Chapter 4: International
Market Entry Strategy
International Marketing
Group discussion
FRANCHISE - HOW DOES IT WORKS ?
CONTENT
1/ Market entry strategies
2/ Why it is very important
3/ 10 market entry strategies for international markets
Market entry strategies - Definition
Market entry strategies are methods companies use to plan, distribute and deliver
goods to international markets. The cost and level of a company's control over
distribution can vary depending on the strategy it chooses.
Companies usually choose a strategy based on the type of product they sell, the value
of the product and whether shipping it requires special handling procedures. Companies
may also consider their current competition and consumer needs.
Impact on your choice
The three primary factors that affect a company's choice of international market entry
strategy
● Marketing: Companies consider which countries contain their target market and
how they would market their product to this segment.
● Sourcing: Companies choose whether to produce the products, buy them or work
with a manufacturer overseas.
● Control: Companies decide whether to enter the market independently or partner
with other businesses when presenting their products to international markets.
Why choose market entry strategies
Selling a product in an international market requires precise planning and
maintenance processes. These strategies enable companies to stay organized
before, during and after entering new markets.
Since every company has its own goals for entering an international market, having the
option to choose from various types of strategies can give a company the opportunity to
find one that fits its needs.
10 international
market entry
strategies
Export strategy
Some companies use direct exporting, in which they sell the product they manufacture
in international markets without third-party involvement.
A company may export indirectly by using the services of agents, such as international
distributors.
Export strategy (overseas to Vietnam)
Direct Indirect
Joint Ventures
Some companies attempt to minimize the
risk of entering an international market by
creating joint ventures with other
companies that plan to sell in the global
marketplace.
In 2012, technology giant Microsoft and world
energy leader General Electric (GE) created a joint
venture aimed at using data to improve healthcare
quality and patient experience.
Licensing strategy
Licensing occurs when one company
transfers the right to use or sell a
product to another company. A company
may choose this method if it has a product
that's in demand and the company to which
it plans to license the product has a large
market.
BREAK
Piggybacking strategy
If your company has contacts who work for
organizations that currently sell products overseas,
you may want to consider piggybacking. This market
entry strategy involves asking other businesses
whether you can add your product to their
overseas inventory.
If your company and an international company agree
to this arrangement, both parties share the profit for
each sale. Your company can also manage the risk of
selling overseas by allowing its partner to handle
international marketing while your company focuses
on domestic retail.
Group discussion
Piggybacking strategy - select suitable
products/services that can work well with the
Apple company.
Each group come up with three
products/services and explain the choice.
Countertrade strategy
Countertrade is a common form of indirect
international marketing. Countertrading functions
as a barter system in which companies trade
each other's goods instead of offering their
products for purchase
● Barter
● Counterpurchase
● Offetset
Countertrade strategy
Bartering is the oldest countertrade arrangement. It is the direct exchange of
goods and services with an equivalent value but with no cash settlement. For
example, a bag of nuts might be exchanged for coffee beans or meat.
Counterpurchase: the exporter sells goods or services to an importer and
agrees to also purchase other goods from the importer within a specified
period
Offset is a countertrade agreement in which a company offsets a hard currency
purchase of an unspecified product from that nation in the future
Company ownership
If your company plans to sell a product
internationally without managing the shipment and
distribution of the goods you produce, you might
consider purchasing an existing company in the
country in which you want to do business.
Owning a company established in your
international market gives your organization
credibility as a local business, which can help
boost sales. Company ownership costs more than
most market entry strategies, but it has the
potential to lead to a high ROI.
Franchising
A franchise is a chain retail company in which an individual or group buyer
pays for the right to manage company branches on the company's behalf.
Outsourcing
Outsourcing involves hiring another company to manage certain aspects
of business operations for your company. As a market entry strategy, it
refers to making an agreement with another company to handle international
product sales on your company's behalf.
Companies that choose to outsource may relinquish (give up) a certain
amount of control over the sale of their products, but they may justify this risk
with the revenue they save on employment costs.
Greenfield investments
Greenfield investments are complex market entry strategies that some companies
choose to use. These investments involve buying the land and resources to build a
facility internationally and hiring a staff to run it.
Greenfield investments may subject a company to high risks and significant costs, but
they can also help companies comply with government regulations in a new market.
These investments typically benefit large, established organizations as opposed to new
enterprises.
Group discussion
Find out the advantage and disadvantages of greenfield investment
Turnkey Projects
Turnkey projects apply specifically to companies that plan, develop and
construct new buildings for their clients. The term "turnkey" refers to the
idea that the client can simply turn a key in a lock and enter a fully operational
facility.
Zurich Airport International,
a Swiss firm is working on it.
Q&A
