Market Entry Strategy

1. Market Entry Strategy TekleSebhatu, Ph.D. http://www.stcinternational.us stcintL@q.com

2. Market Entry Strategy Agenda • Market Entry Decision Questions • Market Entry Modes • Exporting • Licensing • Joint venture • Wholly owned subsidiary (FDI) • Reducing partnership risk • Partner selection • Q & A

3. Market Entry Decisions • Which markets to enter? • When to enter the markets? • What scale of entry? • Cost of entering markets?

4. Which Market to Enter? • Analyze external environmental factors • Economic environment b) Political environment c) Socio –cultural environment d) Legal environment e) Technological environment • Analyze the market size, product acceptability and customer perceptions. • Analyze internal environmental factors • Product b) Price c) Place (distribution) d) Promotion • Based on potential markets, profit margin and market share potential analysis focus on no more than 3 countries.

5. Timing of Entry? • First-mover advantage: • Preempt rivals and capture demand. • Build sales volume and brand • Move down experience curve before rivals and achieve cost advantage. • Disadvantages: • First mover disadvantage - pioneering costs. • Changes in government policy. Costs early entrant bears that later entrant can avoid.

6. Scale of Entry? • Large scale entry • Strategic Commitments - a decision that has a long-term impact and is difficult to reverse. • May cause rivals to rethink market entry. • Small scale entry: • No long term commitment. • Increase market/experience learning curve. • Reduces exposure risk.

7. Cost Of Entering Markets • Initial investment –Extra cost • Research and development • Training • Participation at tradeshow/mission

8. Joint Ventures Exporting Licensing Turnkey Projects Wholly Owned Subsidiaries Franchising Entry Modes

9. Exporting • Advantages: • Avoids cost of establishing manufacturing operations. • May help achieve experience curve. • Disadvantages: • May compete with low-cost location manufacturers. • Possible high transportation costs. • Tariff barriers. • Possible lack of control over marketing reps.

10. Selection of Channel Direct Exporting vs. Indirect Exporting

11. Indirect Exporting • Export Management Companies (EMC) • Export Trading Companies (ETC) • Selling Through Trade Associations • Piggyback Marketing • Export Merchants or Re-Marketers

12. Agreement where licensor grants rights to intangible property to another entity for a specified period of time in return for royalties. Licensing • Advantages: • Reduces development costs and risks of establishing foreign enterprise. • Overcomes restrictive investment barriers. • Disadvantages: • Lack of control. • Creating a competitor.

13. Joint Ventures • Advantages: • Benefit from local partner’s knowledge. • Shared costs/risks with partner. • Reduced political risk. • Disadvantages: • Risk giving control of technology to partner. • Shared ownership can lead to conflict.

14. Wholly Owned Subsidiary Greenfield Acquisition • Advantages: • No risk of losing technical competence to a competitor. • Tight control of operations. • Realize experience and location economies. • Disadvantage: • Bear full cost and high risk.

15. Structuring Partnership to Reduce Opportunism Walling off critical technology Establishing contractual safeguards Opportunism by partner reduced by: Agreeing to swap valuable skills and technologies Seeking credible commitments

16. Partner Selection • Get as much information as possible on the potential partner • Collect data from informed third parties • former partners (suppliers) • Banks, FF, CHB • former employees • Get to know the potential partner before committing

18. Thank You for participating! http://www.stcinternational.us stcintL@q.com