a r ke t

M
E n t r y
e g i es
St ra t
 INTRO

• When an organization has made a decision to enter an overseas

market, there are a variety of options open to it.

• These options vary with cost, risk & the degree of control which
can be exercised over them.

• One of the most important strategic decisions in international

business is the mode of entering the foreign market.
 ATI O N
DE F I N
• A market entry strategy is the planned
method of delivering goods or services  to
a target market and distributing them
there. When importing or exporting
 services, it refers to establishing and
managing contracts in a foreign country.’’
 U ES
ISS An organization willing to “go international”
SIC faces 3 major issues.
BA
• Marketing – which countries, which
segments, how to manage, how to enter,
with what information.

• Sourcing – whether to obtain products,

make or buy.

• Investment & Control – Joint Venture, global

partner, acquisition.
 MARKET ENTRY STRATAGIES
• EXPORTING • COUNTER TRADE
• LICENSING • TURNKEY CONTRACTS
• FRANCHISING • THIRD COUNTRY LOCATION
• JOINT VENTURING
• CONTRACT MANUFACTURING
• MERGERS & ACQUASITIONS
• FULLY OWNED
MANUFACTURING FACILITIES
 RT I NG
E XP O • Exporting is the most traditional and well established
form of operating in foreign markets.

• Exporting can be defined as the marketing of goods

produced in one country into another.

• Whilst no direct manufacturing is required in an

overseas country, significant investments in
marketing are required.

• The tendency may be not to obtain as much detailed

marketing information as compared to manufacturing
in marketing country.
• Those firms who are aggressive have clearly defined plans and
strategy, including product, price, promotion, distribution and
research elements.

• In countries like Tanzania and Zambia, which have embarked on

structural adjustment programs, organizations are being
encouraged to export, motivated by foreign exchange earnings
potential, saturated domestic markets, growth and expansion
objectives, and the need to repay debts incurred by the borrowings
to finance the programs.

• The type of export response is dependent on how the pressures are

perceived by the decision maker.
 ng
o rti
Ex p
o f
ge s
nta
va The advantages of exporting are :
A d • Manufacturing is home based thus,
it is less risky than overseas based
• Gives an opportunity to "learn"
overseas markets before investing
in bricks and mortar
• Reduces the potential risks of
operating overseas.
 e s
t ag
v n
a ng
s ad rti
Di Expo • The disadvantage is
of mainly that one can be
at the "mercy" of
overseas agents and so
the lack of control has to
be weighed against the
advantages.
 IN G
H I S • Players : Franchisor & Franchisee.

N C • In terms of distribution, the franchisor is a

FR A supplier who allows an operator, or a

franchisee, to use the supplier's trademark
and distribute the supplier's goods.
• In return, the operator pays the supplier a
fee.
• Thirty three countries, including the United
States, and Australia, have laws that
regulate franchising.

• Franchising is the practice of using

another firm's successful business model.
• For the franchisor, the franchise is an alternative
to building ‘Chain Stores’ to distribute goods that
avoids the investments and liability of a chain.

• The franchisor's success depends on the

success of the franchisees.

• The franchisee is said to have a greater incentive

than a direct employee because he or she has a
direct stake in the business.
Examples
 ADVANTAGES
• Freedom of Employment
• Proven products & Services
• Proven Trade Mark
• Reduced Risk of Failure
 IN G
NS • Licensing is defined as
IC E "the method of foreign
L operation whereby a firm in
one country agrees to
permit a company in
another country to use the
manufacturing, processing,
trademark, know-how or
some other skill provided by
the licensor".
• Licensing involves little expense and involvement.
• The only cost is signing the agreement and policing
its implementation.
• It is quite similar to the "franchise" operation.
• Coca Cola is an excellent example of licensing.
• In Zimbabwe, United Bottlers have the license to
make Coke.
 • Good way to start in foreign
o f operations and open the door to
gs
e
ta . low risk manufacturing
va n g relationships
d
A ens in
• Linkage of parent and receiving
Lic partner interests means both get
most out of marketing effort
• Capital not tied up in foreign
operation and
• Options to buy into partner exist
or provision to take royalties in
stock
 of • Limited form of participation - to length of
es
ta g agreement, specific product, process or
n
a in g . trademark.
v
d ns • Potential returns from marketing and
i sa e
D L i c manufacturing may be lost.
• Partner develops know-how and so license is
short.
• Licensees become competitors - overcome
by having cross technology transfer deals
and
• Requires considerable fact finding, planning,
investigation and interpretation.
 ES
UR
N T • Joint ventures can be defined
VE
NT as
J O I
"an enterprise in which two
or more investors share
ownership and control over
property rights and operation."

