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ENTRY STRATEGIES

ENTRY STRATEGIES. Additional research issues Methods of entry Advantages Disadvantages. Competitor Analysis. Strengths and weaknesses Brand recognition/reputation Distribution channels and relationships Knowledge of domestic market Government Protection

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ENTRY STRATEGIES

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  1. ENTRY STRATEGIES • Additional research issues • Methods of entry • Advantages • Disadvantages

  2. Competitor Analysis • Strengths and weaknesses • Brand recognition/reputation • Distribution channels and relationships • Knowledge of domestic market • Government Protection • Weaknesses from experience of protection • Signaling

  3. Country identification Preliminary screening In-Depth Screening Market size Growth rate Competitive intensity Trade barriers Final selection Country Evaluation

  4. Forecasting • Basic—share of overall market • Build-up—share within segments • Analogy to comparable country ahead in the product life cycle • Subjective methods (e.g., jury, export pooling, Delphi) • Time series and regression (require reliable data!)

  5. Competitors and Predicted Market Share • Identification • Foreign vs. domestic • Existing vs. potential • Direct vs. indirect • Likely growth of competitors

  6. The Reality Exportation and Entry EXPORT MANAGEMENT COMPANY HOME COUNTRY OPERATIONS IMPORTS EXPORTS LOCAL PARTNERS LOCAL MANUFACTURING LOCAL MARKETING LOCAL ASSEMBLY LOCAL BUYER HOST COUNTRY CUSTOMERS

  7. Entry Strategies FOREIGN MARKET ENTRY MANUFACTURING AT HOME MANUFACTURING ABROAD INVESTMENT ENTRY CONTRACTUAL OVERSEAS ASSEMBLY/ MIXING EXPORTING ACQUISITION/ SELF-BUILT OTHER DIRECT ENTRY LICENSING/ FRANCHISING CONTRACT MANUF. DIRECT INDIRECT TURNKEY PROJECTS MGT CONTRACTS “PIGGY- BACKING” JOINT VENTURES

  8. Direct Sales to foreign Distributors Retailers End customers Large Small (e.g., through eBay) Indirect Sales to export company which handles sales to foreign buyers or distributors “Piggy-backing” (Complementary Exporting) Two firms exchange exporting services by distributing the other’s product abroad Exporting

  9. Advantages: Limited investment; low risk Disadvantages: Higher unit cost to consumer Likely lower market share Limited learning on country market characteristics Possible preemption by competitors Exporting

  10. Transportation Negotiation Coordination between modes and shippers Export licenses and permissions Customs clearing Warehousing Financing Quotes Point of transfer (FOB) Credit Risk assessment/letters of credit Exchange rate risk Repatriation/ counter-trade Export Tasks

  11. Export Problems • Price escalation • Dumping regulations • Finding local distribution • Screening • Negotiation • After sales support • Imitation by importer/failure to learn local market

  12. Foreign Entry Sequences • Indirect exporting and licensing • Direct exporting via independent distributor • Foreign sales subsidiary • Local assembly • Local manufacturing

  13. Entry Barriers • Cost of entry • Tariff vs. non-tariff • Government regulations • Market structure • Distribution • Established brands

  14. Advantages Low investment Limited direct exposure Lower exit costs Rapid entry Possible reduction in counterfeiting Disadvantages Limited control (contract = enforceability!) Quality Promotion Image Difficulty in terminating relationship Licensing and Franchising

  15. Overseas Turnkey Projects • Firm agrees to set up construction and/or manufacturing project—promised to be in operation form when completed • Helps leverage investment made at home if direct competition in the new market is unlikely • Some risk in being able to “deliver” • Maneuvering local government regulations and local infrastructure

  16. Advantages Faster start Reduced investment in manufacturing Ability to take advantage of established manufacturer’s experience and cost structure (experience curve) Disadvantages “Training” of competitor Still left with marketing responsibilities  need country presence Contract Manufacturing

  17. Management Contracts • Opportunity for firm to profit on its technology and “know-how” in a market where the firm does not want to enter or face competition from contractee • Minimal transfer of assets • Must be able to operate in local infrastructure, but contractee and/or government usually has a strong interest in the success of the project

  18. Advantages Control Learning about country market Leverage (may be disadvantage, though) Disadvantages Large investment; risk Risk of nationalization/ extortion May take longer to be successful Direct Entry--acquisitions or “building from scratch”

  19. Foreign Assembly/Mixing • Motivations • Lower labor local labor costs • Ease of shipping • Local content requirement • Duties/tariffs • Locus of value addition for tax purposes

  20. Strategic Alliances • Distribution • Manufacturing • Research and development • Joint ventures

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