Presentation on theme: "Global Market Entry Strategies"— Presentation transcript:
1 Global Market Entry Strategies Operational reasons for setting up overseas manufactureStrategic reasons for investing in local operationsMethods of overseas productionExporting optionsJoint Ventures and Strategic Alliances
2 Operational reasons for setting-up overseas manufacture reduced costs of transportationreduced barriers/ quota handicap e.g. Nissansome governments demand investment with market entry e.g. ChinaCustomers sometimes prefer local manufacture e.g. Heinz ‘British’?Government contracts prefer firms contributing to the local economy
3 Improved local market information local manufacture ensures greater commitment to international marketsFaster response and Just-in-time deliveryDoole, Phillips and Lowe (1994)
4 Strategic reasons for investing in local operations Gain new businessdemonstrates strong commitmentpersuades customers to change suppliersprovides better service and more reliabilityDefend existing businessavoid market restrictions as sales increase, particularly in single market
5 Move with established customer component suppliers follow customers to compete with local component suppliersSave costslabour, raw materials and transportAvoid government restrictions to import certain goodsDoole, Phillips and Lowe (1994)
6 Exporting Indirect Direct Degree of involvement v control? export housesUK buying offices of foreign stores or governmentscomplementary exportingDirectsales to final useroverseas agenciesdistributors and stockistscompany branch offices abroadDegree of involvement v control?
7 Methods of overseas production LicensingCompanies with strong brand or know-howe.g. Coca-Cola, DisneyFranchisingmore of a ‘whole’ packagee.g.Body Shop, KFCContract manufacturebulk items e.g. Nikecomponents
9 Strategic AlliancesStrategic 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.Typestechnology swapsR&D exchangesdistribution relationshipsDriving forcesinsufficient resourcesHigh R&D costsConcentration of firms in mature marketsMarket access
10 Joint ventures e.g European Airbus. Orgs can remain separate, but have a tight legal relationship.Reasons for setting upovercome foreign ownership restrictionsincrease speed of entryexploit new opportunities, complementary technologies and management skillsachieve worldwide presence at lower costDisadvantagesdifferences in partner aims and objectivesequal ownership and different options can slow decision makingdominance by one partner can lead to resentment in the otherLarge time commitment for education, negotiation and agreement with partner
11 MergersThe identity of each of the merging companies is subordinated into the identity of the newly merged organisation, or disappears.Benefits include:Cutting costEliminate competitionSynergy augments mutual strengthsCase study – Chrysler and Mercedes.