7.3 Entering the Global Arena
4 min read•june 25, 2024
Global market entry strategies are crucial for businesses expanding internationally. Companies can choose from various methods, including , , , , and , each with unique benefits and risks.
Understanding different types of global firms and carefully assessing market potential, resource requirements, risk exposure, control, and speed of entry is essential. Successful international expansion requires adapting to , navigating , and developing competitive advantages in new markets.
Global Market Entry Strategies
Methods of global market entry
Top images from around the web for Methods of global market entry
Global Marketing Strategy | Building Marketing Capabilities as a Way... View original
Is this image relevant?
Reading: Entry Strategies in Global Markets – Introduction to Marketing II (MKTG 2005) View original
Is this image relevant?
Theoretical Features of FDI (Foreign Direct Investment) and its influence to Economic Growth ... View original
Is this image relevant?
Global Marketing Strategy | Building Marketing Capabilities as a Way... View original
Is this image relevant?
Reading: Entry Strategies in Global Markets – Introduction to Marketing II (MKTG 2005) View original
Is this image relevant?
1 of 3
Top images from around the web for Methods of global market entry
Global Marketing Strategy | Building Marketing Capabilities as a Way... View original
Is this image relevant?
Reading: Entry Strategies in Global Markets – Introduction to Marketing II (MKTG 2005) View original
Is this image relevant?
Theoretical Features of FDI (Foreign Direct Investment) and its influence to Economic Growth ... View original
Is this image relevant?
Global Marketing Strategy | Building Marketing Capabilities as a Way... View original
Is this image relevant?
Reading: Entry Strategies in Global Markets – Introduction to Marketing II (MKTG 2005) View original
Is this image relevant?
1 of 3
- Exporting involves selling goods or services produced domestically to customers in foreign markets
- Enables companies to enter international markets with limited investment and risk exposure
- Can be executed directly by selling to end-users or indirectly through intermediaries (distributors, agents)
- Franchising grants foreign entities the right to use a company's business model, brand, and processes for a fee or royalty
- Facilitates rapid international expansion with minimal capital investment from the franchisor
- Necessitates diligent selection and oversight of franchisees to ensure brand consistency (McDonald's, Subway)
- Licensing allows foreign companies to manufacture and sell a company's products in exchange for a fee or royalty
- Permits market entry with reduced investment and risk compared to other strategies
- Demands careful selection of licensees and robust protection of intellectual property (Coca-Cola, Disney)
- Joint ventures involve partnering with local companies to establish new business entities in foreign markets
- Enable sharing of risks, costs, and expertise with local partners familiar with the market
- Require thoughtful partner selection and effective management of cultural differences (Sony-Ericsson, Fuji Xerox)
- Foreign direct investment (FDI) involves establishing or acquiring existing companies in foreign markets
- Provides full control over operations and potential for higher returns compared to other strategies
- Entails substantial capital investment and exposure to political and economic risks (Toyota in the US, HSBC in Asia)
Types of global firms
- primarily operate domestically but engage in some international business activities
- Frequently use exporting or licensing to enter foreign markets (Hershey's, Harley-Davidson)
- Maintain centralized management structures and decision-making processes at the home country headquarters
- operate in multiple countries through subsidiaries or affiliates
- Adapt products and strategies to local market conditions and consumer preferences (Unilever, Nestlé)
- Employ decentralized management structures with some autonomy granted to local subsidiaries
- operate as integrated global networks with a presence in multiple countries
- Leverage global resources and capabilities to achieve economies of scale and scope (IBM, GE)
- Utilize matrix management structures to balance global coordination and local responsiveness
Risks vs benefits of entry strategies
- evaluates the size, growth, and profitability of the target market
- Considers factors such as population, income levels, consumer preferences, and competitive landscape
- Helps determine the attractiveness and viability of entering a specific foreign market
- evaluates the financial, human, and technological resources needed for each entry strategy
- Assesses the costs of adaptation, localization, and compliance with local regulations and standards
- Helps identify the most feasible and cost-effective entry strategy given available resources
- evaluates the political, economic, and cultural risks associated with each entry strategy
- Considers factors such as currency fluctuations, intellectual property protection, and government stability
- Helps select the entry strategy that minimizes risk exposure while still achieving market entry objectives
- assesses the degree of control and adaptability offered by each entry strategy
- Considers the ability to respond to changing market conditions and local competition
- Helps choose the entry strategy that balances control and flexibility based on the company's goals and capabilities
- evaluates the time required to establish a presence and generate revenues in the target market
- Considers the urgency of market entry and the potential advantages or disadvantages of being a first-mover
- Helps prioritize entry strategies that align with the company's timeline and market entry objectives
Global Market Considerations
- has increased interconnectedness of markets, creating opportunities and challenges for businesses
- Trade barriers, such as tariffs and regulations, can impact the feasibility and profitability of different entry strategies
- Cultural differences influence consumer behavior and business practices, requiring adaptation of marketing strategies
- helps identify specific target groups within global markets for more effective positioning
- Developing a is crucial for success in international markets
- Effective is essential for coordinating global operations and ensuring product availability
- The must be tailored to address unique aspects of each target market
Key Terms to Review (22)
Competitive Advantage: Competitive advantage refers to the unique attributes or capabilities that allow a business to outperform its competitors and provide superior value to customers. It is the edge a company has over its rivals in attracting and retaining customers, as well as achieving greater profitability and market share.
