Transcript GLOBAL MARKET ENTRY STRATEGIES Chapter Nine

Global Marketing Management
Masaaki Kotabe & Kristiaan Helsen
Third Edition
John Wiley & Sons, Inc., 2004
Chapter 9
Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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Chapter 9
Global Market-Entry Strategies
Chapter 9
Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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Chapter Overview
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2.
3.
4.
5.
6.
7.
8.
Target Market Selection
Choosing the Mode of Entry
Exporting
Licensing
Franchising
Contract Manufacturing
Joint Ventures
Wholly Owned Subsidiaries
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Management, Third Edition, 2004
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Chapter Overview (contd.)
9. Strategic Alliances
10. Timing of Entry
11. Exit Strategies
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Introduction
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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
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Introduction (contd.)
– (4) The time of entry
– (5) A marketing-mix plan
– (6) A control system to check the performance
in the entered markets
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1. Target Market Selection
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A crucial step in developing a global expansion
strategy is the selection of potential target markets
(see Exhibit 9-1 for the entry decision process).
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
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Management, Third Edition, 2004
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2. Choosing the Mode of Entry
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Decision Criteria for Mode of Entry (see Exhibit
9-12):
– Market Size and Growth
– Risk
– Government Regulations
– Competitive Environment
– Local Infrastructure
» Classification of Markets:
 Platform Countries (Singapore & Hong
Kong)
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Management, Third Edition, 2004
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2. Choosing the Mode of Entry (contd.)
 Emerging
–
–
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Countries (Vietnam & the
Philippines)
 Growth Countries (China & India)
 Maturing and established countries
(examples: South Korea, Taiwan &
Japan)
Company Objectives
Need for Control
Internal Resources, Assets and Capabilities
Flexibility
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Management, Third Edition, 2004
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2. Choosing the Mode of Entry (contd.)
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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)
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Management, Third Edition, 2004
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3. Exporting
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Indirect Exporting
– Export management companies
Cooperative Exporting
– Piggyback Exporting
Direct Exporting
– Firms set up their own exporting departments
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Management, Third Edition, 2004
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4. Licensing
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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
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Management, Third Edition, 2004
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4. Licensing (contd.)
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– 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)
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Management, Third Edition, 2004
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5. Franchising
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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
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Management, Third Edition, 2004
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5. Franchising (contd.)
–
–
–
–
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Limited franchising opportunities overseas
Lack of control over the franchisees’ operations
Problem in performance standards
Cultural problems
Physical proximity
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6. Contract Manufacturing
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Benefits:
– Labor cost advantages
– Savings via taxation, lower energy costs, raw
materials, and overheads
– Lower political and economic risk
– Quicker access to markets
Caveats:
– Contract manufacturer may become a future
competitor
– Lower productivity standards
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Management, Third Edition, 2004
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6. Contract Manufacturing (contd.)
– 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
– Solid financial footings
– Able to integrate with company’s business
– Must have contingency plans
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7. Joint Ventures
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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
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7. Joint Ventures (contd.)
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Caveats:
– 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
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7. Joint Ventures (contd.)
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Establish clear objectives from the beginning
Bridge cultural gaps
Gain top managerial commitment and respect
Use incremental approach
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8. Wholly Owned Subsidiaries
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Acquisitions
Greenfield Operations
Benefits:
– Greater control and higher profits
– Strong commitment to the local market on the
part of companies
– Allows the investor to manage and control
marketing, production, and sourcing decisions
Caveats:
– Risks of full ownership
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Management, Third Edition, 2004
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8. Wholly Owned Subsidiaries (contd.)
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– Developing a foreign presence without the
support of a third part
– Risk of nationalization
– Issues of cultural and economic sovereignty of
the host country
Acquisitions and Mergers
– Quick access to the local market
– Good way to get access to the local brands
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Management, Third Edition, 2004
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9. Strategic Alliances
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Greenfield Operations
– Offer the company more flexibility than
acquisitions in the areas of human resources,
suppliers, logistics, plant layout, and
manufacturing technology.
Types of Strategic Alliances
– Simple licensing agreements between two
partners
– Market-based alliances
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Management, Third Edition, 2004
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9. Strategic Alliances (contd.)
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– Operations and logistics alliances
– Operations-based alliances
The Logic Behind Strategic Alliances
– Defend
– Catch-Up
– Remain
– Restructure
Cross-Border Alliances that Succeed:
– Alliances between strong and weak partners
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Management, Third Edition, 2004
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9. Strategic Alliances (contd.)
seldom work.
– Autonomy and flexibility
– Equal ownership
– Other factors:
» Commitment and support of the top of the
partners’ organizations
» Strong alliance managers are the key
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Management, Third Edition, 2004
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9. Strategic Alliances (contd.)
» Alliances between partners that are related in
terms of products, technologies, and markets
» Similar cultures, assets sizes and venturing
experience
» A shared vision on goals and mutual benefits
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10. Timing of Entry
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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.
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Management, Third Edition, 2004
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10. Timing of Entry (contd.)
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Reasons for exit:
– Sustained losses
– Volatility
– Premature entry
– Ethical reasons
– Intense competition
– Resource reallocation
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Management, Third Edition, 2004
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11. Exit Strategies
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Risks of exit:
– Fixed costs of exit
– Disposition of assets
– Signal to other markets
– Long-term opportunities
Guidelines:
– Contemplate and assess all options to salvage
the foreign business
– Incremental exit
– Migrate customers
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Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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Copyright © John Wiley & Sons, Inc. 2004
Chapter 9
Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
32