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Entry Strategies
Corporate Management
Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
Entry Strategies
• Market entry
strategy is
influenced by the
firm and product
characteristics and
the domestic and
international market
characteristics.
Foreign Market Entry and Operations Strategies
Exporting
• Direct Exporting.
• Indirect Exporting.
Contractual Agreement
• Licensing & Franchising.
• Strategic Alliance.
• Contract Manufacturing.
Production facility in foreign
market.
• Assembly Operations.
• Wholly owned
manufacturing facility.
• Joint Ventures.
Mergers and Acquisitions
Direct exporting
In direct exporting,
the firm becomes
directly involved in
marketing its
products in foreign
markets, because the
firm itself performs
the export task
(rather than
delegating it to
others).
Direct exporting
To implement a direct exporting
strategy, the firm must have
representation in the foreign
markets. This can be achieved in a
number of ways:
– Sending international sales
representatives into the foreign
market.
– Selecting local representatives or
agents to prospect the market.
– Using independent local distributors
who will buy the products to resell
them in the local market.
– Creating a fully owned commercial
subsidiary to have a greater control
over foreign operations.
Indirect exporting
The market-entry
technique that offers the
lowest level of risk and the
least market control is
indirect export, in which
products are carried
abroad by others. The firm
is not engaging in
international marketing
and no special activity is
carried on within the firm;
the sale is handled like
domestic sales
Indirect exporting
There are several different
methods of indirect
exporting:
– The simplest method is to deal
with foreign sales through the
domestic sales organisation.
– A second form of indirect
exporting is the use of
international trading
companies with local offices
all over the world.
– A third form of indirect
exporting is the export
management company
located in the same country as
the producing firm and which
plays the role of an export
department.
Example
The mumbai based
American Dry Fruits
(ADF) which began
selling a range of
packaged foods liked
Chutneys, Spices,
Canned vegetables,
ready to eat dals, etc
under different brand
names later moved to
other countries with
large Indian population.
Licensing & Franchising
Licensing is another way
to enter a foreign market
with a limited degree of
risk. Under international
Licensing, a firm in one
country permits a firm in
another country to use
its intellectual property(
Patents, trade marks
etc).
Licensing & Franchising
Franchising is a business model
in which many different
owners share a single brand
name. A parent company
allows entrepreneurs to use
the company's strategies and
trademarks; in exchange, the
franchisee pays an initial fee
and royalties based on
revenues. The parent company
also provides the franchisee
with support, including
advertising and training, as
part of the franchising
agreement.
Licensing & Franchising
Licensing is similar to
franchising except that
the franchising
organisation tends to be
more directly involved in
the development and
control of the marketing
programme.
Licensing & Franchising
The major drawback of
licensing is the problem of
controlling the licensee
due to the absence of
direct commitment from
the international firm
granting the licence. After
few years, once the know-
how is transferred, there is
a risk that the foreign firm
may begin to act on its
own and the international
firm may therefore lose
that market.
Example
ITC Hotels and ITT
Sheraton corporation had
an agreement under which
ITC Hotel’s Welcom group
franchised two of its hotels
in Bangkok and Hong kong
to ITT Sheraton holding, in
exchange, the franchise for
Sheraton in India. Later,
partners decided to set up
a joint venture with
Sheraton having major
stake to manage all new
ITC hotel projects in India.
Strategic Alliance
It is an arrangement
between two companies
that have decided to share
resources to undertake a
specific, mutually
beneficial project. A
strategic alliance is less
involved and less
permanent than a joint
venture, in which two
companies typically pool
resources to create a
separate business entity.
Strategic Alliance
In a strategic alliance,
each company maintains
its autonomy while
gaining a new
opportunity. A strategic
alliance could help a
company develop a more
effective process, expand
into a new market or
develop an advantage
over a competitor,
among other
possibilities.
Example
An oil and natural gas
company might form a
strategic alliance with a
research laboratory to
develop more commercially
viable recovery processes. A
clothing retailer might form
a strategic alliance with a
single clothing
manufacturer to ensure
consistent quality and
sizing. A major website
could form a strategic
alliance with an analytics
company to improve its
marketing efforts.
