INTERNATIONAL BUSINESS SCHOOL

INTERNATIONAL MARKETING

Eighth Session:

Market entry strategies

Dirección Académica

Professor: Enrique Angles

LEARNING OBJECTIVES

Apply knowledge of strategies for international market entry

INDICATOR:

•Implements knowledge input selection

strategies to international markets

through the solution of case studies and the development of international

marketing plan of a company

IntroductionInternational Marketing Decisions

(Structure of this course)

Phase 1: Deciding whether to go abroad

Phase 2: Deciding which markets to enter

Phase 3: Deciding how to enter the market

Phase 4: Deciding on the international marketing plan

Going International

E-commerce◦ The ability to offer goods and services over the Web.

◦ Various methods to market products over the internet:

Development of corporate websites.

Business-to-consumer and consumer-to-business forums.

Firms must be ready to:

◦ Provide 24-hour order taking and customer support

service.

◦ Have the regulatory and customs-handling expertise to

deliver internationally.

◦ Have an understanding of global marketing environments

for further development of business relationships.

Determinants of Entry Strategy

Degree of contact with foreign market desired◦ no contact - export intermediary◦ some contact - foreign import intermediary◦ high contact - subsidiary, FDI, etc.

Determined by:◦ market potential◦ firm’s capabilities and experience◦ managerial commitment to export, market and risk

tolerance◦ degree of control desired◦ the “make or buy decision”

International Market Entry Strategies

Indirect export

◦ intermediary located in domestic market

◦ firms with little experience with export

◦ exporter deals with export agents

few intermediaries

Exporter

Home country

Agent

Host Country

Intermediary

Exporting modes of entry

Direct Exporting

Direct market representation

◦ via wholesalers or retailers or directly to the consumers

Independent representation

◦ independent distributor

Piggyback marketing

◦ distribution through another distributor´s channel

Exporting: A Developmental

ProcessStages of the firm

1. ... is unwilling to export.

2. ... fills unsolicited export orders (export seller).

3. ... explores the feasibility of exporting (may bypass

stage 2).

4. ... exports to one or more markets on a trial basis.

5. ... is an experienced exporter to one or more markets.

6. ... pursues country or region focused marketing.

7. ... evaluates the global market potential. All markets,

domestic & international, are regarded as equally

worthy of consideration.

Export Selling vs. Export Marketing

◦ Export selling involves selling the same

product, at the same price, with the same

promotional tools in a different place

◦ Export marketing tailors the marketing

mix to international customers- An understanding of the target market environment

-The use of market research and identification of

market potential

- Decisions concerning product design, pricing,

distribution and channels, advertising, and

communications

STRATEGIC ALLIANCE (J.V.)

Home country

LICENSING

Blueprint : “how to do it”

WHOLLY-OWNED SUBSIDIARY

Host Country

Ho

st C

ou

nty

A “joint effort”A replica of home

Three non-exporting modes of entry

Licensing

◦ LICENSING refers to offering a firm’s know-

how or other intangible asset to a foreign

company for a fee, royalty, and/or other type of

payment

Advantages for the new exporter

The need for local market research is reduced

The licensee may support the product strongly in the new

market

Disadvantages

Can lose control over the core competitive advantage of the

firm.

The licensee can become a new competitor to the firm.

Franchising

A form of licensing where the franchisee in a local market

pays a royalty on revenues - and sometimes an initial fee -

to the franchisor who controls the business and owns the

brand.

The local franchisee typically invests money in the local

operation and has the right to operate under the

franchisor’s brand name.

The franchisee gets help setting up the operation, usually

according to a well-developed blueprint. The business is

typically very standardized (fast food operations is a case in

point).

“a company permits its name, logo, cultural design and

operations to be used in establishing a new firm or store.”

Franchising Pros and Cons

◦ Advantages

The basic “product” sold is a well-recognized brand

name.

The franchisor provides various market support

services to the franchisee

The local franchisee raises the necessary capital and

manages the franchise

◦ A disadvantage

Careful and continuous quality control is necessary to

maintain the integrity of the brand name.

Strategic Alliances

Strategic Alliances (SAs)

◦ Typically a collaborative arrangement between

firms, sometimes competitors, across borders

Based on sharing of vital information, assets, and

technology between the partners

Have the effect of weakening the tie between potential

ownership advantages and company control

Non-equity Strategic Alliances:

– Distribution Alliances

– Manufacturing Alliances

– Research and

Development Alliances

Equity Strategic Alliances

– Joint Ventures

Equity and Non-Equity SAs

Equity Alliances: Joint Ventures Joint Ventures

Company run by two or more partner firms

Risk is shared and different value chain strengths are

combined

Influence depends on degree of ownership

Good opportunity to build on local know-how, because

it involves the transfer of capital, manpower, and usually

some technology from the foreign partner to an

existing local firm.

JV finds greater acceptance by local authorities

Wholly-owned

Subsidiaries/Acquisition

Represents the most extensive engagement abroad

Subsidiary is either established through the

creation of a new facility or the acquisition of an

existing firm

Company has complete decision power & control

Investor achieves greater flexibility

In many countries majority or 100% ownership by

foreign companies is forbidden

Manufacturing Subsidiaries

Wholly Owned Manufacturing

Subsidiaries

◦ Undertaken by the international firm

for several reasons

To acquire raw materials

To operate at lower manufacturing costs

To avoid tariff barriers

To satisfy local content requirements

ADVANTAGES

• Local production lessens

transport/import-related costs, taxes

& fees

• Availability of goods can be

guaranteed, delays may be

eliminated

• More uniform quality of product or

service

• Local production says that the firm

is willing to adapt products &

services to the local customer

requirements

DISADVANTAGES

• Higher risk exposure

• Heavier pre-decision

information gathering & research

evaluation

• Political risk

• “Country-of-origin” effects can

be lost by manufacturing

elsewhere.

Manufacturing Subsidiaries

FDI: Acquisitions

A company can enter by acquiring an existing local company.

◦ Advantages

Speed of penetration

Quick market penetration of the company’s products

◦ Disadvantages

Existing product line and new products to be introduced might not be compatible

Can be looked at unfavorably by the government, employees, or others

Necessary re-education of the sales force and distribution channels