Opportunity Identification and
Country Selection
Alexander Consulting Enterprise
3/23/2016
Foreign Market Entry
Firm Specific
Characteristics
Objectives of
Market Entry
Product
Selection
Country
Selection
Alexander Consulting Enterprise
Mode of Entry
3/23/2016
Strategy and
Time of Entry
1. Firm Specific Characteristics
Firm Specific Characteristics Provide the Lens to Assess the
Foreign Market Entry Decision. Product Selection, Country
Selection, Mode of Entry, Strategy, and Timing All Depend
on Firm Specific Characteristics. To Define the Firm
Specific Characteristics a Situation Analysis is Required!
Alexander Consulting Enterprise
3/23/2016
2. Objectives of Market Entry
2.1 Production Focused
- Cost Advantages
 Economies of Scale
 Global Sourcing
 Labor Cost
 Cost to Protect Environment
 Taxes
-Knowledge Transfer
-Potential for Innovation
-Access to Skilled Labor
Alexander Consulting Enterprise
3/23/2016
2. Objectives of Market Entry (Cont.)
Porter’s Diamond
Firm strategy,
structure and rivalry
Factor
conditions
Demand
conditions
Related and
supporting industries
Alexander Consulting Enterprise
3/23/2016
2. Objectives of Market Entry (Cont.)
Innovation and Competition
“Companies gain advantage against the world’s best competitors
because of pressure and challenge. They benefit from having strong
domestic rivals, aggressive home based suppliers, and demanding local
customers”
Michael Porter
Alexander Consulting Enterprise
3/23/2016
“Without Coke, Pepsi would have a tough time being an
original and lively competitor…..And on the other side of
the fence, I’m sure the folks at Coke would say that nothing
contributes as much to the present day success of the CocaCola Company than…Pepsi”
Roger Enrico
Ex-CEO of Pepsi Cola
Alexander Consulting Enterprise
3/23/2016
2. Objectives of Market Entry (Cont.)
Innovation and Economic Clusters
Clusters are geographic concentrations of interconnected
companies and institutions in a particular field.
- Clusters increase competition and cooperation
- Clusters increase communication between companies and
employees. Clusters decrease transaction cost by
establishing trust.
- Clusters increase productivity. Clusters offer access to
skilled labor, local suppliers, and public institutions
- Clusters offer a high potential for innovation. Companies
in clusters are close to competition, customers, and public
institutions. Employees might feel peer pressure.
Alexander Consulting Enterprise
3/23/2016
2. Objectives of Market Entry (Cont.)
Innovation and Economic Clusters
Strategic Implications:
Choosing location not only based on input cost.
Consideration of Potential for Innovation is a critical
factor for long term success.
Alexander Consulting Enterprise
3/23/2016
2. Objectives of Market Entry (Cont.)
2.2 Market Focused
-Capturing new Markets
- Diversification
- Brand name Leverage
- Economies of Scope
- Access to Know How and Qualified
Employees
2.3. Competition Focused
- First Mover Advantage
- Preemptive Strike
- Learning in Leading Markets
- First - Mover (Dis)Advantage
Alexander Consulting Enterprise
3/23/2016
“If you are going to be the world’s best furnishing
company, you have to show you can succeed in
America, because there is so much to learn here.”
Goran Carstedt
Head of Marketing IKEA
Alexander Consulting Enterprise
3/23/2016
3. Country Selection
Sociopolitical
Factors
Cost /
Factors
Fit with
Company
Regulatory
Factors
Demand
Factors
Strategic
Factors
Alexander Consulting Enterprise
3/23/2016
3. Country Selection
1. Region
Identification
Potential candidates are identified
using easily available statistical
data.
2. Preliminary
Screening
Involves rating the identified
countries on macro level
indicators, such as political
stability, geographic distance and
economicc development.
3. In-depth Screening Analyzes data specific to the
industry and product markets and
segments. Analyses of Market
Attractiveness
4. Final Selection
Company objectives are brought
to bear for a match.
Alexander Consulting Enterprise
3/23/2016
3. Country Selection (cont.)
Analysis of Market Attractiveness
Economic Freedom Index
 Size
http://www.heritage.org/Index/Ranking.aspx
 Growth
 Competition
Market Potential Index
 Trade Barriers
http://globaledge.msu.edu/resourcedesk/mpi/
 Analysis of Political Risk
 Currency
 Infrastructure
 Capital Requirements
 Production Cost
 Taxes
Alexander Consulting Enterprise
3/23/2016
General Data Resources
o Michigan State CIBER international business
information repository:
o http://globaledge.msu.edu/
o U.S. Commercial Service - Export assistance arm
of the Department of Commerce
o http://export.gov/
o Available through UNLV Library Electronic
Collections
o Global Market Information Database
Alexander Consulting Enterprise
3/23/2016
4. Mode of Entry
 Exporting
 Licensing
 Strategic Alliance
 Joint Venture
 M&A
 Direct Investment
Alexander Consulting Enterprise
3/23/2016
4. Mode of Entry (Cont.)
Considerations affecting mode of entry
Local Factors
•
•
Legal requirements
Cultural distance
vs.
relevant MNE experience
• Customers
• Human resources
• Distribution chain/supply chain
•
Political risk/value of connections
Alexander Consulting Enterprise
3/23/2016
4. Mode of Entry (Cont.)
Considerations affecting mode of entry
Nature of the Product
•
•
•
Importance of control of brand, product leakquality, etc.
Importance of technical knowledge
vs. relevant local expertise
Danger of leakage of critical technology
Alexander Consulting Enterprise
3/23/2016
4. Mode of Entry (Cont.)
Considerations affecting mode of entry
Strategic considerations
•
•
•
Risk tolerance
vs.
relative size of project
Importance of learning from the market
Important to demonstrate commitment?
Alexander Consulting Enterprise
3/23/2016
5. Strategy and Time of Entry
- Domestic Market Extension
- Multinational
- Global
-Market Concentration versus Market
Spreading
Alexander Consulting Enterprise
3/23/2016
5. Strategy and Time of Entry (Cont.)
Market Spreading versus Market Concentration:
Market Concentration
Market Spreading
 High Penetration
 High Control
 Knowledge of Market
Conditions
 Economies of Scale
 Economies of Information
 Steep Learning Curve
 Low Penetration
 Low Control
 Little Effort in Single Markets
 Target Market Does not
Reflect National Borders
 Diversification
Alexander Consulting Enterprise
3/23/2016
5. Strategy and Time of Entry (Cont.)
Profit and Risk in International Markets
Operating Profit
Risk
Domestic Operations Only
Alexander Consulting Enterprise
International Experience
3/23/2016