Control and Flexibility Evaluation: Control and flexibility evaluation refers to the process of assessing an organization's ability to manage and adapt to changing circumstances in the global marketplace. It involves evaluating the level of control the organization has over its operations, resources, and decision-making, as well as its capacity to respond to shifting market conditions, competitive threats, and regulatory changes.
Cultural Differences: Cultural differences refer to the variations in beliefs, values, behaviors, and social norms that exist among different societies, ethnic groups, or communities. These differences can impact various aspects of life, including communication, decision-making, and interpersonal interactions, and are an important consideration when operating in the global marketplace or entering new international markets.
Exporting: Exporting refers to the process of selling and shipping goods or services produced in one country to customers in another country. It is a fundamental aspect of international trade and a key strategy for businesses seeking to expand their market reach beyond domestic borders.
FDI (Foreign Direct Investment): FDI, or Foreign Direct Investment, refers to the investment made by an entity or individual from one country into business interests located in another country. This type of investment involves the acquisition of foreign assets with the intent of controlling or influencing the management of the foreign enterprise.
Foreign Direct Investment: Foreign direct investment (FDI) refers to the investment made by an entity or individual from one country into business interests located in another country. This investment typically involves the acquisition of a controlling stake or the establishment of operations in the foreign market.
Franchising: Franchising is a business model where a company (the franchisor) grants the right to independent parties (franchisees) to use its business name, products, and operating systems in exchange for a fee and a percentage of revenue. This arrangement allows for rapid geographic expansion while leveraging the local knowledge and entrepreneurial spirit of franchisees.
Globalization: Globalization is the process by which the world is becoming increasingly interconnected and interdependent, driven by the expansion of international trade, investment, and the integration of financial, economic, and cultural systems across national borders. This term is crucial in understanding various aspects of marketing, from the factors that shape the marketing environment to the strategies and ethical considerations in the global marketplace.
International Firms: International firms are organizations that conduct business operations across national borders, engaging in activities such as trade, investment, and production in multiple countries. These firms leverage global resources, markets, and capabilities to achieve competitive advantages and expand their reach beyond their domestic markets.
International Marketing Mix: The international marketing mix refers to the combination of product, price, place, and promotion strategies that a company employs to effectively market its goods or services in foreign markets. It encompasses the adaptations and adjustments businesses make to their traditional marketing mix to cater to the unique cultural, economic, and regulatory environments of different countries.
Joint Ventures: A joint venture is a strategic business arrangement where two or more companies or organizations come together to pursue a specific project or objective, sharing resources, risks, and rewards. It is a collaborative effort that allows the participating entities to leverage their individual strengths and expertise to achieve a common goal.
Licensing: Licensing is the practice of granting permission to use intellectual property rights, such as patents, trademarks, or copyrights, to another party in exchange for payment or other consideration. It is a common strategy used by companies to expand their reach and generate revenue in domestic and international markets.
Market Potential Assessment: Market potential assessment is the process of evaluating and quantifying the maximum possible sales or demand for a product or service within a defined market. It helps organizations understand the size, growth, and viability of a target market, which is crucial when entering the global arena.
Market Segmentation: Market segmentation is the process of dividing a broad consumer or business market into subsets of consumers or businesses that have, or are perceived to have, common needs, interests, and priorities. Marketers can then design and implement strategies to target these specific segments with offerings that match their unique needs and characteristics.
Multinational Firms: Multinational firms, also known as transnational corporations, are large businesses that operate in multiple countries, with production and service facilities, as well as management structures, spread across national borders. These firms leverage global resources, markets, and economies of scale to gain a competitive advantage in the international arena.
Resource Requirements Analysis: Resource Requirements Analysis is the process of identifying and quantifying the resources needed to successfully execute a project or business initiative. It involves a comprehensive assessment of the various types of resources, such as personnel, equipment, materials, and funding, required to achieve the desired objectives within a specified timeframe and budget.
Risk Exposure Assessment: Risk exposure assessment is the process of identifying, analyzing, and evaluating the potential risks associated with a particular situation or activity. It is a critical step in the risk management process, as it helps organizations and individuals understand the nature and magnitude of the risks they face, enabling them to make informed decisions and implement appropriate risk mitigation strategies.
Speed of Entry Assessment: The speed of entry assessment is a crucial factor in evaluating a company's strategy for entering a new global market. It refers to the analysis of how quickly a company can establish its presence and start operations in the target market, which is a key consideration when expanding internationally.
Supply Chain Management: Supply chain management is the coordination and management of the flow of goods, services, information, and finances across an entire supply chain, from the sourcing of raw materials to the delivery of products to the end consumer. It involves the planning, implementation, and control of all activities related to the movement and storage of goods, as well as the effective management of relationships with suppliers, intermediaries, and customers to maximize value and achieve a sustainable competitive advantage.
Trade Barriers: Trade barriers are policies or regulations implemented by governments to restrict or limit the flow of goods and services between countries. These barriers can take various forms and are designed to protect domestic industries, jobs, and the national economy from foreign competition.
Transnational Firms: Transnational firms, also known as multinational corporations, are large businesses that operate in multiple countries, with production and service facilities located around the world. These firms leverage global resources, markets, and talent to achieve economies of scale, increase efficiency, and expand their reach and influence beyond their home country.
Wholly-Owned Subsidiaries: A wholly-owned subsidiary is a company that is 100% owned and controlled by a parent company. The parent company has full ownership and decision-making authority over the subsidiary's operations, finances, and strategic direction.