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Chapter 7 Entry and Competing In Foreign Markets. The foreign markets entry decision-making. COUNTRY OPPORTUNITIES. 1. COUNTRY RISK ANALYSIS. Analysis (Assessing Country Attractiveness). 2. External Internal. COMPETITIVE ANALYSIS. 3. 4. ENTRY MODE. Implementation. 5.

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Presentation Transcript
slide1

Chapter 7

Entry and Competing

In Foreign Markets

slide2

The foreign markets entry decision-making

COUNTRY OPPORTUNITIES

1

COUNTRY RISK ANALYSIS

Analysis

(Assessing Country

Attractiveness)

2

  • External
  • Internal

COMPETITIVE ANALYSIS

3

4

ENTRY MODE

Implementation

5

DEVELOPMENT PATHS

6

ORGANISATION:CONTROL

slide4

Objectives

Market Driven

Resources Driven

Capture resources (natural, human, knowledge) for global competitiveness

Capture growth opportunities

of the region to expand global sales

Global Innovation

Regional Production

and Innovation

Global Production and

back offices

Local Production

Local marketing

Export Processing Factories

Sourcing base

Export

slide5

First Mover Advantages

Acquirers advantages

Window of Opportunity

Followers advantage

First movers advantages

  • Pre-empt key resources
  • Establish standards
  • Blocks brands and distribution
  • Learn
  • Benefit from mistakes of first movers
  • Capitalize on blind spots
  • Ride on efforts of first movers
slide7

Three Dimensions Of Global Competitive Positioning

Global Standardisation

Multiple Segments

Single Segment

Local Adaptation

Compete

on Costs/price

Advantages

Compete

on Differentiated/value

Advantages

slide8

Standardised or Localized ?

High

MODULAR

GLOBAL

(Global Scale)

STANDARDISATION

And MULTIBRANDS

STANDARDISATION

Aircraft

Elevators

IT Services

Handphones

Microprocessors

BasicChemicals

Pulp and paper

Minimun Size

of

Production

E.g. : Otis, Nokia

Electronic Componernts

E.g. : Intel, Dell

PROCESS

LOCAL

STANDARDISATION

ADAPTATION

Consumer Banking

Low

Cement

Consulting Services

Mobile telephony Services

(Local Scale)

Example: Cemex

Example: HSBC

Little Difference across the World

Countries specific

(Global Segments)

(Local Segments)

Customers Requirements and Competitive Contexts

slide9

Positioning: Value Proposition

Adaptive

Usage

Adaptive

Product

Fully

Adaptive

Pure

Global

Same

Same

Different

Different

Product

Same

Different

Same

Different

Message

Customer

Group

Different

Same

Different

Same

Usage

Same

Different

Same

Different

Distribution

Different

Same

Different

Same

Same

Different

Same

Brand

Different

Price

Same

Different

Different

Different

slide10

Positioning: Segmentation

Luxurious and top-of-the-line products and services.

Global brands are well entrenched

Rich

Mainly increasing urban markets.

Mix of global focus and local brands

and products and services

Middle Class

Still important in term of numbers.

Product and services adaptation

and simplification are needed

Bottom of the Pyramid

slide11

Competing

  • Technological Performances
  • Superior Quality
  • Superior Service
  • Image
  • Customization
  • Timeliness and Responsiveness
  • Relationships
  • Risk Reduction

Differentiation ?

Customer Value

Price

Industry

Average

Profit

Costs

Internal Costs

  • Economies of Scale due to size
  • Economie of Scope due to shared costs
  • Low cost of factors ( labor, materials..)
  • Installed base
  • Superior productivity in processes

Supplies

Cost

Leadership ?

slide12

Sources of Competitive Advantages

Marketing

Sales and

Distribution

General

Management

R & D

Procurement

Manufacturing

  • Better suppliers
  • Larger suppliers’ base
  • Cheaper sources of supplies
  • Higher quality supplies
  • Higher quality scientists and technologists
  • Better data base
  • Higher amount of funding for R&D
  • More creative designers
  • Better locationand infrastructure
  • Higher qualification of work force
  • Lower labor costs?
  • Good qualitychannel partners
  • Superior strategicand marketing intelligence
  • Higher quality marketing and sales personnel
  • Higher quality managerial personnel
  • Cheaper cost of capital
  • Strong “sponsors”
  • Privileged access to licenses from authorities

Resources

based

  • More effective warehousing
  • and inventories management
  • Electronic data purchasing
  • Economies of scale due to high volume of purchase
  • Better electronic data mgt and transmissionnetwork

