Chapter 7:

Entry and Competing

In Foreign Markets
 Making the Decision on Foreign Market Entry

1 COUNTRY OPPORTUNITIES

COUNTRY RISK ANALYSIS

Analysis 2
(Assessing Country
Attractiveness) • Internal
3 COMPETITIVE ANALYSIS
• External

4 ENTRY MODE

Implementation 5 DEVELOPMENT PATHS

6 ORGANIZATION:CONTROL

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 Entry and Development

Global
Market Strategic Government
Attractiveness Objectives Policies

Competitive
Risks Advantages

AMBITION
What do we want to achieve?
Market driven/ Resources driven

Entry and
POSITIONING Country CAPABILITIES
•Which Segments Strategy • Business Model
• Which Value Proposition?
ˉ Transfer
ˉ Adapt
ORGANISATION ˉ Create
• Development mode
•Global /Regional Linkages - Organic
• People Development - Joint Ventures
- Acquisitions

3
 Objectives
Market Driven Resources Driven
Capture Growth Capture resources
Opportunities (Natural, Human,
of the region to Knowledge) for global
expand global sales competitiveness

Regional Production
Global Innovation
and Innovation

Global Production and

Local Production back offices

Export Processing Factories

Local marketing

Sourcing base
Export

4
 First Mover Advantages

Acquirers advantages

Window of Opportunity

Followers advantage

First Movers advantages

• Pre-empt key resources • Benefit from mistakes of First Movers
• Establish standards • Capitalize on blind spots
• Blocks brands and distribution • Ride on efforts of First Movers
• Learn

5
 First Mover Advantage?
Entry into the Chinese Car Industry
14% Volkswagen

12%

10%

8%
General Motors
China
Market Share 6%
Honda Toyota
in 2017
4% Peugeot-Citroen

2% Jeep

0%
1985 1985 1987 1988 1990 1991 1992 1999 1999 2002

First movers First Generation Follower Late comers

Chart based on data from http://carsalesbase.com/china-car-sales-analysis-2016/

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 The Three Dimensions Of Global Competitive Positioning

Global Standardization

Multiple Segments

Single Segment
Local Adaptation

Compete Compete
on Costs/price on Differentiated/value
Advantages Advantages

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 GLOBAL Standardized or Localized ?
POSITIONING

HIGH GLOBAL MODULAR

(Global Scale) STANDARDIZATION STANDARDIZATION
Aircraft
Microprocessors And MULTIBRANDS
Basic Chemicals Elevators
Pulp and paper IT Services
Electronic Components Phone handsets
Minimum Size Examples: Otis, Nokia
Examples: Intel, Dell
of Production
PROCESS LOCAL ADAPTATION
STANDARDIZATION Elevators
Cement Consulting Services
Mobile Telephony Services
LOW Example: Cemex
Example: Vodafone
(Local Scale)
Little Difference across the World Country specific
(Global Segments) (Local Segments)
Customers Requirements and Competitive Contexts

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 Positioning: Value Proposition
Pure Adaptive Adaptive Fully
Global Usage Product Adaptive

Product Same Same Different Different

Message Same Different Same Different

Customer
Same Different Same Different
Group

Same Different
Usage Same Different

Distribution Same Different Same Different

Brand Same Different Same Different

Price Same Different Different Different

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 Positioning: Segmentation

Luxurious ‘Top of the line’ products and services

Rich
Global brands are well entrenched

Mainly increasing urban markets.. Mix of

Middle Class global and local brands and products and
services

Still important in term of numbers.

Bottom of the Pyramid Product and services adaptation and
Simplification are needed

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10
 Difference Between Traditional Middle Class Strategies and
Bottom of the Pyramid Strategies
Traditional Middle Class
 Value pricing based on differentiation and
segmentation
 
 Product obsolescence and renewal
 
 Products, services functionalities and packaging
are adaptation of industrialized markets
 
 Advertising on mass TV and media supports
 Products designed for ‘regular” environments
 Urban areas focus
 Transfer of technology
 Use of skilled resources
 Build supplies chains similar to industrialized world
Bottom of the Pyramid
 Find new price-performances relationships leading to
quality at low prices
 Products built to last
 Products, services functionalities packaging are
“reinvented to fit local conditions
 
 Communication and advertising rely less on mass
advertising and more on educational campaigns using
government programs and non government organizations.
 Products designed for “hostile” environments.
 Rural focus
 Hybrid technology: combination of advanced and
adaptation
 Deskill the work process
 Adapt supplies chains to local conditions
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 Competing

• Technological Performance
• Superior Quality
• Superior Service
Differentiation ?
Customer Value
• Image
• Customization
• Timeliness and Responsiveness
• Relationships
• Risk Reduction
Price
Industry
Average
Profit
Costs
Internal Costs
• Economies of Scale due to size
• Economies of Scope due to shared costs
• Low cost of Factors ( Labor, materials..) Supplies
• Installed base
• Superior productivity in processes
Cost
Leadership ?

