Manufacturing and service companies may enter international markets for several reasons. Some go abroad because markets at home are stagnant or foreign markets are growing faster. Others may simply follow their domestic customers who are going international----a common reason among service companies such as advertising, computer services, engineering, and insurance. Still other firms in oligopolistic industries dominated by a few sellers go abroad to match the international market entry of a domestic rival or to counter foreign firms penetrating domestic markets. Or companies may go abroad in search of greater sales volume in order to reduce the unit costs of manufacturing overheads and thereby strengthen their competitiveness at well as in foreign countries. But to the typical company, the fundamental or strategic reason for entering foreign markets becomes apparent only some time after its first tentative ventures in that direction.
The conscious impulse behind a company’s initial entry into foreign markets is almost always the prospect of profit on immediate sales. In response to an unsolicited or accidental order from a foreign source, the company ships its product abroad because the profit looks good and the shipment does not cut into domestic sales. Or the company licenses a foreign firm simply to get incremental income on technology that has already been expensed against domestic sales. Only later, after some success in casual export or licensing, do some companies start to think about what they need to do to create positions in foreign markets that can be sustained over the long run. Companies become committed to international markets only when they no longer believe that they can attain their strategic objectives by remaining at home. Many companies in the United States and elsewhere have already reached this point, and the continuing expansion of a global economy will almost certainly bring many more companies to that point in the future. For the truth is that today all business firms----whether small or larger domestic or international-----must strive for profits and growth in a world economy characterized by enormous flows of products, technology, capital, and enterprise among countries. In this economy no market is forever safe from foreign competition. And so, ever when companies stay at home, sooner or later they learn from hard experience that there are no longer any domestic markets but only world markets. (Just talk with the American manufactures of automobiles, electronic products, cameras, sporting goods, motorcycles, shoes, and the many others that have badly hurt by imports!) Nor can companies any longer count on having domestic markets protected by tariffs and other import barriers, because foreign competitors can leap such barriers by producing inside the home country.
The Elements of Entry Strategy (进入国际市场策略要素)
Entry strategy for international markets is a comprehensive plan. It sets forth the objectives, goals, resources, and policies that will guide a company’s international business operations over a future period long enough to achieve sustainable growth in world markets. For most companies the entry-strategy time horizon is from three to five years, because it will take that long to achieve enduring market performance. For some companies the period may be shorter or longer, but whatever its length, the time horizon should be distant enough to compel managers to raise and answer questions about the long-run direction and scope of a company’s international business.
Although it is common to speak of a company’s entry strategy as if it were a single plan, it is actually a composite of several individual product/market plans. Managers need to plan the entry strategy for each product in each foreign market, because it is foolhardy to assume that the response to a particular entry strategy would be the same across different products and different country markets. Once the individual (constituent) product/market plans are completed, they should be brought together and reconciled to form the corporate international entry strategy.
The constituent product/market entry strategies require decisions on (1) the choice of target product/market, (2) the objectives and goals in the target market, (3) the choice of an entry mode to penetrate the target country, (4) the marketing plan to penetrate the target market, and (5) the control system to monitor performance in the target market.
Figure 5-1 depicts these elements of an international market entry strategy.
Although the elements are shown as a logical sequence of activities and decisions in Figure 5-1, the design of a market entry strategy is actually iterative with many feedback loops. Evalution of alternative entry modes, for instance, may cause a company to revise target market objectives or goals or even to initiate the search for a new target market. Again, the formulation of the marketing plan may call into question an earlier preference for a particular entry mode. After operations begin, variances in market performance may lead to revisions in any or all of the first four elements, as indicated by the dashed lines emerging from the Control System box. In short, planning for international market entry is a continuing, open-ended process.
To managers in small and middle-size companies, planning entry strategies may appear to be something that only big companies can afford to do. These managers identify such planning with elaborate research techniques that are applied by specialists to a massive body of quantitative data. But this is a misconception of the entry planning process. What is truly important is the idea of planning entry strategies. Once management accepts this ides, it will find ways to plan international market entry, however limited company resources may be. To say that a company cannot afford to plan an entry strategy is to say that it cannot afford to think systematically about its future in world markets.
Classification of Entry Modes (进入模式的分类)
An international market entry mode is an institutional arrangement that makes possible the entry of a company’s products, technology, human skills, management, or other resources into a foreign country. For a domestic company already located in the country that contains its market, the question of entry mode as distinguished from market entry (the marketing plan) simply does not arise. In contrast, the international company initially stands outside both the foreign country and the market it contains, and it must find a way to enter the country as well as a way to enter the market. Hence the international company must decide on both an entry mode and a marketing plan for each foreign target country.
From an economist’s perspective, a company can arrange entry into a foreign country in only two ways. First, it can export its products to the target country from a production base outside that country. Second, it can transfer its resources in technology, capital, human skills, and enterprise to the foreign country, where they may be sold directly to users or combined with local resources (especially labor) to manufacture products for sale in local markets. Companies whose end products are services cannot produce them at home for sale abroad and must, therefore, use this second way to enter a foreign country.
Figure 5-1 The Elements of an International Market Entry Strategy
From a management/operations perspective, these two form of entry break down into several distinctive entry modes, which offer different benefits and costs to the international company. The classification of entry mode used in this text is as follows:
Export Entry Modes:
Contractual Entry Modes:
Investment Entry Modes:
Sole venture: new establishment;
Sole venture: acquisition;
Joint venture: new establishment/acquisition;
Export entry modes differ from the other two primary entry modes (contractual and investment) in that a company’s final or intermediate product is manufactured outside the target country and subsequently transferred to it. Thus exporting is confined to physical products. Indirect exporting uses middlemen who are located in the company’s own country and who actually do the exporting. In contrast, direct exporting does not use home country middlemen, although it may use target country middlemen. The latter leads to a distinction between direct agent/distributor exporting, which depends on target country middlemen to marker the exporter’s product, and direct branch/subsidiary exporting, which depends on the company’s own operating units in the target country. The latter form of exporting therefore requires equity investment in marketing institutions located in the target country.
Contractual entry modes are long-term nonequity associations between an international company and an entity in a foreign target country that involve the transfer of technology or human shills from the former to the latter. Contractual entry modes are distinguished from export modes because they are primarily vehicles for the transfer of knowledge and skills, although they may also create export opportunities. They are distinguished from investment entry modes because there is no equity investment by the international company. In a licensing arrangement, a company transfers to a foreign entity (usually another company) for a defined period of time the right to use its industrial property (patents, know-how, or trademarks) in return for a royalty or other compensation. Although similar, franchising differs from licensing in motivation, services, and duration. In addition to granting the right to use the company name, trademarks, and technology, the franchisor also assists the franchisee in organization, marketing, and general management under an arrangement intended to be permanent. Other contractual entry modes involve the transfer of services directly to foreign entities in return for monetary compensation (technical agreements, service contracts, management contracts, and construction/turnkey contracts) or in return for products manufactured with those services (contract manufacture and co-production agreements). International companies frequently combine contractual entry modes with export or investment modes.
Investment entry modes involve ownership by an international company of manufacturing pants or other production units in the target country. In terms of the production stage, these subsidiaries may range all the way from simple assembly plants that depend entirely on imports of intermediate products from the parent company to plants that undertake the full manufacture of a product. In terms of ownership and management control (which is the distinctive feature of this entry mode), foreign production affiliates may be classified as sole ventures with full ownership and control by the parent company or as joint ventures with ownership and control shared between the parent company and one or more local partners, who usually represent a local company start a sole venture from scratch (new establishment) or by acquiring a local company.