Download - Global Entry Strategy
GLOBALENTRY STRATEGY
Prepared forDr. Syed Ferhat AnwarCourse InstructorInternational Business Environment (L301)
Prepared byGroup 11Fariha Islam RH-1Moumita Shabur RH-17Fableeha Bushra Choudhury RH-19Sayeda Shifat Nazmee RH-63
GLOBAL ENTRY STRATEGY (GES)
DEFINED
FACTORS AFFECTING THE GES
Company size and resources
Experience in using market entry modes (MEMs)
Management risk attitudes
Profit targets
Industry feasibility and viability of MEMs
Market growth rate
RELEVANCE OF MARKET ENTRY BARRIERS IN GES
‘Low entry and exit barriers reduce the risk in entering a new market, and may make the
opportunity more attractive financially.’
SOURCES OF MARKET ENTRY BARRIERS
ECONOMIES OF SCALE
PRODUCT DIFFERENTIATION
CAPITAL REQUIREMENTS
SWITCHING COSTS
ACCESS TO DISTRIBUTION CHANNELS
GOVERNMENT POLICY
PIONEER VS. LATE ARRIVALS
BENEFITS TO PIONEER: Brand Image
Customer Loyalty Technological Barriers
LIMITATIONS TO PIONEER:
Advantage limited in case of high tech
productsExample: Pictured phones in late 1970’s
ADVANTAGE OF LATE ENTRANTS Lower cost of production than
cost of innovation Minimal cost of product usage
and awareness Defined market
Example: China, Hong Kong, TaiwanBangladesh Telecom Industry: Citycell vs. Grameen
Phone
RELEVANCE OF EXIT BARRIERS
Moves to Germany in 1998 American approach failed in German lands Wal-Mart's American managers pressured German
executives to enforce American-style management practices in the workplace.
German court rules against Wal-Mart High labor cost Clashes with labor unions Labor resisting management's demands In 2006 sales of stores to metro retail chain Cost of retreat: $1 billion
MODES OF ENTRY
EXPORTING
Exporting can be defined as the marketing of goods produced in one country into another
Traditional form of entry
Common approach for mature international companies with strong marketing and relational capabilities
EXPORTING
Direct Exporting:
The organization may use an agent, distributor, or overseas subsidiary, or act via a Government agency
Indirect Exporting:The company sells to a buyer (importer or distributor) in the home country, which in turn exports the product. Example: Walmart and Sears
ADVANTAGES OF EXPORTING
Less risky Low investment required relative to other modes of
entry The cost of establishing the manufacturing facilities
overseas is minimized Learning opportunity Reduces the potential risks of operating overseas Assists in diversification
DISADVANTAGES OF EXPORTING
Lack of control and contact High transport costs Presence of tariff and other barriers Very limited learning to the firms about the
characteristics of the imported nation Susceptible to exchange rate fluctuations
EXPORTINGBANGLADESH’S SUCCESS: 2nd Largest Producer in
GarmentsExport(USmillio
n $)Growth (%)
EU countries 14745.39 17.35
USA 5141.38 2.90
Non-traditional markets
3603.15 21.15
Total 24491.88 13.83
EXPORTING
SUCCESS FACTORS: Cheap labor Government support Back to back letter credit Compliance to international rules of trading
EXPORTING
FAILURE STORYBan on Shrimp Exports by EU and Japan
Reason: Contamination in shrimps
GREENFIELD INVESTMENTS
Setting up operations in foreign locations
Also known as wholly owned subsidiaries
ADVANTAGES OF GREENFIELD INVESTMENTS
Greater control and higher profits Strong commitment to the local market on the
part of companies Allows the investor to manage and control
marketing, production, and sourcing decisions Assists in learning about the country’s market
ADVANTAGES OF GREENFIELD INVESTMENTS
No risk of cultural conflicts Cost of financing the import barriers reduced Greater knowledge of local market allows the
firm to strategize appropriately to gain more sales
DISADVANTAGES OF GREENFIELD INVESTMENTS
Most expensive method of entry Risks associated with learning to do business
in a new culture High political risks of being nationalized Continuous investments required for a long
time until returns can be yield Risk of management of the local resources Political and environmental factors, example
Fujifilm in US
GREENFIELD INVESTMENTS
Example
Mercedes production in Pune , India Started production in mid 1990s from Pimpri In 2007 it acquired 100acres of land in
Maharashtra In 2009 production started in Pune Rs.250 crores of investment Dealership in 31 cities of India
GREENFIELD INVESTMENTS
Example
Carrefour S.A.: French multinational retailer Fourth largest retail group Failed operations in South Korea Failed to understand Korean
customers Shut down in April 2006 Sales of stores worth $1.3 billion
LICENSING A licensed asset may be:
A brand name A company name Patent Trade secret Product formulation
LICENSING
Top Licensed Brands
ADVANTAGES OF LICENSING
Enables companies to evade tariffs, quotas or similar export barriers
Licensees are granted considerable autonomy Licensor retains ownership of intellectual
property Costs are usually low, no capital or investment
needed
DISADVANTAGES OF LICENSING
Less profitable than other entry modes Quality control issues might arrive Risk of licensees turning into strong
competitors, even market leaders
LICENSING Examples of Success
Calvin Klein
Disney
LICENSING Examples of Success
“Happy Birthday to you”
Country example: China
LICENSING
Examples of Distress
Apple vs. Microsoft
Metallica vs. Napster
Vs.
