Global Market Entry Strategies

1. Global Market Entry Strategies • Criteria for deciding market entry • Operational reasons for setting up overseas manufacture • Strategic reasons for investing in local operations • Methods of overseas production • Exporting options

2. Criteria for deciding market entry method • The company objectives and expectations relating to the size and value of business • the size and financial resources of the organisation • its existing foreign involvement • the skill, abilities and attitudes of the company management towards international marketing

3. The nature and power of the competition within the market • the nature of existing and anticipated non-tariff barriers • the nature of the product itself, particularly in any areas of competitive advantage, such as trademark of patent protection Phillips, Doole and Lowe (1994)

4. Operational reasons for setting-up overseas manufacture • reduced costs of transportation • reduced barriers/ quota handicap e.g. Nissan • some governments demand investment with market entry e.g. China • Customers sometimes prefer local manufacture e.g. Heinz ‘British’? • Government contracts prefer firms contributing to the local economy

5. Improved local market information • local manufacture ensures greater commitment to international markets • Faster response and Just-in-time delivery Doole, Phillips and Lowe (1994)

6. Strategic reasons for investing in local operations • Gain new business • demonstrates strong commitment • persuades customers to change suppliers • provides better service and more reliability • Defend existing business • avoid market restrictions as sales increase, particularly in single market

7. Move with established customer • component suppliers follow customers to compete with local component suppliers • Save costs • labour, raw materials and transport • Avoid government restrictions to import certain goods Doole, Phillips and Lowe (1994)

8. Exporting • Indirect • export houses • Buying offices of foreign stores or governments • complementary exporting • Direct • sales to final user • overseas agencies • distributors and stockists • company branch offices abroad • Degree of involvement v control?

9. Methods of overseas production • Licensing • Companies with strong brand or know-how • e.g. Coca-Cola, Disney • Franchising • more of a ‘whole’ package • e.g.Body Shop, KFC • Contract manufacture • bulk items e.g. Nike • components

10. Joint ventures - • e.g. Burmah Castrol in S.Korea • Wholly owned overseas subsidiaries • Organic growth

11. Strategic Alliances • Types • technology swaps • R&D exchanges • distribution relationships • marketing relationships • manufacturer-supplier relationships • Cross-licensing • Driving forces • insufficient resources • place of innovation and market diffusion • High R&D costs • Concentration of firms in mature markets • Government co-operation • Self-protection • Market access

12. Joint ventures • Reasons for setting up • overcome foreign ownership restrictions • increase speed of entry • exploit new opportunities, complementary technologies and management skills • achieve worldwide presence at lower cost • Disadvantages • differences in partner aims and objectives • equal ownership and different options can slow decision making • dominance by one partner can lead to resentment in the other • Large time commitment for education, negotiation and agreement with partner