Svend Hollensen

GLOBAL MARKETING
4th Edition

9 Some approaches to the choice

Traducción y Adaptación J Gudziol-9-1

of entry mode
 Learning objectives
 Identify and classify different market entry
modes
 Explore different approaches to the choice of
entry mode
 Explain how opportunistic behaviour affects the
manufacturer/intermediary relationship
 Identify the factors to consider when choosing a
market entry strategy

Traducción y Adaptación J Gudziol-9-2

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-2

 What is this?

An institutional arrangement necessary

for the entry of a company’s products
into a new foreign market is known as
an ______.

Entry mode
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 Types of entry modes

Export

Intermediate

Hierarchical

Traducción y Adaptación J Gudziol-9-4

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-4

 Rules for choosing
mode of entry

Naive rule

Pragmatic rule

Strategy rules

Traducción y Adaptación J Gudziol-9-5

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-5

 What is this?

Which rule for choosing a mode of entry

is based upon selecting the mode that
maximizes the profit contribution over
the strategic planning period subject to
(a) the availability of company
resources, (b) risk and (c) non-profit
objectives?

Strategy rule
Traducción y Adaptación J Gudziol-9-6

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-6

 Transaction cost approach

Opportunistic Opportunistic
VS behaviour of
behaviour of
export intermediary producer

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Hollensen, Global Marketing 4e, © Pearson Education 2008 9-7

 Export intermediary
responses to opportunistic
behaviour of producer
Establish personal relations with
producer’s key employees
Create an independent identity in
connection with selling producer’s
products
Add further value to the product

Traducción y Adaptación J Gudziol-9-8

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-8

 Factors affecting foreign
market entry mode decision

Internal factors

Desired mode
characteristics Entry mode
decision
Transaction-
specific factors

External factors
Traducción y Adaptación J Gudziol-9-9

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-9

 Internal factors affecting
market entry mode decision
Product

Product
Product
differentiation
complexity
advantage

+ +
International
experience
+ Entry mode
decision
Firm +
size
Traducción y Adaptación J Gudziol-9-10

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-10

 Desired mode
characteristics affecting
market entry mode decision
Risk
averse
-

+
Control
Entry mode
- decision
Flexibility

Traducción y Adaptación J Gudziol-9-11

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-11

 Transaction-specific factors
affecting
market entry mode decision

Tacit nature of
+
know-how
Entry mode
decision
+
Opportunistic +
behaviour
Transaction
costs

Traducción y Adaptación J Gudziol-9-12

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-12

 External factors affecting
market entry mode decision

- Entry mode
Sociocultural decision
distance - +

Country risk/ Number of

demand + export
+ -
uncertainty intermediaries

Market size/ Direct/

Intensity of
growth indirect
competition
trade barriers
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Hollensen, Global Marketing 4e, © Pearson Education 2008 9-13

 What is this?

What term refers to some investment of

a defined financial value?

Equity
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Hollensen, Global Marketing 4e, © Pearson Education 2008 9-14

 What factors affect
Konica Minolta’s
entry mode decision in Belgium?

Traducción y Adaptación J Gudziol-9-15

Source: http://www.konicaminolta.eu/

Hollensen, Global Marketing 4e, © Pearson Education 2008 9-15

 Figure 9.1 All factors
affecting decision

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Hollensen, Global Marketing 4e, © Pearson Education 2008 9-16

 For discussion (1)

 Why is choosing the most appropriate market

entry and development strategy one of the most
difficult decisions for the international marketer?
 Do you agree with the view that LSEs use a
‘rational analytic’ approach to the entry mode
decision, while SMEs use a more
pragmatic/opportunistic approach?
 Use Figure 9.1 to identify the most important
factors affecting the choice of foreign entry
mode. Prioritize the factors.
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Hollensen, Global Marketing 4e, © Pearson Education 2008 9-17

 Entry modes in the
Chinese market: A case study
 What factors do companies consider when
determining the best form of operation to use
when entering the Chinese market?
 What have been the challenges and
opportunities for foreign companies in Requires web access

establishing collaborative arrangements?

 How have Chinese government policies and
attitudes towards foreign businesses evolved?
How have the changes affected foreign
companies’ forms of operations?
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Hollensen, Global Marketing 4e, © Pearson Education 2008 9-18