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Global Entry Strategy

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Global Entry Strategy

  1. 1. GLOBAL Dr. Syed Ferhat Anwar Course Instructor International Business Environment (L301) Group 11 Fariha Islam RH-1 Moumita Shabur RH-17 Fableeha Bushra Choudhury RH-19 Sayeda Shifat Nazmee RH-63
  2. 2. GLOBAL ENTRY STRATEGY (GES) DEFINED
  3. 3. FACTORS AFFECTING THE GES Company size and resources Experience in using market entry modes (MEMs) Management risk attitudes Profit targets Industry feasibility and viability of MEMs Market growth rate
  4. 4. RELEVANCE OF MARKET ENTRY BARRIERS IN GES ‘Low entry and exit barriers reduce the risk in entering a new market, and may make the opportunity more attractive financially.’
  5. 5. SOURCES OF MARKET ENTRY BARRIERS
  6. 6. ECONOMIES OF SCALE PRODUCT DIFFERENTIATION CAPITAL REQUIREMENTS SWITCHING COSTS ACCESS TO DISTRIBUTION CHANNELS GOVERNMENT POLICY
  7. 7. PIONEER VS. LATE ARRIVALS
  8. 8. BENEFITS TO PIONEER:  Brand Image  Customer Loyalty  Technological Barriers LIMITATIONS TO PIONEER:  Advantage limited in case of high tech products Example: Pictured phones in late 1970’s
  9. 9. ADVANTAGE OF LATE ENTRANTS  Lower cost of production than cost of innovation  Minimal cost of product usage and awareness  Defined market Example: China, Hong Kong, Taiwan Bangladesh Telecom Industry: Citycell vs. Grameen Phone
  10. 10. RELEVANCE OF EXIT BARRIERS
  11. 11.  Moves to Germany in 1998  American approach failed in German lands  Wal-Mart's American managers pressured German executives to enforce American-style management practices in the workplace.  German court rules against Wal-Mart  High labor cost  Clashes with labor unions  Labor resisting management's demands  In 2006 sales of stores to metro retail chain  Cost of retreat: $1 billion
  12. 12. MODES OF ENTRY
  13. 13.  Exporting can be defined as the marketing of goods produced in one country into another  Traditional form of entry  Common approach for mature international companies with strong marketing and relational capabilities
  14. 14. Direct Exporting: The organization may use an agent, distributor, or overseas subsidiary, or act via a Government agency Indirect Exporting: The company sells to a buyer (importer or distributor) in the home country, which in turn exports the product. Example: Walmart and Sears
  15. 15.  Less risky  Low investment required relative to other modes of entry  The cost of establishing the manufacturing facilities overseas is minimized  Learning opportunity  Reduces the potential risks of operating overseas  Assists in diversification
  16. 16.  Lack of control and contact  High transport costs  Presence of tariff and other barriers  Very limited learning to the firms about the characteristics of the imported nation  Susceptible to exchange rate fluctuations
  17. 17. BANGLADESH’S SUCCESS: 2nd Largest Producer in Garments Export(USmillion $) Growth (%) EU countries 14745.39 17.35 USA 5141.38 2.90 Non-traditional 3603.15 21.15 markets Total 24491.88 13.83
  18. 18. SUCCESS FACTORS:  Cheap labor  Government support  Back to back letter credit  Compliance to international rules of trading
  19. 19. FAILURE STORY Ban on Shrimp Exports by EU and Japan Reason: Contamination in shrimps
  20. 20.  Setting up operations in foreign locations  Also known as wholly owned subsidiaries
  21. 21.  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  Assists in learning about the country’s market
  22. 22.  No risk of cultural conflicts  Cost of financing the import barriers reduced  Greater knowledge of local market allows the firm to strategize appropriately to gain more sales
  23. 23.  Most expensive method of entry  Risks associated with learning to do business in a new culture  High political risks of being nationalized  Continuous investments required for a long time until returns can be yield  Risk of management of the local resources  Political and environmental factors, example Fujifilm in US
  24. 24. Example Mercedes production in Pune , India  Started production in mid 1990s from Pimpri  In 2007 it acquired 100acres of land in Maharashtra  In 2009 production started in Pune  Rs.250 crores of investment  Dealership in 31 cities of India
