IBMgmt Transcript For Week 9 - HGU

ENTRY STRATEGIES: CHAPTER 7

When an organization has made a decision to enter an overseas market, there are a variety of options open to it. These options vary with cost, risk and the degree of control which can be exercised over them. The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or counter trade, in the case of the latter. More complex forms include truly global operations which may involve joint ventures, or export processing zones. Having decided on the form of export strategy, decisions have to be made on the specific channels. Many agricultural products of a raw or commodity nature use agents, distributors or involve Government, whereas processed materials, whilst not excluding these, rely more heavily on more sophisticated forms of access. These will be expanded on later.

MAJOR TYPES OF ENTRY STRATEGIES:

1. Exporting Strategies:
1. Indirect Exporting
2. Direct Exporting

· Independent Distribution.

· Sales Subsidiary.

2. Local Production
1. Licensing

· Company lacks time and knowledge for other strategy.

· Market potential may be too small.

2. Franchising

· Marketing program to include branding, logo etc. (a special form of licensing).

· Method of operation and other support.

3. Local Manufacturing Base

· Contract Manufacturing

· Assembly

· Full-Scale Production

3. Ownership Strategies:
1. Joint Ventures
2. Strategic Alliances
3. Collaborative Strategies
4. Mergers and Acquisition
5. Portal or e-Business strategies.

ENTRY STRATEGY ANALYSIS:

1. Cost estimating.
2. Asset levels estimating.
3. Forecasting Profitability.

STRATEGY CONFIGURATION:

1. Most entry strategies combined with some of the various entry options.
2. Deciding on the best strategy mix is called strategy configuration.
3. Business is the set up of just one legal business unit.

EXIT STRATEGIES:

1. Its company’s decision to actually abandon the market.

2. Many do so for a number of reasons:

a. Failure to meet profit objectives.

b. Changes in political, economic or legal environment.

c. Pressures from home market.

d. Need to conserve necessary operating resources.