1. 1 1 Chapter 7 Entry and Competing In Foreign Markets

2. 2 The foreign markets entry decision-making 4 3 5 1 2 COUNTRY OPPORTUNITIES COUNTRY RISK ANALYSIS COMPETITIVE ANALYSIS ENTRY MODE DEVELOPMENT PATHS ORGANISATION:CONTROL 6 Analysis (Assessing Country Attractiveness) Implementation External Internal

3. 3 Entry and Development

4. 44 Market DrivenResources Driven Capture growth opportunities of the region to expand global sales Capture resources (natural, human, knowledge) for global competitiveness Local Production Local marketing Regional Production and Innovation Export Export Processing Factories Sourcing base Global Production and back offices Global Innovation Objectives

5. 5 First movers advantages Followers advantage Acquirers advantages Pre-empt key resources Establish standards Blocks brands and distribution Learn Benefit from mistakes of first movers Capitalize on blind spots Ride on efforts of first movers Window of Opportunity First Mover Advantages

6. 6 Chinese entry in the car industry

7. 7 Three Dimensions Of Global Competitive Positioning Global Standardisation Local Adaptation Compete on Costs/price Advantages Compete on Differentiated/value Advantages Multiple Segments Single Segment

8. 8 8 Customers Requirements and Competitive Contexts Little Difference across the World (Global Segments) Countries specific (Local Segments) Minimun Size of Production High (Global Scale) Low (Local Scale) GLOBAL STANDARDISATION Aircraft Microprocessor s BasicChemicals Pulp and paper Electronic Componernts MODULAR STANDARDISATION And MULTIBRANDS Elevators IT Services Handphones LOCAL ADAPTATION Consulting Services Mobile telephony Services PROCESS STANDARDISATION Cement E.g. : Intel, Dell E.g. : Otis, Nokia Example: Cemex Example: HSBC Standardised or Localized ? Consumer Banking

9. 99 Positioning: Value Proposition Product Message Customer Group Usage Distribution Brand Adaptive Usage Pure Global Fully Adaptive Product Same Different Price Same Different

10. 10 Positioning: Segmentation Middle Class Bottom of the Pyramid Rich Luxurious and top-of-the-line products and services. Global brands are well entrenched Mainly increasing urban markets. Mix of global focus and local brands and products and services Still important in term of numbers. Product and services adaptation and simplification are needed

11. 11 Price Costs Industry Average Profit Differentiation ? Cost Leadership ? Competing Technological Performances Superior Quality Superior Service Image Customization Timeliness and Responsiveness Relationships Risk Reduction Economies of Scale due to size Economie of Scope due to shared costs Low cost of factors ( labor, materials..) Installed base Superior productivity in processes Internal Costs Supplies Customer Value

12. 12 R & DProcurementManufacturing Marketing Sales and Distribution Sources of Competitive Advantages Resources based Asset based Competencies based Proprietary scientific/ technological know-how Superior and faster product development Superior research techniques Superior existing products line Patents More efficient CAD Higher quality scientists and technologists Better data base Higher amount of funding for R&D More creative designers Better suppliers Larger suppliers’ base Cheaper sources of supplies Higher quality supplies More effective supply chain mgt (JIT) More effective supplier relationships management More effective warehousing and inventories management Electronic data purchasing Economies of scale due to high volume of purchase Better location and infrastructure Higher qualification of work force Lower labor costs? Economies of scale due to volume Better quality/cost processes More advanced CAM Proprietary equipment Better management of : plant quality processes and time General Management Well established brand/reputation Density and scope of distribution Good quality channel partners Superior strategic and marketing intelligence Higher quality marketing and sales personnel Superior product and brand management Superior customer relationship management Higher quality managerial personnel Cheaper cost of capital Strong “sponsors” Privileged access to licenses from authorities Better electronic data mgt and transmission network Better financial mgt Better HR mgt Superiority in strategizing More effective, timely, responsive organisational mechanisms “Better” corporate culture

13. 13 Resources Assets Competencies Product Service Design Innovation ProductionMarketingSourcing General Management Building a Business System in a Foreign Environment Availability of scientists Availability of suppliers Skill base of the workforce Production managers Infrastructure: Transport, telecom Transfer of production technology Quality management Process control Distribution network Branding – global/local Sales force Information Local Financing Local Skills Relationship management Working capital management Partnership management Ability to adapt Appropriate Technology Logistics IT infrastructure Support & maintenance of equipment Negotiation skills Quality management What is required ? ▪ What do we transfer without adaptation? ▪ What do we need to adapt or create? ▪ How?

14. 14 R & DProcurementManufacturingMarketing General Management What capabilities are needed to compete? What capabilities do we bring and can transfer? What capabilities do we bring but need to adapt? What capabilities do we not bring and need to create? How do firms’ capabilities fit to regional/local markets? The Transfer, Adapt, Create model

15. 15 What is the value of our existing advantages on local markets?  To what extent do we need to adapt our products and management approaches?  What new capabilities need to be acquired and how? Competitive Advantages Technological Social Consumer Behavior Global (Same across the world) Local TransferAdapt Adaptation through learning Replicate Transferability of Competitive Advantages

16. 16 Wholly-Owned Subsidiary AcquisitionOffice License Franchise Joint-Venture Agent Distributor Entry Modes Benefits? Costs? Feasibility?Risks?

17. 17 Wholly-owned subsidiary AcquisitionJoint VentureLicense Market Attractiveness Costs Time Horizon Risks Internal Requirements Competitive Advantages Relevant for attractive markets Relevant for both attractive markets and less attractive markets High investmentsHighMediumLow Long pay-off Medium-term if properly managed Medium-termShort-term High exposureHighShared risks but risks of conflicts Low risks Local know-how Acquisition skills Local insights Partnership management Technology transfer Can be high for early entrants Can be high if properly managed Leveraged with partner Limited but testing base Entry Modes

18. 18 OPPORTUNITIES RISKS PRESSURE FOR LOCALISATION HIGH LOW MARKETING SUBSIDIARY MARKETING SUBS WHOLLY OWNED ACQUISITION LICENSE JOINT VENTURE DISTRIBUTOR REP OFFICE DISTRIBUTOR AGENT JOINT VENTURE ACQUISITION WHOLLY OWNED JOINT VENTURE LOW

19. 19 Create a small team with mandate to gather information, establish contacts, initiate first move Individual Skills - Cultural - Relational - Invest - Create JV - Logistical base - Educational leadership - Political - Relational - Technical - Develop people - Expand networks - Broaden scope - Leadership - Technical - Relational - Internal networking - Interdependencies -Leadership -Technical - Relational COUPLINGDEVELOPINGESTABLISHING PIONEERING Business development and managerial skills Critical Task

20. 20 Organizational Capabilities LOCAL HUMAN RESOURCES MANAGEMENT - Recruitment - Socialisation - Career - Training - Managing expatriates LEARNING - Business practices - Business and social cultures - Local sources of innovation INNOVATING - Transferring technology - Adapting “best practices” - Creating global base out of local resources

21. 21 Linkages LOCAL LINKAGES - Citizenship - Public relations - Suppliers/distributors/retailers - Local communities - Local education institutions - Partners - Business associations CORPORATE LINKAGES - Role in corporate portfolio - Reporting - Integration in global value chain