mktg769 entry strategies lars perner, instructor 1 entry strategies additional research issues...

MKTG769 ENTRY STRATEGIES Lars Perner, Instructor 1

ENTRY STRATEGIES

• Additional research issues

• Methods of entry

– Advantages

– Disadvantages


Competitor Analysis

• Strengths and weaknesses– Brand recognition/reputation– Distribution channels and relationships– Knowledge of domestic market– Government Protection– Weaknesses from experience of protection

• Signaling


Country Evaluation

1. Country identification

2. Preliminary screening

3. In-Depth Screening

1. Market size

2. Growth rate

3. Competitive intensity

4. Trade barriers

4. Final selection


Forecasting

• Basic—share of overall market• Build-up—share within segments• Analogy to comparable country ahead in the

product life cycle• Subjective methods (e.g., jury, export pooling,

Delphi)• Time series and regression (require reliable

data!)


Competitors and Predicted Market Share

• Identification• Foreign vs. domestic• Existing vs. potential• Direct vs. indirect• Likely growth of competitors


The Reality Exportation and Entry

EXPORTS

LOCAL MANUFACTURING

LOCALASSEMBLY

LOCALMARKETING

LOCALPARTNERS

HOMECOUNTRY

OPERATIONS IMPORTS

HOST COUNTRYCUSTOMERS

EXPORTMANAGEMENT

COMPANY

LOCAL BUYER


Entry Strategies

FOREIGN MARKETENTRY

MANUFACTURINGAT HOME

MANUFACTURINGABROAD

INVESTMENTENTRY

EXPORTING

INDIRECTDIRECT

“PIGGY- BACKING”

CONTRACTUAL

LICENSING/FRANCHISING

CONTRACTMANUF.

TURNKEYPROJECTS

MGTCONTRACTS

OVERSEASASSEMBLY/

MIXING

JOINT VENTURES

ACQUISITION/SELF-BUILT

OTHER DIRECTENTRY


Exporting

• Direct

– Sales to foreign• Distributors• Retailers• End customers

– Large

– Small (e.g., through eBay)

• Indirect

– Sales to export company which handles sales to foreign buyers or distributors

• “Piggy-backing” (Complementary Exporting)

– Two firms exchange exporting services by distributing the other’s product abroad


Exporting

• Advantages:

– Limited investment; low risk

• Disadvantages:

– Higher unit cost to consumer

– Likely lower market share

– Limited learning on country market characteristics

Possible preemption by competitors


Export Tasks

• Transportation

– Negotiation

– Coordination between modes and shippers

• Export licenses and permissions

• Customs clearing

• Warehousing

• Financing

– Quotes

– Point of transfer (FOB)

– Credit• Risk

assessment/letters of credit

– Exchange rate risk

• Repatriation/ counter-trade


Export Problems

• Price escalation• Dumping regulations• Finding local distribution

– Screening– Negotiation

• After sales support• Imitation by importer/failure to learn local market


Foreign Entry Sequences

1. Indirect exporting and licensing

2. Direct exporting via independent distributor

3. Foreign sales subsidiary

4. Local assembly

5. Local manufacturing


Entry Barriers

• Cost of entry• Tariff vs. non-tariff• Government regulations• Market structure

– Distribution– Established brands


Licensing and Franchising

• Advantages

– Low investment

– Limited direct exposure

– Lower exit costs

– Rapid entry

– Possible reduction in counterfeiting

• Disadvantages

– Limited control (contract = enforceability!)

• Quality• Promotion• Image

– Difficulty in terminating relationship


Overseas Turnkey Projects

• Firm agrees to set up construction and/or manufacturing project—promised to be in operation form when completed

• Helps leverage investment made at home if direct competition in the new market is unlikely

• Some risk in being able to “deliver”– Maneuvering local government regulations

and local infrastructure


Contract Manufacturing

• Advantages

– Faster start

– Reduced investment in manufacturing

– Ability to take advantage of established manufacturer’s experience and cost structure (experience curve)

• Disadvantages

– “Training” of competitor

– Still left with marketing responsibilities need country presence


Management Contracts

• Opportunity for firm to profit on its technology and “know-how” in a market where the firm does not want to enter or face competition from contractee

• Minimal transfer of assets• Must be able to operate in local infrastructure,

but contractee and/or government usually has a strong interest in the success of the project


Direct Entry--acquisitions or “building from scratch”

• Advantages

– Control

– Learning about country market

– Leverage (may be disadvantage, though)

• Disadvantages

– Large investment; risk

– Risk of nationalization/ extortion

– May take longer to be successful


Foreign Assembly/Mixing

• Motivations– Lower labor local labor costs– Ease of shipping– Local content requirement– Duties/tariffs– Locus of value addition for tax purposes


Strategic Alliances

• Distribution

• Manufacturing

• Research and development

• Joint ventures

mktg769 entry strategies lars perner, instructor 1 entry strategies additional research issues...

Documents

direct entry slide

local market slide

foreign entry sequences

indirect exporting

final selection slide

market size

exporting advantages

country identification