7/2/2019 Strategies for Entering Foreign Markets

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Introduction
In today’s business world, globalization has a great impact on management decisions, processes and the culture of an organization. The most i
openness to new markets due to liberalization and deregulation, further developments in technologies and logistics, as well as shorter product
strategic-focused attitude of companies represents an essential factor. [1] More and more companies do not only want to stay in a single mark
market, a company has to decide not only on an appropriate entry strategy but also should consider the main steps of the market entry framew

The following assignment provides a profound analysis of market entry strategies in the context of international marketing management. First o
framework in chapter 3. Further on, different methods of entry will be discussed stating advantages and disadvantages as well as giving examp
different timing strategy approaches will be introduced. Finally, a conclusion will be drawn from the preceding findings.

Reasons for entering foreign markets

There are a variety of reasons why companies decide to go abroad and expand their business operations. Organizations mainly engage in inter
adapt to the ever-changing business environment. However, it is rarely the case that firms are just driven by one single factor. In the context of
differentiated. While proactive factors are stimulated by internal strategic change, reactive reasons result from environmental shifts. [2] Proactiv
savings due to economies of scale or low-cost manufacturing, and reduction of dependency on a single national market as well as alternative s
countries and markets are described as reactive ones. For instance, domestic markets could be already saturated or emerging competitors prev
competitive. [3] 

Even though most companies highly profit from operating internationally, they are often faced with incalculable risks and challenges. Possible r
preferences, unfamiliar business procedures and regulations, as well as human resources management. [4] 

Market Entry Framework

A market entry strategy framework serves as a helpful management tool for firms aiming to enter a foreign market. It is highly recommended t
internalization and to specify appropriate action steps for a firm. Generally speaking, the organization has to decide on the following questions
regions) should the market entry take place? 3) What entry strategy should be used to enter the foreign market? 4) How should be operated in
figure below, a conceptual framework consists of four main steps. After the decision has been made to enter a new market, a profound market
analyze its own resources and capabilities. A SWOT-analysis can help identifying the firm’s internal and external environment. Another key aspe
competitors and to deal with possible political risks and uncertainty. Due to different customer tastes and preferences in other countries and re
customize its products to their specific needs and wants. In step 2, the business environment should be closer examined, looking for business p
barrier analyses to prevent early failure.

Not until step 3 an entry mode is selected and implemented and further negotiations with business partners will be continued. [6] Critical facto

deciding on the best possible entry strategy mix”. [7] Step 4 finally repre-sents the actual operation phase in which strategy and performances
providing them with the desired products and services and setting adequate prices while remaining competitive. Ultimately, the company has t
as planned.

Market Entry Strategies

In the following the different market entry strategies will be described and advantages and disadvantages will be shown.

Exporting
Most companies operate within their country; however when they deÂcide to enter foreign territory most of the companies use export as their
country and selling them in another country”. [8] Some companies operate only in one niche market and are successful; however in most cases
stability by entering new markets. Exchanging goods across boarders has grown to be a lot easier throughout the years and therefore exporting
foreign country. However, when a company chooses exporting as their strategy there are several factors that have to be considered when deter
of the company, what product the company is going to sell, previous export experience and expertise and business conditions in the market th
can reach their foreign customers through intermediaries. This approach is called indirect exporting and is often used by first-time exporters. [9
foreign country through an intermediary”. [10] Intermediaries also called middlemen is usually a firm or person that acts as a link between parti
methods. Companies using this method have the smallest amount of commitment; however on the other hand receive the least profit. Direct ex
exports on their own and sells its products or services directly to the customers. This method gives the company much more control over their

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7/2/2019 Strategies for Entering Foreign Markets

market as well as keep closer contact with clients. Also, using direct exporting gives the company higher returns in investments. The Boeing Co
largest aerospace company but the number one exporter in the US. On the other hand, the pitfalls for direct exporting are that, it is a lot more
market. [11] 

Licensing
Licensing is another common approach of global marketing. Many companies use this method by “offering the right to a trademark, patent, tra
royalty or a fee”. [12] One example is the company Marvel Entertainment Inc. Marvel has mad millions of dollars in licensing with their superher
industry, toy industry, computer game industry and many other areas. Spiderman, Hulk and many other characters are famous around the worl
contract manufacturing, management contracting and franchising. [14] 

Contract manufacturing is some sort of outsourcing. A German company for example contracts with the foreign company to produce the produ
produces the products, the German company puts the company’s brand name on the goods. In the computer and electronic field contract man
their products produce by Taiwanese companies. The advantages for using this method are that the capital investment is relatively low; howeve

Management contracting is similar to manufacturing contracting, just that the domestic company is not producing the products in a foreign co
company for a definite time for a fee. [16] Management contracts are especially used in the hotel business. The Marriot or Carnival Hotels and R
popular in Asia and many developing countries which need the expertise from professional management. An advantage of managements cont
Major disadvantages are that the company has to give up a big amount of control as well as flexibility. [17] 

