Module Notes:
Why expand internationally? Each country you expand to is like creating a new startup. François Cazor There are many reasons why it may be advantageous for a business to expand into foreign markets. An organization’s domestic profit margins are reduced if the competition starts to saturate the home market. Moreover, an organization can use its current competitive advantages in production, technology, and management to capture new business opportunities abroad. Organizations can also reduce or minimize overall costs by outsourcing their operations or gaining access to lower-cost inputs in overseas locations. However, operating internationally involves more than transporting products overseas and setting up operations. Entering a foreign market represents a significant financial and time investment (Asgary, 2019). Once a firm makes the strategic decision to move its operations to a foreign market, there are several decisions to be made and research is then needed. When they consider how they will enter an international market, businesses must have a clear understanding of the following factors: Political and legal environments Market size Cultural environment (Asgary, 2019) Modes of foreign market entry 7-11 franchise in JapanOnce the foreign market analysis is conducted, a firm must make the decision concerning how it will expand internationally. The choice to conduct business globally will depend on a firm’s strategic objectives, so it is key to consider the advantages and disadvantages of each mode of entry. Although there are many methods utilized to enter a foreign market, some of the more common methods are listed below. Export-Import Licensing Management Contracts Turnkey Projects Franchising Joint Ventures International Strategic Alliances (Asgary, 2019) Making it work Expanding into a foreign market involves many strategic decisions and should be aligned with an organization’s structure and resources (Asgary, 2019). As previously mentioned, expansion requires considerable time and financial investment. Now that you have a foundation of the common entry modes for international expansion, let us apply this knowledge in your discussion and presentation.
Videos
CGTN America. (2021, April 4). Entering global markets while in pandemic recoveryLinks to an external site. [Video]. YouTube. [2:18] https://youtu.be/4XQpywXPTn4
Readings
Asgary, N.H. (2020). Global Business: An Economic, Social, and Environmental Perspective. Information Age Publishing. Chapter 8, International business strategyLinks to an external site. Chapter 9, Entry into a foreign marketLinks to an external site. Supplemental: Barrow, C., Barrow, P., & Robert Brown. (2021). The business plan workbook : A step-by-step guide to creating and developing a successful business: Tenth edition.Links to an external site. Kogan Page.
Within this module, we have outlined the five most common modes of international market entry: 1) exporting, 2) licensing and franchising, 3) acquisition, 4) partnering (or strategic alliance) and 5) establishing a new subsidiary. Each entry mode has advantages and disadvantages which must be understood and incorporated into business strategy planning. In this discussion, we’ll be researching and reporting on both successful and unsuccessful attempts to enter foreign markets using these modes of entry.
Pre-step: Make sure you’ve reviewed our M7 Learning Materials. As well as our M7 Module Notes. Step 1: Identify examples of both a successful and unsuccessful foreign market entry. You should aim to find examples that may not be as widely known as, say, the Coca Cola Company or Starbucks. Your examples must represent one of the market entry modes discussed above. However, your examples don’t have to reflect the same entry mode. Leverage the Excelsior University Library to research your examples.
Step 2: Initial post. Addressing each of the following prompts: Provide an overview of the results that you found concerning the two firms that you researched. Why do you believe that the organizations that you researched were successful or unsuccessful? What could those organizations have done differently to make their entry successful (or more successful)? What might other organizations learn from the failure or success of the firms that you researched?
Introduction: Expanding into foreign markets offers businesses new growth opportunities, but it requires careful strategic planning and execution. In this discussion, we will examine examples of both successful and unsuccessful attempts at international market entry across various modes. By analyzing these cases, we can gain insights into the factors that contribute to success or failure and identify key lessons for other organizations seeking to expand globally.
L’Oréal, a global cosmetics and beauty company, successfully expanded into foreign markets through strategic acquisitions. One notable example is its acquisition of The Body Shop, a UK-based ethical beauty brand. This move allowed L’Oréal to enter new markets and tap into The Body Shop’s established brand identity and loyal customer base.
Strategic Fit: L’Oréal’s acquisition aligned with its core values and business goals, enabling it to leverage The Body Shop’s unique market position.
Local Expertise: The acquisition provided L’Oréal with valuable insights into local preferences and consumer behavior.
Brand Synergy: L’Oréal maintained The Body Shop’s brand identity, preserving its authenticity and credibility.
Deeper Integration: Facilitating stronger collaboration between the parent company and the acquired brand to drive synergies and innovation.
Adaptive Marketing: Tailoring marketing strategies to local cultural nuances to resonate more effectively with diverse audiences.
Walmart’s entry into the German market serves as an example of an unsuccessful international expansion. Despite its success in the US and other markets, Walmart struggled to gain traction in Germany and eventually withdrew.
Cultural Mismatch: Walmart’s low-cost, high-volume model clashed with German consumer preferences for quality and personalized service.
Ineffective Localization: Failure to adapt its stores and offerings to German preferences led to a disconnect with local shoppers.
Labor Relations: Walmart’s labor practices, such as resistance to unionization, created negative public perception and strained relationships.
Thorough Market Research: Conducting in-depth cultural and market research to understand local preferences and adapt strategies accordingly.
Localization: Tailoring products, services, and store layouts to align with local consumer behaviors and expectations.
Responsive Engagement: Prioritizing positive labor relations and community engagement to foster goodwill and mitigate reputational risks.
Successful and unsuccessful international market entry strategies provide valuable insights for businesses aiming to expand globally. Strategic fit, cultural adaptation, and effective localization emerge as critical factors that can determine success or failure. By learning from these examples and applying the lessons garnered, organizations can enhance their chances of successful international expansion and mitigate potential pitfalls. As businesses navigate the complexities of foreign markets, a comprehensive understanding of various entry modes and their associated challenges will prove indispensable.
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