Chapter 9 - Global Market-Entry Strategies Flashcards
Explain the advantages and disadvantages of using licensing as a market‐entry strategy.
Advantages of L:
- provides additional profitability with little initial investment
- provides method of circumventing tariffs, quotas, and other export barriers
- Attractive ROI
- low costs to implement
- licensees have autonomy to adapt products to local tastes
- license agreements should have crss-technology agreements to share developments and create competitive advantage for each party
Disadvantages:
- limited market control
- returns may be lost
- the agreement may be short-lived
- licensee may become competitor
- licensee may exploit company resources
Discuss the factors that contribute to the successful launch of a global strategic partnership. (success factors of alliances)
Mission:
Successful GSPs create win-win situations, where participants pursue objectives on the basis of mutual need or advantage
Strategy:
A company may establish separate GSPs with different partners; strategy must be thought out up front to avoid conflicts
Governance:
Discussions and consensus must be the norms. Partners must be viewed as equals.
Culture:
Personal chemistry is important, as is the successful development of a shared set of values.
Organisation:
Innovative structrures and designs may be needed to offset the complexity of multi-course management.
Management:
Potenially divisive issues must be identified in advance and clear, unitary lines of authorty established that will result in commitment by all partners
Explain the evolution of cooperative strategies in the 21st century.
Alliances between companies in several industries that are undergoing transformation and governance:
- computers
- communications
- consumer electronics
- entertainment
Semantech: Consortium of 14 tech companies tasked with saving th U.S. chip-making industry
Relationship enterprise: groupings of firms from different industries and countries with common goals and act as one entity
Next stage of evolution of the strategic alliance:
- super-alliance
- virtual corporation
Use the market expansion strategies matrix to explain the strategies used by the world’s biggest global companies.
Matrix shows market and country and differs between concentration and diversification
Case 1 (C-Concentration/M-Concentration): Narrow Focus
Case 2 (C-Concentration/M-Diversification): Country Focus
Case 3 (C-Diversification/M-Concentration): Country Diversification
Case 4 (C-Diversification/M-Diversification): Global Diversification
Companies must decide to expand by:
- seeking new markets in existing countries (Case 2)
- seeking new country markets for already identified and served market segments (Case 3)
Order 5 aspects of marketing entry strategies by their cost and degree of involvement
(From low to high)
Exporting
Licensing
Contract Manufacturing
Joint Venture
Equity stake or acquisition
Which strategy should be used for market entry - name aspects on what this depends
- Vision
- Attitude towards risk
- Availability investment capital
- how much control is desired
Define licensing, name options of it and the wordwide sales amount of licensed goods in 2014
- contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fee, or some other form of compansation
- Patent, Trade secret, Brand name, Product formulations
- worldwide sales in 2014: $241.5 billion
Explain contract manufacturing (Special licensing agreement)
- company provides technical specifications to a subcontractor or local manufacturer
- allows company to specialize in product design, while contractors accept responsibility for manufactoring facilities
- May open the firm to criticism if manufacturers operate with harsh working conditions or have low wages
Explain Franchisiong (Special licensing agreement)
- contract between a parent company-franchisor and a frachisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies
- used by the specialty retailing & fast-food industries
What are examples of important franchising questions?
- Will local consumers buy your product?
- How tough is the local competition?
- Does the government respect trademark and franchiser rights?
- Can your profits be easily repatriated?
- Can you buy all the suppliees you need locally?
- Is commercial space available and are rents affordable?
- Are your local partners financially sound and do they understand the basics of franchising?
