Chapter 10: Entering and Maintaining a Market

Question 1

Key considerations for strategic market entry and maintenance:

Answer 1

• customer preferences
• market trends
• competition
• distribution channel strategy and selection
• investment required
• critical success factors
• modification of strategy over time

Question 2

5 stages of market entry :

Answer 2

Stage	Description
1	Domestic market establishment
2	Export research and planning
3	Initial export sales
4	Expansion of international sales
5	Investment abroad

Question 3

5 stages of market entry : Stage one: domestic-market establishment

Answer 3

Domestic market is appropriate place to test products and fine-tune performance before going international. Also, because international market takes much time and resources, it is important to develop strong foundation in the domestic market upon which to base international plans

Question 4

5 stages of market entry : Stage two : Export research and planning

Answer 4

Before venturing into market, they should conduct research to see how their product will do in market. By doing so they can segment a select few markets.

Question 5

5 stages of market entry : Stage three: initial export sales

Answer 5

Begin small to test the market. This enables the exporter to gain practical experience in a market without incurring unnecessary risk. It allows them to monitor their progress and make changes.

Question 6

5 stages of market entry :Stage four: expansion of international sales

Answer 6

○ If plans go well
§ Larger orders
§ Expand activity
§ Market research
§ Aggressive participation in international trade shows
§ Greater emphasis on strengthening networks and contacts in market

Question 7

5 stages of market entry : Stage five: Investment abroad

Answer 7

If sales are brisk, profits encouraging and opportunities promising, the company may choose to expand its presence in the target market. The target market may serve as a stepping stone to adjacent markets and become a focal point for a larger trade strategy.

Question 8

Brownfield investments

Answer 8

Remodeling

Question 9

Greenfield investments

Answer 9

Ground up

Question 10

Disadvantage of agent

Answer 10

○ Need them to be ethical 
		○ Work for more than one company
		○ If one pays him more, he may want to do more for them
Loyalty is to whoever 
 (pg. 226)

Question 11

Disadvantage of greenfield

Answer 11

○ Requires huge capital (you will have to buy land

Question 12

Elements of Trade

Answer 12

Merchandise trade
Trade in services
Investment
Technology transfer

Question 13

Elements of Trade:Merchandise trade

Answer 13

Refers to trade in tangible goods– commodities and manufactured goods (raw materials, agricultural commodities, semi-processed, components)

Question 14

Elements of Trade:Trade in services

Answer 14

• 20 % of world trade and one of fastest growing sectors.
• Different from goods:
○ Intangible
○ Requires skills, knowledge and expertise
○ Focused towards client needs

Question 15

Elements of Trade:Investment

Answer 15

• Engine of growth in the international economy.

* Price of entering into a market (creating jobs)

Question 16

Elements of Trade: Technology transfer

Answer 16

• Important way to gain access to market .
• Transfer through license agreement (transfer patents intellectual property)
-Partner uses license agreement to penetrate the market.

Question 17

Market Entry Options

Answer 17

Direct export
Indirect export
Investment
Strategic alliances

Question 18

Market Entry Options: Direct export

Answer 18

involves a company selling goods directly to customer in an international. Uses a wider variety of intermediaries

Question 19

Market Entry Options: Indirect export

Answer 19

a company sells to an intermediary in their own country . This intermediary then sell the goods to the international market and takes on the responsibility of organizing paperwork and permits, organizing shipping and arranging marketing.

• trading houses, confirming houses, foreign companies based in other countries, piggybacking, countertrade

Question 20

Market Entry Options: Investment

Answer 20

• Greenfield/Brownfield–

M&A

Question 21

Market Entry Options: Strategic alliances

Answer 21

strategic alliances provide a variety of ways for firms to gain access to the resources they need to enter foreign market.

Question 22

• Importers
• Wholesalers–>
•

Answer 22

purchase goods in bulk and distribute them ot retailers or other customers in the local market.

Question 23

Distributers–>

Answer 23

they are wholesalers that only carry non-competing lines of goods

Question 24

• Government procurement departments:

Answer 24

these are local government departments that seek out providers of goods and services that are required for serving the public

Question 25

.Agents-

Answer 25

some who is responsible for receiving the goods and applies and tariffs, and finds temporary storage.

