In today's business world, globalization has a great effect on management decisions, operations and the culture of a business. The most important external driving pushes of a growing internationalization are the openness to new markets credited to liberalization and deregulation, further trends in technology and logistics, as well as shorter product life cycles, and a homogenous consumer habit whereas internally the strategic-focused attitude of companies represents an essential factor. Increasingly more companies do not only want to stay in an individual market but aim to expand into overseas market segments as well. Before joining a foreign market, a corporation has to decide not only on an appropriate entrance strategy but also should consider the main steps of the marketplace entry framework presented in the approaching chapter.
The following task provides a serious evaluation of market entrance strategies in the framework of international marketing management. First of all, reasons to go international will be presented followed by a market entry construction in section 3. Further on, different methods of access will be talked about stating advantages and disadvantages as well as supplying examples of firms which successfully have implemented these strategies. In chapter 5, different timing strategy techniques will be released. Finally, a conclusion will be attracted from the preceding results.
Reasons for stepping into foreign markets
There are a number of reasons why companies decide to go in foreign countries and increase their business functions. Organizations mainly take part in international businesses in order to establish competitive advantages and successfully adjust to the ever-changing business environment. However, it is hardly ever the case that companies are just motivated by one single factor. In the framework of international marketing, proactive and reactive reasons or motivations can be differentiated. While proactive factors are stimulated by internal strategic change, reactive reasons derive from environmental shifts. Proactive reasons include expansion in conditions of revenue, sales and customer platform, cost savings scheduled to economies of range or low-cost creation, and reduced amount of dependency about the same nationwide market as well as alternative resources of labor. Reasons which somewhat force the businesses to increase to international countries and market segments are described as reactive ones. For example, domestic marketplaces could be already saturated or emerging competitors prevent firms from further increase its market stocks and therefore, stay competitive.
Even though most companies highly benefit from operating internationally, they are often faced with incalculable hazards and challenges. Possible risks are primarily based on too little information regarding consumer choices, unfamiliar business types of procedures and legislation, as well as human resources management.
Market Entrance Framework
A market accessibility strategy framework assists as a helpful management tool for companies aiming to go into a foreign market. It is strongly suggested that companies follow these rules to better understand the process of internalization also to specify appropriate action steps for a company. Generally speaking, the business has to decide on the following questions: 1) What products should be offered abroad? 2) Where (countries, locations) should the market entry happen? 3) What accessibility strategy should be utilized to go into the international market? 4) How should be operated in the overseas market in terms of marketing programs? Since it is shown in the figure below, a conceptual construction consists of four main steps. After the decision has been made to enter a new market, a deep market diagnosis should be conducted. Regarding step one 1, the company has to review its resources and capabilities. A SWOT-analysis can help figuring out the firm's inside and exterior environment. Another key aspect is to evaluate legal and regulatory considerations as well as existing competition and to offer with possible political risks and uncertainty. Due to different customer tastes and preferences far away and parts potential target communities need to be interviewed and analyzed to be able to modify its products to their specific needs and wants. In step two 2, the business environment should be better evaluated, looking for business partnerships, examining market appeal and doing financial and entry barrier analyses to prevent early inability.
Not until step 3 3 an entry mode is preferred and implemented and additional discussions with business lovers will be prolonged. Critical factor is the entrance strategy configuration, thought as "the procedure of
deciding on the perfect entry strategy mix". Step 4 4 finally repre-sents the actual operation phase in which strategy and performances are aligned. This means gratifying the international clientele's needs by giving them with the required products and services and establishing enough prices while remaining competitive. Ultimately, the business must ensure that performance goals and strategic targets will be achieved as planned.
Market Entrance Strategies
In the next the several market access strategies will be referred to and benefits and drawbacks will be shown.