FRANCHISING
When is a Business “Franchisable”? It needs to be credible It needs to be unique It needs to be teachable It needs to provide an adequate
return
FRANCHISING
Top Franchises in the World
ADVANTAGES OF FRANCHISING
Established brand and customer base
Business support, training and assistance from franchiser
Reduced risk
DISADVANTAGES OF FRANCHISING
Large initial cost Royalty payments Limited flexibility and scope of
creativity
FRANCHISING Examples of Success
McDonald’s
FRANCHISING Examples of Success
7-Eleven The Body Shop Country
Example: USA
FRANCHISING Examples of Distress
Quiznos Golf
FRANCHISING
Other Types of Franchises
Social Franchises
Event Franchises
Third Party Logistics
LICENSING VS. FRANCHISING
COMPARISON CHART
Franchising Licensing
Governed by Securities law Contract law
Registration Required Not required
Territorial Rights Offered to franchisee Not offered; licensee can sell similar licenses and products in same area
Support & Training Provided by franchiser Not provided
Royalty Payments Yes Yes
Use of Trademark/Logo
Logo and trademark retained by franchiser and used by franchisee
Can be licensed
Control Franchiser exercises control over franchisee
Licensor does not have control over licensee
JOINT VENTURE
An enterprise in which two or more investors share ownership and control over property rights and operation
A cooperative joint venture is an agreement for the partners to collaborate but does not involve any equity investments. Example: Cisco
ADVANTAGES OF JOINT VENTURE
Allows for sharing of risk (both financial and political)
Sharing of resources Provides opportunity to learn new environment Provides opportunity to achieve synergy by
combining strengths of partners May be the only way to enter market given barriers
to entry Access to distribution network Contact with local suppliers and government
officials
DISADVANTAGES OF JOINT VENTURE
Lack of control Requires strong coordination Partner may become a competitor Collision of cultures Conflicts arising over matters such as
strategies, resource allocation, transfer pricing, ownership of critical assets like technologies and brand names
JOINT VENTURE
Case of Sony Ericsson
Example
JOINT VENTURE
Factors that led to Failure:1. Lack in communication and coordination2. Lack in dominant control of one party over the other 3. Sony needed to achieve what Apple had4. The consumer-focused cellphone business ran
contrary to Ericsson's engineering-heavy, business-to-business focus
STRATEGIC ALLIANCES Coalition of two or more organizations to achieve
strategically significant goals that are mutually beneficial Examples include • Shared manufacturing• Research and Development (R&D) arrangements• Distribution alliances• Marketing agreements
Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate
ADVANTAGES OF STRATEGIC ALLIANCE
Shared risk Shared knowledge Opportunities for growth Speed to market Complexity Costs Access to resources Access to target markets Economies of scale
DISADVANTAGES OF STRATEGIC ALLIANCE
Creating a competitor Uneven alliances with minority share Foreign confiscation Risk of losing control over proprietary
information Coordination difficulties
STRATEGIC ALLIANCES
Hewlett Packard & Walt Disney
Example
STRATEGIC ALLIANCESReasons for Success:1. Alliance was well negotiated and structured2. Solid planning and manageable expectations
regarding implementation3. Coordinating brand exposure, joint marketing
and customer experience
ACQUISITIONS
A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm
ACQUISITIONS
A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm
ADVANTAGES OF ACQUISITIONS
Can quickly position a firm in a new business Less time to establish presence Takes a potential competitor out of the
market Lower risk than Greenfield Investments
DISADVANTAGES OF ACQUISITIONS
