Global Market Entry Strategies

1
Global Market Entry Strategies

• Operational reasons for setting up overseas
  manufacture
• Strategic reasons for investing in local
  operations
• Methods of overseas production
• Exporting options
• Joint Ventures and Strategic Alliances

2
Operational reasons for setting-up overseas
manufacture

• reduced costs of transportation
• reduced barriers/ quota handicap e.g. Nissan
• some governments demand investment with market
  entry e.g. China
• Customers sometimes prefer local manufacture e.g.
  Heinz British?
• Government contracts prefer firms contributing to
  the local economy

3

• Improved local market information
• local manufacture ensures greater commitment to
  international markets
• Faster response and Just-in-time delivery
• Doole, Phillips and Lowe (1994)

4
Strategic reasons for investing in local
operations

• Gain new business
• demonstrates strong commitment
• persuades customers to change suppliers
• provides better service and more reliability
• Defend existing business
• avoid market restrictions as sales increase,
  particularly in single market

5

• Move with established customer
• component suppliers follow customers to compete
  with local component suppliers
• Save costs
• labour, raw materials and transport
• Avoid government restrictions to import certain
  goods
• Doole, Phillips and Lowe (1994)

6
Exporting

• Indirect
• export houses
• UK buying offices of foreign stores or
  governments
• complementary exporting
• Direct
• sales to final user
• overseas agencies
• distributors and stockists
• company branch offices abroad
• Degree of involvement v control?

7
Methods of overseas production

• Licensing
• Companies with strong brand or know-how
• e.g. Coca-Cola, Disney
• Franchising
• more of a whole package
• e.g.Body Shop, KFC
• Contract manufacture
• bulk items e.g. Nike
• components

8

• Joint ventures -
• e.g. Burmah Castrol in S.Korea
• Wholly owned overseas subsidiaries
• Organic growth

9
Strategic Alliances

• Strategic alliances can range from loose
  networking relationships to very tight
  contractual relationships such as joint ventures.
• e.g. code share where airlines of a similar
  type sell each others tickets. There is no
  co-ownership.
• Types
• technology swaps
• RD exchanges
• distribution relationships
• Driving forces
• insufficient resources
• High RD costs
• Concentration of firms in mature markets
• Market access

10
Joint ventures e.g European Airbus.

• Orgs can remain separate, but have a tight legal
  relationship.
• Reasons for setting up
• overcome foreign ownership restrictions
• increase speed of entry
• exploit new opportunities, complementary
  technologies and management skills
• achieve worldwide presence at lower cost
• Disadvantages
• differences in partner aims and objectives
• equal ownership and different options can slow
  decision making
• dominance by one partner can lead to resentment
  in the other
• Large time commitment for education, negotiation
  and agreement with partner

11
Mergers

• The identity of each of the merging companies is
  subordinated into the identity of the newly
  merged organisation, or disappears.
• Benefits include
• Cutting cost
• Eliminate competition
• Synergy augments mutual strengths
• Case study Chrysler and Mercedes.