No one market entry strategy works for all international markets. Direct exporting may be the most appropriate strategy in one market while in another you may need to set up a joint venture and in another you may well license your manufacturing. There will be a number of factors that will influence your choice of strategy, including, but not limited to, tariff rates, the degree of adaptation of your product required, marketing and transportation costs. While these factors may well increase your costs it is expected the increase in sales will offset these costs.
Concerning investment and control, the question really is how far the company wishes to control its own fate. The degree of risk involved, attitudes and the ability to achieve objectives in the target markets are important facets in the decision on whether to license, joint venture or get involved in direct investment.
Cunningham1 identified five strategies used by firms for entry into new foreign markets: In marketing products from less developed countries to developed countries point iii poses major problems.
Buyers in the interested foreign country are usually very careful as they perceive transport, currency, quality and quantity problems. This is true, say, in the export of cotton and other commodities. Because, in most agricultural commodities, production and marketing are interlinked, the infrastructure, information and other resources required for building market entry can be enormous.
Sometimes this is way beyond the scope of private organisations, so Government may get involved. It may get involved not just to support a specific commodity, but also to help the "public good".
Whilst the building of a new road may assist the speedy and expeditious transport of vegetables, for example, and thus aid in their marketing, the road can be put to other uses, in the drive for public good utilities.
Moreover, entry strategies are often marked by "lumpy investments". Huge investments may have to be undertaken, with the investor paying a high risk price, long before the full utilisation of the investment comes. Good examples of this include the building of port facilities or food processing or freezing facilities.
Moreover, the equipment may not be able to be used for other processes, so the asset specific equipment, locked into a specific use, may make the owner very vulnerable to the bargaining power of raw material suppliers and product buyers who process alternative production or trading options.
Zimfreeze, Zimbabwe is experiencing such problems.
It built a large freezing plant for vegetables but found itself without a contract. It has been forced, at the moment, to accept sub optional volume product materials just in order to keep the plant ticking over.
In building a market entry strategy, time is a crucial factor. The building of an intelligence system and creating an image through promotion takes time, effort and money. Brand names do not appear overnight. Large investments in promotion campaigns are needed. Transaction costs also are a critical factor in building up a market entry strategy and can become a high barrier to international trade.
Costs include search and bargaining costs. Physical distance, language barriers, logistics costs and risk limit the direct monitoring of trade partners.
Enforcement of contracts may be costly and weak legal integration between countries makes things difficult. Also, these factors are important when considering a market entry strategy.
In fact these factors may be so costly and risky that Governments, rather than private individuals, often get involved in commodity systems.
This can be seen in the case of the Citrus Marketing Board of Israel. With a monopoly export marketing board, the entire system can behave like a single firm, regulating the mix and quality of products going to different markets and negotiating with transporters and buyers.
Whilst these Boards can experience economies of scale and absorb many of the risks listed above, they can shield producers from information about, and from. They can also become the "fiefdoms" of vested interests and become political in nature. They then result in giving reduced production incentives and cease to be demand or market orientated, which is detrimental to producers.
Normal ways of expanding the markets are by expansion of product line, geographical development or both. New market opportunities may be made available by expansion but the risks may outweigh the advantages, in fact it may be better to concentrate on a few geographic areas and do things well.
This is typical of the horticultural industry of Kenya and Zimbabwe. Traditionally these have concentrated on European markets where the markets are well known.
Ways to concentrate include concentrating on geographic areas, reducing operational variety more standard products or making the organisational form more appropriate. In the latter the attempt is made to "globalise" the offering and the organisation to match it.China Market Entry Strategies 1.
China – Market Entry Strategies AQA BUSS4 Research Theme However, there is increasing evidence that China’s traditional manufacturing locations are becoming less competitive Many different methods of market entry It is important that the method of market entry is aligned with the . The main strategies that an organisation can use to gain entry into a foreign market depends on factors such as organisation using a strategy of technical innovation where it introduces a product which it regards as superior to those already in the market.
MAKING CHINA BEAUTIFUL: SHISEIDO & THE CHINA MARKET I. Problem The Shiseido company is weak in understanding the market needs and is looking to create a strategy that will both increase global market share and reap success in the high potential Chinese market. Determinants of MNCs’ entry mode strategies in China Shuang Wang Abstract factors on their entry mode strategies since they first came to China.
The empirical Entry mode refers to the methods used to enter a new market. Multitudes of studies. Once a strategy is chosen for the expansion across borders, the company then needs to research and choose which market to enter, when to enter the market, and at what scale to enter the market at.
All three of these decisions are very important to the success of the business in the new market. Oct 25, · Market entry strategies will normally take into account the environment of the market to be entered and develop a strategy that best suits that market.
Considering the high cost of entry into the Chinese market adopting an American approach without considering whether it is the best approach could be concerning.