Global Market Entry Strategies

Operational reasons for setting up overseas manufacture Strategic reasons for investing in local operations Methods of overseas production Exporting options Joint Ventures and Strategic Alliances

 reduced costs of transportation reduced barriers/ quota handicap e.g. Nissan some governments demand investment with market entry e.g. China Customers sometimes prefer local manufacture e.g. Heinz British? Government contracts prefer firms contributing to the local economy

Operational reasons for settingup overseas manufacture

 Improved local market information local manufacture ensures greater commitment to international markets Faster response and Just-in-time delivery
Doole, Phillips and Lowe (1994)

Strategic reasons for investing in local operations

Gain new business
demonstrates strong commitment persuades customers to change suppliers provides better service and more reliability

Defend existing business

avoid market restrictions as sales increase, particularly in single market

 Move with established customer

component suppliers follow customers to compete with local component suppliers

Save costs
labour, raw materials and transport

Avoid government restrictions to import certain goods

Doole, Phillips and Lowe (1994)

Exporting
Indirect
export houses UK buying offices of foreign stores or governments complementary exporting

Direct
sales to final user overseas agencies distributors and stockists company branch offices abroad

Degree of involvement v control?

Methods of overseas production

Licensing
Companies with strong brand or know-how e.g. Coca-Cola, Disney

Franchising
more of a whole package e.g.Body Shop, KFC

Contract manufacture
bulk items e.g. Nike components

 Joint ventures e.g. Burmah Castrol in S.Korea

Wholly owned overseas subsidiaries Organic growth

Strategic Alliances
Strategic alliances can range from loose networking relationships to very tight contractual relationships such as joint ventures. e.g. code share where airlines of a similar type sell each others tickets. There is no co-ownership. Types
technology swaps R&D exchanges distribution relationships

Driving forces
insufficient resources High R&D costs Concentration of firms in mature markets Market access

Joint ventures e.g European Airbus.

Orgs can remain separate, but have a tight legal relationship. Reasons for setting up
overcome foreign ownership restrictions increase speed of entry exploit new opportunities, complementary technologies and management skills achieve worldwide presence at lower cost

Disadvantages
differences in partner aims and objectives equal ownership and different options can slow decision making dominance by one partner can lead to resentment in the other Large time commitment for education, negotiation and agreement with partner

Mergers
The identity of each of the merging companies is subordinated into the identity of the newly merged organisation, or disappears. Benefits include:
Cutting cost Eliminate competition Synergy augments mutual strengths

Case study Chrysler and Mercedes.