8
+
Ch. 8. Some approaches to the choice of entry mode
Hollensen, S. Essentials of Global Marketing,
2nd Edition, 2012
9-2
Learning objectives
Explore different approaches to the choice of entry mode
Explain how opportunistic behaviour affects the manufacturer/intermediary relationship
Identify the factors to consider when choosing a market entry strategy
Explain the major types of exporting
Entry mode
An entry mode is an institutional arrangement necessary for the entry of a company’s products into a new foreign market.
9-3
9-4
Types of entry modes
Export
Intermediate
Hierarchical
9-5
Rules for choosing mode of entry
Naive rule
(same entry mode for all foreign markets)
Pragmatic rule
(find workable entry mode for each market – not necessarily the best)
Strategy rules
(the analytical approach)
Strategy rule
Choosing a mode of entry is based upon selecting the mode that maximizes the profit contribution over the strategic planning period subject to
(a) the availability of company resources
(b) risk
(c) non-profit objectives.
9-6
Transaction cost approach
Opportunistic behaviour of export intermediary
VS
Opportunistic behaviour of producer Issues such as: stock size, service, marketing costs, price, commission etc.
9-7
9-8
Export intermediary responses to opportunistic behaviour of producer
Establish personal relations with producer’s key employees
Create an independent identity/image in connection with selling producer’s products
Add further value to the product (i.e. service)
Factors affecting the foreign market entry mode decision
1. Internal factors affecting market entry mode decision
9-10
Product
Product differentiation advantage
Product complexity +
International experience Entry mode decision +
Firm size +
+
2. External factors affecting market entry mode decision
-
Sociocultural distance Country risk/ demand uncertainty
Market size/ growth 9-11
Entry mode decision +
-
+
+
Direct/
Ch. 8. Some approaches to the choice of entry mode
Hollensen, S. Essentials of Global Marketing,
2nd Edition, 2012
9-2
Learning objectives
Explore different approaches to the choice of entry mode
Explain how opportunistic behaviour affects the manufacturer/intermediary relationship
Identify the factors to consider when choosing a market entry strategy
Explain the major types of exporting
Entry mode
An entry mode is an institutional arrangement necessary for the entry of a company’s products into a new foreign market.
9-3
9-4
Types of entry modes
Export
Intermediate
Hierarchical
9-5
Rules for choosing mode of entry
Naive rule
(same entry mode for all foreign markets)
Pragmatic rule
(find workable entry mode for each market – not necessarily the best)
Strategy rules
(the analytical approach)
Strategy rule
Choosing a mode of entry is based upon selecting the mode that maximizes the profit contribution over the strategic planning period subject to
(a) the availability of company resources
(b) risk
(c) non-profit objectives.
9-6
Transaction cost approach
Opportunistic behaviour of export intermediary
VS
Opportunistic behaviour of producer Issues such as: stock size, service, marketing costs, price, commission etc.
9-7
9-8
Export intermediary responses to opportunistic behaviour of producer
Establish personal relations with producer’s key employees
Create an independent identity/image in connection with selling producer’s products
Add further value to the product (i.e. service)
Factors affecting the foreign market entry mode decision
1. Internal factors affecting market entry mode decision
9-10
Product
Product differentiation advantage
Product complexity +
International experience Entry mode decision +
Firm size +
+
2. External factors affecting market entry mode decision
-
Sociocultural distance Country risk/ demand uncertainty
Market size/ growth 9-11
Entry mode decision +
-
+
+
Direct/