Export problems (I)

1. Culture culture differs and is difficult to understand self-reference thinking sterotyping

2. Market factors distribution structure customs & duties specific norms, specifications, laws market information media habits

Export problems (II)

3. Financial factors securing payment exchange rates

4. Organisational factors finding labour force control and coordination

The seven deadly traps

1. Entering markets in order of size or growth of demand go where strategy will work best

2. Underestimate foreign competitors3. Expectations that customer motivations will be

similar worldwide the real world is not a global village

4. Entering markets at the wrong price5. Market entry without planning the expansion process6. Association with poor partners7. Losing brand exclusivity

(Simmonds 1999)

Key success factors

Planning and controlling Product strength and uniqueness Service Product adaptation Support to intermediaries International competence and experience Commitment Low price? High price?

Key success factors - 2

Service aspects Quality Brand image Export experience and scale Financial resources for export Information Physical distribution

International marketing management process

Strategic export decision

Market screening/country selection

Product/marketing strategy - entry strategy - attack strategy - competitive positioning - expansion strategy

Marketing-mix planning - adaptation vs. standardisation - coherence, synergy

Implementation & control

Reasons to go abroad

Proactive

managerial urge growth & profit unique product or competencies economics of scale

foreign market opportunities change agents preemptive move

Reactive

spreading risk extend sales of seasonal

product excess capacity

unsollicited orders follow key customer small home market stagnant or declining market (position) countercompetition

Internal External

A model for selecting foreign markets

Filter 1

preliminary opportunities +

Filter 2

potental opportunities +

Filter 3

Macro-level research (General market potential)- socio-economic statistics- geographical factors- political stability/openness

Product-class related factors- cultural framework- growth trends similar products- stage of development

Macro-level research (General market potential)- competition- customer buying behaviour- channels- key success factors vs. strengths/weaknesses- profit potential Target markets prority listing Entry strategy

- Rejectedmarkets

Rejectedmarkets

-

+

Rejectedmarkets

-

Strategy in Globalizing Markets

Preparedness for internationalization- international sales ratio- market presence in key markets- modes of operation: level of control and involvement- dominant market position

Industry globality- concentrated industry- homogeneity and cross-border demand- liberal trade & investment policy- market interdependence

Solberg, 1997

The Nine Strategic Windows Frame (Solberg, 1997)

Pre

pare

dn

ess

for

inte

rnati

on

aliza

tion

High

Middle

Low

Low Middle

High

Industry Globality

The Nine Strategic Windows Frame (Solberg, 1997)

Enter new business

Prepare for globalization

Strengthen your global

position

Consolidate your export

markets

Consider expansion in international

markets

Seek global alliances

Stay at homeSeek niches in international

markets

Prepare for a buy-out

Pre

pare

dn

ess

for

inte

rnati

on

aliz

ati

on

High

Middle

Low

Low Middle

High

Industry Globality

The European/Global challenge

CustomerCustomer Global Global

convergenceconvergence EfficienciesEfficiencies

Pan-European orPan-European or

Global ApproachGlobal Approach

- Economies of Scale- Economies of Scope

Risks of Pan-European marketing

Cultural differences persist Differences in market infrastructure Differences in competitive structure Different legal context Internal friction Costs of co-ordination

Standardization

Product Policy

Brand Name

Logistics

Positioning

But …

Adaptation required for:

Local Selling

Customized Service

Local Pricing

Local Distribution

Local PR and Sales Promotion

Adaptations due to:

Legal Differences Competition Buyer Behaviour Distribution Structure Market Position Market Development

The Belgian Compromise

Global Global Local Local

Glocal Glocal

- A subtle mix …- Coordination- A strategic frame but flexibility- Alliances when needed- Communication systems- Global management as team player

Standardization strategy toward CEE (1)

Typical elements of standardization strategy for CEE markets

- value-based positioning ( Q, image) - product and brand elements -pricing -pioneering strategy in high end

markets -exporting approach

Standardization strategy toward CEE (2)

Typical adaptations - non-core elements ( packaging, sales

promotion) - creative selection ( product-mix,

advertising) - regional management

Key problems identified by head-quarter executives

Lack of qualified local managers Operational focus , no long run view Lack of marketing competence ‘fire fighters’

Key problems identified by subsidiary executives

Short term goals block our strategic expansion

Reaching decisions takes too long due to bureaucracy and paper work

HQ feels that what works in one market should work everywhere

Too much marketing constraints

Comparison Matrix for Entry Modes

CriteriaModes Investment Sales Costs

ProfitContributi

on

MarketShare

Reversibility

Control Risk Other

IndirectExport

Agent/Distributor Export

Branch/Subsidiary Export

Licensing

Franchising

Other Contractual Agreements

Investment: NewEstablishment

Investment Acquisition

Joint Venture

Mixed

Evolution of a Manufacturer’s Decision on

Entry Mode

Branch export/subsidiary Sole

venture

Joint venture

Agent/distributor export

Licensing

Indirect export

Risk

TimeC

ontr

ol

0

Entry Strategies (I)

Experience

Entry strategy

Suitable type ofCountries/Situations

Do’s Dont’s

Export

Joint venture

Countertrade

Entry Strategies (II)

Experience

Entry strategy

Suitable type ofCountries/Situations

Do’s Dont’s

Licensing

Acquisition

Greenfield FDI

A process model of international market

withdrawal

PHASE 1 PHASE 2 PHASE 3 PHASE 4 PHASE 5 PHASE 6AccumulatingCommitment

IncreasingStress

ConflictingReactions

Power Play Vacuum versusFait Accompli

Beyond the withdrawal

Enactment

Executive

Increasingendogenous stress

Increasingendogenous stress

Increasingendogenous stress stress is high Withdrawal = Failure

Management

ActionsAnalysis of causes

Tactical measuresIncreasing commitment

Tactical measuresEscalation of commitment

Withdrawal as a reaction to strategic drift

No effects on theinternational market

portfolio

DriverInstitutionalization

Threat-rigidity behavior

Threat-rigidity behavior

Threat-rigidity behavior and

hierarchical power

Organizational de-commitment

None

Enactment

Challening

Increasingexogenous stress

Increasingexogenous stress

Increasingexogenous stress

stress -> 0 Withdrawal = Opportunity

Middle Managers

Actions

Analysis of causes

1. Passive rejection

2. Pro-active rejection

Fading out

Strategic alternative

- isolation of the venture- reallocation of resources

learning effects on the international

market portfolio

DriverInstitutionalization

Failure-inducedlearning

Failure-inducedlearning

Failure-inducedlearning and

knowledge powerNew strategic logic Institutionalization

Investing in the ventureand developing a

strategic logic

Investing in the ventureand implementing a

strategic logic

S t

r e

s s

T

h r

e s

h o

l d

W i

t h

d r

a w

a l

CONFRONTATION

TACTICAL WITHDRAWAL

STRATEGIC WITHDRAWAL

TACTICAL WITHDRAWAL

STRATEGIC WITHDRAWAL