Market entry strategies and
territorial expansion
Internationalization occurs ...
• Internationalization occurs when the firm
expands its R and D, production, selling
and other business activities into
international markets.
Inward/outward
internationalization
• A natural way of internationalizing would be first
to get involved in inward activities (imports) and
thereafter in outward activities (export).
• Relations and knowledge gathered from import
activities could thus be used when the firm
engages in export activities.
Natural way of development...
1. Marketing, sales
2. and services
3. Production
1. Buying
2. at foreign market
import
export
Marketing, sales,
Services at foreign market
Market entry strategies
Once the firm has chosen target market
abroad, the question arises as to the best
way to enter those markets.
Classification of market entry modes:
• Export mode – 100 % externalizing (low
control, low risk, high flexibility)
• Intermediate modes (contractual modes)
(shared control and risk, split ownership)
• Hierarchical modes (investment modes) –
100 % internalizing (high control, high risk,
low flexibility)
Kraft Foods Inc´s (2011)
• NEW DELHI/MUMBAI: As the world’s second
biggest processed foods company, Illinois-based
Kraft Foods Inc’s $18.9 billion takeover of British
confectionery maker Cadbury is finalised after a
protracted boardroom battle, Kraft Foods’ finally
gets a clean sweep of the only big emerging
market it did not yet have a presence in, India.
•
Cadbury India came under the Kraft Foods fold after the US-based firm
acquired British candy maker, Cadbury Plc for $19.6 billion in January
this year.
Asked if Cadbury India will be selling more products from Kraft
portfolio, Kripalu said: "As of now we are still focusing on our core
confectionery business."
He, however, said integration process is still going on in terms of
synergising distribution channels of Cadbury and Kraft in India .
Commenting on the overall plans of Cadbury India, he said: "Capacity
is a challenge for us, as we look to drive up volumes. We need to
expand it and we will be doing it significantly."
He said the expansions will take place at the company's existing six
facilities in India but declined to share details such as investments
and envisaged additional output.
Cadbury sells chocolate brands, including Cadbury Dairy Milk, 5 Star
and Perk, along with snacks Cadbury Bytes and health drink Bournvita
among others in India.
Starting to manufacture
TANG in INDIA
•
NEW DELHI: Cadbury India on Thursday said it will start local
manufacturing of parent Kraft Foods' orange drink Tang , while it will also
embark on a capacity expansion for its confectionery products.
"We will start local manufacturing of Tang in India. We are rejuvenating it
and we will start producing it within this fiscal," Cadbury India Managing
Director Anand Kripalu told reporters in Delhi on the sidelines of a CII
event.
He said Tang, which has been imported from Thailand to serve the Indian
market so far, will be produced at Kraft's Hyderabad plant.
"It is a legacy plant of Kraft in Hyderabad, which has not been utilised. We
will start manufacturing there," he said.
•
Asked if Cadbury India will be selling more products from Kraft
portfolio, Kripalu said: "As of now we are still focusing on our core
confectionery business."
He, however, said integration process is still going on in terms of
synergising distribution channels of Cadbury and Kraft in India .
Commenting on the overall plans of Cadbury India, he said: "Capacity
is a challenge for us, as we look to drive up volumes. We need to
expand it and we will be doing it significantly."
He said the expansions will take place at the company's existing six
facilities in India but declined to share details such as investments
and envisaged additional output.
Cadbury sells chocolate brands, including Cadbury Dairy Milk, 5 Star
and Perk, along with snacks Cadbury Bytes and health drink Bournvita
among others in India.
Group assignment
• What kind of specific marketing information
the international company needs to know to
design its marketing program for Indian market?
Define it according to 4 marketing tools –
product (demand and supply), price, place,
promotion.
• What to consider at the selection of a
suitable intermediary – business partner at
the foreign market?
Group assignment
• Identify opportunities and threats for INDIA
from being involved in the process of
internationalization and globalization.
• Identify the factors of attractiveness of INDIA
for foreing direct investors and foreign
businesses operating.
• What kind of specific marketing information
the international company needs to know to
design its marketing program for Indian market?
Define it according to 4 marketing tools –
product, price, place, promotion
Factors influencing the choice
of entry mode
• Internal factors:
- firm size, international experience, product/services
• External factors:
– socio-cultural distance between home country and
host country
– Country risk/demand uncertainty
– Market size and growth
– Direct and indirect trade barriers
– Intensity of competition, small number of relevant
intermediaries available
Indirect export modes
• Indirect export occurs when the exporting
manufacturer uses independent
organizations located in the producer´s
country
Direct export modes
• direct export occurs when a manufacturer
or exporter sells directly to an importer or
buyer located in a foreign market area.
Choice of intermediary
The selection of a suitable
intermediary can be a problematic
procedure.
What to consider?