Term Paper on "International Marketing Management A) Market Entry Strategy"

Term Paper 8 pages (2716 words) Sources: 12 Style: Harvard

[EXCERPT] . . . .

International Marketing Management A) Market Entry Strategy

The common belief that there exists no such thing as a perfect market entry strategy fit for all types of market is becoming more and more of a fact. The specialized literature presents the reader with a wide variety of entry strategies, and however some are similar to others, there is no general perfect recipe for a successful market penetration. "There is no single strategy to fit all companies, products and markets" (Marketing 4 Entrepreneurs). There does exist a palette of strategies that are vital for the success of any entry, such as the studying of the market, the customers, the demands, the competition, but all these must de perfectly adjusted to the unique requirements of each market, company and even political, economic, social or technological backgrounds. The strategy must then be developed and implemented in accordance with the objectives established by the company. In other words, if the company desires to become an international leader and maintain a competitive edge, they will implement aggressive strategies. But if they do not have such high expectations, they will implement more offensive strategies, aimed at ensuring them with a limited but loyal customer base. In regard to the objectives set, the strategy must also be based on the temporal characteristics of the goals, meaning short or long-term goals. It then depends on the type of product and its stage of life. For instance, if the organization desires to penetrate a foreign market with a new product, they will base their strategy on the elements of novelty brought in by the product. On the other hand, if the company will enter the market promoting an already existent product, previously traded in other markets, the strategy will be based on presenting the benefits former customers have retrieved by using the respective line of products. Other reasons that determine the need for diversified strategies, adapted to the unique requirements of each environment include:

Legal background - however globalization is increasing in presence and importance, there are still countries which implement numerous protectionist policies, making it as such more difficult for foreigners to enter the market. These regulations generally include government subsidies to national manufacturers, which then sell their products at lower and uncompetitive prices. Other forms of legal barriers to entry could refer to numerous taxes and permits that must be obtained from the government of the hosting country prior to commencing operations. In Russia for instance, a foreign company entering the market has to go through about 20 to 30 agencies and get somewhere between 50 and 90 permits, depending on the type of operation conducted (Broadman, 2000)

Socio-cultural features - these are also crucial in determining an entry strategy as they can ensure the company with future success or guaranteed failure. Take for instance the case of a fast-food organization expanding into India. Were the company to promote beef burgers, they would next to commit business suicide in the country which holds the cow as a sacred animal.

Hostility onto the market - this is generally given by the level of competition in the market for the promoted product. "Competition is the principal key to determining the hostility of the market. If the market is crowded with competitors and the business is crucial to their success, the market will be very hostile. If there are no competitors, or the competition is highly fragmented and no clear market leadership is present, the market will be effectively benign." (Block and MacMillan, 1999) if the entering company will activate onto a highly competitive market, their strategies will have to be extremely offensive, whereas if they activate onto a market with reduced competition, their strategies will be more on the defensive side, will be easier to implement, less time and money consuming.

Resources - the entry strategy will also depend upon the resources possessed by organization. "An effective market entry strategy ensures optimal use of corporate resources" (China Business Solutions, 2008). In this particular sense, it means that even if there were to exist such a thing as the universal strategy, most companies would not be able to implement it since they did not posses the necessary resources or the necessary amounts of resources. There are five major categories of resources on which every organization will base their market entry strategy: marketing, human, physical (assets), intangible (such as corporate culture) and financial (Morris Jr., 1996)

Technological background - the technological developments in both host as well as outsourcing country must be well considered before developing and implementing the most suitable strategy. "Rapid change in technology can reconfigure a market. Word processors irrevocably altered the market for electric typewriters. A critical question and judgement is about how long market bounty will last" (Marketing 4 Entrepreneurs). The technological applications are extremely important moreover when the internet has become a useful tool in implementing marketing strategies. In India for instance, a web-based strategy would have limited chances of success, since out of the country's 1.1 billion inhabitants, only 42 million are active users of the internet (Internet World Statistics, 2000-2007).

Product features and competitive advantage - it is generally agreed that the positioning of a product will be realized based on the core benefits offered by the product, or service. Therefore, this will also influence the strategy chosen on entering the foreign market (Bennett, Alder and Blythe, 2002). Take for instance the case of three restaurant chains entering the same new territory, say a developing European country. The first could be an internationally recognized one, such as KFC, and their strategy would be based on brand promotion. The second one could be a Chinese chain, and their strategy would be based on promoting traditional products and the introduction of novelty elements. Finally, the third could be a new chain of restaurants, emerging from a neighboring country, without a clearly established brand and significantly different products. Their strategy could be based on offering a wide array of products, especially prepared to meet the tastes of a varied palette of customers.

The list of reasons why no single entry strategy can be implemented by all organizations could go on for countless pages. But not even this list can be a universal one, for it also depends on numerous features which are internal or external of the organization. The closest thing to a single strategy is given by a generalist approach and mere recommendations. The most commonly used strategies when entering a foreign market are:

i) Technical innovation strategy - perceived and demonstrable superior products ii) Product adaptation strategy - modifications to existing products iii) Availability and security strategy - overcome transport risks by countering perceived risks iv) Low price strategy - penetration price and, v) Total adaptation and conformity strategy - foreign producer gives a straight copy" (Cunningham, 1986)

There is no such thing as the perfect strategy to be implemented by all organizations and ensure their future success onto a foreign market. And it is a good thing such a strategy does not exists, for it would force organizations to lose their unique features, would align them to meet the same requirements, possess the same resources and finally manufacturer and deliver the same products and services. In other words, a universal market entry strategy would strip companies of their individuality and their comparative advantages that differentiate and ensure their success.

References

Bennett, R., Alder, H., Blythe, J., 2002, International Marketing: Strategy Planning, Market Entry and Implementation, Kogan Page, ISBN 9780749438081

Broadman, H.G., 2000, Competition and Entry in Russian Industry, the World Bank, Retrieved at http://www.imf.org/external/pubs/ft/seminar/2000/invest/pdf/broadman.pdfon March 13, 2008

Block, Z., MacMillan, I., 1999, Market Entry Strategies for New Corporate Ventures,

Cunningham, M.T. Strategies for International Industrial Marketing, in D.W. Turnbull and J.P. Valla (eds.) Croom Helm 1986, p 9.

Morris Jr., J.D., 1996, Market Power and Business Strategy: In Search of the Unified Organization, Quorum Books, ISBN 9781567200454

Formulating Market Entry Strategy, Marketing 4 Entrepreneurs, Retrieved from on March 25, 2008

India - Internet Usage Stats and Telecommunications Market Report, 2000-2007, Internet World Statistics, http://www.internetworldstats.com/asia/in.html. Ast accessed on March 25, 2008

Services - Market Entry Strategy, 2008, China Business Solutions, http://www.chinabusinesssolutions.com/main.php?pag=pages&id=9&sid=2,last accessed on March 25, 2008 b) International Franchising

International franchising is a more and more common phenomenon which has been made possible with the liberalization of markets and the globalization of international economies (Preble and Hoffman, 1995). Franchising operations are most common among the fast food and restaurants industry, with current trends developing in hotel operations as well (Fried and Elango, 1997). Franchising basically implies that the large company, the franchisor, will allow a secondary party, the franchisee, to operate in his behalf, to sell his products under the corporate brand name and to partially benefit from the registered revenues. "A franchise agreement is typically defined as a contractual arrangement between two legally independent firms, whereby the franchisee pays the franchisor for the right to sell the franchisor's product or the right to use his trademarks in a given location for a specified… READ MORE

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