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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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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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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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BMAKT2201 INTERNATIONAL MARKETING 6
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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BMAKT2201 INTERNATIONAL MARKETING 15
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.
BMAKT2201 INTERNATIONAL MARKETING