CHAPTER 3

MARKET ENTRY DECISIONS

3.1 Analyzing International Marketing opportunities

International marketing opportunities can be identified by:

 Recognizing the existence of unfulfilled demand in a foreign country- that your company
can effectively serves or
 Recognizing the existence of goods and services in foreign markets that your company can
obtain to fulfill domestic demand.

Types of demand that indicate international opportunity

A. Existing Demand in Foreign Countries: The primary indicators of international marketing
opportunity are the demand and supply situation for goods and service in foreign country,
moderated by the international marketer’s ability to effectively serve that market.. Your
marketing task in this context is to offer superior value to the customers.
B. Latent Demand and International Marketing Opportunity: Latent demand may exist in
foreign markets because of unavailability of certain products and services that will fulfill the
need or want of a substantial number of people in the country. Such unavailability of
products could be due to the lack of technological solutions for certain problems.
C. Incipient Demand and International Market: One of the most exciting opportunities for
international marketing arises when there is incipient demand for some products and services
in foreign markets. Incipient markets are usually characterized by emerging demand for
certain products and services.
Process of international marketing opportunity analysis

1. Identify Opportunity: begins when you scan markets for gaps in product usage availability,
and unfulfilled need of consumers in different parts of the world. Your advantage in such a
market may be a superior product, a faster way to get that product to market, or information
about latent demand for products or services that the target market may not have yet.

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2. Establishing Qualifications and Requirements

At this point you have decided to further investigate an opportunity which at least passes your
testes regarding external obstacles over which you have no control. It is now time to see whether
there is indeed potential for your company to succeed. The first step here is to analyze the market
for your prospective product or services. You must then do a complete opportunity assessment
further, clarifying upon the above characteristics.

3. Defining the Opportunity

This process involves the final analysis of the opportunity before you put in place the elements
needed to begin doing business. This analysis includes preliminary estimates of the potential of
the business in terms revenues, income, and resources to be utilized in the effort. The other
market players must be identified and their position in the market ascertained. It must be shown
what the new business can do for the company in the long run, and what effect the proposed
moves of the company will have on the market, competitor, suppliers, and trends in customer’s
choices. Finally, a solution to whatever issues are contained in these assessments must be
devised, and any technical issues related to product development and movement must be
identified and planned for.

3.2 The Index for International Marketing

In the dynamic and ever-evolving world of international business, companies seeking to expand
their reach beyond domestic borders must navigate a complex landscape of cultural, economic,
and regulatory factors. The Index for International Marketing (IIM) has emerged as a vital tool to
help organizations assess their readiness and potential for successful global expansion.

The IIM is a comprehensive framework that evaluates a company's internal capabilities and
external market conditions, providing a holistic view of its international marketing potential.
This index considers factors such as the company's financial resources, operational efficiency,
technological capabilities, and market knowledge, as well as the target market's economic
stability, regulatory environment, and competitive landscape.

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3.2 Assessing a company's resources for export involvement

Assessing a company's resources for export involvement is a crucial step in developing an

effective international marketing strategy. Here are the key elements to consider when
evaluating a company's resources for export involvement:

1. Financial resources:

- Available capital for investment in international market entry and expansion

- Ability to finance export-related activities, such as market research, product adaptation, and
distribution

- Access to financing options, such as export credit, trade finance, or government export
assistance programs

2. Human resources:

- Availability of personnel with international business experience and language skills

- Presence of a dedicated export or international marketing team

- Ability to provide training and support for employees involved in export activities

3. Operational capabilities:

- Production capacity to meet potential export demand

- Logistics and supply chain infrastructure to support international distribution

- Quality control and compliance systems to meet foreign market requirements

4. Technological resources:

- Availability of digital tools and platforms for international market research, customer
engagement, and e-commerce

- Ability to adapt products or services to meet the technical specifications or preferences of

foreign markets

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5. Intellectual property (IP) protection:

- Strength of the company's IP rights, such as patents, trademarks, and copyrights, in foreign
markets

- Ability to enforce IP rights and protect the company's competitive advantages internationally

6. Market knowledge and networks:

- Understanding of the target foreign markets, including their economic, political, cultural, and
regulatory environments

By thoroughly assessing these resources, companies can identify their strengths, weaknesses, and
areas for improvement, which can inform the development of a tailored international marketing
strategy and help ensure the successful execution of export initiatives.

3.4. Direct exporting activities

Agent:
In the context of international marketing, the term "agent" refers to an independent
intermediary who represents a company or a brand in a foreign market. Agents play a crucial
role in facilitating international business transactions and market entry strategies.

Franchising:
Franchising is a business model where a franchisor (the company that owns the brand,
product, or service) grants the right to a franchisee (an independent business owner) to use
the franchisor's business system, brand, and support in exchange for a fee and/or a percentage
of sales.

