the factors influencing the method of entry into international markets

8.2 Marketing Strategy – International Marketing

Objective

To understand the factors that determine the choice of entry method into international markets and to see how the selected entry mode fits within a complete marketing plan.

1. Marketing‑Plan Contents (Cambridge 9609 – 8.2)

A full marketing plan must contain the following elements. Use the checklist to verify that each part is addressed before moving on to the entry‑mode decision.

• Marketing objectives – market‑share, sales volume, profit targets, brand‑awareness goals (SMART).
• Resources – financial capital, human expertise, production capacity, technology, and any partnership assets.
• Market research – primary & secondary data, competitor analysis, consumer insight, and a brief SWOT.
• Marketing‑mix (4 Ps)
  • Product – core, actual, and augmented features; need for adaptation.
  • Price – positioning, price‑elasticity, discount policy.
  • Place – distribution channels, logistics, location of facilities.
  • Promotion – advertising, sales‑promotion, personal selling, digital tactics.
• Sales forecasting – quantitative (time‑series, regression) and qualitative (Delphi, market‑expert panels) methods to estimate demand in the target market.
• Product‑development strategy – sources of ideas, R&D intensity, protection of intellectual property, and the role of new products in market entry.
• Elasticities – price, income, and promotional elasticities that indicate how sensitive demand will be to price changes, income shifts, or promotional activity.
• Strategic approach – pan‑global (standardised) vs local‑difference (adapted) and the degree of coordination required across markets.
• IT/AI considerations – e‑commerce platforms, data‑analytics, AI‑driven demand forecasting, and digital supply‑chain tools.

2. Elasticity and Its Relevance to Entry‑Mode Choice

3. Product Development and Its Impact on Entry Mode

• R&D intensity – High‑tech firms with significant R&D often need tight control over technology; they favour wholly‑owned subsidiaries or joint ventures with strong IP clauses.
• Source of ideas – If new ideas arise from local market insight, a partnership (JV, licensing) can accelerate localisation.
• Stage of the product life‑cycle
  • Introduction – low sales forecast, high risk → low‑investment modes (indirect export, licensing).
  • Growth – rising demand, need for rapid scale → direct export or strategic alliance.
  • Maturity/Decline – focus on cost efficiency → wholly‑owned subsidiary for economies of scale or divestment.
• IP protection – Strong legal protection encourages high‑control entry modes; weak protection pushes firms toward low‑control, low‑investment options.

4. Sales Forecasting (8.1 Sales Forecasting)

Accurate forecasts are essential for matching the scale of the entry mode with expected demand.

• Quantitative techniques
  • Moving averages & exponential smoothing – useful for stable markets.
  • Regression analysis – relates sales to macro‑variables (GDP, population).
  • Time‑series decomposition – separates trend, seasonal, and irregular components.
• Qualitative techniques
  • Delphi method – structured expert panels.
  • Market‑expert interviews – especially valuable in emerging markets with limited data.
  • Scenario planning – builds forecasts under different political/economic assumptions.
• Using forecasts – Convert projected unit sales into required investment (production capacity, distribution network) and match with the capital intensity of each entry mode.

5. Approaches to Marketing Strategy (Coordination, Consistency, IT/AI)

• Co‑ordinated strategy – All elements of the marketing mix must work together across markets; entry mode determines the level of coordination possible (e.g., a wholly‑owned subsidiary enables full coordination, whereas licensing relies on the licensee’s actions).
• Consistency with corporate objectives – The entry mode should reinforce the brand’s global positioning and long‑term strategic goals.
• IT/AI impact
  • Digital platforms (Amazon, Alibaba) allow low‑cost, low‑risk entry via online marketplaces.
  • AI‑driven demand forecasting improves accuracy of sales forecasts, influencing the scale of investment.
  • Big‑data analytics help identify cultural nuances, informing the choice between pan‑global and local‑difference approaches.

