Entry Barriers of Global Marketing
Entry Barriers in Global Marketing
An understanding of the entry barriers to internationalization and their effect on entry mode selection is important because they can assist in determining why global marketers are unable to exploit their full potential and why many firms fail or incur financial losses in their international activities. The height and nature of market entry barriers directly influence the entry mode chosen by a company. Entry barriers increase the cost of entry and constraint the option available, and where they are high, the company might have only one choice of entry mode or else have to stay out.
The concept of entry barriers comes from the economics of industrial organization. It generally connotes any obstacle making it more difficult for a firm to enter a product market. Thus entry barriers exist at home, as when limited self space prohibits a company from acquiring sufficient retail coverage to enter a market. Overseas it can mean that customs procedures are so lengthy that they prohibit at importer’s fresh produces from getting to the stores before spoiling.
In global marketing it is convenient to classify the entry barriers according to their origin. Although gradually less important because of dramatic improvements in technology, transportation costs sometimes force new investment in manufacturing to be close to the market. Proximity of supplies and service still matters when transportation costs are high. Tariff barriers are obvious obstacles to entry into the country. Less visible non-tariff barriers for example slow custom procedures, special product tests for imports and bureaucratic inertia in processing import licenses can also make entry difficult. Government regulations of business, domestic as well as foreign, constitute another set of market barriers, sometimes creating local monopolies. A special subset of these barriers is regulations directly intended to protect domestic business against foreign competitors.
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An understanding of the entry barriers to internationalization and their effect on entry mode selection is important because they can assist in determining why global marketers are unable to exploit their full potential and why many firms fail or incur financial losses in their international activities. The height and nature of market entry barriers directly influence the entry mode chosen by a company. Entry barriers increase the cost of entry and constraint the option available, and where they are high, the company might have only one choice of entry mode or else have to stay out.
The concept of entry barriers comes from the economics of industrial organization. It generally connotes any obstacle making it more difficult for a firm to enter a product market. Thus entry barriers exist at home, as when limited self space prohibits a company from acquiring sufficient retail coverage to enter a market. Overseas it can mean that customs procedures are so lengthy that they prohibit at importer’s fresh produces from getting to the stores before spoiling.
In global marketing it is convenient to classify the entry barriers according to their origin. Although gradually less important because of dramatic improvements in technology, transportation costs sometimes force new investment in manufacturing to be close to the market. Proximity of supplies and service still matters when transportation costs are high. Tariff barriers are obvious obstacles to entry into the country. Less visible non-tariff barriers for example slow custom procedures, special product tests for imports and bureaucratic inertia in processing import licenses can also make entry difficult. Government regulations of business, domestic as well as foreign, constitute another set of market barriers, sometimes creating local monopolies. A special subset of these barriers is regulations directly intended to protect domestic business against foreign competitors.
Other