  25. 25. Example Carrefour S.A.:  French multinational retailer  Fourth largest retail group  Failed operations in South Korea  Failed to understand Korean customers  Shut down in April 2006  Sales of stores worth $1.3 billion
  26. 26. A licensed asset may be:  A brand name  A company name  Patent  Trade secret  Product formulation
  27. 27. Top Licensed Brands
  28. 28.  Enables companies to evade tariffs, quotas or similar export barriers  Licensees are granted considerable autonomy  Licensor retains ownership of intellectual property  Costs are usually low, no capital or investment needed
  29. 29.  Less profitable than other entry modes  Quality control issues might arrive  Risk of licensees turning into strong competitors, even market leaders
  30. 30. Examples of Success  Calvin Klein  Disney
  31. 31. Examples of Success  “Happy Birthday to you”  Country example: China
  32. 32. Examples of Distress  Apple vs. Microsoft  Metallica vs. Napster Vs.
  33. 33. When is a Business “Franchisable”?  It needs to be credible  It needs to be unique  It needs to be teachable  It needs to provide an adequate return
  34. 34. Top Franchises in the World
  35. 35.  Established brand and customer base  Business support, training and assistance from franchiser  Reduced risk
  36. 36.  Large initial cost  Royalty payments  Limited flexibility and scope of creativity
  37. 37. Examples of Success  McDonald’s
  38. 38. Examples of Success  7-Eleven  The Body Shop  Country Example: USA
  39. 39. Examples of Distress  Quiznos  Golf
  40. 40. Other Types of Franchises  Social Franchises  Event Franchises  Third Party Logistics
  41. 41. LICENSING VS. FRANCHISING
  42. 42. COMPARISON CHART Franchising Licensing Governed by Securities law Contract law Registration Required Not required Territorial Rights Offered to franchisee Not offered; licensee can sell similar licenses and products in same area Support & Training Provided by franchiser Not provided Royalty Payments Yes Yes Use of Trademark/Logo Logo and trademark retained by franchiser and used by franchisee Can be licensed Control Franchiser exercises control over franchisee Licensor does not have control over licensee
  43. 43.  An enterprise in which two or more investors share ownership and control over property rights and operation  A cooperative joint venture is an agreement for the partners to collaborate but does not involve any equity investments. Example: Cisco
  44. 44.  Allows for sharing of risk (both financial and political)  Sharing of resources  Provides opportunity to learn new environment  Provides opportunity to achieve synergy by combining strengths of partners  May be the only way to enter market given barriers to entry  Access to distribution network  Contact with local suppliers and government officials
  45. 45.  Lack of control  Requires strong coordination  Partner may become a competitor  Collision of cultures  Conflicts arising over matters such as strategies, resource allocation, transfer pricing, ownership of critical assets like technologies and brand names
  46. 46. Example Case of Sony Ericsson
  47. 47. Factors that led to Failure: 1. Lack in communication and coordination 2. Lack in dominant control of one party over the other 3. Sony needed to achieve what Apple had 4. The consumer-focused cellphone business ran contrary to Ericsson's engineering-heavy, business-to-business focus
  48. 48.  Coalition of two or more organizations to achieve strategically significant goals that are mutually beneficial  Examples include • Shared manufacturing • Research and Development (R&D) arrangements • Distribution alliances • Marketing agreements  Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate
  49. 49.  Shared risk  Shared knowledge  Opportunities for growth  Speed to market  Complexity  Costs  Access to resources  Access to target markets  Economies of scale
  50. 50.  Creating a competitor  Uneven alliances with minority share  Foreign confiscation  Risk of losing control over proprietary information  Coordination difficulties
  51. 51. Example Hewlett Packard & Walt Disney
  52. 52. Reasons for Success: 1. Alliance was well negotiated and structured 2. Solid planning and manageable expectations regarding implementation 3. Coordinating brand exposure, joint marketing and customer experience
