International(7)BusinessHuang HuipingEconomic School. Whut
International Business (7) Huang Huiping Economic School. Whut
7. Entering Foreign Market (chpt.12)LearningObiective1.Explore the three basicdecisionsthat a firm contemplatingforeign expansion must make:which marketsto enter, whenonwhatscale.toenterthosemarkets,and2.Review the different modes that firms use to enter a foreignmarket.Understandtheadvantagesanddisadvantagesofeachentry mode.3.ReviewingFDltheoriesandpolicies.4.Appreciatethe relationshipbetweenstrategyandafirm'schoiceofentrymode
7. Entering Foreign Market (chpt.12) Learning Objective 1. Explore the three basic decisions that a firm contemplating foreign expansion must make: which markets to enter, when to enter those markets, and on what scale. 2. Review the different modes that firms use to enter a foreign market. Understand the advantages and disadvantages of each entry mode. 3. Reviewing FDI theories and policies. 4. Appreciate the relationship between strategy and a firm's choice of entry mode
Opening CaseINGStudy: ING GroupNEal
Opening Case Study: ING Group
Opening CaseStudy:International Expansion at ING Groupwhich markets:0Whydid the ING managers choose America?What issuesdid managers concern during the market- and-site-screeningprocess?when to enter2Do you thinkING has chosenproper time toentering theAmerican market? Why,or why not? Was ING the first-moverenteringthis market?o on whatscaleBy entering the U.S.financial market on a large scale, whatwere the effects on ING ? Give your comments.o Entry modeING chose to enter the U.S. market via acquisitions ratherthan green-field ventures, What do you think the advantagesto ING of doing this? What might the drawbacks be? Does thisstrategy make sense?Why?
Opening Case Study: International Expansion at ING Group which markets : Why did the ING managers choose America? What issues did managers concern during the market- and-site-screening process? when to enter Do you think ING has chosen proper time to entering the American market? Why, or why not? Was ING the first-mover entering this market? on what scale By entering the U.S. financial market on a large scale, what were the effects on ING ? Give your comments. Entry mode ING chose to enter the U.S. market via acquisitions rather than green-field ventures, What do you think the advantages to ING of doing this? What might the drawbacks be? Does this strategy make sense? Why?
7.1 Basic EntryStrategyFour basic decisions:o Which foreign market?o When to enter?o On what scale?o By which entry mode?
7.1 Basic Entry Strategy Four basic decisions: Which foreign market? When to enter? On what scale? By which entry mode?
Which foreign market?Some irhportant issues concerned managers during the market- and-site-screening process:o (1) The attractiveness of a potential market for aninternational business depends on the balancing of thebenefits, costs, and the risks; (the conclusion in chpt 2)o (2) Value create in foreign markets: check the adaptationof the product and the competition in this market . (theconclusion in chpt 11)o (3) following the steps:a)Identifybasic appealb)Assessthenationalbusinessenvironmentc) Measuremarketorsite potentiald) Select the marketor site
Which foreign market? Some important issues concerned managers during the market- andsite-screening process: (1) The attractiveness of a potential market for an international business depends on the balancing of the benefits, costs, and the risks; (the conclusion in chpt 2) (2) Value create in foreign markets: check the adaptation of the product and the competition in this market . (the conclusion in chpt 11) (3) following the steps: a) Identify basic appeal b) Assess the national business environment c) Measure market or site potential d) Select the market or site
CostsBenefitsCorruptionSizeof EconomyLackofinfrastructureLikelyeconomicGrowthLegal costsOverallAttractivenessRisksPolitical risks: social unrest/anti-business trendsEconomicrisks:economicmismanagementLegal risks:failure to safeguard property right
Benefits Size of Economy Likely economic Growth Costs Corruption Lack of infrastructure Legal costs Overall Attractiveness Risks Political risks: social unrest/anti-business trends Economic risks: economic mismanagement Legal risks: failure to safeguard property right
Step 4:Select the Market or Site-Field trips·CompetitoranalysisStep 3:Measure Market or Site Potential·Current sales, income elasticity,market potentialindicatorQuality ofworkforce,materials,infrastructureStep 2:Assess the National Business Environment.Language,attitudes,religious beliefs,traditions,work ethicGovernment regulation, government bureaucracy,political stability.Fiscal and monetary policies,currencyissuesCost of transporting goods,country imageStep 1:Identify Basic Appeal.Suitability of climate,absolutebansAccess to materials,labor, financing
When to enter ?Entry is early : when a firm enters a foreignmarket before othersfirst-mover advantage :1.By brand name;2.Experience curve & cost advantage;3.Creatingswitching cost.- first-mover disadvantage : pioneering cost1.Learning costs;2.Failure costs;3.Promotion and establishing a product offeringRegulations change in a way4
Entry is early : when a firm enters a foreign market before others. - first-mover advantage : 1. By brand name; 2. Experience curve & cost advantage; 3. Creating switching cost. - first-mover disadvantage : pioneering cost 1. Learning costs; 2. Failure costs; 3. Promotion and establishing a product offering 4. Regulations change in a way When to enter ?
On What Scale ?On a large scale0Strategic Commitment: A decision that hasda long-term impact and is difficult to reverseThe effects:First mover advantage: Easier to attract1.customs and distributors;+Give other competitors' entry pause; +2.Limit the company's flexibility3./-Onasmall scaleO- gather information;- lower the risks, lower the benefits
On a large scale Strategic Commitment: A decision that has a long-term impact and is difficult to reverse. The effects: 1. First mover advantage: Easier to attract customs and distributors;+ 2. Give other competitors’ entry pause; + 3. Limit the company’s flexibility － On a small scale - gather information; - lower the risks, lower the benefits On What Scale ?