Chapter 12:
Strategies for Analyzing and Entering Foreign Markets
Strategies for Analyzing and Entering Foreign Markets
Ø Foreign Market Analysis
· Assess alternative markets
· Evaluate the respective costs, benefits, and risks of entering each
· Select those that hold the most potential for entry or expansion
Ø Factors in Assessing New Market Opportunities
· Product-market dimensions
· Major product-market differences
· Structural characteristics of the national product market
· Competitor analysis
· Potential target markets
· Relevant trends
· Explanation of change
· Success factors
· Strategic options
Ø Exporting
a. Advantages
· Relatively low financial exposure
· Permit gradual market entry
· Acquire knowledge about local market
· Avoid restrictions on foreign investment
b. Disadvantages
· Vulnerability to tariffs and NTBs
· Logistical complexities
· Potential conflicts with distributors
Ø Motivations for Exporting
· Proactive motivations: pull a firm into foreign markets as a result of opportunities available there
· Reactive motivations: push a firm into foreign markets because opportunities are decreasing in the domestic market
Ø Forms of Exporting
· Indirect exporting
· Direct exporting
· Intracorporate transfers
Ø Export Intermediaries
· Export Management Company
· Webb-Pomerene Association
· International Trading Company
· Other intermediaries
Ø Licensing
a. Advantages
· Low financial risks
· Low-cost way to assess market potential
· Avoid tariffs, NTBs, restrictions on foreign investment
· Licensee provides knowledge of local markets
b. Disadvantages
· Limited market opportunities/ profits
· Dependence on licensee
· Potential conflicts with licensee
· Possibility of creating future competitor
Ø Franchising
a. Advantages
· Low financial risks
· Low-cost way to assess market potential
· Avoid tariffs, NTBs, restrictions on foreign investment
· Maintain more control than with licensing
· Franchisee provides knowledge of local market
b. Disadvantages
· Limited market opportunities/ profits
· Dependence on franchisee
· Potential conflicts with franchisee
· Possibility of creating future competitor
Ø Specialized Entry Modes
· Contract Manufacturing
· Management Contract
· Turnkey Project
Ø Foreign Direct Investment
· Building new facilities (the greenfield strategy)
· Buying existing assets in a foreign country (acquisition strategy)
· Participating in a joint venture
Ø Greenfield Strategy
· Best site
· Modern facilities
· Economic development incentives
· Clean slate
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