Global Sales and Marketing Development

2021-22
Week 4

Assessing a Country’s
Attractiveness and Entry
Decision
Learning Outcomes
Week 4

1. To be able to analyse the country attractiveness and company’s competitive

strengths

2. To be able to evaluate the market entry strategies in selected countries.

Assessing the attractiveness of a country

Helps a company:

1. To screen the market in relation to its objectives overall strategy, and the
country’s economic, cultural and legal environment.

2. To assess whether the market is economically attractive or not.

3. To make an advanced in-depth analysis of market opportunity for its

particular product.
Dimension of country attractiveness and
competitive strengths

Country attractiveness Competitive strengths of a company

● Market size ● Market share (achievable)

● Market growth ● Marketing ability and capacity

● Competitive conditions ● Product and positioning fit

● Market uncontrollable (culture, legal ● Quality of distribution service

and political environments)

High- Medium- Low High- Medium- Low

Lesson discussion: 5 min
Research on UK fast food industry

Market : Fast Food Industry

Research-

1- what is the size of the UK fast food industry? £21.4bn

2- is this market growing or shrinking? 8.9% expected for 2023

3- what is the state of competition in the fast food industry? Intense - new business
joining, many fast food businesses, not capital intensive

Discussion questions:

Do you think this market is attractive?

What are the key strengths that are required to compete in this industry?
Assessing the Country/market attractiveness

Analyse a country's attractiveness by investigating- market size and potential for

a product (Market Research)

Analyse a country's attractiveness by investigating the competitive landscape

(Porter’s 5 Force model)

Analyse a country’s attractiveness by investigating the economic, cultural and

political/legal challenges. (Macro and Micro analysis)
Match the company’s competitive strengths

To gain the Market share, a company needs to have (few key strengths)

1. Ability to innovate and invest.

2. Production capacity to match or surpass the competitors. E.g. economies of

scale advantage, economies of scope advantage.

3. Product Portfolio

4. Marketing mix (product, place, price and promotion) matches the needs and
wants of the market.

After analysing and matching- you should then decide the ENTRY
STRATEGY using Country attractiveness/competitive strengths matrix
Entry strategy choice

Boston Consulting Group:

Using the specific model (country attractiveness/competitive strength). We could

then decide the entry strategy for a particular country.

A multinationals can maximize the long-term profit and growth of a firm by

analysing:

1- country attractiveness

2-competitive strength of a company

 Market Entry Decision
Country attractiveness/competitive strengths matrix

Invest: Joint venture

High FDI-
Franchising
Merger,
Country Acquisition or
attractive Greenfield
ness- Investment
host
country

Export Divest/license

Low
Competitive strengths (company)
High Low
 FDI
High country attractiveness/ high competitive strengths

1. FDI is practiced by companies in order to benefit from cheaper labour costs, tax
exemptions, and other privileges in that foreign country.

2. Foreign Direct Investment (FDI) is the flow of investments from one company to
production in a foreign nation, with the purpose of lowering labour costs and gaining tax
incentives.

3. FDI can help the economic situations of developing countries, as well as facilitate
progressive internal policy reforms.

4. A major contributing factor to increasing FDI flow was internal policy reform relating to
trade openness and participation in international trade agreements and institutions.
 FDI

Foreign direct investment: Investment directly into production in a country by a

company located in another country, either by buying a company in the target
country or by expanding operations of an existing business in that country.

Example

Intel is headquartered in the United States, but it has made foreign direct investments in a
number of Southeast Asian countries where they produce components of their products in
Intel-owned factories.
 FDI
High country attractiveness/ high competitive strengths
Pros
Take advantage of cheaper wages in the country, special
investment privileges, such as tax exemptions, offered by
the country as an incentive to gain tariff-free access to the
markets of the country or the region.
The creation of jobs is the most obvious advantage of FDI,
one of the most important reasons why a nation
(especially a developing one) will look to attract foreign
direct investment.
Skills that employees gain through training and experience
can boost the education and human capital of a specific
country. Through a ripple effect, it can train human
resources in other sectors and companies.
Targeted countries and businesses receive access to the
latest financing tools, technologies, and operational
practices from all across the world.
Cons
Other countries’ political movements can be changed
constantly which could hamper the investors.
When investors invest in foreign counties, they might
notice that it is more expensive than when goods are
exported. Often times, more money is invested into
machinery and intellectual property than in wages for local
employees.
Considering that foreign direct investments may be capital-
intensive from the point of view of the investor, it can
sometimes be very risky or economically non-viable.
Constant political changes can lead to expropriation. In
this case, those countries’ governments will have control
over investors’ property and assets.
 Joint Venture
High country attractiveness/low competitive strengths

▪ In a joint venture business model, two or more parties agree to invest time,
equity, and effort for the development of a new shared project.

