Presentation of IMM
Mode of Entry to Foreign
Market and Marketing
Strategies
Pushpendra singh
Arvind Choudhary
Romio Borogoan
Foreign Market
Foreign markets are any markets outside of a
company's own country. Selling in foreign markets
involves dealing with different languages,
cultures, laws, rules, regulations and requirements.
Companies looking to enter a new market need to
carefully research the potential opportunity and
create a market entry strategy.
Modes of Entry to Foreign
Markets:
Exporting
Exporting is the marketing and direct sale of domestically produced
goods to another country through a distributor. This is a great first step in
global expansion because it allows you to enter a foreign market with
low overhead costs.
It is viewed as relatively low risk and highly profitable because you do not
need to create new or localized products for the target market. Also,
some companies choose to export because there is less competition
overseas.
One challenge some companies face is how to scale without hiring incountry resources and staff for the new international markets.
Licensing
Licensing gives legal rights to parties within international
markets to use your company’s name and other intellectual
property to sell your product. A licensee can produce and sell
products under your name or offer services using your brand. In
exchange, you get royalties or other payments. It can be an
effective way of entering a market, especially if you’re a service
business that needs a local workforce or your products would
benefit from local manufacturing.
Brands that come to the table with detailed research on their
new market are much more likely to solidify essential factors for
a successful licensing partnership.
Franchising
One of the most popular international market entry strategies is the
franchising process. Franchising is similar to licensing but requires a
lot more heavy lifting. Franchising works well for organizations with a
trustworthy and established business model, such as McDonald’s or
Starbucks. Businesses that begin franchising should ensure that they
earn a good brand name, build on it, and promote it.
the franchisee pays a lump sum payment up front and a share
of future profits. Through this contractual relationship, the
success of the operations is interdependent, but the franchisor
gains other advantages from the partnership than the
franchisee.
Joint Ventures
A joint venture is a partnership between two
companies that may sometimes be domestic and
foreign firms. Both invest money, share ownership
and control. The foreign partner provides expertise,
connections, and access to the new market. Joint
ventures are riskier but allow faster entry into
foreign markets. They can offer tax advantages and
may be required in some countries.
Examples :- include real estate, media, and tech
sectors.
Foreign Direct Investment
Foreign direct investment (FDI) occurs when a company
takes controlling ownership in a business entity in
another country. With FDI, foreign companies are
directly involved with day-to-day operations in the
other country. This means they’re bringing money into
the investment, knowledge, skills, and technology.
FDI can be a source of resources and technology and can
spur economic growth and development. However, FDI does
come with risks for investors and can raise concerns about
foreign influence in target countries.
Marketing Strategies
A marketing strategy refers to a business’s overall game plan for
reaching prospective consumers and turning them into customers
of their products or services. A marketing strategy contains the
company’s value, key brand messaging, data on target customer,
demographics, and other high-level elements.
Some key considerations for marketing in foreign markets
Product adaptation
Pricing
Distribution
Promotion
Product
Product adaptation refers to the process of making changes to a product
to reach new or foreign customers and markets. A team may modify an
existing product's features or use it as the base for a product sold to new
markets.
team may also adjust elements of a product to make it more marketable
to foreign customers, such as its packaging.
Price
Determine the optimal pricing strategy based on local economic
conditions, competition, and consumer expectations. Consider factors like
currency exchange rates and purchasing power parity.
Distribution
You need to develop a distribution strategy that will get your product or
service to your target customers in the foreign market. This may involve
working with local distributors or retailers, or it may involve establishing
your own sales and distribution network.
Promotion
You need to develop a promotional strategy that will raise awareness of
your product or service in the foreign market and convince potential
customers to buy it. This may involve using a variety of marketing
channels, such as advertising, public relations, and social media.
The Case Study Summary
“Starbucks”
Starbucks' international expansion endeavours and the unique challenges
it has encountered across various regions. Despite facing competition
from local coffee establishments and low coffee consumption per capita
in countries like Ireland and the Netherlands, Starbucks has managed to
establish a significant presence in Europe with over 1,200 outlets. In
France, where coffee culture is deeply rooted, Starbucks embarked on a
daring venture, introducing its brand to a market traditionally favouring
dark espresso. However, Italy, with its longstanding coffeehouse
traditions, poses a formidable challenge. Starbucks has also strategically
expanded into China, where tea is the favoured beverage, and
government regulations initially required local partnerships.
