Marketing in the Digital World-2
Sa1_Jyyy
8Marketentrystrategies.pptx
MARKET ENTRY STRATEGIES
londonmet.ac.uk
Module Overview
1. Introduction
2. The Global
Marketplace
3. Segmentation,
Targeting,
Positioning
(Connected consumers )
4. Developing
Value
5.Communicating
Value
6.Pricing Value
7. Delivering Value
(Channelnomics)
8. Market Entry
Strategies
9. International
Sales (Producrts v
Services ) B2C &
B2B
10. Marketing and
the impact of
Digital
11. The New
Customer Path
12. Summary & Planning
Application
MARKET EXPANSION STRATEGIES
| Market Concentration | Market Diversification | ||
| Country | Concentration | 1. Narrow focus | 2. Country focus |
| Diversification | 3. Country diversification | 4. Global diversification |
Companies must decide to expand by:
Seeking new markets in existing countries
Seeking new country markets for already identified and served market segments
INVESTMENT COST OF MARKETING ENTRY STRATEGIES
CRITERIA FOR EFFECTIVE SEGMENTATION
Measurability – can the size and purchasing power of segments be measured?
Accessibility – can segments be reached and
served?
Substantiality/profitability – are the segments sufficiently large and profitable?
Actionability – has the organisation sufficient resources?
The basis of international
market segmentation
MARKET ENTRY STRATEGIES
A market entry strategy is the planned method of delivering goods or services to a target market and subsequent distribution of the goods.
WHICH STRATEGY SHOULD BE USED?
It depends on:
Vision
Attitude toward risk
Organisation Culture
Available investment capital
How much control is desired
SAB was a local company that used joint ventures and acquisitions to become the world’s largest brewer: SAB Miller’s merger with Anheuser-Busch In Bev.
TYPES OF INTERNATIONAL NEW VENTURE
Source: reproduced with permission of Palgrave Macmillan: Journal of International Business Studies, Vol. 25, No. 1, pp. 45–64, Toward a theory of international new ventures, by Oviatt,
B.M. and McDougall, P.P., copyright 1994, published by Palgrave Macmillan.
Companies planning to go international faces 3 major issues:
Marketing: which countries, which markets to enter, how to manage, how to enter
Sourcing: whether to “make or buy” products
Investment: Joint venture, partnership, acquisition
MARKET ENTRY STRATEGIES
MARKET ENTRY STRATEGIES
EXPORTING
LICENSING
FRANCHISING
JV
M&A
EXPORTING:
Most traditional and well-established form of operating in foreign markets
Definition: Marketing of goods produced in foreign country
No investment in manufacturing facilities but significant investment required in marketing
MARKET ENTRY STRATEGIES
ADVANTAGES OF EXPORTING:
Manufacturing is home-based, less risky that overseas
Opportunity to establish foothold before ploughing in huge investment
DISADVANTAGE:
“Overseas agents” could provide an ostensibly rosy picture
MARKET ENTRY STRATEGIES
FRANCHSING:
Franchisor (supplier) allows an franchisee (operator) to use the franchisor’s trademark and distribute the supplier’s goods
In return, the franchisee will pay the franchisor a fee
MARKET ENTRY STRATEGIES
FRANCHSING:
ADVANTAGE:
Proven products and services
Proven trademark
Lower risk of failure
MARKET ENTRY STRATEGIES
LICENSING:
Licensing is defined as the method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark and other competencies provided by the licensor
MARKET ENTRY STRATEGIES
ADVANTAGE OF LICENSING:
Good way to start in a foreign operations and open door to low risk manufacturing
Linkage to patent protection
Option to buy into existing partner
DISADVANTAGE OF LICENSING:
Partner may develop know-how and start own operations
Licensees morph into competitor
MARKET ENTRY STRATEGIES
MARKET ENTRY STRATEGIES
Licensing is a contractual arrangement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation.
Two key advantages are associated with licensing as a market-entry mode:
First, because the licensee is typically a local business that will produce and market the goods on a local or regional basis, licensing enables companies to circumvent tariffs, quotas, or similar export barriers
Second, when appropriate, licensees are granted considerable autonomy and are free to adapt the licensed goods to local tastes.
Special licensing arrangements:
Contract manufacturing
Franchising
Foreign direct investment
Joint ventures
Investment via equity stake or full ownership
Investment to establish new operations
Expansion by acquisition
MARKET ENTRY STRATEGIES
JOINT VENTURE:
An enterprise in which 2 or more investors share ownership and control over property rights and operation
MARKET ENTRY STRATEGIES
JOINT VENTURE
ADVANTAGES:
Sharing of risk
Joint financial strength
Only means of entry in some countries
DISADVANTAGES:
Partners may compete for control
Challenging to recover capital if needed
Partners have different views
MARKET ENTRY STRATEGIES
MERGERS AND ACQUISITION
Expansion strategy
Important and powerful drivers of globalisation
MARKET ENTRY STRATEGIES
MERGERS AND ACQUISITION
Increase the market share
Acquisition of technology
Optimise utilisation of technology
Minimise risk
Tax benefits
MARKET ENTRY STRATEGIES
DISADVANTAGES
Some of the units acquired would have problems such as old plants, obsolete technologies, surplus or demoralised labour
MARKET ENTRY STRATEGIES
Licensing
a contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation
patent
trade secret
brand name
product formulations
worldwide sales of licensed goods totaled ~$300 billion in 2017
Advantages to Licensing
Provides additional profitability with little initial investment
Provides method of circumventing tariffs, quotas, and other export barriers
Attractive ROI
Low costs to implement
Licensees have autonomy to adapt products to local tastes
DISADVANTAGES TO LICENSING
Limited market control
Returns may be lost
The agreement may be short-lived
Licensee may become competitor
Licensee may exploit company resources
SPECIAL LICENSING ARRANGEMENTS
Contract manufacturing
Company provides technical specifications to a subcontractor or local manufacturer
Allows company to specialise in product design while contractors accept responsibility for manufacturing facilities
May open the firm to criticism if manufacturers operate with harsh
working conditions or have low wages
Franchising
Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies
Used by the specialty retailing & fast-food industries
FRANCHISING QUESTIONS
Will local consumers buy the product?
