International Entry Strategies and Rapid Growth

International Entry Strategies and Rapid Growth

Arild Aspelund

Senter for entreprenørskap – Truls Erikson

Outline• The traditional categorization of entry modes

– Characteristics in terms of:• Resource commitment• Control• Flexibility• Efficiency

• Hybrid structures – Entry modes under resource constraints and rapid growth

• The role of social capital– Some examples from Norwegian High Tech Start-Ups


What are Entry Modes?

• Often cited in order of commitment and control

– Direct Sales / Export Sales– License / Franchise– Agent / Distributor– Sales Office– Joint Venture– Acquisition– Wholly-Owned Subsidiary

• Hybrid structures can be a combination of any of these, but often includes a partner.


Entry modes (1)

• Export Sales– Resource commitment Low– Control High– Flexibility High– Efficiency Low

• License / Franchise– Resource commitment Low– Control Medium– Flexibility Medium to low– Efficiency High


Entry modes (2)

• Agent / Distributor– Resource commitment Low– Control Low– Flexibility High– Efficiency Medium to high

• Sales Office– Resource commitment Medium– Control High– Flexibility Medium– Efficiency Medium


Entry modes (3)

• Joint Venture– Resource commitment Medium– Control Medium to High– Flexibility Low– Efficiency Medium

• Acquisition– Resource commitment High– Control High– Flexibility Medium– Efficiency Medium to High


Entry modes (4)

• Wholly-Owned Subsidiary– Resource commitment High– Control High– Flexibility Medium to High– Efficiency Medium

• Hybrid Structures– Resource commitment Low– Control Low– Flexibility Case specific– Efficiency Case specific


Some Examples of Hybrid Structures (1)

Taken from Gabrielsson and Kirpalani (2004)

• MNCs acting as system integrators

Examples:

PC brand makers (e.g. PCs and Logitech)

Hardware and software suppliers (e.g. Motorola and Opera Software)




MNCs distributing complementary products/services, also often called client followership (Bell, Crick and Young, 2004)

Examples:

Internet providors (Telenor and Norman Antivirus)

B2B/C end product supplier (Johnson and Johnson)




Value net partners; technology and marketing partners

Examples:

Software developers (e.g. Linux and ez.no)

High-end commodities (Italian design)



Taken from Gabrielsson and Kirpalani (2004)• Internet as infrastructure: distribution, marketing, customer interaction,

and sales

Examples:

Internet retailers (Amazon or Play.com)

Niche oriented commodities (African art)


Managerial Lessons

• Managerial Lessons– There are many examples of entry modes that are not in mainstream

marketing textbooks• Creativity only limitation!

– The “international entrepreneurship – performance” dilemma

– Is it safe to rely on channels that you do not own?• Examples here are examples of new entry modes – might not be good

examples of international marketing development• Build alternative channels with higher degrees of control• When establishing cooperative structures - make sure you do end up

locked in


Siebel Systems


Siebel Systems

• How can you describe Siebel’s business model?– How does it compare to others at the time of the establishment of the

venture?

• How does Siebel use partners for marketing purposes?– Which effects does this have for the firm’s possibilities for growth?– Do you think Siebel could have managed such growth with a different

business model where they internalized implementation?

• In which ways do this business model lay the foundation for a rapid growth?


Example: Siebel Systems- Competition and Marketing

• Competition– ERP Software Companies, and smaller specialized vendors (about

400)• Focus on CRM!

– “That is what makes us untouchable”• Market channels

– Typical order size $1 – $10 million – 729 external partners– Alliances

• Consulting• Software• Platform• Content

– Siebel (10-15%), system integration (70%), hardware (10%), content (5%), other software (5%)


Example: Siebel Systems- The Vision

“We are here to build a great company. A company that has achieved the highest levels of customer satisfaction. A great place to work. A good member of the community. A provider of exceptionally high-quality products. A company that carries itself into the marketplace with the highest levels of business integrity and business ethics. A company composed of dedicated, accomplished professionals, committed to the customer. We are here to build a company in which we all can take great pride” Tom Siebel

• The prime example of how Customer Focus permeates the identity of Siebel Systems!


Example: Siebel Systems- The Values

• Core Values:1. Customer Satisfaction – We regard it as a privilege to serve our customers.

We make 100% customer satisfaction our overriding priority.2. Professional Courtesy – We comport ourselves with the highest levels of

business ethics and professional courtesy.3. Professionalism – We demonstrate the highest levels of professionalism

and quality in everything we do.4. Goal and Action Orientation – In pursuing our objectives, we have a bias for

action.

“Siebel Systems is the first company where I have seen an excellent performer fired because he ignored the values of the company. Either you play by the rules or you’re out.” Siebel employee


Example: Siebel Systems- The Sales Organization

Legal Services

Sales

Alliances

Finance

Professional Services

Corporate Marketing

Product Marketing


Example: Siebel Systems- Human Resource Management

• Mandatory quarterly report of personal objectives

• Transparent – Generally transparent through mySiebel– Tom Siebel publishes his report for every employee to see through

mySiebel

• 7 days into each quarter, TMT reports personal objectives

• 15 days into each quarter, middle management reports

• 21 days into each quarter, all employees have reported



• Customer Satisfaction“We measure customer satisfaction as if it were money”– Quarterly

• Employee satisfaction– Every 6 months

• Partner satisfaction– Quarterly

• Business Performance– Weekly and continually on competition and market movements through Siebel

eBusiness Applications

• Product quality– Internal quality check on Beta Versions, continually on operational products

• Individual performance– Quarterly



• Employee Relationship Management – ERM – mySiebel

• Coordination and management of an organization with global dispersion and heavy dependency on external parties is a challenge

• Value-based management requires channels through which you can communicate corporate visions, values, organization and remuneration

• Simply speaking, you need an arena where you can tell everybody how it works…



• Bonus awards– Tied to achievements of personal objectives– Sales targets– Customer satisfaction– Also dependent on the performance of other functions

• Product Marketing on Sales etc.

• Heavy use of stock ownership and stock options plans– 40 % of the company was owned by employees

• Ranking and discharging the bottom 5 % of employees every 6 month…– Workforce Improvement Initiative


Siebel SystemsSummary and Conclusions

• Summary– Siebel Systems faces an enormous challenge

• Extreme growth, 0 to 10 000 employees in a decade…• Globally disperse organization, multicultural• Heavily dependent on partner performance

– Siebel Systems have developed an organization that has coped with those challenges

– They have done so partly by organization, party through values and human resource management

• The ’alliance-based’ marketing system• The values management system• The people management system - MySiebels

– But in the core, there is a fundament on customer satisfaction that add value to Tom Siebel’s exit…

International Entry Strategies and Rapid Growth

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