▪ A cooperative partnership between two individuals or businesses in which

profits and risks are shared.

Example:

Sony Ericsson is a joint venture between Swedish telecom corporation Ericsson

and Japanese electronics manufacturer Sony to develop cellular devices.
 Joint Venture
High country attractiveness/low competitive strengths

Pros Cons
Opportunity to leverage the distinct strengths of both Rewards of success shared with the JV partner.
partner organisations.

Partner skill set should be complementary, making the In addition, the JV partner may simply use the knowledge
value of the JV greater than the sum of its parts, as well as gained through the JV to set up in
providing quick and low cost access to expertise in an competition themselves.
area where you are weak.

Reduces downside risk should partnership not deliver the Likely complex diligence process
expected returns
Still no overall control.
Allows a deal to be done when funding might otherwise
preclude it, since you can contribute things other than
cash, such as assets, IP or know-how.
 Franchising
High country attractiveness/low competitive strengths

Franchising is the practice of licensing another firm’s business model as an

operator.

Essentially, and in terms of distribution, the franchiser is a supplier who allows

an operator, or a franchisee, to use the supplier’s trademark and distribute the
supplier’s goods. In return, the operator pays the supplier a fee.

Franchising is the practice of using another firm’s successful business model.

For the franchiser, the franchise is an alternative to building “chain stores” to
distribute goods that avoids the investments and liability.
 International Franchising
High country attractiveness/low competitive strengths

Pros Cons

Cost effective way to grow the business internationally. Franchise agreements carry no guarantees or warranties,
and the franchisee has little or no recourse to legal
intervention in the event of a dispute.

Access to local knowledge, network and resources International Franchising carries greater financial risk. For
example, the exchange rates between currencies could
lead to an unfavourable return on the investment.

Building brand Regulatory differences can also pose a significant

challenge. Business laws and regulations can vary
significantly between countries,

* These pros and cons are for the Franchisor willing to expand to international market
 Licensing
Low country attractiveness/Low competitive strengths

An international business licensing agreement involves two firms from different

countries, with the licensee receiving the rights or resources to manufacture in
the foreign country.

Licensing gives a licensee certain rights or resources to manufacture and/or

market a certain product in a host country.

Rights or resources may include patents, copyrights, technology, managerial

skills, or other factors necessary to manufacture the good.

Example:

Suppose Company A, a manufacturer and seller of Baubles, was based in the US and wanted to expand to the Chinese
market with an international business license. They can enter the agreement with a Chinese firm, allowing them to use
their product patent and giving other resources, in return for a payment. The Chinese firm can then manufacture and sell
Baubles in China.
 International Licensing
Low country attractiveness/low competitive strengths

Pros Cons

Obtain extra income for technical know-how and services. Lower income than in other entry modes.

Reach new markets not accessible by export from existing Risk of having the trademark and reputation ruined by a
facilities. incompetent partner.

Political risk is minimized as the licensee is usually 100% The foreign partner also can become a competitor by
locally owned. selling its production in places where the parental
company has a presence.

Retain established markets closed by trade restrictions.

* These pros and cons are for the Licensor willing to expand to international market
Divest strategy

This situation have no promising outlooks anymore and should not be invested
in. Corporate strategists have two main options to consider:

• They divest the business units by selling it to an interested buyer for a

reasonable price.

• Or corporate strategists can choose a harvest strategy. This basically

means that the business unit gets just enough investments (or non at all) to
keep the business running, while reaping the few fruits that may be left.
Decision to Invest
High country attractiveness/high competitive strengths

• A company can reach this scenario if it is operating in a moderate to highly

attractive industry while having a moderate to highly competitive position
within that industry.

• In such a situation there is a massive potential for growth.

• These investments are necessary to increase capacity, to reach new

customers through more advertisements or to improve products through
Research & Development.
Summary:
 What next

Please see the Self-directed section on the Blackboard.

Complete the initial research and come prepared to participate in the group
work during the seminar.
The End
Week 4 : Seminar

Assessing a country’s
attractiveness and evaluating
the entry strategies
Recap - Assignment brief
Global Marketing and Sales Development assignment

1. Please note down the company you have been given for the assignment.

2. Some of the companies such as Nestle, Johnson and Johnson, Heinz

produce wide range of products. You are required to choose 1 range/ OR 1
product.

3. You are required to choose two countries.

4. You may choose your home country- but make sure that the company and
the product you have chosen is present in your home country.

5. Do not choose the countries with similar culture. Choosing similar

countries will make it difficult for you to evaluate the marketing and sales
strategies.
 Seminar task

Please see the seminar task detailed on the Blackboard. The seminar task will
be explained to you in detail.

The seminar task is a group work and should be completed during the seminar.

The seminar task should be uploaded on the submission box found in week 4.