Foreign production costs are low
Transportation costs may render heavy products
non-competitive
Tariffs can prevent entry of an exporter’s
products
Government preference for national suppliers
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-8
Benetton’s use of
contract manufacturing
Benetton relies upon a
contractual network of
small overseas
manufacturers
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-9
What is this?
What term refers to the exchange of
rights, such as manufacturing rights, to
another in exchange for payment?
Licensing
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-10
Rights that may be offered
in a licensing agreement
Patent covering a product or process
Manufacturing know-how not subject to a
patent
Technical advice and assistance
Marketing advice and assistance
Use of a trade mark/trade name
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-11
Components of royalty fees
Lump sum not related to output
Minimum royalty
Running royalty
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-12
Other methods of
licensing payments
Conversion of royalties to equity
Management and technical fees
Complex systems of counter purchase
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-13
Motives for licensing out (1)
Licensor firm will remain technologically superior
in its product development
Licensor is too small to have financial,
managerial or marketing expertise for overseas
investment
Product is at end of product life cycle in
advanced countries but stretching product life
cycle is possible in less developed countries
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-14
Motives for licensing out (2)
Opportunity for profit on key components
Government regulations may restrict
foreign direct investment or, if political
risks are high, licensing may be only
realistic entry mode
Constraints may be imposed on imports
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-15
Figure 11.2 Life cycle
benefits of licensing
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-16
What is this?
What term refers to the exchange of
rights between a franchisor and
franchisee, such as the right to use a
total business concept including use of
trade marks, against some agreed
royalty?
Franchising
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-17
Types of Franchising
Product and
trade name
franchising
Business
format
‘package’
franchising
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-18
Business format ‘packages’
Trade marks/ trade names/ designs
Patents and copyrights
Business know-how/ trade secrets
Geographic exclusivity
Store design
Market research
Location selection
Source: http://www.kabooki.com/
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-19
McDonald’s is among
the best known
global franchise businesses
Source: http://www.mcdonalds.com/
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-20
Interdependence between
franchisor-franchisee
Franchisor-franchisee
Fast growth
Capital infusion
Income stream
Community goodwill
Franchisee-franchisor
Trade mark strength
Technical advice
Support services
Marketing resources
Advertising
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-21
Key success factors in the
franchisor-franchisee relationship
Integrity of
business system
Capacity for
renewal of
business system
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-22
What is this?
What term refers to an equity
partnership between two or more
partners?
Joint venture
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-23
Reasons for using
joint ventures
Complementary technology or management
skills can lead to new opportunities
Firms with partners in host countries can
increase speed of market entry
Less developed countries may restrict foreign
ownership
Costs of global operations in R&D and
production can be shared
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-24
Figure 11.3 Joint ventures
Parent
firm
A
Parent
firm
B
Joint venture C
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-25
Figure 11.3 Strategic alliances
Parent
firm
A
Parent
firm
B
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-26
Types of
value chain partnerships
Upstream-based collaboration
Downstream-based collaboration
Upstream/downstream-based collaboration
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-27
Figure 11.4 Collaboration
possibilities in the value chain
Research
and development
Production
Upstream
Marketing
Downstream
3
1
2
Upstream
Research
and development
Sales
and services
Downstream
Production
Marketing
Sales
and services
Source: Source: Adapted from Lorange and Roos, 1995, p. 16.
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-28
What is this?
Which type of value chain partnership
involves each partner contributing
complementary product lines or
services, with each partner taking care
of all value chain activities within their
own product line?
Y-coalitions
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-29
What is this?
Which type of value chain partnership
involves each partner in the value chain
dividing the value chain activities
between them?
X-coalitions
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-30
Stages in
joint-venture formation
1: Joint venture objectives
2: Cost/benefit analysis
3: Partner selection
4: Business plan development
5: Joint-venture agreement
6: Contract writing
7: Performance evaluation
Source: Source: Adapted from Young et al., 1989, p. 233.
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-31
Principle objectives for
forming a joint venture
Entering
new markets
Reducing
manufacturing
costs
Hollensen, Global Marketing 4e, © Pearson Education 2008
Developing
and
diffusing
technology
11-32
Factors to consider during the
cost/benefit analysis
Financial commitment
Synergy
Management
commitment
Risk reduction
Control
Long-run market
penetration
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-33
Desirable partner resources
Development know-how
Sales and service expertise
Critical manufacturing capabilities
Low-cost production facilities
Reputation/brand equity
Market access/knowledge
cash
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-34
Sources of
potential conflict
Diverging goals
Double management
Repatriation of profits
Mixing cultures
Shared equity
Developing trust
Providing an exit
strategy
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-35
For discussion (1)
 Why are joint ventures preferred by host
countries as an entry strategy for foreign firms?
 Why are strategic alliances used in new product
development?
 Under what circumstances should franchising be
considered? How do these circumstances vary
from those leading to licensing?
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-36
For discussion (2)
 Do you believe that licensing in represents a
feasible long-term product development strategy
for a company? Discuss in relation to in-house
product development.
 Why would a firm consider forming partnerships
with competitors?
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-37
Marriott: A case study
 What could be the main motives for Marriott
in using franchising, compared to other
entry modes and operation forms?
 Identify several major categories of
segmentation used by Marriott. For each,
relate specific examples of hotel services
tailored to various target markets.
Requires web access
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-38
Skagen Designs: A case study
 What screening criteria should Skagen Designs
use in connection with its choice of new markets for
its watch collection?
 Which entry mode should Skagen Designs use on
the chosen markets?
 Skagen Designs has launched other product lines
(e.g. sun glasses) with varying success. What
should be the guidelines for including other product
lines in the Skagen Designs collection?
 Which criteria should SD use for its selection of
future sponsor partners?
Hollensen, Global Marketing 4e, © Pearson Education 2008
11-39