2. Workshop Agenda
 INTERNATIONAL MARKET ENTRY
MODES
 PROCESS OF INTERNATIONALISATION
 THEORETICAL/CONCEPTUAL
FRAMEWORKS
 BOARD MEETING ACTIVITY

3. BASIC FOREIGN EXPANSION
ENTRY DECISIONS
 International Market Entry
 Which markets to enter
 When to enter these markets
 What is the scale of entry

4. WHICH FOREIGN MARKETS
 Favorable
 Politically stable developed and developing
nations
 Free market systems
 No dramatic upsurge in inflation or private-sector
debt
 Unfavorable
 Politically unstable developing nations with a
mixed or command economy or where
speculative financial bubbles have led to excess
borrowing

5. EARLY MARKET ENTRY
 Advantages
 First-mover advantage.
 Build sales volume.
 Move down experience curve and achieve cost
advantage.
 Create high switching costs.
 Disadvantages
 First mover disadvantage - pioneering costs.
 Changes in government policy.

6. MARKET ENTRY SCALE
 Large scale entry
 Strategic Commitments - a decision that has a
long-term impact and is difficult to reverse.
 May cause rivals to rethink market entry.
 May lead to indigenous competitive response.
 Small scale entry
 Time to learn about market.
 Reduces exposure risk.

7. ENTRY MODES
 Exporting
 Turnkey Projects
 Licensing
 Franchising
 Joint Ventures
 Wholly Owned Subsidiaries
 Strategic Alliances

8. Exporting
 Advantages
 Avoids cost of establishing manufacturing
operations
 May help achieve experience curve and location
economies
 Disadvantages
 May compete with low-cost location
manufacturers
 Possible high transportation costs
 Tariff barriers
 Possible lack of control over marketing reps
14-8

9. Piggy backing
 Distribution of products is through utilising the
international distribution network of other
international manufacturers.
 Advantages
 Effective entry strategy into developed countries
 Cost-effective
 Economies of Scale
 Disadvantages
 Often poor channels of marketing communication
 Locked into non strategic unsatisfactory arrangement.

10. Turnkey projects
 Contractor agrees to handle every detail of
project for foreign client
 Advantages
 Can earn a return on knowledge asset
 Less risky than conventional FDI
 Disadvantages
 No long-term interest in the foreign country
 May create a competitor
 Selling process technology may be selling
competitive advantage as well
14-10

11. Licensing
 Agreement where licensor grants rights to
intangible property to another entity for a
specified period of time in return for royalties
 Advantages
 Reduces development costs and risks of establishing
foreign enterprise.
 Lack capital for venture.
 Unfamiliar or politically volatile market.
 Overcomes restrictive investment barriers.
 Others can develop business applications of intangible property.
14-11

12. Franchising
 Franchiser sells intangible property and
insists on rules for operating business.
 Advantages
 Reduces costs and risk of establishing enterprise
 Disadvantages
 May prohibit movement of profits from one
country to support operations in another country
 Quality control
14-12

13. NATURE OF
STRATEGIC
Range of assets possessed by Partner Range of assets possessed by
ALLIANCE
A in home country Partner B in international market
Market access / distribution Product-market knowledge
Manufacturing competence
Franchising Market access/distribution
Manufacturing competence
Raw materials Licensing Process know-how
Management
Marketing
Product-market knowledge Product-market know-how
Partnership
Market access / distribution Product process know – how
Manufacturing competence Joint Product-market knowledge
Raw materials ventures Raw materials
Management Management
(Bradley, 2005:241)

14. Joint Ventures
 A foreign company invites an outside
partner to share stock ownership in the new
unit. The ownership could vary for
companies accepting minority or majority
position in the Joint Venture.
(Jeanet & Hennesey, 2004:300)

15. JOINT VENTURES
Advantages
 Access to new markets and distribution
networks
 Benefit from local partner’s knowledge.
 Shared costs/risks with partner.
 Reduced political risk.

16. JOINT VENTURES
Disadvantages
 Ambiguous objectives.
 Partners have different objectives for the joint venture
 Imbalance of Expertise
 Poor integration due to different management styles and
cultures brought in.
 Early stages are difficult.

