Chapter 7 Entry and Competing In Foreign Markets
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Transcript of Chapter 7 Entry and Competing In Foreign Markets
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Chapter 7
Entry and CompetingIn Foreign Markets
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The foreign markets entry decision-making
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COUNTRY OPPORTUNITIES
COUNTRY RISK ANALYSIS
COMPETITIVE ANALYSIS
ENTRY MODE
DEVELOPMENT PATHS
ORGANISATION:CONTROL6
Analysis(Assessing CountryAttractiveness)
Implementation
• External• Internal
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Entry and Development
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Market Driven Resources DrivenCapture growth opportunities
of the region to expand global sales
Capture resources (natural, human, knowledge) for global
competitiveness
Local Production
Local marketing
Regional Productionand Innovation
Export
Export Processing Factories
Sourcing base
Global Production and back offices
Global Innovation
Objectives
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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
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Group Start Carmakers in China M/S in 2001 Pioneers (mid-1980s)
1985 1985
1987-98
Beijing Jeep Shanghai VW Guangzhou Peugeot
0.7% 31.9%
– 1st follower gen. (late 1980s/early 1990s)
1988 1990 1991 1991 1992 1992
Tianjin Daihatsu (TLA in 1986) FAW Group (TLA in 1988) Changan Suzuki (TLA in 1988) Guizhou Subaru (TLA in 1989) Dongfeng Citroen FAW-VW
8.7% 3.0% 7.2% 0.2% 7.4%
17.3% 2nd follower gen. (late 1990s)
1999 1999
Shanghai GM Guangzhou Honda
8.1% 7.1%
Chinese entry in the car industry
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Three Dimensions Of Global Competitive Positioning
Global Standardisation
Local Adaptation
Competeon Costs/priceAdvantages
Competeon Differentiated/valueAdvantages
Multiple Segments
Single Segment
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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)
GLOBALSTANDARDISATION
AircraftMicroprocessors BasicChemicalsPulp and paper
Electronic Componernts
MODULARSTANDARDISATIONAnd MULTIBRANDS
ElevatorsIT ServicesHandphones
LOCALADAPTATION
Consulting ServicesMobile telephony Services
PROCESSSTANDARDISATION
Cement
E.g. : Intel, DellE.g. : Otis, Nokia
Example: Cemex Example: HSBC
Standardised or Localized ?
Consumer Banking
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Positioning: Value Proposition
Product
Message
Customer Group
Usage
Distribution
Brand
AdaptiveUsage
Pure Global
Fully Adaptive
AdaptiveProduct
Same
Same
Same
Same
Same
Same
Same
Same
Same
Same
Same Same
Different
Different
Different
Different
Different
Different
Different
Different
Different
Different
Different
Different
Price Same Different DifferentDifferent
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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
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Price
Costs
IndustryAverageProfit
Differentiation ?
CostLeadership ?
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
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R & D Procurement ManufacturingMarketingSales andDistribution
Sources of Competitive Advantages
Resources based
Asset based
Competenciesbased
• 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 locationand infrastructure
• Higher qualification of work force
• Lower labor costs?
• Economies of scale due to volume
• Better quality/costprocesses
• More advanced CAM
• Proprietary equipment• Better
management of : plant quality processes and time
GeneralManagement
• Well established brand/reputation
• Density and scope
of distribution
• Good qualitychannel partners
• Superior strategicand marketing intelligence
• Higher quality marketing and sales personnel
• Superior product andbrand 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 transmissionnetwork
• Better financial mgt
• Better HR mgt• Superiority in
strategizing• More effective, timely, responsiveorganisational mechanisms• “Better” corporate
culture
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Resources
Assets
Competencies
ProductService DesignInnovation
Production MarketingSourcingGeneralManagement
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
Wha
t is
requ
ired
?
▪ What do we transfer without adaptation? ▪ What do we need to adapt or create? ▪ How?
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R & D Procurement Manufacturing Marketing GeneralManagement
What capabilitiesare needed to compete?
What capabilitiesdo 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
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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?
CompetitiveAdvantages
Technological
Social
Consumer Behavior
Global(Same across
the world)
Local
Transfer Adapt
Adaptationthrough learningReplicate
Transferability of Competitive Advantages
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Wholly-OwnedSubsidiary
Acquisition OfficeLicenseFranchiseJoint-Venture
AgentDistributor
Entry Modes
Benefits? Costs?Feasibility? Risks?
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Wholly-ownedsubsidiary
Acquisition Joint Venture License
MarketAttractiveness
Costs
TimeHorizon
Risks
InternalRequirements
CompetitiveAdvantages
Relevant for attractive marketsRelevant for both attractive markets
and less attractive markets
High investments High Medium Low
Long pay-offMedium-term
if properlymanaged
Medium-term Short-term
High exposure High Shared risks butrisks of conflicts
Low risks
Local know-how Acquisition skillsLocal insights
Partnershipmanagement
Technologytransfer
Can be high forearly entrants
Can be high ifproperly managed
Leveraged withpartner
Limited buttesting base
Entry Modes
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OPPORTUNITIES
RISKS
PRESSURE FOR LOCALISATION
HIGHHIGH
HIGH
LOW
LOW
MARKETINGSUBSIDIARY
MARKETING SUBSWHOLLY OWNEDACQUISITION
LICENSE
JOINT VENTUREDISTRIBUTOR
REP OFFICEDISTRIBUTORAGENT
JOINT VENTURE
JOINT VENTUREACQUISITIONWHOLLY OWNED
JOINT VENTURE
LOW
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Create a small teamwith mandate to gather information, establish contacts, initiate first move
IndividualSkills
- Cultural- Relational
- Invest- Create JV- Logistical base
- Educationalleadership
- Political- Relational- Technical
- Develop people- Expand networks- Broaden scope
- Leadership- Technical- Relational
- Internal networking- Interdependencies
- Leadership- Technical- Relational
COUPLINGDEVELOPINGESTABLISHINGPIONEERING
Business development and managerial skills
CriticalTask
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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
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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