Global Market Entry Strategies

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• Global Market Entry Strategies

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Learning Objectives

• Differentiate among market entry optionsindirect
  exporting, direct exporting, licensing,
  franchising, contract manufacturing, assembly,
  and full-scale integrated manufacturingand note
  the conditions under which each is an appropriate
  strategy.
• Explain the role of export management companies,
  export agents, and export consortiums.
• Note the ways in which the Internet has impacted
  international entry strategies employed by firms.
• List the pros and cons of establishing wholly
  owned subsidiaries and the pros and cons of
  establishing joint ventures.
• Compare and contrast technology-based,
  production-based, and distribution-based
  strategic alliances.
• Explain when entering a market by acquisition is
  desirable.
• Define entry strategy configuration, bundling,
  and unbundling, and explain their significance to
  market entry strategies.
• Explain why market exitand possibly
  re-entrystrategies might be necessary.

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Chapter Outline

• Exporting as an entry strategy
• Indirect exporting, direct exporting
• Foreign production as an entry strategy
• Licensing, franchising, local manufacturing
• Ownership strategies
• Wholly owned subsidiaries, JVs, alliances
• Entering markets through mergers and acquisitions
• Portal or e-business entry strategies
• Entry strategy configuration
• Exit strategies

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Two Methods of Exporting

• Indirect - Reaching markets with the use of an
  intermediary located in the exporters home
  country
• Leverage intermediarys expertise
• Good for firms with little international
  experience
• Less profit, less control, do not gain experience
  curve effects

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Two Methods of Exporting

• Direct Reaching markets either yourself or with
  the use of an intermediary located in the foreign
  market
• More profit, greater control, able to leverage
  experience curve effects
• Requires more expertise, management time, and
  financial resources

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Cooperating for Export

• Companies competing against each other in their
  domestic market may unite to address export
  markets
• Governments may encourage and support cooperation
• Brazils Ministry of Development, Industry, and
  Foreign Trade create export consortiums to share
  logistical and promotion costs of entering
  foreign markets
• SMEs may cooperate for export
• 83 Danish firms in Jutland cooperate

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Foreign Production

• Firms may shift production to foreign markets
• Gain market position
• Circumvent import restrictions, communicate
  commitment to market
• Defend market position
• Response to protectionism, currency fluctuations
• Follow the customer
• Save costs
• Cheaper production factors, decrease
  transportation costs, etc.
• Reduces currency risk as costs and revenue are in
  the same currency

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Foreign Production

• Franchising Special type of licensing where
  company makes total marketing plan available,
  including brand name, logo, products, and methods
  of operation.

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Foreign Production

• Contract Manufacturing Company arranges to have
  its products manufactured by an independent local
  company on a contractual basis

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Foreign Production (cont.)

• Other Options
• Assembly
• Full-Scale Integrated Production
• Manufacturing and Inter-firm Licensing

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Ownership Strategies

• Wholly Owned Subsidiaries Operations fully
  owned by a foreign parent firm (May involve
  marketing, assembly, or full-scale integrated
  production operations)

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Ownership Strategies (cont.)

• Joint Ventures (JVs) Foreign company invites an
  outside partner to share stock ownership in a new
  unit.

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Going It Alone in Overseas Markets

• Companies increasingly are entering markets with
  wholly owned subsidiaries and are buying out
  their foreign affiliates

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Strategic Alliances

• Strategic Alliances an alliance involving two
  or more global firms in which each partner brings
  a particular skill or resource to relationship.

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Entering Markets via Acquisitions

• Opening of financial markets has made acquisition
  of publicly traded firms much easier

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Portal or E-business Strategies

• Through the use of web pages, email, file
  transfer, and related communication tools, firms
  have begun to enter markets without establishing
  a physical presence in the host country

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Exit Strategies

• Circumstances may make companies want to leave a
  country or market
• Market Consolidation rationalizing overseas
  operations, abandoning particular markets

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Exit Strategies (cont.)

• Political Considerations Political events may
  change the attractiveness and/or viability of the
  market

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Market Re-entry

• Several of the markets left by international
  firms over the past decades have become
  attractive again, and some companies have
  reversed their exit decisions and entered those
  markets a second time