International market entry strategies for mba marketing class

1. International Market Entry
Strategies
By: Mrittika Wahid

2. Introduction
A market entry strategy is the planned method of delivering goods or services to a
target market and distributing them there.
 When a firm decides of enter an overseas market, there are a variety of options
open to it.
 These options vary with cost, risk and the degree of control which can be exercised
over them.
 One of the most important strategic decisions in international business is the mode
of entering the foreign market.

3. Basic Issues
An organization willing to “go international” faces 3 major issues:
 Marketing
 Sourcing
 Investment & Control

4. Foreign Market Analysis
A firm has alternative markets to enter and in order to attain its goal successfully it has
to:
 Analyze alternative foreign market
 Current and potential size of alternative markets
 Level of competition
 Legal and political environment
 Socio cultural environment
 GDP and Per capita income
 Purchasing power
 Urban & Rural areas

5.  Asses cost, benefits and risks
Cost
 Direct cost
 Indirect cost
 Opportunity cost
Benefits
 Market expansion
 Wealth maximization
 Global recognition
 Cost reduction

6. Risks
 Exchange rate fluctuation
 Operating complexity
 Government seizure of property

7. Market entry strategies Or Modes of entry
 Exporting
 Licensing
 Franchising
 Foreign Direct
Investment
 Joint Ventures
 Strategic Alliances
 Wholly Owned Subsidiaries
 Turnkey Projects
 Contract Manufacturing
 Management Contract

8. Exporting
 Direct exporting: Is selling the product overseas through its own distribution
arrangements or through a host country’s company.
 Indirect exporting: Indirect export is the process of exporting through domestically
based export intermediaries. The exporter has no control over its products in the
foreign market.
 Intra corporate transfer: Is selling the products by a company to its affiliation
company in host country. Example: HLL in India to UNILEVER in USA.

9. Licensing
 In general terms a License means the “Right to sell”.
 Licensing is a relatively sophisticated arrangement where a firm transfers the rights
to the use of a product or service to another firm.
 It is a particularly useful strategy if the purchaser of the license has a relatively large
market share in the market you want to enter.

10. Franchising
 Franchising is a typical North American process for rapid market expansion but it is
gaining traction in other parts of the world.
 Franchising works well for firms that have a repeatable business model (eg. food
outlets) that can be easily transferred into other markets.
 3 Major components of franchising are:
 Brand
 Business assistance
 Collection of profit

11. Joint Ventures
 Joint ventures are a particular form of partnership that involves the creation of a
third independently managed company. It is the 1+1=3 process.
 Two companies agree to work together in a particular market and create a third
company to undertake this.
 Risks and profits are normally shared equally.

12. Strategic Alliance
 A strategic alliance is an arrangement between two companies that have decided
to share resources to undertake a specific, mutually beneficial project.
 In a strategic alliance, each company maintains its autonomy while gaining a new
opportunity.

13. Foreign Direct Investment (FDI)
A foreign direct investment (FDI) is a controlling ownership in a business enterprise in
one country by an entity based in another country.
Methods of FDI:
 Greenfield Entry
 Brownfield Entry
 Joint Venture

14. Wholly Owned Subsidiary
 A wholly owned subsidiary is a company whose common stock is 100% owned by
another company, called the parent company.
 A company can become a wholly owned subsidiary through acquisition by the
parent company or spin off from the parent company.

15. Contract Manufacturing
 Contract manufacturing is the outsourcing of part of the manufacturing process of
a product to a third-party.
 More specifically, contract manufacturing is an outsourcing of certain production
activities that were previously performed by the manufacturer to a third-party.
 A company may outsource the manufacture of certain components for the product
or outsource the assembly of the product.

16. Management Contract
 One firm provides managerial assistance, technical advice and specialized services
to another firm for an agreed time period in return for a fee ( A flat fee or a percent
of revenue).

17. Turnkey Project
 One firm agrees to fully design, construct and equip a facility and then “turn the
key” over the purchaser when the plant is ready for operation.
 It may be a fixed price or a cost plus contract.
 Often done with large construction project in developing countries.

18. Thank You!!!