20/6-internat'l market entry1 6 international market entry and development interrelation...

20/ 6-Internat'l market entry 1

66 International market entry International market entry and developmentand development

Interrelation between external and internal factors in shaping market entry and development strategy

Factors influencing country/market selectionAlternative methods of entering cross-border marketsThe need to configure and co-ordinate key business

functions to effect the successful implementation of the chosen entry strategy

How progresive corrective adjustments to market entry strategy result from inadequate business performance

The reason international market entry and development can fail

Market concentration versus market spreading


Worldwide

Internationalregional

International International market entry market entry a developmenta development

Restricted national

market scope

Internationalisation Retrenchment

Phase 1 Phase 2 Phase 3 Phase 4

Figure 6.1. The phase model of international business development

Restricted national market scope

International market entry and development

International regional

Worldwide competitor


Move to international scope

Meta trends

Industry compet’n

International International business business

developmentdevelopment

Vision, mindsetReturn to restricted national

market scope

Organisat’l dynamics

Figure 6.2 Developing an international business strategy

Internal triggers

External tiggers


Method selection

PerformanceOK?

Config. functions

Market selection

Corrective adjust.

Home market

External tr.

Internal tr.Cross border

market?

GO ON

n

n

y

y


INTERNAL

triggers

EXTERNAL

triggers

PRO-

ACTIVE

RE-

ACTIVE

Table 6.1 External versus internal triggers to change: proactive or reactive?

VisionaryVisionary leadershipleadershipExploitation ofExploitation of core core

competenciescompetenciesOpportunity to realize

competitive interdependencies

Cross-border market Cross-border market opportunities – opportunities – grogrowwth th

and profitand profitss

Current level of business performances

Internal pressure Internal pressure from disaffected from disaffected

managersmanagersExcess capacity

Saturation/decline of local/national market

Intensity of competitionMovement of key Movement of key customers abroadcustomers abroad

Entry by cross-border rivals to local/national

market


Vision/mindset Organisational dynamics

Intern’l Business StrategyIntern’l Business Strategy

Industry competitionIndustry competition Meta trendsMeta trends

Market screening and selection Entry mode

Market Entry StategyMarket Entry Stategy

Business performanceBusiness performanceImplementation of market

entry strategy

Figure 6.3 Generic framework: Market entry and development strategies

2244

11

33

RATIONAL

IRRATIONAL

WHAT?WHAT?

HOW?HOW?

20/ 6-Internat'l market entry 7Table 6.2 Alternative decision-making processes to choosing market entry strategies

External CharacteristicsCharacteristics InternalMarket entry and

development strategy determined

by externalexternal factors

Strategy strongly influenced by external assessment of

market and business opportunities, level of

competition, etc.

Market entry and development strategy

determined by internalinternal factors

Strategy strongly influenced by power elites in the

organisation who control overall direction of the

organisation

Market selection and entry modes may be based on

•intuition rather than ’hard’ evidence

•personal preferencespersonal preferences of chief executive/senior managers

Over-emphasis on external factors

•neglect of internal context• neglect ability to implement

externally determined strategy

Key decision-makers may have an inaccurate view of the external context, leading to the

development of an inappropriate strategy for the

organisation*

Overall Overall decisiondecision

Key factors Key factors influencing the influencing the entry decisionentry decision

Nature of Nature of the processthe process

Potential Potential wweakneseaknessesses

Emphasis tends to be

on a highly rational and planned approach


DecisionsDecisions

Wrong: significant Wrong: significant penaltiespenalties

• Investment of managerial time

• Investments of financial resources

• Shareholders: loss confidence

• Opportunities cost

Right: benefitsRight: benefits

• No vasted managerial time

• No vasted financial resources

• Shareholders increasing support

• Higher growth path

20/ 6-Internat'l market entry 9Figure 6.4 The inter-relationships between the elements of the market entry model

Market screening and

selection

Entry modeBusiness

performance

Implementation

Constant Constant adjustment and adjustment and

iteration!iteration!


