Agenda

Semana 6

Caso Burberry: Decisiones sobre nuevas adquisiciones Debate Burberry & Angela Ahrendts Anlisis y Seleccin de Mercados Modos de Entrada (1era parte) Conclusiones

Logro
El alumno identifica las razones para entrar en mercados extranjeros y explica los modos de entrada a mercados internacionales
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Nuestro Mapa de Direccin

El Entorno Global
Globalizacin vs Internacionalizacin The World is Flat Estrategias de Internacionalizacin Factores para el comercio y la inversin, Las Multinacionales. Joint ventures, Alianzas Estratgicas, IED Plan de Marketing Internacional

Planeamiento y Estrategias de Internacionalizacin

Entry Modes + Estrategia Marketing Internacional Organizacin y Control de Operaciones Empresa Internacional

Organizacin de la Multinacional, Produccin , Logstica, RRHH, Tecnologa de la Informacin

Facultad de Negocios, UPC Carrera de Administracin y Marketing

Conocen Burberry?

Facultad de Negocios, UPC Carrera de Administracin y Negocios Internacionales

Burberry
Burberry es una casa britnica de moda de lujo, fabrica ropa y otros complementos. Su distintivo es un caballero ingls montado en un corcel y el monograma de enrejado. La empresa tiene tiendas propias en el mundo entero, y tambin se vende en almacenes de prestigio. La marca tambin controla un negocio por catlogo y tiene una lnea de fragancias. Tanto la Reina Isabel II como elPrncipe de Gales han concedido a la marca el ttulo Proveedor Real. El Director de Diseo actual es Christopher Bailey. Fundacin Basingstoke, Reino Unido en 1856, Sede Londres (Reino Unido) mbito Mundial, Industria Moda Ingresos 1,279.9 millones (2010) Beneficio de explotacin 171.1 millones (2010) Beneficio neto 82.2 millones (2010) Empleados 6,681 (2010) Fuerte presencia de marca en mercados desarrollados

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Debate Burberry 1:
Cul es la estrategia global de marca que tiene Burberry? Por qu mercados emergentes? Cules son los diversos modo de entrada de Burberry identificable en el discurso de Ahrendts?

Facultad de Negocios, UPC Carrera de Administracin y Negocios Internacionales

Important issues when going into internationalization

Firms expanding internationally must decide Which markets to enter When to enter and on what scale

Which entry mode to use

Selection of the Entry Mode
Export, Representative Office, JV, Franchising, Licensing, Subsidiary, etc

Selection of Foreign Market(s)

Which one(s) and to which extent?

Those who enter late can still be succesful against consolidated global competition but they have to apply the appropriate strategy of entry to do so

Factors affecting the decisions may include transport costs, trade barriers, political and economic risks, and firm strategy

Which Foreign Market?

The choice must be based on an assessment of a nations long-run profit potential The attractiveness of a country depends upon balancing the benefits, costs, and risks associated with doing business in that country Benefits include:
Size of market Present wealth of the consumers in the market Likely future wealth of consumers Economic growth rates

Timing of the Entry

Advantages frequently associated with
entering a market early are commonly known as first-mover advantages:
The ability to preempt rivals and capture demand by establishing a strong brand name Ability to build sales volume Ability of early entrants to create switching costs

Disadvantages associated with entering a

foreign market before other international businesses are referred to as first-mover disadvantages:
Pioneering costs are costs that an early entrant has to bear Possibility that regulations may change

Scale of Entry
Large scale entry
Strategic Commitments - a decision that has a long-term impact and is difficult to reverse May cause rivals to rethink market entry May lead to indigenous competitive response

Small scale entry

Time to learn about market Reduces exposure risk

The important questions about internationalization

Analyzing & Selecting a Market

10

Analyzing & Selecting a Market (1)

Which Market (s)?

Assessing the potential gain(s) of the country(ies) in the long run Depending on the size(s) as well as the present & future potentalities

Thinking out of the Box

Lets get think about and discuss About Risks vs. Profits for each block of countries afterwards

Equilibrium of Benefits vs. losses Costs & Risks

11

Analyzing & Selecting a Market (3)

WESTERN EUROPE
USA EASTERN EUROPE

FAR EAST

Central America & Mexico

MIDDLE EAST

AFRICA Latin America

12

Debate Burberry 2:
Cuals son los factores relevantes en su decisin de ingresar a China? que inputs le da el mercado chino? qu capacidades internas tiene Burberry para aventurarse en el mercado chino?
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Matriz de seleccin de mercados (Macrosegmentacin) 1

