Global Marketing-9

Entry strategies

Basic entry decisions

i) Which markets? There are more than 200 nation states in the world. All do not hold the same profit potential The market/profit potential is based on many factors Choice of markets to enter must be based on the nations long-run profit potential

 ii) When to enter? First mover advantages: preempt rivals and establish brand; go further down the experience curve; create switching costs for customers to change There are also first mover disadvantages-High costs (pioneering) Late entrants may benefit from observing, learning and avoiding mistakes made by first movers

Scale of entry
Entering a market on a large scale involves the commitment of significant resources Not all firms have the necessary resources Even some firms that do, prefer to enter in a small way and then increase resource commitments as the market build up.

Entry modes
Exporting- avoids substantial costs of establishing manufacturing operations Exporting may help a firm build up experience of the market Buttransport costs could be high Tarriff barriers may make exporting uneconomical/ infeasible

Licensing
An arrangement where a licensor grants the rights to intangible property to another entity (licensee) for a specified period in return for royalty payments Advantage is that a firm can grow internationally with little capital infusion. Most of the capital is put up by the licensee Disadvantage is loss of control on operations; limits the ability of the firm to craft a global strategy

Franchising
A specialized form of licensing The franchisee agrees to conduct the business strictly in accordance with the terms of the franchisor. Advantages-the firm is relieved of many of the costs and risks of entering a foreign market on its own Disadvantages-Loss of control, brand dilution, hinders strategic implementation

Joint ventures
Establishing a firm that is jointly owned by two otherwise independent firms eg: Modi Xerox Can be 50/50 or where one party has majority control A firm benefits from the local partners market knowledge. Local partner has skin in the game unlike licensing or franchising Costs and risks are shared In many countries, legal and political regulations make JVs the only feasible mode of entry

Joint ventures
Key disadvantages- Conflicts / disputes over control can get very bitter leading to dissolution eg: Tata-IBM; P&G Godrej Firms risks giving away control of its IPR

W.O.S.
Wholly Owned Subsidiary Gives a firm complete control over operations and quality No risk of loss of IPR/technology Butvery expensive.WOS is the most expensive mode of entry. Also need to consolodate in the accounting statements

Strategic Alliances
Short term contractual/ collaborative agreements Can be between firms in different countries
Allow a firm to share fixed costs and some risk A good way to synergise complementary skills and assets Quick start-up But.alliances have risks A firm may give away more than it receives Failure rate for international alliances is high

Success factors
Partner selection Alliance structure Alliance management-relational capital