Explain term investments and name forms of it
partial or full ownership of opeations outside of home country (Foreign direct investment (FDI))
Joint Ventures, Minority or majority equity stakes (Minderheits- oder Mehrheitsbeteiligungen), outright acquisition (Vollständiger Erwerb)
Explain Joint Ventures and name some examples
Entry strategy for a single target country in which the partners share ownership of a newly‐created business entity (Eintrittsstrategie für ein einzelnes Zielland, in dem die Partner das Eigentum an einer neu gegründeten Geschäftseinheit teilen)
Builds upon each partners strenghts
(e.g. Budweiser und Kirin, GM and Toyota, GM and Daewoo, Ford & Mazda, Chrysler und BMW)
Point out advantages and disadvantages of joint ventures
Advantages:
- allows for risk sharing (financially and politically)
- provides opportunity to learn new environment
- provides opportunity to achieve synergy by combining strengths of partners
- may be the only way to enter market given barriers to entry
Disadvantages:
- requires more investment than a licensing agreement
- must share rewards as well as risks
- requires strong coordination
- potential for conflict among partners
- partner may become a competitor
Name and explain ways of investment via equity stake or full ownership
- equity stake is an investment (minority >50%, majority <50%, full ownership 100%)
- Start-up of new operations (greenfield operations or greenfield investment)
- Merger with an existign enterprise
- Acquisition of an existing enterprise
Name issues in acquisition as a market entry strategy
- Globalisation is driving acquisitions, smaller firms cannot expand without a partner
- Ownership circumvents tariffs and quota barriers, gets new markets, allows technology transfers and gain new manufacturing methods.
(Eigentum umgeht Zölle und Quotenbarrieren, erschließt neue Märkte, ermöglicht Technologietransfers und erschließt neue Herstellungsmethoden.)
Name alternatives for market entry
licensing, jv, minority and majority equity stake, ownership
- companies may use combination
What are possible terms of global strategic partnership?
Collaborative agreement
Strategic alliances
Strategic international alliances
Global strategic partnership
What are the characteristics of global strategic partnerships?
- Participants remain independent following formation of the alliance
- Participants share benefits of alliance as well as control over performance of assigned tasks
- Participants make ongoing contributions in technology, product and other key strategic araes
What are five attributes of true global strategic partnership?
- two or more companies develop a joint long-term strategy
- relationship is reciprocal/mutual
- partners’ vision and efforts are global
- relationship is organised along horizontal lines (not vertical)
- when competing in markets not covered by alliance, participant retain nationa and ideological identities (Beim Wettbewerb auf Märkten, die nicht von der Allianz abgedeckt werden, behalten die Teilnehmer ihre nationale und ideologische Identität)
What is the challenge with alliances with asian competitors?
Western companies must learn from Asian firms’ excellence in manufacturing, overcome NIH syndrome and become students, not teachers
For common problem areas are:
- each partner had a different dream
- each must contribute to the alliance and each must depend on the other to a degree that justifies the alliance
- differences in management philosophy, expectations and approaches
- no corporate memory
Explain the cooperative alliance in Japan: Keiretsu
- inter-business alliance or enterprise groups in which business families join together to fight for market share (Zusammenschluss Geschäftsfamilien, um Marktanteil zu erkämpfen)
- often cemented by bank ownerships of large blocks of stock and by cross-ownership of stock between a company and its buyers and non-financial suppliers
(oft zementiert durch den Besitz großer Aktienpakete durch Banken und durch gegenseitigen Besitz von Aktien zwischen einem Unternehmen und seinen Käufern und nichtfinanziellen Lieferanten) - Keiretsu executives can legally sit on each other’s boards, share informatin and coordinate prices
Explain the horizontal Keiretsu
- Big Six: Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa, DKB Groups
- Horizontal keiretsu: intragroup relationships involve shared stock holdings and trading relations
- large, powerful with revenues in hundreds of billions
- can block foreign suppliers causing higher prices
- promotes corporate stability, rish sharing, long-term employment
Explain vertical keiretsu
hierarchical alliances between manufacturers and retailers
Explain manufacturing keiretsu
Vertical hiearachicl alliances between automakers suppliers, and component manufacturers
Explain cooperative strategies in South Korea: Chaebol
Composed of dozens of companies, centered around a bank or holding company and dominated by a founding familiy
- Samsung
- LG
- Hyundai
- Daewoo
