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IMH – 11.02 - Explain the International Market-Entry Strategies

IMH – 11.02 - Explain the International Market-Entry Strategies. Goals Explain “environment-strategy fit” for international market Describe different international entry strategies. ENVIRONMENT-STRATEGY FIT.

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IMH – 11.02 - Explain the International Market-Entry Strategies

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  1. IMH – 11.02 - Explain the International Market-Entry Strategies Goals • Explain “environment-strategy fit” for international market • Describe different international entry strategies.

  2. ENVIRONMENT-STRATEGY FIT There must be a fit between environmental conditions and business strategies. Hence it is important to understand the types of environment for a business when it goes into international markets. • placid environment • an environment with very little change • Easy to develop strategic plans for long term • Not very common • turbulent environment • rapid and unpredictable environmental change • Businesses must develop strategic plans for shorter time periods • More common

  3. ENVIRONMENT-STRATEGY FIT (continued) • macroenvironment • the environmental factors that influence the economy, governments, legal environment, technology, ecology, social cultural factors, and competition • http://www.youtube.com/watch?v=5xwyGVr51Dw • environmental shocks • rapid changes to the macroenvironment • Ex: The terrorist attacks Sept 2001, or the fall of communism in the 1990s.

  4. Environmental Planning • Most international companies operate in a turbulent environment. • It is difficult to plan for every macroenvironmental change. • When a company sees an increase chance of threat, they should be pro-active. • E.g., adjusting inventory levels of a recession is anticipated • Governments can help ensure stability by strengthening their resource base and their relationships with other countries.

  5. Environmental Planning (examples) • Asian Bird Flu • http://live.wsj.com/video/bird-flu-variant-pandemic-potential/FCCF8D56-CE49-4373-9DD1-760F4844E6CE.html#!FCCF8D56-CE49-4373-9DD1-760F4844E6CE • Businesses pulled employees out of infected countries • Increased inventory levels in case foreign producers could not send products • U.S. shortage of qualified employees for manufacturing jobs • Federal funds to NSF for create research centers • Goal to graduate 100,000 new scientists and engineers during next four years

  6. IMH – 11.02 - Activity: Recent environmental Shocks • Visit a reliable source of world information like • http://www.time.com/time/ - (time magazine) • Or similar to research some current events/developments/environmental changes in the world • Identify at least three factors that could result in environmental shocks and why? • Briefly specify the type of business planning that would be needed to minimize the effect of these shocks.

  7. INTERNATIONAL ENTRY STRATEGIES • For the least environmental turbulences impacting a business it is important to adopt the right market entry strategies • The strategies for international entry include options such as: • Exporting • Contracting • Joint venture • Direct investments.

  8. INTERNATIONAL ENTRY STRATEGIES • Exporting: Creating a market for a business’s products in the importing country to provide additional profits for the business as it expands internationally. • Simplest and least risky means of entry • Example: US exporting commercial and small jet air crafts to many countries of the world. • Exporting represents the lowest level of international commitment and risk as the business can pull out of the market relatively easily.

  9. INTERNATIONAL ENTRY STRATEGIES • Contracting: contractual agreements enable a business to work with local partners in a foreign market. • It is a higher level of commitment as it involves contractual agreements, manufacturing, licensing, franchising etc. • Ex: Nike entering into a manufacturing contract with local Chinese manufacturing firms.

  10. INTERNATIONAL ENTRY STRATEGIES • Joint venture: two or more businesses create a new business to pursue a strategic goal. • Partners agree to share ownership, capital, and revenue • Ex. Fox broadcasting company's star TV joint ventures with Chinese company Quinghai Satellite. • It brings in local partners but involves higher risk because businesses commit resources.

  11. INTERNATIONAL ENTRY STRATEGIES • Direct investments: two types: • Foreign direct investment-the purchase of assets in a foreign country by a business • Ex: The purchase of land in Kentucky by Japan for its Toyota manufacturing plant • Wholly-owned subsidiary-an independent company owned by a parent company • Ex: Parle products of India owned by Coca Cola

  12. IMH 11.02 Activity • Followed by a discussion with a partner, make a foldable listing advantages & disadvantages of each of the foreign market entry strategies. • Which strategy do you believe would be the best for the following products…why…explain • Anderson windows • Lays Potato chips • Schwinn bikes • Press Pass Trading cards

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