2013-02 Bbm2143 Notes 1370335635 Chap 7 Market Entry Strategies

7/28/2019 2013-02 Bbm2143 Notes 1370335635 Chap 7 Market Entry Strategies

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Noraizan Abdul RashidFaculty of Business Management & Globalization

Tel : 603 8317 8833 (Ext 8125)Email: [email protected]

BMAKT2201 INTERNATIONAL MARKETING

CHAPTER 7MARKET ENTRY STRATEGIES

Christopher JohnLimkokwing University of creative technology


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BMAKT2201 INTERNATIONAL MARKETING 2

MARKET ENTRY

Mode of entry determines involvement of a company with thenew market.

For SMEs it is considered as a crucial first step to choose howinvolved they should be with new market

Each entry mode has its own set of controls over the market, inresources, marketing and sales and customer relationships.


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ch7/3

MARKET ENTRY METHODS & THELEVELS OF INVOLVEMENT ININTERNATIONAL MARKETS

Wholly-owned subsidiary

Company acquisition

Assembly operations

Joint venture

Strategic allianceLicensing

Contract manufacture

Direct marketing

Franchising

Distributors and agents

Sales force

Trading companies

Export management companies

Piggyback operations

Domestic purchasing

Levels

of

involvement



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ch7/4

SUCCESSFUL MARKET ENTRY #1

Criteria for Selecting Appropriate Market EntryMethod

The company objectives and expectations relating tothe size and value of anticipated business

The size and financial resources of the company

Existing foreign market involvement

The skills, abilities and attitudes of the companymanagement towards international marketing

The nature and power of the competition with themarket



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SUCCESSFUL MARKET ENTRY #2

Criteria for Selecting Appropriate MarketEntry Method

The nature of existing and anticipated tariffand non-tariff barriers

The nature of the product itself, particularlyany areas of competitive advantage, such as

trademark or patent protection The timing of the move in relation to the

market and competitive situation



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Discuss the situation

Asian companies to a far greater extent than western companies, tend toenter new and emerging market.

The rationale is the first mover advantage.

There are several difficulties in entering a new market for the first time whichthey prefer to experience those.

This is again happening for countries such as Vietnam and Cambodia whichAsian companies are attracted to with huge investments

Q1. What are the difficulties a first mover in a new market faces?

Q2. What are the advantages to be first mover in a country?


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ENTRY MODE ASSESSMENT

Indirect exporting

Direct exporting

Licensing

Franchising

Strategic Alliances

Joint Ventures

Acquisition

Wholly owned subsidiary

OVERSEAS PRODUCTIONEXPORTING

High

Low

Low High

INVOLVEMENT

CONTROL


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RISK & CONTROL IN MARKET ENTRY

Indirect ExportingPiggybacking

Trading companies

Export management companies

Domestic purchasing

Co-operation

StrategiesJoint ventures

Strategic alliances

Direct ExportingDistributors

Agents

Direct marketing

Franchising

Management contracts

ManufacturingOwn subsidiary

Acquisition

Assembly

Control

Risk



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INDIRECT EXPORTING #1

Domestic Purchasing Foreign organisation purchases the product for export to another country

Gives access to and limited knowledge of the international market

Little control over choice of markets entered

For longer term, need a more proactive approach

Export Management Companies (EMCs) Specialist companies act as the export department for a range of companies

Help SMEs to initiate/develop/maintain international sales

Deal with documentation, government regulation



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INDIRECT EXPORTING #2

Trading Houses Their extensive operations and controls enable operation in more

difficult trading areas

Manage countertrade activities

Piggy Backing An established international distribution network of one manufacturerused to carry products of a second

Particularly good for firms from developing countries

Often poorly considered terms and conditions



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Direct Export and Marketing MIX

EXPORT

MARKETING

MIX

Product:Selection, development &

sourcing

Pricing:Policy, strategies, discount

structures & trading terms

Promotion:Corporate promotions & local selling,

trade shows & literature

Distribution:Sales force management, agents,

distributors & logistics

Services:Market research, training & sales

servicing

F inance & Administration:

Budgets, order processing, insurance & credit

control

Technical:Specifications, testing &

product quality



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IMPORTANT FACTORS FORSUCCESSFUL EXPORTING

Commitment of the firms management

Exporting approach reliant on strong skills base

Good marketing and information communication system

production capacity & capability, product superiority, competitive pricing Effective market research

Effective national export policy

Source: Katsikeas et al (1996)



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INITIATION AND DEVELOPMENTOF EXPORT PRODUCT POTFOLIOS



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SELECTION CRITERIA FORFINDING A SUITABLE AGENT

Financial strength of the agent

Their contacts with potential customers

The nature and extent of their responsibilities toother organisations

Their premises, equipment and resources(including sales representatives)



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How to find a Good agent?

Asking Potential customers to suggest one

Recommendation from institutions such as tradeassociations

Using commercial agencies

Using agents of non-competing products

Poaching a competitors agent


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ACHIEVING SATISFACTORYMANUFACTURER-AGENTRELATIONSHIP

Achieving Satisfactory Manufacturer-agentRelationship

Allocate time and resources to find a suitable agent Ensure that both understand what each expects of theother

Ensure that the agent is motivated to improveperformance

Provide adequate support on a continuing basis

Ensure that there is sufficient advice and informationtransfer in both directions



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REASONS FOR SETTING UPOVERSEAS MANUFACTURE

Product avoiding problems, e.g. perishability

Costs of transporting and warehousing

Tariff barriers and quotas

Government regulations e.g. local investment Local manufacture viewed favourably by market

Government contacts

Market information feedback

International culture in firm Local manufacture - faster response and just-in-time delivery

Lower labour cost



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MINIMISING THE POTENTIALPROBLEMS OF LICENSING #1

Allocate licensing responsibility to a seniormanager

Select licensees carefully Draft the agreement carefully to include

duration, royalties, trade secrets, quality controland performance measures

Develop a clear policy and plan



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MINIMISING THE POTENTIALPROBLEMS OF LICENSING #2

Supply the critical ingredients

Obtain equity in the licensee

Limit the product and territorial coverage

Retain patents, trademarks, copyrights

Be an important part of the licensees business



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FOREIGN MANUFACTURINGSTRATEGIES WITH DIRECTINVESTMENT

Reasons for investment in local operations To gain new business: local production

demonstrates strong commitment To defend existing business

To move with an established customer

To save costs: e.g. labour, raw materials andtransport

To avoid government restrictions



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WHO PROVIDES WHAT INEAST-WEST PARTNERSHIPS



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DRIVING FORCES FOR THEFORMATION & OPERATION OFSTRATEGIC ALLIANCES

Insufficient resources

Pace of innovation and market diffusion

High research and development costs

Concentration of firms in mature industries

Government co-operation

Self protection Market access



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References

These slides are taken from Doole and Lowe.International Marketing Strategy, 5th ed.


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2013-02 Bbm2143 Notes 1370335635 Chap 7 Market Entry Strategies

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