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Alternative Market-Entry Strategies

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The selection of entry mode is one of the most


significant decisions a firm takes in the process
of Internationalization.
It is an institutional mechanism by which a
firm makes its products and services available
to consumers in international markets.

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Types of Entry Strategies


1.Waterfall Model
2.Sprinkler Model

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Companies most often begin with modest


export involvement
A company has different modes of foreign
market entry
Exporting
Contractual agreements
Strategic alliances

Exporting

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Exporting accounts for some 10% of global


activity.
Indirect exporting the company
-sells to a foreign firm or a buying agent in India
-Intermediary or a trading house.

Functions carried out byName


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trading house:
a.
b.
c.
d.
e.
f.
g.

Market Selection and research


Customer identification
Packaging adaptations
Securing credit if needed
Protection against exporting, i.e.insurance
Create distribution networks abroad
Foster special relations with the government.

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Advantages of a merchant exporter:


-Operational cost of cargo shipment is spread
over a no. of clients served, savings in
operational cost.
-Merchant exporter spends in gathering market
intelligence data, documents --- cost saving for
the manufacturer.
-Better negotiating capability.

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Trading houses in India:


Adani Exports
Metals and Minerals Trading Corporation
Ruchi International
State trading corporations

Small scale operational


Lack of professional management

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Direct exporting the company sells to importers in another country

-Selects market, establish contact, handle documents, decide marketing mix elements.
-AGENTS AND DISTRIBUTORS
-Agents find wholesalers and retailers of the product
-overseas agent--- cargo directly shipped to the importer, all terms and conditions between them
-Overseas agent provides market intelligence data.

The Internet
Initially, Internet marketing focused on domestic sales
A surprisingly large number of companies started receiving orders from customers in other countries,
Resulting in the concept of international Internet marketing (IIM)
Direct sales
Particularly for high technology and industrial products

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Piggybacking exports:
-Overseas distribution channels of another firms
are used by the company to make its product
available in the overseas market.
- Rider- Carrier
Parrys distribution network used by WrigleyUS based chewing company.

Contractual Agreements

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Using synergetic effect of a partner firm and make use


of its resources.

Tata tea- strong backward linkages, own tea gardens,--JV with Tetley group UK strong market presence in
US, Europe and Australia.

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International Licensing
A means of establishing a foothold in foreign
markets without large capital outlays
It reduces the political risk -Exit cost is low.
Pharma and TV programming
Supplement to exporting - Granted for production
process, use of trade name, distribution of
imported products
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Trademark and brand licensing


Artwork and character licensing
A licensor may grant a permission to a licensee
to copy and distribute copyrighted works such
as "art" (e.g., Thomas Kinkade's painting
"Dawn in Los Gatos") and characters
(e.g., Mickey Mouse).
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Academia
A license is an academic degree. Originally, in
order to teach at a university, one needed this
degree which, according to its title, gave the
bearer a license to teach.
The name survived despite the fact that
nowadays a doctorate is typically needed in
order to teach at a university. A person who
holds a license is called a licentiate.
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In some other major countries, such as France,


Belgium or Poland, a license is achieved
before the master's degree (it takes 3 years of
studies to become licentiate and 2 additional
years to become Master) in France, while in
Belgium the license takes 4 years while the
master itself takes 2 more years.

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In Sweden, Finland, and in some other


European university systems, a license or
'Licentiate' is a postgraduate degree between
the master's degree and the doctorate. The
Licentiate is a popular choice in those
countries where a full doctoral degree would
take five or more years to achieve.

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In Switzerland, a license is a 4-year degree then there is


a DEA degree which is equivalent to the Master's degree. In
Portugal, before the Bologna process, students would become
licentiates after 5 years of studies (4 years in particular cases
like Marketing, Management, etc.; and 6 years for Medicine).
However, since the adoption of the Bologna Process
engineering degrees in Portugal were changed from a 5 year
license to a 3 year license followed by 2 years for the MSc:
Not having the MSc does not confer accreditation by
the Ordem dos Engenheiros.

