FOREIGN MARKET

ENTRY STRATEGIES
GROUP MEMBERS:
Andrew Clarke
Nollette Callinan
Susan Connell
Louise Considine
 Foreign Market Entry Strategies
Risk And Control in Market Entry
Control
Manufacturing
Own Subsidiary
Cooperative Acquisition
Strategies Assembly
Joint Ventures
Strategic Alliances
Direct Exporting
Distributors
Agents
Direct Marketing
Indirect Exporting
Franchising
Piggybacking
Management
Trading Companies
Contracts
Export Management
Companies
Domestic Purchasing

Risk
Indirect Exporting
- Using a third party to export goods
Advantages
Less complicated and less expensive than direct exporting
methods
Quickly provide access and wide coverage of foreign
markets

Disadvantages
Little or no control over foreign market decisions
Lower profit margins
Little experience/knowledge/foreign contacts gained
 Domestic Purchasing

Often involves an unsolicited purchase

request from a foreign buyer
Can be used to sell off excess stock with the
least inconvenience

Export Management Companies (EMCs)

Specialist companies that act as the export

department for a number of companies
Trading Companies
Extensive contacts, experience and operations in
many different trading regions in the world
Long-term commercial relationships all over the world
Trading companies may accept goods as payment for
other goods

Piggybacking
•Established international distribution network
of one manufacturer may be used to carry the
products of a second company
DIRECT EXPORTING
Agents
 Cheaper
 Lower risk
 Quicker
Distributors
 Larger cost – exclusivity
 Long term relationship
 More specialised
DIRECT EXPORTING contd…
Management Contracts
 Internationalisation of Services
 System installation and training
Franchising
 Less risky – more favourable laws
 Less costly – significant investment in
training needed
 More control
 Transfer of skills, knowledge, competences
and systems
 Standardisation v’s adaptation
DIRECT EXPORTING contd…
Direct Marketing
 Database Marketing Tools
 telemarketing, media marketing, direct mail
and the internet
 Transferability across boundaries
 Customisation is essential for success
Manufacturing Strategies
Why?
 Gain new business – commitment
 To defend existing business
 Move with an established customer
 Reduce costs
 Avoid government restrictions
Assembly
Involves establishing plants in foreign markets simply
to assemble components manufactured in the
domestic market by the firm.
Advantages Disadvantages
Lower tariff barriers Not all governments
welcome assembly plants
Reduce costs Operating costs subject to
rapid change
Allows domestic firm to
concentrate on product
development, production
skills & investment →
economies of scale
Wholly Owned Subsidiaries
Advantages
Level of control necessary
to fully meet strategic
objectives
Offers the fullest means of
participating in a market
Avoids communication &
conflict of interest problems prevent 100% ownership
Disadvantages
Most expensive method
Costs of withdrawing
substantial → LT view
Gov restrictions may
Political risks = threat to
success
High degree of visibility
Acquisitions

“where an organisation develops its

resources and competences by taking
over another organisation”

Johnson & Scholes (2002, p. 375)

Acquisitions
Why?
 To enter new product or market areas with
more speed
 Meet with less retaliation in mature foreign
markets
 Cost efficiencies
 Under pressure from stakeholders
 Experience curve effects
Acquisitions
Drawbacks
 Can take a lot of time to search & appraise
probable acquisition targets, engage in
negotiations & integrate
 Acquire firm with problems which are expensive to
overcome
 Acquisitions are often associated with job losses &
transfer of production facilities over seas
 National resentment
 Strategic alliances
Strategic alliances are described as a wide range of
cooperative
partnerships and joint ventures.

Defining characteristics:
1. Two or more entities unite to pursue a set of important,
agreed goals while in some way remaining independent
subsequent to the formation of an alliance.
2. The partners share both the benefits of the alliance and
control over the performance of assigned tasks during the
life of the alliance.
3. The partners contribute on a continuing basis in one or
more key strategic areas, for example, technology or
products.
 To Conclude…
Firms seek to expand geographically due to:
- The convergence of technology.
- The emergence of alternative communication structures.
- The increased competition.

Firms must be proactive rather than reactive in their

approach to internationalisation.

Must conduct market research.

Firms must consider their objectives, size, level of

available resources and level of control and commitment
they wish to exert.