Desde el producto
(A travs de una valoracin cualitativa de variables e indicadores, testear los mercados potenciales, la red ms adecuada y las mejores opciones para la empresa) Seleccionar el Mercado Objetivo

1. Oportunidades segn la demanda

2. Importaciones y competencia 3. Disponibilidad de Transporte 4. Tratamiento Preferencial 5. Informacin de Mercado (Cualitativa)

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Matriz de seleccin de mercados (Macrosegmentacin) 2

Tomando en cuenta la Empresa Internacional
(A travs de una valoracin cualitativa de variables e indicadores, testear el entorno cultural, econmico, politico y legal de los potenciales mercados destino) Analizar el entorno global

1. Afinidad Cultural y Comercial

2. Resea geogrfica, econmica, poltica y legal 3. Marketing Mix y tendencias

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The important questions about internationalization

Selection of an Entry Mode

16

Selecting a Market according to a Product

Gold Jewelry Sugar Cane

Industrial shoes

Selecting a Market Where and to which extent?

Animations for Computers

Selecting a Entry Mode Baby garments Export, - JV, - Subsidiary Representative Office. etc Computer programming

Thinking out of the Box

Soft drinks bottling

Car assembly / manufacturing

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Selecting an Entry Mode (1)

To which extent?
A tactical decision based on 3 concerns

A large scale entry needs significant resources but is faster to implement

A large scale entry means a strategic commitment which is difficult to reverse

Modifying the game field while entering is also difficult to reverse

18

Selecting an Entry Mode (2)

When? 2 questions
Are there any advantage(s) to an early entry in the market(s)? The first to enter the market incur higher costs & take higher risks of failure

19

Selecting a Market acording to a Company

Thinking out of the Box
AJE Group Newspaper El Comercio RANSA

Select a foreign market

Which one, When and to which extent?

Supermercados Peruanos

Select an Entry Mode Alicorp

Export, JV, subsidiary etc.

Camposol

BCP

Gloria Group

20

Entry Modes
1 2
Export (Direct or through Importer / Distributor)
Representative Office (Commercial) Franchising (Commercial)

3
4 5

Licencing (Industrial)
Joint Venture Subsidiary with majority equity (Greenfield / merger or acquisition) Turnkey project / Management Contracts Strategic Alliance
21

6
7 8

(1) EXPORT
Advantages Avoid cost of establishing operations Economies of location based on the curb of experience Disavantages Difficulties for identifying and locating the related costs Cost of logistic Custom barriers Lack of loyalty from the distribution network (except in th case of exclusive contracts)

Economes of cale due to the standadization of products with some customization

22

(2) REPRESENTATIVE OFFICE

Advantages
Limit costs and risks of establishing operations Better control of the activities within the country where the represemtative office is established Surveillance of the country evolution prior to other type of operations

Disavantages Not possible to invoice In some countries, such type of implementation is not permitted

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(3) FRANCHISING
Franchising is a specialized form of licensing and used primarily by service firms in which the franchisor not only sells intangible property to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business Franchising is attractive because firms can quickly build a global presence by avoiding many costs and risks of opening up a foreign market Franchising is unattractive because the geographic distance of the firm from its foreign franchisees can make poor quality difficult for the franchisor to detect

(4) LICENSING
A licensing is an arrangement whereby a licensor grants the rights of its intangible property (e.g., patents, inventions, formulas, processes, designs, copyrights, and trademarks) to another entity (licensee) to use for a specified time period for a royalty fee Licensing is unattractive because it doesnt have the tight control over manufacturing, marketing, and strategy and its proprietary (or intangible) assets could be lost
One way of reducing this risk is through cross-licensing agreements where a firm might license intangible property to a foreign partner, but requests that the partner license some of its valuable know-how to the firm in addition to a royalty payment

(3) & (4) FRANCHISING & LICENSING

Advantages
There is neither cost nor risk related to the starting of the operations Very benefitial to companies lacking of investment capacity Possibility to overcome the barriers related to investment Disadvantages No strict control over the manufacturing & marketing processes as well the strategies of development in both cases Limit the possibility of crossed subsidies apart from the royalties May be a source of competitive advantage for the beneficiary

Franchising Implies a longer term relationship and requires strict rules and procedure for conducting he business
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(5) JOINT VENTURE

A joint venture (JV) is the establishment of a separate firm that is jointly owned by two or more firms and most JVs are 50:50 partnerships
JVs are attractive because the firm may benefit from a partner's local knowledge, the shared costs and risks, and political regulations JVs are unattractive because:
The firm risks losing its technology to its partner It may not have the tight control over subsidiaries to realize experience curve or location economies Shared ownership can lead to conflicts and battles for control if goals and objectives differ or change over time

(5) JOINT VENTURE

Advantages Knowledge of the local partner Disadvantages Risk of losing control of the processes and the related technologies and know-how

Sharing of costs and risks Reduced political risks: Good against political considerations which may prevent other types of projects

No strict control over the subsidiaries

Complicate the rules of the game of world competition May not realize experience curve or location economies operations

28

Conclusiones
que debemos tomar en cuenta al analizar un mercado internacional? cules son esos factores clave que no deben faltar en la construccin de la macrosegmentacin?