6. Key Factors Influencing Entry‑Mode Choice (8.2 Marketing‑Strategy)

• Political & legal environment – stability, trade barriers, tariffs, import quotas, IP protection, foreign‑ownership restrictions.
• Economic conditions – market size, growth rate, income levels, currency stability, payment systems.
• Cultural distance – language, consumer behaviour, social norms, business etiquette.
• Market structure & competition – number/strength of rivals, channel structure, saturation.
• Company resources & objectives – financial strength, managerial expertise, desire for control, long‑term goals.
• Risk tolerance – willingness to accept political, economic, operational, reputational risks.
• Control requirements – need to protect brand, technology, or proprietary processes.
• Speed of entry – how quickly the firm wants to establish a presence.
• Regulatory restrictions on foreign ownership – equity limits, mandatory local partnership.
• Consistency with business, product & market strategy – alignment with overall corporate strategy, product life‑cycle stage, target‑market positioning.
• Co‑ordination of the marketing mix – how the entry mode influences promotion, distribution, and pricing across markets.
• IT/AI considerations – digital platforms, e‑commerce, data‑analytics, AI‑driven market‑entry tools.
• Pan‑global vs local‑difference approach – decision on standardising or adapting the marketing mix and the entry modes that best support each.

7. Pan‑global vs Local‑difference Approaches

8. Common Entry Modes (with marketing‑approach fit)

9. Decision‑Making Process (Step‑by‑Step)

1. Analyse the external environment – political, legal, economic, cultural, competitive factors.
2. Assess internal capabilities – resources, expertise, risk appetite, strategic objectives.
3. Determine required control and speed of entry – high control = subsidiary/JV; fast entry = exporting or digital platform.
4. Select the marketing‑approach – pan‑global or local‑difference based on elasticity, cultural distance, and product‑development stage.
5. Match factors to entry‑mode characteristics – use the tables above to shortlist viable modes.
6. Validate against the marketing plan – ensure objectives, budget, and 4 Ps are consistent with the chosen mode.
7. Develop an implementation timetable – include market‑research, pilot testing, resource allocation, and performance‑monitoring milestones.

10. Applying the Factors – Example Scenario

Company: UK‑based consumer‑electronics manufacturer.

Target market: Brazil.

1. Political/Legal: Moderate tariff barriers; 100 % foreign ownership allowed in electronics.
2. Economic: Large, growing middle class; high currency volatility.
3. Cultural: Preference for locally‑adapted products and strong after‑sales service.
4. Market structure: Dominated by a few local distributors; intense price competition.
5. Company resources: Strong R&D, limited international distribution network, moderate financial capacity.
6. Risk tolerance: Willing to invest for long‑term market share.
7. Elasticities: High price elasticity (price‑sensitive consumers) and moderate income elasticity (growing middle class).
8. Product‑development stage: Mature core product with scope for local feature additions.
9. Marketing approach: Local‑difference – product features and service need adaptation.

Recommended entry sequence:

• Phase 1 – Joint Venture with a reputable local distributor to share market knowledge, mitigate political/economic risk, and provide the required after‑sales network.
• Phase 2 – Wholly‑Owned Subsidiary once the brand is established and demand forecasts (based on AI‑driven analytics) confirm sufficient scale to justify the investment.
• Parallel digital strategy – Online marketplace (e.g., Amazon Brazil) to reach tech‑savvy consumers quickly, collect real‑time sales data, and refine product localisation.

11. Summary

The entry‑mode decision is a strategic bridge between the external market environment and the internal marketing plan. By systematically analysing political, economic, cultural, competitive, organisational, and technological factors—and by linking them to elasticity, product‑development stage, and sales‑forecast accuracy—students can justify the most appropriate pathway (export, licensing, JV, subsidiary, digital platform, etc.). The chosen mode must align with the overall objectives, resources, and the desired level of standardisation versus adaptation, ensuring a coordinated and consistent international marketing strategy.