Welcome!
Foreign Market Entry
Dr. Satyendra Singh
Professor, Marketing & International Business
Conference Chair, ABEM Conference
University of Winnipeg, CANADA
Objective: Foreign market entry
Nonequity
Export
Licensing and Franchising
Contracts
Equity
Wholly owned subsidiary
Joint venture
Strategic alliance
Mergers and Acquisitions
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Pioneers vs. followers
Pioneers
Can gain and maintain competitive edge in new market
Overall pioneers may not perform as well in the long run as followers
Most successful when
High entry barriers exist
Firm has sufficient size, resources, and competencies
Followers
Many become followers by default
May be advantage to let pioneer take initial risks
Most successful when
Few legal, technological, cultural, or financial barriers
Sufficient resources or competencies to overwhelm the pioneer’s early advantage
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Export
Goods and services
Turnkey Projects: After trial run, facility is turned over to purchaser
Own or exclusive agent: commission based
Independent sales representative of competing suppliers
Distributor/wholesale importer: Independent importer that buys for own account
Retailer: Frequently direct importer
Trading company: serves as intermediary between foreign buyers and domestic sellers
Japan: Sogo Shoshaly, Korean: chaebol
Each has advantage and disadvantage
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Licensing and Franchising
Licensing
A contractual arrangement to allow other firms to sell patents, trade secrets, technology…
Licensee pays fixed sum and sales royalties (2%-5%)
Popular because
Courts have begun upholding patent infringement claims
Patent holders have become vigilant in suing violators
Foreign governments have been pressed to enforce their patent laws
Franchising
A form of licensing in which one firm contracts with another to operate a certain type of business under an established name according to specific rules.
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Contracts
Management Contract
Arrangement by which one firm provides management in all or specific areas to another firm
Contract Manufacturing
Arrangement in which one firm contracts with another to produce products to its specifications but assumes responsibility for marketing
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Wholly owned subsidiary
Risky
Build a new plant (greenfield investment)
Acquire a going concern for branding
Purchase distributor to obtain a distribution network familiar with products
Add capacity
Change culture
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Joint venture
2 or more firms share common interest to form a business enterprise
Cannot do own its own
Synergy eg learn and serve in different market
Patriotism ie need a local firm, brand that sound like local
But
Profits shared
Foreign firm may have control ie 51% share
Minority firm may control by taking 49% and giving 2% to local firm (eg law firm)
Culture or management role or style mismatch
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Strategic alliances
Partnerships between competitor, customers or suppliers for mutual benefits
Fast access to market, customers, products, technologies… and ↓costs, risks, resources…
But many fail or are taken over by a partner
Difficult to manage
Different strategies
Different operating practices
Different organizational cultures
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Questions?�s.singh@uwinnipeg.ca