• It is a very common strategy

of entering the foreign market.
• Any form of association which implies collaboration for
more than a transitory period is a joint venture.

• A joint venture may be brought about by a foreign

investor showing an interest in local company,

• A local firm acquiring an interest in an existing foreign

firm or

• By both the foreign and local entrepreneurs jointly

forming a new enterprise.
 • Sharing of RISK.
ge s • Joint financial strength.
nta
a • May be only means of entry
v
Ad in some countries.

s • Partners do not have full control

ge of management.
nta
va • May be impossible to recover
s a d capital if need be.
Di
• Partners may have different
views on expected benefits.
Examples
 D E
R A
R T • Largest indirect method of exporting
T E is countertrade.
UN
CO • Competitive intensity means more
and more investment in marketing.

• In this situation the organization

may expand operations by operating
in markets where competition is less
intense but currency based
exchange is not possible.
• Also, countries may wish to trade in spite of the degree
of competition, but currency again is a problem.

• Countertrade can also be used to stimulate home

industries or where raw materials are in short supply.

• It can, also, give a basis for reciprocal trade.

• Estimates vary, but countertrade accounts for about 20-

30% of world trade, involving some 90 nations and
between US $100-150 billion in value. 
• ADVANTAGES:
Its main attraction is that it can give a firm a way to
finance export when other means are not available.

• DISADVANTAGES:
o Variety is low so marketing is limited
o Difficult to set prices and service quality
o Inconsistency of delivery and specification,
o Difficult to revert to currency trading - so quality may
decline further and therefore product is harder to market.
 K E Y
N C TS
U R A • Turnkey contracts are common
T T R
O N in international business in the
C
supply, erection &
commissioning of plants, as in
the case oil refineries, steel
mills, cement & fertilizer plants
etc.. Construction projects &
franchising agreements.
• A turnkey operation is an agreement by the seller to supply
a buyer with a facility fully equipped & ready to be
operated by the buyer, who will be trained by the seller.

• The term is used in fast food franchising when a franchiser

agrees to select a store site, build he store, equip it, train
the franchisee & employee.

• Many turnkey contracts involve government/public sector

as buyer.

• A turnkey contractor may subcontract different

phases/parts of the project.
 T I N G
AC UR • A company doing international
T R C T
N A marketing contracts with firms in foreign
CO NUF countries to manufacture or assemble
MA the products while retaining the
responsibility of marketing the product.

• This is a common practice in

international business.

• Many multinationals employ this in India

example: Park Davis Hindustan Lever,
Ponds.
 s • It frees the company from risks
tage of investing in foreign countries.
va n
Ad • It does not have to commit
resource for setting up
production facilities.

• There can be a loss on

ge s manufacturing.
nta
ad va • Less control over manufacturing
Di s process.
• Risk of developing potential
competitors.
 TRY
UN
O
C ON • This is sometimes used as an entry
I D
R ATI
H
T LOC strategy.
• When there is no commercial
transaction between 2 nations
because of political reasons,
• or when direct transactions
between 2 nations are difficult &
• if one nation wants to enter other
nation,
• then the nation will have to operate
from the third country base.
• It may be helpful to take advantage of the friendly
trade relations between the third party & the
foreign market concerned.

• Sometimes commercial reasons encourage third

country location.

• Example: Rank Xerox found it convenient to enter

USSR through its Indian joint venture Modi Xerox.
 &
S NS
E R O
G
R ISI TI • This strategy is also known as an
E
M QU expansion strategy.

AC • M&As have been imp & powerful

driver of globalization.
• Between 1980 – 2000 the value of
cross border grew at an average
annual rate of 40%.
• A large no. of foreign firms have
entered India through acquisition.
• Example: Automobiles, Pharmacy,
banking, telecom etc.
 ge s
nta
va
Ad • Increasing the market
power.
• Acquisition of
Technology.
• Optimum utilization of
Resources.
• Minimization of Risks.
• Tax Benefits
 ge s
nta • Some of the units acquired
a d va would have problems such
Di s
as old plant, obsolete
technology, surplus, or
demoralized labor.

• The firm may not have the

experience & expertise to
manage the unit taken over
if it is an entirely new field.