1 Chapter 9 Global Market Entry Strategies: Licensing, Investment, and Strategic Alliances 2 Introduction The various entry mode options form a continuum; as shown on this slide, the level of involvement, risk, and financial reward increases as a company moves from market entry strategies such as licensing to joint ventures and ultimately, various forms of investment. When a global company seeks to enter a developing country market, there is an additional strategy issue to address: Whether to replicate the strategy that served the company well in developed markets without significant adaptation. To the extent that the objective of entering the market is to achieve penetration, executives at global companies are well advised to consider embracing a mass-market mind-set. This may well mandate an adaptation strategy. 3 Which strategy should be used? 4 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 5 Advantages to Licensing 6 Disadvantages to Licensing 7 Special Licensing Arrangements 8 Franchising Questions 9 Investment Partial or full ownership of operations outside of home country Foreign Direct Investment Forms Joint ventures Minority or majority equity stakes Outright acquisition 10 Joint Ventures Entry strategy for a single target country in which the partners share ownership of a newly-created business entity 11 Joint Ventures Advantages Disadvantages 12 Investment via Ownership or Equity Stake 13 Global Strategic Partnerships 14 The Nature of Global Strategic Partnerships 15 The Nature of Global Strategic Partnerships 16 5 Attributes of True Global Strategic Partnerships 17 Success Factors Mission. Successful GSPs create win-win situations, where participants pursue objectives on the basis of mutual need or advantage. Strategy. A company may establish separate GSPs with different partners; strategy must be thought out up front to avoid conflicts. Governance. Discussion and consensus must be the norms. Partners must be viewed as equals. 18 Success Factors Culture. Personal chemistry is important, as is the successful development of a shared set of values. Organization. Innovative structures and designs may be needed to offset the complexity of multi-country management. Management. Potentially divisive issues must be identified in advance and clear, unitary lines of authority established that will result in commitment by all partners. 19 Alliances with Asian Competitors 20 Cooperative Strategies in Japan: Keiretsu 21 Cooperative Strategies in South Korea: Chaebol 22 Market Expansion Strategies |