FOREIGN MARKET ENTRY STRATEGIES

GROUP MEMBERS: Andrew Clarke Nollette Callinan Susan Connell Louise Considine

Foreign Market Entry Strategies

Risk And Control in Market Entry
Control
Manufacturing yOwn Subsidiary yAcquisition yAssembly

Cooperative Strategies yJoint Ventures yStrategic Alliances Direct Exporting yDistributors yAgents yDirect Marketing Indirect Exporting yFranchising yPiggybacking yManagement yTrading Companies Contracts yExport Management Companies yDomestic Purchasing

Risk

Indirect Exporting
- Using a third party to export goods
Advantages
Less complicated and less expensive than direct exporting methods Quickly provide access and wide coverage of foreign markets

Disadvantages
Little or no control over foreign market decisions Lower profit margins Little experience/knowledge/foreign contacts gained

Domestic Purchasing
Often involves an unsolicited purchase request from a foreign buyer Can be used to sell off excess stock with the least inconvenience

Export Management Companies (EMCs)

Specialist companies that act as the export department for a number of companies

Trading Companies
Extensive contacts, experience and operations in many different trading regions in the world Long-term commercial relationships all over the world Trading companies may accept goods as payment for other goods

Piggybacking

Established international distribution network of one manufacturer may be used to carry the products of a second company

DIRECT EXPORTING
Agents
  

Cheaper Lower risk Quicker Larger cost exclusivity Long term relationship More specialised

Distributors
  

DIRECT EXPORTING contd

Management Contracts
 

Internationalisation of Services System installation and training Less risky more favourable laws Less costly significant investment in training needed More control Transfer of skills, knowledge, competences and systems Standardisation v s adaptation

Franchising
 

 

DIRECT EXPORTING contd

Direct Marketing


Database Marketing Tools

 telemarketing, media marketing, direct mail and the internet

 

Transferability across boundaries Customisation is essential for success

Manufacturing Strategies
Why?
    

Gain new business commitment To defend existing business Move with an established customer Reduce costs Avoid government restrictions

Assembly
Involves establishing plants in foreign markets simply to assemble components manufactured in the domestic market by the firm. Advantages Disadvantages Lower tariff barriers Reduce costs Allows domestic firm to concentrate on product development, production skills & investment economies of scale Not all governments welcome assembly plants Operating costs subject to rapid change

Wholly Owned Subsidiaries

Advantages
Level of control necessary to fully meet strategic objectives Offers the fullest means of participating in a market Avoids communication & conflict of interest problems

Disadvantages
Most expensive method

Costs of withdrawing substantial LT view Gov restrictions may prevent 100% ownership Political risks = threat to success High degree of visibility

Acquisitions
where an organisation develops its resources and competences by taking over another organisation
Johnson & Scholes (2002, p. 375)

Acquisitions
Why?


  

To enter new product or market areas with more speed Meet with less retaliation in mature foreign markets Cost efficiencies Under pressure from stakeholders Experience curve effects

Acquisitions
Drawbacks


Can take a lot of time to search & appraise probable acquisition targets, engage in negotiations & integrate Acquire firm with problems which are expensive to overcome Acquisitions are often associated with job losses & transfer of production facilities over seas National resentment

Strategic alliances
Strategic alliances are described as a wide range of cooperative partnerships and joint ventures. Defining characteristics: 1. Two or more entities unite to pursue a set of important, agreed goals while in some way remaining independent subsequent to the formation of an alliance. 2. The partners share both the benefits of the alliance and control over the performance of assigned tasks during the life of the alliance. 3. The partners contribute on a continuing basis in one or more key strategic areas, for example, technology or products.

To Conclude
Firms seek to expand geographically due to: - The convergence of technology. - The emergence of alternative communication structures. - The increased competition. Firms must be proactive rather than reactive in their approach to internationalisation. Must conduct market research. Firms must consider their objectives, size, level of available resources and level of control and commitment they wish to exert.