Session: - 2014-2015

Topic:- Various market enter strategies in

Globalization

Submitted to:- submitted by :- Aditya Saraswat

Trilok sir &

Himanshu Verma

Meaning :-• When an organization has made a decision to enter an overseas market, there are a variety of

options open to it.

• These options vary with cost, risk & the degree of control which can be exercised over them.

• One of the most important strategic decisions in international business is the mode of entering the foreign market.

• When an organization has made a decision to enter an overseas market, there are a variety of options open to it.

• These options vary with cost, risk & the degree of control which can be exercised over them.

• One of the most important strategic decisions in international business is the mode of entering the foreign market.

• 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

DEFINATION A market entry strategy is the planned method of

delivering goods or services to a target market and distributing them there. When importing or exporting services, it refers to establishing and managing contracts in a foreign country.’’

BASIC ISSUES

An organization willing to “go international” faces 3 major issues.

• Marketing – which countries, which segments, how to manage, how to enter, with what information.

• Sourcing – whether to obtain products, make or buy.

• Investment & Control – Joint Venture, global partner, acquisition.

MARKET ENTRY STRATAGIES

• EXPORTING

• LICENSING

• FRANCHISING

• JOINT VENTURING

• CONTRACT MANUFACTURING

• MERGERS & ACQUASITIONS

• COUNTER TRADE

• TURNKEY CONTRACTS

• THIRD COUNTRY LOCATION

EXPORTING

• Exporting is the most traditional and well established form of operating in foreign markets.

• Exporting can be defined as the marketing of goods produced in one country into another.

• Whilst no direct manufacturing is required in an overseas country, significant investments in marketing are required.

• The tendency may be not to obtain as much detailed marketing information as compared to manufacturing in marketing country.

• Those firms who are aggressive have clearly defined plans and strategy, including product, price, promotion, distribution and research elements.

• In countries like Tanzania and Zambia, which have embarked on structural adjustment programs, organizations are being encouraged to export, motivated by foreign exchange earnings potential, saturated domestic markets, growth and expansion objectives, and the need to repay debts incurred by the borrowings to finance the programs.

• The type of export response is dependent on how the pressures are perceived by the decision maker.

FRANCHISING

• Players : Franchisor & Franchisee.

• In terms of distribution, the franchisor is a supplier who allows an operator, or a franchisee, to use the supplier's trademark and distribute the supplier's goods.

• In return, the operator pays the supplier a fee.

• Thirty three countries, including the United States, and Australia, have laws that regulate franchising.

• Franchising is the practice of using another firm's successful business model.

• For the franchisor, the franchise is an alternative to building ‘Chain Stores’ to distribute goods that avoids the investments and liability of a chain.

• The franchisor's success depends on the success of the franchisees.

• The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business.

Examples :-

LICENSING

Licensing is defined as "the method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, know-how or some other skill provided by the licensor".

Licensing involves little expense and involvement.

The only cost is signing the agreement and policing its implementation.

It is quite similar to the "franchise" operation.

Coca Cola is an excellent example of licensing.

In Zimbabwe, United Bottlers have the license to make Coke.

JOINT VENTURES

• Joint ventures can be defined as "an enterprise in which two or more investors share ownership and control over property rights and operation."

• It is a very common strategy of entering the foreign market.

• Any form of association which implies collaboration for more than a transitory period is a joint venture.

• A joint venture may be brought about by a foreign investor showing an interest in local company,

• A local firm acquiring an interest in an existing foreign firm or

• By both the foreign and local entrepreneurs jointly forming a new enterprise.

Examples

COUNTER TRADE

• Largest indirect method of exporting is countertrade.

• Competitive intensity means more and more investment in marketing.

• In this situation the organization may expand operations by operating in markets where competition is less intense but currency based exchange is not possible.

• Also, countries may wish to trade in spite of the degree of competition, but currency again is a problem.

• Countertrade can also be used to stimulate home industries or where raw materials are in short supply.

• It can, also, give a basis for reciprocal trade.

• Estimates vary, but countertrade accounts for about 20-30% of world trade, involving some 90 nations and between US $100-150 billion in value.

TURNKEY CONTRACTS

• Turnkey contracts are common in international business in the supply, erection & commissioning of plants, as in the case oil refineries, steel mills, cement & fertilizer plants etc.. Construction projects & franchising agreements.

• A turnkey operation is an agreement by the seller to supply a buyer with a facility fully equipped & ready to be operated by the buyer, who will be trained by the seller.

• The term is used in fast food franchising when a franchiser agrees to select a store site, build he store, equip it, train the franchisee & employee.

• Many turnkey contracts involve government/public sector as buyer.

• A turnkey contractor may subcontract different phases/parts of the project.

CONTRACT MANUFACTURING

• A company doing international marketing contracts with firms in foreign countries to manufacture or assemble the products while retaining the responsibility of marketing the product.

• This is a common practice in international business.

• Many multinationals employ this in India example: Park Davis Hindustan Lever, Ponds.

THIRD COUNTRY LOCATION

• This is sometimes used as an entry strategy.

• When there is no commercial transaction between 2 nations because of political reasons,

• or when direct transactions between 2 nations are difficult &

• if one nation wants to enter other nation,

• then the nation will have to operate from the third country base.

• It may be helpful to take advantage of the friendly trade relations between the third party & the foreign market concerned.

• Sometimes commercial reasons encourage third country location.

• Example: Rank Xerox found it convenient to enter USSR through its Indian joint venture Modi Xerox.

MERGERS & ACQUISITIONS

• This strategy is also known as an expansion strategy.

• M&As have been imp & powerful driver of globalization.

• Between 1980 – 2000 the value of cross border grew at an average annual rate of 40%.

• A large no. of foreign firms have entered India through acquisition.

• Example: Automobiles, Pharmacy, banking, telecom etc.