Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

1.0 INTRODUCTION...................................................................................................1 2.0 RESEARCH METHODOLOGY............................................................................2 3.0 LIMITATIONS.......................................................................................................2 4.0FACTORS AFFECTING MARKET ENTRY.........................................................2 4.1 Market Related Characteristics........................................................................3 4.2 Cost-Related Aspects..........................................................................................3 4.3 Political/Legal Factors.......................................................................................3 4.4 Tariff a d !o -Tariff "arriers.........................................................................3 MARKET ENTRY MODES..........................................................................................4 5.0 EXPORTING...........................................................................................................4 #.1 $ direct %&porti g..............................................................................................# 5.1.1 Export Management Company (EMC) or Export Ho ses............................! 5.".1 #gents an$ %istrib tors.................................................................................& 6.0 CONTRACTUAL AGREEMENTS......................................................................10 '.2 Fra chisi g........................................................................................................11 (.1 )oi t *e t+res...................................................................................................13 (.2 ,trategic Allia ces............................................................................................1# 8.0 Es !"#$s%$&' (%)##* O+&,- S."s$-$!/$,s............................................................10 -.1 .ree field /peratio s......................................................................................1( -.2 Ac0+isitio s.......................................................................................................1( T%, E1,/'$&' E#,2 /)&$2 M!/3, $&' M)-,...............................................................18 1.1 Pre-Market-% tr2 Acti3ities ..........................................................................11 1.2 Market-% tr2 ,trategies..................................................................................24 '.".1 (ro$ )t Strategy.........................................................................................."* '."." (ri)ing Strategy..........................................................................................."1 '.".+ %istrib tion Strategy..................................................................................."1 '."., (romotion Strategy......................................................................................"1 11.0 CONCLUSION....................................................................................................23

1.4 $!TR/56CT$/!
#))or$ing to Mal-otra. #gar/al 0 1lga$o. ("**+) t-e )-oi)e o2 2oreign market entry strategies is a )r )ial part o2 t-e internationalisation pro)ess 2or 2irms. 3-e entry
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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

mo$e a 2irm )-ooses 2or a 2oreign market -as ma6or in2l en)es on t-e extent to /-i)t-e 2irm )apitalises on market potential an$ on t-e strategi) )ontrol it -as o7er market $e7elopment. 3-ese entry mo$es in)l $e exporting. t-e se o2 agents an$ $istrib tors. )ontra)t al arrangements s )- as li)ensing an$ 2ran)-ising. 6oint 7ent res. strategi) allian)es. an$ /-olly o/ne$ 2oreign $ire)t in7estment (F%8). in)l $ing green2iel$ in7estments an$ mergers an$ a)9 isitions. $isa$7antages o2 ea)-. 3-is paper /ill attempt to assess ea)- o2 t-ese entry mo$es. analysing t-e a$7antages an$

2.4 R%,%ARC7 M%T7/5/L/.8

For t-e p rpose o2 t-is paper se)on$ary resear)- /as n$ertaken. 8nternational marketing an$ global marketing textbooks /ere t-e main so r)e se$. # small n mber o2 rele7ant :o rnal arti)les /ere re7ie/e$. 3-ese arti)les /ere a))esse$ t-ro g- t-e $ata t-e ele)troni) $atabase 4 siness So r)e (remier.

3.4 L$M$TAT$/!,
% e to time )onstraints an$ t-e o7erall nat re o2 t-is paper no primary resear)- or empiri)al resear)- /as )on$ )te$. 3-e paper is base$ solely on pre7io s literat re on t-e topi). 3-e gro p -a7e also been )onstraine$ by a maxim m page limit 2or t-e paper. Some topi)s an$ entry mo$es )o l$ be $is) sse$ in 2ar greater $etail.

4.4

FACT/R, AFF%CT$!. MAR9%T %!TR8

4e2ore assessing ea)- market entry mo$es t-e gro p belie7e it is ne)essary to gi7e a brie2 o7er7ie/ o2 t-e market sele)tion pro)ess. Certain )riteria m st be examine$ to

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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

assess t-e attra)ti7eness o2 t-e market. ;-en assessing potential markets 2or entry. 2irms s-o l$ )onsi$er all o2 t-e 2ollo/ing 2a)tors market5relate$ )-ara)teristi)s. )ost5relate$ aspe)ts. t-e legal an$ politi)al en7ironments. an$ tari22 an$ non5tari22 barriers. (:o-ansson. 1''<= :eannet 0 Hennessey. "**,= >eegan 0 S)-legelmil)-. "**1= Hollensen. 1''&= >otabe 0 Helsen. "**1) 4.1 M!/3, R,#! ,- C%!/!2 ,/$s $2s 3-ese )-ara)teristi)s relate to areas s )- as market si?e an$ potential. market gro/t-. pro$ )t52it to market $eman$s. b ying po/er o2 ) stomers. market seasons an$ 2l )t ations. an$ t-e le7el an$ 9 ality o2 )ompetition (Hollensen. 1''&). Companies s-o l$ e7al ate t-ese 2a)tors /-en $e)i$ing on /-i)- 2oreign markets to enter. 3-ese 2a)tors -elp establis- t-e attra)ti7eness o2 t-e market an$ t-e extent to /-i)- t-e )ompany@s pro$ )ts or ser7i)es are s ite$ to t-at market. 4.2 C)s 4R,#! ,- As5,2 s :eannet 0 Hennessey ("**,) state transportation )osts. 2reig-t. an$ logisti)s are some )ost5relate$ aspe)ts t-at s-o l$ be )onsi$ere$ /-en assessing markets. #ny )ompany /is-ing to enter a 2oreign market s-o l$ )onsi$er t-ese. as s )- )osts are likely to 7ary 2rom )o ntry to )o ntry. t- s ea)- market m st be e7al ate$ in$i7i$ ally in or$er to /eig- p t-e )osts t-at may be in) rre$ pon entry. 4.3 P)#$ $2!#6L,'!# F!2 )/s :o-ansson. (1''<) arg es t-at politi)al risk is one o2 t-e 2irst )onsi$erations 2irms take in to a))o nt /-en $e)i$ing on /-at 2oreign markets to enter. :eannet 0 Hennessey. ("**, p."1") propose t-at politi)al risk may res lt 2rom Ain anything from limitations on the number of foreign company officials and on the amount of profits paid to the parent company, to refusal to issue a business licence B. 3-e possibility o2 )-anges in go7ernment poli)y is anot-er 2a)tor t-at may -a7e an impa)t on pro2itability (>eegan 0 S)-legelmil)-. "**1). 4.4 T!/$77 !&- N)&4T!/$77 8!//$,/s 3ari22s an$ $ ties are signi2i)ant 2a)tors o2 t-e reg latory en7ironment o2 2oreign )o ntries an$ s-o l$ be e7al ate$ by )ompanies /-en assessing potential 2oreign markets. Con5tari22 barriers in)l $e li)ensing reg lations. pa)kaging an$ labelling re9 irements. /eig-t re9 irements. 9 otas. an$ tra$e )ontrol (>eegan 0
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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

S)-legelmil)-. "**1). 3-e a t-ors o tline t-at not all o2 t-ese barriers are $is)riminatory in t-at some are p t in pla)e to ens re p bli) -ealt- an$ sa2ety. -o/e7er the line between social well-being and protection is a fine one (Gillespie. :eannet an$ Hennessey. "**,. p.+,). 3-ese toget-er /it- t-e abo7e mentione$ tari22 barriers are important 2a)tors in t-e e7al ation o2 2oreign markets. 3-e 2a)tors mentione$ abo7e represents a brie2 o7er7ie/ o2 t-e main 2a)tors t-at a )ompany s-o l$ )onsi$er /-en e7al ating /-at markets to enter. 3-ese 2a)tors may also be se2 l in assessing /-i)- market entry mo$es to 6oint 7ent res. se. as 2or example a reg lation t-at re9 ires lo)al management may en)o rage a 2irm to se 2ran)-ising or

MAR9%T %!TR8 M/5%, #.4 %:P/RT$!.

