Strategy for International Expansion and Market Entry

2
A systematic approach to frame international expansion plans
Why grow? How to grow?
Where to
grow?
How to
support
growth?

A structured approach for identifying viable growth options will enable the
organization to
Identify relevant targets for profitable internationalization
Define actionable implementation plans

3
Key steps when thinking through expansion plans
Options for market
entry
Make vs. partner
vs. buy
Own brand vs.
new brand
Organizational
design
Timing
Assessment of
attractive markets
New products vs.
new customers vs.
new markets
Strategic markets

Rationale for growth
Revenue /
profitability targets
Competitive
dynamics
Market potential
Scale economies
IPO story
Key Topics
Why grow?
Where to
grow?
How to
support
growth?
Key Analysis
High level business
case
Assessment of own
capabilities

Market analysis
Competitor
analysis



Revenue potential
Cost and profit
calculation
Target prioritisation


Options for growth
Fast growth vs.
profitable growth

Ground rules
Network design
(structure,
development, etc.)
Operations/production
management issues
How to grow?
Benchmarking
Risk assessment
Review of market
entry strategies
4
Why grow:
Different motivations
Rationale for growth for incumbents:
Competitors enter home market
Expected losses in market share in home country can only be compensated
abroad
Growth of low cost competitors
Increasing competition might entail market share losses in the (international)
market
Leverage own asset base
Experience from past operations
Take advantage of opening windows in various countries
Leverage own brand name recognition
5
Growth Options vs. Risk and Return
(Illustrative)
Issues / questions
Return
(Operating
profit, market
potential)
Risk
(Fixed costs, investments)

What are the correct risk
/ return-relationships?
What triggers choice of
higher level option?
Which option fits best to
the overall strategy?
How to grow:
The approach to internationalization determines the risk involved
High Low
Low
High
J V for
small
operations
1 country
Own small
operations
1 country
Several
own
operations
1 country
Several
J Vs for
operations
several
countries
Several
own
operations
several
countries
6
Make Partner Buy
Full force
Staged
development
Opportunistic
1 4 7
2 5 8
3 6 9
Mode of entry
Scale
of
entry
How to grow:
Options to enter a new market
Select suitable
options based on
company
objectives and/or
resources
available
Describe attractive
options in detail
7
Outspending
New entrant has and is
willing to use superior
resources
Redefinition:
New entrant re-defines the
competitive scope of activities
Redefined scope different from
incumbent
How to grow:
Generic approaches for market entry
Reconfiguration:
New entrant innovates in the
way it performs activities
New entrant re-configures the
value chain
Possible Market Entry Strategies
Cost-control, price
Superior service
Fun customer experience
New product development
(e.g. internet on-board)
Innovative marketing, brand
communications
Movement along value chain

Target and specific segment only
(e.g. 1st class, business only)
Limit offer to route archetype
(e.g. high volume, leisure, geography)
Industry scope
(broaden to related industry)
Only successful if outspending yields a
lasting competitive advantage and
incumbent would be unable / willing to
keep up
Examples
1
2
3
8
How to grow:
Review of various market entry strategies (examples from transportation industry)
Possible Market
Entry Strategies
Description
Observed so
far?
Examples Rationale
Point-to-Point
Long-Distance
Only
Cherry pick attractive point-to-
point routes based on high
volumes, average prices, etc.
Yes Connex
Rhenus
Keolis
Focus on most attractive /
vulnerable routes
Low marketing leverage
Regional-Base
Expansion
Create dense local / regional
presence and use as base for
expansion
Yes, limited Connex
Possible:
Hamburger
Hochbahn,
Albtal, etc.
Safer entry into market,
guaranteed income
Build critical mass, share
of mind
Public / Private
Alliance
State rail competitors seek
foothold through nimble
private competitors
Public / private combined
Yes, limited Georg traffic
(with
Swedish SJ )
Combination of local
market knowledge and
operational scale effects
Market testing
Hub-Based
Long-Distance
Only
Offer point-to-point city
connections from central hub
station
Not yet in
railroads
Southwest
Easyjet
Population-dense areas
to serve as operational
base, good demand
Marketing efficiency
Add-On
Passenger
Services
Market expansion on existing or
new routes from cargo-service
only basis
Not yet in
railroads
BASF
Eko Stahl
Ikea
Gaining operational
experience with easier
type of service


Overview of Range of Likely Intra-Modal Market Entry Strategies
Note: Options are not discrete; competitors may utilize a combination of described entry strategies
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How to grow:
Key questions of how to approach a new market
Market entry
strategy
Current strategy
Market development Competitor strategy
Stakeholder strategy
Franchise evaluation
What are the objectives for market entry?
What is the necessary platform of capabilities
to be successful in the new market?
What management resources are necessary to
support the strategy?
What is the roadmap
for a successful market
entry?
What is the franchise
situation?
Which franchises
should be targeted?
What are strengths
and weaknesses of
current / potential
franchisees?
Who are potential
partners?
What are the levers to convince the
local stakeholders?
What are requirements for successful
franchise bids?
Who are potential partners?

How has the
market evolved?
What is the likely future
development?
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Selection
Anal ysis of Market Potential
and Feasibility
Anal ysis of Competition and
Market Entry Strategies
Where to grow:
A structured selection process can identify most attractive target markets
Prioritize markets, where market
entry appears feasible and
competition seems favorable
Initial country list
Selection
Phase 1
Phase 2
Revised country list
Prioritize regions, franchises,
potential
partners in selected countries
Gather and assess competitor
data to benchmark competitor
strategies
Assess market specific entry
options
Prioritized list of targets Market entry strategy
Masterplan for
internationalization
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Choices
JV with own brand
Acquisition
JV with other brand

Description
Acquire local company with attractive
operations
Immediate additional capacity and
market insights

Options
International takeovers, bids and
franchises
Switch capacity from less
attractive operations
Sharing the risk for the new
operations
Build on perceived strengths
Organic
Get access to operations in order
to gain market experience
Leverage (local?) brand
Partner
Buy
Make
2
3
4
1
How to support growth:
Options to access capacity in order to support growth strategies