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 Capabilities and Sources of Competitive Advantages
Marketing
R&D Procurement
General
Manufacturing Sales &
Distribution Management

• Higher quality • Better suppliers • Better locations • Good quality • Higher quality managerial
• Larger supplier
Resources based scientists and
base
& infrastructure channel partners personnel
technologists • Better qualiified • Superior strategic • Cheaper cost of capital
• Better database • Cheaper sources
work force and marketing • Strong “sponsors”
• Higher funding of supplies • Lower labor intelligence • Privileged access to
for R&D • Higher quality • Higher quality
costs? licenses from authorities
• More creative supplies marketing and
designers sales personnel
• More effective • Economies of scale
• Superior existing warehousing •Better electronic
due to volume • Well established
and inventory mgmt data mgmt and
Assets based products
• Patents • Electronic Data
• Better quality/ brand/reputation transmission
cost controls • Density and
• More efficient CAD Purchasing networks
More advanced CAM scope
• Economies of scale • Proprietary of distribution
(high purchase volumes) equipment
• Proprietary scientific/
technological know-how • More effective • Better quality plant • Superior product • Better Financial
• Superior Product Management
Competencies development
Supply Chain Mgmt management and brand mgmt
• Better HRM
(JIT) • Better process • Superior
based • Superior research • More effective mgmt Customer • Superior strategizing
techniques supplier relationship • Better time mgmt relationship • More effective, responsive
•Faster product mgmt management organizational mechanisms
development • “Better” corporate culture

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 Building a Business System in a Foreign Environment

Product
Service General
Sourcing Production Marketing
Design Management
Innovation

• Availability • Availability • Skill base of • Sales force • Local Financing

Resources
What is Required ?

of scientists of Suppliers the workforce • Information • Local Skills

• Production Managers
• Infrastructure:tansport/ telecoms • Distribution
• IT Infrastructure • Transfer network
Assets • Support & maintenance • Logistics of production • Branding:
of equipments technology Global/Local

• Ability to Adapt • Quality • Relationship • Working capital

Competences • Negotiation skills
• Appropriate management management management
• Quality management
Technology • Process control • Partnership
management

What can we Transfer without adaptation?

What do we need to Adapt?
What do we need to Create? How?

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 How do Firms’ Capabilities Fit to Regional/Local Markets?
The Transfer, Adapt, Create Model

R&D Procurement Manufacturing Marketing General

Management

What Capabilities
are needed
to Compete?

What Capabilities
do We Bring and
can transfer?

What Capabilities
Do We Bring but
Need to adapt?

What Capabilities
We don’t bring
and need to create?

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 Transferability of Competitive Advantages

What is the value of our existing advantages in local markets?

 To what extent do we need to adapt our products and
management approaches?
 What new capabilities need to be acquired and how?

Technological
Transfer Adapt

Competitive
Advantages

Adaptation
Social Replicate
through Learning

Global
(Same across Local
the world) Consumer Behavior

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 Entry Modes

Wholly-Owned Acquisition Joint-Venture License Agent

Office
Subsidiary Franchise Distributor

Benefits?
Costs?
Feasibility?
Risks?

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 Entry Modes
Wholly-owned
Acquisition Joint Venture License
Subsidiary

Market Relevant for both Attractive Markets

Attractiveness Relevant for Attractive Markets and less Attractive Markets

Costs High investments High Medium Low

Time Medium-term
Long pay-off if properly Medium-term Short-term
Horizon
managed

Shared risks but

Risks High exposure High risks of conflicts Low risks

Internal Acquisition skills Partnership Technology

Local know-how
Requirements Local insights management transfer

Competitive Can be high for Can be high if Leveraged with Limited but
Advantages early entrants properly managed partner testing base

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 HIGH
JOINT VENTURE
JOINT VENTURE

MARKETING SUBS JOINT VENTURE

WHOLLY OWNED
MARKETING ACQUISITION
ACQUISITION
SUBSIDIARY WHOLLY OWNED
OPPORTUNITIES
REP OFFICE
DISTRIBUTOR LICENSE
AGENT

LOW DISTRIBUTOR JOINT VENTURE

HIGH

LOW
LOW HIGH
RISKS
PRESSURE FOR LOCALISATION

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 Business Development and Managerial Skills

PIONEERING ESTABLISHING DEVELOPING COUPLING

Critical Create a small team Invest Develop people Internal networking

Task with mandate to Create JV Expand networks Interdependancies
gather information, Logistical base Broaden scope
establish contacts,
initiate first move

Individual - Cultural - Educational - Leadership -Leadership

Skills - Relational Leadership - Technical -Technical
- Political - Relational - Relational
- Relational
- Technical

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 Organizational Capabilities

LOCAL HUMAN - Recruitment

RESOURCES MANAGEMENT - Socialization
- Career
- Training
- Managing expatriates

LEARNING - Business practices

- Business and social cultures
- Local sources of innovation

- Transferring technology
INNOVATING - Adapting “best practices”
- Creating global base out of
Local resources

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 Linkages

LOCAL LINKAGES
- Citizenship
- Public relations
- Suppliers/distributors/retailers
- Local communities
- Local education institutions
- Partners
- Business associations

CORPORATE LINKAGES
- Role in corporate portfolio
- Reporting
- Integration in global value chain

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