The International Marketing Plan and Entry Mode Selection

1. The International Marketing Plan and Entry Mode Selection Dana-Nicoleta Lascu Chapter 8

2. Chapter Objectives • Develop a general understanding of international marketing strategies at the different levels of the international organization and provide insights into the international marketing planning process of selected companies • Offer an understanding of company entry mode selection and the risks involved at each level • Describe different types of strategic alliances involving international companies

3. Developing an International Marketing Strategy Developing and maintaining a strategic fit between international company objectives, competencies and resources, and the challenges presented by its international markets.

4. Corporate Division Business Unit Product Level Levels of Strategic Planning

5. Corporate Levels of Strategic Planning, continued • Strategic plan allocates resources and establishes objectives for the whole enterprise worldwide • Has long-term focus • Involves the highest levels of management • Involves international target market selection

6. Division Levels of Strategic Planning, continued • Strategic plan allocates resources to each business unit based on division goals and objectives • Portfolio analysis is used to decide which brands to harvest, invest in, or divest • Has longer-term focus

7. Business Unit Levels of Strategic Planning, continued • Planning involves decisions on which consumer segments to target in each country and how to target them

8. Product Level Levels of Strategic Planning, continued • A marketing plan is developed at product level, product line level, or at brand level • Has shorter-term focus • Involves the marketing department

9. Developing the International Marketing Plan • Develop strategies for the target market • Product mix • Distribution • Promotion mix • Pricing • Plan international marketing programs • Manage the international marketing effort: • Organize • Implement • Control

10. Deciding on the International Entry Mode • Indirect Exporting • Company uses home country intermediaries, who in turn sell product overseas • Lowest risk, lowest control • Companies can use cooperative exporting, also known as piggybacking and mother-henning • Involves using the distribution system of exporters with established systems for selling abroad who agree to handle the export function of a non-competing company on a contractual basis • Direct Exporting • Own in-house exporting department handles the exporting function

11. Selecting the International Entry Mode, continued • Licensing • Licensor offers know-how, shares technology, and shares brand name with licensee • Licensee pays royalties • Lower-risk entry mode; limits exposure to economic, financial, and political instability • Permits the company access to markets that may be closed or that may have high entry barriers DOWNSIDE: Can produce competitor in the licensee

12. Selecting the International Entry Mode, continued • Franchising • Franchisor gives franchisee right to use brand name, trademarks and business know-how • Less risk, higher level of control • Very rapid market penetration DOWNSIDE: Can create future competitors who understand the operations of the franchise

13. Selecting the International Entry Mode, continued • Joint Venture • Preferred entry mode of governments of developing countries • Help develop local expertise • If production is exported, helps with country’s balance of trade • Foreign company and local company establish a jointly-owned new company • Parties share capital, equity, labor • 70% of all joint ventures break up within 3.5 years DOWNSIDE: Joint-venture partners can turn into viable competitors; and 70% of all joint ventures break up within 3.5 years.

14. Selecting the International Entry Mode, continued • Consortia • Involve three or more companies • Monopoly effect • Allowed • where expensive R&D is involved • in underserved markets • in markets where the government and/or the marketplace can control its activity

15. Selecting the InternationalEntry Mode, continued • Wholly Owned Subsidiaries • Can be developed by the company –greenfielding – or can be purchased (acquisition or merger) • Involve long-term market commitment • High cost • High control of operations • Greatest level of risk

16. Selecting the InternationalEntry Mode, continued • Branch Offices • Entities are part of the international company, rather than a new company (as in the case of the subsidiary) • Involves substantial investment • sales office • showroom • Engages in a full spectrum of marketing activity • High level of control

17. International Strategic Alliances • Typically, the term refers to nonequity alliances; for example: • Manufacturing • Contract manufacturing, engineering, technological, and research and development alliances • Marketing • One firm handles marketing for another, or some aspect of the marketing process • Distribution • One firm handles the distribution for another, or some aspect of the distribution process

18. Chapter Summary • Addressed marketing strategies involved at different levels of the international organization • Provided insights into the international marketing planning process • Offered an understanding of company entry mode selection decision and the risks and control level associated with each level • Described different types of entry modes and the risks and control level associated with each