Global Market Entry Strategies

• Operational reasons for setting up overseas

manufacture
• Strategic reasons for investing in local
operations
• Methods of overseas production
• Exporting options
• Joint Ventures and Strategic Alliances
 Operational reasons for setting-
up overseas manufacture
• reduced costs of transportation
• reduced barriers/ quota handicap e.g. Nissan
• some governments demand investment with
market entry e.g. China
• Customers sometimes prefer local
manufacture e.g. Heinz ‘British’?
• Government contracts prefer firms
contributing to the local economy
• Improved local market information
• local manufacture ensures greater
commitment to international markets
• Faster response and Just-in-time delivery
Doole, Phillips and Lowe (1994)
Strategic reasons for investing in
local operations
• Gain new business
• demonstrates strong commitment
• persuades customers to change suppliers
• provides better service and more reliability
• Defend existing business
• avoid market restrictions as sales increase,
particularly in single market
• Move with established customer
• component suppliers follow customers to compete
with local component suppliers
• Save costs
• labour, raw materials and transport
• Avoid government restrictions to import
certain goods
Doole, Phillips and Lowe (1994)
 Exporting
• Indirect
• export houses
• UK buying offices of foreign stores or governments
• complementary exporting
• Direct
• sales to final user
• overseas agencies
• distributors and stockists
• company branch offices abroad
• Degree of involvement v control?
 Methods of overseas production
• Licensing
• Companies with strong brand or know-how
• e.g. Coca-Cola, Disney
• Franchising
• more of a ‘whole’ package
• e.g.Body Shop, KFC
• Contract manufacture
• bulk items e.g. Nike
• components
• Joint ventures -
• e.g. Burmah Castrol in S.Korea
• Wholly owned overseas subsidiaries
• Organic growth
 Strategic Alliances
• Strategic alliances can range from loose networking
relationships to very tight contractual relationships such as
joint ventures.
• e.g. ‘code share’ where airlines of a similar type sell each
other’s tickets. There is no co-ownership.
• Types
• technology swaps
• R&D exchanges
• distribution relationships
• Driving forces
• insufficient resources
• High R&D costs
• Concentration of firms in mature markets
• Market access
 Joint ventures e.g European Airbus.
• Orgs can remain separate, but have a tight legal
relationship.
• Reasons for setting up
• overcome foreign ownership restrictions
• increase speed of entry
• exploit new opportunities, complementary technologies and
management skills
• achieve worldwide presence at lower cost
• Disadvantages
• differences in partner aims and objectives
• equal ownership and different options can slow decision making
• dominance by one partner can lead to resentment in the other
• Large time commitment for education, negotiation and agreement
with partner
 Mergers
• The identity of each of the merging companies is
subordinated into the identity of the newly merged
organisation, or disappears.
• Benefits include:
– Cutting cost
– Eliminate competition
– Synergy augments mutual strengths
• Case study – Chrysler and Mercedes.