Global Market Entry Strategies

Global Marketing Global Market Entry Strategies

M. Ali Hassan PCIT [email protected]

Global Market Entry Strategies • Operational reasons for setting up overseas manufacture • Strategic reasons for investing in local operations • Methods of overseas production • Exporting options • Joint Ventures and Strategic Alliances [email protected]

Operational reasons for settingup overseas manufacture • reduced costs of transportation • reduced barriers/ quota handicap e.g. Nissan • some governments demand investment with market entry e.g. China • Customers sometimes prefer local manufacture e.g. Heinz ‘British’? • Government contracts prefer firms contributing to the local economy [email protected]

• Improved local market information • local manufacture ensures greater commitment to international markets • Faster response and Just-in-time delivery Doole, Phillips and Lowe (1994)

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Strategic reasons for investing in local operations • Gain new business • demonstrates strong commitment • persuades customers to change suppliers • provides better service and more reliability

• Defend existing business • avoid market restrictions as sales increase, particularly in single market

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• Move with established customer • component suppliers follow customers to compete with local component suppliers

• Save costs • labour, raw materials and transport

• Avoid government restrictions to import certain goods Doole, Phillips and Lowe (1994)

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Exporting • Indirect • export houses • UK buying offices of foreign stores or governments • complementary exporting

• Direct • • • •

sales to final user overseas agencies distributors and stockists company branch offices abroad

• Degree of involvement v control?

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Methods of overseas production • Licensing • Companies with strong brand or know-how • e.g. Coca-Cola, Disney

• Franchising • more of a ‘whole’ package • e.g.Body Shop, KFC

• Contract manufacture • bulk items e.g. Nike • components

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• Joint ventures • e.g. Burmah Castrol in S.Korea

• Wholly owned overseas subsidiaries • Organic growth

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Strategic Alliances • Strategic alliances can range from loose networking relationships to very tight contractual relationships such as joint ventures. • e.g. ‘code share’ where airlines of a similar type sell each other’s tickets. There is no co-ownership. • Types • technology swaps • R&D exchanges • distribution relationships

• Driving forces • • • •

insufficient resources High R&D costs Concentration of firms in mature markets Market access [email protected]

Joint ventures e.g European Airbus. • Orgs can remain separate, but have a tight legal relationship. • Reasons for setting up • overcome foreign ownership restrictions • increase speed of entry • exploit new opportunities, complementary technologies and management skills • achieve worldwide presence at lower cost

• Disadvantages • • • •

differences in partner aims and objectives equal ownership and different options can slow decision making dominance by one partner can lead to resentment in the other Large time commitment for education, negotiation and agreement with partner

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Mergers • The identity of each of the merging companies is subordinated into the identity of the newly merged organisation, or disappears. • Benefits include: – Cutting cost – Eliminate competition – Synergy augments mutual strengths

• Case study – Chrysler and Mercedes.

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