intertnational marketing

8/12/2019 Intertnational Marketing

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Overview

1. Target Market Selection

2. Choosing the Mode of Entry

3. Exporting

4. Licensing

5. Franchising6. Contract Manufacturing

7. Joint Ventures

8. Wholly Owned Subsidiaries9. Strategic Alliances

10. Timing of Entry

11. Exit Strategies


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Introduction

The need for a solid market entry decision is an integralpart of a global market entry strategy.

Entry decisions will heavily influence the firms othermarketing-mix decisions.

Global marketers have to make a multitude of decisions

regarding the entry mode which may include: (1) the target product/market

(2) the goals of the target markets

(3) the mode of entry

(4) The time of entry (5) A marketing-mix plan

(6) A control system to check the performance in the enteredmarkets


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1. Selecting the Target Market

A crucial step in developing a global expansionstrategy is the selection of potential target markets(see Exhibit 9-1 for the entry decision process).

A four-step procedure for the initial screeningprocess:

1. Select indicators and collect data

2. Determine importance of country indicators

3. Rate the countries in the pool on each

indicator

4. Compute overall score for each country


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Chapter 9 Copyright (c) 2007 John Wiley & Sons, Inc. 4

1. Selecting the Target Market


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Decision Criteria for Mode of Entry:

Market Size and Growth

Risk

Government Regulations

Competitive Environment/Cultural Distance

Local Infrastructure


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Classification of Markets:

Platform Countries (Singapore & Hong Kong)

Emerging Countries (Vietnam & the Philippines)

Growth Countries (China & India) Maturing and established countries (examples:

South Korea, Taiwan & Japan)

Company Objectives

Need for Control

Internal Resources, Assets and Capabilities

Flexibility


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Mode of Entry Choice: A Transaction Cost

Explanation

Regarding entry modes, companies normally

face a tradeoff between the benefits ofincreased control and the costs of resource

commitment and risk.

Transaction Cost Analysis (TCA) perspective Transaction-Specific Assets (assets valuable for

a very narrow range of applications)


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3. Exporting

Indirect Exporting

Export merchants

Export agents

Export management companies (EMC)

Cooperative Exporting

Piggyback Exporting

Direct Exporting

Firms set up their own exporting departments


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4. Licensing

Licensor and the licensee Benefits:

Appealing to small companies that lack resources

Faster access to the market

Rapid penetration of the global markets Caveats:

Other entry mode choices may be affected

Licensee may not be committed

Lack of enthusiasm on the part of a licensee

Biggest danger is the risk of opportunism

Licensee may become a future competitor


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5. Franchising

Franchisor and thefranchisee

Master franchising

Benefits:

Overseas expansionwith a minimum

investment

Franchisees profits tied

to their efforts Availability of local

franchisees knowledge

Caveats:

Revenues may not be adequate

Availability of a master

franchisee Limited franchising

opportunities overseas

Lack of control over the

franchisees operations

Problem in performancestandards

Cultural problems

Physical proximity


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Chapter 9 Copyright (c) 2007 John Wiley & Sons, Inc. 13

5. Franchising


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6. Contract Manufacturing (Outsourcing)

Qualities of an ideal subcontractor:

Flexible/geared toward just-in-time delivery

Able to meet quality standards

Solid financial footings

Able to integrate with companys business

Must have contingency plans


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7. Expanding through Joint Ventures

Cooperative joint venture

Equity joint venture

Benefits:

Higher rate of return and more control over theoperations

Creation of synergy

Sharing of resources

Access to distribution network

Contact with local suppliers and governmentofficials


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Caveats:

Lack of control

Lack of trust

Conflicts arising over matters such as

strategies, resource allocation, transfer pricing,

ownership of critical assets like technologies

and brand names


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Drivers Behind Successful International Joint Ventures :

Pick the right partner

Establish clear objectives from the beginning

Bridge cultural gaps

Gain top managerial commitment and respect Use incremental approach

Create a launch team during the launch phase:

(1) Build and maintain strategic alignment

(2) Create a governance system

(3) Manage the economic interdependencies

(4) Build the organization for the joint venture


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8. Entering New Markets through Wholly

Owned Subsidiaries

Caveats:

Risks of full ownership

Developing a foreign presence without the

support of a third part Risk of nationalization

Issues of cultural and economic sovereignty of

the host country


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8. Entering New Markets through Wholly

Owned Subsidiaries

Acquisitions and Mergers

Quick access to the local market

Good way to get access to the local brands

Greenfield Operations

Offer the company more flexibility than

acquisitions in the areas of human resources,suppliers, logistics, plant layout, and

manufacturing technology.


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9. Creating Strategic Alliances

Types of Strategic Alliances

Simple licensing agreements between two

partners

Market-based alliances

Operations and logistics alliances

Operations-based alliances


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The Logic Behind Strategic Alliances

Defend

Catch-Up

Remain

Restructure


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Cross-Border Alliances that Succeed:

Alliances between strong and weak partners

seldom work.

Autonomy and flexibility

Equal ownership


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10. Timing of Entry

International market entry decisions should also

cover the following timing-of-entry issues:

When should the firm enter a foreign market?

Other important factors include: level of

international experience, firm size

Also, the broader the scope of products and

services Mode of entry issues, market knowledge,

various economic attractiveness variables, etc.


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10. Timing of Entry

Reasons for exit:

Sustained losses

Volatility

Premature entry

Ethical reasons

Intense competition

Resource reallocation


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11. Exit Strategies

Risks of exit:

Fixed costs of exit

Disposition of assets

Signal to other markets

Long-term opportunities

Guidelines:

Contemplate and assess all options to

salvage the foreign business Incremental exit

Migrate customers

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