Exporting )an take t/o 2orms. in$ire)t an$ $ire)t exporting. 8n$ire)t exporting is best s ite$ to small 2irms /it- limite$ reso r)es /-o -a7e only a passing interest in
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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

exporting. /-ile $ire)t exporting is a strategy se$ by a 2irm t-at /ants to establis- a greater presen)e in 2oreign markets. 3-e )-ara)teristi)s. merits an$ limitations o2 ea)are o tline$ belo/.. 5.1 I&-$/,2 E95)/ $&' 3erpstra 0 Sarat-y. (1''<) state The firm is an indirect exporter when its products are sold in foreign markets but no special activity for this purpose is carried on within the firm (1''<. p. 51,). 3-is met-o$ o2 2oreign market entry in7ol7es t-e exporting man 2a)t rer -iring an in$epen$ent organisation. /-i)- be)omes. in e22e)t. t-e export $epartment 2or t-e pro$ )er. 8n$ire)t exporting is o2ten sai$ to be like a $omesti) sale (3erpstra 0 Sarat-y. 1''<)= (Hollensen. 1''&). 3-e pro$ )er )ompletes a $omesti) sale t-at. in t rn. res lts in an export sale by someone else (;al7oor$. 1'&"). Simply p t. in$ire)t exporting in7ol7es selling to ot-ers /-o export. 3- s t-e 2irm is not engaging meaning2 lly in global marketing as t-e 2irm@s pro$ )ts are being )arrie$ abroa$ by ot-ers. 3-is market entry mo$e is more likely to be exer)ise$ by a 2irm /-o primarily 7ie/ international markets as a means o2 $isposing ex)ess pro$ )tion. or a 2irm /itlimite$ reso r)es a7ailable 2or international expansion (Hollensen. 1''&). 8n$ire)t exporting o2ten be)omes t-e nat ral 2irst step 2or ne/)omers to t-e international s)ene. as it re9 ires minimal 2inan)ial an$ management )ommitment. /-en )ompare$ to $ire)t exporting. 3-e main a$7antage o2 in$ire)t exporting is t-at it o22ers a))ess to 2oreign markets /it-o t t-e )omplexities an$ risks o2 $ire)t exporting. For )ompanies /it- little or no experien)e in selling abroa$ t-e se o2 a $omesti) interme$iary pro7i$es t-e 2irm /itrea$ily a7ailable expertise (:eannet 0 Hennessey. "**,). #lso t-ese types o2 $istrib tion )-annels are in-erently less expensi7e t-an t-eir $ire)t exporting )o nterparts (;al7oor$. 1'&") as operations s )- as transportation are -an$le$ by t-e in$epen$ent organisation. 3-ere are a n mber o2 $isa$7antages /it- t-is entry mo$e. 8t o22ers least )ontrol o7er -o/. /-en. /-ere an$ by /-om t-e pro$ )ts are sol$ (%oole 0 Do/e. "**1). #s a res lt t-e exporting 2irm loses )ontrol o2 t-e , (@s. /-i)- may lea$ to pro$ )ts being
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sol$ t-ro g- ns itable )-annels. /it- poor s pporting ser7i)es an$ little promotion. /-ile being inappropriately pri)e$. 3-is loss o2 )ontrol may $amage t-e 2irm an$ its pro$ )ts image an$ rep tation abroa$. 3-e only prote)tion in t-is sit ation is 2or t-e 2irm to $o a t-oro g- ba)kgro n$ sear)- to make s re t-at t-e $omesti) interme$iary@s rep tation /ill not -in$er t-e 2irm@s rep tation (;al7oor$. 1'&"). 3-ere is also t-e $isa$7antage t-at t-e skills an$ kno/5-o/ $e7elope$ t-ro g- $ire)t exporting experien)es are a)) m late$ o tsi$e t-e 2irm an$ not in it (:o-ansson. 1''<). # t-ors $i22er on /-at t-ey )onsi$er to be t-e most important met-o$s o2 in$ire)t exporting. %oole 0 Do/e ("**1) o22er $omesti) p r)-asing. piggyba)k operations. an$ Export Management Company (EMC) or Export Ho ses an$ tra$ing )ompanies to be t-e main met-o$s. Hollensen (1''&) agrees /it- t-e pre7io s met-o$s /-ile a$$ing brokers as anot-er important met-o$ o2 in$ire)t exporting. :o-ansson (1''<) 2o) ses on tra$ing )ompanies an$ EMC@s as t-e important met-o$s. t-is met-o$ o2 in$ire)t exporting /ill no/ be $is) sse$. 5. . !xport "anagement #ompany $!"#% or !xport &ouses #2ter examination o2 t-e literat re EMC@s are most )ommonly -ig-lig-te$. Conse9 ently

EMC@s or Export -o ses are spe)ialist )ompanies establis-e$ to a)t as t-e export $epartment 2or an array o2 )ompanies (Hollensen. 1''&= %oole 0 Do/e. "**1). 3-e EMC )arries o t b siness in t-e name o2 ea)- 2irm it represents. EMC@s take )are o2 t-e ne)essary exporting $o) mentation. 3-eir kno/le$ge o2 lo)al b ying be-a7io r an$ go7ernment reg lations are spe)i2i)ally se2 l in -ar$ to penetrate markets (Hollensen. 1''&). EMC@s are parti) larly a$7antageo s in -elping small to me$i m si?e$ 2irms /it- little international market experien)e as t-ey allo/ in$i7i$ al 2irm@s to gain 2ar /i$er expos re o2 t-eir pro$ )ts in 2oreign markets at m )- lo/er )osts t-an t-ey )o l$ a)-ie7e on t-eir o/n. 4y )arrying a large range o2 pro$ )ts. EMC@s )an sprea$ t-eir selling an$ a$ministration )osts o7er more )ompanies as /ell as re$ )ing transportation )osts $ e to t-e e)onomies gaine$ 2rom large s-ipments. # t-ors (Hollensen. 1''&= %oole 0 Do/e. "**1) -a7e i$enti2ie$ similar $isa$7antages o2 EMC@s. /-i)- in)l $eE

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Sele)tion o2 markets may be ma$e on t-e basis o2 /-at is best 2or t-e EMC rat-er t-an /-at is best 2or t-e pro$ )er. 3-e EMC may spe)ialise. 2or instan)e. by geograp-i)al region. t-e market )-osen. -o/e7er. may not )orrespon$ to t-e pro$ )er@s ob6e)ti7es.

Sometimes EMC@s are tempte$ to )arry too many pro$ )t ranges as a res lt some pro$ )ts may not be gi7en t-e re9 ire$ attention 2rom salespeople. Competing pro$ )t lines may be )arrie$ by t-e EMC. Some pro$ )t lines may be gi7en pre2erential treatment. again to t-e $etriment o2 anot-er 2irm. EMC@s are pai$ on )ommission t-ere2ore pro$ )ts /-i)- may re9 ire a s staine$ marketing e22ort to a)-ie7e s ))ess in t-e longer term may be o7ers-a$o/e$ by pro$ )ts /it- imme$iate sales potential.

