Chapter 3
International Expansion
Strategies
International development phases
• Phase 1: Initial market entry
• Phase 2: Local market expansion
• Phase 3: Globalization
Choosing which markets to enter
Opportunities and threats are assessed at two
different levels:
• General business climate of a country
• Specific product market
Country/Market Choice
• Market information
• Competitor information
• Internal information
Market information
• Market potential: measure current demand, forecast
future growth, new product launches…
• Market access: “openness”, cost and delays, legal
and customs obstacles, marketing infrastructure
(distribution channels, ad agencies, etc…)…
• Market receptiveness: perception of firm, “made in”
effect of country of origin…
• Market stability: economic, legal, political, cultural
risks…
Competitor information
• Who are the competitors?
– Inventory of competition
– Direct/indirect
– Local/global
How many?
– Market share?
Internal Information
• Production capacities: product adaptation, quality
control, packing, stocking, transport…
• Marketing and sales situation: current strategy,
distribution channels, brand image, quality
advantages, relationships…
• General strategic situation: situation in domestic
market, new product development, innovation,
competitive advantage…
• Business goals: short term and long term goals
• Financial resources: costs of canvassing, capital
budgeting orientation, available cash, export
subsidies…
• Human resources: staff and management
motivation, availability, training required, expatriates…
Internal export audit, “diagnostic export”
Criteria for ranking export markets
• General attractiveness of the
market
• Competitive advantage
• Risk
• Global strategic importance
• Possible synergies
Market-Portfolio Matrix
Market-Portfolio Matrix
High
INVEST
Country
Attractiveness
SELECTIVITY
DIVEST
Low
Low
Internal strengths
High
Market selection strategies (Ayal and Zif)
Choice of target markets is based on two different alternatives:
• Market penetration (concentration) vs. market skimming
(diversification): a limited number of markets or large number of
markets
– Market penetration: rather low expansion rate in a few markets for
intensive development. The goal is to obtain high market share in each
country before expanding into others.
– Market skimming: high rate of return while maintaining a low level of
resource commitment. The firm selects more easily available market
targets while minimizing risk and investment.
• Segment penetration (concentration) vs. segment skimming
(diversification): similar or dissimilar market segments
– Segment penetration: focus on a small number of segments in which the
firms seeks a dominant position
– Segment skimming: brand and product diversity, specific launches for
some markets
Timing of entry
Simultaneous entry vs. sequential entry
• Simultaneous entry: preempt competition be
establishing presences in all major markets, limit
opportunities for imitation, potential scale economies
may lead to lower unit costs
• Sequential entry: build on knowledge and experience,
generally preferred if substantial financial, managerial or
other resources are required