Question 26

• Retailers–>

Answer 26

these are companies that sell to end consumers

Question 27

Trading houses

Answer 27

○ Wholesalers that purchase goods and sell them to international markets. They use salespeople, stock lists and sometimes theor own retail outlets to sell their purchased goods in foreign markets.
○ Useful because they have an expert knowledge of international markets and have established distribution and selling channels

Question 28

Confirming houses

Answer 28

○ These companies represent foreign businesses that do not have well-established reputation and cannot obtain credit to purchase goods fro other countries

Question 29

Foreign companies based in a company’s country (buying offices)

Answer 29

Many large companies and organization establish offices overseas and purchase locally produced good. They are useful customers for companies entering international trade because they arrange for shipping overseas and all exportation documentation

Question 30

Piggybacking

Answer 30

Companies (“rider”) use the skills, experience or resources of a company that is more experienced in exporting (carrier)

Question 31

Counter trade

Answer 31

Most often used for indirect exporting. Payments for goods and services are made by deliveries of other goods and services as well as, or in place of, financial payments.

Question 32

Distribution channels can be defined in several ways

Answer 32

§ Geography
□ Assign territories by drawing lines on a map, distribbutor works within their territory
§ Customer type
□ Catered to the need of the customer
§ Distributor type
-Sent to a exclusive or specialty store that is not generally used by the general public.

Question 33

Managing channels:

Answer 33

• Maximizing market coverage
○ When two products are similar, in order to get the most of their sales, they have to drop the price.
• Minimizing inter-channel conflict- Two ways
i. Branding
§ Creating a new name and image fo a product, with minor modifications. ( normal electric drill, or “Professional Series” drill with a couple extra features )
ii. Pricing
§ Offer discounts to distribution for different business types (retailers, whoesalers, dealers) to encourage their conformance within a defined channel structure.

Question 34

Factors to consider in the sales cycle

Answer 34

• Distance
• Important for suppliers to minimize perceived distance of customer
○ Reply to communication quickly ( day or less)
• Take every avaiable measure to make doing business easy.
• Cost
• Cost money (visit target market, translaortess, brochure translation, trade shows and other investmetns to generate sales
• Market
• Finding information about foreign market is difficult. Not familiar with market and must resort to primary and secondary sources
• Competition
• Understand the competition. Talk to customers what needs to be done to develop an edge
• Language and culture
• Try to communicate in local language, this offers a competitive edge. Also take into account culture as it shows respect

Question 35

Distribution Channel Management : Channel membership alternatives:

Answer 35

Intensive distribution
Selective distribution
Exclusive distribution

Question 36

Intensive distribution

Answer 36

• where the majority of resellers stock the “product” and where price competition may be evident (with convenience products, for example, and particularly the brand leaders in consumer-goods markets)

Question 37

Selective distribution

Answer 37

where suitable resellers stock the product– the normal pattern (in both consumer and industrial markets)

Question 38

Exclusive distribution

Answer 38

Where only specially selected resellers (typically only one per geographical area) are allowed to sell the product

Question 39

Distribution Channel Management : Channel motivation

Answer 39

• Motivating the owners and employees of independent organizations in a distribution chain requires significant effort.
○ Bribery
○ Supplier offers better margin to tempt the channel personnel to push their product.
○ A competition is organized among the distributor’s sales personnel so they are tempted to push the product.

Question 40

Distribution Channel Management : Monitoring and managing channels

Answer 40

• Distribution networks can be complex, so they need to be managed carefully
○ Effective and regular strategic planning
○ Writing regular reports on channel and partner performance.
• These will help identify and problems that need to be corrected.

Question 41

Communication priorities:

Answer 41

• Informing
○ Implies a flow of information in both directions: from a supplier to its channel partners and/or customers (outbound), and feedback from both to the supplier (inbound).
§ Ex. Outbound information –> product improvements, service updates, price changes
§ Ex. Inbound information–> changes in competitive and market conditions, complaints and suggestions for product modifications.
• Motivating
○ Use motivation to encourage their channel partners to take appropriate action to promote and sell their products and to persuade their customers to buy their products
§ Channels –> motivated by money
§ Customers–> motivated by the ability to save money, improve quality and productivity to make their lives easier
• Relationship building
○ Face to face meetings.
○ Regular communications will help maintain and strengthen relationship.
○ Even in cultures where personal relationships aren’t valued , they will always help.

Question 42

Direct Sales v.s. Distribution

Answer 42

• Population of customer
• Value of product
• requirement of stock
• requirement of service