Chapter 14: Selecting and Entering an International Market
Chapter 14 Summary
LO 14.1 Selection of a Foreign Market, the Time of the Entry, and the Scale of the Entry
- Organizations must analyze the political, legal, economic, social, and cultural risks of a market.
- The CAGE Distance Framework can assist them with international market evaluation, considering cultural, administrative/political, geographic, and economic distances.
- CAGE allows firms to understand the distance, compare target countries, and select the correct one.
- Time of entry is a critical step, with early entry before other foreign firms and late entry after other international firms have already established their operations in a market.
- Early entry provides a first-mover advantage, which allows for initial market share, building sales volume, control of resources, and buyer switching costs.
- Late entry advantages include informed buyers, product improvements, and avoidance of mistakes.
- The scale of entry can be large or small.
- Large-scale entry requires a commitment of significant resources and is difficult to reverse.
- Small-scale entry gives companies time to learn about the market and reduces risk exposure, making it difficult to build market share.
LO 14.2 Different Modes of Entry to a Foreign Market
- The selection of the market entry mode is the last and most important step in the international business decision-making process.
- Entry modes include exporting, franchising, joint ventures, and wholly owned subsidiaries, which include the strategies of acquisition and greenfield venture.
- All modes have advantages and disadvantages; selection depends on the company’s readiness factors, competitive capabilities, experience and training, skills and knowledge, resources, and motivation.
