Foreign Market Entry Modes

1
Foreign Market Entry Modes

• Export
• Licensing
• Joint Venture
• WOS
• Acquisition
• Greenfield

2
Entry Mode Framework

• Mindset
• Country-market opportunity/cost analysis
• Stand-alone Attractiveness
• Strategic Importance
• Resources-Control-Risk tradeoff

3
Mindset and International Activity

• International
• Overseas activities support / subordinate to
  domestic activities
• Multinational
• Flexibly adapting value-creating activities on
  country-by-country basis nationally-responsive
• Global
• The world is the market standardization
• Transnational
• Glocalization Some value-creating activities
  standardized/globalized, others localized

4
Entry Mode Decision Matrix
Hi
Strategic Importance of Country
Lo
Hi
Resources, Control, Risk
Lo
Hi
Lo
Stand-alone Attractiveness of Country
5
Country-Market Analysis

• Stand-alone attractiveness
• Size
• Growth
• Product acceptance / segmentation
• Cultural similarity
• Risk
• Policy incentives
• Other factors? .MNC power?

6
Country-Market Analysis

• Strategic importance
• Home market of global customer
• Home market of global rivals
• Significant market of global rivals
• Major source of innovation
• Demanding/sophisticated customers
• Factor-cost advantages

7
Resources-Control-Risks

• Resources
• , time, technology, machinery, people,
  organizational, strategy
• Control
• Operational and strategic discretion over
  value-creating activities
• Risks
• Political, F/X, economic, cultural, dissemination

8
Control

• Extent of involvement

Ship Product
Distribution
After-sales Support
Marketing

• Channel control / ownership

Retail
Local Whsle.
Regional Whsle.
Import Agent
Export Agent
Mfg.
9
Entry Mode Decision Framework
Control Resources Risk Dissem.
Low
Low
Low
High
Licensing Exporting Intermediaries
Direct Joint Venture Wholly-owned
Subsidiary
High
High
High
Low
10
Entry Mode Decision Matrix
Hi
Strategic Importance of Country
Lo
Hi
Resources, Control, Risk
Lo
Hi
Lo
Stand-alone Attractiveness of Country
11
General Electric and International Involvement

• GE Product Divisions
• Light bulbs
• Aircraft engines
• Appliances
• Power-generation
• GE Market Opportunity
• North America
• Europe
• Pacific rim / Asia
• Emerging markets

12
GEs Markets, Entry and Strategy Choices
4
3
Product Lines
2
?
1
?
International Strategy
A
B
C
D
Country-Markets
13
Entry Mode Decision Matrix
Hi
Strategic Importance of Country
Lo
Hi
Resources, Control, Risk
Lo
Hi
Lo
Stand-alone Attractiveness of Country
14
Procter GamblePan-European Brand Development
15
PG Multidomestic Strategy
UK
Neth.
France
Germany
Italy
16
Product Characteristics Map
High Washing Temp
Enzymatic Stain Removers
Fabric Softener
Bleach Additives
17
Product Characteristics Map
High Washing Temp
Excluded countries
Italy
Italy
Enzymatic Stain Removers
Fabric Softener
Spain
Bleach Additives
18
PG TransEuro Strategy
UK
Neth.
Zone 1
France
Germany
Italy
Spain
Zone 2
19
No problem taking a sack. Ill just use Vizir
after the game.
20
Gotta keep this sweaty Tarheel off my clean
uniform Im out of Vizir.
21
Epilogue

• VIZIR was precursor to Liquid Tide in US
• Great irony is PGs struggle to develop
  Euro-brand first found success in another
  large, integrated marketthe U.S.
• The VIZIR experience facilitated
  learning/cross-fertilization w/in PG worldwide
• Developed world-class technology and product
  development capabilities worldwide

22
Industry Globalization

• What is a global industry? Why?
• Which drivers/factors most important?
• How does a global industry compare with a
  multi-domestic one?
• How is the extent of globalization measured?
• What are the implications for firms
  international strategies?

23
Globalization Drivers

• Market Drivers
• Cost Drivers
• Government Drivers
• Competitive Drivers

High Global
Low Multi-domestic
24
Definitions

• Multi-domestic
• Many-country view of the international
  marketplace
• Value chain activities are performed in the local
  country-market and are adapted to local tastes,
  preferences, needs, etc.

25
Definitions

• Global
• A whole world-level view of the international
  marketplace, the world is the market
• Value chain activities are standardized and are
  performed in country locations according to
  efficiency, favorable policies, knowledge,
  resources, etc.

26
Definitions

• Transnational
• A glocal level view of the international
  marketplace has some global, some local
  elements
• Some value chain activities are standardized and
  are performed in country locations others are
  nationally-adapted and performed in the local
  market

27
Market Globalization Drivers

• Common customer needs
• Global customers
• Global market channels
• Transferable marketing

28
Strength of Market Drivers
Aircraft
Computers
Automobiles
Soft Drinks
Toothpaste
Retail Banking
Book Publishing
Baked Goods
Low
High
Multidomestic
Global
29
Cost Globalization Drivers

• Global scale economies
• Sourcing efficiencies
• Factor of production differences
• High product development costs
• Rapidly changing technology

30
Strength of Cost Drivers
Pharmaceuticals
Aircraft
Computers
Automobiles
Toothpaste
Retail Banking
Baked Goods
Soft Drinks
Low
High
Multidomestic
Global
31
Government Globalization Drivers

• Unrestrictive trade and investment policies
• Compatible technical standards
• Common marketing regulations

32
Strength of Government Drivers
Toothpaste
Baked Goods
Soft Drinks
Computers
Automobiles
Pharmaceuticals
Airlines
Retail Banking
Restrictive
Loose
Multidomestic
Global
33
Competitive Globalization Drivers

• High two-way trade / cross-border FDI
• Global competitors
• Interdependence among countries
• Trade/Investment Policies
• Role of WTO, etc.