Distributors

Distributors provide companies with access to foreign markets by leveraging their established
distribution networks, relationships with local retailers, and knowledge of the market.

Licensing

Licensing is an agreement that permits a foreign company to use industrial property (i.e.,
patents, trademarks, and copyrights), technical know-how and skills (e.g., feasibility studies,
manuals, and technical advice), architectural and engineering designs, or any combination of

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these in a foreign market. Licensing is not only restricted to tangible products but also service
as well.

Licensing offers several advantages. It allows a company to spread out its R&D and investment
costs, while enabling it to receive incremental income with only negligible expenses. In addition,
granting a license protects the company’s patent and/or trademark against cancellation for
non-use. This protection is especially crucial for a firm that, after investing in production and
marketing facilities in a foreign country, decides to leave the market either temporarily or
permanently.

In fact, licensing may be the least profitable of all entry strategies. It is necessary to consider
the long-term perspective. By granting a license to a foreign firm, a manufacturer may be
nurturing a competitor in the future – someone who is gaining technological and product
knowledge. At some point, the licensee may refuse to renew the licensing contract. To
complicate the matter further, it is anything but easy to prevent the licensee from using the
process learned and acquired while working under license.

3.5 Direct investment activities

1. Wholly owned subsidiaries

A wholly owned subsidiary is a company that is 100% owned and controlled by a parent
company. The parent company owns all the shares and has complete control over the operations
and decision-making of the subsidiary.

Some key characteristics of wholly owned subsidiaries:

 Ownership Structure: The parent company owns 100% of the subsidiary's shares,
giving it full control and decision-making authority.
 Legal Entity: The subsidiary maintains its own legal identity and corporate structure,
separate from the parent company.
 Financial Integration: The subsidiary's financial results are fully consolidated into the
parent company's financial statements.

2. Acquisition

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When a manufacturer wants to enter a foreign market rapidly and yet retain maximum control,
direct investment through acquisition should be considered. The reasons for wanting to acquire
a foreign company include product/geographical diversification, acquisition of expertise
(technology, marketing, and management), and rapid entry. Acquisition is viewed in a different
light from other kinds of foreign direct investment. A government generally welcomes foreign
investment that starts up a new enterprise (called a green field enterprise), since that investment
increases employment and enlarges the tax base. An acquisition, however, fails to do this since it
displaces and replaces domestic ownership. Therefore, acquisition is very likely to be perceived
as exploitation or a blow to national pride – on this basis, it stands a good chance of being turned
down. A green field project, while embraced by the host country, implies gradual market entry.

A special case of acquisition is the brown field entry mode. This mode happens when an
investor’s transferred resources dominate those provided by an acquired firm. In addition, this
hybrid mode of entry requires the investor to extensively restructure the acquired company so as
to assure fit between the two organizations. This is not uncommon in emerging markets, and the
extensive restructuring may yield a new operation that resembles a green field investment. As
such, integration costs can be high. However, brown field is a worthwhile strategy to consider
when neither pure acquisition nor green field is feasible. Due to the sensitive nature of
acquisition, there are more legal hurdles to surmount.

International mergers and acquisitions are complex, expensive, and risky. The problems are
numerous: finding a suitable company, determining a fair price, acquisition debt, merging two
management teams, language and cultural differences, employee resentment, geographic
distance, and so on. Acquirers thus must exercise due diligence. Sometimes, it may be better to
walk away from a deal. The reasons for exiting from a deal include: high price, no agreement
on governance issues, no synergies, poor quality of management, environmental issues, ethical
reasons, no strategic fit, detection of significant unrecorded/undisclosed liability, potential
problems with antitrust laws, and uncertainty about legal/tax aspects. Quite often, the future

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3. Joint Venture

A joint venture is simply a partnership at corporate level, and it may be either domestic or
international. An international joint venture is one in which the partners are from more than one
country. Much like a partnership formed by two or more individuals, a joint venture is an
enterprise formed for a specific business purpose by two or more investors sharing ownership
and control. Joint ventures, like licensing, involve certain risks as well as certain advantages over
other forms of entry into a foreign market. In most cases, company resources, circumstances, and
the reasons for wanting to do business overseas will determine if a joint venture is the most
reasonable way to enter the overseas market. Firms tend to use joint ventures when they enter
markets that are characterized by high legal restrictions or high levels of investment risks.

Marketers consider joint ventures to be dynamic because of the possibility of a parent firm’s
change in mission or power. There are two separate overseas investment processes that describe
how joint ventures tend to evolve. The first is the “natural,” nonpolitical investment process. In
this case, a technology-supplying firm gains a foothold in an unfamiliar market by acquiring a
partner that can contribute local knowledge and marketing skills.

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