3-ere2ore m )- time s-o l$ be $e7ote$ to )are2 lly sele)ting a s itable EMC an$ t-e 2irm m st be prepare$ to $e$i)ate reso r)es to managing t-e relations-ip an$ monitoring t-eir per2orman)e (%oole 0 Do/e. "**1). 5.2 D$/,2 E95)/ $&' #))or$ing to Hollensen Adirect exporting occurs when a manufacturer or exporter sells directly to an importer or buyer located in a foreign marketB (1''&. p.""5). 3-e $i22eren)e bet/een in$ire)t an$ $ire)t exporting is t-at in t-e latter. t-e man 2a)t rer per2orms t-e export task rat-er t-an $elegating it to ot-ers. 3-e exporting 2irm -an$les e7ery aspe)t o2 t-e exporting pro)ess 2rom market resear)an$ -an$ling $o) mentation to 2oreign $istrib tion an$ )olle)tions o2 payments. #s in$ire)t exporters gro/ more )on2i$ent t-ey may 7ent re to n$ertake t-eir o/n exporting operations (Hollensen. 1''&). 3-ese operations in)l $e b il$ing o7erseas )onta)ts= transportation an$ $esigning an$ implementing marketing mix strategies. # )ompany may engage in $ire)t exporting i2 t-ey /is- to establis- a more permanent role in international markets. %ire)t exporting -as a n mber o2 a$7antages o7er in$ire)t exporting. Firstly. t-ere is greater potential pro2it. %ire)t exporting is a more proa)ti7e approa)- to 2oreign markets t-an in$ire)t exporting. 3-e exporting 2irm -as greater control over the
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n$ertaking market resear)-. -an$ling $o) mentation an$

Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

selection of markets, greater control over the elements of the marketing mix, improved feedback about the performance of individual products, changing situations in individual markets and competitor activity, and the opportunity to build up expertise in international marketing (%oole 0 Do/e. "**1) pg. "55). # )loser relations-ip is establis-e$ /it- b yers an$ more kno/le$ge is gaine$ on t-e marketpla)e. #not-er a$7antage o2 $ire)t exporting is t-at t-e 2irm@s 2oreign partner /ill -a7e a 7ast kno/le$ge o2 t-e lo)al marketpla)e s )- as lo)al ) stoms. 3- s t-e 2oreign partner be)omes a prime so r)e o2 in7al able market resear)- (;al7oor$. 1'&"). % e to its $ay5to5$ay operations o2 a 2oreign market t-e 2irm /ill generate m )- in5-o se kno/le$ge. 3-ere are a n mber o2 $ra/ba)ks asso)iate$ /it- $ire)t exporting. 3-e )ompany nee$s to $e7ote more time. personnel. an$ )orporate reso r)es t-an in$ire)t exporting re9 ires. 3-e le7el o2 )ommitment re9 ire$ to engage in $ire)t exporting is s bstantial an$ takes t-e 2orm o2 in7estment in t-e international operation t-ro g- allo)ating time an$ reso r)es to a n mber o2 s pporting a)ti7ities (%oole 0 Do/e. "**1). 3-e 2irm m st also bear t-e $istrib tion. a$ministrati7e an$ marketing )osts o2 t-eir international operations. 3-is in)rease$ le7el o2 )ommitment lea$s to an in)rease in t-e le7el o2 responsibility an$ risk 2a)e$ by t-e 2irm. 8n parti) lar t-e 2irm -as to en$ re risk o2 )olle)ting payments in international markets. Hollensen (1''&) i$enti2ies t-e t/o main mo$es o2 $ire)t exporting to be agents an$ $istrib tors. 3-ese /ill no/ be $is) sse$. 5.'. (gents and )istributors

3-e se o2 agents is t-e most 2re9 ently se$ met-o$ to initially penetrate a 2oreign market. #n agent is an in$i7i$ al or a )ompany t-at represents a 2oreign organisation in t-e target market. (ro$ )ts are sol$ into t-e target market t-ro g- t-is t-ir$ party. 3-e agent is s ally 2rom t-e 2oreign market. -o/e7er t-is is not essential. #gents s ally /ork on a )ommission basis an$ /it-in a )learly $e2ine$ geograp-i)al area. #gents s ally represent a n mber o2 2irms an$ are not ex)l si7ely promoting t-e 2irm@s pro$ )ts. # -ig- $egree o2 )ontrol on 2ixe$ payment ()ommission basis) relate$ to t-e le7el o2 sales t rno7er. Many o2 t-e )osts o2 $oing b siness abroa$ are a7oi$e$. 8t $oes not
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in7ol7e t-e )apital )ommitment o2 $ire)t in7estment. nor $oes it p t t-e 2irms kno/ -o/ at risk as li)ensing may $o. For )ompanies /it- little or no experien)e in selling abroa$ t-e se o2 a $omesti) interme$iary pro7i$es t-e 2irm /it- rea$ily a7ailable expertise (:eannet 0 Hennessey. "**,). #gents o22er 7ery little )ontrol to t-e 2irm on operations in 2oreign markets. #gents are not employees o2 t-e 2irm t- s operate 2or t-eir o/n interests. Some agents represent a large n mber o2 2irms an$ negle)t t-e ones t-at bring in t-e lo/est ret rns (Hibbert. 1'&'). Firms $o not gain 7al able export experien)e as t-is is a)) m late$ o tsi$e t-e )ompany. %epen$ing on t-e agreement )olle)tion o2 payments may not be -an$le$ by t-e agent an$ may be t-e responsibility o2 t-e 2irm. %istrib tors are $i22erent 2rom agents in t-at t-ey generally p r)-ase t-e exporter@s pro$ )ts /it- a 7ie/ to reselling t-em in t-e 2oreign market. 3-e $istrib tor is responsible 2or t-e marketing. promotion an$ $istrib tion o2 t-e 2irm@s pro$ )t in t-e target market. # )ommission is not pai$ to t-e exporter be)a se t-e exporter -as alrea$y re)ei7e$ payment 2or t-e goo$s. #s $istrib tors are establis-e$ in t-e market t-ey generally goo$ market kno/le$ge. )onta)ts an$ an establis-e$ $istrib tion net/ork. 3-ey o2ten re9 ire g arantees 2rom t-e exporter /it- regar$s to pro$ )t 9 ality. an$ a2ter sales ser7i)e. 3-e exporter on t-e ot-er -an$ may -a7e $eman$s in relation to -o/ t-e pro$ )t is to be markete$ or -o/ it is pri)e$. Similar to /it- an agent. t-e exporter )an limit t-e geograp-i)al area or t-e in$ stry se)tor in /-i)- t-e $istrib tor )an /ork (Hibbert. 1'&').