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Agenda

Semana 7

Debate sobre la IED China en Alatina Entry Modes (2da parte) Conclusiones Presentaciones de Company Profile + Executive Summary (8 min presentacin)

Logro
El alumno identifica las razones para entrar en mercados extranjeros y explica los modos de entrada a mercados internacionales.
Facultad de Negocios, UPC Carrera de Administracin y Negocios Internacionales 30

Nuestro Mapa de Direccin

El Entorno Global
Globalizacin vs Internacionalizacin The World is Flat Estrategias de Internacionalizacin Factores para el comercio y la inversin, Las Multinacionales. Joint ventures, Alianzas Estratgicas, IED Plan de Marketing Internacional

Planeamiento y Estrategias de Internacionalizacin

Entry Modes + Estrategia Marketing Internacional Organizacin y Control de Operaciones Empresa Internacional

Organizacin de la Multinacional, Produccin , Logstica, RRHH, Tecnologa de la Informacin

Facultad de Negocios, UPC Carrera de Administracin y Marketing 31

La IED en China est cayendo.

Pero como va la IED China en el mundo, sobretodo en Latinoamrica???
Nueva era de la poltica china en Amrica Latina (2008 - ) Estrategias de competitividad de las EMN chinas La financiacin china en ALC como apoyo a la penetracin de sus EMN Implicancias para las empresas latinoamericanas.
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Entry Modes
1 2
Export (Direct or through Importer / Distributor)
Representative Office (Commercial) Franchising (Commercial)

3
4 5

Licencing (Industrial)
Joint Venture Subsidiary with majority equity (Greenfield / merger or acquisition) Turnkey project / Management Contracts Strategic Alliance
33

6
7 8

WHOLLY OWNED SUBSIDIARY

In a Wholly Owned Subsidiary (WOS), the firm has 100% ownership; it can be established by setting up a new operation (i.e., green-field investment) or by merging and acquiring (M&A) an established firm. WOSs are attractive because they:
Reduce the risk of losing control over core competencies
Give a firm the tight control over operations in different countries necessary for global strategic coordination
Realize location and experience curve economies

WOSs are unattractive because of the full cost and risk of setting up overseas operations

(6) Subsidiary with majority equity (Greenfield / Merger or Acquisition)

Advantages When the competitive advantage is the know-how and/or technological competence Tight control over the operations May allow economies of location Disadvantages It is the most expensive & risky entry mode Supporting all the risks of learning from the operations Necessity to mix and adapt different company or corporate cultures (merger & acquisition)

Greenfield

Mergers & Acquisitions

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(6A) GREENFIELD OPERATION

Disadvantages Advantages Time necessary for the establishment = Long lasting procedure Uncertainty about the future inputs and earnings May be invalidated by agressive and adquiring minded global competitors

Build up p the subsidiary according to your needs and wants Building up the company culture from zero. Establishing the operating procedures as per your concepts

Lincoln Electric
Welding Tools & Equipment

36

(6B) MERGERS & ACQUISITIONS

Advantages Easy to execute. Eliminate reduce the impact of your competitors. The management and shareholders havethe feeling it is less risky than a greenfield operation. Disadvantages The price of the operation may be very high Differences in company or corporate cultures. Not easy to work out synergies.

Discrepancies and lack of information when analyzing the aquisition

37

(7) TURNKEY PROJECTS

At completion of a turnkey project, the foreign client is handed the "key" to a plant that is ready for full operation. The Contractor agrees to handle every

detail of the project to the foreign client

Turnkey projects are common in the chemical, pharmaceutical, petroleum refining,and metal refining industries

(8) TURNKEY PROJECTS

Advantages

Disadvantages Short & Mid-term spot businesses. No long term interest in the foreign country Possibility to facilitate the introduction of a competitor The transferred of know how & technology may be a source of competitive advantage for those benefiting from it.

Necessary know-how to start technological complicated processes.

