Alexander Consulting Enterprise 12/14/2015 Opportunity Identification and Country Selection

Alexander Consulting Enterprise 12/14/2015 Foreign Market Entry Firm Specific Characteristics Country Selection Mode of EntryProduct Selection Objectives of Market Entry Strategy and Time of Entry

Alexander Consulting Enterprise 12/14/2015 Firm Specific Characteristics Provide the Lens to Assess the Foreign Market Entry Decision. Product Selection, Country Selection, Mode of Entry, Strategy, and Timing All Depend on Firm Specific Characteristics. To Define the Firm Specific Characteristics a Situation Analysis is Required! 1. Firm Specific Characteristics

Alexander Consulting Enterprise 12/14/ Objectives of Market Entry 2.1 Production Focused - Cost Advantages  Economies of Scale  Global Sourcing  Labor Cost  Cost to Protect Environment  Taxes -Knowledge Transfer -Potential for Innovation -Access to Skilled Labor

Alexander Consulting Enterprise 12/14/ Objectives of Market Entry (Cont.) Demand conditions Firm strategy, structure and rivalry Related and supporting industries Factor conditions Porter’s Diamond

Alexander Consulting Enterprise 12/14/ Objectives of Market Entry (Cont.) “Companies gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home based suppliers, and demanding local customers” Michael Porter Innovation and Competition

Alexander Consulting Enterprise 12/14/2015 “Without Coke, Pepsi would have a tough time being an original and lively competitor…..And on the other side of the fence, I’m sure the folks at Coke would say that nothing contributes as much to the present day success of the Coca- Cola Company than…Pepsi” Roger Enrico Ex-CEO of Pepsi Cola

Alexander Consulting Enterprise 12/14/2015 Clusters are geographic concentrations of interconnected companies and institutions in a particular field. - Clusters increase competition and cooperation - Clusters increase communication between companies and employees. Clusters decrease transaction cost by establishing trust. - Clusters increase productivity. Clusters offer access to skilled labor, local suppliers, and public institutions - Clusters offer a high potential for innovation. Companies in clusters are close to competition, customers, and public institutions. Employees might feel peer pressure. 2. Objectives of Market Entry (Cont.) Innovation and Economic Clusters

Alexander Consulting Enterprise 12/14/ Objectives of Market Entry (Cont.) Innovation and Economic Clusters Strategic Implications: Choosing location not only based on input cost. Consideration of Potential for Innovation is a critical factor for long term success.

Alexander Consulting Enterprise 12/14/ Market Focused -Capturing new Markets - Diversification - Brand name Leverage - Economies of Scope - Access to Know How and Qualified Employees 2.3. Competition Focused - First Mover Advantage - Preemptive Strike - Learning in Leading Markets - First - Mover (Dis)Advantage 2. Objectives of Market Entry (Cont.)

Alexander Consulting Enterprise 12/14/2015 “If you are going to be the world’s best furnishing company, you have to show you can succeed in America, because there is so much to learn here.” Goran Carstedt Head of Marketing IKEA

Alexander Consulting Enterprise 12/14/2015 Fit with Company 3. Country Selection

Alexander Consulting Enterprise 12/14/ Country Selection 1. Region Identification Potential candidates are identified using easily available statistical data. 2. Preliminary Screening Involves rating the identified countries on macro level indicators, such as political stability, geographic distance and economicc development. 3. In-depth Screening Analyzes data specific to the industry and product markets and segments. Analyses of Market Attractiveness 4. Final Selection Company objectives are brought to bear for a match.

Alexander Consulting Enterprise 12/14/2015  Size  Growth  Competition  Trade Barriers  Analysis of Political Risk  Currency  Infrastructure  Capital Requirements  Production Cost  Taxes Analysis of Market Attractiveness 3. Country Selection (cont.)  Economic Freedom Index  Market Potential Index

Alexander Consulting Enterprise 12/14/2015 General Data Resources o oMichigan State CIBER international business information repository: o ohttp://globaledge.msu.edu/ o oU.S. Commercial Service - Export assistance arm of the Department of Commerce o ohttp://export.gov/ o oAvailable through UNLV Library Electronic CollectionsElectronic Collections o oGlobal Market Information DatabaseGlobal Market Information Database

Alexander Consulting Enterprise 12/14/ Mode of Entry  Exporting  Licensing  Strategic Alliance  Joint Venture  M&A  Direct Investment

Alexander Consulting Enterprise 12/14/ Mode of Entry (Cont.) Considerations affecting mode of entry Local Factors Legal requirements Cultural distancevs. relevant MNE experience Customers Human resources Distribution chain/supply chain Political risk/value of connections

Alexander Consulting Enterprise 12/14/ Mode of Entry (Cont.) Considerations affecting mode of entry Nature of the Product Importance of control of brand, product leakquality, etc. Importance of technical knowledge vs. relevant local expertise Danger of leakage of critical technology

Alexander Consulting Enterprise 12/14/ Mode of Entry (Cont.) Considerations affecting mode of entry Strategic considerations Risk tolerancevs. relative size of project Importance of learning from the market Important to demonstrate commitment?

Alexander Consulting Enterprise 12/14/ Strategy and Time of Entry - Domestic Market Extension - Multinational - Global -Market Concentration versus Market Spreading

Alexander Consulting Enterprise 12/14/2015 Market Spreading versus Market Concentration: Market Concentration  High Penetration  High Control  Knowledge of Market Conditions  Economies of Scale  Economies of Information  Steep Learning Curve Market Spreading  Low Penetration  Low Control  Little Effort in Single Markets  Target Market Does not Reflect National Borders  Diversification 5. Strategy and Time of Entry (Cont.)

Alexander Consulting Enterprise 12/14/2015 International Experience Domestic Operations Only Operating Profit Risk Profit and Risk in International Markets 5. Strategy and Time of Entry (Cont.)