International Market Entry Strategies

Posted on May 12, 2024 in Economy

Market Entry Modes

Licensing

Granting permission for others to use intellectual property (e.g., trademarks, patents) in exchange for other forms of compensation. Select trustworthy licensees, clarity in licensing agreements. Advantages: low risk, low initial investment, and quick market entry & expansion. Disadvantages: loss of control over quality or brand image and dependence on licensees.

Exporting/Direct Sales Offices

Selling products directly to customers in foreign markets. Market research & understanding local regulations, build relationships with local partners & distributors. Advantages: low risk & investment, allows gradual expansion, retains control over distribution/marketing. Disadvantages: limited understanding of local dynamics, transportation costs & trade barriers.

Franchising

Granting the right to use a company’s business model & brand in exchange for fees & royalties. Strong brand reputation, selection & training of franchisees. Advantages: rapid expansion with minimal capital investment, provides local market knowledge from local franchisees, shared risk with franchisees. Disadvantages: loss of control over brand standards, potential conflicts.

Joint Ventures

Collaboration between two or more companies for specific objectives. Clear agreements & roles for each partner, effective communication. Advantages: access to local expertise/resources/knowledge, shared investment & risk, potential for innovation. Disadvantages: cultural & strategic differences between partners, shared decisions may lead to conflicts, risk of loss of proprietary information.

Wholly Owned Subsidiaries

Establish a new entity in a foreign market & parent company has complete ownership/control. In-depth market analysis, legal compliance. Advantages: full control of operations/brand/quality, adapt strategies to local market conditions, protect intellectual property rights. Disadvantages: high initial investment & risk, needs significant management attention, potential for cultural & regulatory challenges.

Turn-key Contracts

Providing complete services (design, construction) for a client in a foreign market. Clear agreement, reputation for contractor, project management capabilities. Advantages: low risk for the client since the contractor has responsibility, faster project implementation, specialized expertise. Disadvantages: potential cost overruns/delays, depend on contractor’s performance, limited opportunity for the client to customize the project.

Strategic Acquisitions/Mergers

Purchasing/merging with existing companies in foreign markets. Strategic fit with the parent company’s objectives, integration plan & execution. Advantages: rapid market entry & expansion, potential for economies of scale. Disadvantages: high acquisition costs & financial risk, cultural integration challenges, antitrust issues.

Design of International Expansion Strategy

1. Choose continent/region, choose new markets/countries to enter.
2. Choose & design your international expansion strategy & objectives.
   1. Design common/shared market entry strategies & objectives at the regional or continental level. (Standardized & overall market entry strategies per region, develop your regional and shared new CVP, define & describe your regional target audience (macro-segments across your region)).
   2. Design tailored specific market entry strategies & objectives at the country level for each country:
      1. Design market entry strategy.
      2. Set objectives.
      3. Determine scale (large = significant amount of time & resources, small = entrepreneurs learn more about the foreign market with limited exposure), decide market audience.
      4. Define customer value proposition in that country.
      5. Decide purpose (repositioning = changes how customers perceive the brand, depositioning = diminishing a competitor’s brand perception).
      6. Entry modes & distribution decision, can change the degree of risk they present, two types of market entry modes (non-equity modes = indirect ownership through partnership/agreements, equity modes = direct ownership & control).
      7. Define branding strategy (intended brand image).
      8. Define the timing & sequence of market entry strategy. (Consider economic growth, inflation rates, understand legal requirements, assess the availability of financial resources, ensure the product is fully developed/tested ready for market & timing, predict the forecast of competitor strategy & see their weaknesses/strengths to see how or when to enter.)
3. Define the sequence & priority of entry & time to entry.

International Market Segmentation

Macro Segmentation

Dividing the market into broad groups based on general characteristics (demographics or geography). High degree of measurability.

Micro Segmentation

Dividing those broad groups into smaller, more specific segments based on detailed criteria (behavior or preferences). Low degree of measurability. Levels/scopes of segmentation: Global segmentation of consumers, Regional segmentation of consumers, Country segmentation, Local/city segmentation. Segmentation convergence: combining similar market segments. Segmentation divergence: splitting market segments based on differences.

Choosing Between Common or Tailored International Expansion Objectives & Strategies

1. Shared/common expansion strategy per continental region.
2. Tailored per country.
3. Combination of both shared & tailored.
4. Just replicate your global marketing strategy or your domestic marketing strategy.