The Elements of Entry Strategy

Entry strategy for international markets is a comprehensive plan. It sets forth the objectives, goals, resources, and policies that will guide a compa­ny’s international business operations over a future period long enough to achieve sustainable growth in world markets. For most companies the entry-strategy time horizon is from three to five years, because it will take that long to achieve enduring market performance. For some companies the period may be shorter or longer, but whatever its length, the time horizon should be distant enough to compel managers to raise and answer questions about the long-run direction and scope of a company’s international busi-ness. For convenience of exposition, we shall assume in this book that the entry-strategy planning horizon is three to five years.

Although it is common to speak of a company’s entry strategy as if it were a single plan, it is actually a composite of several individual product/ market plans. Managers need to plan the entry strategy for each product in each foreign market, because it is foolhardy to assume that the response to a particular entry strategy would be the same across different products and different country markets. Once the individual (constituent) product/market plans are completed, they should be brought together and reconciled to form the corporate international entry strategy.

The constituent product/market entry strategies require decisions on (1) the choice of a target product/market, (2) the objectives and goals in the target market, (3) the choice of an entry mode to penetrate the target country, (4) the marketing plan to penetrate the target market, and (5) the control system to monitor performance in the target market. Figure 1 depicts these elements of an international market entry strategy.

Although the elements are shown as a logical sequence of activities and decisions in Figure 1, the design of a market entry strategy is actually iterative with many feedback loops. Evaluation of alternative entry modes, for instance, may cause a company to revise target market objectives or goals or even to initiate the search for a new target market. Again, the formulation of the marketing plan may call into question an earlier prefer­ence for a particular entry mode. After operations begin, variances in mar­ket performance may lead to revisions in any or all of the first four elements, as indicated by the dashed lines emerging from the Control Sys­tem box. In short, planning for international market entry is a continuing, open-ended process.

To managers in small and middle-size companies, planning entry strate­gies may appear to be something that only big companies can afford to do. These managers identify such planning with elaborate research techniques that are applied by specialists to a massive body of quantitative data. But this is a misconception of the entry planning process. What is truly impor­tant is the idea of planning entry strategies. Once management accepts this idea, it will find ways to plan international market entry, however limited company resources may be. To say that a company cannot afford to plan an entry strategy is to say that it cannot afford to think systematically about its future in world markets.

Without an entry strategy for a product/target market, a company has only a “sales” approach to foreign markets. Table 1 contrasts the sales and entry strategy approaches. Suffice it to say at this point that the sales approach may be narrowly justified for a first-entry company lacking in any international experience and doubtful of its ability to compete abroad. But a prolonged adherence to the sales approach will almost certainly doom a company’s international business. That approach is simply not viable in a world of international competitors who plan and act to create foreign market positions for long-run success.

Source: Root Franklin R. (1998), Entry Strategies for International Markets, Jossey-Bass; 2nd edition.

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