Lecture Global marketing management (7th edition): Chapter 9 - Masaaki Kotabe, Kristiaan Helsen

GLOBAL
MARKETING
MANAGEMENT
Seventh Edition
MASAAKI KOTABKE | KRISTIAAN HELSEN

Chapter 9 PowerPoint
Global Market Entry
Strategies


Chapter Overview
1. Country Selection
2. Scale of Entry
3. Choosing the Mode of Entry
4. Exporting
5. Licensing
6. Franchising
7. Expanding through Joint Ventures and Alliances
8. Wholly Owned Subsidiaries
9. Dynamics of Entry Strategies
10. Timing of Entry
11. Exit Strategies
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Introduction
• The need for a solid market entry decision is an integral
part of a global market entry strategy.
• Entry decisions will heavily influence the firm’s other
marketing-mix decisions.
• Global marketers have to make a multitude of decisions
regarding the entry mode which may include:
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(1) country selection
(2) the scale of entry
(3) the mode of entry
(4) The time of entry
(5) A marketing-mix plan

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1. Country Selection
• A crucial step in developing a global expansion
strategy is the selection of potential target markets

(Exhibit 9-1).
• A four-step procedure for the initial screening
process:
1. Select indicators and collect data
2. Determine importance of country indicators
3. Rate the countries in the pool on each
indicator
4. Compute overall score for each country

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Exhibit 9-1:
Logical
Flowchart of
the Entry
Decision
Process

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2. Scale of Entry
• Factors influencing scale of entry
– Large-scale entry may induce volume-driven cost
advantages
– Where location matters, large-scale entry can lead to
lock-up of more attractive locations
– Existing players less likely to respond aggressively
when entrant has made substantial investments
– Large-scale entry may deter other prospective players
from entering market

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3. Choosing the Mode of Entry
• Decision Criteria for Mode of Entry:
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Market Size and Growth
Risk
Government Regulations
Competitive Environment
Cultural Distance
Local Infrastructure

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Exhibit 9-2: Method for Prescreening Market
Opportunities: Example

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Exhibit 9-3: Entry Modes and Market
Development

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3. Choosing the Mode of Entry
• Classification of Markets:
• Platform Countries (Singapore & Hong
Kong)
• Emerging Countries (Vietnam & the
Philippines)
• Growth Countries (China & India)
• Maturing and established countries
(examples: South Korea, Taiwan & Japan)
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Company Objectives
Need for Control
Internal Resources, Assets and Capabilities
Flexibility
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Exhibit 9-4: Top 20 Global Franchises

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3. Choosing the Mode of Entry
• Mode of Entry Choice: Regarding entry modes,
companies normally face a tradeoff between the
benefits of increased control and the costs of
resource commitment and risk.

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4. Exporting
• Indirect Exporting
– Export merchants
– Export agents

– Export management companies (EMC)

• Cooperative Exporting
– Piggyback Exporting

• Direct Exporting
– Firms set up their own exporting departments

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5. Licensing
• Benefits
– Appealing to small companies that lack resources
– Faster access to the market
– Rapid penetration of the global markets

• Caveats:
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Other entry mode choices may be affected
Licensee may not be committed
Lack of enthusiasm on the part of a licensee
Biggest danger is the risk of opportunism
Licensee may become a future competitor
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5. Licensing
• How to seek a good licensing agreement:
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Seek patent or trademark protection
Thorough profitability analysis
Careful selection of prospective licensees
Contract parameter (technology package, use
conditions, compensation, and provisions for the
settlement of disputes)

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6. Franchising
• Franchisor and the
franchisee
• Master franchising
• Benefits:
– Overseas expansion with a
minimum investment
– Franchisees’ profits tied to
their efforts
– Availability of local
franchisees’ knowledge

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• Caveats:
– Revenues may not be adequate
– Availability of a master franchisee
– Limited franchising opportunities
overseas
– Lack of control over the
franchisees’ operations
– Problem in performance
standards
– Cultural problems
– Physical proximity

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Exhibit 9-5: GNC−International Franchising

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7. Expanding through Joint Ventures
and Alliances
• Cooperative joint venture
• Equity joint venture
• Benefits:
– Higher rate of return and more control over the
operations
– Creation of synergy
– Sharing of resources
– Access to distribution network
– Contact with local suppliers and government officials

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7. Expanding through Joint Ventures
and Alliances
• Caveats:
– Lack of control
– Lack of trust
– Conflicts arising over matters such as strategies,
resource allocation, transfer pricing, ownership of
critical assets like technologies and brand names
(Exhibit 9-7)

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Exhibit 9-6: Conflicting Objective in Chinese
Joint Ventures

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7. Expanding through Joint Ventures
and Alliances
• Drivers Behind Successful International Joint
Ventures
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Pick the right partner
Establish clear objectives from the beginning
Bridge cultural gaps
Gain top managerial commitment and respect
Use incremental approach
Create a launch team during the launch phase:

(1) Build and maintain strategic alignment
(2) Create a governance system
(3) Manage the economic interdependencies
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Chapter 9 (4) Build the organization for the joint venture
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Exhibit 9-7: Starbucks Coffee’s Criteria in
Selecting Partners

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8. Wholly Owned Subsidiaries
• Acquisitions and Mergers
– Quick access to the local market
– Good way to get access to the local brands

• Greenfield Operations
– Offer the company more flexibility than acquisitions in
the areas of human resources, suppliers, logistics,
plant layout, and manufacturing technology.

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8. Wholly Owned Subsidiaries

– Benefits:
• Greater control and higher profits
• Strong commitment to the local market on the
part of companies
• Allows the investor to manage and control
marketing, production, and sourcing decisions

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8. Wholly Owned Subsidiaries
– Caveats:
• Risks of full ownership
• Developing a foreign presence without the
support of a third party
• Risk of nationalization
• Issues of cultural and economic sovereignty of
the host country
• Can be blocked by antitrust rulings

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