Global Marketing Management

Chapter 8 Entry and Expansion Strategies: Marketing and Sourcing

Warren J. Keegan

Overview
aDecision Criteria for IB aEntry & Expansion Decision Model aExporting aAdditional Expansion Alternatives aMarket Strategy aSummary

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Learning Objectives
aTo identify criteria for selection of foreign markets. aTo appreciate which market entry alternatives are available to companies. aTo recognise export activities as a process developing over time. aTo understand different entry startegies: sourcing, licensing,investment & ownership

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Decision Criteria for IB

aPolitical risk aMarket access aFactor cost & conditions aShipping consideration aCountry infrastructure aForeign Exchange
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Selecting Foreign Markets

a... should be based on a number of criteria:
`market-related characteristics `cost-related aspects `the regulatory framework `tariffs, duties & non-tariff trade barriers

athe importance of these selection criteria depends upon the industry & the markets taken into account
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Market Selection Criteria

a1. Market Potential a2. Market Access a3. Shipping Cost & Time a4. Appraising Level & Quality of Competition a5. Service a6. Product Fit
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Product-Market Profile: The 9 Ws

1.Who buys our product? 2.Who does not buy our product? 3.What need or function does our product serve? 4.What problem does our product solve? 5.What are customers currently buying to satisfy the need and/or solve the problem for which our product is targeted? 6.What price are they paying for the products they are currently buying? 7.When is our product purchased? 8.Where is our product purchased? 9.Why is our product purchased?
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A Multi-Stage Selection Process

Approx. 150 countries

Markets which drop out due to restrictions (must criteria)

Source: adapted from D.J.G. Schneider, and R.U. Mller, Datenbankgesttzte Marktselektion: Eine methodische Basis fr Internationalisierungs-strategien, Stuttgart, 1989

Markets which are filtered out based on a first set of selection criteria Markets which are filtered out based on a second set of selection criteria

Potential foreign target markets

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Visiting the Potential Market

a... is essential after assessment & selection of potential market(s) agoals:
`to confirm (or contradict) assumptions regarding market potential `to gather additional (primary) data `to develop a marketing plan in co-operation with the local agent or distributor

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Production Abroad
Ownership and Control
100 % Ownership & Strategic Alliances

Equity Joint Ventures

Licensing Franchising 0 0 Control

Management Contracts 100 %

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Direct Exporting
aDirect market representation
`via wholesalers or retailers or directly to the consumers

aIndependent representation
`independent distributor

aPiggyback marketing
`distribution through another distributors channel

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Exporting: A Developmental Process

Stages of the firm
1 2 3 4 5 6 7 is unwilling to export. fills unsolicited export orders (export seller). explores the feasibility of exporting (may bypass stage 2). exports to one or more markets on a trial basis. is an experienced exporter to one or more markets. pursues country or region focused marketing. evaluates the global market potential. All markets, domestic & international, are regarded as equally worthy of consideration.

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Export-Related Problems ( LLSSF)

aLogistics aLegal procedure aServicing exports aSales promotion aForeign market intelligence

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Sourcing Decision Factors

1. 2. 3. 4. 5. 6. Factor costs & conditions Logistics Country infrastructure Political risk Market access Exchange rate, availability & convertibility of local money
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Licensing
acontractual arrangement whereby one company (licensor) makes an asset available to another company (licensee) in exchange for royalties, license fees or other form of compensation

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Franchising
aA form of licensing aa company permits its name, logo, cultural design and operations to be used in establishing a new firm or store.

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Joint Ventures
aCompany run by two or more partner firms aRisk is shared and different value chain strengths are combined aInfluence depends on degree of ownership aGood opportunity to build on local know-how aJV finds greater acceptance by local authorities

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Wholly-owned Subsidiaries/Acquisition
aRepresents the most extensive engagement abroad aSubsidiary is either established through the creation of a new facility or the acquisition of an existing firm aCompany has complete decision power & control aInvestor achieves greater flexibility aIn many countries majority or 100% ownership by foreign companies is forbidden

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Market Expansion Strategies

aNarrow focus: concentrated markets/concentrated countries aCountry focus: diverse markets/concentrated countries aCountry diversification: concentrated markets/diverse countries aGlobal diversification: diverse markets/diverse countries
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Summary
aThe choice of potential foreign markets must be based on a thorough evaluation of criteria which influence the potential success abroad; eg market potential, market access, or product fit. aOnce the potential foreign target market(s) is selected, a company has to decide how to enter this market.
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