34
Strength of Competitive Drivers
Aircraft
Pharmaceuticals
Computers
Toothpaste
Automobiles
Soft Drinks
Retail Banking
Baked Goods
Low
High
Multidomestic
Global
35
International Strategy

• Globalization drivers Assess dual pressures
• Global efficiency - standardization
• National/local responsiveness - adaptation
• Location/configuration of value-creating
  activities
• Integration/coordination of value-creating
  activities

36
Effective Standardization
Coca-Colas transnational polar bears
McDonalds Big Mac
37
Effective Adaptation

• PG single-use shampoo packages in India

38
Effective Transnationalization

• Barbie is 51 years old
• Sold in 130 countries
• National adaptations
• Physical features
• Costumes
• Activity sets
• Standardized physique
• Scaled to 62, 110 lbs.

39
Globalization Drivers

• Market Drivers
• Cost Drivers
• Government Drivers
• Competitive Drivers

High Global
Low Multidomestic
40
International StrategyManaging Dual Pressures
High
Pressures for Global Efficiency
Low
Low
High
Pressures for Local Responsiveness
41
Value ChainLocation and standardization/adaptatio
n
Infrastructure
Technology Development
Procurement
Human Resource Management
Profit Margin
Inbound Logistics
Outbound Logistics
Service
Operations
Marketing
42
Value Chain
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management
Profit Margin
Inbound Logistics
Outbound Logistics
Operations
Marketing
Service
43
Value Chain
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management
Profit Margin
Inbound Logistics
Outbound Logistics
Operations
Marketing
Service
Upstream
44
Value Chain
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management
Profit Margin
Inbound Logistics
Outbound Logistics
Operations
Marketing
Service
Upstream
Downstream
45
Value Chain Sub-functions (Marketing)
Infrastructure
Technology Development
Procurement
Human Resource Management
Profit Margin
Inbound Logistics
Outbound Logistics
Operations
Marketing
Service
Advert.
Distrib.
Packaging
Pricing
46
Value Chain Configuration

• Geographic location of value chain activities
• Concentrated/centralized vs. dispersed/decentraliz
  ed

47
Value Chain Coordination

• Cross-border linkages between dispersed
  value-creating units
• Coordination Flows of
• Product (finished and intermediate)
• Technology
• People
• Information (market data, strategic direction,
  etc.)
• Highly coordinated vs. only money flows

48
International StrategyManaging Dual Pressures
High
Pressures for Global Efficiency
Export Strategy
Low
Low
High
Pressures for Local Responsiveness
49
Export Strategy(same as Export entry mode)
Germany
U.S.
Mexico
Malaysia
50
International StrategyManaging Dual Pressures
High
Pressures for Global Efficiency
Export Strategy ??
Multidomestic Strategy
Low
Low
High
Pressures for Local Responsiveness
51
Multidomestic Strategy
Germany
U.S.
Mexico
Malaysia
52
International StrategyManaging Dual Pressures
High
Global Strategy
Pressures for Global Efficiency
Export Strategy ??
Multidomestic Strategy
Low
Low
High
Pressures for Local Responsiveness
53
Global Strategy(Textbook Variety)
Germany
U.S.
Mexico
Malaysia
54
International StrategyManaging Dual Pressures
High
Global Strategy
Transnational Strategy
Pressures for Global Efficiency
Export Strategy ??
Multidomestic Strategy
Low
Low
High
Pressures for Local Responsiveness
55
Transnational Strategy (v.1)
Germany
U.S.
Mexico
Malaysia
56
Transnational Strategy (v.2)
Germany
U.S.
Mexico
Malaysia
57
Transnational Strategy (v.3)
Germany
Engines
U.S.
Steel
Mexico
Final Assembly
Malaysia
Trim, seats, glass
58
VW Jetta
Engines Poland
Customers U.S.
Transmissions Japan
Assembly Mexico
59
VW International Strategy Map - Jetta
U.S.
Japan
Marketing
Transmission
Mexico
Final Assembly
Germany
Misc.
Poland
Engine
60
(No Transcript)
61
McDonalds Identity
62
McDonalds Transnational Menu
US Brazil Canada India Germany
Big Mac ? ? ? ?
French Fries ? ? ? ? ?
Coca-Cola ? ? ? ? ?
McNuggets ? ? ?
McAloo Tikki ?
McRib ?
McBier ? ?
McLobster ?
McCalebresa ?
PitaMac ?
McFarmer ?
63
(No Transcript)
64
McDonalds Site Selection and Stores
US -- Colorado
65
McDonalds Site Selection and Stores
Bangkok, Thailand
66
McDonalds Site Selection and Stores
Moscow, Russia
67
Hamburger University
Illinois, USA
68
Hamburger University Curriculum

• 80 classroom hours
• Topics Fast food the McDonalds way
• Restaurant operations, food preparation
• Crew selection, training and team building
• Marketing and promotion
• Asset management
• Corporate citizenship and ethics
• Leadership, effective supervisory skills

69
Hamburger University
Hong- Kong
London
Illinois
Munich
Sydney
70
McDonaldsTransnational Strategy
Singapore
U.S.
Greece
Brazil