Useful for exporting know-how and technology and get a return from them Minor risk due to to th advantage of posessing the know-how. Less risky than FDI

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Advantages & Disadvantages of Entry Modes

(8) STRATEGIC ALLIANCE

Strategic alliances refer to cooperative agreements between potential or actual competitors and range from formal JVs to short-term contractual agreements. There is an increasing tendency for strategic alliances

The success of an alliance is a function of:

Partner selection

Alliance structure
The manner in which the alliance is managed

A good partner
Helps the firm achieve its strategic goals and has the capabilities the firm lacks and that it values Shares the firms vision for the purpose of the alliance Is unlikely to try to opportunistically exploit the alliance for its own ends

(9) STRATEGIC ALLIANCE

Advantages Facilitate the introduction to a foreign market Disadvantages May lead competitors to an easy access to kmow-how and technology Risks links to the fact of sharing information

Opportunity to share fixed costs resulting from new products or processes

Join complementary capacities or assets Mean to reach technological standardization

Boeing

Roll Royce

42

Characteristics of a Strategic Alliance

Benefits Control

Independence of Participants

Technology
Products

Shared Benefits

Ongoing Contributions

Markets

14-23

Global Strategic Alliance

Firms join to attain world leadership
Each partner has significant strength to bring to the Alliance A true global vision Relationship is horizontal not vertical When competing in markets not part of alliance, they retain their own identity

How to make Strategic Alliances work?

After selecting the partner and structuring the alliance, the alliance must be managed Successfully managing an alliance requires managers from both companies to build interpersonal relationships A major determinant of how much a company gains from an alliance is its ability to learn from its alliance partners

Structuring the Alliance to Reduce Opportunism

Separation of Strategic Knowhow & Technology
Contractual guarantees

How to reduce probability of opportunism by alliance partner

Agreement about interexchange of abilities and valuable know-how & technology

Search for realistic commitments between partners within the strategic alliance

46

Strategic Decisions in terms of Implementation Processes

47

How to make Strategic Alliances work? Core Competences vs. Entry Mode
The optimal entry mode depends to some degree on the nature of a firms core competencies When a firms competitive advantage is based on proprietary technological know-how, the firm should avoid licensing and JV arrangements unless it believes its technological advantage is only transitory, or that it can establish its technology as the dominant design in the industry
When a firms competitive advantage is based on management know-how and brand name, the risk of losing control over the management skills is not high. Such firms (e.g., McDonalds) may favor a combination of franchising and subsidiaries (either WOS or JV)

(1)

Core Competences vs. Entry Mode (2)

The optimal entry mode for firms depends to some degree on the nature of their core competencies. A distinction can be drawn between firms whose core competency is:
Technological know-how Management know-how

The greater the pressures for cost reductions are, the more likely a firm will want to pursue some combination of exporting and wholly owned subsidiaries

Core Competences vs. Entry Mode (2)

Technological Know-How
Licensing and joint-venture arrangements should be avoided if possible
Should probably use a wholly owned subsidiary

Management Know-How

The firms valuable asset is normally a brand name

The result is that franchising and subsidiaries are very attractive Often times a joint venture is politically more acceptable

Exceptions include
An arrangement can be structured to reduce the risk of licensees If the technological advantage is only transitory

Pressure for Cost vs. Entry Mode

When pressure for cost reductions is high, firms are more likely to pursue some combination of exporting and WOSs

This will allow the firm to achieve location and scale economies as well as retain some degree of control over its worldwide product manufacturing and distribution

So, firms pursuing global standardization or transnational strategies prefer WOSs

Greenfield vs. Acquisition (1)

Firms can establish a WOS by greenfield or acquisition strategy The main advantage of a greenfield venture is that it gives the firm a greater ability to build the kind of subsidiary company that it wants. However, greenfield ventures are slower to establish and are also risky Acquisitions are attractive because they: are quick to execute
enable firms to preempt their competitors may be less risky than greenfield ventures

Greenfield vs. Acquisition (3)

Pro:
Can build subsidiary it wants Easy to establish operating routines Quick to execute Preempt competitors Possibly less risky

Con:
Slow to establish Risky Preemption by aggressive competitors Disappointing results Overpay for firm Optimism about value creation (hubris) Culture clash Problems with proposed synergies

Greenfield vs. Acquisition (3)

Acquisitions are attractive if:

There are well established firms already in operation Competitors want to enter the region

Greenfield ventures are attractive if:

There are no competitors Competitors have a competitive advantage that consists of embedded competencies, skills, routines, and culture

Risk, Control & Experience (4)

Risk ,Control, and Experience

Conclusiones
1. Es la IED la mejor alternativa frente a los obstculos al comercio? 2. Pueden las pymes exportadoras apostar por otros modos de entrada adems de la exportacin.que deben hacer?

Facultad de Negocios, UPC Carrera de Administracin y Negocios Internacionales 56