The Case Study Summary
“Starbucks”
Adapting to local preferences, such as introducing red bean cappuccino
in China, has been essential. Furthermore, Starbucks navigated the global
economic downturn by adjusting to changing consumer habits and
engaging with customers through social media. It faced competitive
pressures from chains like McDonald's, which offered lower-priced coffee
options. Lastly, Starbucks pursued innovation with the Starbucks Reserve
Roastery and Tasting Room, targeting upscale coffee enthusiasts with
single-origin beans and creating a unique retail experience.
The Case Study Summary
“Starbucks”
Adapting to local preferences, such as introducing red bean cappuccino
in China, has been essential. Furthermore, Starbucks navigated the global
economic downturn by adjusting to changing consumer habits and
engaging with customers through social media. It faced competitive
pressures from chains like McDonald's, which offered lower-priced coffee
options. Lastly, Starbucks pursued innovation with the Starbucks Reserve
Roastery and Tasting Room, targeting upscale coffee enthusiasts with
single-origin beans and creating a unique retail experience.
The Case Study Summary
“Starbucks”
Que1:In the United States, nearly two-thirds of Starbucks outlets are company owned; the remaining one-third
is operated by licensees. Outside the United States, the proportions are re- versed: About two-thirds are run
by licensees or partnerships in which Starbucks has equity stakes. What is the explana- tion for the two
different market expansion strategies?
Ans:The two different market expansion strategies (company-owned vs. licensed) in the
United States and international markets are primarily driven by risk-sharing and market
familiarity. In the United States, where Starbucks originated and has a strong understanding
of the market, the company prefers to own a larger proportion of its outlets to maintain
control over operations and quality. In contrast, in international markets, Starbucks often
partners with local licensees or forms equity partnerships. This approach allows Starbucks to
leverage the local knowledge and resources of its partners, reduce financial risk, and
navigate unfamiliar markets more effectively. Additionally, it enables quicker expansion
without the need for significant capital investment.
The Case Study Summary
“Starbucks”
Que2:In response to the economic downturn, Starbucks launched a new line of instant coffee called VIA
Ready Brew. The com- pany also developed a breakfast value meal that costs less than $4. Do you agree with
these decisions?
Ans:Starbucks' decision to launch VIA Ready Brew and introduce a breakfast value meal in
response to the economic downturn can be seen as a sound strategy. These decisions aim to
cater to changing consumer preferences during tough economic times. VIA Ready Brew
caters to convenience-seeking consumers, while the value meal offers affordability. These
initiatives help Starbucks diversify its product offerings and attract a broader customer base,
mitigating the impact of the economic downturn.
The Case Study Summary
“Starbucks”
Que3:Should Starbucks enter the Italian coffeehouse market? Why or why not?
Ans:The likelihood of winning the global "coffee wars" between Starbucks and McDonald's
depends on various factors, including each company's strategy, adaptability, and brand
perception. Starbucks has a strong global presence, a premium brand image, and a focus on
high-quality coffee and unique customer experiences. McDonald's, on the other hand, has a
vast global footprint, is known for affordability and convenience, and has made strides in its
McCafé brand.
In the long run, it's possible for both companies to coexist and thrive in the coffee industry by
catering to different segments of the market. Starbucks may continue to excel in the premium
and specialty coffee sector, while McDonald's could maintain a strong position in the fastfood and value-driven segments. Ultimately, the "winning" company may vary depending on
regional preferences and evolving market dynamics.
The Case Study Summary
“Starbucks”
Que4:In the long run, which company is more likely to win the global "coffee wars," Starbucks or
McDonald's?
Ans:The prospects for the Starbucks Reserve Roastery and Tasting Room initiative are
positive. This premium concept targets coffee enthusiasts who seek unique and high-quality
coffee experiences. Starbucks is leveraging its expertise in sourcing single-origin beans and
creating a captivating retail environment. By cultivating relationships with small-scale farmers
and offering specialized products, Starbucks can tap into a niche market segment willing to
pay a premium for exceptional coffee experiences. However, success will depend on
Starbucks' ability to maintain consistency and quality across these upscale locations and
effectively communicate the value of this concept to its target audience.
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