Chapter 3 international expansion strategies
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Chapter 3 International Expansion Strategies. International development phases. Phase 1: Initial market entry Phase 2: Local market expansion Phase 3: Globalization. Choosing which markets to enter. Opportunities and threats are assessed at two different levels:

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Chapter 3 International Expansion Strategies

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Chapter 3 international expansion strategies

Chapter 3International Expansion Strategies


International development phases

International development phases

  • Phase 1: Initial market entry

  • Phase 2: Local market expansion

  • Phase 3: Globalization


Choosing which markets to enter

Choosing which markets to enter

Opportunities and threats are assessed at two different levels:

  • General business climate of a country

  • Specific product market


Country market choice

Country/Market Choice

  • Market information

  • Competitor information

  • Internal information


Market information

Market information

  • Market potential: measure current demand, forecast future growth, new product launches…

  • Market access: “openness”, cost and delays, legal and customs obstacles, marketing infrastructure (distribution channels, ad agencies, etc…)…

  • Market receptiveness: perception of firm, “made in” effect of country of origin…

  • Market stability: economic, legal, political, cultural risks…


Competitor information

Competitor information

  • Who are the competitors?

    • Inventory of competition

    • Direct/indirect

    • Local/global

      How many?

    • Market share?


Internal information

Internal Information

  • Production capacities: product adaptation, quality control, packing, stocking, transport…

  • Marketing and sales situation: current strategy, distribution channels, brand image, quality advantages, relationships…

  • General strategic situation: situation in domestic market, new product development, innovation, competitive advantage…

  • Business goals: short term and long term goals

  • Financial resources: costs of canvassing, capital budgeting orientation, available cash, export subsidies…

  • Human resources: staff and management motivation, availability, training required, expatriates…

    Internal export audit, “diagnostic export”


Criteria for ranking export markets

Criteria for ranking export markets

  • General attractiveness of the market

  • Competitive advantage

  • Risk

  • Global strategic importance

  • Possible synergies

    Market-Portfolio Matrix


Market portfolio matrix

Market-Portfolio Matrix

High

INVEST

Country Attractiveness

SELECTIVITY

DIVEST

Low

Low

High

Internal strengths


Market selection strategies ayal and zif

Market selection strategies (Ayal and Zif)

Choice of target markets is based on two different alternatives:

  • Market penetration (concentration) vs. market skimming (diversification): a limited number of markets or large number of markets

    • Market penetration: rather low expansion rate in a few markets for intensive development. The goal is to obtain high market share in each country before expanding into others.

    • Market skimming: high rate of return while maintaining a low level of resource commitment. The firm selects more easily available market targets while minimizing risk and investment.

  • Segment penetration (concentration) vs. segment skimming (diversification): similar or dissimilar market segments

    • Segment penetration: focus on a small number of segments in which the firms seeks a dominant position

    • Segment skimming: brand and product diversity, specific launches for some markets


Timing of entry

Timing of entry

Simultaneous entry vs. sequential entry

  • Simultaneous entry: preempt competition be establishing presences in all major markets, limit opportunities for imitation, potential scale economies may lead to lower unit costs

  • Sequential entry: build on knowledge and experience, generally preferred if substantial financial, managerial or other resources are required


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