Today's Topics

Why international expansion? How to select a market International market research Selecting a mode of market entry

Why “Go” International?

Markets Resources Diversification Strategy

Selecting a Market

Out of approximately 200 countries in the world, and thousands of states, regions, territories, or major cities how do we decide where to expand internationally?

http://en.wikipedia.org/wiki/List_of_countries

What Data Might You Need?

Demographics Economics Laws Culture Technology Literacy and education Infrastructure and logistics Rates of change in all of the above

Global Market Research

Secondary data Internet International organizations Government agencies (trade.gov) Industry and trade associations Market research companies

Primary data

Data Challenges

Availability No data Too expensive Access restricted Language barriers

Comparability (cultural differences) Reliability

Biased Missing or wrong information Outdated

Group Activity

Select a product or service Identify three possible good choices of

countries in which to expand with product or service

Identify data needed to finalize choice to one country

(Non-Exclusive) Ways to Enter a Foreign Market

Wholly-owned subsidiary Equity joint venture Strategic alliance

Equity/Cross-ownership Marketing/Sales/Distribution Manufacturing/Production/Design

Licensing, franchising, or contract Exporting

Direct Indirect

Collaboration may occur anywhere on the Value Chain

Challenges of Collaboration

Create a competitor Antitrust Violations Loss of control

Processes or quality Technology

Conflict between partners Culture Relative partner contributions Purpose of the JV

Group Activity

Identify the best type of mode of entry for your product or service

Explain your choice Identify important partner attributes

Degree of Export Involvement

Direct exportingDirect exporting(sell to buyers)(sell to buyers)

Indirect exportingIndirect exporting(sell to intermediaries)(sell to intermediaries)

• Sales representatives

• Distributors

• Sales representatives

• Distributors

• Agents• Export management companies• Export trading companies

• Agents• Export management companies• Export trading companies

Export/Import Financing

Licensing

AdvantagesAdvantages

+ Finance expansionFinance expansion+ Reduce riskReduce risk+ Reduce counterfeitsReduce counterfeits+ Upgrade technologiesUpgrade technologies

– Restrict licensor’s futureRestrict licensor’s future– Reduce global consistencyReduce global consistency– Lend strategic propertyLend strategic property

DisadvantagesDisadvantages

Company owning intangible property (licensor) grantsCompany owning intangible property (licensor) grantsanother firm (licensee) the right to use it for a specified timeanother firm (licensee) the right to use it for a specified time

Franchising

AdvantagesAdvantages+ Low cost and low riskLow cost and low risk+ Rapid expansionRapid expansion+ Local knowledgeLocal knowledge

– CumbersomeCumbersome– Lost flexibilityLost flexibilityDisadvantagesDisadvantages

Company (franchiser) supplies another (franchisee)Company (franchiser) supplies another (franchisee)with intangible property over an extended periodwith intangible property over an extended period

Management Contract

Company supplies another withCompany supplies another withmanagerial expertise for amanagerial expertise for a

specific period of timespecific period of time

AdvantagesAdvantages+ Few assets riskedFew assets risked+ Nations finance projectsNations finance projects+ Develops local workforceDevelops local workforce

DisadvantagesDisadvantages– Personnel at riskPersonnel at risk– Create competitorCreate competitor

Turnkey Project

AdvantagesAdvantages

+ Firms specialize in coreFirms specialize in core competencycompetency

+ Nations obtain infrastructureNations obtain infrastructure projectsprojects

– Politicized processPoliticized process– Create competitorCreate competitor

DisadvantagesDisadvantages

Company designs, constructs, and testsCompany designs, constructs, and testsa production facility for a clienta production facility for a client

Wholly Owned Subsidiary

Facility entirelyFacility entirelyowned and controlledowned and controlled

by a single parent companyby a single parent company

AdvantagesAdvantages

+ Day-to-day controlDay-to-day control+ Coordinate subsidiariesCoordinate subsidiaries

DisadvantagesDisadvantages

– Expensive– High risk

Separate company created and jointly owned by two or more Separate company created and jointly owned by two or more independent entities to achieve a common business objective independent entities to achieve a common business objective

Advantages

• Reduce risk level• Penetrate markets• Access channels• Protect interests

Disadvantages

• Partner conflict• Lose control

Joint Venture

Strategic Alliances

DisadvantagesCreate competitor

Partner conflict

Advantages Share project cost

Tap competitors’ strengths Gain channel access

Protect interests

Entities cooperate (but do not form a separate Entities cooperate (but do not form a separate company) to achieve strategic goals of eachcompany) to achieve strategic goals of each

Levels of Company Strategy