McDonalds, Burger King, Starbucks all have one thing in common; they are world wide companies which use the franchise method in order to b
both are the most common used method by small and medium size companies. “In a franchising agreement, the franchisor sells limited rights t
future profits”. [18] The franchiser assists the franchisee on a continuing basis, through sale, promotion and training. [19] The advantages of fra
method for a market entry a firm whishing to expand globally. On the contrary, the franchisee has to be careful to make all the adjustments nec
should be considered. McDonalds for example had to make adoptions when entering the Indian market because of the different culture and lif

Joint Venture
Joint venture occurs when an international company enters in to an agreement with a local partner to develop a new entity and assets for a fini
majority, minority, or fifty-fifty ventures in regard to the equity share of the international company and may be started from the scratch or by th
local company. In most cases, firms choose joint ventures over sole ventures as a result of the restrictive regulatory measures towards sole vent
venture can also bring positive benefits to the foreign partner through their local partners, because local partners have better knowledge of the
with local suppliers, customers, banks and government officials, management, production and marketing skills, local prestige and other resourc
some countries like Japan even when a sole venture is open to them. The advantages of Joint ventures are 1) risk diversification and allocation o
reducing political and other investment risks 4) access to the distribution network. The disadvantages are 1) lack of management control 2) join
framework and long period of due-diligence3) lack of trust 4) risk of conflict as a result of cultural differences.

Direct Investment
Direct Investment can be divided into two parts 1) merger and acquision and 2) wholly owned subsidies. These kinds will be explained in the fo

Merger and Acquisition: There are two primary mechanisms by which ownership and control of a corporation can change: Either another corpo
merge with another firm. [23] According to Brealey et al, a merger can be an added value only if the two companies are worth more together th
This is a type of merger where two firms producing similar goods or offering similar services are combined to form an entity. Examples are Vod
Dresdner Bank. 2) Vertical Merger: is referred to as a combination of two companies in the same industry whose products are required at differ
example of forward integration merger is Walt Disney’s acquisition of the ABC television network. In which Disney planned to use ABC network
integration would be Ford’s acquisition of Rouge Steel Company to reduce risks associated with the dependency on steel. 3) Conglomerate m
become an entity. The reason why companies decide to go into this type of merger is to diversify and reduce their exposure to industry specific
acquisitions, the performance of the entire firm can wither. Quellen?

Reasons for Mergers & Acquisition

Economic of scale and scope: Cost efficiency of high volume production are one of the privileges merged firms enjoy, which small firms can on
which are savings as a result of synergy effect in the marketing and distribution of different types of related products (e.g. computers and print

Vertical Integration: As a means to improve its products or services, a company might decide to have the direct control of the inputs required t
the manner at which distribution of it products is conducted, so it might decide to take direct control of the distribution channels by acquiring

Expertise: In order to compete effectively and efficiently, firms often need expertise in particular fields. A more efficient approach may be to acq

Monopoly Gains: Merging with or acquiring a major competitor might enable a firm to reduce competition within the sphere of its operation. T
share, which could result in higher margin and operating income.

Diversification: This is the very beneficial in the issue with conglomerate merger. These benefits are direct risk reduction and liquidity enhancem

Reasons for Merger and Acquisition are 1) to gain cost efficiency through Economic of scale and scope 2) to improve products or services throu
required acquire talents 4) to get monopolistic advantages and at the same time reduce competitors [25] 5) with Diversification reduces an inve

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7/2/2019 Strategies for Entering Foreign Markets

Wholly owned subsidies: Market entry through a wholly owned subsidiary consist of two distinctive strategies: it can be achieved through a Gre
direct entry mode whereby a parent firm extends its operation in a host country by constructing a new operational base from the scratch. It is r
implementation. For example, in order to establish successfully in a foreign market, it is expected of a firm to have an extensive knowledge and
the third parties such as local independent consultants are required, and their services are usually very expensive. The cost of its implementatio
entrance. Acquisition in the other hand offers the fastest means of achieving market power. As explained above, this strategy requires buying a
the acquiring firm’s industry, in order to gain access to core competencies and achieve a greater competitive advantage. [27] The fact that it is e
an acquisition makes acquisition a less risky alternative in comparison to Greenfield investment.

Timing strategies of market entry

In this part timing strategies as a different kind of internationalization will be described. Timing strategies could be divided into two categories
timing strategies, and 2) strategies for market entry in more countries synchronous, called cross-border timing strategies. [28] Some important
competition in the market, technology, substitute, customer behavior and the market potential as well as market growth. If this is done a comp
goals. [29] 

Country-specific Timing Strategies

A company has to clarify when they want to enter into a new market. Most times the decision for a strategy depends from the strategies of the
follower strategy will be described and benefits and risk of each will be identified. First-mover Strategy: Companies those are first into the indus
higher awareness level as well as more time for image building in the market. Additionally, the firm gain more and earlier experience which ena
the firm can recruit educated employees and build up intensive relationships with market entry. Disadvantages are the free-ride-effect, which d
mover. Additionally, the high costs of exploitation of the target market and the high risk of failure. [31] As an example for a first mover strategy
apple were innovative and the first products in the target industry or nation. Follower Strategy: Companies which follows the first mover or ente
are mainly that the firm can avoid the mistakes of the first mover, have access to reliable information about the market, can profit from the inve
or education of employees. Disadvantages are market entry barriers created by the first-mover, less experiences over the market situation, find
example for followers Microsoft could be named. Microsoft offers a smart phone after the successful iPhone implementation of Apple.

