Global Market Entry Strategies Marketing Essay

Each company has a spesific strategy may be selected to suit a company’s needs. Many companies use a combination of global and national strategies. Some firms use a global strategy elsewhere some countries and some products are more receptive to global strategies than others. Global strategies are directed at those national product markets that are large and have low barriers to foreign products and companies. They are also likely to comprimise the center of world demand, particularly in the newer, more technologically intensive product.

Companies adapting global strategies are not likely to target seriously countries with high barriers and small national product markets.However given the long term trend in declining trade barriers coupled with the economic growth, more companies will adopt global strategies. (Walker et al,1992)

GLOBAL MARKET ENTRY STRATEGIES

Wholly-owned subsidiary

Company acquisition

Assembly operations

Joint venture

Strategic alliance

Licencing

Contract manufacture

Direct marketing

Franchising

Distributers and agents

Sales force

Trading companies

Export management companies

Piggyback operations

Domestic purchasing

Market entry options

Source: Doole and Lowe 2005

1.EXPORTING

Exporting to a foreign market is a strategy many companies follow for at least some of their markets. Many countries do not offer a large enough opportunity to justify local production, so exporting allows a company to manufacture its products centrally for several markets and, therefore, to obtain economies of scale. Invensys Energy Systems(NZ) Ltd. serves as an example of a company driven by exporting. This is a typical example of a small to medium sized specialized company based in a small home market (New Zealand) and marketing niche products worldwide.

1.1 INDIRECT EXPORTING

A firm can contact foreign markets through a domestically located (in the exporter’s country of operation) intermediary, an approach called indirect exporting. The major advantage for using a domestic intermediary lies in that individual’s knowledge of foreign market conditions. Particularly for companies with little or no experience in exporting, the use of domestic intermediary provides teh exporter with readily available expertise. The most common types of intermediaries are brokers, combination export managers and manufacturers’ export agents. Browne & Dreyfus acts as the market link, thus sharing its exporting skill with several smaller firms that would find it diffucult to maintain their own exporting organizations. Despite their effiency for small firms, indirect exporters represent a small part of total global marketing.

1.2 DIRECT EXPORTING

A firm can use an intermediary located in the foreign market, an approach termed direct exporting. A company engages in direct exporting when it exports through intermediaries located in the foreign markets. Under direct exporting, an exporter must deal with a large number of foreign contacts, possibly one or mor efor each company the company plans to enter. Pasific world corp. Ä°s a small California based manufacturer of artificial fingelnails and nail care products. The company began export its products in 1992. Although the company is stil small, with thirty five employees, its Nailane brand is now one of the most widely distributed artificial nail brands in the world. With export 15 percent of sales and growing rapidly, the export share is expected to reach 25 percent over the next few years. The company believed it was successful by building long-term relationships with distributers, agents, and other partners.

1.3 FOREIGN SALES SUBSIDIARY

Many companies export directly to their own subsidiaries abroad, sidestepping independent intermediaries. The sales subsidiary assumes the role of independent distributer by stocking the manufacturer’s products, selling to buyers, and assuming the credit risk. The sales subsidiary offers the manufaccturer full control of selling operations in the foreign market. Such control may be important if the company’s products require the use of special marketing skills, such as advertising or selling. The exporter thus finds it possible to transfer or export not only the product but also the entire marketing program, which often makes the product success.

2.FOREIGN PRODUCTION

2.1 LICENCING AS A MARKET ENTRY STRATEGY

Under licencing, a company assigns to right to patent ( which protects a product, technology or process) or trademark ( which protect a product name) to another company for a fee or royalty. Using licencing as a method of market entry, a company can gain gain market presence without a major investment. The foreign company or licencee, gains the right to exploit the patent or trademark commercially, on either an exclusive( teh exclusive right to a certain geographic region) or an unrestricted basis.

Companies use licencing for several reasons. For one, a company may not have the knowledge or the time to engage more actively in international marketing.The market potential of thetarget country may also be too small to support a manufacturing operation. A licencee has the advantage of adding the licenced product’s volume to an ongoing operation, thereby reducing the need for a large investment in new fixed assets. A company with limited resources can gain advantage by having a foreign partnermarket its product, both would sign a licencing contract. Licencing saves capital because no additional investment is necessary and allows scarce managerial resources to be concentrated on more lucrative markets.

In some countries where the political or economic situation appears uncertain, a licencing will avoid the potential risk associated with investments in fixed facilities. Both commercial and political risks are absorbed by the licencee. In other countries governments favor the granting of licences to independent local manufacturers as a means of building up an independent local industry. In such cases, a foreignmanufacturer may prefer to team up with a capable licencee, despite a large market size, because other forms of entry may not possible.

The French pharmaceutical company Sanofi has become a major user of licencing. A new entrant into drug business, the company realized that it could do only a limited number of research projects if it had to bring them from the lab to trial and eventual market entry.Sanofi therefore decided to engage in active licencing, letting other pharmaceutical companies market its newly discovered drugs. As a result of licencing and sharing, Sanofi was able to advance many more researchand development projects. With this strategy, Sanofi advanced to twenty-fifth place in pharmaceutical industry and achieved sales of $3.5 billion.

2.2 FRANCHISING

Franchising is a special form of licencing in which the franchiser makes available a total marketing program, including the brand name, logo, products and method of operation. Usually, the franchise agreement is more comprehensive than a regular licencing agreement because the total operation of the franchisee is prescribed.

2.3 CONTRACT MANUFACTURING

Under contract manufacturing , a company arranges to have its products manufactured by an independent local company on a contract basis. The manufacturer’s responsibility is restricted to production. Afterward, products are turned over to the international company, which usually assumes the marketing responsibilities for sales, promotion, and distribution. In a way, the international company’rents’ the production capacity of the local firm avoid establishing its own plan tor to circumvent barriers set up to prevent the important of its products. Contract manufacturing differs from licencing with respect to legal ralationship of the firms involved. The local producer manufactures based on orders from the international firm , but the international firm gives almost no commitment beyond the placement of orders.

Nokia the world leader in mobile phones, is using outsourcing of its manufacturing in some markets. South Korea’s Telson Electronics Co. Ä°s producing Nokia handsets fort he Korean market, with some being exported to other countries as well.