Entering New Market
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Criteria for evaluating new markets
6. Evaluating new markets
Key figures Development of population Development of GDP Development of GDP per capita
Infrastructure Traffic infrastructure Telecommunications infrastructure Health care system
Criteria for evaluating
the geographical market in general
Key figures Development of quantit Development of prices Development of market
market
Market system Players
Flows of products and Flows of information
Producers and trade Sub-markets National and internatio Wholesalers and retaile Competitive intensity
Customers Customer segments Link between customer
industry segments Demand similarity
Criteria for evaluatin
inside the geograph
Legal restrictions for economic activities Possible legal forms
Conditions for profit repatriation Conditions for sales (e.g. local production) Operations risks
Society Political system Ethnic and religious groups Languages Demographic structure Cultural distance Political risks
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Process for evaluating new markets
6. Evaluating new markets
1. Producing an initial list of potential new markets
2. Eliminating the less attractive markets
3. Selecting the most attractive markets
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China's BERI ratings 2001 to 2007
6. Evaluating new markets
Year Combinedscore
Political r iskindex
Operationrisk index
2001 57 56 49
2002 58 56 50
2003 58 56 50
2004 59 56 51
2005 60 56 52
2006 61 57 53
2007 61 57 53
( BERI, 2009 )
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Capacity shares of Holcim, Lafarge and Ceme
markets in 1999
6. Evaluating new markets
Country Holcim Lafarge Cemex
Argentina 38% 11% 0%
Canada 19% 33% 0%
France 13% 34% 0%
Indonesia 0% 3% 44%
Mexico 19% 4% 65%
Philippines 38% 21% 22%
South Africa 36% 26% 0%
Spain 10% 19% 27%
Venezuela 25% 24% 41%
(adapted from Bartlett/Beamish, 2011 )
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Init ial l ist of potential new markets
6. Evaluating new markets
IndustriesGeo-
graphi-
cal market
Industrymarket I
Industrymarket II
Country A
Country BRegion C1 in country C
Rest of country C
Country D
Country group E, F and G
Country H
= potential new markets = no potential new market
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Summary of market data
6. Evaluating new markets
Industries
Geo-
graphi-
cal market
General information for
geographical market
Industry
market I
Industry
market II
GDP per
capita
Real
annual
GDP
growth
Political
risk
Index
Opera-
tional
risk
Index
Profit
repatria-
tion
factor
… Market
size
Size of
relevant
sub-
market
… Market
size
Size
relev
sub-
mark
Country A
Country B
Region C1 in
country C
Rest of
country C
Country D
Country group
E, F and G
Country H
= potential new markets = no potential new market
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Comparison of three car part markets
6. Evaluating new markets
Number
of cars
Average ageof cars
Country A
Country C
Country B
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Remaining markets after the first round
6. Evaluating new markets
Industries
Geo-
graphi-
cal market
General information for geographical
market
Industry
market I
Industry
market I
GDP per
capita
Real
annual
GDP
growth
Political
Risk
Index
Opera-
tional
risk
Index
Profit
repatria-
tion
factor
… Market
size
Size of
relevant
sub-
market
… Market
size
Siz
rele
sub
ma
Country A
Country B
Region C1 in
country C
Rest of country
C
Country D
Country group
E, F and G
Country H
= potential new markets = no potential new market = elim
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Managing the cultural barrier in international m
research
6. Evaluating new markets
Option A Company Agency
Option C
Company Foreign
agencies
Option B
Company Agency Local
branches
Cultural
barrier
(adapted from Cateora/Gilly/Graham, 2009)
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The five cultural indices of Hofstede for Switz
Germany, France and China
Indices
Countries
French - speaking
Switzerland70 64 58
German - speaking
Switzerland26 69 72
Germany 35 67 66
France 68 71 43
China 80 20 66
6. Evaluating new markets
P o w e r
d i s t a n c e
i n d e x
M a s c u l i n i t y
i n d e x
I n d i v i d u a l i s m
i n d e x
U n c e r t a i n t y
(Hofstede/Hofstede, 2005)
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Cultural differences between regions of Switz
Germany, France and ChinaIndices
differences
Countries
Differences
German - French
Switzerland44 5 14 14
German Switzerland -
Germany 9 2 6 9
French Switzerland -
Germany35 3 8 5
German Switzerland -
France42 2 29 30
French Switzerland -
France2 7 15 16
German Switzerland -
China54 49 6 26
French Switzerland -
China10 44 8 40
D i f f e r e n c e s
i n p o w e r
d i s t a n c e
D i f f e r e n c e s
i n i n d i v i d u a -
l i s m
D i f f e r e n c e s
i n m a s c u l i n i t y
D i f f e r e n c e s
i n u n c e r t a i n t y
a v o i d a n c e
6. Evaluating new markets
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Industry segments in the European market for
cars
6. Evaluating new markets
Customer
group
Product
group
Families
with lowincome
Young
peoplebuying
their first
car
Purchasers
of a 2nd car
Retired
persons
Companies
providingcompany
cars
Crafts-me
etc.