17. WHOLLY OWNED SUBSIDIARY
 Subsidiaries could be Greenfield investments or
acquisitions
 Advantages
 No risk of losing technical competence to a competitor
 Tight control of operations.
 Realize learning curve and location economies.
 Disadvantage
 Bear full cost and risk

18. STRATEGIC ALLIANCES
 Cooperative agreements between potential or actual
competitors.
 Advantages
 Facilitate entry into market
 Share fixed costs
 Bring together skills and assets that neither company has
or can develop
 Establish industry technology standards
 Disadvantages
 Competitors get low cost route to technology and markets

19. Why Strategic Alliances
 High cost of technology development
 Reduction of Psychic Difference
 Good way to secure access to foreign markets
 Host country may require some local ownership

20. Global Alliances
 Firms join to attain world leadership
 Each partner has significant strength to bring to the
alliance
 A true global vision
 Relationship is horizontal not vertical
 When competing in markets not part of alliance, they
retain their own identity

21. Partner selection
 Get as much information as possible on the
potential partner
 Collect data from informed third parties
 Former partners
 Investment bankers
 Former employees
 Get to know the potential partner before
committing
 Expert Opinion

22. Characteristics of Strategic Alliances
(HILL 2005:500)
Independence of
Participants
Benefits Technology
Control Products
Shared Ongoing
Benefits Contributions
Markets
Cooperation

23. Managing the alliance
 Build trust
 Relational capital
 Learning from partners
 Diffusion of knowledge

24. Wholly Owned Subsidiary
Stage 4
L installation of foreign
production facilities
E
V
E Stage 3
L Franchising establishment of
foreign sales affiliates Joint Venture
O Licensing
F
Stage 2
C export by independent Export
O representatives
N
T
R Stage 1
O no regular export Indirect Export
L activities
Amount of Resources Committed - Foreign Market
Approaches to Foreign Market Entry - Uppsala model (Bartlett, Ghoshal & Beamish, 2008:9)

25. Ohmae's (1990) 5-stage globalisation model
(evolutionary)
1. Export orientated company (develop strong product base in home
market)
2. Establish overseas branches
3. Relocating production base to key markets
4. 'Insiderisation': transferring corporate functions from parent firm
HQ to new local environment
5. Complete global company: establishing global branding
(Ohmae, K. 1990, The Borderless World, Harper Business, New York.)

26. RISK & CONTROL IN MNE
(Doole & Lowe, 2004:220)
Cooperation
Strategies Direct Invest’
Joint ventures Own subsidiary
Strategic alliances Acquisition
Assembly
Direct Exporting
CONTROL
Distributors
Agents
Direct marketing/
E-commerce
Franchising
Management contracts
Indirect Exporting
Piggybacking
Trading companies
Export management companies
Domestic purchasing
RISK

27. PRESSURE OF GLOBAL
Globally
INTEGRATION:
Integrated
• Importance of Multinational Transnational Strategy
Product
Customers
Emphasis
• Presence of Multinational
Competitors Multifocal
• Investment Intensity Oriented
• Technology Intensity
• Pressure for Cost Reduction Area
• Universal Needs Emphasis
• Access to Raw Materials &
Energy
Locally
Responsive
PRESSURE OF LOCAL RESPONSIVENESS:
• Difference in Consumer Needs
• Difference in Distribution Channels
• Availability of Substitutes
• Market Structure
• Host Government Demands
(Prahalad and Doz see Dicken, 2003:Figure 7.12;220)

28. References
 Bradley, F., 2005. International Marketing
Strategy. 5th ed. England: Pearson Education Ltd.
 Bartlett, C., Ghoshal, S. & Beamish, P., 2008.
Transnatonal Management. 5th ed. New York:
McGraw-Hill/Irwin.
 Hill, C., 2005. International Business. 5th ed. New
York: McGraw-Hill/Irwin.
 Dicken, P., 2003. Global Shift. 4th ed. London:
SAGE Publications Ltd.

29. References (Continued)
 Jeanet, J. P., Hennessey, H. D., 2004. Global
Marketing Strategies. 6th ed. USA: Houghton
Mifflin Company
 Partneringalliances, 2008. Deliver the Value Your
Strategic Alliance Partner Needs. Available via:
uk.youtube.com Available at
<http://uk.youtube.com/watch?v=uk_Th-v7plg>
[Accessed : 28 November 2008]
 Doole, I., Lowe, R., 2004. International Marketing
Strategy. 4th ed. London: Thomson Learning