How tough is the local competition?
Does the government respect trademark and franchiser
rights?
Can profits be easily repatriated?
Can supplies be sourced locally?
Is commercial space available and are rents affordable?
Are local partners financially sound and do they understand the basics of franchising?
Investment
Partial or full ownership of operations outside of home country
Foreign Direct Investment (FDI)
Forms
Joint ventures
Minority or majority equity stakes
Outright acquisition
JOINT VENTURES
Entry strategy for a single target country in which the partners share ownership of a newly-created business entity
Builds upon each partner’s strengths
Examples:
GM and Toyota,
GM and Daewoo in S. Korea,
Ford and Mazda,
Chrysler and BMW,
Nissan and Renault
JOINT VENTURES
Advantages
Allows for risk sharing- financial and political
Provides opportunity to learn new environment
Provides opportunity to achieve synergy by combining strengths of partners
May be the only way to enter market given barriers to entry
Disadvantages
Requires more investment
than a licensing agreement
Must share rewards as well as risks
Requires strong coordination
Potential for conflict among
partners
Partner may become a competitor
INVESTMENT VIA EQUITY STAKE OR FULL OWNERSHIP
Equity stakes is an investment
Minority ˂ 50%, Majority˃ 50%
Full ownership =100%
Majority may not be allowed in certain countries
Start-up of new operations
Greenfield operations or
Greenfield investment
Merger with an existing enterprise
Acquisition of an existing enterprise
Facebook acquires Kustomer for $1B
ISSUES IN ACQUISITIONS
Globalisation is driving acquisitions; smaller firms cannot expand without a partner
Ownership circumvents tariffs & quota barriers, gets new markets, allows technology transfers and gain new manufacturing methods.
Global Strategic Partnerships
Possible terms:
Collaborative agreements
Strategic alliances
Strategic international
alliances
Global strategic partnerships
Oneworld is a GSP made up several airlines around the world.
THE NATURE OF GLOBAL STRATEGIC PARTNERSHIPS
CHARACTERISTICS OF GLOBAL STRATEGIC PARTNERSHIPS
Participants remain independent following formation of the alliance
Participants share benefits of alliance as well as control
over performance of assigned tasks
Participants make ongoing contributions in technology, products, and other key strategic areas
Five Attributes of True Global Strategic Partnerships (GSP)
Two or more companies develop a joint long-term strategy
Relationship is reciprocal
Partners’ vision and efforts are global
Relationship is organised along horizontal lines (not vertical)
When competing in markets not covered by alliance,
participants retain national and ideological identities
Key Success Factors of
Alliances (1 of 2)
Mission: Win-win situations can only be created where participants pursue objectives on the basis of mutual need or advantage.
Strategy: A company may establish separate GSPs with different partners; strategy must be thought out up front to avoid conflicts.
Governance: Discussion and consensus must be the
norms. Partners must be viewed as equals.
The visible and invisible
parts of culture
The different layers of
culture
Success Factors of Alliances (2 of 2)
Culture: Chemistry is important, as is the successful development of a shared set of values.
Organisation: Innovative structures and designs may be needed to offset the complexity of multi-country management.
Management: Potentially divisive issues must be identified in advance and clear, unitary lines of authority established that will result in commitment by all partners.
UNILEVER’S PORTFOLIO
ALLIANCES WITH ASIAN COMPETITORS
Western companies must learn from Asian firms’ excellence in manufacturing, become students, not teachers
Four common problem areas:
Each partner had a different dream
Each must contribute to the alliance and each must depend on the other to a degree that justifies the alliance
Differences in management philosophy, expectations,
and approaches
Cooperative Alliance in
Japan: Keiretsu
Inter-business alliance or enterprise groups in which business
families join together to fight for market share
Often cemented by bank ownership of large blocks of stock and by cross-ownership of stock between a company and its buyers and non-financial suppliers
Keiretsu executives can legally sit on each other’s boards, share information, and coordinate prices
Big Six: Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa, DKB Groups
Horizontal keiretsu: intragroup relationships involve shared stock
holdings and trading relations
Cooperative Strategies in South Korea: Chaebol*
Composed of dozens of companies, centered around a bank
or holding company, and dominated by a founding family
Samsung
LG
Hyundai
Daewoo
* group of massive, mostly family-run business conglomerates, called chaebol, dominates South Korea’s economy and wields extraordinary influence over its politics. These powerful entities played a central role in transforming what was once a humble agrarian market into one of the world’s largest economies