Most companies operate within their country; however when they decide to go into foreign territory most of the companies use export as their first method of go international. Exporting means "producing goods in a single country and offering them in another country". Some companies operate only in one niche market and are successful; however in most conditions companies achieve success by increasing brand recognition and business steadiness by stepping into new markets. Exchanging goods across boarders is continuing to grow to be always a whole lot easier throughout the years and therefore exporting is just about the simplest and most easy way to meet the need of the international country. However, whenever a company selects exporting as their strategy there are several factors which may have to be considered when identifying whether to use a immediate or indirect strategy. Such factors can be the size of the business, what product the business is going to sell, past export experience and know-how and business conditions on the market the company needs to enter into. Companies without any experience in exporting can reach their foreign customers through intermediaries. This process is named indirect exporting which is often utilized by first-time exporters. Indirect exporting is "when a firms provides its domestically produced goods in a overseas country through an intermediary". Intermediaries also known as middlemen is generally a firm or person that acts as a connection between parties to a business package. Using indirect exporting is one of the least high-risk methods. Companies using this method have the smallest amount of dedication; however on the other hand have the least profit. Direct exporting is one way utilized by companies. A corporation usually manages its exports independently and offers its products directly to the customers. This method gives the company a lot more control over their activities. It allows them to start out at lower prices, become more competitive on the market as well as keep closer connection with clients. Also, using immediate exporting gives the company higher dividends in investment funds. The Boeing Company was very successful like this and is currently, not only the world's largest aerospace company but the number one exporter in america. On the other hand, the pitfalls for immediate exporting are that, it is much more risky and they have to get far more time to become familiar with the market.
Licensing is another common approach of global marketing. Many companies utilize this method by "offering the right to a brand, patent, trade top secret or other similar valued item of intellectual property in substitution for a royalty or a fee". One example is the company Marvel Entertainment Inc. Marvel has mad millions of dollars in licensing with their superheroes and intellectual property. Marvel has licensing agreements with the film industry, toy industry, computer game industry and a great many other areas. Spiderman, Hulk and a great many other heroes are famous surrounding the world and can be seen and played with. Other specialized types of licensing are deal creation, management contracting and franchising.
Contract making is some sort of outsourcing. A German company for example contracts with the international company to create the products they want to sell in the new market. While the contract company produces the merchandise, the German company places the company's brand name on the products. Within the computer and electronic field contract creation is employed a lot by companies such as IBM and Dell. Dell and IBM let their products produce by Taiwanese companies. The advantages for like this are that the administrative centre investment is relatively low; however on the other hands the company won't have full control.
Management contracting is similar to manufacturing contracting, that the domestic company is not producing the merchandise in a overseas country, but transfer parts of their management staff to assist a international company for an absolute time for a charge. Management contracts are especially used in the hotel business. The Marriot or Carnival Hotels and Resorts use this method to go into new foreign markets. This technique is also extremely popular in Asia and many developing countries which need the skills from professional management. An good thing about managements contracting is the minimum amount risk for the company, credited to low collateral investment. Major disadvantages are that the company has to give up a huge amount of control as well as flexibility.
McDonalds, Burger King, Starbucks all have one thing in common; they are really world wide companies designed to use the franchise method to become help people internationally. Franchising is a expertise of licensing and both are the most common used method by small and medium size companies. "In a very franchising agreement, the franchisor sells limited rights to make use of its brand name in substitution for a lump amount and share of the franchisee's future profits". The franchiser helps the franchisee on an ongoing basis, through sales, advertising and training. The benefits of franchising are that it is less risky and less costly. Franchising is the fast growing way for a market admittance a firm whishing to develop globally. On the other hand, the franchisee must be careful to make all the modifications necessary. Issues concerning the transferability of products, brands and services is highly recommended. McDonalds for example were required to make adoptions when stepping into the Indian market as a result of different culture and lifestyle.
Joint endeavor occurs when an international company enters in to an contract with an area partner to build up a new entity and investments for a finite time by contributing equity. A Joint venture may be categorised as bulk, minority, or fifty-fifty ventures in regard to the equity share of the international company and may be started from the scuff or by the foreign partner's acquisition of a incomplete ownership interests in an existing local company. Generally, businesses choose joint endeavors over sole projects consequently of the restrictive regulatory actions towards sole business of the foreign buyers by the host governments. In the other side, a Joint venture can also bring positive advantages to the foreign partner through their local companions, because local partners have better knowledge of the variety country's environment and business methods as well as personal connections with local suppliers, customers, lenders and government officials, management, creation and marketing skills, local prestige and other resources. These benefits will be the reason most firms insist on joint venture in a few countries like Japan even when a sole endeavor is available to them. The benefits of Joint projects are 1) risk diversification and allocation of dangers between the lovers 2) sharing of resources 3) can be considered a means of lowering politics and other investment risks 4) access to the distribution network. The disadvantages are 1) lack of management control 2) joint venture's discussions are frustrating, requires a great deal of contractual framework and long amount of due-diligence3) insufficient trust 4) risk of conflict therefore of cultural dissimilarities.
