International Entry Strategies and Rapid Growth
Arild Aspelund
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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
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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.
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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
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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
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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
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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
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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)
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Some Examples of Hybrid Structures (2)
Taken from Gabrielsson and Kirpalani (2004)
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)
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Some Examples of Hybrid Structures (3)
Taken from Gabrielsson and Kirpalani (2004)
Value net partners; technology and marketing partners
Examples:
Software developers (e.g. Linux and ez.no)
High-end commodities (Italian design)
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Some Examples of Hybrid Structures (4)
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)
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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
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Siebel Systems
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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?
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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%)
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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!
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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
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Example: Siebel Systems- The Sales Organization
Legal Services
Sales
Alliances
Finance
Professional Services
Corporate Marketing
Product Marketing
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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
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Example: Siebel Systems- Human Resource Management
• 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
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Example: Siebel Systems- Human Resource Management
• 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…
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Example: Siebel Systems- Human Resource Management
• 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
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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…
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