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'.4 C/!TRACT6AL A.R%%M%!T,

Contra)t al agreements take t-e 2orm o2 li)ensing an$ 2ran)-ising. Di)ensing as a 2orm o2 market entry is beat s ite$ to a 2irm t-at /is-es to parti)ipate in international marketing b t $o not -a7e t-e reso r)es or kno/5-o/ to $o so. Fran)-ising. is a 2orm o2 li)ensing t-at o22ers a )ompany a )-an)e to $e7elop a presen)e in a 2oreign market /-ile retaining a signi2i)ant amo nt o2 )ontrol o7er t-eir operation. Di)ensing an$ 2ran)-ising /ill no/ be $is) sse$ in greater $etail belo/. 6.1 L$2,&s$&' #))or$ing to :o-ansson (1''<. p.15,) li)ensing in7ol7es A offering a foreign company the rights to use the firm*s proprietary technology and other know-how, usually in return for a fee plus a royalty on revenues B. 3-e li)ensor may gi7e t-e li)ensee t-e rig-t to se t-e 2irm@s patent on a parti) lar pro$ )t or a pro)ess. man 2a)t ring kno/5-o/. te)-ni)al a$7i)e an$ assistan)e. marketing a$7i)e. or t-e se o2 a tra$emark or t-e )ompany@s name (Hollensen. 1''&). 3-e time perio$s 2or li)en)es may 7ary. as note$ by :eannet 0 Hennessey ("**,). $epen$ing on t-e le7el o2 in7estment re9 ire$ by t-e li)ensee to enter t-e market. #s it is s ally t-e li)ensee /-o makes all t-e ne)essary )apital in7estments /it- regar$ to e9 ipment. marketing expen$it re et).. t-is party may insist on a lengt-y agreement in to re)o7er t-e )ost o2 in7estment. Hollensen (1''&) $es)ribes li)ensing as a t/o5/ay pro)ess /-ere bot- parties bring s bstantial bene2its to t-e relations-ip. 3-e li)ensor. /-ile allo/ing t-e li)ensee to gain a))ess to t-eir man 2a)t ring )apabilities. te)-nology. tra$e marks et).. also bene2its 2rom a))ess to t-e )apabilities o2 t-e li)ensee. /-i)- may be in areas s )- as te)-nology or man 2a)t ring )apabilities. 8n t-is /ay. a t/o5/ay pro)ess is )reate$ bet/een li)ensor an$ li)ensee t-at bene2its bot- parties as in2ormation is ex)-ange$ /-i)- may ai$ in impro7ing t-e operations o2 bot- parties. Hollensen (1''&) o tlines t-e 7ario s li)ensor5li)ensee arrangements. ;-en a li)ensing agreement in7ol7es a pro$ )t or ser7i)e. t-e li)ensee is s ally responsible 2or t-e pro$ )tion. $eli7ery an$ marketing o2 t-e pro$ )tFser7i)e in an agree$ area.
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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

3-e li)ensee bears all t-e risk asso)iate$ /it- in7estment in t-e 7ent re. Goyalties or 2ees are t-e li)ensor@s main so r)e o2 in)ome res lting 2or t-e li)ensing agreement an$ may in7ol7e a )ombination o2 an initial l mp s m pai$ at t-e start o2 t-e )ontra)t an$ an on5r nning loyalty base$ on li)ensee sales. #))or$ing to :eannet 0 Hennessey. ("**,) li)ensing is bene2i)ial. i2 a )ompany /is-es to engage in international marketing b t $oes not -a7e t-e )apability or t-e time to $o so. 8n t-is )ase t-e )ompany )an still realise t-e bene2its o2 2oreign markets by sing a li)ensee /-o may bring experien)e o2 t-e potential market an$ marketing kno/5-o/. enabling t-e li)ensor to engage in international marketing. Di)ensing is also a relati7ely inexpensi7e /ay o2 a)-ie7ing 2oreign market entry. 3-e main $isa$7antage o2 li)ensing is t-e limite$ 2orm o2 parti)ipation by t-e li)ensor in a 2oreign market. #s t-e man 2a)t ring an$ te)-nologi)al kno/5-o/ is li)ense$ o t to t-e li)ensee. t-e li)ensor loses )ontrol an$ )an be a$7ersely a22e)te$ i2 t-e li)ensee $oes not exploit all t-e potential ret rns o2 t-e agreement. :eannet 0 Hennessey ("**,) propose anot-er signi2i)ant $isa$7antage in terms o2 t-e li)ensors $epen$en)e on t-e li)ensee to )reate sales t- s pro$ )ing royalties 2or t-e li)ensor. 6.2 F/!&2%$s$&' %oole 0 Do/e ("**1) state 2ran)-ising is a means by /-i)- a )ompany )an market its goo$s an$ ser7i)es by granting t-e 2ran)-isee t-e legal rig-ts to se t-eir b siness 2ormat. #))or$ing to (>eegan 0 S)-legelmil)-. "***) it $i22ers 2rom li)ensing. in t-at t-ere is an entire b siness )on)ept trans2erre$ bet/een parties an$ a greater $egree o2 )ontrol o7er operations is maintaine$. 3-ere are t/o ma6or types o2 2ran)-ising o tline$ by (Hollensen. 1''&). Firstly t-ere is pro$ )t an$ tra$e name 2ran)-ising. 3-is type o2 2ran)-ising in7ol7es a $istrib tion system /-ere s ppliers agree )ontra)ts /it- $ealers to b y or sell pro$ )ts or pro$ )t lines. 3-e $ealer ses t-e tra$e name an$ tra$emark o2 t-e )ompany. 3-e se)on$ type o tline$ by Hollensen (1''&) is t-e b siness 2ormat Hpa)kage@ 2ran)-ising. 8nternational b siness 2ormat 2ran)-ising is a market entry mode that involves a relationship between the entrant $the franchisor% and a host country entity, in which

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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

the former transfers, under contract, a business package $or format%, which it has developed and owns, to the latter Hollensen (1''&. p.","). 3-e main a$7antage o2 2ran)-ising is it represents a 9 i)k /ay 2or a )ompany to enter a 2oreign market. an$ similar to t-e )ase o2 li)ensing. t-is option represents a relati7ely inexpensi7e mo$e o2 entry (>eegan 0 S)-legelmil)-. "***). Ho/e7er. nlike li)ensing. 2ran)-ising in7ol7es a greater element o2 )ontrol. 8n 2ran)-ising t-ere are )ontra)t al agreements in pla)e t-at pro7i$es t-e 2ran)-isor /it- a great $egree o2 )ontrol o7er t-e 2ran)-isee@s operations. t- s enabling t-e bran$ image to be p-el$ an$ prote)te$ internationally. 3-e 2ran)-isee@s pro2its are tie$ to t-eir e22orts an$ per2orman)e. For t-is reason t-e 2ran)-isee /ill be moti7ate$ to $o all t-ey )an to ens re t-e b siness /orks an$ to ens re t-e 7ent re is pro2itable. 3- s. as t-e 2ran)-isee gro/s t-e b siness. t-e 2ran)-isor /ill re)ei7e a 2ee tie$ to t-e 2ran)-isee@s pro2its. %oole an$ Do/e ("**1) i$enti2y $i22eren)es in ) lt re exist in $i22erent 2oreign markets as a potential $isa$7antage o2 2ran)-ising. ;-ile t-ere is a )ontra)t al agreement in pla)e bet/een t-e 2ran)-isor an$ 2ran)-isee as to -o/ t-e 2ran)-ise operations s-o l$ be )arrie$ o t. t-e risk still remains o2 problems in relation to per2orman)e stan$ar$s. 82 a 2ran)-ise is not operate$ to t-e stan$ar$s set o t by t-e parent )ompany. t-is may -a7e a $amaging a22e)t on t-e bran$ (>otabe 0 Helsen. "**1).

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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

(.4

C//P%RAT$*% A.R%%M%!T,

:oint 7ent res an$ strategi) allian)es are t/o 2orms o2 )ooperati7e agreements t-at may be n$ertaken bet/een 2irms to $e7elop a presen)e in a 2oreign market. :oint 7ent res are best s ite$ to t/o )ompanies /it- )omplementary pro$ )ts or ser7i)es. t- s enabling a goo$ strategi) 2it. Strategi) allian)es may be se$ by a 2irm t-at -a7e a $esire to enter 2oreign markets b t la)k t-e ability or )on2i$en)e to $o it alone. t- s seeking t-e assistan)e o2 a player in t-e 2oreign market. 3-ese /ill no/ be $is) sse$ in greater $etail.