Direct Investment can be divided into two parts 1) merger and acquision and 2) wholly managed subsidies. These types will be described in the next.
Merger and Acquisition: A couple of two key mechanisms by which possession and control of a organization can change: Either another firm or band of individuals can acquire the target firm, or the target firm can merge with another company. Corresponding to Brealey et al, a merger can be an added value only if the two companies are worthwhile more jointly than apart. You will find three classifications of mergers: 1) Horizontal mergers: This is a kind of merger where two organizations producing similar goods or offering similar services are combined to form an entity. Instances are Vodafone's acquisition of Mannesmann and Commerzbank's acquisition of Dresdner Bank or investment company. 2) Vertical Merger: is referred to as a combo of two companies in the same industry whose products will be required at different levels of the production cycle. The buyers can integrate backwards. A good example of in front integration merger is Walt Disney's acquisition of the ABC tv set network. Where Disney planned to use ABC network to show recent movies to huge viewers, and an example of backward integration would be Ford's acquisition of Rouge Metallic Company to reduce risks associated with the dependency on steel. 3) Conglomerate merger: occurs when companies in unrelated lines of businesses are combined to be an entity. The key reason why companies opt to go into this kind of merger is to diversify and reduce their exposure to industry specific dangers. However, when a conglomerate becomes too large and diverse through acquisitions, the performance of the complete firm can wither. Quellen?
Reasons for Mergers & Acquisition
Economic of range and opportunity: Cost efficiency of high quantity development are one of the privileges merged organizations enjoy, which small companies can only dream of. Larger firms also will reap the benefits of economies of range, which are savings as a result of synergy result in the marketing and distribution of different kinds of related products (e. g. personal computers and printers).
Vertical Integration: As a way to boost its products, a business might decide to have the immediate control of the inputs required to make its products. In the same way, another company is probably not contented with the manner at which syndication of it products is conducted, so it might opt to take immediate control of the distribution stations by acquiring a significant distributive company.
Expertise: To be able to contend effectively and proficiently, businesses often need expertise in particular fields. A more useful way may be to obtain the talents as an already working unit in an existing organization.
Monopoly Benefits: Merging with or acquiring a major competitor might allow a firm to reduce competition within the sphere of its procedure. There is higher pricing power from reduced competition and higher market share, which could result in higher margin and working income.
Diversification: This is the very beneficial in the issue with conglomerate merger. These benefits are immediate risk lowering and liquidity improvement.
Reasons for Merger and Acquisition are 1) to gain cost efficiency through Economic of range and opportunity 2) to boost products through Vertical Integration 3) to become more competitive because know-how is required acquire talents 4) to get monopolistic advantages and at exactly the same time reduce competitors 5) with Diversification reduces an investor's contact with firm-specific risk.
Wholly held subsidies: Market accessibility by using a wholly had subsidiary consist of two distinctive strategies: it can be achieved through a Greenfield investment or through an acquisition. Greenfield investment is a kind of direct entry setting whereby a parent firm stretches its procedure in a host country by building a new operational basic from the damage. It is remarkable for the complexity and the high cost of its development and execution. For example, to be able to establish successfully in a foreign market, it is expected of a firm to have an considerable knowledge and know-how of the new market, and for this to be possible, a reasonable help from the third parties such as local unbiased consultants are essential, and their services are usually very costly. The expense of its implementation makes Greenfield investment in a international market a very risky setting of market entry. Acquisition in the other hands supplies the fastest means of achieving market electricity. As discussed above, this plan requires buying a rival company, distributor, provider or a firm which is related or completely unrelated to the acquiring firm's industry, in order to gain usage of central competencies and achieve a greater competitive advantage. The actual fact that it's easier and more accurate to calculate the outcomes associated with an investment via an acquisition makes acquisition a less risky alternative compared to Greenfield investment.
Timing strategies of market entry
In this part timing strategies as an alternative kind of internationalization will be explained. Timing strategies could be split into two categories 1) approaches for market access in a particular country, called country-specific timing strategies, and 2) approaches for market entrance in more countries synchronous, called cross-border timing strategies. Some important factors that ought to be examined before a timing-strategy can be chosen are competition on the market, technology, alternative, customer action and the market probable as well as market development. If this is done an organization can decide which timing strategy pays to to reach the business's goals.
