Global Market Entry Strategies: Licensing, Investment, and Strategic Alliances
Global Market Entry Strategies: Licensing, Investment, and Strategic Alliances
Global Market Entry Strategies: Licensing, Investment, and Strategic Alliances
Chapter 9
Global Marketing
What is the Right
Market Entry Strategy?
• It depends on:
– Vision
– Attitude toward risk
– How much investment capital is available
– How much control is desired
Market Entry Strategies
Licensing
• A contractual agreement whereby one
company (the licensor) makes an asset
available to another company (the licensee)
in exchange for royalties, license fees, or
some other form of compensation
– Patent
– Trade secret
– Brand name
– Product formulations
Advantages of Licensing
• Provides additional profitability with little
initial investment
• Provides method of circumventing tariffs,
quotas, and other export barriers
• Attractive ROI
• Low costs to implement
Disadvantages of Licensing
• Limited participation
• Returns may be lost
• Lack of control
• Licensee may become competitor
• Licensee may exploit company resources
Special Licensing Arrangements
• Contract manufacturing
– Company provides technical specifications to a
subcontractor or local manufacturer
– Allows company to specialize in product design while
contractors accept responsibility for manufacturing facilities
• Franchising
– Contract between a parent company-franchisor and a
franchisee that allows the franchisee to operate a business
developed by the franchisor in return for a fee and
adherence to franchise-wide policies
Investment
• Partial or full ownership of operations
outside of home country
– Foreign Direct Investment
• Forms
– Joint ventures
– Minority or majority equity stakes
– Outright acquisition
Joint Ventures
Network-based X X X
More complex
International Cooperative
Strategies
• Japan
• Korea
• United States
Cooperative Strategies in Japan:
Keiretsu
• Interbusiness alliance or enterprise groups in
which business families join together to fight for
market share
• Often cemented by bank ownership of large
blocks of stock and by cross-ownership of stock
between a company and its buyers and
nonfinancial suppliers
• Keiretsu executives can legally sit on each other’s
boards, share information, and coordinate prices
Cooperative Strategies in Korea:
Chaebol
• Composed of dozens of companies,
centered around a bank or holding
company, and dominated by a founding
family
– Samsung
– LG
– Hyundai
– Daewoo
Cooperative Strategies in US:
Digital Keiretsu
• Alliances between companies in several
industries that are undergoing
transformation and convergence
– Computers
– Communications
– Consumer electronics
– Entertainment
Relationship Enterprise
• Next stage of evolution of the strategic
alliance
– Super-alliance
– Virtual corporation
Table 9-9: Market Expansion
Strategies
MARKET
C Concentration Diversification
O
U Concentration 1. Narrow 2. Country
N Focus Focus
T
R 3. Country 4 . Global
Y Diversification Diversification Diversification