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Chapter 7 International Entry Strategies

In order to enter foreign markets, firms must make three basic decisions: where to enter, when to enter, and how to enter. When deciding where to enter, firms should consider factors like resource availability, political/economic conditions, demographics, and supporting industries. For when to enter, first movers have advantages like capturing early demand but also pioneering costs, while late movers have less risk. The main entry modes are exporting, licensing, franchising, joint ventures, and wholly owned subsidiaries, each with their own advantages and disadvantages regarding costs, control, and risks.

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159 views9 pages

Chapter 7 International Entry Strategies

In order to enter foreign markets, firms must make three basic decisions: where to enter, when to enter, and how to enter. When deciding where to enter, firms should consider factors like resource availability, political/economic conditions, demographics, and supporting industries. For when to enter, first movers have advantages like capturing early demand but also pioneering costs, while late movers have less risk. The main entry modes are exporting, licensing, franchising, joint ventures, and wholly owned subsidiaries, each with their own advantages and disadvantages regarding costs, control, and risks.

Uploaded by

Bukhary Mohd
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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CHAPTER 7 INTERNATIONAL ENTRY STRATEGIES

Learning Objectives
Explain three basic decisions before entering a foreign market Explain the different mode of entry and its advantages and disadvantages Identify which mode of entry suits the best for a firm

Basic Concepts and Definition


In order for a firm to enter foreign market, they need to justify three basic decisions : Where to enter When to enter How to enter Any firm will have to enter foreign market and thus, consider everything at every angle to make strategic business decision that fit with the firms strategy and nature of business.

Where To Enter ?
Relates to the location of foreign expansion Must meet the right location to realize long-run profit potential of the firm A firm can gain location advantage through demand and factor condition of the selected country Factors to be considered : Resources availability Political, economy and technological Demographic Market and supporting industries

When To Enter ?
Timing of entry usually produces two significant issues whether the firm becomes the first mover or late mover A firm who enters foreign market earlier than its competitors is said to gain first mover advantages. A firm who gain the first mover advantages could first capture the demand due to the strong demand established. First mover will be also associated to some disadvantages such as pioneering costs and substantial amount of marketing expenses.

How To Enter ?
Entry Mode Exporting Advantages Minimize risk Lower cost Increased economies of scale Disadvantages High shipping and handling cost Inexperienced local agents can strain resources Sensitive to fluctuations in tariff and other trade barriers Risk of losing control over technology Future expansion may be limited Licensee may gain access to intellectual property

Famous, cheap and easy

Licensing Agreement whereby a firm grants intangible property rights to licensee

Capital investment and presence in a foreign market are not required Minimize risk

How To Enter ?
Entry Mode Franchising Extensions of licensing Advantages Rapid expansion to foreign market Investment is minimal Develop brand equity Disadvantages Conflict with local operator Maintaining brand image and reputation may be challenging Control over quality may be difficult Coordination between partners may not be smooth High political risk exposure Complex management structure of responsibilities

Joint Ventures Collaborative ventures between firms

Gain immediate access to local partners expertise Development cost and risks are shared equally

How To Enter ?
Entry Mode Wholly Owned Subsidiaries Advantages Disadvantages High operating costs High political risks exposure High currency and economic risks exposure Slow to establish due to constraints such as govt. policies and bureaucracy Secure complete control over management, Traditional Foreign technology and Direct Investment assets (FDI) Direct access to capital, tax, incentives and other benefits given by the host

THANK YOU FOR YOUR ATTENTION

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