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 3International 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:

  • General business climate of a country

  • Specific product market


Country/Market Choice

  • Market information

  • Competitor information

  • Internal 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

  • Who are the competitors?

    • Inventory of competition

    • Direct/indirect

    • Local/global

      How many?

    • Market share?


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

  • General attractiveness of the market

  • Competitive advantage

  • Risk

  • Global strategic importance

  • Possible synergies

    Market-Portfolio Matrix


Market-Portfolio Matrix

High

INVEST

Country Attractiveness

SELECTIVITY

DIVEST

Low

Low

High

Internal strengths


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

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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