International Entry Strategies
and Rapid Growth
Arild Aspelund
Outline
• The traditional categorization of entry modes
– Characteristics in terms of:
• Resource commitment
• Control
• Flexibility
• Efficiency
• Hybrid structures
– Entry modes under resource constraints and rapid growth
• The role of social capital
– Some examples from Norwegian High Tech Start-Ups
Senter for entreprenørskap – Truls Erikson
What are Entry Modes?
• Often cited in order of commitment and control
–
–
–
–
–
–
–
Direct Sales / Export Sales
License / Franchise
Agent / Distributor
Sales Office
Joint Venture
Acquisition
Wholly-Owned Subsidiary
• Hybrid structures can be a combination of any of
these, but often includes a partner.
Senter for entreprenørskap – Truls Erikson
Entry modes
• Export Sales
–
–
–
–
Resource commitment
Control
Flexibility
Efficiency
Low
High
High
Low
• License / Franchise
–
–
–
–
Resource commitment
Control
Flexibility
Efficiency
Senter for entreprenørskap – Truls Erikson
Low
Medium
Medium to low
High
(1)
Entry modes
(2)
• Agent / Distributor
–
–
–
–
Resource commitment
Control
Flexibility
Efficiency
Low
Low
High
Medium to high
• Sales Office
–
–
–
–
Resource commitment
Control
Flexibility
Efficiency
Senter for entreprenørskap – Truls Erikson
Medium
High
Medium
Medium
Entry modes
(3)
• Joint Venture
–
–
–
–
Resource commitment
Control
Flexibility
Efficiency
Medium
Medium to High
Low
Medium
• Acquisition
–
–
–
–
Resource commitment
Control
Flexibility
Efficiency
Senter for entreprenørskap – Truls Erikson
High
High
Medium
Medium to High
Entry modes
(4)
• Wholly-Owned Subsidiary
–
–
–
–
Resource commitment
Control
Flexibility
Efficiency
High
High
Medium to High
Medium
• Hybrid Structures
–
–
–
–
Resource commitment
Control
Flexibility
Efficiency
Senter for entreprenørskap – Truls Erikson
Low
Low
Case specific
Case specific
Some Examples of Hybrid
Structures (1)
Taken from Gabrielsson and Kirpalani (2004)
• MNCs acting as system integrators
Examples:
PC brand makers
(e.g. PCs and Logitech)
Hardware and software suppliers
(e.g. Motorola and Opera Software)
Senter for entreprenørskap – Truls Erikson
Some Examples of Hybrid
Structures (2)
Taken from Gabrielsson and Kirpalani (2004)
MNCs distributing complementary products/services, also often called client
followership (Bell, Crick and Young, 2004)
Examples:
Internet providors
(Telenor and Norman Antivirus)
B2B/C end product supplier
(Johnson and Johnson)
Senter for entreprenørskap – Truls Erikson
Some Examples of Hybrid
Structures (3)
Taken from Gabrielsson and Kirpalani (2004)
Value net partners; technology and marketing partners
Examples:
Software developers
(e.g. Linux and ez.no)
High-end commodities
(Italian design)
Senter for entreprenørskap – Truls Erikson
Some Examples of Hybrid
Structures (4)
Taken from Gabrielsson and Kirpalani (2004)
•
Internet as infrastructure: distribution, marketing, customer interaction,
and sales
Examples:
Internet retailers
(Amazon or Play.com)
Niche oriented commodities
(African art)
Senter for entreprenørskap – Truls Erikson
Managerial Lessons
• Managerial Lessons
– There are many examples of entry modes that are not in mainstream
marketing textbooks
• Creativity only limitation!
– The “international entrepreneurship – performance” dilemma
– Is it safe to rely on channels that you do not own?
• Examples here are examples of new entry modes – might not be good
examples of international marketing development
• Build alternative channels with higher degrees of control
• When establishing cooperative structures - make sure you do end up
locked in
Senter for entreprenørskap – Truls Erikson
Siebel Systems
Senter for entreprenørskap – Truls Erikson
Siebel Systems
• How can you describe Siebel’s business model?
– How does it compare to others at the time of the establishment of the
venture?
• How does Siebel use partners for marketing purposes?
– Which effects does this have for the firm’s possibilities for growth?
– Do you think Siebel could have managed such growth with a different
business model where they internalized implementation?