Market screening and selectionMarket screening and selection

– Political and economic risks

– Cultural diversity or convergence

– Product match

– Size of market and growth rates

– Extent of competition

– Scale of entry


Product match: DisneyUS Disney EuroDisney• Proven management,

marketing strength• Family annual holiday• Artificial castles• Simulated flight over

Big Ben• Different culture: a

little bit childish

• New business, no experience

• Day visitors• Why? (Loire valley)• Why? (London within

easy reach)• Different culture• Economic difficulties

in Europe


Contextual factors

(U=unacceptable/

A=acceptable)

Country A Country B Country C Country D

Political and economic risks

Cultural diversity

Specific product-market (rank order)

Product match

Size of market

Expected growth

Extent of competition

Scale of entry

Unweighted total

AA AA AA AA

AA AA AA UU

5 5 2 -

3 2 1 -

2 3 2 -

2 1 2

2 3 1

-

-

14 14 8 -

Table 6.4 Market selection grid

Contextual factors A=acceptable U=unacceptable


Entry modesEntry modes

– Degree of control

– Resources available

– Degree of risk

– Speed

– Opportunities available

– Expected return


Classification of entry modes

• Export entry mode– Indirect– Direct

• Contract entry mode– Licensing– Franchising

• Investment entry mode– Independent

venture– Acquisition– Joint venture– Strategic alliance


Market entry

Key factorsWeight (1-

10)

(1)

Value (1-5)

(2)

Entry option A Entry option B Entry option C

Weighted score

(1)x(2)

Value (1-5)

(4)

Weighted score

(1)x(4)

Value (1-5)

(b)

Weighted score

(1)x(b)

Degree of control

Resource availability

Level of risk

Speed

Expected return

Opportunities available

Rank order

Total weighted score -

-

-

-

-

-

-

-

Table 6.6. Entry mode grid


Implementation of chosen Implementation of chosen market entry modemarket entry mode

– Marketing

– Human resources

– Operations

– Logistics

– Finance


Business performanceBusiness performance

Planned vs. actual performance

Reasons for failureReasons for failure– Wrong implementation

– Inappropriate market screening and selection

– Unforeseen events

– Retaliation of indigenous competitors


Market Market screening and screening and

selectionselection

Review entry

strategy

Review implementation

Entry Entry modemode

Implemen-Implemen-tationtation

Business Business perfor-perfor-mancemance

Performance Performance unacceptableunacceptable

Corrective adjustments

Figure 6.5 Corrective adjustments to the chosen market entry strategy

Review basis Review basis for screeening for screeening

and market and market selectionselection


Market Market concentrationconcentration

Market spreadingMarket spreading

Characteris-Characteris-ticstics

Small number of markets

high volume of sales to each

Large number of markets, low level of sales to each

market

(1) external =>(1) external =>

Factors Factors favoring favoring adoption of the adoption of the strategystrategy

(2) internal =>(2) internal =>

Conditions for gaining high volumes are present

High level of potential demand

Week, fragmented competitors

Concentrate significant resources on a small number of

markets

Accept higher degree of dependence on key

international markets

Products in their early or late phase of the product life

cycle. Difficult to gain high volume of sales to any of market, due to either low

levels of demand or intensity of competition.

Company unwilling to over-Company unwilling to over-commit to a single market, commit to a single market,

and wishes to spread risk of and wishes to spread risk of sales instabilitysales instability

Potential Potential difficultiesdifficulties

Danger of concentrating on unattractive markets, impact of changing levels of economic

activity in key markets

Unable to achieve significant presence, and loss of

potential sales through spreading efforts too thinly

Market entry

Key factorsWeight (1-10)

(1)

Value (1-5)

(2)

Entry Japan Entry Germany

Weighted score

(1)x(2)

Value (1-5)

(4)

Weighted score

(1)x(4)

Degree of control

Resource availability

Level of risk

Speed

Expected return

Opportunities available

Rank order

Total weighted score -

-

-

-

-

-

Entry mode grid

20/6-internat'l market entry1 6 international market entry and development interrelation...

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