Micro cars X X
Sub-
compacts X X X X X
Compacts X X X X X X4-wheel
sub-comp. X X X X X
4-wheel
compacts X X X X X X
Cheap
minivans X
Cheap
cabriolets X X XSecond
hand cars X X
X = important in terms of volume = industry segments
(Grünig, 2012)
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The largest retailers for food and near food
6. Evaluating new markets
Company Country oforigin
Revenue fromfood and near
food 2004
Wal-Mart USA 288
Carrefour France 99
Tesco UK 65
Total for top ten - 839
Total world
market- 3,500
Figures in billion USD
(Deloitte, 2011; ETC group, 2005)
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Scoring model for selecting the most attractiv
6. Evaluating new markets
Option Criteria
Geo-
graphical
market
Industry
market
Cultural
distance
Size of the
target sub-
markets
Growth of
the target
sub-
markets
Competi-
tive
intensity
Access t
distribu-
tion
channel
Importance of the criteria
2 3 2 2 3
A I 2 4 3 4 3
III 2 2 2 3 3
C1 I 3 2 2 1 2
II 3 3 1 2 1
III 3 1 3 2 1
Rest of C III 3 2 2 3 1
E, F + G I 2 4 2 4 3
II 2 3 3 3 3H I 2 1 2 2 2
II 2 4 3 2 4
Scores: 4 = very positive, 3 = positive, 2 = negative, 1 = very negative
Importance of the criteria: 3 = high, 2 = medium, 1 = low
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Different alternatives within exporting
7. Evaluating market entry modes
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Agent
Distributor
Salesrepresentative
Sales branch/subsidiary
Export firm
Border
= Company = Partners/customers
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Process for evaluating market entry modes
7. Evaluating market entry modes
1. Eliminate the less suitable entry modes based on external andinternal conditions
2. Select the best suitable entry modes based on a detailed
evaluation
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Matching market attributes, internal attr ibutes
modes
7. Evaluating market entry modes
Market
barriers
Market
attractiveness
Market
attractiveness
low
low
high
high
Production
subsidiary
Joint
venture
(Direct)
export
Licensing
Joint
venture
Indirect
exportlow
high
low
(Zentes, 1993)
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Process for developing an internationalization
new markets
8. Developing an internationalization strategy for new markets
3. Developing feasibility studies for entering the attractive country markets3. Developing feasibility studies for entering the attractive country markets
0. Preparing the strategy planning project
2. Determining the market entry modes for the attractive markets
3. Developing feasibility studies for entering the attractive country markets5. If needed: Signing agreements with partners
4. Developing the internationalization
strategy
1. Evaluating potential markets and selecting the most attractive ones
3. Developing feasibility studies for entering the attractive country markets6. Developing the market entry programs
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Market - entry mode combinations as result of
8. Developing an internationalization strategy for new markets
Most attractive markets Entry modes
Geographical
markets
Industry markets Production
subsidiary
Sales
subsid
A I
III
E, F + G I
II
H II
= selected entry mode
= entry mode which would fit best
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Table of contents of a feasibili ty study for ente
country market1. Served industry markets2. Market entry mode(s)3. If needed: Partner(s)4. Marketing plans for the served industry markets
4.1 Industry market A4.2 Industry market B
5. Resources needed5.1 Human resources5.2 Assets
5.3 Working capital6. Quantitative objectives
6.1 Industry market A6.2 Industry market B
7. Measures7.1 Order of entering the industry markets7.2 Steps and time needed for building up activities in industry7.3 Steps and time needed for building up activities in industry
8. Responsibilities9. Budget
9.1 Expenses including investments9.2 Revenues
10. Economic evaluation
8. Developing an internationalization strategy for new markets
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Net present values of market entry options
8. Developing an internationalization strategy for new markets
Market entry
options
Free cash flows
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year
Market A with
wholly owned
production
subsidiary
-1,500 +150 +200 +250 +250 +250 +250 +250
Market E, F + G
with sales
subsidiary
-600 +90 +120 +150 +150 +150 +150 +150
Market H with
sales subsidiary-400 +60 +80 +100 +100 +100 +100 +100
Figures in 1,000 EUR
NPV = net present value
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Table of contents of an internationalization str
markets
1. Country and industry markets to build up
2. Entry modes and, if needed, partners
3. Quantitative market objectives
4. Timetable
5. Responsibilities
6. Investment budgets and free cash flow targets
8. Developing an internationalization strategy for new markets
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http://www.springer.com/978-3-642-24724-8