Country-specific Timing Strategies
A company must clarify when they want to enter into a new market. Most times your choice for a technique will depend from the strategies of the competition in the prospective market. Now the first-mover as well as the follower strategy will be referred to and benefits and risk of each will be recognized. First-mover Strategy: Companies those are first into the industry or land. The features of the first-mover are mainly that the firm has an increased consciousness level as well as additional time for image building on the market. Additionally, the company gain more and previous experience which permits them to change itself previously to changing market environmental. Moreover, the company can recruit informed employees and build-up intensive interactions with market entrance. Disadvantages will be the free-ride-effect, which explained early followers who'll benefit from the assets of the first-mover. Additionally, the high costs of exploitation of the mark market and the high risk of failure. As an example for an initial mover strategy could be known as apple. The iPhone, iPad and the majority of the other products from apple were progressive and the first products in the prospective industry or region. Follower Strategy: Companies which follows the first mover or enter the marketplace after it is becoming established. The advantages of the follower are mainly that the organization can stay away from the problems of the first mover, get access to reliable information about the marketplace, can profit from the ventures of the first-mover hence, cost lowering for example for infrastructure or education of employees. Negatives are market entrance barriers created by the first-mover, less activities over the marketplace situation, finding of suppliers and gain the commitment of potential clients. As an example for supporters Microsoft could be called. Microsoft offers a good phone following the successful iPhone execution of Apple.
Cross-border timing strategies
Cross-border timing strategies will be the waterfall or sprinkler strategies. The Waterfall strategy detailed a scenario in which a product or a service is gradually migrated into the target audience as the sprinkler strategy implements a product or service in a number of countries at exactly the same time. Benefits of the Waterfall strategy are that the enlargement can take place in a systematic method. Hence resources are needed one-by-one and not at the same time to get into successful all the target market. Furthermore, the life pattern of some technologies or products can be extended and experience can be utilized for the next market entry. On top of that, it is a relative less risk strategy. Down sides of the waterfall strategy may be the long time period execution. In fast paced markets this strategy might be too gradually. Furthermore, the competition will be warned so that they can build-up more market access barriers for example. Illustrations for the waterfall strategy will be the metro group, that used the activities of the last market entrance when they start a fresh subsidiary in a fresh market as well as Dell, Benetton and YOUR BODY Shop. The Sprinkler strategy is has the contrary advantages and disadvantages as the waterfall strategy. Within a short time period the strategy were put in place in a large amount marketplace. The sprinkler strategy generates first-mover advantage. It is a very functional strategy in hyper and time-based competition markets. Disadvantages are the high amount of resources required for entering and the chance of failing because of less knowledge or experience of the various countries. Good examples for the sprinkler strategy are Microsoft with its House windows software and Gillette with its Sensor.
In this task, the major need for a well-thought-through collection of a market entry strategy has been proven and various types of accessibility methods have been shown and additional analyzed.
Market admittance strategies can have a far-reaching effect on an organization's global strategy. Choosing the right access strategy is a complicated decision-making process and requires various things to consider. The importance of which aspects should be taken into closer factor may differ by the proper goals of any company, by country, and even by industry. Which access strategy to choose highly depends on various strategic factors like ease of exit, rate of entry, social distance, and competitive level. Under all conditions, there will be no ideal option. In all cases, ways of market admittance should be fine-tuned to the organization's long-term strategies and goals and really should be based on future ambitions as well as on current resources and capabilities. Companies do not only benefit from the advantages, but will also have to cope with cons of a chosen access strategy. Therefore, compromises frequently have to be produced when going international. Eventually, today's organizations must remain versatile enough to incorporate the high amount of dynamism in an ever-changing business environment.
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This case evaluation is the original work of the writers. It is not presented somewhere else for grading. All sources have been suggested to the best of the writer's ability.
Ort, Datum Personal: Anja Chan
Ort, Datum Personal: Annika Nienaber
Ort, Datum Personal: Emmanuel Ofobeze
Ort, Datum Signature: Jana Theresa Germeroth
Appendix 1 Waterfall Strategy
Appendix 2 Sprinkler Strategy
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