GLOBAL MARKET ENTRY

STRATEGIES
Global Marketing Management by
Lee & Carter

Determining Market Entry

Strategy

The most significant international marketing decision

Commitment of resources in every aspects over a long
period of time
It signifies the companys attitude and ambition in
international markets
It determines the competitive position of the company
Degree of control over the entire product/service offer,
distribution, and profitability (repatriation)

Process of Firms
Internationalization
The process that an organization goes through to be an
international (and ultimately a global) company
Lee and Carter (2005)

Tend to begin with experimental or tentative attempts, then

gradually increase commitment as experience and
knowledge improve
Not always a smooth, immutable path of development
de-internationalization can occur at any time

Process of Firms Internationalization:

Main Approaches
The Stage Models Approach
Network Approach
Born Global Approach

Internationalization Approaches:
The Stage Models (1)
Process of internationalization is 'incremental', 'gradual'
and 'sequential'
Commitment increases as experience and learning build
up

Stage 1: No regular export activity

Stage 2: Export via independent representative
Stage 3: Establish own sales subsidiaries
Stage 4: Overseas manufacturing

Internationalisation Approaches:
The Network Perspective(2)
Articulates how organizations make use of business
networks as a 'mechanism' to internationalization
The networks may comprise customers, customers'
customers, competitors, suppliers, suppliers' suppliers,
distributors, agents and consultants
Similar to the 'Stages' models in that commitment is built
up when expertise, knowledge and experience improve
Offer a clearer explanation of 'how' organizations can
make a 'step change' in the internationalization process

Internationalization Approaches:
The Born Globals(3)
The recent increases in the number of 'instant international' or 'born
global' companies (Jolly et.al. 1992; Knight and Cavusgil, 1996; Mc
Auley, 1999)
Patterns of internationalization do not conform to the traditional
approaches
Often have 'global outlook' from the beginning; and derive a large
proportion of sales from international activities
Enabling factors for 'born global':
Changing consumer preferences and shortened PLC demand for
specialist and/or customized products/services (global niche)
Advances in affordable production technologies easier for small
companies to customize
New communication and E-commerce (or e-delivery technologies)

Factors influencing the choice and importance of

market entry mode

Market Entry Modes

Foreign Market Entry Modes

Exporting

Foreign Production
Indirect

Ownership Strategies
Contract Manuf.
Licensing/Franch.
Joint Venture
Strategic Alliance
Wholly Owned Sub

Assembly

Direct

Full-scale Integrated Production

Distributor Alliance

Marketing
Subsidiary

Exporting
Export selling/export marketing
Export selling:
Does not involve tailoring the marketing mix
May work for some products/services or for unique
products with little international competition
Companies new to exporting use this

Export Marketing:
As companies mature in the global market place, they
engage in export marketing

Two Methods of Exporting

Direct Reaching markets either yourself or
with the use of an intermediary located in the
foreign market
+ More profit, greater control, able to leverage
experience curve effects
- Requires more expertise, management time, and
financial resources

Some Examples of Direct

Exporting Activities
Identifying market opportunity
Product, price, place, promotion
Ensuring payment

Distributing the product

Shipping the product
Insurance, freight forwarding

Clearing customs
Getting it into the hands of buyers
Warehousing, transporting to retail, etc.

Providing after-sales support

Lots to Do!
No wonder many
firms choose
an intermediary
to do this for them

Direct Export Options

Independent Distributor
No direct cost to
exporter; takes margin
on selling price of
products

LESS PER-UNIT PROFIT

USEFUL IF VOLUME
LOW

Marketing Subsidiary
Initial and fixed costs to
establish and maintain
subsidiary
Manager, sales manager,
clerical staff, warehousing
operation, etc.
MORE PER-UNIT PROFIT
USEFUL IF VOLUME
HIGH

Intermediaries for Indirect Exporting

Export Management Company (EMC)
Handles all aspects of export operations
Marketing research, patent protection, channel
credit, shipping, logistics, and actual marketing of
product

Can act as merchant (taking title of product) or

as agent (receiving fee or commission on
product sale)

Intermediaries for Indirect Exporting (contd)

Export Agents
Individuals or firms that assist manufacturers in
exporting goods
Similar to EMCs; but tend to provide more limited
services and focus on one country or part of the
world
Focus more on sale and handling of goods
Exporting firms may need to utilize several export
agents to gain adequate worldwide market coverage

Licensing
is a contractual agreement whereby one company
(the licensor) makes an asset available to another
company (the licensee) in exchange for royalties,
license fees, or some other form of compensation.
The licensed asset may be a patent, trade secret, or
company name.
Who can use this and why?
A company with advanced technology , know-how, or a strong brand image can
use licensing agreements to supplement its bottom-line profitability with
little initial investment

Pros and Cons of Licensing

+ Leverage local knowledge
of licensee
+ Commercial and political
risks absorbed by licensee
+ Allows resources to be
concentrated in more
lucrative markets
+ Adds to firms
manufacturing capacity
+ Enables firms to enter
several markets quickly

Possibility of creating a
competitor
Dependence on licensee
Uncertainty of licensees
marketing capabilities and
product quality
Management time and
resources

Franchising
is a contractual agreement between a franchiser
and a franchisee whereby the franchiser grants the
right to sell goods/services to a franchisee.
The franchisee agrees to operate the business
according to a plan defined by the franchiser and
under a trade name owned by the franchiser.
http://www.franchisedirect.com/top100globalfran
chises/

McDonalds:
The Big Mac of Franchising
30,000+ locations; 119 countries
70% franchises
New franchise $500,000
At least $100,000 cash

McDonalds gets
Initial fee
% sales volume
McDonalds supplies:
Pre-planning market and location research
Operations and standards training
Management training

Foreign Production
Contract Manufacturing
Company arranges to have its products manufactured by
an independent local company on a contractual basis
Avoids having to establish a factory in that market; can
help to overcome import barriers
Typically chosen for countries with low volume potential
smaller Central American, African, and Asian countries
Appropriate only when production technology know-how
is available in the market

Foreign Production
Other Options
Assembly Company locates a proportion of manufacturing
processtypically last stagesto the foreign country
Full-Scale Integrated Production Company locates a fully
integrated production unit in the foreign country
Manufacturing and Inter-firm Licensing If taxes on
royalties are less than taxes on repatriated profits, a firm may
license its trademark or technology to its manufacturing
subsidiary

Joint Ventures
More extensive form of participation than
exporting or licensing.
Companies lacking sufficient capital resources
might seek partner to jointly finance a project.
Advantages:
Sharing of risk
Ability to combine different value chain strengths
such as manufacturing, international marketing
capability, etc.

Wholly owned & fully controlled

.after gaining experience outside home country via
exporting/ licensing/joint ventures
Invest/acquire plant, equipment, or other assets
outside the home country
Investor has control or significant influence over the
investment
Requires greatest commitment of capital and
managerial effort

The End