market entry strategies 7
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8/7/2019 Market Entry Strategies 7
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Global Market Entry Strategies� Operational reasons for setting up overseas
manufacture
� Strategic reasons for investing in localoperations
� Methods of overseas production
� Exporting options� Joint Ventures and Strategic Alliances
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Operational reasons for setting-
up overseas manufacture� reduced costs of transportation
� reduced barriers/ quota handicap e.g. Nissan
� some governments demand investment
with market entry e.g. China
� Customers sometimes prefer local
manufacture e.g. Heinz µBritish¶?� Government contracts prefer firms
contributing to the local economy
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� Improved local market information
� local manufacture ensures greater commitment to international markets
� Faster response and Just-in-time delivery
Doole, Phillips and Lowe (1994)
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Strategic reasons for investing in
local operations� Gain new business
� demonstrates strong commitment
� persuades customers to change suppliers
� provides better service and more reliability
� Defend existing business
� avoid market restrictions as sales increase, particularly in single market
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� Move with established customer
� component suppliers follow customers to compete
with local component suppliers
� Save costs
� labour, raw materials and transport� Avoid government restrictions to import
certain goodsDoole, Phillips and Lowe (1994)
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Exporting
� Indirect� export houses
� UK buying offices of foreign stores or governments
� complementary exporting
� Direct� sales to final user
� overseas agencies
� distributors and stockists
� company branch offices abroad
� Degree of involvement v control?
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Methods of overseas production� Licensing
� Companies with strong brand or know-how
� e.g. Coca-Cola, Disney
� Franchising� more of a µwhole¶ package
� e.g.Body Shop, KFC
� Contract manufacture� bulk items e.g. Nike
� components
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� Joint ventures -
� e.g. Burmah Castrol in S.Korea
� Wholly owned overseas subsidiaries
� Organic growth
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Strategic Alliances
� Strategic alliances can range from loose networkingrelationships to very tight contractual relationships such as joint ventures.
� e.g. µcode share¶ where airlines of a similar type sell eachother¶s tickets. There is no co-ownership.
� Types� technology swaps
� R&D exchanges
� distribution relationships
� Driving forces
� insufficient resources� High R&D costs
� Concentration of firms in mature markets
� Market access
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Joint ventures e.g European Airbus.� Orgs can remain separate, but have a tight legalrelationship.
� Reasons for setting up� overcome foreign ownership restrictions
� increase speed of entry
� exploit new opportunities, complementary technologies andmanagement skills
� achieve worldwide presence at lower cost
� Disadvantages� differences in partner aims and objectives
� equal ownership and different options can slow decision making
� dominance by one partner can lead to resentment in the other
� Large time commitment for education, negotiation and agreementwith partner
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Mergers� The identity of each of the merging companies is
subordinated into the identity of the newly merged
organisation, or disappears.� Benefits include:
± Cutting cost
± Eliminate competition
± Synergy augments mutual strengths
� Case study ± Chrysler and Mercedes.
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