Global Strategic Management

Session: Global Strategy and Foreign Market Entry

(EuroDisney)

Professor Jeff Dyer

Global Strategic Management 1
 EuroDisney Case Summary

EuroDisney illustrates:

• The importance of the location decision (e.g., the sequence

of where to take your product/service first). With a global
strategy you need to select new locations that are most
similar to where you have been successful in the past.
• Successful companies can get into trouble basing future
success too heavily on past performance without making
appropriate adjustments for the new country and culture.
• The importance of mode of entry: each mode may be more
appropriate under different circumstances; the choice
regarding mode of entry can strongly influence the success
of international expansion.

Professor Jeff Dyer

Global Strategic Management 2
 Market Entry Mechanisms
Exporting

Conditions favoring exporting

• Limited sales potential in target country; little product adaptation required
• Good available distribution channels; close to existing production plants
• High target country production costs
• Liberal import policies; high political risk

Advantages
• Minimizes risk, investment
• Speed in entering market
• Maximizes scale, utilization of
existing facilities
Disadvantages
• Trade barriers, tariffs (5%+)
• Transportation costs
• Limits access to local
information
• Company viewed as outsider

Professor Jeff Dyer

Global Strategic Management 3
 Market Entry Mechanisms
Licensing/Contracting
Conditions favoring licensing/contracting
• Import and investment barriers that increase cost, limit FDI
• Institutional environment that secures legal protection
• Tangible or intangible assets can be fairly priced
• Low sales potential in target country; large cultural distance
• Licensee lacks ability/resources to become competitor

Advantages Disadvantages
• Minimizes risk, investment • Lack control over use of assets
• • Licensee may become competitor
Speed in entering market
• Potential for knowledge
• Able to circumvent trade spillovers
barriers • Return is for limited period
• High return on investment

Professor Jeff Dyer

Global Strategic Management 4
 Market Entry Mechanisms
Joint Ventures/Alliances

Conditions favoring joint ventures/alliances

• Similar to sole ownership plus: cultural distance is large
• Government restrictions on foreign ownership
• Local company can provide complementary skills
• Local knowledge, resources, distribution, brand name, etc.

Advantages
• Overcome ownership restrictions
and cultural distance
• Combines resources of two
companies, potential for learning
• Viewed as insider
• Reduces investment
Disadvantages
• Difficulties in managing j/v
• Dilution of management control
• Greater risk (than export, license)
• Partner may become competitor;
potential for knowledge spillovers

Professor Jeff Dyer

Global Strategic Management 5
 Market Entry Mechanisms
Investment/Sole Ownership

Conditions favoring investment, sole ownership

• Import barriers that increase import costs
• Tangible or intangible assets can’t be fairly priced
• Cultural distance between home/host countries is small
• High sales potential in target country

Advantages
• Greater knowledge on local
market and customer
• Increases ability to
appropriate specialized skills
• Minimizes knowledge
transfers
• Can be viewed as insider
Disadvantages
• Most risky and expensive way
to enter a market (investment,
resources, commitment)
• Inability to manage in local
resources in local market

Professor Jeff Dyer

Global Strategic Management 6