strategies to enter foreign markets (1)

Strategies to Enter Foreign Markets

Group 2

International Marketing

Strategies to Enter Foreign Markets 2

Foreign Market Entry Modes

• A mode of entry into an international market is the channel which your organization employs to gain entry to a new international market

Strategic Alliances

The InternetExporting

Licensing

Joint Venture

Mergers & Acquisitions

International Agents & Distributors

Direct Investment


The Internet

• The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations

• The e-Marketing space consists of new Internet companies that have emerged as the Internet has developed, as well as those pre-existing companies that now employ e-Marketing approaches as part of their overall marketing plan


Companies Adopted e-Marketing

• New online retail brand e.g. Amazon, Lastminute.com

• Online Auction e.g. eBay

• New online manufacturer brand e.g. Dell.com

• Banking and financial Services e.g. HSBC Bank

• Agents e.g. Avon Representatives, Oriflame

• Franchises e.g. KFC

New Companies Pre-existing Companies


Exporting- Exporting is the marketing & direct sale of

domestically-produced goods in another country

Direct Exporting

- organization makes a commitment to market overseas on its own behalf

Indirect Exporting- Organization employing a home country agency (i.e. an

exporting company from your country - which handles exporting on your behalf) to get your product into an overseas market


What conditions should one Export?

• Limited sales potential in target country; little product adaptation required

• Distribution channels close to plants

• High target country production costs

• Liberal import policies

• High political risk


Merits & Demerits of Exporting

• Minimizes risk and investment

• Speed of entry

• Maximizes scale; uses existing facilities

• Trade barriers & tariffs add to costs.

• Transport costs

• Limits access to local information

• Company viewed as an outsider

Merits Demerits


Licensing

• Licensing essentially permits a company in the target country to use the property of the licensor

• Such property usually is intangible• The licensee pays a fee in exchange for the

rights to use the intangible property and possibly for technical assistance.

• Because little investment on the part of the licensor is required, licensing has the potential to provide a very large ROI


Licensing

FranchisingTurnkey

ContractsContract

Manufacturing


Franchising

• Franchising involves the organization (franchiser) providing branding, concepts, expertise, and infact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser


Turnkey Contracts

• Turnkey contracts are major strategies to build large plants.

• They often include the training and development of key employees where skills are sparse

• You would not own the plant once it is handed over.


Contract Manufacturing

• Contract manufacturing firm is that which manufactures components or products for another "hiring" firm. It is a form of outsourcing

• The practice of utilizing contract manufacturing relies on the manufacturer's ability to drive down the cost of production through economies of scale

• It also allows the hiring company to obtain the needed components or products without needing to own and operate a factory.


What conditions should one License?

• Import and investment barriers

• Legal protection possible in target environment.

• Low sales potential in target country.

• Large cultural distance

• Licensee lacks ability to become a competitor


Merits & Demerits of Licensing

• Minimizes risk and investment.

• Speed of entry

• Able to circumvent trade barriers

• High ROI

• Lack of control over use of assets.

• Licensee may become competitor.

• Knowledge spillovers

• License period is limited

Merits Demerits


Joint Venture

Objectives in a joint venture• market entry• risk/reward sharing• technology sharing• joint product development• conforming to government

regulations


What conditions should one JV?

• Import barriers

• Large cultural distance

• Assets cannot be fairly priced

• High sales potential

• Some political risk

• Government restrictions on foreign ownership

• Local company can provide skills, resources, distribution network, brand name, etc


Merits & Demerits of JV

• Overcomes ownership restrictions and cultural distance

• Combines resources of 2 companies.

• Potential for learning

• Viewed as insider

• Less investment required

• Difficult to manage

• Dilution of control

• Greater risk than exporting a & licensing

• Knowledge spillovers

• Partner may become a competitor.

Merits Demerits


Foreign Direct Investment

A business may decide that none of the other options are as viable as actually owning an overseas manufacturing plant i.e. the organization invests in plant, machinery and labor in the overseas market

• It involves the transfer of resources including capital, technology, and personnel through the acquisition of an existing entity or the establishment of a new enterprise

• The key benefit is that your business becomes localized- you manufacture for customers in the market in which you are trading


What conditions should one FDI?

• Import barriers

• Small cultural distance

• Assets cannot be fairly priced

• High sales potential

• Low political risk


Merits & Demerits of FDI

• Greater knowledge of local market

• Can better apply specialized skills

• Minimizes knowledge spillover

• Can be viewed as an insider

• Higher risk than other modes

• Requires more resources and commitment

• May be difficult to manage the local resources.

Merits Demerits


International Agents & Distributors

• Agents are individuals or organizations that are contracted to your business, & market on your behalf in a particular country

• They rarely take ownership of products, & more commonly take a commission on goods sold

• Agents usually represent more than one organization• Agents are a low-cost, but low-control option• They tend to be expensive to recruit, retain and train• Distributors are similar to agents, with the main

difference that distributors take ownership of the goods


Strategic Alliance

• A strategic alliance is a term that describes a whole series of different relationships between companies that market internationally

• Essentially, Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate.


Examples of Strategic Alliance

• Shared manufacturing e.g. Toyota Ayago is also marketed as a Citroen and a Peugeot

• Research and Development (R&D) arrangements

• Distribution alliances e.g. iPhone was initially marketed by O2 in the UK

• Marketing agreements


Mergers & Acquisitions

• When an organization either merges or acquires another organization in the foreign market so that it can enter in that market.


Case Study: Euro Disney• Different modes of entry may be more

appropriate under different circumstances, and the mode of entry is an important factor in the success of the project

• Walt Disney Co. faced the challenge of building a theme park in Europe

• Disney's mode of entry in Japan had been licensing

• the firm chose direct investment in its European theme park, owning 49% with the remaining 51% held publicly

• another important element in Disney's decision was exactly where in Europe to locate


Euro Disney

• There are many factors in the site selection decision, and a company carefully must define and evaluate the criteria for choosing a location.

• if a company has been successful in the past, as Disney had been with its California, Florida, and Tokyo theme parks, future success is not guaranteed, especially when moving into a different country and culture


Case Study: Coco Cola v/s Pepsi


Group 2

• Karan Dhawan 77

• Pankti Solanki

• Riddi Gehlani

• Mihika Aggarwal

strategies to enter foreign markets (1)

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