Contract Manufacturing
In contract
manufacturing, the firm’s
product is produced in
the foreign market by
local producer under
contract with the firm.
Because the contract
covers only
manufacturing, marketing
is handled by a sales
subsidiary of the firm
which keeps the market
control.
Contract Manufacturing
Contract manufacturing
obviates the need for plant
investment, transportation
costs and custom tariffs and
the firm gets the advantage
of advertising its product as
locally made. Contract
manufacturing also enables
the firm to avoid labour and
other problems that may
arise from its lack of
familiarity with the local
economy and culture.
Example
Balsara’s private label
manufacturing activity is
focused on the supply of
children’s toothpaste
formulations. Balsara’s
empahsis on Private lable
products and contract
manufacturing has
resulted in increased
business from North
American and European
Markets.
Assembly Operations
Assembling is a
compromise between
exporting and foreign
manufacturing. The firm
produces domestically all
or most of the
components or
ingredients of its product
and ships them to foreign
markets to be put
together as a finished
product.
Assembly Operations
By shipping CKD
(completely knocked
down), the firm is saving on
transportation costs and
also on custom tariffs which
are generally lower on
unassembled equipment
than on finished products.
Another benefit is the use
of local employment which
facilitates the integration of
the firm in the foreign
market.
Example
Notable examples of
foreign assembly are the
automobile and farm
equipment industries. In
similar fashion, Coca-Cola
ships its syrup to foreign
markets where local bottle
plants add the water and
the container.
Wholly owned manufacturing facility.
Companies with long term
and substantial interest in
the foreign market normally
establish wholly owned
manufacturing facilities
there. A number of factors
like trade barriers,
difference in the production
and other costs encourage
the establishment of
production facilities in the
foreign markets.
Joint Ventures
Foreign joint ventures have
much in common with
licensing. The major
difference is that in joint
ventures, the international
firm has an equity position
and a management voice in
the foreign firm. A
partnership between host-
and home-country firms is
formed, usually resulting in
the creation of a third firm.
Mergers and Acquisitions
From a legal point of view,
a merger is a legal
consolidation of two
companies into one
entity, whereas an
acquisition occurs when
one company takes over
another and completely
establishes itself as the
new owner
Entry strategies  - corporate management - Strategic Management - Manu Melwin Joy
Entry strategies  - corporate management - Strategic Management - Manu Melwin Joy

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Entry strategies - corporate management - Strategic Management - Manu Melwin Joy

  • 2. Prepared By Kindly restrict the use of slides for personal purpose. Please seek permission to reproduce the same in public forms and presentations. Manu Melwin Joy Assistant Professor Ilahia School of Management Studies Kerala, India. Phone – 9744551114 Mail – manu_melwinjoy@yahoo.com
  • 3. Entry Strategies • Market entry strategy is influenced by the firm and product characteristics and the domestic and international market characteristics.
  • 4. Foreign Market Entry and Operations Strategies Exporting • Direct Exporting. • Indirect Exporting. Contractual Agreement • Licensing & Franchising. • Strategic Alliance. • Contract Manufacturing. Production facility in foreign market. • Assembly Operations. • Wholly owned manufacturing facility. • Joint Ventures. Mergers and Acquisitions
  • 5. Direct exporting In direct exporting, the firm becomes directly involved in marketing its products in foreign markets, because the firm itself performs the export task (rather than delegating it to others).
  • 6. Direct exporting To implement a direct exporting strategy, the firm must have representation in the foreign markets. This can be achieved in a number of ways: – Sending international sales representatives into the foreign market. – Selecting local representatives or agents to prospect the market. – Using independent local distributors who will buy the products to resell them in the local market. – Creating a fully owned commercial subsidiary to have a greater control over foreign operations.
  • 7. Indirect exporting The market-entry technique that offers the lowest level of risk and the least market control is indirect export, in which products are carried abroad by others. The firm is not engaging in international marketing and no special activity is carried on within the firm; the sale is handled like domestic sales
  • 8. Indirect exporting There are several different methods of indirect exporting: – The simplest method is to deal with foreign sales through the domestic sales organisation. – A second form of indirect exporting is the use of international trading companies with local offices all over the world. – A third form of indirect exporting is the export management company located in the same country as the producing firm and which plays the role of an export department.