0.1 :)$& ;,& ./,s A ( +oint venture is any kind of cooperative arrangement between two or more independent companies which leads to the establishment of a third entity organisationally separate from the parent companies.B (4 )-el et al.. 1''&. pg. !). # 6oint 7ent re /it- a lo)al partner represents a more extensi7e 2orm o2 parti)ipation in 2oreign markets t-an eit-er exporting or li)ensing. # 6oint 7ent re is $i22erentiate$ 2rom ot-er 2orms o2 strategi) allian)es an$ )ollaborati7e agreements as t-e partners )reate a separate legal entity. (Cateora 0 Gra-am. "**") -ig-lig-t 2o r 2a)tors asso)iate$ /it- 6oint 7ent resE . '. .. ,-s are established, separate, legal entities. They acknowledge intent by partners to share in management of the ,-. They are partnerships between legally incorporated entities such as companies, chartered organisations, or governments, and not between individuals. ,. !/uity positions are held by each partner.

# 6oint 7ent re may be t-e only /ay to enter a )o ntry or region i2 go7ernment )ontra)t negotiation pra)ti)es ro tinely 2a7o r lo)al )ompanies or i2 la/s pro-ibit 2oreign )ontrol b t permit 6oint 7ent res. 4esi$es operating to re$ )e politi)al an$ e)onomi) risk. 6oint 7ent res pro7i$e a less risky /ay to enter markets /it- regar$s to
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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

legal an$ ) lt ral iss es t-an /o l$ be t-e )ase in an a)9 isition o2 an existing )ompany (>eegan 0 S)-legelmil)-. "***). 8n 6oint 7ent res t-e )osts an$ risk o2 going global are re$ )e$. sa2eg ar$ing reso r)es t-at )annot be obtaine$ 7ia t-e market. Firms -a7e impro7e$ a))ess to 2inan)ial reso r)es. bene2it o2 e)onomies o2 s)ale an$ a$7antage o2 si?e. 3-ey also may -a7e a))ess to ne/ te)-nology an$ managerial pra)ti)es. 3-e strategi) goals o2 a 6oint 7ent re are 2o) se$ on t-e )reation an$ exploitation o2 synergies as /ell as t-e trans2er o2 te)-nologies an$ skills. 3-e e9 ity s-are o2 t-e international )ompany )an range bet/een 1*I an$ '*I b t is generally "55<5I (3erpstra 0 Sarat-y. 1''<). 3-ere are six types o2 6oint 7ent res a7ailable to organisation an$ t-ese are o tline$ belo/.
Complementary te)-nology 7ent resE Market te)-nology 6oint 7ent resE Sales 6oint 7ent reE 3-e partners )ombine t-eir te)-nologies to $i7ersi2y t-eir existing pro$ )tFmkt port2olios. Combination o2 Mkt kno/le$ge o2 1 partner /itt-e pro$ )tion or pro$ )t kno/ -o/ o2 t-e ot-er 3-e pro$ )er an$ a lo)al partner )ooperate in an arrangement. /-i)- is a mixt re o2 in$epen$ent Con)entration 6oint 7ent resE Gesear)- 0%e7elopment 6oint 7ent resE representation an$ o/n bran)-. Competing partners )ooperate to 2orm larger an$ more e)onomi)al nits. Create synergy by making 6oint se o2 resear)2a)ilities. exploiting opport nities to spe)ialise an$ stan$ar$ise. )ombining kno/ -o/ an$ S pply 6oint 7ent resE s-aring risks. Competitors /it- similar inp t nee$s )ooperate to sa2eg ar$ s pplies. re$ )e pro) rement )osts or pre7ent t-e entry o2 ne/ )ompetitors.

#$apte$ 2rom (4 )-el et al.. 1''&) #))or$ing to 4 )-el et al.. (1''&) t-e reasons to 2orm a 6oint 7ent re )an be sprea$ o t o7er internal reasons. )ompetiti7e goals an$ strategi) goals. 8nternal reasons /o l$ be to sprea$ t-e )ost an$ risk o2 going global. sa2eg ar$ing reso r)es /-i))annot be obtaine$ 7ia t-e market. impro7ing a))ess to 2inan)ial reso r)es. bene2its o2 e)onomies o2 s)ale an$ a$7antage o2 si?e. a))ess to ne/ te)-nology. managerial pra)ti)es an$ to en)o rage entreprene rial employees. 8n t-e area o2 )ompetiti7e goals 6oint 7ent res /o l$ in2l en)e t-e str )t ral e7ol tion in t-e spe)i2i) in$ stry. t-e pre5empting o2 )ompetitors. t-e $e2en$ing o2 t-e )ompany as globalisation makes bo n$aries retra)t. an$ t-e )reation o2 a stronger )ompetiti7e nit. 3-e strategi) goals
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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

2o) s on t-e )reation an$ exploitation o2 synergies. t-e trans2er o2 te)-nologies an$ skills an$ t-e $i7ersi2i)ation. 3-e main $isa$7antage o2 t-is global expansion strategy is t-at a )ompany in) rs 7ery signi2i)ant )osts asso)iate$ /it- )ontrol an$ )oor$ination iss es t-at arise /-en /orking /it- a partner. Con2li)t may arise bet/een t-e t/o management teams an$ t-e relations-ip mig-t $eteriorate espe)ially i2 t-ey are )ompetitors. 3-is s)enario )an o)) r /-en 6oint 7ent res are 2orme$ as a so r)e o2 s pply 2or t-ir$ )o ntry markets. 3-is m st be )are2 lly t-o g-t o t in a$7an)e. Jne o2 t-e main reasons 2or 6oint 7ent re A$i7or)eB is $isagreement abo t t-ir$ )o ntry markets in /-i)- partners 2a)e ea)- ot-er as a)t al or potential )ompetitors (4 )-el et al.. 1''&). 8nternationality also poses problems bet/een partners /it- regar$s to ) lt ral barriers. $i22erent negotiating styles. i$eas. pay systems. b siness pra)ti)es an$ - man reso r)es. Cross5) lt ral $i22eren)es in managerial attit $es an$ be-a7io r )an present 2ormi$able )-allenges 2or 6oint 7ent res (>eegan 0 S)-legelmil)-. "***). 3erpstra 0 Sarat-y. (1''<) i$enti2y t-e problem o2 )on2li)ting interests bet/een partners as /ell as t-e $i22i) lty 2irms 2a)e integrating 6oin 7ent res into t-eir operations. %isagreements also arise on t-e iss e o2 t-e position in t-e 7al e )-ain like t-e )ompatibility o2 pro$ )ts /it- t-e partners. 4 )-el et al.. (1''&) also proposes t-at property relation is a - ge bone o2 )ontention as it en)ompasses t-e agreements on pro2it s-aring. /-i)- 2irm -as t-e a t-ority to make /-at $e)isions an$ )ontrol. t-e layo t an$ str )t re o2 )ontra)ts an$ t-e $ominan)e o2 one o2 t-e partners. Jt-er problems t-at management m st $eal /it- are problems o2 -armonyE t-e ins 22i)ient agreement bet/een t-e partners. (roblems o2 translationE 2rom t-e strategi) prin)iples to a 6oint 7ent re a)tion plan (roblems o2 )o-eren)eE $i22ering $eman$s on t-e 6oint 7ent re. (roblems o2 a$6 stmentE )-anges in t-e en7ironmental )ir) mstan)es o2 t-e 6oint 7ent re o7er time. (4 )-el et al.. 1''&) 0.2 S /! ,'$2 A##$!&2,s Cateora 0 Gra-am ("**") $e2ine a strategi) allian)e as Aa business relationship established by two or more companies to cooperate out of mutual need and to share
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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

