GMS 522 Chapter 6 Modes of Market Entry

·         Planning and execution of an international venture must be incorporated into the firms strategic management process

·         Proactive motivations: profit advantage, unique product technological advantages, exclusive information, managerial urge, tax benefit, economies of scale

·         Reactive motivations: competitive pressure, overproduction, declining domestic sales, excess capacity, saturated domestic market, proximity to customers and ports 


Psychological distance: cultural variables, legal factors, other societal norms make a foreign market that is geographically close seen psychologically distant . Example: US and Canada vs. US and Mexico

·         Two major issues in the context of psychological distance

·         Distance seen by firms is based on perception not reality: too much focus on similarities may let the firm loose sight of differences

·         Motivations of the firm do not seem to shift dramatically over the short term but are stable (proactive or reactive)

Waterfall strategy: company gradually moves its products and services overseas markets, start with psychologically close markets, then moves to more risky developing country markets
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