  • 9. Example The mumbai based American Dry Fruits (ADF) which began selling a range of packaged foods liked Chutneys, Spices, Canned vegetables, ready to eat dals, etc under different brand names later moved to other countries with large Indian population.
  • 10. Licensing & Franchising Licensing is another way to enter a foreign market with a limited degree of risk. Under international Licensing, a firm in one country permits a firm in another country to use its intellectual property( Patents, trade marks etc).
  • 11. Licensing & Franchising Franchising is a business model in which many different owners share a single brand name. A parent company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement.
  • 12. Licensing & Franchising Licensing is similar to franchising except that the franchising organisation tends to be more directly involved in the development and control of the marketing programme.
  • 13. Licensing & Franchising The major drawback of licensing is the problem of controlling the licensee due to the absence of direct commitment from the international firm granting the licence. After few years, once the know- how is transferred, there is a risk that the foreign firm may begin to act on its own and the international firm may therefore lose that market.
  • 14. Example ITC Hotels and ITT Sheraton corporation had an agreement under which ITC Hotel’s Welcom group franchised two of its hotels in Bangkok and Hong kong to ITT Sheraton holding, in exchange, the franchise for Sheraton in India. Later, partners decided to set up a joint venture with Sheraton having major stake to manage all new ITC hotel projects in India.
  • 15. Strategic Alliance It is an arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project. A strategic alliance is less involved and less permanent than a joint venture, in which two companies typically pool resources to create a separate business entity.
  • 16. Strategic Alliance In a strategic alliance, each company maintains its autonomy while gaining a new opportunity. A strategic alliance could help a company develop a more effective process, expand into a new market or develop an advantage over a competitor, among other possibilities.
  • 17. Example An oil and natural gas company might form a strategic alliance with a research laboratory to develop more commercially viable recovery processes. A clothing retailer might form a strategic alliance with a single clothing manufacturer to ensure consistent quality and sizing. A major website could form a strategic alliance with an analytics company to improve its marketing efforts.
  • 18. Contract Manufacturing In contract manufacturing, the firm’s product is produced in the foreign market by local producer under contract with the firm. Because the contract covers only manufacturing, marketing is handled by a sales subsidiary of the firm which keeps the market control.
  • 19. Contract Manufacturing Contract manufacturing obviates the need for plant investment, transportation costs and custom tariffs and the firm gets the advantage of advertising its product as locally made. Contract manufacturing also enables the firm to avoid labour and other problems that may arise from its lack of familiarity with the local economy and culture.
  • 20. Example Balsara’s private label manufacturing activity is focused on the supply of children’s toothpaste formulations. Balsara’s empahsis on Private lable products and contract manufacturing has resulted in increased business from North American and European Markets.
  • 21. Assembly Operations Assembling is a compromise between exporting and foreign manufacturing. The firm produces domestically all or most of the components or ingredients of its product and ships them to foreign markets to be put together as a finished product.
  • 22. Assembly Operations By shipping CKD (completely knocked down), the firm is saving on transportation costs and also on custom tariffs which are generally lower on unassembled equipment than on finished products. Another benefit is the use of local employment which facilitates the integration of the firm in the foreign market.
  • 23. Example Notable examples of foreign assembly are the automobile and farm equipment industries. In similar fashion, Coca-Cola ships its syrup to foreign markets where local bottle plants add the water and the container.
  • 24. Wholly owned manufacturing facility. Companies with long term and substantial interest in the foreign market normally establish wholly owned manufacturing facilities there. A number of factors like trade barriers, difference in the production and other costs encourage the establishment of production facilities in the foreign markets.
  • 25. Joint Ventures Foreign joint ventures have much in common with licensing. The major difference is that in joint ventures, the international firm has an equity position and a management voice in the foreign firm. A partnership between host- and home-country firms is formed, usually resulting in the creation of a third firm.
  • 26. Mergers and Acquisitions From a legal point of view, a merger is a legal consolidation of two companies into one entity, whereas an acquisition occurs when one company takes over another and completely establishes itself as the new owner