J - Cross-cultural Distribution politics Flashcards
Criteria for market entry
“Hard factors” to select country markets
External factors
- market size
- market growth
- market entry barriers -> import quote
- stability (incl. political)
- competition intensity
- purchasing power for consumer
- infrastructure
Criteria for market entry
“Hard factors” to select country markets
Internal factors
- company size
- product complexity
- control
Choice of country markets
Filter method based on “hard factors”
All countries (--> exclusion) -> acceptable countries (--> ranking) -> closer selection (--> selection) -> target countries
Criteria for market entry
“Soft factors” to select country markets
- cultural distance
- risk aversion
- perceived insecurity
- intercultural experience
Criteria for market entry
Preferred type of market entry
Low international experience:
“full control mode” because insecurity and desire to control
Medium international experience:
“shared control mode” because sensibility for own know-how ?? -> joint ventures
High international experience:
“full control mode” because comprehensive market knowledge and desire for more room to maneuver
Uppsala Model of internationalization
Internationalization as a learning process
Gradual internationalization (by the interplay of knowledge, experience, and market attachment)
Static factors:
market attachment
market knowledge
Dynamic factors:
ongoing business activities
decision on further internationalization
Uppsala Model of internationalization
Internationalization as a learning process
Psychic distance chain
- refers to the question where the company’s internationally active
- first: country markets that are psychically close to the home country
- later: country markets that are psychically farther away
Uppsala Model of internationalization
Internationalization as a learning process
Establishment chain
- timely order of Market entry and market development strategy
- first: no international activities
- second: exports
- then: foreign subsidiaries
Uppsala Model of internationalization
Internationalization as a learning process
Establishment chain
Type of market entry depends on controllability
(Capital expenditure in target market: low
management activity in target country: low)
- export
- licensing
- franchising
- strategic alliance
- joint venture
- production plant
- subsidiary
(capital expenditure in target market: high
management activity in target country: high)
-> increasing control over the channel of distribution
Timing of the market entry
Strategies to coordinate the time of market entry
Waterfall strategy
Sprinkler strategy
Near market strategy
Timing of the market entry
Strategies to coordinate the time of market entry
Waterfall strategy
Entry market 1
- > then market 2
- > then market 3
- > …
e.g. Starbucks
Timing of the market entry
Strategies to coordinate the time of market entry
Sprinkler strategy
Entry market 1, market 2, market 3, … at the same time
-> Unternehmen wird dadurch dominanter im Markt
Timing of the market entry
Strategies to coordinate the time of market entry
Near market strategy
entry
- > lead market A1
- > then near market A2
- > then near market A3
- > …
parallel: entry -> lead market B1 -> then near market B2 -> then near market B3 -> ...
-> contribution of both strategies
Timing of the market entry
Advantages and disadvantages of the waterfall strategy
Advantages:
- temporal distribution of the risk
- financial and personal resources can be build up successively
- possibility to learn from earlier errors
Disadvantages:
- competitors may be the first-movers in other market
Timing of the market entry
Advantages and disadvantages of the sprinkler strategy
Advantages:
- regional distribution of the risk
- competitive advantage as a “first mover”
- creation of market entry barriers for “follower”
Disadvantages:
- need for intensive financial and personal researchers
- standardization strategy may mismatch the needs of local consumer
