BMAKT2201 INTERNATIONAL MARKETING

CHAPTER 7 MARKET ENTRY STRATEGIES

Christopher John Noraizan Abdul Rashid Limkokwing University of creative technology Faculty of Business Management & Globalization Tel : 603 8317 8833 (Ext 8125) Email: noraizan@limkokwing.edu.my

MARKET ENTRY

Mode of entry determines involvement of a company with the new market. For SMEs it is considered as a crucial first step to choose how involved they should be with new market Each entry mode has its own set of controls over the market, in resources, marketing and sales and customer relationships.

BMAKT2201

INTERNATIONAL MARKETING

MARKET ENTRY METHODS & THE LEVELS OF INVOLVEMENT IN INTERNATIONAL MARKETS

Wholly-owned subsidiary Company acquisition Assembly operations Joint venture Strategic alliance Licensing Contract manufacture Direct marketing Franchising Distributors and agents Sales force Trading companies Export management companies Piggyback operations Domestic purchasing
INTERNATIONAL MARKETING ch7/3

Levels of involvement

BMAKT2201

SUCCESSFUL MARKET ENTRY #1

Criteria for Selecting Appropriate Market Entry Method
The company objectives and expectations relating to the size and value of anticipated business The size and financial resources of the company Existing foreign market involvement The skills, abilities and attitudes of the company management towards international marketing The nature and power of the competition with the market
BMAKT2201 INTERNATIONAL MARKETING ch7/4

SUCCESSFUL MARKET ENTRY #2

Criteria for Selecting Appropriate Market Entry Method
The nature of existing and anticipated tariff and non-tariff barriers The nature of the product itself, particularly any areas of competitive advantage, such as trademark or patent protection The timing of the move in relation to the market and competitive situation
BMAKT2201 INTERNATIONAL MARKETING ch7/5

Discuss the situation

Asian companies to a far greater extent than western companies, tend to enter new and emerging market. The rationale is the first mover advantage. There are several difficulties in entering a new market for the first time which they prefer to experience those. This is again happening for countries such as Vietnam and Cambodia which Asian companies are attracted to with huge investments Q1. What are the difficulties a first mover in a new market faces? Q2. What are the advantages to be first mover in a country?

BMAKT2201

INTERNATIONAL MARKETING

ENTRY MODE ASSESSMENT

EXPORTING
High

OVERSEAS PRODUCTION
Wholly owned subsidiary Acquisition Joint Ventures

CONTROL

Strategic Alliances Franchising Licensing Direct exporting Indirect exporting

Low Low INVOLVEMENT High

RISK & CONTROL IN MARKET ENTRY

Control
Co-operation Strategies
Joint ventures Strategic alliances

Manufacturing
Own subsidiary Acquisition Assembly

Direct Exporting
Distributors Agents Direct marketing Franchising Management contracts

Indirect Exporting
Piggybacking Trading companies Export management companies Domestic purchasing
BMAKT2201 INTERNATIONAL MARKETING

Risk
ch7/8

INDIRECT EXPORTING #1
Domestic Purchasing
Foreign organisation purchases the product for export to another country Gives access to and limited knowledge of the international market Little control over choice of markets entered For longer term, need a more proactive approach

Export Management Companies (EMCs)

Specialist companies act as the export department for a range of companies Help SMEs to initiate/develop/maintain international sales Deal with documentation, government regulation

BMAKT2201

INTERNATIONAL MARKETING

ch7/9

INDIRECT EXPORTING #2
Trading Houses
Their extensive operations and controls enable operation in more difficult trading areas Manage countertrade activities

Piggy Backing
An established international distribution network of one manufacturer used to carry products of a second Particularly good for firms from developing countries Often poorly considered terms and conditions

