market entry strate
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Global Market-Entry Strategies
1
Submitted By:Binny Grover(15)Ritika Choudhury(39)Sachin Kumar(41)Varun Kaw(56)Vivek Kumar(58)
1. Target Market Selection2. Choosing the Mode of Entry3. Exporting4. Licensing5. Franchising6. Contract Manufacturing7. Joint Ventures8. Wholly Owned Subsidiaries9.
Strategic Alliances10. Timing of Entry11. Exit Strategies
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: (1) the target product/market (2) the goals of the target markets (3) the mode of entry (4) The time of entry (5) A marketing-mix plan (6) A control system to check the
performance in the entered markets
• A crucial step in developing a global expansion strategy is the selection of potential target markets
• A four-step procedure for the initial screening process:
1. Select indicators and collect data2. Determine importance of country indicators3. Rate the countries in the pool on each
indicator4. Compute overall score for each country
Decision Criteria for Mode of Entry: Market Size and Growth Risk Government Regulations Competitive Environment Local Infrastructure▪ 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)
Company Objectives Need for Control Internal Resources, Assets and
Capabilities Flexibility
Mode of Entry Choice: A Transaction Cost Explanation Regarding entry modes, companies
normally face a tradeoff between the benefits of increased control and the costs of resource commitment and risk.
Transaction Cost Analysis (TCA) perspective Transaction-Specific Assets (assets valuable
for a very narrow range of applications)
Indirect Exporting Export management
companies Cooperative Exporting
Piggyback Exporting Direct Exporting
Firms set up their own exporting departments
Licensor and the licensee Benefits:
Appealing to small companies that lack resources
Faster access to the market Rapid penetration of the global markets
Caveats: Other entry mode choices may be affected Licensee may not be committed Lack of enthusiasm on the part of a
licensee
Biggest danger is the risk of opportunism Licensee may become a future competitor
How to seek a good licensing agreement: Seek patent or trademark protection Thorough profitability analysis Careful selection of prospective licensees Contract parameter (technology package,
use conditions, compensation, and provisions for the settlement of disputes)
Franchisor and the franchisee Master franchising Benefits:
Overseas expansion with a minimum investment
Franchisees’ profits tied to their efforts Availability of local franchisees’
knowledge Caveats:
Revenues may not be adequate Availability of a master franchisee
Limited franchising opportunities overseas
Lack of control over the franchisees’ operations
Problem in performance standards Cultural problems Physical proximity
• Benefits:– Labor cost advantages– Savings via taxation, lower energy costs,
raw materials, and overheads– Lower political and economic risk– Quicker access to markets
• Caveats:– Contract manufacturer may become a
future competitor– Lower productivity standards
Backlash from the company’s home-market employees regarding HR and labor issues
Issues of quality and production standardsQualities of an ideal subcontractor: Flexible/geared toward just-in-time delivery Able to meet quality standards Solid financial footings Able to integrate with company’s business Must have contingency plans
• Cooperative joint venture• Equity joint venture• Benefits:– Higher rate of return and more control
over the operations– Creation of synergy– Sharing of resources– Access to distribution network– Contact with local suppliers and
government officials
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
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
• Acquisitions• Greenfield Operations• 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
• Caveats:– Risks of full ownership
Developing a foreign presence without the support of a third part
Risk of nationalization Issues of cultural and economic
sovereignty of the host country 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.
Types of Strategic Alliances Simple licensing agreements between
two partners Market-based alliances
Operations and logistics alliances Operations-based alliances
The Logic Behind Strategic Alliances Defend Catch-Up Remain Restructure
Cross-Border Alliances that Succeed: Alliances between strong and weak
partners
seldom work. Autonomy and flexibility Equal ownership Other factors: ▪ Commitment and support of the top of
the partners’ organizations▪ Strong alliance managers are the key
▪ Alliances between partners that are related in terms of products, technologies, and markets▪ Similar cultures, assets sizes and
venturing experience▪ A shared vision on goals and mutual
benefits
– When should the firm enter a foreign market?
– Other important factors include: level of international experience, firm size
– Mode of entry issues, market knowledge, various economic attractiveness variables, etc.
Reasons for exit: Sustained losses Volatility Premature entry Ethical reasons Intense competition Resource reallocation
Risks of exit: Fixed costs of exit 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 9 Kotabe & Helsen's Global Marketing Management, Third Edition, 2004 27
Chotukool consumes half the power consumed by regular refrigerators and uses high-end insulation to stay cool for hours without power
It keeps food stuffs 20 degree Celsius below ambient temperature
It is an engineering excellence – only 20 parts, as opposed to more than 200 parts in a normal refrigerator and hence less maintenance
It works on inverter or battery
The unit is highly portable, with 43 liters of volume inside a fully plastic body weighing less than 10 pounds.
