UCV Session 8 Market Entry Strategies IM 2015

INTERNATIONAL BUSINESS SCHOOL
Direccin Acadmica
INTERNATIONAL MARKETING
Eighth Session:
Market entry strategies
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
Introduction
International 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
Determined by:
no contact - export intermediary

some contact - foreign import intermediary
high contact - subsidiary, FDI, etc.
market potential
firms capabilities and experience
managerial commitment to export, market and risk
tolerance
degree of control desired
the make or buy decision
International Market Entry Strategies
Exporting modes of entry

Indirect export
intermediary located in domestic market

firms with little experience with export
exporter deals with export agents
few intermediaries
Exporter
Home country
Agent
Intermediary
Host Country
Direct Exporting
Direct
market representation
via wholesalers or retailers or directly
to the consumers
Independent representation
independent distributor
Piggyback marketing
distribution through another
distributors channel
Exporting: A Developmental
Process
Stages 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
Three non-exporting modes of entry

Host Country
Home country
LICENSING
Blueprint : how to do it
Host County
WHOLLY-OWNED SUBSIDIARY
A replica of home
STRATEGIC ALLIANCE (J.V.)
A joint effort
Licensing
LICENSING refers to offering a firms knowhow 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
franchisors 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
Equity and Non-Equity SAs

Equity Strategic Alliances
Joint Ventures
Non-equity Strategic Alliances:
Distribution Alliances
Manufacturing Alliances
Research and
Development Alliances
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
Manufacturing Subsidiaries
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.
FDI: Acquisitions
A company can enter by acquiring an existing local company.
Advantages
Speed of penetration
Quick market penetration of the companys 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

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INTERNATIONAL BUSINESS SCHOOL

Apply knowledge of strategies for

Implements knowledge input selection

Phase 2: Deciding which markets to enter

Determinants of Entry Strategy

Degree of contact with foreign market desired

no contact - export intermediary

International Market Entry Strategies

Exporting modes of entry

intermediary located in domestic market

Export Selling vs. Export Marketing

Three non-exporting modes of entry

STRATEGIC ALLIANCE (J.V.)

Franchising Pros and Cons

Typically a collaborative arrangement between

Equity and Non-Equity SAs

Equity Alliances: Joint Ventures

Company run by two or more partner firms

Represents the most extensive engagement abroad

To acquire raw materials

Availability of goods can be

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