Expensive way to enter a market Likelihood of overbidding Not all bundles of assets and capabilities are of
interest to the acquirer Costly Integrating an acquired company into a
corporation is challenging
ACQUISITIONS
Example
Daimler-Benz AG and Chrysler
ACQUISITIONS
Reasons behind Failure: Cultural clash Attitude to hierarchy was different Coordination problems Heavy competition from non-US brands in
the US auto market Issue of trust
FOREIGN DIRECT INVESTMENT (FDI) AND
GES
FDI & GESFDI figures reflect investment flows out of the home country as
companies invest in or acquire plants, equipment, or other assets
Foreign investments may take the form of minority or majority shares in joint ventures, minority or majority equity stakes in another company or outright acquisition
A company may choose to use a combination of these entry strategies by acquiring one company, buying an equity stake in another, and operating a joint venture with a third
FDI FLOW IN BANGLADESH
INVESTMENT REGISTRATION STATISTICS IN BANGLADESH
TURNKEY A type of project that is constructed so that it could be
sold to any buyer as a completed product
Contractor agrees to deliver every detail of the project to a foreign client, including the training of operating personnel
Upon completion of the contract, the foreign client receives the "key" to a plant ready for its overall performance
ADVANTAGES OF TURNKEY
Allows for a means of exporting process technology
Less risky than conventional strategies Economic benefit Applicable for technology based firms
DISADVANTAGES OF TURNKEY
The firm has no long term interest in the country
Firm can take minority equity interest in company
Inadvertently creates competition
TURNKEY
Example
PACIFIC RESOURCES INTERNATIONAL
PIGGYBACKING
Involves taking advantage of a channel to an international market rather than selecting the country-market in a more conventional manner
The most common form of piggybacking is to internationalize by serving a customer who is more international than the vendor firm
ADVANTAGES OF PIGGYBACKING
Low risk method of beginning export operations for the rider
Focused selling to the appropriate market segments
Advantage for the rider is that he has the chance to gain market knowledge and expertise through the carrier
DISADVANTAGES OF PIGGYBACKING
Company leaves control of products to intermediary
Loss of control of product in the long run Competitive advantage left open for the carrier
to examine Finding a suitable partner is difficult
PIGGYBACKING
Example
F&P GRUPPO
RISK CONTINUUM
UNCONVENTIONAL ENTRY STRATEGIES
Bangladesh’s Military Activities Overseas
MILITARY COOPERATION
1991 - Operation Desert Storm; and the world's largest contributor (10,736) to UN peacekeeping forces
2007 - Major deployments in Democratic Republic of Congo, Liberia, Sudan, Timor-Leste and Côte d'Ivoire
2013 - second highest number of total personnel to United Nations Peacekeeping Operations; with (1,830 police, 73 UNMEM and 6,605 troops) attached to various UN peacekeeping forces worldwide
India-Bangladesh
India and Bangladesh have signed a Cultural Exchange Program (CEP) for the years 2010-2012
Both sides are to exchange the visits of scholars/academicians in the field of art, culture and literature and also dance, music, theatre, Jatra groups, art exhibitions, mime shows, performing art groups, exhibitions and other cultural events to meet the local demands for exposure to each other’s rich cultural tradition
CULTURAL EXCHANGE
BRAC
Works for economic development, education, public health, social development and disaster relief
Apart from Bangladesh, BRAC is present Afghanistan, Pakistan, Sri Lanka, Uganda, Tanzania, South Sudan, Sierra Leone, Liberia, Haiti and The Philippines
It has successfully crossed national boundaries with its unconventionally beneficial development works
EXPANSION OF THE DEVELOPMENT SECTOR
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