SpecificationInternal capacity:43 litresWeight:8.9 kgsDimension:59.8 cm x 41.8 cm x 55.9 cmPower source:230V 50 Hz AC Current:0.3 amperesWattage:62 WPrice - Rs 3,250/
People needed an affordable way to keep milk, vegetables and leftovers cool for a day or two—both at home or away.
This job is urgent in a country where a third of all food is lost to spoilage, according to the United Nations Commission on Sustainable Development.
Cooling solution for Mass market and Retailers in Rural Areas.
Areas which have shortage of electricity
Fiscal Year 2010-11: Rs. 58 billion (US$ 1.2 billion) Combined Sales of the Company and its major subsidiaries and affiliates, for FY 2010-11: Rs.
150 billion (US$ 3 billion) The Company has a network of Company-operated GODREJ INTERIO Retail Stores, more than
2,200 Wholesale Dealers, and more than 18,000 Retail Outlets. The Company has Representative Offices in Colombo (Sri Lanka), The Netherlands, Sharjah
(UAE), Riyadh (Saudi Arabia) and Guangzhou (China-PRC).50 billion (US$ 3 billion) EMPLOYEES - 11,000 (including 2,000 in Sales and Service)
Parameters Verdict
Financial strength High
Risk taking ability High
Market knowledge High
Commitment High
The markets considered were the emerging markets in Latin America, Africa and Asia
Some very broad market characteristics favoring selection were: High percentage of rural population, large number of small/medium retail stores, inherent desire for cost efficient refrigeration, power shortage issues
The strategy for expansion: Proactive formal process, following and expansive strategy (expanding to similar markets first)
Parameter Brazil Argentina Nigeria Egypt Bangladesh
Geography Favorable
Political and legal environment
Favorable Favorable
Economy Favorable Favorable Favorable Favorable
Demography Favorable Favorable Favorable Favorable
Infrastructure Neutral Neutral Neutral Neutral Neutral
Social and cultural factors
Favorable
Competition Favorable Favorable Favorable Favorable Favorable
Demand Favorable Favorable Favorable Favorable Favorable
Population: 158,570,535 (9th)
Population density: 964.42/sq km (9th )
GDP per capita: $1,572
Government: Parliamentary democracy
Official language: Bengali
Rural population: approx 70%
Listed among “next 11 economies” basedon macroeconomic stability, political maturity,openness of trade and investment opportunityand quality of education
Parameter Status Verdict
Geography Close proximity to home market, low export costs
Favorable
Political and legal environment
Parliamentary democracy, robust legal framework
Favorable
Economy Rapidly developing market based economy
Favorable
Demography 55% working age population
Favorable
Infrastructure Transport facilities poor, shortage of power (LT 60%)
Neutral
Social and cultural factors
Very similar to home market
Favorable
Competition Innovative ,“one of a kind” product, with low or no competition
Favorable
Demand Can be expected to be very high
Favorable
Parameters Value/Remarks
No of Rural households 1.95 Cr
Average refrigerator penetration
2%
Potential sales 7% of 1.95 Cr = 13.6lakhs
No of FMCG retailers 5.7 lakhs (5.1 per 1000 people)
Country Restrictions Good bilateral relations
Import duties 22%
Export market identified : Bangladesh
More control over the channel vs. Exports
Requirement of last mile deep penetration
Large future potential of the market
Low technology product
Non conflicting/Complementary licensee available
Problems Future competition Conflicts over margins with the Licensee Retail Price control
Two-pronged strategy to reach different customer segments
Channel Description
Rural Retailers Large beverage company like Coca cola, Pepsi
And /OrBangladesh Dairy Cooperativewhich are our customers
Tie up with beverage company so that chotukool complements their product.
Cobranded product
Rural Households W and W grains (Cargill) Cargill warehouse which stocks the product -> supplies to the distributors ->
Agricultural RetailersSHGs
Price out of factory= 3250*0.9*0.95 = INR 2705
Logistics Cost = INR 100 (From Pune to Cargill warehouse in Bangladesh ) 100 units in 1 ton truck Distance 2300Km (Pune to Dhaka ) INR 5 per km INR 10,000 per trip for 100 units = INR 100 (Max.)
Customs -22%
Price to Cargill – INR 3420
Price to Coke/ BDC – INR 2740 ( 20% discount)
The media classes chosen will have the objective of attaining maximum reach and also act as frequency builders
The company will have a substantial role to play in the media planning and will have to make an initial investment into promotional activities
The advertisements will be aired on local radio channels and print ads will be published in regional language newspapers
Promotion will be done in the form of wall paintings, mobile vans, demo stalls at melas and “haats”, large hoardings and hoardings on busses and trucks
Co branding is to be done with Coca cola/ Pepsi/ BDC in FMCG retail outlets
Below the line promotion will be taken up by Cargill
Thank You!
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