Dole Foods International

Expansion

Live case-based skill development exercise

Basics of Strategic Management

• Strategy formulation in int’l context– Developing mission/vision– Conducting external and internal audit (SWOT)• Involves numerous analyses (product, marketing,

financial, industry, country, etc.)– Establishing long-term objectives– Developing strategies– Developing policies and short-term objectives– Allocating resources– Measuring performance

Internationalization from a Company Standpoint:Decision Steps

• Going international: to be or not to be?– SWOT => mission, objectives. Available resources and other

constrains

• Assessing the benefits, costs and risks of international expansion (country, industry, firm)

• Barriers to overcome• Where to go: country or global region• Entry strategy• Survival and growth strategy• Exit strategy

Going Int’l: Motivations/Pros Company Level

• Enhance domestic competitiveness • Increase global market share, sales and profits • Reduce dependence on existing markets • Exploit corporate technology and know-how • Extend the sales potential of existing products • Stabilize seasonal market fluctuations • Enhance potential for corporate expansion • Sell temporary excessive production capacity • Gain information about foreign competition E

conom

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!!!

Going Int’l: Reservations/Cons Company Level

• Develop new promotional material • Subordinate short-term profits to long-term gains • Incur added administrative costs • Allocate personnel for travel • Wait longer for payments • Modify your product or packaging • Apply for additional financing • Obtain special export licenses • Overcome trade barriers and numerous other

obstacles

The Marketing Mix (the 4Ps)

Should be researched and incorporated into the marketing strategy

Key Considerations and Options in International Expansion Decision

A firm expanding internationally must decide:

•Which markets to enter•When (early/late) to enter them and on what scale (small/large)•How to enter them (the choice of entry mode)

Available Entry Options:•Exporting•Licensing or franchising to host country firms•Setting up a joint venture with a host country firm•Setting up a wholly owned subsidiary in the host country to serve that market

Enter Which Foreign Markets?• There are more than 200 world’s nations• Each one’s attractiveness to a particular firm as a

particular market depends on:– The firm’s objectives– A balance of benefits, costs, and risks: short- term and

long-term– Industry dynamics and competition in which a firm

operates– A country which a firm is about to enter

• Depending on the goals of the expansion (e.g. manufacturing vs. marketing) the selection criteria differ– Manufacturing: cheap labor, minerals, energy and other resources – Marketing: high GDP per capita, population density

Timing of Entry

• Fist-mover advantages• Preempt rivals; establish strong brand name;

capture demand• Build sales volume; ride down experience curve

ahead of competitors; gain cost advantage• Create switching costs for that tie customers to

1st mover’s products• Establish social ties ahead of following foreign

competitors– important in high-context cultures

Timing of Entry

• First-mover disadvantages; pioneering costs• Time spent to learn dos-don’ts; competitors can

learn from 1st mover• If 1st mover introducing a new industry, it is often

compelled to build infrastructure• 1st mover “trains” customers for followers/

competition• Break through host country’s adjustment to

“foreignness” issues– Regulations may change as a result of 1st mover’s entry

Scale of Entry• Resources to commit: large vs. small amount• How much resources can firm afford to commit?• A strategic commitment is difficult to reverse– Has a long-term impact (sunk costs/investments)– Means that the resources cannot be used elsewhere

• 1st mover advantages and large scale are linked• Small scale entry allows learning at low risk• Entry in small or large potential market may

require the same level of initial resources

Pressures for Cost Reduction and Local Responsiveness

Firms that compete in the global marketplace typically face two types of competitive pressures:• pressures for cost reductions• pressures to be locally responsive

These pressures place conflicting demands on the firm.

Selecting an Entry ModeChoosing the entry mode very often involves trade-offs.

Export/Import Alternative

Market Research: A Step-by-step approach A.Screen potential marketsB.Assess targeted marketsC.Draw conclusions

Assess targeted markets• Step 1. Examine trends for company products

as well as related products that could influence demand. – Calculate overall consumption of the product and the

amount accounted for by imports. Industry sector analyses (ISAs), alert reports, and country marketing plans, all from Commerce Dept., summarize economic backgrounds and market trends for each country.

– Demographic information (population, age, etc.) can be obtained from: CIA Worldfactbook (excellent although not comprehensive source); World Population (Census – may be dated); Statistical Yearbook (UN – may be dated).

– Euromonitor’s CONSUMER LIFESYTLE REPORTS are excellent course

Assess targeted markets

• Step 2. Ascertain the sources of competition, including– the extent of domestic industry production– the major foreign countries the firm is competing against

in each targeted market, by using ISA and competitive assessment reports (all from Commerce Dept.).

• Look at each competitor's U.S. market share.

Assess targeted markets• Step 3. Analyze factors affecting marketing and use of the

product in each market, such as end user sectors, channels of distribution, cultural idiosyncrasies, and business practices

• Step 4. Identify any foreign and U.S. barriers (tariff or non-tariff) for the product being imported into the country/exported from the U.S. – http://export.gov/tradeproblems/exp_market_access.asp

– http://www.ustr.gov/Document_Library/Reports_Publications/2007/2007_NTE_Report/Section_Index.html

– U.S. barriers (such as export controls) can affect exports to the country.

• Step 5. Identify any U.S. or foreign government incentives to promote exporting of the product or service.

C. Draw conclusions

FDI vs. Outsourcing Production: Make versus Buy Decisions

Should Dole Foods make or buy the component parts to go into their final product? The Advantages of Make Vertical integration (making component parts in-house):•lower costs•facilitates investments in highly specialized assets•protects proprietary technology•facilitates the scheduling of adjacent processesThe Advantages of Buy Buying component parts from independent suppliers:•gives the firm greater flexibility•helps drive down the firm's cost structure•helps the firm to capture orders from international customers

Strategic Alliances with Suppliers: JVs

• Firms have tried to capture some of the benefits of vertical integration, without encountering the associated organizational problems, by entering into long-term strategic alliances with key suppliers •While such alliances can help the firm to capture the benefits associated with vertical integration firms may find their strategic flexibility limited by commitments to alliance partners