BMAKT2201

INTERNATIONAL MARKETING

ch7/10

Direct Export and Marketing MIX

Pricing:
Policy, strategies, discount structures & trading terms

Promotion:
Corporate promotions & local selling, trade shows & literature

Product:
Selection, development & sourcing

EXPORT MARKETING MIX

Technical:
Specifications, testing & product quality

Distribution:
Sales force management, agents, distributors & logistics

Services:
Market research, training & sales servicing

Finance & Administration: Budgets, order processing, insurance & credit control
BMAKT2201 INTERNATIONAL MARKETING ch7/11

IMPORTANT FACTORS FOR SUCCESSFUL EXPORTING

Commitment of the firms management Exporting approach reliant on strong skills base Good marketing and information communication system production capacity & capability, product superiority, competitive pricing Effective market research Effective national export policy

Source: Katsikeas et al (1996)

BMAKT2201

INTERNATIONAL MARKETING

ch7/12

INITIATION AND DEVELOPMENT OF EXPORT PRODUCT POTFOLIOS

BMAKT2201

INTERNATIONAL MARKETING

ch7/13

SELECTION CRITERIA FOR FINDING A SUITABLE AGENT

Financial strength of the agent Their contacts with potential customers The nature and extent of their responsibilities to other organisations Their premises, equipment and resources (including sales representatives)

BMAKT2201

INTERNATIONAL MARKETING

ch7/14

How to find a Good agent?

Asking Potential customers to suggest one Recommendation from institutions such as trade associations Using commercial agencies Using agents of non-competing products Poaching a competitors agent

BMAKT2201

INTERNATIONAL MARKETING

15

ACHIEVING SATISFACTORY MANUFACTURER-AGENT RELATIONSHIP

Achieving Satisfactory Manufacturer-agent Relationship
Allocate time and resources to find a suitable agent Ensure that both understand what each expects of the other Ensure that the agent is motivated to improve performance Provide adequate support on a continuing basis Ensure that there is sufficient advice and information transfer in both directions
BMAKT2201 INTERNATIONAL MARKETING ch7/16

REASONS FOR SETTING UP OVERSEAS MANUFACTURE

Product avoiding problems, e.g. perishability Costs of transporting and warehousing Tariff barriers and quotas Government regulations e.g. local investment Local manufacture viewed favourably by market Government contacts Market information feedback International culture in firm Local manufacture - faster response and just-in-time delivery Lower labour cost

BMAKT2201

INTERNATIONAL MARKETING

ch7/17

MINIMISING THE POTENTIAL PROBLEMS OF LICENSING #1

Allocate licensing responsibility to a senior manager Select licensees carefully Draft the agreement carefully to include duration, royalties, trade secrets, quality control and performance measures

Develop a clear policy and plan

BMAKT2201

INTERNATIONAL MARKETING

ch7/18

MINIMISING THE POTENTIAL PROBLEMS OF LICENSING #2

Supply the critical ingredients Obtain equity in the licensee Limit the product and territorial coverage Retain patents, trademarks, copyrights Be an important part of the licensees business

BMAKT2201

INTERNATIONAL MARKETING

ch7/19

FOREIGN MANUFACTURING STRATEGIES WITH DIRECT INVESTMENT Reasons for investment in local operations
To gain new business: local production demonstrates strong commitment To defend existing business To move with an established customer To save costs: e.g. labour, raw materials and transport To avoid government restrictions

BMAKT2201

INTERNATIONAL MARKETING

ch7/20

WHO PROVIDES WHAT IN EAST-WEST PARTNERSHIPS

BMAKT2201

INTERNATIONAL MARKETING

ch7/21

DRIVING FORCES FOR THE FORMATION & OPERATION OF STRATEGIC ALLIANCES

Insufficient resources Pace of innovation and market diffusion High research and development costs Concentration of firms in mature industries Government co-operation Self protection Market access

BMAKT2201

INTERNATIONAL MARKETING

ch7/22

References
These slides are taken from Doole and Lowe. International Marketing Strategy, 5th ed.

BMAKT2201

INTERNATIONAL MARKETING

23