risk in achieving a common ob+ective. B #llian)es $i22er 2rom 6oint 7ent res be)a se in an allian)e bot- 2irms pool t-eir reso r)es $ire)tly in a )ollaboration t-at goes beyon$ t-e bo n$s o2 a 6oint 7ent re (:eannet 0 Hennessey. "**,). 3-e se o2 strategi) allian)es as an international market entry mo$e -as in)rease$ as 2irms in)reasingly re)ognise t-e ne)essity to internationalise an$ 2eel t-e nee$ 2or 2oreign -elp. :eannet 0 Hennessey ("**,) o tline t-ree $i22erent types o2 strategi) allian)esE 3e)-nology54ase$ #llian)esE #s t-e name s ggests 2irms s-are te)-nology )apabilities in t-ese allian)es. 3-e most )ommon reasons 2or 2irms entering t-ese allian)es in)l $e a))ess to markets. a))ess to )omplementary te)-nologies. an$ a $e)rease in time taken 2or ne/ inno7ations. (ro$ )tion54ase$ #llian)esE (ro$ )tion 2a)ilities an$ )apabilities are s-are$ bet/een )ompanies /it- )omponent linkages to re$ )e )osts. 3-is 2orm o2 an allian)e is most )ommonly se$ /-en t-e pro$ )tion re9 irements are 7ery expensi7e to a)9 ire. %istrib tion54ase$ #llian)esE Firms sometimes 2orm allian)es /it- an emp-asis on $istrib tion. # n mber o2 $rinks )ompanies -a7e 2orme$ strategi) allian)es /it- t-e sole emp-asis on $istrib tion o2 t-e pro$ )ts. 3-e main a$7antage o2 strategi) allian)es is t-e opport nities 2or rapi$ expansion into ne/ markets an$ a))ess to ne/ te)-nology. 3-ey also o22er more e22i)ient pro$ )tion an$ marketing )osts an$ a))ess to a$$itional so r)es o2 )apital. 3-e $ra/ba)ks o2 strategi) allian)es are similar to t-ose o2 6oint 7ent res. 3-e parties in7ol7e$ m st be able to /ork toget-er s ))ess2 lly $espite any ) lt ral $i22eren)es t-at may o)) r bet/een t-em. %i22eren)es o2 managerial styles may )a se a problem. an$ also )o l$ $isagreements may o)) r on t-e per)ei7e$ le7el o2 importan)e o2 ea)party in7ol7e$.

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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

-.4 %sta;lishi g <holl2 /= ed ,+;sidiaries

Companies. /anting to enter 2oreign markets /-ile retaining ltimate )ontrol an$ a7oi$ing t-e relate$ )osts o2 ot-er entry strategies. may p rs e a /-olly o/ne$ s bsi$iary approa)-. Green2iel$ operations is one s )- approa)- /-ere t-e )ompany establis-es a )ompletely ne/ operation in t-e 2oreign market. /-ile strategi) a)9 irements may be se$ to establis- a position in a 2oreign market by p r)-asing an existing b siness. 8.1 G/,,&7$,#- O5,/! $)&s Green2iel$ in7estments are /-en a 2irm attempts to establis- operations in a 2oreign )o ntry 2rom s)rat)-. 3-e main reasons 2or a Green2iel$ operation is to a)9 ire ra/ materials. to operate at lo/er man 2a)t ring )osts. to a7oi$ tari22 barriers. to satis2y lo)al $eman$. or to penetrate lo)al markets (Hollensen. 1''&). 8t is parti) larly a22e)ti7e 2or market penetration 2or a n mber o2 reasons. 3-ere is t-e elimination pri)e es)alation )a se$ by transport )osts. ) stom $ ty 2ees. an$ lo)al t rno7er taxes. #lso. a s pply o2 goo$s )an s ally be g arantee$ to resellers. minimi?ing potential )-annel )on2li)ts. 3-ere is also a greater /illingness 2or a 2oreign man 2a)t ring 2a)ility to a$apt pro$ )ts an$ ser7i)es to lo)al ) stomer re9 irements (:o-ansson. 1''<). 3-e ma6or $isa$7antage o2 Green2iel$ operations is a 2irm -as to establis- s ppliers. b yers. establis- $istrib tion )-annels et). 2rom s)rat)-. # - ge reso r)e )ommitment is re9 ire$ /-i)- lea$s to massi7e risks. F%8 generally means t-e )ompany be)omes a 2 ll52le$ge$ member o2 t-e e)onomi) an$ so)ial s)ene an$ t-ere2ore is expose$ to )o ntry spe)i2i) t-reats. 3-e bran$ image )an be a22e)te$ i2 a )ompany sets p man 2a)t ring 2a)ilities to a7ail o2 lo/er )-eaper labo r. as pro$ )ts m st )arry a )o ntry o2 origin label (:o-ansson. 1''<). 8.2 A2<.$s$ $)&s Gat-er t-an establis-ing a /-olly o/ne$ s bsi$iary 2rom s)rat)- t-e )ompany )an )onsi$er an a)9 isition o2 an existing )ompany. #)9 isitions o22er s/i2t entry into a market an$ o2ten pro7i$e a))ess to $istrib tion )-annels. an existing ) stomer base. an$. sometimes an establis-e$ bran$ name (Hollensen. 1''&). #n existing )ompany /ill alrea$y -a7e a pro$ )t line to be exploite$. m )- o2 t-e $istrib tion net/ork an$
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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

$ealers nee$e$. an$ a )ompany )an simply get on /it- marketing its ne/ pro$ )ts in )on6 n)tion /it- t-e existing line (:o-ansson. 1''<). # n mber o2 $isa$7antages exist /it- a)9 isitions. 3-e )ost o2 a)9 iring an existing )ompany is generally -ig-. 8t is o2ten $i22i) lt to 2in$ a s itable )ompany to a)9 ire. /-os existing pro$ )t range are )ompatible /it- t-e ne/ pro$ )ts to be intro$ )e$. Gationalisation o2 operations is sometimes re9 ire$. espe)ially i2 )ertain 2 n)tions are to be )entralise$. #s a res lt employees may nee$ to be lai$ o22 in some o2 t-ese 2 n)tional areas. /-i)- )o l$ lea$ to ba$ p bli)ity. Sometimes employees o2 t-e a)9 ire$ )ompany look on an a)9 isition o2 a t-eir )ompany n2a7o rably

The %>ergi g %lectro ic Marketi g Mode

Gronroos (1''') i$enti2ie$ t-e gro/ing importan)e o2 t-e ele)troni) marketing mo$e in international markets. AEle)troni) marketing as an internationalising strategy means t-at t-e ser7i)e 2irm exten$s its a))essibility t-ro g- t-e se o2 a$7an)e$ ele)troni) te)-nologyB (Gronroos. 1'''. p."'5). Ele)troni) strategies )-ange t-e logisti)s o2 ser7i)es more so t-an 2or goo$s. 3-e reason 2or t-is is t-at at some point a p-ysi)al ob6e)t -as to tra7el 2rom t-e maker to t-e )ons mer b t ser7i)es -o/e7er. $o not ne)essarily re9 ire a p-ysi)al presen)e. Hen)e t-e se o2 te)-nology -as re$ )e$ t-e nee$ to -a7e lo)al p-ysi)al presen)e in many $o/nstream an$ s pport a)ti7ities. 8t allo/s net/orks to )on)entrate an$ pool kno/le$ge an$ reso r)es 2rom separate lo)ations. 3-e se o2 -ar$/are. so2t/are an$ net/ork te)-nologies -a7e bro g-t abo t t-is ne/ market entry strategy. For example. Athe 0nternet can be used as a form of market entry as it is a way of communicating its offerings and putting them up for sale, and a way of collecting data about the buying habits and patterns of its customers and using network partners to arrange delivery and paymentB ( Gronroos. 1'''. p."'5). 3-e resear)- in t-is area is limite$ at t-e moment as it is a ne/ an$ emerging area an$ 2 rt-er empiri)al resear)- is nee$e$.

