Global Market Entry
Strategies
Unit 3
Entering a foreign market
Company objectives
Market potential
Resource availability.
Level of risk
Modes of Market Entry
Exporting
Licensing
Franchising
Joint Ventures
Strategic Alliances
Wholly Owned Subsidiary
Exporting
• Selling products produced in the home country to customers abroad.
• Types
• Direct: Company sells directly to foreign buyers/distributors.
• Indirect: Through intermediaries (export houses, agents).
• Advantages
• Low investment, low risk.
• Quick entry into markets.
• Disadvantages
• Limited control over marketing & distribution.
• Exposure to trade barriers and transportation costs.
• Example: Indian textile firms exporting garments to the US.
Licensing
• A firm (licensor) permits a foreign firm (licensee) to use its intellectual
property (brand, technology, patents) for a fee or royalty.
• Advantages
• Low investment.
• Rapid expansion.
• Disadvantages
• Risk of creating competitors.
• Loss of control over quality.
• Example: Disney licensing its characters for merchandise production
in Asia.
Franchising
• A form of licensing in which the franchisor provides not only brand
name but also an entire business model (training, marketing,
operational systems).
• Advantages
• Rapid global expansion.
• Local ownership ensures cultural adaptation.
• Disadvantages
• Dependence on franchisee quality.
• Conflicts over royalty payments.
• Example: McDonald’s and Domino’s Pizza in India.
Joint Ventures (JV)
• A partnership between a foreign company and a local firm where
ownership, risks, and profits are shared.
• Advantages
• Access to local market knowledge.
• Shared financial risk.
• Disadvantages
• Risk of conflict between partners.
• Control issues.
• Example: Tata Starbucks (JV between Tata Global Beverages and
Starbucks).
Strategic Alliances
• Non-equity, cooperative agreements between firms for mutual
benefit (without forming a new entity).
• Advantages
• Synergy of resources (R&D, technology, distribution).
• Flexible compared to JV.
• Disadvantages
• Risk of partner opportunism.
• Example: Renault-Nissan strategic alliance.
Wholly Owned Subsidiary
• A company sets up its own operations in the foreign country. This can be:
• Greenfield Investment → Establishing a new facility.
• Acquisition → Buying an existing company.
• Advantages
• Full control over operations.
• Greater integration with global strategy.
• Disadvantages
• Highest cost and risk.
• Vulnerable to political & economic instability.
• Example: Hyundai’s manufacturing plant in Chennai, India (Greenfield).
Factors Affecting Choice of Entry Strategy
Market Size & Growth Potential • Large markets attract FDI (e.g., India, China).
Risk & Control • Higher risk often means greater control (e.g., subsidiaries).
Resource Commitment • Exporting requires less investment than setting up plants.
Competition • Intense competition may demand partnerships or acquisitions.
Government Policies • Restrictions on FDI may force JVs (e.g., earlier in India).
Cultural Distance • Greater cultural differences often make partnerships safer.
Comparison of Entry Strategies
Mode Investment Control Risk Example
Indian pharma
Exporting Low Low Low
exports
Disney
Licensing Low Low Moderate
merchandise
McDonald’s
Franchising Moderate Medium Moderate
India
Joint Venture Moderate Shared Shared Tata Starbucks
Strategic
Low-Moderate Shared Shared Renault-Nissan
Alliance
Wholly Owned
High High High Hyundai in India
Subsidiary
Case Examples
Walmart in India →
• Entered via JV with Bharti, later exited due to policy & cultural issues.
Starbucks in China →
• JV with local partners helped adapt to tea-drinking culture.
Tesla in China →
• Wholly owned subsidiary (Shanghai Gigafactory), unusual since China usually demanded JVs.
KFC in India →
• Franchising model enabled rapid scale-up with menu adaptation.
Strategies for Reducing Risks
Conduct thorough market research before entry
Use phased entry (start with exporting, move to JV, then WOS).
Develop local partnerships for cultural & regulatory navigation.
Invest in cross-cultural training for employees.
Maintain exit strategies in case of failure.