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Strategies of market entry

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Strategies of market entry

  1. 1. Session: - 2014-2015 Topic:- Various market enter strategies in Globalization Submitted to:- submitted by :- Aditya Saraswat Trilok sir & Himanshu Verma
  2. 2. Meaning :- • Whenan organizationhasmade a decisiontoenteranoverseasmarket,there are a varietyof optionsopentoit. • These optionsvarywithcost,risk& the degree of control whichcanbe exercisedoverthem. • One of the mostimportantstrategicdecisionsininternational businessisthe mode of entering the foreignmarket. • Whenan organizationhasmade a decisiontoenteranoverseasmarket,there are a varietyof optionsopentoit. • These optionsvarywithcost,risk& the degree of control whichcanbe exercisedoverthem. • One of the mostimportantstrategicdecisionsininternational businessisthe mode of entering the foreignmarket. • The needfora solidmarketentrydecisionisanintegral partof a global marketentrystrategy. • Entry decisionswill heavilyinfluence the firm’sothermarketing-mix decisions. • Global marketershave tomake a multitude of decisionsregardingthe entrymode whichmay include: • (1) the targetproduct/market • (2) the goalsof the targetmarkets • (3) the mode of entry • (4) The time of entry • (5) A marketing-mix plan • (6) A control systemtocheck the performance inthe enteredmarkets DEFINATION  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.’’
  3. 3. BASIC ISSUES An organization willing to “go international” faces 3 major issues. • Marketing –which countries, which segments, how to manage, how to enter, with what information. • Sourcing – whether to obtain products, makeor buy. • Investment &Control – Joint Venture, global partner, acquisition. MARKET ENTRY STRATAGIES • EXPORTING • LICENSING • FRANCHISING • JOINTVENTURING • CONTRACT MANUFACTURING • MERGERS & ACQUASITIONS • COUNTER TRADE • TURNKEY CONTRACTS • THIRD COUNTRYLOCATION
  4. 4. EXPORTING • 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. FRANCHISING • Players : Franchisor & Franchisee. • In terms of distribution, the franchisor is a 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.
  5. 5. • The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business. Examples :- LICENSING  Licensing is defined as "the method of foreign operation 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. JOINT VENTURES • Joint ventures can be defined as "an enterprise in which two or more investors share ownership and 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. Examples
  6. 6. COUNTER TRADE • Largestindirectmethodof exportingis countertrade. • Competitive intensitymeansmore andmore investmentinmarketing. • In thissituationthe organizationmayexpandoperationsbyoperatinginmarketswhere competitionislessintensebutcurrencybasedexchange isnotpossible. • Also,countries maywishtotrade in spite of the degree of competition,butcurrencyagainisa problem. • Countertrade canalsobe usedto stimulate home industriesorwhere raw materialsare inshort supply. • It can, also,give a basisforreciprocal trade. • Estimatesvary,butcountertrade accountsfor about20-30% of worldtrade,involvingsome 90 nationsandbetweenUS$100-150 billioninvalue. TURNKEY CONTRACTS • Turnkeycontracts are commonin internationalbusinessinthe supply,erection& commissioningof plants, asinthe case oil refineries,steel mills,cement&fertilizerplantsetc.. Constructionprojects&franchisingagreements. • A turnkeyoperationisanagreementbythe sellertosupplyabuyerwitha facilityfullyequipped & readyto be operatedbythe buyer,whowill be trainedbythe seller. • The term isusedinfast foodfranchisingwhenafranchiseragreestoselectastore site,buildhe store,equipit,trainthe franchisee &employee. • Many turnkeycontracts involve government/publicsectorasbuyer. • A turnkeycontractormay subcontractdifferentphases/partsof the project. CONTRACTMANUFACTURING • A companydoinginternationalmarketingcontractswithfirmsinforeigncountriesto manufacture orassemble the productswhile retainingthe responsibilityof marketingthe product. • Thisis a commonpractice in internationalbusiness. • Many multinationalsemploythisinIndiaexample:ParkDavisHindustanLever,Ponds.
  7. 7. THIRD COUNTRY LOCATION • Thisis sometimesusedasanentrystrategy. • Whenthere isno commercial transactionbetween2nationsbecause of political reasons, • or whendirecttransactionsbetween2nationsare difficult& • if one nationwantsto enterothernation, • thenthe nationwill have tooperate fromthe thirdcountrybase. • It may be helpful totake advantage of the friendlytrade relationsbetweenthe thirdparty& the foreignmarketconcerned. • Sometimescommercial reasonsencourage thirdcountrylocation. • Example:RankXerox founditconvenienttoenterUSSRthroughitsIndianjoint venture Modi Xerox. MERGERS & ACQUISITIONS • Thisstrategyis alsoknownas an expansionstrategy. • M&As have beenimp& powerful driverof globalization. • Between1980 – 2000 the value of cross bordergrew at an average annual rate of 40%. • A large no.of foreignfirmshave enteredIndiathroughacquisition. • Example:Automobiles,Pharmacy,banking,telecometc.

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