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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

1.4

T7% ALT%R!AT$*% APPR/AC7

>otler. Fa-ey 0 :at sripitak. (1'&5) o tline an alternati7e approa)- to market entry not $is) sse$ in t-e ma6ority marketing textbooks. 3-is approa)- pro7e$ immensely s ))ess2 l 2or :apanese 2irms an$ )ontrib te$ in a large /ay to t-e extraor$inary gro/t- o2 t-e :apanese E)onomy in t-e 1'<*s an$ 1'&*s. 3-ey $e7elope$ a -ig$egree o2 pro2i)ien)y in 2orm lating entry strategies to penetrate e7ery market sele)te$ as a target. 3-e :apanese $i$ not originally 2orm late t-e market entry strategies b t t-ey $o $isplay t-e :apanese ability 2or meti) lo s implementation o2 )lassi) marketing te)-ni9 es $isplaye$ else/-ere. :apanese entry strategies )an be $is) sse$ in t/o stages (i) (re5market entry strategies an$. (ii) Market entry strategies. 3-is alternati7e approa)- 2or market entry /ill no/ be $is) sse$. =.1 P/,4M!/3, 4E& /* A2 $>$ $,s 3-e :apanese $o not merely export pro$ )ts ma$e 2or t-eir $omesti) market to ne/ markets. 3-ey spen$ large amo nts o2 time analysing market opport nities an$ attempt to gain a $eep n$erstan$ing o2 -o/ ) stomers an$ markets /ork in t-e target markets t-ey are )onsi$ering. Market 2easibility st $ies an$ marketing resear)- are )onsi$ere$ t-e t/o most important pre5entry market a)ti7ities :apanese. 3-e pre5market5entry strategy s ally 2ollo/s a n mber o2 stepsE St $y teams are sent to t-e )o ntry. 3-ese teams spen$ se7eral mont-s )on$ )ting a 2easibility st $y be2ore making t-eir re)ommen$ations. Sales s bsi$iaries an$ personnel are statione$ in 7ario s )ompanies. :apanese tra$ing )ompanies an$ t-e go7ernment bo$y :E3GJ )on$ )t market resear)- on many markets an$ pro7i$e n mero s 7al able insig-ts an$ market in2ormation to :apanese )ompanies. n$ertaken by t-e

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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

Gra$ ate st $ents are sent to t-ese )o ntries to )on$ )t market resear)-. #ll t-ese $i22erent so r)es o2 market in2ormation /ill be )-annelle$ to t-e )ompany. 3-e )olle)ti7e in2ormation /ill be analyse$ an$ market opport nities /ill be i$enti2ie$ be2ore any market is entere$.

=.2 M!/3, 4E& /* S /! ,'$,s Jn)e an opport nity -as been i$enti2ie$ t-e :apanese /ill pro$ )e a strategi) market entry plan t-at in)orporates t-e ,(s. 1.'. 2roduct 3trategy

3-e :apanese -a$ t-ree pro$ )t )ategories 2or 2oreign market entry. 3-e 2irst )ategory is lo=er-cost prod+cts. ;-ile #meri)an )ompanies /ere )on)entrate$ on )reating sop-isti)ate$ pro$ )ts )arrying -ig- pri)es. t-e :apanese /ere )ontent to man 2a)t re small. simple. more stan$ar$i?e$ pro$ )ts. 3-is strategy /as aime$ at b il$ing market s-are. /-ile at t-e same time $ri7e $o/n )osts. # 2amo s example o2 t-is /as Hon$a@s entry into t-e motor)y)le market /-ere t-ey intro$ )es a smaller. less po/er2 l. easier5to5operate ma)-ine t-at /as $i22erent 2rom anyt-ing else on t-e market. 3-e se)on$ )ategory is prod+cts =ith i o3ati3e feat+res. Some :apanese

)ompanies entere$ 2oreign markets by o22ering pro$ )ts /it- more 2 n)tions an$ 2eat res t-an existing pro$ )ts on t-e market. 3-is strategy /as se$ 2or te)-ni)al pro$ )ts /it- s-ort li2e)y)les. 3-e aim o2 t-is strategy is to spee$ p an$ s-orten t-e pro$ )t li2e)y)le in or$er to $eter )ompetitors intro$ )ing a similar pro$ )t to t-e market. 3-e t-ir$ )ategory in7ol7es prod+cts =ith high 0+alit2 a d ser3ice. 82 pro$ )ts are nreliable an$ i2 ser7i)e )annot be g arantee$ it is nlikely a )ompany /ill s ))ee$ in a market. Geliability /as o2 key importan)e to :apanese 2irms. 3-ese 2irms o2ten stresse$ t-eir s perior 9 ality as a $isting is-ing 2a)tor o2 t-eirs. Ser7i)e /as also 2o) se$ on an$ t-e 2irms /o l$ go o t o2 t-eir /ay to $eal /it- ) stomers /-o -a$ problems.

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1.'.'

2ricing 3trategy

E7ery market t-e :apanese entere$ t-ey se$ a similar pri)ing entry strategy. (ro$ )ts /ere intro$ )e$ at $eliberately lo/ pri)e to b il$ p market s-are an$ to gain a long r n $ominant position in t-e market. 3-ese 2irms /ere /illing to sa)ri2i)e pro2its an$ in some )ases in) r losses. /-i)- are seen as an in7estment in t-eir long5term $e7elopment in t-e market. J2ten :apanese )ompanies se$ an entry strategy t-at linke$ lo/ 9 ality. -ig- 9 ality an$ s perior ser7i)e in t-e same o22ering. Sometimes market lea$ers-ip positions /ere gaine$ in ea)- o2 t-ese t-ree attrib tes. 1.'.. )istribution 3trategy

(ro$ )t $istrib tion /as a ma6or )-allenge 2or :apanese )ompanies as t-ey initially -a$ a poor 9 ality rep tation. 3o o7er)ome t-is t-ey )-ose to 2o) s on spe)i2i) market segments an$ entry points. Many )ompanies )-ose to 2o) s on t-e Cali2ornian market initially be2ore expan$ing a)ross #meri)a. :apanese 2irms also 2o) se$ on sele)ti7e $istrib tion )-annels an$ $ealers by seeking o t $istrib tion )-annels t-at /o l$ maximise market )o7erage. #not-er $istrib tion strategy se$ by :apanese 2irms /as to -a7e 1S 2irms $istrib te t-eir goo$s n$er 1S bran$ names. 3-is /as se$ to o7er)ome t-e barriers to $istrib tion in #meri)an markets. 3-ey also establis-e$ t-eir o/n o7erseas sales s bsi$iaries in or$er to better n$erstan$ t-e market an$ to be better able to manage marketing in t-ese markets. Mi$$lemen responsible 2or selling t-eir pro$ )ts /ere s ally o22ere$ -ig-er )ommission 2or selling :apanese pro$ )ts t-an t-ose o2 t-eir )ompetitors in or$er to )reate pro$ )t p s- 2rom t-ese so r)es. 1.'.4 2romotion 3trategy

3-ese 2irm@s promotional strategies re2le)te$ t-eir long5term intentions in t-e 2oreign market. 3o s pport t-e p s- strategy )reate$ t-ro g- $istrib tion )-annels t-ey spen$ -ea7ily on a$7ertising an$ promotion. Firms t-at /ere selling t-eir o/n name an$ trie$ to $e7elop t-eir o/n image an$ rep tation. n$er t-eir o/n )orporate bran$ name parti) larly spent -ea7ily on a$7ertising. 3-ese 2irms p s-e$

