a r k e t

M t ry
En s
t e g ie
Str a
 INT RO

• When an organization has made a decision to enter an overseas

market, there are a variety of options open to it.

• These options vary with cost, risk & the degree of control which can
be exercised over them.

• One of the most important strategic decisions in international

business is the mode of entering the foreign market.
 I ON
F IN AT
DE

 A market entry strategy is the planned

method of delivering goods or services  to
a target market and distributing them there.
When importing or exporting services, it
refers to establishing and managing
contracts in a foreign country.’’
 S IC
BA ES An organization willing to “go international” faces
S U
IS
3 major issues.

• Marketing – which countries, which segments,

how to manage, how to enter, with what
information.

• Sourcing – whether to obtain products, make

or buy.

• Investment & Control – Joint Venture, global

partner, acquisition.
 MARKET ENTRY
STRATAGIES
• EXPORTING • COUNTER TRADE
• LICENSING • TURNKEY CONTRACTS
• FRANCHISING • THIRD COUNTRY LOCATION
• JOINT VENTURING
• CONTRACT MANUFACTURING
• MERGERS & ACQUASITIONS
• FULLY OWNED
MANUFACTURING FACILITIES
 T I N G
P OR
E X • Exporting is the most traditional and well established form
of operating in foreign markets.

• Exporting can be defined as the marketing of goods

produced in one country into another.

• Whilst no direct manufacturing is required in an overseas

country, significant investments in marketing are required.

• The tendency may be not to obtain as much detailed

marketing information as compared to manufacturing in
marketing country.
• Those firms who are aggressive have clearly defined plans and
strategy, including product, price, promotion, distribution and
research elements.

• In countries like Tanzania and Zambia, which have embarked on

structural adjustment programs, organizations are being
encouraged to export, motivated by foreign exchange earnings
potential, saturated domestic markets, growth and expansion
objectives, and the need to repay debts incurred by the borrowings
to finance the programs.

• The type of export response is dependent on how the pressures are

perceived by the decision maker.
 i n g
or t
x p
o fE
ges
an ta The advantages of exporting are :
dv
A • Manufacturing is home based thus, it
is less risky than overseas based
• Gives an opportunity to "learn"
overseas markets before investing in
bricks and mortar
• Reduces the potential risks of
operating overseas.
 e s
t a g
n
a i ng
d v t
i sa o r
D Ex p  The disadvantage is mainly
of that one can be at the
"mercy" of overseas agents
and so the lack of control
has to be weighed against
the advantages.
 NG
ISI • Players : Franchisor & Franchisee.
C H
A N • In terms of distribution, the franchisor is a
FR supplier who allows an operator, or a
franchisee, to use the supplier's trademark
and distribute the supplier's goods.
• In return, the operator pays the supplier a fee.
• Thirty three countries, including the United
States, and Australia, have laws that regulate
franchising.

• Franchising is the practice of using another

firm's successful business model.
• For the franchisor, the franchise is an alternative to
building ‘Chain Stores’ to distribute goods that
avoids the investments and liability of a chain.

• The franchisor's success depends on the success of

the franchisees.

• The franchisee is said to have a greater incentive

than a direct employee because he or she has a
direct stake in the business.
Exam
p les
 • Freedom of Employment
• Proven products & Services
S
AG E • Proven Trade Mark
• Reduced Risk of Failure
ANT
ADV
 N G
S I  Licensing is defined as "the
EN method of foreign operation
I C
L whereby a firm in one country
agrees to permit a company in
another country to use the
manufacturing, processing,
trademark, know-how or some
other skill provided by the
licensor".
• Licensing involves little expense and involvement.
• The only cost is signing the agreement and policing
its implementation.
• It is quite similar to the "franchise" operation.
• Coca Cola is an excellent example of licensing.
• In Zimbabwe, United Bottlers have the license to
make Coke.
 • Good way to start in foreign
o f operations and open the door to
g e s low risk manufacturing
n t a
v a g . relationships
d
A en s i n
L i c • Linkage of parent and receiving
partner interests means both get
most out of marketing effort
• Capital not tied up in foreign
operation and
• Options to buy into partner exist
or provision to take royalties in
stock
 o f
e s . • Limited form of participation - to length of
t a g n g
a n nsi agreement, specific product, process or

d v ce trademark.

i s a L i • Potential returns from marketing and

D manufacturing may be lost.

