8/7/2019 There Are Two Possible Approaches to Enter the Market

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There are two possible approaches to enter the market.

A waterfall approach, in which countries are gradually entered subsequently. E.g.BMW, General Electric and most recent Dell and Body Shop.

A sprinkle approach in which many countries are entered simultaneously within alimited period of time. E.g. McDonalds, Toyota etc.

The sprinkle approach is preferred when the first-movers advantage is crucial andhigh degree of competitive intensity prevails.

Developed versus Developing markets. The developed nation and the rich part of the developing countries account for less than 15% of the world’s total population.Is there any way to serve this 85% which has less purchasing power. Consider howthe following companies are leading to serve these consumers.

• Grameen- phone markets cell phones to 35000 villages in Bangladesh by

hiring women as agents.

• Indian banks come up with special credit products for agricultural and ruralpeople.

• Colgate-Palmolive entered Indian villages with video vans that shows thebenefit of tooth-brushing.

Regional Free Trade Zones

Regional integration- trading agreements between blocs of countries hasintensified in recent years. Certain countries have formed free trade zones oreconomic communities- group pf countries organized to work towardcommon goals.

The European Union:

Formed in 1957, European Union set to create a singleEuropean market by reducing barriers to the free flow of products, services,

finance and labor among member countries. Today it’s one of the largestsingle markets in the world. It contains more than 454 million customers andaccounts for 23% of the world’s exports annually.

Nafta:

8/7/2019 There Are Two Possible Approaches to Enter the Market

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In January 1994, the North American Free Trade Agreement establisheda free trade zone among the US, Mexico and Canada. It contains more than360 million consumers who produce and consume $6.7 trillion worth of goodsand services annually.

Mercosul:

Mercosul links Brazil, Argentina, Paraguay, Uruguay. Its likely thatNAFTA will eventually merge with this and other arrangement to form an all-Americas free trade zone.

Apec:Twenty-one Pacific Rim countries, including the NAFTA countries, Japan

and China, are working together to create a Pan-specific free trade zoneunder the Asia pacific Economic Cooperation Forum.

Deciding How to Enter the Market

Once a company decides to target a particular country, it has to determine the bestmode of Entry.

Indirect and Direct Export:

It’s a normal way to enter int’l market.

Companies typically starts with indirect exporting. They export their productsthrough

• domestic based agents,

• domestic based merchants and

• cooperative organization.

These all are paid commission or fee.