The process of penetrating and then developing an international market is a difficult one, which many companies still identify as an Achilles’ heel in their global capabilities. In fundamental terms, entering a new country-market is very like a start-up situation, with no sales, no marketing infrastructure in place, and little or no knowledge of the market. Despite this, companies usually treat this situation as if it were an extension of their business, a source of incremental revenues for existing products and services. Two aspects of the typical approach are particularly striking. First, companies often pursue this new business opportunity with a focus on minimizing risk and investment—the complete opposite of the approach usually advocated for genuine start-up situations. Second, from a marketing perspective, many companies break the founding principle of marketing—that a firm should start by analyzing the market, and then, and only then, decide on its offer in terms of products, services, and marketing programs. In fact, it is far more common to see international markets as opportunities to increase sales of existing products and so to adopt a “sales push” rather than a market-driven approach. Given this overall approach, it is not surprising that performance is often disappointing. As was discussed in Chapter 1, profitability in international markets has lagged behind average firm profitability for much of the last two decades (the “foreign investment profitability gap”). This may well be because of what Ghemawat and Ghadar describe as “top-line obsession,” a focus on revenue growth rather than profitability growth.1 The link between this perspective and a view of international sales as incremental business is self-evident. And, after all, many firms enter new country-markets through the indirect channel of a local independent distributor or agent, in which case the multinationals will not know their costs and therefore their operating profitability in the markets. Although more mature firms are altering the way they enter and penetrate new international markets, the mixed results in the post-2001 recession demonstrate that this remains a challenging phase of internationalization.
This common mismatch between expectations and situational requirements stems, above all, from a failure to follow in international operations the marketing strategy process that is probably established in the core domestic business. This may be because participation in the market is indirect (i.e., via an independent local distributor or agent, rather than via a directly controlled marketing subsidiary). It also often reflects a lack of control over strategic marketing and a failure to think rigorously about how the business will develop over the course of several years. While it is true that certain distinctive characteristics of an international marketing situation demand a different approach to marketing, this is not a reason for standards of strategic marketing management to be relaxed. This chapter will begin by examining these unique international marketing challenges and then discuss, in turn, several phases of the process of market entry and development, including the following:
• The objectives of market entry, which will have implications for the strategy and organization adopted.
• The choice of market entry mode (i.e., the form of marketing organization through which the company participates in the market). Particular attention will be paid to the low-intensity modes of entry most commonly favored in market entry situations.
• The marketing entry strategy, with a particular focus on the lessons learned from the strategies of western multinationals in emerging markets.
• A framework for the overall evolution of an international marketing strategy.