IMH – 11.02 - Explain the International Market-Entry

Strategies

Goals Explain “environment-strategy fit”

for international market Describe different international

entry strategies.

ENVIRONMENT-STRATEGY FITThere must be a fit between environmental

conditions and business strategies. Hence it is important to understand the types of environment for a business when it goes into international markets.

placid environment an environment with very little change Easy to develop strategic plans for long term Not very common

turbulent environment rapid and unpredictable environmental change Businesses must develop strategic plans for

shorter time periods More common

ENVIRONMENT-STRATEGY FIT (continued)

macroenvironment the environmental factors that

influence the economy, governments, legal environment, technology, ecology, social cultural factors, and competition

http://www.youtube.com/watch?v=5xwyGVr51Dw

environmental shocks rapid changes to the

macroenvironment Ex: The terrorist attacks Sept 2001, or

the fall of communism in the 1990s.

Environmental Planning

Most international companies operate in a turbulent environment.

It is difficult to plan for every macroenvironmental change. When a company sees an increase chance

of threat, they should be pro-active. E.g., adjusting inventory levels of a

recession is anticipated Governments can help ensure stability

by strengthening their resource base and their relationships with other countries.

Environmental Planning (examples)Asian Bird Flu http://live.wsj.com/video/bird-flu-variant-pandemic-potential/FCCF8D56-CE49-4373-9DD1-

760F4844E6CE.html#!FCCF8D56-CE49-4373-9DD1-760F4844E6CE

Businesses pulled employees out of infected countries

Increased inventory levels in case foreign producers could not send products

U.S. shortage of qualified employees for manufacturing jobsFederal funds to NSF for create research

centersGoal to graduate 100,000 new scientists and

engineers during next four years

IMH – 11.02 - Activity: Recent environmental Shocks

Visit a reliable source of world information likehttp://www.time.com/time/ - (time magazine)Or similar to research some current events/developments/environmental changes in the world Identify at least three factors that could result in environmental shocks and why? Briefly specify the type of business planning that would be needed to minimize the effect of these shocks.

INTERNATIONAL ENTRY STRATEGIES For the least environmental

turbulences impacting a business it is important to adopt the right market entry strategies

The strategies for international entry include options such as:

Exporting Contracting Joint venture Direct investments.

INTERNATIONAL ENTRY STRATEGIES

• Exporting: Creating a market for a business’s products in the importing country to provide additional profits for the business as it expands internationally. • Simplest and least risky means of entry Example: US exporting commercial and

small jet air crafts to many countries of the world.

Exporting represents the lowest level of international commitment and risk as the business can pull out of the market relatively easily.

INTERNATIONAL ENTRY STRATEGIES

• Contracting: contractual agreements enable a business to work with local partners in a foreign market. • It is a higher level of commitment as it

involves contractual agreements, manufacturing, licensing, franchising etc.

• Ex: Nike entering into a manufacturing contract with local Chinese manufacturing firms.

INTERNATIONAL ENTRY STRATEGIES

Joint venture: two or more businesses create a new business to pursue a strategic goal. Partners agree to share ownership, capital,

and revenue Ex. Fox broadcasting company's star TV

joint ventures with Chinese company Quinghai Satellite.

It brings in local partners but involves higher risk because businesses commit resources.

INTERNATIONAL ENTRY STRATEGIES Direct investments: two types:

Foreign direct investment-the purchase of assets in a foreign country by a business

Ex: The purchase of land in Kentucky by Japan for its Toyota manufacturing plant

Wholly-owned subsidiary-an independent company owned by a parent company Ex: Parle products of India owned by

Coca Cola

IMH 11.02 Activity Followed by a discussion with a partner,

make a foldable listing advantages & disadvantages of each of the foreign market entry strategies.

Which strategy do you believe would be the best for the following products…why…explain

Anderson windows Lays Potato chips Schwinn bikes Press Pass Trading cards