Chapter 3 International Expansion Strategies

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Chapter 3International Expansion Strategies

2
International development phases

• Phase 1 Initial market entry
• Phase 2 Local market expansion
• Phase 3 Globalization

3
Choosing which markets to enter

• Opportunities and threats are assessed at two
  different levels
• General business climate of a country
• Specific product market

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Country/Market Choice

• Market information
• Competitor information
• Internal information

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Market information

• Market potential measure current demand,
  forecast future growth, new product launches
• Market access openness, cost and delays, legal
  and customs obstacles, marketing infrastructure
  (distribution channels, ad agencies, etc)
• Market receptiveness perception of firm, made
  in effect of country of origin
• Market stability economic, legal, political,
  cultural risks

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Competitor information

• Who are the competitors?
• Inventory of competition
• Direct/indirect
• Local/global
• How many?
• Market share?

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Internal Information

• Production capacities product adaptation,
  quality control, packing, stocking, transport
• Marketing and sales situation current strategy,
  distribution channels, brand image, quality
  advantages, relationships
• General strategic situation situation in
  domestic market, new product development,
  innovation, competitive advantage
• Business goals short term and long term goals
• Financial resources costs of canvassing, capital
  budgeting orientation, available cash, export
  subsidies
• Human resources staff and management motivation,
  availability, training required, expatriates
• Internal export audit, diagnostic export

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Criteria for ranking export markets

• General attractiveness of the market
• Competitive advantage
• Risk
• Global strategic importance
• Possible synergies
• Market-Portfolio Matrix

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Market-Portfolio Matrix
High
INVEST
Country Attractiveness
SELECTIVITY
DIVEST
Low
Low
High
Internal strengths
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Market selection strategies (Ayal and Zif)

• Choice of target markets is based on two
  different alternatives
• Market penetration (concentration) vs. market
  skimming (diversification) a limited number of
  markets or large number of markets
• Market penetration rather low expansion rate in
  a few markets for intensive development. The goal
  is to obtain high market share in each country
  before expanding into others.
• Market skimming high rate of return while
  maintaining a low level of resource commitment.
  The firm selects more easily available market
  targets while minimizing risk and investment.
• Segment penetration (concentration) vs. segment
  skimming (diversification) similar or dissimilar
  market segments
• Segment penetration focus on a small number of
  segments in which the firms seeks a dominant
  position
• Segment skimming brand and product diversity,
  specific launches for some markets

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Timing of entry

• Simultaneous entry vs. sequential entry
• Simultaneous entry preempt competition be
  establishing presences in all major markets,
  limit opportunities for imitation, potential
  scale economies may lead to lower unit costs
• Sequential entry build on knowledge and
  experience, generally preferred if substantial
  financial, managerial or other resources are
  required