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Timing of Entry International Business

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9 views11 pages

Timing of Entry International Business

Uploaded by

Aiman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Entering Foreign Markets

Part 1
OVERVIEW

• Introduction
• Entry Decision
• Entry Modes
Introduction

• There are about 200 countries in the


world

• Each country or market is attractive to a


particular firm, as selection of a particular
market depends on:
• The firm’s objectives
• A balance of benefits, costs, and risks

• It is complex and critical to decide about


which market, how, why and when to
enter?
• If enter which mode and why?
• Such decisions are mostly driven by an
assessment of the potential for relative
long-run growth, profit and value creation
Basic Entry Decisions

What are the basic entry decisions for


firms expanding internationally?

A firm expanding internationally must


decide
• which markets to enter ?
• when to enter them and on what scale ?
• how to enter them (the choice of entry
mode) ?
Which Markets to Enter
Firms need to assess the long run profit potential of each
market.
The most favorable markets are
• Large population with higher demand (BRCICS)
• politically stable
• nations with free market systems
• low inflation, and low public sector debt
• High growth rate

The less desirable markets are


• politically unstable
• nations with command economies
Time of Entry

• After a firm identifies which market


to enter, it must determine the timing
of entry

• Entry is early when an international


business enters a foreign market
before other foreign firms

• Entry is late when a firm enters after


other international businesses have
already established themselves in the
market
• Early Entry- Firms enter foreign
market before other foreign
firms

• Firms entering a market early


can gain first mover
advantages including:

• The ability to pre-empt rivals


and capture demand by
establishing a strong brand name

• The ability to build up sales


volume in that country and learn
from experience ahead of rivals
and gain a cost advantage over
later entrants

• The ability to create switching


Time of Entry costs that tie customers into their
products or services making it
difficult for later entrants to win
business
Time of Entry
• First mover disadvantages are the disadvantages
associated with entering a foreign market before
other international businesses
• These may result in pioneering costs (costs that an
early entrant has to bear that a later entrant can
avoid e.g. time and efforts to learn rules, liability
of being foreigner)
• The costs of business failure if the firm, due to its
ignorance of the foreign environment, makes some
major mistakes
• The costs of promoting and establishing a product
offering, including the cost of marketing,
educating the customers
• Rapid technological changes may favor followers
to leapfrog pioneers
• Pioneers can be easily imitated by followers
• It is relatively easy for the late commers to crack
the market.
Summary of Market Entry

• What should be the right decision


of market entry?

• There are no “right” decisions


with foreign market entry, but
decisions that are associated with
different levels of risk and
reward

• Firms in developing countries can


learn from the experiences of
firms in developed countries

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