Global Marketing Management

1

Global Market Entry Strategies

2

Overview
        

Target Market Selection Choosing the Mode of Entry Exporting Licensing Franchising Contract Manufacturing Joint Ventures Wholly Owned Subsidiaries Strategic Alliances
3

1. Target Market Selection




A crucial step in developing a global expansion strategy is the selection of potential target markets. A four-step procedure for the initial screening process: 1. Select indicators and collect data 2. Determine importance of country indicators 3. Rate the countries in the pool on each indicator 4. Compute overall score for each country

4

Choosing the Mode of Entry
Sample Decision Criteria: Mode of Entry  Market Size and Growth  Risk  Regulatory Environment  Competitive Environment  Local Infrastructure  Tax Breaks…

5

2. Choosing the Mode of Entry (contd.)
• Emerging Countries (Vietnam, the Philippines) • Growth Countries (China, India) • Maturing and established Countries (South Korea, Taiwan, Japan) Company Objectives Need for Control Internal Resources, Assets and Capabilities Flexibility

   

6

2. Choosing the Mode of Entry (contd.)


Mode of Entry Choice: A Transaction Cost Explanation  Transaction Cost Analysis (TCA)  Transaction-Specific Assets

7

3. Exporting





Indirect Exporting Cooperative Exporting  Piggyback Exporting Direct Exporting

8

4. Licensing
 



Licensor and the licensee Benefits:  Appealing to small companies that lack resources  Faster access to the market  Rapid penetration of the global markets Caveats:  Other entry mode choices may be affected  Licensee may not be committed  Lack of enthusiasm on the part of a licensee
9

4. Licensing (contd.)


Licensee may become a future competitor How to seek a good licensing agreement?  Seek patent or trademark protection  Thorough profitability analysis  Careful selection of prospective licensees  Contract parameter (technology package, use conditions, compensation, and provisions for the settlement of disputes)


10

5. Franchising
  



Franchisor and the franchisee Master franchising Benefits:  Overseas expansion with a minimum investment  Franchisees’ profits tied to their efforts  Availability of local franchisees’ knowledge Caveats:  Revenues may not be adequate  Availability of a master franchisee
11

5. Franchising (contd.)
Limited franchising opportunities overseas  Lack of control over the franchisees’ operations  Problem in performance standards  Cultural problems  Physical proximity


12

6. Contract Manufacturing




Benefits:  Labor cost advantages  Savings via taxation, lower energy costs, raw materials, and overheads  Lower political and economic risk  Quicker access to markets Caveats:  Contract manufacturer may become a future competitor  Lower productivity standards
13

6. Contract Manufacturing (contd.)
Backlash from the company’s homemarket employees regarding HR and labor issues  Issues of quality and production standards


14

7. Joint Ventures

 

Cooperative joint venture Equity joint venture Benefits:  Higher rate of return and more control over the operations  Creation of synergy  Sharing of resources  Access to distribution network  Contact with local suppliers and government officials
15

7. Joint Ventures (contd.)




Caveats:  Lack of control  Lack of trust  Conflicts arising over matters such as strategies, resource allocation, transfer pricing, ownership of critical assets like technologies and brand names Drivers Behind Successful International Joint Ventures :  Pick the Right Partner
16

7. Joint Ventures (contd.)
Establish Clear Objectives from the Beginning  Bridge Cultural Gaps  Gain Top Managerial Commitment and Respect  Use Incremental Approach


17

8. Wholly Owned Subsidiaries

 



Acquisitions Greenfield Operations Benefits  Greater control and higher profits  Strong commitment to the local market on the part of companies  Allows the investor to manage and control marketing, production, and sourcing decisions Caveats  Risks of full ownership
18

8. Wholly Owned Subsidiaries (contd.)
Developing a foreign presence without the support of a third part  Risk of nationalization  Issues of cultural and economic sovereignty of the host country Acquisitions and Mergers Greenfield Operations


 

19

9. Strategic Alliances




Types of Strategic Alliances  Simple licensing agreements between two partners  Market-based alliances  Operations and logistics alliances  Operations-based alliances The Logic Behind Strategic Alliances  Defend  Catch-Up
20

9. Strategic Alliances (contd.)
Remain  Restructure Cross-Border Alliances that Succeed:  Alliances between strong and weak partners seldom work.  Autonomy and flexibility  Equal ownership  Other factors: • Commitment and support of the top of the partners’ organizations

21



9. Strategic Alliances (contd.)
•Strong alliance managers are the key •Alliances between partners that are related in terms of products, technologies, and markets •Similar cultures, assets sizes and venturing experience •A shared vision on goals and mutual benefits
22

What is the Right Strategy?


It depends on:  Vision  Attitude toward risk  How much investment capital is available  How much control is desired

23

24