International Market Entry Strategies

1. INTRODUCTION Globalization brings multinational enterprises (MNEs), their products and their brands into ever more remote corners of the world. The large number of potential customers in emerging economies raises expectations of unprecedented demand for consumer goods, if only the right products could be delivered in the right places (D. J. Arnold et al 1998).Yet, MNEs encounter business environments in emerging economies that are not only different from those with which they are familiar, but that also vary greatly from each other.

In the last 10 to 20 years the term emerging market has become very important in the international business context because countries such as China grew heavily and created new, enormous market segments.

Important strategic decisions such as pricing, market barriers, product positioning, marketing or environmental restrictions would be considered accordingly. In addition, in Appendix 3 all main entry are summarized.

3.3.1 Exporting

Exporting is the easiest and most common entry strategy. Products are manufactured in the home country and shipped to the foreign target country. Whilst no direct production is required in an overseas country, only significant investments in marketing are needed. Exporting demands coordination among four market players, namely the exporter, importer, transport provider and the government. (www.quickmba.com/strategy/global/marketentry/)

3.3.2 Contractual Arrangement

Contractual arrangements generally include licensing and franchising. Licensing involves granting the rights and methods for production to a host-country firm in return for a royalty fee. Franchising is a form of licensing, which combines the franchisor’s standard bundle of products, management expertise, and support systems. In the last years franchising has grown to a popular approach to enter new

The company’s strategic objective is to acquire 30% market share within the first five years of operation in China.(market seeking).

Reed pharmaceutical would adopt a gradual approach through incremental direct investment The process flow to be adopted by the company is to introduce its product into the market via exporting from home country to establish a relationship with local firms in China. Terms and conditions for exporting would be negotiated with the local firms which includes; the price, quantity, frequency of supplies, etc.

Where a relationship has been built with respect to product satisfaction, giving discount to local suppliers, and where applicable create a credit line to support the supplier’s business, the company would further establish sales subsidiaries and eventually invest in wholly-owned manufacturing subsidiaries.

The rationale behind the incremental approach is that it allows the company to gradually learn about the healthcare market in China and increase commitment over time. This in turn reduces the hazards of