Page 118 - DMGT547_INTERNATIONAL_MARKETING

Unit 6: Negotiation and Decision Making

undoubtedly benefit from participating in the world's lead market and that its own product Notes
design and marketing would improve and enable it to perform better around the world.4
In most sectors, participation in the "lead market" would be a prerequisite for qualifying
as a global leader, even if profits in that lead market were low. The lead market will vary
by sector: the United States for software, Japan for consumer electronics and
telecommunications, France or Italy for fashion, and so on.
The important point about such an objective for market entry is that it will change the
calculus of the market entry mode decision. If a company is to maximize learning from a
lead market, for example, it will need to participate with its own subsidiary and a cadre of
its own executives. Learning indirectly, via a local distributor or other partner, is obviously
less effective and will contribute less to the company's development as a global player,
even if short-term profitability is superior because of the lower investment required.
2. Competitive Attack or Defense: In some situations, market entry is prompted not by some
attractive characteristics of the country identified in a market assessment exercise, but as
a reaction to a competitor's move. The most common scenario is market entry as a follower
move, when a company enters the market simply because a major competitor has done so.
This is obviously driven by the belief that the competitor would gain a significant advantage
if it were allowed to operate alone in that market, and so it is most common in concentrated
or even duopolistic industries. Another frequent scenario is "offense as defense," in which
a company enters the home market of a competitor-usually in retaliation for an earlier
entry into its own domestic market. In this case, the objective is also to force the competitor
to allocate increased resources to an intensified level of competition. In both cases, a
company will have to adapt its strategies to the particular strategic stakes: rather than
focusing on market development, the firm will set market share objectives and be prepared
to accept lower levels of profitability and higher levels of marketing expenditure. This
requires different performance standards and budgets from the usual scenario of low-risk
entry and long-run development, and the company's control system must have sufficient
flexibility to adapt to this. The overriding competitive objective should also be taken into
account when considering whether and how to participate in the market with a local
distributor or partner. Certainly, the low-intensity entry modes, such as import agents
and trading houses, would be inappropriate unless the local partner will accept the lower
profit expectations.
3. Scale Economies or Marketing Leverage: A number of objectives result from
internationalization undertaken as what is sometimes described as a "replication strategy,"
in which a company seeks a larger market arena in which to exploit an advantage. In many
manufacturing industries, for example, internationalization can help the company achieve
greater economies of scale, particularly for companies from smaller domestic country-
markets. In other cases, a company may seek to exploit a distinctive and differentiating
asset (often protected as intellectual property), such as a brand, service model, or patented
product. In both cases, the emphasis is on "more of the same," with relatively little
adaptation to local markets, which would undermine scale economies or diminish the
returns from replication of the winning model. To achieve either of these objectives, a
company must retain some control, so it may enter markets with relatively high-intensity
modes, such as joint ventures. In particular, either franchising or licensing are business
models naturally suited for the rapid replication of businesses through expansion of units
since both are centered on protected and predefined assets.
Apart from these varied marketing objectives, it is also common for governments to
"incentivize" their country's companies to export, in which case the company may enter
markets it would otherwise not have tackled. In summary, given the rapid business

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