Section 6 - Market Entry Strategies Flashcards
Preliminary Research
Know your Organization, Product, Home Market, Target Market, SRC, Redesign the “Value Proposition”
Stage 1 of Market Entry: Domestic Evaluation
Know your Organization, Know your Products, the SW of SWOT.
Stage 2: The Global Evaluation
The first round of segmentation focuses on identifying the ideal countries to enter. The most significant issue at this stage is political stability (which accounts for approximately 80% of the ‘known’ variables). Then find market potential of identified countries. Get secondary and primary data.
Stage 3: Entry Mode
Exporting: Indirect (using an intermediary), directly, or through the Internet. Indirectly through the Internet is like Amazon, directly through the Internet is like ordering computers directly from Dell.
Export Selling vs. Export Marketing
Export selling: Selling the same product, same price, same promo tools for individual target audiences.
Export marketing: the 4Ps are customized for each target audience. Do a personal visit to the market!!
Government Programs that Support Exports
Tax Incentives or Exemption, Subsidies, Governmental Assistance, Free Trade Zones.
Government Programs to Discourage Imports
Tariffs, non tariff barriers (quotas, discriminatory procurement policies, discriminatory exchange rate policies, customs procedures, etc.)
Factors that Affect Sourcing
Management’s vision: Two extremes: Keep manufacturing at home or contract everything -Factor costs and logistics.(automation or labour outsourcing, shipping and duties, etc.)
- Customer’s expectations
- Country infrastructure issues
- Political risk
- Exchange rates and convertibility of local money
Stage 3: Mode of Entry
Increasing in Degrees of Involvement and Cost: Exporting, Licensing, Contract Manufacturing, Joint Ventures, Equity Stake or Acquisition.
-As the level of involvement increases, so does the level of cost for the mode of entry and the risk of things going wrong, but also hopefully the profit also increases.
Licensing
A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license feeds, or some other form of compensation. Typically patent, manufacturing secret, brand name, product formulation, etc.
Advantages/Disadvantages of Licensing
Advantages: not shipping anymore; no taxes or quotas or tariffs. Provides additional profitability with little initial investment.
Disadvantages: now you have a partner who knows a lot of your secrets and you have limited participation or control.
Contract Manufacturing: Special Licensing Agreements
The company provides technical specs to a subcontractor or local manufacturer. All they do is make the product for you.
Advantages: limited financial commitment, and quick entry into a target country.
Disadvantages: shared confidential trade secrets and loss of quality control.
Franchising: Special Licensing Agreements
A contract with a parent company (franchisor) and a franchisee that allows the franchisee to operate a business developed by the franchisor.
You own the business and are running it but they have tight contracts with you that are very restricive. The product cannot be modified beyond its original design or only for the local market with permission. It does allow market expansion at a rate far beyond the financial capabilities of the parent organization. Do your own risk assessment when entering a franchise agreement!
This is College Pro Window Cleaners with Braden Fleury!!
Foreign Direct Investment
Foreign Direct Investment (FDI): Unlike exporting (no international financial commitment) and licensing (no asset investment), FDI is the commitment of funds towards physical assets such as factories, sales organizations, or R&D commitments.
Common models: Joint ventures, minority or majority equity stakes, outright acquisition, global strategic alliance.
Joint Venture
Entry strategy for single target country where partners share ownership of a newly-created business entity. Build on each partner’s strength by sharing.