• Partner develops know-how and so

license is short.
• Licensees become competitors -
overcome by having cross technology
transfer deals and
• Requires considerable fact finding,
planning, investigation and interpretation.
 ES
U R
N T • Joint ventures can be defined as
V E "an enterprise in which two or
N T
O I more investors share ownership and
J control over property rights and
operation."

• It is a very common strategy of

entering the foreign market.
• Any form of association which implies collaboration for more
than a transitory period is a joint venture.

• A joint venture may be brought about by a foreign investor

showing an interest in local company,

• A local firm acquiring an interest in an existing foreign firm

or

• By both the foreign and local entrepreneurs jointly forming a

new enterprise.
 • Sharing of RISK.
ge s • Joint financial strength.
nt a • May be only means of entry in
d va some countries.
A

s • Partners do not have full control

g e of management.
nt a
v a • May be impossible to recover
sa d capital if need be.
Di
• Partners may have different
views on expected benefits.
Exam
p les
 E R
N T E
U D
CO TRA • Largest indirect method of exporting
is countertrade.

• Competitive intensity means more

and more investment in marketing.

• In this situation the organization may

expand operations by operating in
markets where competition is less
intense but currency based
exchange is not possible.
• Also, countries may wish to trade in spite of the degree of
competition, but currency again is a problem.

• Countertrade can also be used to stimulate home industries

or where raw materials are in short supply.

• It can, also, give a basis for reciprocal trade.

• Estimates vary, but countertrade accounts for about 20-30%

of world trade, involving some 90 nations and between US
$100-150 billion in value. 
• ADVANTAGES:
Its main attraction is that it can give a firm a way to finance
export when other means are not available.

• DISADVANTAGES:
o Variety is low so marketing is limited
o Difficult to set prices and service quality
o Inconsistency of delivery and specification,
o Difficult to revert to currency trading - so quality may decline
further and therefore product is harder to market.
 E Y S
NK CT
U R RA
T NT • Turnkey contracts are common in
international business in the supply,
CO erection & commissioning of
plants, as in the case oil refineries,
steel mills, cement & fertilizer
plants etc.. Construction projects &
franchising agreements.
• A turnkey operation is an agreement by the seller to supply a
buyer with a facility fully equipped & ready to be operated by
the buyer, who will be trained by the seller.

• The term is used in fast food franchising when a franchiser

agrees to select a store site, build he store, equip it, train the
franchisee & employee.

• Many turnkey contracts involve government/public sector as

buyer.

• A turnkey contractor may subcontract different phases/parts of

the project.
 T RIN G
C
A TU • A company doing international
TR C
O N FA marketing contracts with firms in foreign
C NU countries to manufacture or assemble
M A the products while retaining the
responsibility of marketing the product.

• This is a common practice in

international business.

• Many multinationals employ this in India

example: Park Davis Hindustan Lever,
Ponds.
 s • It frees the company from risks of
t a g e investing in foreign countries.
v an • It does not have to commit
Ad resource for setting up
production facilities.

• There can be a loss on

g e s manufacturing.
nt a • Less control over manufacturing
d va
is a process.
D • Risk of developing potential
competitors.
 RY
N T
O U ION
C A T
I RD
LO C • This is sometimes used as an entry
TH strategy.
• When there is no commercial
transaction between 2 nations
because of political reasons,
• or when direct transactions
between 2 nations are difficult &
• if one nation wants to enter other
nation,
• then the nation will have to operate
from the third country base.
• It may be helpful to take advantage of the friendly trade
relations between the third party & the foreign market
concerned.

• Sometimes commercial reasons encourage third country

location.

• Example: Rank Xerox found it convenient to enter USSR

through its Indian joint venture Modi Xerox.
 S & S
E R O N
G I T I •
E R IS This strategy is also known as an
M Q U expansion strategy.

A C • M&As have been imp & powerful driver

of globalization.
• Between 1980 – 2000 the value of cross
border grew at an average annual rate
of 40%.
• A large no. of foreign firms have entered
India through acquisition.
• Example: Automobiles, Pharmacy,
banking, telecom etc.
 es
n t ag
v a
Ad • Increasing the market
power.
• Acquisition of Technology.
• Optimum utilization of
Resources.
• Minimization of Risks.
• Tax Benefits
 ge s
n t a • Some of the units acquired
d v a
i s a would have problems such as
D old plant, obsolete technology,
surplus, or demoralized labor.

• The firm may not have the

experience & expertise to
manage the unit taken over if
it is an entirely new field.