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A Greenfield Investment is the investment in a


manufacturing, office, or other physical commerce-related
structure or group of structures in an area where no previous
facilities exists.
A form of foreign direct Greenfield investment is where a
parent company starts a new venture in a foreign country by
constructing new operational facilities from the ground up. In
addition to building new facilities, most parent companies also
create new long-term jobs in the foreign country by hiring new
employees.
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Franchising
Franchiser provides a standard package of products, systems,
and management services
Franchise provides market knowledge, capital, and personal
involvement in management
Expected to be the fastest-growing market-entry strategy
-Combination of skills centralization and operational
decentralization.
Master franchising- McDonald, NIIT--- std shop layout,
follow marketing guidelines, min sales.
Licensing- CocaColalicenses local bottlers to manufacture
and market CocaCola using syrup sold by CoCaCola.

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A Strategic International Alliance (SIA)


A business relationship established by two or more
companies to cooperate out of mutual need
To share risk in achieving a common objective
SIAs are sought as a way to shore up weaknesses and increase
competitive strengths
Firms enter SIAs for several reasons
Opportunities for rapid expansion into new markets
Access to new technology
More efficient production and innovation
Reduced marketing costs
Strategic competitive moves
Access to additional sources of products and capital

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General Mills --- enter Europe, growing


breakfast cereal market.
Kellogs--- a astrong competitor
GM joined Nestle
- Nestle name, access to retailers,a strong
distr.netwk of plants, brand name, netwk of
plants- GM provided knowledge in cereal tech.,
equipments.

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International joint ventures (IJVs)


A complementary competitive advantage for the
formation of a new company
Participating firms contribute their expertise and
resources.
They are two companies with equity sharing.

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Consortia
Similar to joint ventures and could be classified as
such except for two unique characteristics
Typically involve a large number of participants
Frequently operate in a country or market in which none
of the participants is currently active

Consortia are developed to pool financial and


managerial resources and to lessen risks

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The most prominent international consortium


has been Airbus. Formed with 4 major European
aerospace firms.
-Frances aerospatiale Mantra,
-Germanys Dasa aerospace
-Britains BAE system
-Spains Construcciones.
--- Decide to form a global company to beat
Boeing

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Sep-22, 2014
Siemens acquires Dresser-Rand group for $7.6
billion .
Dresser Rand Oil and gas equipment
manufacturing company
With the acquisition energy business of Siemens
will strengthen where US has not been strong.

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Organizing for Global Competition

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Devising a standard organizational structure is difficult


Because organizations need to reflect a wide range of
company-specific characteristics
Companies are usually structured around one of three
alternatives
Global product divisions responsible for product sales
throughout world
Geographical divisions responsible for all products and
functions within a given geographical area
A matrix organization consisting of either of these
arrangements
With centralized sales and marketing run by a
centralized functional staff, or a combination of area
operations and global product management

Locus of decision

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Considerations of where decisions will be


made, by whom, and by which method
constitute a major element of organizational
strategy

Corporate headquarters
International headquarters
Regional levels
National levels
Local levels

Tactical decisions normally should be made at


lowest possible level

Centralized Versus
Decentralized Organizations

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Most organizational patterns of multinational


firms fit into one of three categories
Centralized
Regionalized
Decentralized

No single traditional organizational plan is


adequate for todays global enterprise
Seeking to combine the economies of scale of a
global company with the flexibility and marketing
knowledge of a local company

Indian Firms in International Markets

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Essel Propack is the worlds largest laminated tube


manufacturer with its manufacturing presence in
12 countries.
Bharat Forge has the worlds largest single-location
forging faciliy-1.2 tonns per annum.
Hindustan Ink has worlds largest single stream
plant at Vapi-Gujarat and 100% subsidy in US and
Austria.
Asian Paints has production facility in 24 countries.