Market Entry Strategies

MARKET ENTRY STRATEGIES

M. MURAT NALCI – MERT BÜYÜKAKINCI – TUĞÇE AYDÖNER – HÜSEYİN SAĞOĞLU

A market entry strategy is the planned method of delivering ”goods” or ”services”  to a ”target market” and distributing them there.

When an organization decides to enter an overseasmarket, there are many enter options open to it.

These options vary with cost, risk and the degree of control which can be exercised over them.

MARKET ENTRY STRATEGIES1. EXPORTING

2. LICENSING

3. FRANCHISING

4. JOINT VENTURING

5. CONTRACT MANUFACTURING

6. MERGERS & ACQUASITIONS

7. FULLY OWNED MANUFACTURING FACILITIES

8. COUNTER TRADE

9. TURNKEY CONTRACTS

10. THIRD COUNTRY LOCATION

THIRD COUNTRY LOCATION

EXPORTING Exporting is the most traditional and well

established form of operating in foreign markets.

Exporting can be defined as the marketing of goods produced in one country into another.

ADVANTAGES OF EXPORTING

DISADVANTAGES OF EXPORTING

• Home based manufacturing

• Opportunity to learn foreign markets after the enter

• Reducing the potential risks of operating overseas.

• Lack of control

• Initiatives of overseas agents

EXAMPLE OF EXPORTING FROM DOMESTIC MARKET

EXAMPLE OF EXPORTING FROM FOREIGN MARKETS

Export per 1 kg. in Turkey: $ 1.6

Export per 1 kg. in Japan: $ 3.5

Atak (Turkish Origin helicopter) Export per 1 kilogram: $ 5000

ATAK – Turkish Aerospace Industries

FRANCHISING

• Players : Franchisor & Franchisee

• Franchising is the practice of using another firm's successful business model.

• The franchisor's success depends on the success of the franchisees

ADVANTAGES OF FRANCHISING

• Freedom of Employment

• Proven products & Services

• Proven Trade Mark

• Reduced Risk of Failure

LICENSING

• It is quite similar to the "franchise" operation.

• Licensing involves little expense and involvement

• Coca Cola is an excellent example of licensing

• Good way to start in foreign operations and open the door to low risk manufacturing relationships

• Linkage of parent and receiving partner interests means both get most out of marketing effort

• Capital not tied up in foreign operation andOptions to buy into partner exist or provision to take royalties in stock

ADVANTAGES OF LICENCING

DISADVANTAGES OFLICENCING

• Limited form of participation - to length of agreement, specific product, process or trademark.

• Potential returns from marketing andmanufacturing may be lost.

• Partner develops know-how and so license is short.

JOINT VENTURES

• Collaboration for more than a transitory period

• A foreign investor showing an interest in local company

• A local firm acquiring an interest in an existing foreign firm

• By both the foreign and local entrepreneurs jointly forming a new enterprise

• Two or more domestic corporations in new business area

Joint ventures can be defined as "an enterprise in which two or more investors share ownership and control over property rights and operation."

ADVANTAGES OF JOINT VENTURES

DISADVANTAGES OFJOINT VENTURES

• Sharing the burden of investment and risk

• Cost reduction

• Convenience of finding the resource

• Technology and competitive advantage

• Joint financial strength

• Entry in some countries.

• Partners do not have full control of management.

• Partners may have different views on expected benefits

EXAMPLES OF JOINT VENTURES

• British Aerospace & Taiwan Aerosapace

Countertrade is a form of international trade in which certain export and import transactions are directly linked with each other and in which import of goods are paid for by export of goods, instead of Money payments.

• Very common between the communist countries

• Foreign exchange problems in East-West trade

• Selling obsolete products

COUNTER TRADE

FORMS OF COUNTER TRADE

• Barter

• Buy Back

• Compensation Deal

• Counter Purchase

ADVANTAGES OF COUNTER TRADE

DISADVANTAGES OF COUNTER TRADE

• An alternative way to finance export when other ways are not avalable.

• Marketing is limited

• Difficult to set prices and service quality

• Inconsistency of delivery and specification

• Difficulty of revert to currency trading

TURNKEY CONTRACTS

Turnkey contracts are common in international business in the supply, erection & commissioning of plants

• An agreement by the seller to supply a buyer with a facility fully equipped

• It can be used in fast-food franchising

• Many turnkey contracts involve government/public sector as buyer.

CONTRACT MANUFACTURING

Production of goods by one firm under the name of another firm

One of the most common practices in international business

ADVANTAGES OF CONTRACT

MANUFACTURING

• No risk of investing in foreign country• Cost saving• Focus

DISADVANTAGES OF CONTRACT MANUFACTURING

• Lack of Control

• Outsourcing risks

• Quality concerns

THIRD COUNTRY LOCATION

When there is no transaction between two countries, firm which wants to enter into the market of other nation will have to operate from a third country base

İt is not that common and beneficial

Friendly trade relations of the third party OR sometimes commercial reasons

MERGERS AND ACQUISITIONS

Also known as an expansion strategy Powerful driver of globalization

A merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated

When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition

ADVANTAGES OF M&A

DISADVANTAGES OF M&A

•Increasing the market power.

•Acquisition of Technology.

•Optimum utilization of Resources.

•Minimization of Risks.

•Tax Benefits

• Legal expenses

• Cost of takeover

• Bad for consumers

Lecturer: Prof. Dr. Aslı Küçükaslan Ekmekçi

M. Murat Nalcı

Mert Büyükakıncı

Tuğçe Aydöner

Hüseyin Sağoğlu