International Business
Entry Strategies & Strategic Alliances
Introduction
• General Motors was an early entrant into China’s automobile market
• Entered on a significant scale
Basic Entry Decisions
• A firm contemplating foreign expansion must make three basic decisions o Which markets to enter o When to enter those markets o On what scale
Which Foreign Markets?
• the choice must be based on an assessment of a nation’s long-run profit potential o potential is a function of several factors
• the attractiveness of a country as a potential market for an internal business depends on balancing the benefits, costs, and risks associated with doing business in that country
• the costs and risks associated with doing business in a foreign country are typically lower in the economically advanced and politically stable democratic nations
• look at living standards and economic growth
• another important factor is the value an international business can create in a foreign market o depends on the suitability of its product offering to that market and the nature of indigenous competition
Timing of Entry
• Early entry is when an international business enters a foreign market before other foreign firms
• Late when it enters after other international businesses have already established themselves
• The advantages frequently associated with entering a market early are commonly known as first-mover advantage o Ability to preempt rivals and capture demand by establishing a strong brand name o Ability to build sales volume in that country and ride down the experience curve ahead of rivals, giving the early entrant a cost advantage over later entrants
• May enable the early entrant to cut prices below that of later entrants, thereby driving them out of the market o Ability of early entrants to create switching costs that tie customers into their products or services
• Make it difficult for later entrants to win business
• There can also be disadvantages associated with
Introduction
• General Motors was an early entrant into China’s automobile market
• Entered on a significant scale
Basic Entry Decisions
• A firm contemplating foreign expansion must make three basic decisions o Which markets to enter o When to enter those markets o On what scale
Which Foreign Markets?
• the choice must be based on an assessment of a nation’s long-run profit potential o potential is a function of several factors
• the attractiveness of a country as a potential market for an internal business depends on balancing the benefits, costs, and risks associated with doing business in that country
• the costs and risks associated with doing business in a foreign country are typically lower in the economically advanced and politically stable democratic nations
• look at living standards and economic growth
• another important factor is the value an international business can create in a foreign market o depends on the suitability of its product offering to that market and the nature of indigenous competition
Timing of Entry
• Early entry is when an international business enters a foreign market before other foreign firms
• Late when it enters after other international businesses have already established themselves
• The advantages frequently associated with entering a market early are commonly known as first-mover advantage o Ability to preempt rivals and capture demand by establishing a strong brand name o Ability to build sales volume in that country and ride down the experience curve ahead of rivals, giving the early entrant a cost advantage over later entrants
• May enable the early entrant to cut prices below that of later entrants, thereby driving them out of the market o Ability of early entrants to create switching costs that tie customers into their products or services
• Make it difficult for later entrants to win business
• There can also be disadvantages associated with