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After studying this chapter you will be able to understand: The importance of problem defi nition in international research, the problems of availability and use of secondary data, sources of secondary data, quantitative and qualitative research methods, multicultural sampling and its problems in less-developed countries, using international marketing research.
GLOBAL MARKETING MANAGEMENT Seventh Edition MASAAKI KOTABKE | KRISTIAAN HELSEN Chapter PowerPoint Global Market Entry Strategies Chapter Overview Country Selection Scale of Entry Choosing the Mode of Entry Exporting Licensing Franchising Expanding through Joint Ventures and Alliances Wholly Owned Subsidiaries Dynamics of Entry Strategies 10 Timing of Entry 11 Exit Strategies Chapter Copyright © 2017 John Wiley & Sons, Inc Introduction • The need for a solid market entry decision is an integral part of a global market entry strategy • Entry decisions will heavily influence the firm’s other marketing-mix decisions • Global marketers have to make a multitude of decisions regarding the entry mode which may include: – – – – – Chapter (1) country selection (2) the scale of entry (3) the mode of entry (4) The time of entry (5) A marketing-mix plan Copyright © 2017 John Wiley & Sons, Inc Country Selection • A crucial step in developing a global expansion strategy is the selection of potential target markets (Exhibit 9-1) • A four-step procedure for the initial screening process: Select indicators and collect data Determine importance of country indicators Rate the countries in the pool on each indicator Compute overall score for each country Chapter Copyright © 2017 John Wiley & Sons, Inc Exhibit 9-1: Logical Flowchart of the Entry Decision Process Chapter Copyright © 2017 John Wiley & Sons, Inc Scale of Entry • Factors influencing scale of entry – Large-scale entry may induce volume-driven cost advantages – Where location matters, large-scale entry can lead to lock-up of more attractive locations – Existing players less likely to respond aggressively when entrant has made substantial investments – Large-scale entry may deter other prospective players from entering market Chapter Copyright © 2017 John Wiley & Sons, Inc Choosing the Mode of Entry • Decision Criteria for Mode of Entry: – – – – – – Chapter Market Size and Growth Risk Government Regulations Competitive Environment Cultural Distance Local Infrastructure Copyright © 2017 John Wiley & Sons, Inc Exhibit 9-2: Method for Prescreening Market Opportunities: Example Chapter Copyright © 2017 John Wiley & Sons, Inc Exhibit 9-3: Entry Modes and Market Development Chapter Copyright © 2017 John Wiley & Sons, Inc Choosing the Mode of Entry • Classification of Markets: • Platform Countries (Singapore & Hong Kong) • Emerging Countries (Vietnam & the Philippines) • Growth Countries (China & India) • Maturing and established countries (examples: South Korea, Taiwan & Japan) – – – – Chapter Company Objectives Need for Control Internal Resources, Assets and Capabilities Flexibility Copyright © 2017 John Wiley & Sons, Inc 10 Expanding through Joint Ventures and Alliances • Caveats: – Lack of control – Lack of trust – Conflicts arising over matters such as strategies, resource allocation, transfer pricing, ownership of critical assets like technologies and brand names (Exhibit 9-7) Chapter Copyright © 2017 John Wiley & Sons, Inc 19 Exhibit 9-6: Conflicting Objective in Chinese Joint Ventures Chapter Copyright © 2017 John Wiley & Sons, Inc 20 Expanding through Joint Ventures and Alliances • Drivers Behind Successful International Joint Ventures – – – – – – Pick the right partner Establish clear objectives from the beginning Bridge cultural gaps Gain top managerial commitment and respect Use incremental approach Create a launch team during the launch phase: (1) Build and maintain strategic alignment (2) Create a governance system (3) Manage the economic interdependencies Copyright © 2017 John Wiley & Sons, Chapter (4) Build the organization for the joint venture Inc 21 Exhibit 9-7: Starbucks Coffee’s Criteria in Selecting Partners Chapter Copyright © 2017 John Wiley & Sons, Inc 22 Wholly Owned Subsidiaries • Acquisitions and Mergers – Quick access to the local market – Good way to get access to the local brands • Greenfield Operations – Offer the company more flexibility than acquisitions in the areas of human resources, suppliers, logistics, plant layout, and manufacturing technology Chapter Copyright © 2017 John Wiley & Sons, Inc 23 Wholly Owned Subsidiaries – Benefits: • Greater control and higher profits • Strong commitment to the local market on the part of companies • Allows the investor to manage and control marketing, production, and sourcing decisions Chapter Copyright © 2017 John Wiley & Sons, Inc 24 Wholly Owned Subsidiaries – Caveats: • Risks of full ownership • Developing a foreign presence without the support of a third party • Risk of nationalization • Issues of cultural and economic sovereignty of the host country • Can be blocked by antitrust rulings Chapter Copyright © 2017 John Wiley & Sons, Inc 25 Dynamics of Entry Strategies • Over time, the drivers influencing a firm’s entry strategy will evolve – Host government may loosen ownership restrictions – Firms often move toward greater control Factors influencing entry-mode adaptation – Increase of local-market knowledge by foreign partner – Lower level of perceived external risks – Smaller cultural distance tween foreign and domestic firms – Lower perceived complexity of governmental Copyright © 2017 John Wiley & Sons, Chapter regulation 26 Inc Exhibit 9-8: Recent Chinese Overseas Deals Chapter Copyright © 2017 John Wiley & Sons, Inc 27 10 Timing of Entry • International market entry decisions should also cover the following timing-of-entry issues: – When should the firm enter a foreign market? – Other important factors include: level of international experience, firm size, and breadth of product & service offerings – Mode of entry issues, market knowledge, various economic attractiveness variables, etc Chapter Copyright © 2017 John Wiley & Sons, Inc 28 Exhibit 9-9: Advantages and Disadvantages of Different Modes of Entry Chapter Copyright © 2017 John Wiley & Sons, Inc 29 Exhibit 9-10: Timeline of Wal-Mart’s International Expansion Chapter Copyright © 2017 John Wiley & Sons, Inc 30 11 Exit Strategies • Reasons for Exit: – – – – – – – Chapter Sustained losses Difficulty in cracking the market Volatility Premature entry Ethical reasons Intense competition Resource reallocation Copyright © 2017 John Wiley & Sons, Inc 31 11 Exit Strategies • Risks of Exit: – – – – – Fixed costs of exit Damage to corporate image Disposition of assets Signal to other markets Long-term opportunities • Guidelines: – Contemplate and assess all options to salvage the foreign business – Incremental exit – Migrate customers Chapter Copyright © 2017 John Wiley & Sons, Inc 32 Exhibit 9-11: Timeline International Expansion of Starbucks Coffee Chapter Copyright © 2017 John Wiley & Sons, Inc 33 ... variables, etc Chapter Copyright © 2017 John Wiley & Sons, Inc 28 Exhibit 9- 9: Advantages and Disadvantages of Different Modes of Entry Chapter Copyright © 2017 John Wiley & Sons, Inc 29 Exhibit 9- 10:... technologies and brand names (Exhibit 9- 7) Chapter Copyright © 2017 John Wiley & Sons, Inc 19 Exhibit 9- 6: Conflicting Objective in Chinese Joint Ventures Chapter Copyright © 2017 John Wiley &... – – – Chapter Company Objectives Need for Control Internal Resources, Assets and Capabilities Flexibility Copyright © 2017 John Wiley & Sons, Inc 10 Exhibit 9- 4: Top 20 Global Franchises Chapter