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Entry mode decision – Internationalisation – Global Marketing

As marketers, we talk about making decisions about an organization’s entry mode. However, before we start, let us list the learning goals for this article. Firstly, the goal is to understand what an entry mode decision is and how it’s connected to the rest of the internationalization process.

Secondly, why this decision is important and subsequently how we can go about making an informed choice by looking at some of the factors that influence our decision. We will also provide an overview of the different entry modes available for us to choose between. So let us begin so how is the entry mode decision connected to the rest of the internationalization process when an organization goes from marketing their products and services only on the home market to also target one or several foreign markets in different countries or regions? We talk about an organization’s internationalization process.

The internationalization process starts with a choice of which foreign markets to target. We call this the market selection process. Ultimately, we will define our marketing mix the four of the 7ps for the foreign market. The marketing mix we use on the foreign markets may vary to the one we use on the home market. We would address issues regarding standardization, and/or adaptation of the marketing mix.

However, before deciding on the marketing mix, we need to address how to organize our entry to the foreign market. We discuss, which entry mode to use and many factors will influence our decision. Choice of entry mode is what we will address in this article. So why is choice of entry mode important and how can we go about making the right choice? Let us use an example. This French business, located just outside of Paris, produces French cakes and desserts in these modern production facilities, well-educated confectioner’s, develop recipes and create delicious cakes and desserts ready to be sold and distributed to cake, loving customers.

The cakes and desserts are frozen immediately after production and are then distributed to a variety of catering companies, restaurants and cafes, around France. So what might impact French cakes choice of entry mode to a foreign market? French cakes internal situation will have an impact. Some external factors about the particular country, region and market of choice will influence that decision.

Some conditions related to possible outsourcing of activities are dressed in transaction, specific factors and, finally, French cake preferences for the different characteristics of the various entry modes will also affect their choice. As we will address these four sets of factors for French cakes, we will use this visual to indicate in which direction the different factors appointing us. Some factors might indicate and move towards internalization, in other words, that using a hierarchical mode is appropriate.

Other factors might indicate that a move towards externalization using an export mode is more suitable and some may indicate a more moderate approach and thereby point in the direction of an intermediate mode. So let us apply this visual to our example with French cakes. As we address the four sets of factors. French cakes have set their eyes on the UK and their initial idea is to enter the country by setting up a sales and production subsidiary in the UK.

The characteristics of hierarchical modes are high, set up costs, a production site and sales force carry a large investment high-risk, as there is no guarantee that the initial large investment will pay off and low level of flexibility, as the large investment will make it difficult to quickly Pull the plug on the UK adventure should business not prove to be as successful as hoped, a high level of control, as French cakes would hold on to complete ownership of all value chain activities being in the position to make all decisions about target groups, distribution, blogs And so forth, let us address the first set of factors: the internal factors.

Let us use this visual as we evaluate French cakes, internal factors, and let us see if this will indicate a move towards internalization, as French cakes are considering. French cakes is a small company, their resource availability is low and therefore a large investment would be risky. They have no international experience, making use of an external partners, expertise might prove advantageous. The cakes and desserts are not technically complex and, although their cakes and desserts are good, French cakes doesn’t carry a large product.

Differentiation advantage in terms of, for example, brand image. An evaluation of French cakes. Internal factors has revealed an indication towards externalization and not towards internalization. As French cakes initially suggested, French cakes also has another suggestion meet mr. Thompson. Mr. Thompson is a uk-based agent. He would be happy to represent French cakes and sell their products to appropriate intermediaries around the UK.

Using mr. Thompson would be using a direct export mode. The characteristics of export modes are low costs, as French cakes would not need to setup any facilities, start production or hire staff low risk, as the investment is low. French cakes will not be taken a great risk with this setup, a high level of flexibility. As the ties to the UK market will be limited, it would be fairly easy to pull the plug on the UK adventure.

Should business not prove to be as successful as hoped, but also a low level of control? French cakes will have little control of how mr. Thompson markets and sells their cakes and desserts. Will he choose appropriate sales blogs? Might he favour possible competitors due to a more advantageous Commission rate, and will he miss opportunities that French cakes would have been able to take advantage of if they had had their own sales staff in the UK? Let us address the second set of factors: the external factors.

These are factors that address the foreign market of interest, in our case the UK market for cakes and desserts. Let us use the same visual as before, as we evaluate the UK market for French cakes and see if they indicate a move towards French cakes. Second suggestion of using an agent, although the UK is geographically close to France, research will tell us that the socio-cultural distance is considerable.

This would indicate that having a partner with local knowledge could prove to bridge this gap. French cakes have researched the UK market and concluded that the market is of a decent size and that it is growing at a moderate pace. Currently there are no trade barriers standing in the way of exporting boots to the UK. French cakes have discovered that the competition is intense. This would add to the level of risk should they wish to use a hierarchical mode.

Therefore, this indicates a move towards externalization. Research has also shown that there are large number of relevant intermedia is available. Mr. Thompson is just one of many options in this field. Although the market has experienced growth, brexit is believed to call some general instability and uncertainty in the market, so an evaluation of the external factors has also revealed an indication towards externalization.