Asset

based

  • Superior existing products line
  • Patents
  • More efficient CAD
  • Economies of scale due to volume
  • Better quality/costprocesses
  • More advanced CAM
  • Proprietary equipment
  • Well established brand/reputation
  • Density and scope
  • of distribution
  • Better financial mgt
  • Better HR mgt
  • Superiority in strategizing
  • More effective,
  • timely, responsive
  • organisational mechanisms
  • “Better” corporate culture
  • Proprietary scientific/
  • technological know-how
  • Superior and faster product development
  • Superior research techniques

Competencies

based

  • Superior product andbrand management
  • Superior customer relationship management
  • Better management of : plant quality processes and time
  • More effective supply chain mgt (JIT)
  • More effective supplier relationships management
slide13

Building a Business System in a Foreign Environment

Product

Service

Design

Innovation

General

Management

Sourcing

Production

Marketing

  • Skill base of the workforce
  • Production managers
  • Availability
  • of scientists
  • Availability
  • of suppliers
  • Sales force
  • Information
  • Local Financing
  • Local Skills

Resources

What is required ?

  • Infrastructure: Transport, telecom
  • IT infrastructure
  • Support & maintenance
  • of equipment

Assets

  • Transfer of production technology
  • Distribution network
  • Branding – global/local
  • Logistics
  • Working capital management
  • Partnership management
  • Ability to adapt
  • Appropriate Technology
  • Negotiation skills
  • Quality management
  • Quality management
  • Process control

Competencies

  • Relationship management

▪ What do we transfer without adaptation? ▪ What do we need to adapt or create? ▪ How?

slide14

How do firms’ capabilities fit to regional/local markets?

The Transfer, Adapt, Create model

General

Management

R & D

Procurement

Manufacturing

Marketing

What capabilities

are needed to compete?

What capabilities

do we bring and can

transfer?

What capabilities do

we bring but need

to adapt?

What capabilities do

we not bring and need

to create?

slide15

Transferability of Competitive Advantages

Whatis the value of our existing advantages on local markets?

  • To what extent do we need to adapt our products and

management approaches?

  • What new capabilities need to be acquired and how?

Technological

Transfer

Adapt

Competitive

Advantages

Adaptation

through learning

Replicate

Social

Global

(Same across

the world)

Local

Consumer Behavior

slide16

Entry Modes

License

Franchise

Agent

Distributor

Wholly-Owned

Subsidiary

Acquisition

Joint-Venture

Office

Benefits? Costs?

Feasibility? Risks?

slide17

Entry Modes

Wholly-owned

subsidiary

Acquisition

Joint Venture

License

Market

Attractiveness

Relevant for both attractive markets

and less attractive markets

Relevant for attractive markets

Costs

High investments

High

Medium

Low

Time

Horizon

Medium-term

if properly

managed

Long pay-off

Medium-term

Short-term

Risks

High exposure

High

Shared risks but

risks of conflicts

Low risks

Internal

Requirements

Acquisition skills

Local insights

Partnership

management

Local know-how

Technology

transfer

Competitive

Advantages

Can be high for

early entrants

Can be high if

properly managed

Leveraged with

partner

Limited but

testing base

slide18

HIGH

JOINT VENTURE

JOINT VENTURE

MARKETING SUBS

WHOLLY OWNED

ACQUISITION

JOINT VENTURE

ACQUISITION

WHOLLY OWNED

MARKETINGSUBSIDIARY

OPPORTUNITIES

REP OFFICE

DISTRIBUTORAGENT

LICENSE

LOW

DISTRIBUTOR

JOINT VENTURE

HIGH

LOW

HIGH

LOW

PRESSURE FOR LOCALISATION

RISKS

slide19

Business development and managerial skills

ESTABLISHING

DEVELOPING

COUPLING

PIONEERING

Create a small team

with mandate to

gather information,

establish contacts,

initiate first move

- Develop people

- Expand networks

- Broaden scope

- Internal networking

- Interdependencies

Critical

Task

- Invest

- Create JV

- Logistical base

  • Educationalleadership
  • Political
  • - Relational
  • - Technical
  • Leadership
  • Technical
  • - Relational
  • Leadership
  • Technical
  • - Relational

Individual

Skills

- Cultural

- Relational

slide20

Organizational Capabilities

- Recruitment

- Socialisation

- Career

- Training

- Managing expatriates

LOCAL HUMAN

RESOURCES MANAGEMENT

- Business practices

- Business and social cultures

- Local sources of innovation

LEARNING

- Transferring technology

- Adapting “best practices”

- Creating global base out of

local resources

INNOVATING

slide21

Linkages

- Citizenship

- Public relations

- Suppliers/distributors/retailers

- Local communities

- Local education institutions

- Partners

- Business associations

LOCAL LINKAGES

- Role in corporate portfolio

- Reporting

- Integration in global value chain

CORPORATE LINKAGES