Cross-border timing strategies

Cross-border timing strategies are the waterfall or sprinkler strategies. [33] The Waterfall strategy described a scenario in which a product or a
implements a product or service in several countries at the same time. [34] Advantages of the Waterfall strategy are that the expansion can take
not at the same time to enter successful all the target market. Furthermore, the life cycle of some technologies or products can be extended an
less risk strategy. Disadvantages of the waterfall strategy could be the long time period implementation. In fast moving markets this strategy m
they can build up more market entry barriers for example. [36] Examples for the waterfall strategy are the metro group, which used the experie
market [37] as well as Dell, Benetton and The Body Shop. [38] The Sprinkler strategy is has the contrary strengths and disadvantages as the wat
of target market. The sprinkler strategy generates first-mover advantage. It is a very functional strategy in hyper and time-based competition m
and the risk of failure because of less knowledge or experiences of the different countries. Examples for the sprinkler approach are Microsoft w

Conclusion
In this assignment, the major importance of a well-thought-through selection of a market entry strategy has been shown and different types of

Market entry strategies can have a far-reaching impact on an organization’s global strategy. Selecting the best entry strategy is a complex decis
which aspects should be taken into closer consideration can vary by the strategic goals of a company, by country, and even by industry. Which
exit, speed of entry, cultural distance, and competitive intensity. Under all conditions, there will be no ideal option. In all cases, methods of mar
goals and should be based on future ambitions as well as on current resources and capabilities. Companies do not only benefit from the advan
Therefore, compromises often have to be made when going international. Ultimately, today’s organizations will have to remain flexible enough
environment.

II. Works Cited

A: Books
Ahlstrom. D./ Bruton, D.G. [International Management] International Management – Strategy and Culture in the Emerging World, Student Editio

Learning, Mason 2010 Berk, J. / DeMarzo, P. [Finance] Corporate Finance, Pearson, Boston, 2006

Berndt, R. / Altobelli, C. F. / Sander, M. [Marketing] Internationales Marketing-Management, 4. Auflage, Berlin Heidelberg, 2010

Boone, L./ Kurtz, D./ McKenzie, H./ Snow, K. [Contemporary Marketing] contemporary Marketing, 2nd Canadian Edition, Nelson Education Ltd.,

Brealey, R. A / Myers, S. C. / Allen, F. [Finance] Principles of Corporate Finance, 8 Ed. McGraw-Hill / Irwin, New York, 2006

Damodaran, A. [Finance] Corporate Finance, Theory and Practice, 2nd Edition; Wiley, New York 2001

Dony, A.G. C. [Marketing] Market Entry Strategies for consumer Goods Industry in the PR China: An empirical Study on the Beer and Soft Drink

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7/2/2019 Strategies for Entering Foreign Markets

Hitt, A. [Strategic Management] Strategic Management Competitiveness and Globalization, 4th Edition, Nelson, New York, 2009

Kerin, R./Hartley, S./Berkowitz, E./Rudelius, W. [Marketing] Marketing, 8th Edition, McGraw-Hill/Irwin, New York 2006

Kutschker, M./ Schmid, S. [International Management] International Management, 6. Auflage, Oldenbourg 2008

Meffert H./ Burmann C./ Kirchgeorg M. [Marketing] Marketing – Grundlagen marktorientierter Unternehmensführung, 10 Auflage, Wiesbaden 2

Paul,J./ Kapoor, R. [International Marketing] International MarketingText and Cases, Tata McGraw-Hill Pub lishing, New Dehli, 2008

Peter, P. / Donnelly, J. [Marketing Management] Marketing Management – Knowledge and skills, 5th Edition, McGraw-Hill Companies, 1998 Ro

Entry Strategies for International Markets, Lexington books, New York, 1994

Weitz, B. / Wensley R. [Marketing] Handbook of Marketing, Paperback Edition, London, New Dehli, Thousand Oaks, 2006

Yu, L. [The International Hospitality Business] The International Hospitality Business – Management and Operations, Haworth Hospitality Press,

B: Internet / Website
Niti, B./ Nemer, B., [Businessweek.com]

Brand Magic in India, http://www.businessweek.com/innovate/content/may2006/id2006 0508_952455.htm, 2006

III. Affidavit

This case analysis is the original work of the authors. It has not been presented elsewhere for grading. All sources have been indicated to the be

Ort, Datum Signature: Anja Chan

Ort, Datum Signature: Annika Nienaber

Ort, Datum Signature: Emmanuel Ofobeze

Ort, Datum Signature: Jana Theresa Germeroth

IV. Appendix
Appendix 1 Waterfall Strategy [40] 

Appendix 2 Sprinkler Strategy [41] 

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