68
CHAPTER 9
Global Market Entry Strategies
CHAPTER OUTLINE
LVIII. Exporting as an Entry Strategy
A. Indirect Exporting
B. Direct Exporting
LIX. Foreign Production as an Entry Strategy
A. Licensing
CHAPTER OBJECTIVES
At the end of this chapter, students should be able to do the following:
Differentiate among market entry optionsindirect exporting, direct exporting,
licensing, franchising, contract manufacturing, assembly, and full-scale integrated
of establishing joint ventures.
Compare and contrast technology-based, production-based, and distribution-based
strategic alliances.
Explain when entering a market by acquisition is desirable.
QUESTIONS FOR DISCUSSION
1. Why might entry strategies differ for companies entering the United States, those
entering China, and those entering Costa Rica?
Firm, market, and/or market environment characteristics could cause entry strategies to differ
across these markets.
Firm Characteristics. Management knowledge of and experience in each market may affect
Market Characteristics. The size of the market is a substantial factor in comparing these three
markets. Firms tend to employ more involved, longer-term market entry modes in larger
markets because larger size implies greater opportunity and profit. But beware of making
2. How might the entry strategy of a born-global firm (see Chapter 8) differ from that of a
mature multinational company?
An experienced multinational has had the opportunity to ride the learning and experience
curve in foreign markets. Thus, they may be more likely to proceed with more involved,
70
3. Why would licensing sometimes be appropriate—and sometimes inappropriate—for a
strategically important country?
Licensing is typically inappropriate for strategically important countries since the degree of
control available to the licensor in the market is only as strong as the terms of the license
contract. Markets may be strategically important for competitive reasons: A successful
presence may be necessary to gain a strong foothold in the market before a competitor has
entered or to aggressively respond to a competitor with first-mover advantages in that market.
4. Is there such a thing as a “no-fault” joint venture divorce? Or is joint venture
dissolution always the resort of some sort of failure?
Yes, there can be a no-fault joint venture divorce. Government regulations in the past may
have prevented the investor from entering the market via a wholly owned strategy. Should
CASE 9.1: UNHAPPY MARRIAGE
This case is a classic example of what can happen in a relationship when partner expectations
diverge. It also demonstrates that simply signing a joint venture agreement does not necessarily
translate into cooperation.
71
QUESTIONS
1. Why did Anheuser purchase its stake in Grupo Modelo?
Anheuser hoped to acquire Modelos profitable brands, like Corona. Corona was particularly
NAFTA, preempting a Mexican presence by other global beer companies.
2. Why was Grupo Modelo willing to sell the stake?
Facing trade liberalization in a home market they have traditionally dominated, Modelo
3. What went wrong? Why?
Anheuser expected to offer Corona to its U.S. distributors. But after Anheusers contentious
purchase of additional Modelo stock, Modelos Mexican owners were likely angry. They may
4. What lessons about choosing international partners can be learned from this case?
Synergy is needed between partners. Each has to be offering something that the other
wants and needs. The expectations of what each partner hopes to gain from the
CASE 9.2: WHY DID THEY DO IT?
International joint ventures are usually partnerships between an MNC and a smaller local company
in a foreign market. Such ventures present many challenges as seen in Case 9.1 above. However,
strategic alliances between two large, global competitors may be even more challenging. As noted
in the chapter, these alliances usually arise from the necessity of saving money in industries where
scale is important to success. The automobile industry is a good example of such an industry, and
there are many international strategic alliances among automobile companies. However, such
alliances still involve two or more important competitors agreeing to cooperate in some way.
Competitors cooperating? Needless to say, problems do arise.
DISCUSSION QUESTIONS
1. Why do you think Volkswagen entered into this alliance? Why do you think Suzuki
entered into this alliance? What could be motivations beyond the ones that the
companies stated publicly?
The reasons for forming this alliance appear far-reaching and some may argue unfocused or
2. Why do you think Suzuki now wants out? What could be reasons besides the issue of
diesel technology?
Chairman Suzuki publicly states that the breakup is due to the fact that Volkswagen didnt
have any diesel technologies that Suzuki wanted to use. However this is only one of the
reasons the two companies supposedly had for making the alliance in the first place, and
73
3. Could it be true that a German-Japanese culture class could be adding to the acrimony?
Explain you answer.
Thinking back to issues discussed in Chapter 3, students may indeed conclude that a culture
class is occurring:
4. What lessons does this case raise in respect to global alliances?
Industries that require scalesuch as global economies of scale in production and
expensive R&D and distribution investmentsare key candidates for international
strategic alliances.