• In which ways do this business model lay the foundation for a
rapid growth?
Senter for entreprenørskap – Truls Erikson
Example: Siebel Systems
- Competition and Marketing
• Competition
– ERP Software Companies, and smaller specialized vendors (about
400)
• Focus on CRM!
– “That is what makes us untouchable”
• Market channels
– Typical order size $1 – $10 million
– 729 external partners
– Alliances
• Consulting
• Software
• Platform
• Content
– Siebel (10-15%), system integration (70%), hardware (10%),
content (5%), other software (5%)
Senter for entreprenørskap – Truls Erikson
Example: Siebel Systems
- The Vision
“We are here to build a great company. A company that has
achieved the highest levels of customer satisfaction. A great
place to work. A good member of the community. A provider of
exceptionally high-quality products. A company that carries
itself into the marketplace with the highest levels of business
integrity and business ethics. A company composed of
dedicated, accomplished professionals, committed to the
customer. We are here to build a company in which we all can
take great pride” Tom Siebel
• The prime example of how Customer Focus permeates the
identity of Siebel Systems!
Senter for entreprenørskap – Truls Erikson
Example: Siebel Systems
- The Values
•
Core Values:
1. Customer Satisfaction – We regard it as a privilege to serve our customers.
We make 100% customer satisfaction our overriding priority.
2. Professional Courtesy – We comport ourselves with the highest levels of
business ethics and professional courtesy.
3. Professionalism – We demonstrate the highest levels of professionalism
and quality in everything we do.
4. Goal and Action Orientation – In pursuing our objectives, we have a bias
for action.
“Siebel Systems is the first company where I have seen an
excellent performer fired because he ignored the values of the
company. Either you play by the rules or you’re out.” Siebel
employee
Senter for entreprenørskap – Truls Erikson
Example: Siebel Systems
- The Sales Organization
Legal Services
Alliances
Finance
Professional Services
Corporate Marketing
Product Marketing
Sales
Senter for entreprenørskap – Truls Erikson
Example: Siebel Systems
- Human Resource Management
• Mandatory quarterly report of personal objectives
• Transparent
– Generally transparent through mySiebel
– Tom Siebel publishes his report for every employee to see through
mySiebel
• 7 days into each quarter, TMT reports personal objectives
• 15 days into each quarter, middle management reports
• 21 days into each quarter, all employees have reported
Senter for entreprenørskap – Truls Erikson
Example: Siebel Systems
- Human Resource Management
•
Customer Satisfaction
“We measure customer satisfaction as if it were money”
– Quarterly
•
Employee satisfaction
–
•
Partner satisfaction
–
•
Weekly and continually on competition and market movements through Siebel
eBusiness Applications
Product quality
–
•
Quarterly
Business Performance
–
•
Every 6 months
Internal quality check on Beta Versions, continually on operational products
Individual performance
–
Quarterly
Senter for entreprenørskap – Truls Erikson
Example: Siebel Systems
- Human Resource Management
• Employee Relationship Management – ERM – mySiebel
• Coordination and management of an organization with global
dispersion and heavy dependency on external parties is a
challenge
• Value-based management requires channels through which
you can communicate corporate visions, values, organization
and remuneration
• Simply speaking, you need an arena where you can tell
everybody how it works…
Senter for entreprenørskap – Truls Erikson
Example: Siebel Systems
- Human Resource Management
• Bonus awards
–
–
–
–
Tied to achievements of personal objectives
Sales targets
Customer satisfaction
Also dependent on the performance of other functions
• Product Marketing on Sales etc.
• Heavy use of stock ownership and stock options plans
– 40 % of the company was owned by employees
• Ranking and discharging the bottom 5 % of employees every 6
month…
– Workforce Improvement Initiative
Senter for entreprenørskap – Truls Erikson
Siebel Systems
Summary and Conclusions
• Summary
– Siebel Systems faces an enormous challenge
• Extreme growth, 0 to 10 000 employees in a decade…
• Globally disperse organization, multicultural
• Heavily dependent on partner performance
– Siebel Systems have developed an organization that has coped
with those challenges
– They have done so partly by organization, party through values and
human resource management
• The ’alliance-based’ marketing system
• The values management system
• The people management system - MySiebels
– But in the core, there is a fundament on customer satisfaction that
add value to Tom Siebel’s exit…
Senter for entreprenørskap – Truls Erikson