Global Marketing Management

Chapter 8 Entry and Expansion

Strategies: Marketing and Sourcing

Warren J. Keegan
 Overview
❚ Decision Criteria for IB
❚ Entry & Expansion Decision Model
❚ Exporting
❚ Additional Expansion Alternatives
❚ Market Strategy
❚ Summary

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 Learning Objectives
❚ To identify criteria for selection of foreign markets.
❚ To appreciate which market entry alternatives are
available to companies.
❚ To recognise export activities as a process developing
over time.
❚ To understand different entry startegies: sourcing,
licensing,investment & ownership

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Decision Criteria for IB

❚ Political risk
❚ Market access
❚ Factor cost & conditions
❚ Shipping consideration
❚ Country infrastructure
❚ Foreign Exchange

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 Selecting Foreign Markets

❚ ... should be based on a number of criteria:

❙ market-related characteristics
❙ cost-related aspects
❙ the regulatory framework
❙ tariffs, duties & non-tariff trade barriers
❚ the importance of these selection criteria depends
upon the industry & the markets taken into
account
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Market Selection Criteria

❚ 1. Market Potential
❚ 2. Market Access
❚ 3. Shipping Cost & Time
❚ 4. Appraising Level & Quality of
Competition
❚ 5. Service
❚ 6. Product Fit
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Critical Questions for a
Product-Market Profile: The 9 W´s
1.Who buys our product?
2.Who does not buy our product?
3.What need or function does our product serve?
4.What problem does our product solve?
5.What are customers currently buying to satisfy the need and/or
solve the problem for which our product is targeted?
6.What price are they paying for the products they are currently
buying?
7.When is our product purchased?
8.Where is our product purchased?
9.Why is our product purchased?
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A Multi-Stage Selection Process
Approx. 150
countries
Source: adapted from D.J.G. Schneider,
and R.U. Müller, Datenbankgestützte
Markets which drop out Marktselektion: Eine methodische Basis für
due to restrictions („must“ Internationalisierungs-strategien, Stuttgart,
1989
criteria)

Markets which are filtered out

based on a first set of
selection criteria

Markets which are filtered out

based on a second set of
selection criteria
Potential foreign
target markets

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 Visiting the Potential Market

❚ ... is essential after assessment & selection of

potential market(s)
❚ goals:
❙ to confirm (or contradict) assumptions regarding
market potential
❙ to gather additional (primary) data
❙ to develop a marketing plan in co-operation with the
local agent or distributor

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Production Abroad
100 %
Ownership and Ownership &
Strategic Alliances
Control

Ownership
Equity Joint Ventures

Management
Licensing Franchising
Contracts
0
0 Control 100 %

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 Direct Exporting

❚ Direct market representation

❙ via wholesalers or retailers or directly to the consumers
❚ Independent representation
❙ independent distributor
❚ Piggyback marketing
❙ distribution through another distributor´s channel

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Exporting: A Developmental Process
Stages of the firm
1. ... is unwilling to export.
2. ... fills unsolicited export orders (export seller).
3. ... explores the feasibility of exporting (may bypass stage 2).
4. ... exports to one or more markets on a trial basis.
5. ... is an experienced exporter to one or more markets.
6. ... pursues country or region focused marketing.
7. ... evaluates the global market potential. All markets, domestic &
international, are regarded as equally worthy of consideration.

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 Export-Related Problems

❚ Logistics
❚ Legal procedure
❚ Servicing exports
❚ Sales promotion
❚ Foreign market intelligence

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Sourcing Decision Factors

1. Factor costs & conditions

2. Logistics
3. Country infrastructure
4. Political risk
5. Market access
6. Exchange rate, availability &
convertibility of local money
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Licensing

❚ “contractual arrangement whereby

one company (licensor) makes an
asset available to another
company (licensee) in exchange
for royalties, license fees or other
form of compensation”

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Franchising

❚ A form of licensing

❚ “a company permits its name,

logo, cultural design and
operations to be used in
establishing a new firm or store.”

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 Joint Ventures
❚ Company run by two or more partner firms
❚ Risk is shared and different value chain strengths are
combined
❚ Influence depends on degree of ownership
❚ Good opportunity to build on local know-how
❚ JV finds greater acceptance by local authorities

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 Wholly-owned
Subsidiaries/Acquisition
❚ Represents the most extensive engagement abroad
❚ Subsidiary is either established through the creation of a
new facility or the acquisition of an existing firm
❚ Company has complete decision power & control
❚ Investor achieves greater flexibility
❚ In many countries majority or 100% ownership by
foreign companies is forbidden

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Market Expansion Strategies

❚ Narrow focus: concentrated

markets/concentrated countries
❚ Country focus: diverse
markets/concentrated countries
❚ Country diversification:
concentrated markets/diverse
countries
❚ Global diversification: diverse
markets/diverse countries
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 Summary
❚ The choice of potential foreign markets
must be based on a thorough evaluation of
criteria which influence the potential
success abroad; eg market potential, market
access, or product fit.
❚ Once the potential foreign target market(s)
is selected, a company has to decide how to
enter this market.
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