Chapter 7

Entry and Competing

In Foreign Markets

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 The foreign markets entry decision-making
1 COUNTRY OPPORTUNITIES

COUNTRY RISK ANALYSIS

Analysis 2
(Assessing Country
Attractiveness)
External
3 COMPETITIVE ANALYSIS Internal

4 ENTRY MODE

Implementation 5 DEVELOPMENT PATHS

6 ORGANISATION:CONTROL

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Entry and Development

3
 Objectives
Market Driven Resources Driven
Capture growth opportunities Capture resources (natural,
of the region to expand human, knowledge) for
global sales global competitiveness

Regional Production Global Innovation

and Innovation

Global Production and

Local Production back offices

Local marketing Export Processing Factories

Export Sourcing base

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 First Mover Advantages

Acquirers advantages

Window of Opportunity

Followers advantage

First movers advantages

Pre-empt key resources Benefit from mistakes of first movers
Establish standards Capitalize on blind spots
Blocks brands and distribution Ride on efforts of first movers
Learn

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 Chinese entry in the car industry

Group Start Carmakers in China M/S in 2001

Pioneers 1985 Beijing Jeep 0.7%
(mid-1980s) 1985 Shanghai VW 31.9%
1987-98 Guangzhou Peugeot
1st follower gen. 1988 Tianjin Daihatsu (TLA in 1986) 8.7%
(late 1980s/early 1990 FAW Group (TLA in 1988) 3.0%
1990s) 1991 Changan Suzuki (TLA in 1988) 7.2%
1991 Guizhou Subaru (TLA in 1989) 0.2%
1992 Dongfeng Citroen 7.4%
1992 FAW-VW 17.3%
2nd follower gen. 1999 Shanghai GM 8.1%
(late 1990s) 1999 Guangzhou Honda 7.1%

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 Three Dimensions Of Global
Competitive Positioning
Global Standardisation

Multiple Segments

Single Segment
Local Adaptation

Compete Compete
on Costs/price on Differentiated/value
Advantages Advantages

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 Standardised or Localized ?
High GLOBAL MODULAR
(Global Scale) STANDARDISATION STANDARDISATION
And MULTIBRANDS
Aircraft Elevators
Microprocessors
BasicChemicals IT Services
Pulp and paper Handphones
Minimun Size Electronic Componernts E.g. : Otis, Nokia
of E.g. : Intel, Dell
Production

PROCESS LOCAL
STANDARDISATION ADAPTATION
Consumer Banking
Low Cement Consulting Services
(Local Scale) Mobile telephony Services
Example: Cemex Example: HSBC

Little Difference across the World Countries specific

(Global Segments) (Local Segments)
Customers Requirements and Competitive Contexts

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Positioning: Value Proposition
Pure Adaptive Adaptive Fully
Global Usage Product Adaptive

Product Same Same Different Different

Message Same Different Same Different

Customer
Same Different Same Different
Group

Usage Same Different Same Different

Distribution Same Different Same Different

Brand Same Different Same Different

Price Same Different Different Different

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 Positioning: Segmentation

Luxurious and top-of-the-line products and services.

Rich
Global brands are well entrenched

Mainly increasing urban markets.

Middle Class Mix of global focus and local brands
and products and services

Still important in term of numbers.

Bottom of the Pyramid Product and services adaptation
and simplification are needed

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 Competing
Technological Performances
Superior Quality Differentiation ?
Superior Service
Customer Value
Image
Customization
Timeliness and Responsiveness
Relationships
Risk Reduction
Price
Industry
Average
Profit
Costs
Economies of Scale due to size Internal Costs
Economie of Scope due to shared costs
Low cost of factors ( labor, materials..) Supplies
Installed base Cost
Superior productivity in processes Leadership ?