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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

14.4 ,6MMAR8
3o s mmari?e t-is paper t-e gro p -a7e $e7ise$ a mo$el o tlining t-e a$7antages an$ $isa$7antage o2 ea)- 2oreign market entry strategy $is) sse$. 3-e 2irms most likely to se ea)- entry strategy are also -ig-lig-te$.
#$7antages Dess )omplexities t-an $ire)t exporting Dess Gisk 8n7ol7e$ Gea$ily #7ailable Expertise Greater (ro2it (otential Greater )ontrol o7er marketing mix. Closer to marketpla)e Closer relations-ip /itb yers. 8n5-o se experien)e an$ kno/le$ge gaine$ 8nexpensi7e /ay o2 a)-ie7ing 2oreign market entry Di)ensor takes minimal risks %isa$7antages Doss o2 )ontrol o7er ,(@s (oor S pporting Ser7i)es Dittle (romotion Minimal experien)e gaine$ /it-in t-e 2irm. Dess (ro2it (otential Hig- risk More time. personnel an$ )orporate reso r)es )ommitte$. S bstantial 8n7estment %istrib tion. a$ministrati7e an$ marketing )osts 2a)e$ by t-e 2irm Dimite$ parti)ipation in international markets. Di)ensor passes te)-nology kno/ -o/ on to ot-er party. %epen$ent on Di)ensee to exploit pro$ )ts potential. Da)k o2 )ontrol o7er operations. 4ran$ image at t-reat 2rom poor per2orman)e 2rom 2ran)-isee. Minimal skill an$ experien)e gaine$ /it-in t-e 2irm. 4est S ite$ 3o Firms getting ri$ o2 ex)ess )apa)ity. Small 2irms /itlimite$ reso r)es.

8n$ire)t Exporting

%ire)t Exporting

Firms t-at /is- to establis- a more permanent role in international markets.

Di)ensing

Companies t-at /is- to parti)ipate in international markets b t $o not -a7e t-e time or )apabilities to $o so.

Fran)-ising

K i)k /ay 2or )ompany to enter 2oreign market Gelati7ely 8nexpensi7e Geasonable le7el o2 )ontrol. (ro2its $epen$ent 2or bot- parties on

Firms /it- strong a bran$ or pro)esses. E22e)ti7e met-o$ o2 internationalisation 2or ser7i)es 2irms.

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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

per2orman)e o2 2ran)-ise May be only /ay o2 gaining a))ess to markets 8mpro7e$ a))ess to 2inan)ial reso r)es E)onomies o2 s)ale #))ess to ne/ te)-nologies an$ management pra)ti)es. Can rapi$ly expan$ into ne/ markets May o22er e22i)ient marketing an$ pro$ )tion #))ess to a$$itional so r)es o2 )apital S/i2t a))ess into market. #))ess to $istrib tion )-annels Existing ) stomer base Hig- )ontrol #))ess to Ga/ materials Do/ers man 2a)t ring )osts #7oi$s tari22s Market penetration 3otal )ontrol

:oint Lent res

Signi2i)ant )osts :L 7 lnerable as it is reliant on relations-ip bet/een t/o parties. C lt ral $i22eren)es prominent :L partner may be)ome $ynami) )ompetitor. Cot a separate legal entity. Geliant on positi7e relations-ip bet/een parties in7ol7e$.

Companies /it)omplementary pro$ )ts an$ )apabilities. Companies /it- a goo$ A2itB.

Strategi) #llian)es

Firms t-at re)ognise t-e ne)essity to internationalise b t 2eel t-e nee$ 2or 2oreign -elp.

#)9 isitions

Green2iel$ Jperations

Lery -ig- )osts %i22i) lt to 2in$ s itable )ompany 2or a)9 isition Compatibility problems /it- )ompanies@ pro$ )ts. Ha7e to establisoperations 2rom s)rat) M st set p $istrib tion )-annels. so r)e s ppliers 0 $istrib tors et). H ge reso r)e )ommitment

Darge. -ea7ily reso r)e$ 2irms t-at )an i$enti2y a s itable 2irm 2or a)9 isition.

Darge -ea7ily reso r)e$ 2irms. Firms /-o /is- to re$ )e )osts. parti) larly labo r )osts.

11.4 C/!CL6,$/!
3-e sele)tion o2 a market entry strategy is )riti)al to t-e s ))ess o2 a 2irm@s 2oreign operations. Ea)- 2irm planning on internationalising -as a $i22ering set o2 )ir) mstan)es. 3-ese )ir) mstan)es )an be eit-er internal or external to t-e 2irm. 8nternal )ir) mstan)es in)l $e a7ailability o2 reso r)es. experien)e o2 sta22 an$ spirit o2 entreprene rs-ip. External )ir) mstan)es in)l $e si?e o2 -ome market. attra)ti7eness o2 2oreign markets. an$ politi)al )on$itions in 2oreign markets to name b t a 2e/. 3-ese )ir) mstan)es $etermine t-e s itability o2 t-e $i22erent market entry strategies.

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Global Marketing Foreign Market Entry Strategies ___________________________________________________________________________

% e to a$7an)es in tele)omm ni)ations an$ in)reases in tra$e agreements t-e /orl$ is tr ly be)oming a global 7illage. 3-e tren$ o2 globalisation -as le$ to 2ier)e )ompetition /-ere internationalisation is no longer an option b t a ne)essity in many in$ stries. Foreign market entry is no longer restri)te$ to large m ltinationals an$ is no/ a matter o2 )on)ern 2or all b sinesses regar$less o2 si?e.

R%F%R%!C%,
4 )-el. 4.. (range. C.. (robst. G.. G ling. C.= (1''&) 8nternational :oint Lent re ManagementE Dearning to Cooperate an$ Cooperating to Dearn. Don$on Cateora. (. 0 Gra-am. :. ("**") 0nternational "arketing. CM. M)Gra/5Hill. %oole. 8. 0 Do/e. G. ("**1) 0nternational "arketing 3trategy. Don$on. 3-omson. Hollensen. S. (1''&) 5lobal marketing 6 ( "arket-7esponsive (pproach. Don$on. (renti)e Hall. :eannet. :.5(. 0 Hennessey. %. ("**,) 5lobal "arketing 3trategies. 4oston. Ho g-ton Mi22lin. :o-ansson. :. (1''<) 5lobal marketing 6 8oreign !ntry, 9ocal "arketing, and 5lobal "anagement. C-i)ago. 8r/in. >eegan. ;. 0 S)-legelmil)-. 4. ("**1) 5lobal "arketing "anagement - ( !uropean 2erspective. Don$on. (renti)e Hall. >otabe. M. 0 Helsen. >. ("**1) 5lobal marketing "anagement. CM. :o-n ;iley an$ Sons. >otler. (.. Fa-ey. D. 0 :at sripitak. S. (1'&5) The :ew #opetition - ;hat Theory < )idn=t Tell >ou (bout "arketing. Ce/ :ersey. (rnti)e5Hall. Mal-otra. C. >.. #gar/al. :. 0 1lga$o. F. M. ("**+) 8nternationali?ation an$ entry mo$esE # m ltit-eoreti)al 2rame/ork an$ resear)- propositions. ,ournal of 0nternational "arketing, 11(,). pp. 15+1. 3erpstra. L. 0 Sarat-y. G. (1''<) 0nternational "arketing. Flori$a. 3-e %ry$en (ress. ;al7oor$. ;. (1'&") Foreign market entry strategies. 3.(.". (dvanced "anagement ,ournal, ,&(") Spring. pp. 1,5"<.

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