This supports French cakes. Second, suggestion of using an agent French cakes are still considering both options: 1a sales and production, subsidiary and and agent. The decision isn’t made until a thorough investigation of all four sets of factors have been carried out. Some factors might prove to be a showstopper, making other factors less important when making the final decision. So let us move on to the third set of factors.

The transaction specific factors these address to what extent outsourcing ie using an independent partner to carry out certain functions, is advantageous and safe. Let us use the same visual as before as we evaluate and see if they indicate and move towards French cakes, first or second suggestion. The know-how and product benefits connected with the cakes and desserts are not considered difficult to transfer and explain to an independent partner French cakes consider it unlikely that an independent partner will show opportunistic behavior marketing and selling their cakes and dessert will not reveal secret recipes.

So an evaluation of the transaction specific factors has also revealed an indication towards externalization. Let us move on to the fourth and final set of factors: the desired mode characteristics. We will evaluate French cakes wishes in terms of the main characteristics of the different types of entry modes – French, cakes of express that they can’t afford to be too risky. They have no desire to be in complete control of the operation.

They see the UK adventure more as a first and trial-and-error step in their internationalization process. Therefore, they are also very keen on a high level of so that they are able to pull the plug on their UK adventure. Should business not prove to be as successful as hoped? An evaluation of these and the other three sets of factors indicate a move towards externalization, which support French cakes second option of using a UK agent, a direct export mode.

Now we have evaluated four sets of factors that will influence French cakes decision of entry mode. We have addressed the internal factors, the external factors regarding the UK market, the factors evaluating outsourcing suitability and which mode characteristics, French, cakes desire, conducting a systematic evaluation of all four sets of factors has enabled us to recommend a suitable entry mode for French cakes.

We have now established what an int remote decision is and why we need to know about it. We have also gained knowledge of how to evaluate four sets of factors which will help us decide on a suitable entry mode and we have established the connection to the rest of the internationalisation process. So, let’s move on organizations might choose one or a combination of different intermode during their internationalization process to one or several foreign markets.

The different entry modes will not be discussed in detail in this article, but let us just provide an overview. Export modes include direct export, cooperative export and indirect export. Direct export is the mode we recommended for French cakes in the example used in this article. Intermediate entry modes include joint venture strategic alliance, franchising licensing, contract manufacturing and management contracting and finally, with the highest level of internalization, the hierarchical nodes, transnational organization, region, centers, sales and production, subsidiaries, resident sales representative or subsidiary, and domestic based sales, representative sales and production subsidiary is The mode initially considered by French cakes in our example.

In summary, we have now obtained an understanding of the what why and how event remote decision, and finally, we have provided an overview of the different types of entry modes. Do you want to learn more about entry mode decision-making, market entry strategies and each of the different entry modes, the internationalization process and global marketing? In general, I recommend that you read global marketing 7th edition by 7th Rawlinson.

My name is Tina Wade. Thank you for reading


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Online Marketing

The Global Marketing Mix – Internationalisation – Global Marketing

As marketers, we talk about making decisions about an organization’s global marketing mix, in other words, to what degree the marketing mix should be standardized or adapted. However, before we start, let us list the learning goals for this article. Firstly, the goal is to understand the connection between choice of the global marketing mix and the rest of the internationalization process.

Secondly, we will gain an understanding of what it means to standardize or adapt an organization’s marketing mix and why an organization might be motivated to strive for a high degree of standardization. Thirdly, we will learn how to evaluate different factors that can help an organization decide. The most suitable degree of standardization or adaptation of the different elements of the marketing mix.

So let us begin so. How is the choice of the global marketing mix connected to the rest of the internationalization process when an organization goes for marketing their products and services? Only on the home market to also target one or several foreign markets, we talk about an organization’s internationalization process. The internationalization process starts with a choice of which foreign markets target.

We call this the market selection process. Secondly, we would decide on how to organize our entry to the foreign market. We would evaluate different factors and subsequently we will decide on which intra mode to use and ultimately, we would define our marketing mix the four or the 7ps for the foreign markets. The marketing mix we use on the foreign markets may vary to the one we use on the home market and we would address different factors that influence our choice regarding standardization and adaptation of the marketing mix.

Choice of the global marketing mix is what we’ll address in this article. So when deciding on the global marketing mix, what does standardization and adaptation actually mean and what might motivate an organization to strive for a move in either direction? Let us use an example. This French business produces French cakes and desserts in these modern production facilities, well-educated confectioner’s, develop recipes and create delicious cakes and desserts ready to be sold and distributed to cake, loving customers, the products, the cakes and desserts are typically French in style and tastes.

They are frozen immediately after production and then sold and distributed to organizational customers, a variety of catering companies, restaurants and cafes. Around France. They have developed a price structure which includes a specified discount system with lower prices at higher volume orders they attract new and retain existing customers through a range of promotional activities. Some of these are key account management.

They attend trade shows and they supply their customers with in-store point-of-sale materials, where relevant. If French cakes were to copy this exact setup off the four PS in France when entering a foreign market, for example the UK, we would call this a complete standardization of the marketing mix. If to the other extreme, they were to enter the UK with a different marketing mix, a different product sold through different distribution, blogs at different prices and supported by a different set of promotional activities.