  53. 53.  A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm
  54. 54.  A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm
  55. 55.  Can quickly position a firm in a new business  Less time to establish presence  Takes a potential competitor out of the market  Lower risk than Greenfield Investments
  56. 56.  Expensive way to enter a market  Likelihood of overbidding  Not all bundles of assets and capabilities are of interest to the acquirer  Costly  Integrating an acquired company into a corporation is challenging
  57. 57. Example Daimler-Benz AG and Chrysler
  58. 58. Reasons behind Failure:  Cultural clash  Attitude to hierarchy was different  Coordination problems  Heavy competition from non-US brands in the US auto market  Issue of trust
  59. 59. FOREIGN DIRECT INVESTMENT (FDI) AND GES
  60. 60. FDI figures reflect investment flows out of the home country as companies invest in or acquire plants, equipment, or other assets Foreign investments may take the form of minority or majority shares in joint ventures, minority or majority equity stakes in another company or outright acquisition A company may choose to use a combination of these entry strategies by acquiring one company, buying an equity stake in another, and operating a joint venture with a third
  61. 61.  A type of project that is constructed so that it could be sold to any buyer as a completed product  Contractor agrees to deliver every detail of the project to a foreign client, including the training of operating personnel  Upon completion of the contract, the foreign client receives the "key" to a plant ready for its overall performance
  62. 62.  Allows for a means of exporting process technology  Less risky than conventional strategies  Economic benefit  Applicable for technology based firms
  63. 63.  The firm has no long term interest in the country  Firm can take minority equity interest in company  Inadvertently creates competition
  64. 64. Example PACIFIC RESOURCES INTERNATIONAL
  65. 65.  Involves taking advantage of a channel to an international market rather than selecting the country-market in a more conventional manner  The most common form of piggybacking is to internationalize by serving a customer who is more international than the vendor firm
  66. 66.  Low risk method of beginning export operations for the rider  Focused selling to the appropriate market segments  Advantage for the rider is that he has the chance to gain market knowledge and expertise through the carrier
  67. 67.  Company leaves control of products to intermediary  Loss of control of product in the long run  Competitive advantage left open for the carrier to examine  Finding a suitable partner is difficult
  68. 68. Example F&P GRUPPO
  69. 69. RISK CONTINUUM
  70. 70. UNCONVENTIONAL ENTRY STRATEGIES
  71. 71. Bangladesh’s Military Activities Overseas  1991 - Operation Desert Storm; and the world's largest contributor (10,736) to UN peacekeeping forces  2007 - Major deployments in Democratic Republic of Congo, Liberia, Sudan, Timor-Leste and Côte d'Ivoire  2013 - second highest number of total personnel to United Nations Peacekeeping Operations; with (1,830 police, 73 UNMEM and 6,605 troops) attached to various UN peacekeeping forces worldwide
  72. 72. India-Bangladesh  India and Bangladesh have signed a Cultural Exchange Program (CEP) for the years 2010-2012  Both sides are to exchange the visits of scholars/academicians in the field of art, culture and literature and also dance, music, theatre, Jatra groups, art exhibitions, mime shows, performing art groups, exhibitions and other cultural events to meet the local demands for exposure to each other’s rich cultural tradition
  73. 73. BRAC  Works for economic development, education, public health, social development and disaster relief  Apart from Bangladesh, BRAC is present Afghanistan, Pakistan, Sri Lanka, Uganda, Tanzania, South Sudan, Sierra Leone, Liberia, Haiti and The Philippines  It has successfully crossed national boundaries with its unconventionally beneficial development works
  74. 74. THANK YOU

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