1. Foreign Market Entry
3/17, 2016

2. Market Expansion Strategies
Concentration
Diversification
Concentration
Narrow Focus
Country Focus
Country
Country
Diversification
Global
Diversification
Diversification

3. Set of countries for further screening
Country Screening: The First Cut
POLITICAL RISK
General instability
Expropriation
Exchange rates
reject
accept
ENVIRONMENT
Physical
Socio-cultural
Economic
Regulatory
reject
accept
Set of countries for further screening

4. COUNTRY IDENTIFICATON PRELIMINARY SCREENING
Entry Evaluation Procedure
COUNTRY IDENTIFICATON
accept
reject
PRELIMINARY SCREENING
accept
reject
IN-DEPTH SCREENING
accept
FINAL SELECTION
(personal visit)
reject
accept
Entry Mode Analysis

6. Personal Visit
“So if I asked you about art, you probably give me the skinny on every art book ever written. Michelangelo, you know a lot about him. Life’s work, political aspirations, him and the pope, sexual orientations, the whole works, right? But I’ll bet you can’t tell me what it smells like in the Sistine Chapel. You’ve never actually stood there and looked up at that beautiful ceiling; seen that.”
--Memorable Quotes for Good Will Hunting

7. Ceiling of the Sistine Chapel

8. Decision Criteria for Mode of Entry
Market Size and Growth
Risk
Government Regulations
Competitive Environment
Local Infrastructure
Company Objectives
Need for Control
Internal Resources, Assets, and Capabilities
Flexibility
Market Attractiveness

9. Four Basic Modes of Entry
Exporting
Indirect Exporting
Direct Exporting
Licensing
Incl. Franchising
Strategic Alliances (SA)
Joint ventures
Collaborations between companies
Wholly Owned Manufacturing Subsidiary
The company commits investment capital in plant and machinery.

10. Modes of Entry (I) Exporting Indirect Exporting Cooperative Exporting

11. Modes of Entry (II) Licensing Technical Licensing
Contract Manufacturing
Original Equipment Manufacturing (OEM)
Management Contracts
Turnkey Contracts
Franchising

12. Modes of Entry (III) Strategic Alliance Distribution Alliance
Manufacturing Alliance
R&D Alliance
Joint Venture

13. Modes of Entry (IV) Wholly Owned Subsidiary Assembly
Full-Fledged Manufacturing
Research and Development
Acquisition

14. The “Cultural Distance” Effect
Most of the export expansion paths followed by firms begin in countries “psychologically” or “culturally” similar to their own or countries they already export to
Geographical proximity plays a role but is only one part of the broader notion of “cultural distance” at the heart of expansion by gradually internationalizing
The cultural distance effects works so as to create very natural “biases”

15. The International Learning Curve
The cultural distance path also allows the gradual accumulation of know-how about how to do business abroad, like following a learning curve that gradually increases the productivity of the managers involved
The reason behind the pattern is mainly a desire to limit transaction costs
The learning curve is also at work when the experienced international marketer eyes new and important country markets
European firms enter the U.S. market via Canada, allowing time to elapse before crossing the border

16. An Optimal Entry Mode Strategy
Company
Strategic
Posture
Product/market situation
Emerging High-growth Mature
Services
Incremental
Protected
Control
Indirect exports Indirect exports Direct exports Licensing/alliances
Joint venture Indirect exports Alliance/licensing Licensing
Wholly owned Acquisition/ Wholly owned Franchising/alliance/
subsidiary alliance subsidiary exporting

17. Sequencing Internationalization Strategies
Delayed
Sequential
Parallel
Simultaneous
Waterfall Strategy
Sprinkler Strategy