Chapter 10
Entering Foreign Markets
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Overcoming the Liability of Foreignness: Strategies for Successful Market Entry, Schemes and Mind Maps of Marketing
Insights into the challenges faced by foreign firms in host countries due to their nonnative status, and offers strategies for overcoming the liability of foreignness. Topics include good decisions on market entry, resource-based view, and institution-based view. It also covers the importance of understanding cultural differences and the use of various entry modes.
Typology: Schemes and Mind Maps
2021/2022
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Chapter 10
Entering Foreign Markets
India Outsourcing and Market EntriesAs of 2013, Africa accounted for 16 percent of India’s
foreign direct investment (FDI) stock for a total ofUS$13.6 billion.
Entered market through acquisitions of other firms and joint
ventures
http://www.ictsd.org/bridges‐news/bridges‐africa/news/india%E2%80%99s‐investment‐in‐africa‐feeding‐up‐an‐ambitious‐elephant
Liability of Foreignness
Liability of Foreignness^ The
inherent
disadvantage
foreign firms experience inhost countries because of
their nonnative status.
Differences in formal
and informalinstitutions
Discrimination against foreign firms Semiglobalized world
Formal discrimination: buy national programs
Informal discrimination: distrust and national pride
Institution‐based view: Differences in norms/values
Trade barriersRegulatory risks
Foreign Market Entries
:
Where?When?How?
Resource‐based view:
Value, Rarity Imitability, Organization
-^
Must take “legitimate” actions^ –
Follow local rules, formal and informal – Accept the facts and situation as found
-^
Offset liability by deploying overwhelmingresources^ –
If you’re going to do it, do it right!
Where?All about
Location, Location, Location!
Must consider:
^
Strategic goals ^
Cultural and institutional differences
Location Specific Advantages
- benefits a firm reaps from
features specific to a place^ ^
Geographic ^
Agglomeration – advantages from clustering^ •
Knowledge spillovers • Industry demand for specific workforce • Industry demand facilitates specific suppliers ^
Advantages unique to each firm
Strategic Goals^ •^
Resource Seeking^ –
Locations are resource specific – May have to suffer poor institutions
-^
Market Seeking^ –
Regions with strong demand
-^
Efficiency Seeking^ –
Economies of scale and low cost
-^
Innovation Seeking^ –
Target countries/regions known for generating world-classinnovations
-^ Not always silicon valley!
Basic Needs
Economic/Financial Screen
Political/Legal Screen
Sociocultural
Screen Competitive
Screen
1
Market Screening
(for market seeking firms)
Additional Considerations
Entry location^ depends on
Cultural distance -^ difference betweentwo cultures along
identifiable
dimensions. Ex:individualism.
Institutional
distance –
similarity
or dissimilarity
between regulatory,
normative and
cognitive institutions.
Stage Model
- step‐by‐step process of internationalizing by
entering culturally similar countries first Opposing thought: Profits and Efficiency! Do what you have to do!
FM Global and Market Forces
Segment vs. GeographyNarrow segment across broad geography
Strategic ObjectivesObjectives not exclusive
^
Weigh multiple objectives