6 International market entry and development

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6 International market entry and development

• Interrelation between external and internal
  factors in shaping market entry and development
  strategy
• Factors influencing country/market selection
• Alternative methods of entering cross-border
  markets
• The need to configure and co-ordinate key
  business functions to effect the successful
  implementation of the chosen entry strategy
• How progresive corrective adjustments to market
  entry strategy result from inadequate business
  performance
• The reason international market entry and
  development can fail
• Market concentration versus market spreading

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Worldwide
International regional
Internationalisation
Retrenchment
International market entry a development
Restricted national market scope
Phase 1
Phase 2
Phase 3
Phase 4
Restricted national market scope
International market entry and development
International regional
Worldwide competitor
Figure 6.1. The phase model of international
business development
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External tiggers
Move to international scope
Meta trends
International business development
Industry competn
Organisatl dynamics
Vision, mindset
Return to restricted national market scope
Internal triggers
Figure 6.2 Developing an international business
strategy
4
Internal tr.
Cross border market?
n
Home market
External tr.
y
Market selection
Method selection
Config. functions
y
PerformanceOK?
GO ON
n
Corrective adjust.
5
Cross-border market opportunities growth and
profits
Visionary leadership Exploitation of core
competencies Opportunity to realize competitive
interdependencies
Saturation/decline of local/national
market Intensity of competition Movement of key
customers abroad Entry by cross-border rivals to
local/national market
Current level of business performances Internal
pressure from disaffected managers Excess
capacity
Table 6.1 External versus internal triggers to
change proactive or reactive?
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IRRATIONAL
Vision/mindset
Organisational dynamics
1
Internl Business Strategy
WHAT?
RATIONAL
Industry competition
Meta trends
2
4
Market screening and selection
Entry mode
HOW?
Market Entry Stategy
3
Implementation of market entry strategy
Business performance
Figure 6.3 Generic framework Market entry and
development strategies
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External
Internal
Characteristics
Market entry and development strategy determined
by external factors
Market entry and development strategy determined
by internal factors
Overall decision
Key factors influencing the entry decision
Strategy strongly influenced by external
assessment of market and business opportunities,
level of competition, etc.
Strategy strongly influenced by power elites in
the organisation who control overall direction of
the organisation


Emphasis tends to be on a highly rational and
planned approach

• Market selection and entry modes may be based on
• intuition rather than hard evidence
• personal preferences of chief executive/senior
  managers

Nature of the process
Potential weaknesses

• Over-emphasis on external factors
• neglect of internal context
• neglect ability to implement externally
  determined strategy

Key decision-makers may have an inaccurate view
of the external context, leading to the
development of an inappropriate strategy for the
organisation
Table 6.2 Alternative decision-making processes
to choosing market entry strategies
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Decisions

• Wrong significant penalties
• Investment of managerial time
• Investments of financial resources
• Shareholders loss confidence
• Opportunities cost

• Right benefits
• No vasted managerial time
• No vasted financial resources
• Shareholders increasing support
• Higher growth path

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Constant adjustment and iteration!
Market screening and selection
Business performance
Entry mode
Implementation
Figure 6.4 The inter-relationships between the
elements of the market entry model
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Market screening and selection

• Political and economic risks
• Cultural diversity or convergence
• Product match
• Size of market and growth rates
• Extent of competition
• Scale of entry

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Product match DisneyUS Disney
EuroDisney

• Proven management, marketing strength
• Family annual holiday
• Artificial castles
• Simulated flight over Big Ben
• Different culture a little bit childish

• New business, no experience
• Day visitors
• Why? (Loire valley)
• Why? (London within easy reach)
• Different culture
• Economic difficulties in Europe

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Contextual factors Aacceptable Uunacceptable
Country A
Country B
Country C
Country D
Contextual factors (Uunacceptable/ Aacceptable)
Political and economic risks
A
A
A
A
A
U
A
Cultural diversity
A
Specific product-market (rank order)
Product match
5
5
2
-
Size of market
3
2
1
-
Expected growth
2
3
2
-
Extent of competition
2
1
2
-
Scale of entry
2
3
1
-
Unweighted total
14
14
8
-
Table 6.4 Market selection grid
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Entry modes

• Degree of control
• Resources available
• Degree of risk
• Speed
• Opportunities available
• Expected return

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Classification of entry modes

• Export entry mode
• Indirect
• Direct
• Contract entry mode
• Licensing
• Franchising

• Investment entry mode
• Independent venture
• Acquisition
• Joint venture
• Strategic alliance

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Entry option C
Market entry
Entry option A
Entry option B
Value (1-5) (b)
Weighted score (1)x(b)
Weight (1-10) (1)
Value (1-5) (4)
Weighted score (1)x(4)
Value (1-5) (2)
Weighted score (1)x(2)
Key factors
Degree of control
Resource availability
Level of risk
Speed
Expected return
Opportunities available
-
-
-
-
Total weighted score
-
-
-
-
Rank order
Table 6.6. Entry mode grid
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Implementation of chosen market entry mode

• Marketing
• Human resources
• Operations
• Logistics
• Finance

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Business performance

• Planned vs. actual performance
• Reasons for failure
• Wrong implementation
• Inappropriate market screening and selection
• Unforeseen events
• Retaliation of indigenous competitors

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Market screening and selection
Business perfor-mance
Entry mode
Implemen-tation
Performance unacceptable
Review implementation
Review entry strategy
Review basis for screeening and market selection
Corrective adjustments
Figure 6.5 Corrective adjustments to the chosen
market entry strategy
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Market entry
Entry Japan
Entry Germany
Weight (1-10) (1)
Value (1-5) (4)
Weighted score (1)x(4)
Value (1-5) (2)
Weighted score (1)x(2)
Key factors
Degree of control
Resource availability
Level of risk
Speed
Expected return
Opportunities available
-
-
-
Total weighted score
-
-
-
Rank order
Entry mode grid