IMH – 11.02 - Explain the
International Market-Entry
Strategies
Goals
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Explain “environment-strategy fit” for
international market
Describe different international entry
strategies.
ENVIRONMENT-STRATEGY FIT
There must be a fit between environmental conditions
and business strategies. Hence it is important to
understand the types of environment for a business
when it goes into international markets.
 placid environment
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an environment with very little change
Easy to develop strategic plans for long term
Not very common
turbulent environment
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rapid and unpredictable environmental change
Businesses must develop strategic plans for shorter
time periods
More common
ENVIRONMENT-STRATEGY FIT (continued)
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macroenvironment
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the environmental factors that influence the
economy, governments, legal environment,
technology, ecology, social cultural factors, and
competition
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http://www.youtube.com/watch?v=5xwyGVr51Dw
environmental shocks
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rapid changes to the macroenvironment
Ex: The terrorist attacks Sept 2001, or the fall of
communism in the 1990s.
Environmental Planning
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Most international companies operate in a
turbulent environment.
It is difficult to plan for every
macroenvironmental change.
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When a company sees an increase chance of
threat, they should be pro-active.
E.g., adjusting inventory levels of a recession is
anticipated
Governments can help ensure stability by
strengthening their resource base and their
relationships with other countries.
Environmental Planning (examples)
 Asian Bird Flu
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http://live.wsj.com/video/bird-flu-variant-pandemic-potential/FCCF8D56-CE49-4373-9DD1760F4844E6CE.html#!FCCF8D56-CE49-4373-9DD1-760F4844E6CE
 Businesses pulled employees out of infected countries
 Increased inventory levels in case foreign producers
could not send products
 U.S. shortage of qualified employees for
manufacturing jobs
 Federal funds to NSF for create research centers
 Goal to graduate 100,000 new scientists and engineers
during next four years
IMH – 11.02 - Activity:
Recent environmental Shocks
Visit a reliable source of world information like
http://www.time.com/time/ - (time magazine)
Or similar to research some current
events/developments/environmental changes in
the world
Identify at least three factors that could result
in environmental shocks and why?
Briefly specify the type of business planning
that would be needed to minimize the effect of
these shocks.
INTERNATIONAL ENTRY STRATEGIES
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For the least environmental turbulences
impacting a business it is important to adopt
the right market entry strategies
The strategies for international entry include
options such as:
Exporting
Contracting
Joint venture
Direct investments.
INTERNATIONAL ENTRY STRATEGIES
• Exporting: Creating a market for a business’s
products in the importing country to provide
additional profits for the business as it expands
internationally.
•
Simplest and least risky means of entry
 Example: US exporting commercial and small jet
air crafts to many countries of the world.
 Exporting represents the lowest level of
international commitment and risk as the
business can pull out of the market relatively
easily.
INTERNATIONAL ENTRY STRATEGIES
• Contracting: contractual agreements enable a
business to work with local partners in a foreign
market.
•
It is a higher level of commitment as it involves
contractual agreements, manufacturing, licensing,
franchising etc.
• Ex: Nike entering into a manufacturing contract
with local Chinese manufacturing firms.
INTERNATIONAL ENTRY STRATEGIES
 Joint venture: two or more businesses create a
new business to pursue a strategic goal.
 Partners agree to share ownership, capital, and
revenue
 Ex. Fox broadcasting company's star TV joint
ventures with Chinese company Quinghai Satellite.
 It brings in local partners but involves higher risk
because businesses commit resources.
INTERNATIONAL ENTRY STRATEGIES
 Direct investments: two types:
 Foreign direct investment-the purchase of
assets in a foreign country by a business
 Ex: The purchase of land in Kentucky by Japan
for its Toyota manufacturing plant
 Wholly-owned subsidiary-an independent
company owned by a parent company
 Ex: Parle products of India owned by Coca
Cola
IMH 11.02 Activity
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Followed by a discussion with a partner, make a
foldable listing advantages & disadvantages of
each of the foreign market entry strategies.
Which strategy do you believe would be the best
for the following products…why…explain
Anderson windows
Lays Potato chips
Schwinn bikes
Press Pass Trading cards