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Use with INTERNATIONAL MARKETING STRATEGY:

Analysis, development and implementation 5TH edition ISBN 13: 978-1-84480-763-5 Published by Cengage Learning DOOLE AND LOWE

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MARKET ENTRY STRATEGIES

Session 7



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MARKET ENTRY METHODS & THE LEVELS OF INVOLVEMENT IN INTERNATIONAL

MARKETS



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SUCCESSFUL MARKET ENTRY #1

• Criteria for Selecting Appropriate Market Entry Method– The company objectives and expectations relating

to the size and value of anticipated business– The size and financial resources of the company– Existing foreign market involvement– The skills, abilities and attitudes of the company

management towards international marketing– The nature and power of the competition with the

market



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SUCCESSFUL MARKET ENTRY #2

• Criteria for Selecting Appropriate Market Entry Method– The nature of existing and anticipated tariff and

non-tariff barriers– The nature of the product itself, particularly any

areas of competitive advantage, such as trademark or patent protection

– The timing of the move in relation to the market and competitive situation



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RISK & CONTROL IN MARKET ENTRY



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INDIRECT EXPORTING #1

• Domestic Purchasing– Foreign organisation purchases the product for export to

another country– Gives access to and limited knowledge of the international

market– Little control over choice of markets entered– For longer term, need a more proactive approach

• Export Management Companies / Export Houses– Specialist companies act as the export department for a

range of companies– Help SMEs to initiate/develop/maintain international sales– Deal with documentation, government regulation



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INDIRECT EXPORTING #2

• Piggybacking– An established international distribution network of

one manufacturer used to carry products of a second

– Particularly good for firms from developing countries

– Often poorly considered terms and conditions• Trading Companies

– Their extensive operations and controls enable operation in more difficult trading areas

– Manage countertrade activities



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THE COMPONENTS OF THE EXPORT MARKETING MIX

EXPORT MARKETING

MIX

Product:Selection, development &

sourcing

Pricing:Policy, strategies, discount structures & trading terms

Promotion:Corporate promotions & local

selling, trade shows & literature

Distribution:Sales force management,

agents, distributors & logistics

Services:Market research, training &

sales servicing

Finance & Administration:Budgets, order processing, insurance & credit

control

Technical:Specifications, testing &

product quality



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IMPORTANT FACTORS FOR SUCCESSFUL EXPORTING

• Commitment of the firm’s management• Exporting approach emphasising the skills base• Good marketing and information

communication system• Production capacity & capability, product

superiority, competitive pricing• Effective market research • Effective national export policySource: Katsikeas et al (1996)



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SELECTION CRITERIA FOR FINDING A SUITABLE AGENT

• Financial strength of the agent

• Their contacts with potential customers

• The nature and extent of their responsibilities to other organisations

• Their premises, equipment and resources (including sales representatives)



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ACHIEVING SATISFACTORY MANUFACTURER-AGENT RELATIONSHIP

• Achieving Satisfactory Manufacturer-agent Relationship– Allocate time and resources to find a suitable

agent– Ensure that both understand what each expects of

the other– Ensure that the agent is motivated to improve

performance– Provide adequate support on a continuing basis– Ensure that there is sufficient advice and

information transfer in both directions



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REASONS FOR SETTING UP OVERSEAS MANUFACTURE

• Product– avoiding problems, e.g.

perishability

• Services– Dependant for success on

local intellectual property, knowledge &sensitivity

• Costs of transporting and warehousing

• Tariff barriers and quotas• Government regulations e.g.

local investment

• Market– Local manufacture viewed

favourably by market?

• Government contacts• Market information feedback• International culture in firm• Local manufacture

– faster response and just-in-time delivery

• Lower labour cost



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MINIMISING THE POTENTIAL PROBLEMS OF LICENSING #1

• Develop a clear policy and plan

• Allocate licensing responsibility to a senior manager

• Select licensees carefully

• Draft the agreement carefully to include duration, royalties, trade secrets, quality control and performance measures

Sarathy et al (2006)



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MINIMISING THE POTENTIAL PROBLEMS OF LICENSING #2

• Supply the critical ingredients

• Obtain equity in the licensee

• Limit the product and territorial coverage

• Retain patents, trademarks, copyrights

• Be an important part of the licensee’s business

Sarathy et al (2006)



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FOREIGN MANUFACTURING STRATEGIES WITH DIRECT INVESTMENT

• Reasons for investment in local operations– To gain new business: local production

demonstrates strong commitment– To defend existing business– To move with an established customer– To save costs: e.g. labour, raw materials

and transport– To avoid government restrictions



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Who provides what in partnerships between firms from developed and developing countries



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DRIVING FORCES FOR THE FORMATION & OPERATION OF STRATEGIC ALLIANCES

• Insufficient resources• Pace of innovation and market diffusion• High research and development costs• Concentration of firms in mature industries• Government co-operation• Self protection• Market access

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Business