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IMH – 11.02 - Explain the International Market-Entry
Strategies
Goals Explain “environment-strategy fit”
for international market Describe different international
entry strategies.
ENVIRONMENT-STRATEGY FITThere must be a fit between environmental
conditions and business strategies. Hence it is important to understand the types of environment for a business when it goes into international markets.
placid environment an environment with very little change Easy to develop strategic plans for long term Not very common
turbulent environment rapid and unpredictable environmental change Businesses must develop strategic plans for
shorter time periods More common
ENVIRONMENT-STRATEGY FIT (continued)
macroenvironment the environmental factors that
influence the economy, governments, legal environment, technology, ecology, social cultural factors, and competition
http://www.youtube.com/watch?v=5xwyGVr51Dw
environmental shocks rapid changes to the
macroenvironment Ex: The terrorist attacks Sept 2001, or
the fall of communism in the 1990s.
Environmental Planning
Most international companies operate in a turbulent environment.
It is difficult to plan for every macroenvironmental change. When a company sees an increase chance
of threat, they should be pro-active. E.g., adjusting inventory levels of a
recession is anticipated Governments can help ensure stability
by strengthening their resource base and their relationships with other countries.
Environmental Planning (examples)Asian Bird Flu http://live.wsj.com/video/bird-flu-variant-pandemic-potential/FCCF8D56-CE49-4373-9DD1-
760F4844E6CE.html#!FCCF8D56-CE49-4373-9DD1-760F4844E6CE
Businesses pulled employees out of infected countries
Increased inventory levels in case foreign producers could not send products
U.S. shortage of qualified employees for manufacturing jobsFederal funds to NSF for create research
centersGoal to graduate 100,000 new scientists and
engineers during next four years
IMH – 11.02 - Activity: Recent environmental Shocks
Visit a reliable source of world information likehttp://www.time.com/time/ - (time magazine)Or similar to research some current events/developments/environmental changes in the world Identify at least three factors that could result in environmental shocks and why? Briefly specify the type of business planning that would be needed to minimize the effect of these shocks.
INTERNATIONAL ENTRY STRATEGIES For the least environmental
turbulences impacting a business it is important to adopt the right market entry strategies
The strategies for international entry include options such as:
Exporting Contracting Joint venture Direct investments.
INTERNATIONAL ENTRY STRATEGIES
• Exporting: Creating a market for a business’s products in the importing country to provide additional profits for the business as it expands internationally. • Simplest and least risky means of entry Example: US exporting commercial and
small jet air crafts to many countries of the world.
Exporting represents the lowest level of international commitment and risk as the business can pull out of the market relatively easily.
INTERNATIONAL ENTRY STRATEGIES
• Contracting: contractual agreements enable a business to work with local partners in a foreign market. • It is a higher level of commitment as it
involves contractual agreements, manufacturing, licensing, franchising etc.
• Ex: Nike entering into a manufacturing contract with local Chinese manufacturing firms.
INTERNATIONAL ENTRY STRATEGIES
Joint venture: two or more businesses create a new business to pursue a strategic goal. Partners agree to share ownership, capital,
and revenue Ex. Fox broadcasting company's star TV
joint ventures with Chinese company Quinghai Satellite.
It brings in local partners but involves higher risk because businesses commit resources.
INTERNATIONAL ENTRY STRATEGIES Direct investments: two types:
Foreign direct investment-the purchase of assets in a foreign country by a business
Ex: The purchase of land in Kentucky by Japan for its Toyota manufacturing plant
Wholly-owned subsidiary-an independent company owned by a parent company Ex: Parle products of India owned by
Coca Cola
IMH 11.02 Activity Followed by a discussion with a partner,
make a foldable listing advantages & disadvantages of each of the foreign market entry strategies.
Which strategy do you believe would be the best for the following products…why…explain
Anderson windows Lays Potato chips Schwinn bikes Press Pass Trading cards