Download entry strategies

ENTRY STRATEGIES
• Additional research issues
• Methods of entry
– Advantages
– Disadvantages
MKTG769
ENTRY STRATEGIES
Lars Perner, Instructor
1
Competitor Analysis
• Strengths and weaknesses
– Brand recognition/reputation
– Distribution channels and relationships
– Knowledge of domestic market
– Government Protection
– Weaknesses from experience of protection
• Signaling
MKTG769
ENTRY STRATEGIES
Lars Perner, Instructor
2
Country Evaluation
1.
2.
MKTG769
Country identification
Preliminary screening
ENTRY STRATEGIES
3. In-Depth Screening
1. Market size
2. Growth rate
3. Competitive intensity
4. Trade barriers
4. Final selection
Lars Perner, Instructor
3
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!)
MKTG769
ENTRY STRATEGIES
Lars Perner, Instructor
4
Competitors and
Predicted Market Share
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MKTG769
Identification
Foreign vs. domestic
Existing vs. potential
Direct vs. indirect
Likely growth of competitors
ENTRY STRATEGIES
Lars Perner, Instructor
5
EXPORT
MANAGEMENT
COMPANY
The Reality Exportation
and Entry
HOME
COUNTRY
OPERATIONS
EXPORTS
LOCAL
MANUFACTURING
LOCAL
PARTNERS
LOCAL
ASSEMBLY
HOST COUNTRY
CUSTOMERS
MKTG769
IMPORTS
ENTRY STRATEGIES
LOCAL
MARKETING
LOCAL BUYER
Lars Perner, Instructor
6
Entry Strategies
FOREIGN MARKET
ENTRY
MANUFACTURING
AT HOME
EXPORTING
DIRECT
INVESTMENT
ENTRY
OVERSEAS
ASSEMBLY/
MIXING
CONTRACTUAL
LICENSING/
INDIRECTFRANCHISING
“PIGGYBACKING”
MKTG769
MANUFACTURING
ABROAD
TURNKEY
PROJECTS
ENTRY STRATEGIES
CONTRACT
MANUF.
MGT
CONTRACTS
ACQUISITION/
SELF-BUILT
OTHER DIRECT
ENTRY
JOINT
VENTURES
Lars Perner, Instructor
7
Exporting
• Direct
– Sales to foreign
• Distributors
• Retailers
• End customers
– Large
– Small (e.g.,
through eBay)
MKTG769
ENTRY STRATEGIES
• 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
Lars Perner, Instructor
8
Exporting
• Advantages:
– Limited investment;
low risk
MKTG769
ENTRY STRATEGIES
• Disadvantages:
– Higher unit cost to
consumer
– Likely lower market
share
– Limited learning on
country market
characteristics
Possible preemption
by competitors
Lars Perner, Instructor
9
Export Tasks
• Transportation
– Negotiation
– Coordination between
modes and shippers
• Export licenses and
permissions
• Customs clearing
• Warehousing
MKTG769
ENTRY STRATEGIES
• Financing
– Quotes
– Point of transfer
(FOB)
– Credit
• Risk
assessment/letters
of credit
– Exchange rate risk
• Repatriation/ countertrade
Lars Perner, Instructor
10
Export Problems
• Price escalation
• Dumping regulations
• Finding local distribution
– Screening
– Negotiation
• After sales support
• Imitation by importer/failure to learn local market
MKTG769
ENTRY STRATEGIES
Lars Perner, Instructor
11
Foreign Entry Sequences
1.
2.
3.
4.
5.
MKTG769
Indirect exporting and licensing
Direct exporting via independent distributor
Foreign sales subsidiary
Local assembly
Local manufacturing
ENTRY STRATEGIES
Lars Perner, Instructor
12
Entry Barriers
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MKTG769
Cost of entry
Tariff vs. non-tariff
Government regulations
Market structure
– Distribution
– Established brands
ENTRY STRATEGIES
Lars Perner, Instructor
13
Licensing and Franchising
• Advantages
– Low investment
– Limited direct
exposure
– Lower exit costs
– Rapid entry
– Possible reduction in
counterfeiting
MKTG769
ENTRY STRATEGIES
• Disadvantages
– Limited control
(contract =
enforceability!)
• Quality
• Promotion
• Image
– Difficulty in
terminating
relationship
Lars Perner, Instructor
14
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
MKTG769
ENTRY STRATEGIES
Lars Perner, Instructor
15
Contract Manufacturing
• Advantages
– Faster start
– Reduced investment
in manufacturing
– Ability to take
advantage of
established
manufacturer’s
experience and cost
structure (experience
curve)
MKTG769
ENTRY STRATEGIES
• Disadvantages
– “Training” of
competitor
– Still left with
marketing
responsibilities 
need country
presence
Lars Perner, Instructor
16
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
MKTG769
ENTRY STRATEGIES
Lars Perner, Instructor
17
Direct Entry--acquisitions or “building
from scratch”
• Advantages
– Control
– Learning about
country market
– Leverage (may be
disadvantage,
though)
MKTG769
ENTRY STRATEGIES
• Disadvantages
– Large investment; risk
– Risk of
nationalization/
extortion
– May take longer to be
successful
Lars Perner, Instructor
18
Foreign Assembly/Mixing
• Motivations
– Lower labor local labor costs
– Ease of shipping
– Local content requirement
– Duties/tariffs
– Locus of value addition for tax purposes
MKTG769
ENTRY STRATEGIES
Lars Perner, Instructor
19
Strategic Alliances
• Distribution
• Manufacturing
• Research and
development
• Joint ventures
MKTG769
ENTRY STRATEGIES
Lars Perner, Instructor
20