4.2 Market Entry Strategies Flashcards
What are the five types of market entry?
Exporting, licensing, contract manufacturing, joint venture, equity stake/acquisition
Which four factors is entry strategy dependent on?
- Vision
- Attitude towards risk
- Available investment capital
- Desired amount of control
Define licensing
A contractual agreement whereby one company (licensor) makes an asset available to another (licensee) in exchange for compensation
Examples of information include patents, trade secrets, brand name, formulations
Advantages of licensing include…
- Additional profitability w/ little cost
- Circumventing tariffs
- Licensees can localize appropriately
- Speeds diffusion of new products
Disadvantages of licensing include…
- Limited market control
- Licensee may become a competitor (like Microsoft OS) – cross technology exchange agreements
Define contract manufacturing
Company provides tech specs to a subcontractor and allows licensee to manufacture product.
Define franchising
Contract between parent-company franchiser and franchisee that allows the franchisee to operate a business developed by the franchiser in return for a fee and adherence to policies
Define joint ventures
Entry strategy for one country where partners share ownership of new business entity - sharing technologies, local knowledge, experience, strengths
Advantages of joint ventures include…
- Sharing of financial and political risk
- Opportunity to learn new environment
- Opportunity to achieve synergy by combining strengths
- May be only way to enter market given barriers
Disadvantages of joint ventures include…
- More investment
- Share rewards
- Requires a LOT of coordination
- Conflict potential among partners
- Partner may become a competitor
The nature of global strategic partnerships…
1) Participants remain independent
2) Participants share benefits and control
3) Participants make ongoing contributions
Driving forces of global strategic partnerships…
- High product dev costs
- Highly advanced tech requirements
- Securing access to national/regional markets
Problem areas from Asian alliances
- Culture-oriented conflicts, different dreams and different management styles and priorities
