Market entry strategy
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Market Entry Strategy. Tekle Sebhatu , Ph.D. http://www.stcinternational.us [email protected] Market Entry Strategy Agenda. Market Entry Decision Questions Market Entry Modes Exporting Licensing Joint venture Wholly owned subsidiary (FDI) Reducing partnership risk

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Market Entry Strategy

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Market entry strategy

Market Entry Strategy

TekleSebhatu, Ph.D.

http://www.stcinternational.us

[email protected]


Market entry strategy agenda

Market Entry Strategy Agenda

  • Market Entry Decision Questions

  • Market Entry Modes

    • Exporting

    • Licensing

    • Joint venture

    • Wholly owned subsidiary (FDI)

  • Reducing partnership risk

  • Partner selection

  • Q & A


  • Market entry decisions

    Market Entry Decisions

    • Which markets to enter?

    • When to enter the markets?

    • What scale of entry?

    • Cost of entering markets?


    Which market to enter

    Which Market to Enter?

    • Analyze external environmental factors

      • Economic environment b) Political environment

        c) Socio –cultural environment d) Legal environment

        e)Technological environment

  • Analyze the market size, product acceptability and customer perceptions.

  • Analyze internal environmental factors

    • Productb) Price

      c)Place (distribution)d) Promotion

  • Based on potential markets, profit margin and market share potential analysis focus on no more than 3 countries.


  • Timing of entry

    Timing of Entry?

    • First-mover advantage:

      • Preempt rivals and capture demand.

      • Build sales volume and brand

      • Move down experience curve before rivals and achieve cost advantage.

    • Disadvantages:

      • First mover disadvantage - pioneering costs.

      • Changes in government policy.

    Costs early entrant

    bears that later

    entrant can avoid.


    Scale of entry

    Scale of Entry?

    • Large scale entry

      • Strategic Commitments - a decision that has a long-term impact and is difficult to reverse.

      • May cause rivals to rethink market entry.

    • Small scale entry:

      • No long term commitment.

      • Increase market/experience learning curve.

      • Reduces exposure risk.


    Cost of entering markets

    Cost Of Entering Markets

    • Initial investment –Extra cost

    • Research and development

    • Training

    • Participation at tradeshow/mission


    Entry modes

    Joint

    Ventures

    Exporting

    Licensing

    Turnkey

    Projects

    Wholly Owned

    Subsidiaries

    Franchising

    Entry Modes


    Exporting

    Exporting

    • Advantages:

      • Avoids cost of establishing manufacturing operations.

      • May help achieve experience curve.

    • Disadvantages:

      • May compete with low-cost location manufacturers.

      • Possible high transportation costs.

      • Tariff barriers.

      • Possible lack of control over marketing reps.


    Market entry strategy

    Selection of Channel

    Direct Exporting

    vs.

    Indirect Exporting


    Indirect exporting

    Indirect Exporting

    • Export Management Companies (EMC)

    • Export Trading Companies (ETC)

    • Selling Through Trade Associations

    • Piggyback Marketing

    • Export Merchants or Re-Marketers


    Licensing

    Agreement where

    licensor grants rights to

    intangible property to another

    entity for a specified period

    of time in return

    for royalties.

    Licensing

    • Advantages:

      • Reduces development costs and risks of establishing foreign enterprise.

      • Overcomes restrictive investment barriers.

    • Disadvantages:

      • Lack of control.

      • Creating a competitor.


    Joint ventures

    Joint Ventures

    • Advantages:

      • Benefit from local partner’s knowledge.

      • Shared costs/risks with partner.

      • Reduced political risk.

    • Disadvantages:

      • Risk giving control of technology to partner.

      • Shared ownership can lead to conflict.


    Wholly owned subsidiary

    Wholly Owned Subsidiary

    Greenfield

    Acquisition

    • Advantages:

      • No risk of losing technical competence to a competitor.

      • Tight control of operations.

      • Realize experience and location economies.

    • Disadvantage:

      • Bear full cost and high risk.


    Structuring partnership to reduce opportunism

    Structuring Partnership to Reduce Opportunism

    Walling off

    critical technology

    Establishing

    contractual

    safeguards

    Opportunism by partner

    reduced by:

    Agreeing to swap

    valuable skills

    and technologies

    Seeking credible

    commitments


    Partner selection

    Partner Selection

    • Get as much information as possible on the potential partner

    • Collect data from informed third parties

      • former partners (suppliers)

      • Banks, FF, CHB

      • former employees

    • Get to know the potential partner before committing


    Market entry strategy

    Thank You for participating!

    http://www.stcinternational.us

    [email protected]


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