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 Sources of Competitive Advantages
Marketing General
R&D Procurement Manufacturing Sales and Management
Distribution

Better suppliers
Higher quality Better location Good quality Higher quality
Larger suppliers
scientists and and channel partners managerial personnel
Resources technologists base infrastructure Superior strategic Cheaper cost of capital
Cheaper sources
based Better data base
of supplies
Higher and marketing Strong sponsors
Higher amount of qualification of intelligence Privileged access to
Higher quality
funding for R&D work force Higher quality licenses from authorities
supplies
More creative Lower labor marketing and
designers costs? sales personnel
More effective Better electronic data
warehousing mgt and transmission
Asset Superior existing and inventories Economies of scale Well established network
products line due to volume brand/reputation
based Patents
management
Better quality/cost Density and
Electronic data Better financial mgt
More efficient CAD purchasing processes scope
Better HR mgt
Economies of More advanced CAM of distribution
Superiority in
scale due to high Proprietary equipment
Proprietary scientific/ strategizing
volume of purchase More effective,
technological know-how
Competencies Superior and faster Better Superior product and timely, responsive
More effective supply brand management organisational
based product development
chain mgt (JIT) management of :
Superior customer mechanisms
Superior research plant quality
More effective supplier relationship Better corporate
techniques processes and
relationships management culture
time
management

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 Building a Business System in a
Foreign Environment
Product General
Service Sourcing Production Marketing Management
Design
Innovation

Availability Availability Skill base of Sales force Local Financing

Resources of scientists of suppliers the workforce Information Local Skills
Production managers

Infrastructure: Transport, telecom

IT infrastructure
Assets Support & maintenance Transfer Distribution
of equipment Logistics of production network
technology Branding global/local

Working capital
Ability to adapt Negotiation skills Quality management
Competencies Appropriate Relationship
Quality management management Partnership
Technology management
Process control management

What do we transfer without adaptation? What do we need to adapt or create? How?

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 How do firms capabilities fit to regional/local markets?
The Transfer, Adapt, Create model

R&D Procurement Manufacturing Marketing General

Management

What capabilities
are needed to compete?

What capabilities
do we bring and can
transfer?

What capabilities do
we bring but need
to adapt?

What capabilities do
we not bring and need
to create?

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Transferability of Competitive Advantages
What is the value of our existing advantages on local markets?
To what extent do we need to adapt our products and
management approaches?
What new capabilities need to be acquired and how?

Technological
Transfer Adapt

Competitive
Advantages
Adaptation
Replicate
Social through learning

Global Local
(Same across
the world) Consumer Behavior

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 Entry Modes

Wholly-Owned License Agent

Acquisition Joint-Venture Franchise Distributor Office
Subsidiary

Benefits? Costs?
Feasibility? Risks?

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 Entry Modes
Wholly-owned Acquisition Joint Venture License
subsidiary

Market Relevant for both attractive markets

Attractiveness Relevant for attractive markets and less attractive markets

Costs High investments High Medium Low

Time Medium-term
Long pay-off if properly Medium-term Short-term
Horizon
managed

Risks High exposure High Shared risks but Low risks

risks of conflicts
Internal
Local know-how Acquisition skills Partnership Technology
Requirements Local insights management transfer
Competitive Can be high for Can be high if Leveraged with Limited but
Advantages early entrants properly managed partner testing base

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 HIGH
JOINT VENTURE
JOINT VENTURE

MARKETING SUBS JOINT VENTURE

WHOLLY OWNED
MARKETING ACQUISITION
ACQUISITION
SUBSIDIARY WHOLLY OWNED
OPPORTUNITIES REP OFFICE
DISTRIBUTOR LICENSE
AGENT

LOW JOINT VENTURE

DISTRIBUTOR

HIGH
LOW
LOW HIGH
PRESSURE FOR LOCALISATION
RISKS

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 Business development and managerial skills

PIONEERING ESTABLISHING DEVELOPING COUPLING

Create a small team - Invest - Develop people - Internal networking

Critical
with mandate to - Create JV - Expand networks - Interdependencies
Task gather information, - Broaden scope
- Logistical base
establish contacts,
initiate first move

- Educational - Leadership -Leadership

Individual - Cultural leadership - Technical -Technical
- Relational - Political - Relational
Skills - Relational
- Relational
- Technical

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 Organizational Capabilities
- Recruitment
LOCAL HUMAN - Socialisation
RESOURCES MANAGEMENT - Career
- Training
- Managing expatriates

LEARNING - Business practices

- Business and social cultures
- Local sources of innovation

- Transferring technology
INNOVATING - Adapting best practices
- Creating global base out of
local resources

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 Linkages

- Citizenship
- Public relations
LOCAL LINKAGES - Suppliers/distributors/retailers
- Local communities
- Local education institutions
- Partners
- Business associations

- Role in corporate portfolio

CORPORATE LINKAGES
- Reporting
- Integration in global value chain

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