Internationally Educated Professionals (IEPs) presents PROJECT PANDA “New Market Entry Model” for.

Internationally Educated Professionals (IEPs)presents

PROJECT PANDA “New

Market Entry Model”

for

An entrepreneurial e-retailer with annual revenue of USD$15 million.

Vertically integrated direct response agency operating in Canada, USA, UK, France, Argentina & Australia with health, beauty & novelty products.

Lacks an effective and justifiable ‘Market Entry Decision Model’

This model was developed by Swedish researchers at the University of Uppsala (Johanson and Wiedersheim-Paul, 1975; Johanson and Vahlne, 1977) that stated ‘additional market commitments are made in small incremental steps: choosing additional geographical markets with small psychic distances, combined with choosing entry modes with few additional risks’.

The Uppsala Internationalization Model

Hollensen S, Global Marketing – A Decision Oriented Approach, 4th edition, Prentice Hall, 2007, pg 61)

Williamson (1975), stated that if transaction costs through externalization (e.g. through an importer or agent) are higher than the control cost through an internal hierarchical system, then the firm should seek internalization of activities, i.e. implementing the global marketing strategy in wholly-owned subsidiaries.

(Hollensen, Global Marketing, Chapter 3, pg68)

The Transaction Cost Analysis Model

According to Hollensen (2007), a basic assumption in the network model is that the individual firm is dependent on resources controlled by other firms, and they get access to these external resources though their network positions. Also since the development of positions takes time and depends on resource accumulations, a firm must establish and develop positions in relation to counterparts in foreign markets.

The Network Model

(Hollensen, Global Marketing, Chapter 3, pg71)

Population Internet AvailabilityE-commerceBanking Industry/RegulationsSocial & Cultural FactorsPolitical, Environmental & Ethical

Classification BMI(kg/m2)

Principal cut-off points

Additional cut-off points

Underweight <18.50 <18.50

Severe thinness <16.00 <16.00

Moderate thinness 16.00 - 16.99 16.00 - 16.99

Mild thinness 17.00 - 18.49 17.00 - 18.49

Normal range 18.50 - 24.99 18.50 - 22.99

23.00 - 24.99

Overweight ≥25.00 ≥25.00

Pre-obese 25.00 - 29.99 25.00 - 27.49

27.50 - 29.99

Obese ≥30.00 ≥30.00

Obese class I 30.00 - 34.99 30.00 - 32.49

32.50 - 34.99

Obese class II 35.00 - 39.99 35.00 - 37.49

37.50 - 39.99

Obese class III ≥40.00 ≥40.00

World Overweight based on BMI - Females

The main factors:

Number of Internet users Internet Penetration Internet speed evaluation Internet access cost Internet Usage goals

Data source for Internet and population numbers: Internet World Stats http://www.internetworldstats.com/internetworldstats.com/

Some major challenges confronting e-business in accordance to the Internet use:

Consumer securityPrivacy concernsFraudSystem overloadPoor web design and service

E-commerce is a new ‘Virtual’ market place New lifestyle with e-commerce

Banking – ‘BASEL III’ Stability Liquidity Transparency

Mode of Payment Accessible 24/7 Worldwide Online Payment Features

Gross National Product (GNP)

Gross Domestic Product (GDP)

Per Capita Income/Gross National Income (GNI)

(Hollensen, Global Marketing, Chapter 7)

(Hollensen, Global Marketing, Chapter 7)

Stable political environment is a fundamental basis for any business’s

success, and political status changes overtime.

Use Aggregate Governance Indicators as the benchmark.

Six Criteria: Voice & accountability; Political Stability

no Violence; Government Effectiveness; Regulatory quality; Rule of Law; Control of Corruption

The overall average rank 70-100: 2.5% The overall average rank 50-70: 2% The overall average rank 20-50: 1% The overall average rank 10-20: 0.5% Overall average rank 0-10: 0

The first set of Digital Signature Guidelines passed in 1995.

Enacted the first digital signature legislation in the world May 1995.

UNCITRAL developed a Model Law on E- Commerce in 1996 to remove legal obstacles of using electronic and digital signatures.

E-commerce regulations include: laws, policies, industry self-regulation, technical standards and law enforcement;

Legal environment is important to determine the breadth and depth of e-business adoption, especially in developing and newly industrialized countries. (Gibbs et al. 2004)

Criteria: Credibility, Adaptability, Flexibility

Use Digital Economic Ranking 2011 as the Benchmark

Legal Environmental ranking 7-10: 2.5%Legal Environmental ranking 5-7: 2%Legal Environmental ranking 2-5: 1%Legal Environmental ranking 0-2: 0%

Both sets of criteria can then be scored and the resultant coordinates plotted on a two-dimensional matrix.

This will then allow the firm to identify the clusters or sets of countries in which to invest to grow, those in which to have a more selective strategy, and those where the best option may be to harvest, exit or licence-out.

(Hollensen, Global Marketing, Chapter 8, pg252)

Combine the individual score for ‘Core Attributes’ and ‘Competitive Strength’ to get an aggregate score out of 100; which is the ‘Country Value’. (This is computed on a 60:40 ratio with ‘Core Attributes’ being 60 and ‘Competitive Strength’ at 40; which is then plotted on a bar graph to see whether to enter the market or not).

Good Market

Doubtful

Stay Away

Based on the Country Values obtained: 1. 65 & Above – Potentially Good Market for

initiating business

2. Between 35 & 65 – Further research/investigations are required and its recommended to proceed with great caution

3. 35 & Below – Here too, though some of the individual criteria may be appealing, its recommended ‘NOT’ to initiate any business until the criteria has improved significantly.

Good Market

Doubtful

Stay Away

Though no ‘Silver Bullet Solution’ exists for choosing an international market, a combination of existing models & concepts can provide a gateway for an

optimal solution

Recommends strongly in choosing a country that is either G20/the top 25 Purchasing

Power Parity (PPP) ranking/any other globally accepted economic indexes/ranking, in order to

fully benefit from its planned entry and subsequent operation/s.

Apply the model and see the ranking the country receives.

Then take a decision.

Angela Huang, Gigi Mathews, Olga Parker,

Ricardo Ong & Sona AleksanyanADMS 4950 – Project Consulting

With Prof. Peter Constantinou