market entry strategies 7

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



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



� Improved local market information

� local manufacture ensures greater commitment to international markets

� Faster response and Just-in-time delivery

Doole, Phillips and Lowe (1994)



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



� 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)



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?



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



� Joint ventures -

� e.g. Burmah Castrol in S.Korea

� Wholly owned overseas subsidiaries

� Organic growth



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



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



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.

market entry strategies 7

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