Then this would constitute a complete adaptation of the marketing mix. However, it is unlikely that companies will end up at either of these two extremes. It is more likely that an adaptation of some of the elements in the marketing mix will take place and that others will remain the same. Therefore, marketers will most often talk about the degree of or different elements of adaptation or standardization of the marketing mix.

So why might French cakes be motivated to achieve a high degree of standardization? Entering new markets is a costly affair, both with regards to actual monetary costs and human resources involved, but it is also time consuming, and this will increase the company’s time to market and delay their internationalization process. Therefore, most organizations are naturally motivated towards achieving some degree of standardization.

Simply in order to minimize these types of costs. We have now established an understanding of the connection between the choice of global marketing mix and the rest of the internationalization process, and we understand what it means to standardize or adapt an organization’s marketing mix for foreign markets, and subsequently we have talked about why an organization Might be motivated to strive for some degree of standardization, so let us move on so what might impact French cake’s choice of a suitable degree of standardization or adaptation of the marketing mix when entering the UK market? Let us look at some of the factors that would speak for a move toward standardization and then as some factors which might indicate that some level of adaptation would be suitable.

Let us look at some other factors which would indicate the standardization of all or parts of the marketing mix could be suitable for French cakes when entering the British market. First of all, we will look at the level of globalization of the market that French cakes operates. On research has shown that the British consumers have different needs and values, and so therefore, this does not call for a high level of standardization.

For example, we would recommend that the product, the cakes and desserts be adapted slightly to suit the British consumers tastes. Some of the larger change of restaurants have a global presence and use centralized purchasing processes. This would indicate that French cakes would benefit by having a centralized approach to part of their sales organization in order to respond to these types of customers.

Secondly, we will look at the globalization of the industry, which French cakes operates in if an organization has high research and development costs. This is often the case when operating in technology heavy industries. They are usually very motivated to recuperate these costs as quickly as possible. They would therefore be keen to standardize their marketing mix and thereby be able to enter many countries quickly and achieve high volume sales.

In our example, French cakes does not have high R & D costs, so this will not be the most significant factor for them to consider when evaluating standardization potential. Thirdly, we would look at the globalization of the competition in addition to some local competitors. French cakes also face some larger competitors who supply the larger restaurant change on the British market. These competitors have a global presence and a relatively high level of standardization.

This indicates that French cake should also consider a standardized approach in some aspects of their marketing mix. An internal factor which could indicate standardization potential, French cakes, competitive advantage of the French market is their ability to quickly respond to changes in market needs due to their close cooperation with the distribution network. This also has potential on the British market, but will take time to establish in order to do this successfully.

We could, for example, advise French cakes to standardize certain elements of their sales and data collection processes. Moving on to some factors which would favor an adaptation of the marketing mix, firstly, some local market conditions: research has shown that there are significant socio cultural, economic and political differences, and that consumer needs differ from France. This would therefore favor an adaptation of the marketing mix.

Secondly, the presence of some local competitors would also favor an adaptation in order to compete. French cakes have identified both local and global competitors on the market. Therefore, some adaptation is recommended for parts of this target group. Thirdly, if legal conditions were very different to the home market, this would speak in favor of adaptation. Currently, many laws are the same due to both countries.

Membership of the you, however, due to brexit this might change in the future. If French cakes product was a service or carried large elements of service, this would indicate a move towards adaptation due to local staff being involved in producing the service like it would have been the case with, for example, a hair salon. However, French cakes offering is focused on a physical product, namely the cakes and desserts.

In summary, we have suggested that some elements of the marketing mix, namely place and promotion, would be suitable for a degree of standardization in order to compete with international competitors and adjust to the large restaurant chains purchasing processes. We have suggested that French cake standardized their sales processes. An option would be to standardize their key account management function and to standardize some data collection processes.

This way they will have the possibility of gaining close relationships with the distributors, enabling them to respond faster to market trends. We also uncovered a great need for adaptation, since French cakes also choose to distribute through smaller and independent restaurants and catering businesses, we suggest that they adapt their approach to these in order to compete with local competition. We also suggest an adaptation of the actual products.

The cakes and desserts due to social, cultural and economic differences, both the products, price levels and promotional activities should be adapted to suit the local market needs in cooperation with French cakes. We would now move on to plan these standardizations and adaptations in much more detail, thereby providing them with a ready to launch marketing plan. However, such level of detail will not be carried out in this short introduction article.

In summary, we have now obtained an understanding of what it means to standardize or adapt an organization’s, global marketing mix and the connection to the rest of the internationalization process. And finally, we have gained knowledge of how an evaluation can be carried out. Would you like to learn more about standardization or adaptation of the global marketing mix, the internationalization process and global marketing in general, then I recommend that you read global marketing 7th edition by Sven Hollander.

If you would like to learn more about defining the marketing mix in general, then I recommend that you read my for introduction articles addressing each of the four piece of the marketing six. You will find these articles on my youtube blog, my name is Tina Wade. Thank you for reading


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