Alexander Consulting Enterprise 12/14/2015 Opportunity Identification and Country Selection

Alexander Consulting EnterpriseAlexander Consulting Enterprise 04/22/2304/22/23

Opportunity Identification and Country Selection


Foreign Market Entry

Firm SpecificCharacteristics

Country Selection

Mode of EntryProductSelection

Objectives of Market Entry

Strategy andTime of Entry


Firm Specific Characteristics Provide the Lens to Assess the Foreign Market Entry Decision. Product Selection, Country Selection, Mode of Entry, Strategy, and Timing All Depend on Firm Specific Characteristics. To Define the Firm Specific Characteristics a Situation Analysis is Required!

1. Firm Specific Characteristics


2. Objectives of Market Entry

2.1 Production Focused- Cost Advantages Economies of Scale Global Sourcing

Labor Cost Cost to Protect

Environment Taxes

-Knowledge Transfer-Potential for Innovation-Access to Skilled Labor


2. Objectives of Market Entry (Cont.)

Demandconditions

Firm strategy, structure and rivalry

Related and supporting industries

Factorconditions

Porter’s Diamond



“Companies gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home based suppliers, and demanding local customers”

Michael Porter

Innovation and Competition


“Without Coke, Pepsi would have a tough time being an original and lively competitor…..And on the other side of the fence, I’m sure the folks at Coke would say that nothing contributes as much to the present day success of the Coca-Cola Company than…Pepsi”

Roger EnricoEx-CEO of Pepsi Cola


Clusters are geographic concentrations of interconnectedcompanies and institutions in a particular field.

- Clusters increase competition and cooperation- Clusters increase communication between companies and employees. Clusters decrease transaction cost by establishing trust.- Clusters increase productivity. Clusters offer access to skilled labor, local suppliers, and public institutions- Clusters offer a high potential for innovation. Companies in clusters are close to competition, customers, and public institutions. Employees might feel peer pressure.


Innovation and Economic Clusters



Innovation and Economic Clusters

Strategic Implications:Choosing location not only based on input cost. Consideration of Potential for Innovation is a critical factor for long term success.


2.2 Market Focused-Capturing new Markets- Diversification- Brand name Leverage- Economies of Scope - Access to Know How and Qualified Employees

2.3. Competition Focused- First Mover Advantage- Preemptive Strike- Learning in Leading Markets - First - Mover (Dis)Advantage



“If you are going to be the world’s best furnishing company, you have to show you can succeed in America, because there is so much to learn here.”

Goran CarstedtHead of Marketing IKEA


RegulatoryFactors

Strategic Factors

Cost / Factors

Demand Factors

Sociopolitical Factors

Fit with Company

3. Country Selection


3. Country Selection

1. Region Identification

Potential candidates are identified using easily available statistical data.

2. Preliminary Screening

Involves rating the identified countries on macro level indicators, such as political stability, geographic distance and economicc development.

3. In-depth Screening Analyzes data specific to the industry and product markets and segments. Analyses of Market Attractiveness

4. Final Selection Company objectives are brought to bear for a match.


Size Growth Competition Trade Barriers Analysis of Political Risk Currency Infrastructure Capital Requirements Production Cost Taxes

Analysis of Market Attractiveness

3. Country Selection (cont.)

Economic Freedom Indexhttp://www.heritage.org/Index/Ranking.aspx

Market Potential Indexhttp://globaledge.msu.edu/resourcedesk/mpi/


General Data Resources

o Michigan State CIBER international business information repository:o http://globaledge.msu.edu/

o U.S. Commercial Service - Export assistance arm of the Department of Commerceo http://export.gov/

o Available through UNLV Library Electronic Collections o Global Market Information Database


4. Mode of Entry

Exporting

Licensing

Strategic Alliance

Joint Venture

M&A

Direct Investment


4. Mode of Entry (Cont.)

Considerations affecting mode of entry

Local Factors• Legal requirements• Cultural distance vs. relevant MNE

experience• Customers

• Human resources

• Distribution chain/supply chain

• Political risk/value of connections




Nature of the Product• Importance of control of brand, product leakquality, etc.• Importance of technical knowledge

vs. relevant local expertise• Danger of leakage of critical technology




Strategic considerations• Risk tolerance vs. relative size of project• Importance of learning from the market• Important to demonstrate commitment?


5. Strategy and Time of Entry

- Domestic Market Extension

- Multinational

- Global

-Market Concentration versus Market Spreading


Market Spreading versus Market Concentration:

Market Concentration High Penetration High Control Knowledge of Market Conditions Economies of Scale Economies of Information Steep Learning Curve

Market Spreading Low Penetration Low Control Little Effort in Single Markets Target Market Does not Reflect National Borders Diversification

5. Strategy and Time of Entry (Cont.)


International ExperienceDomestic Operations Only

Operating Profit

Risk

Profit and Risk in International Markets

5. Strategy and Time of Entry (Cont.)

Documents

Alexander Consulting Enterprise 12/14/2015 Opportunity Identification and Country Selection