Market Entry Strategies

Exhibit 6-5: Strategic Thinking MapHierarchy of Strategic Decisions and Alternatives

Directional Strategies Mission Vision Values Goals

Adaptive Strategies Expansion of Scope Diversification Vertical Integration Market Development Product Development Penetration Contraction of Scope Divestiture Liquidation Harvesting Retrenchment Maintenance Scope Enhancement Status Quo

Market Entry Strategies Purchase Acquisition Licensing Venture Capital Investment Cooperation Merger Alliance Joint Venture Development Internal Development Internal Venture

Competitive Strategies Strategic Posture Defender Prospector Analyzer Positioning Marketwide Cost leadership Differentiation Market segment Focus/ Cost leadership Focus/ Differentiation

Implementation Strategies Service Delivery Pre-service Point of Service After-service

Support Culture Structure Strategic Resources

Unit Action Plans Objectives Actions Timelines Responsibilities

Purchase
Acquisition Licensing Venture Capital

Cooperation
Merger Alliance Joint Venture

Development
Internal Development Internal Venture

Purchase
Acquisition
a strategy through which one firm buys a controlling interest in another firm with the intent of making the acquired firm a subsidiary business within its own portfolio

Licensing
Acquiring a technology or product through licensing may be viewed an alternative to acquiring a complete company. License agreements obviate the need for costly and time-consuming product development and provide rapid access to proven technologies, generally with reduced financial and marketing risk to the organization.

Venture Capital Investment

Venture capital investments offer an opportunity to enter or try out a market while keeping risks low. Typically, venture capital investments are used to become involved in the growth and development of a small organization that has the potential to develop a new or innovative technology.

A Merger

C The consolidation or combination of one firm with another

A Acquisition

A The purchase of one firm by another so that ownership transfers

The merger of Daimler with Chrysler in 1997 is considered by many to have been an acquisition in disguise

Purchase
Merger
Mergers are similar to acquisitions. In mergers, however, the two organizations combine through mutual agreement to form a single new organization, often with a new name. Mergers have been used most often in the health care segment to combine two similar organizations (horizontal integration) in an effort to gain greater efficiency in the delivery of health care services

Alliance
Strategic alliances are loosely coupled arrangements among existing organizations that are designed to achieve some long-term strategic purpose not possible by any single organization. Alliances include configurations such as federations, consortiums, networks, and systems..

Joint Venture
When projects get too large, technology too expensive, internal resources, competencies or capabilities too scarce, or the costs of failure too high for a single organization, joint ventures are often used.38 A joint venture (JV) is the combination of the resources of two or more separate organizations to accomplish a designated task.

Reasons for Making Acquisitions

Learn and develop new capabilities Increase market power

Reshape firms competitive scope

Overcome entry barriers

Acquisitions

Increase diversification

Cost of new product development

Increase speed to market

Lower risk compared to developing new products

Problems With Acquisitions

Integration difficulties Resulting firm is too large

Inadequate evaluation of target

Acquisitions

Managers overly focused on acquisitions

Large or extraordinary debt Inability to achieve synergy

Too much diversification

Strategic Alliances

Support Activities

Technological Development

Human Resource Mgmt.

Firm Infrastructure

Service Marketing & Sales Procurement Outbound Logistics Operations Inbound Logistics

Vertical Alliance

Primary Activities

Supplier
Technological Development Human Resource Mgmt.

vertical complementary strategic alliance is formed between firms that agree to use their skills and capabilities in different stages of the value chain to create value for both firms
outsourcing is one example of this type of alliance

Support Activities

Firm Infrastructure

Service Marketing & Sales Procurement Outbound Logistics Operations

Inbound Logistics

Primary Activities