16.7: Global Entry Strategies II

Global Market Entry Strategies: Management Contracting, Joint Ventures, and Franchising

Management contracting, joint ventures, and franchising are additional global market entry strategies that allow firms to enter foreign markets while minimizing financial risks and maintaining operational control. Each of these strategies is suited to different business objectives.

Management contracting involves providing managerial expertise to foreign businesses in exchange for a fee. This strategy allows firms to enter new markets with minimal capital investment. Marriott International's strategy exemplifies this approach, where it manages international hotels without owning the properties, allowing it to expand its global footprint while leveraging its management skills and brand recognition.

A joint venture is a partnership between two or more entities to share resources, ownership, and control over a specific business objective. Joint ventures allow firms to pool expertise and enter new markets without taking on the full burden of risks. A notable example is MillerCoors, a joint venture between SABMiller and Molson Coors, which allowed both companies to consolidate resources and expertise to distribute their beer brands across the United States and Puerto Rico.

On the other hand, franchising allows a company to grant foreign entities the right to operate under its brand name. This strategy involves lower financial commitment from the franchisor but requires careful management of brand standards. McDonald's successful global expansion through franchising showcases this approach, as it enables rapid entry into new markets while maintaining control over brand integrity and operational standards.

Management Contracting, Joint Ventures, and Franchising are the global market entry strategies that leverage local market knowledge, enable rapid expansion, and mitigate financial risks while emphasizing brand integrity.

Management contracting involves providing managerial expertise to a foreign business without substantial capital commitment.

Marriott International uses this strategy by managing foreign hotel operations for a fee instead of owning the property, leveraging its brand name and management skills.

A Joint Venture involves partnering with a foreign entity to share ownership and resources to achieve a specific goal.

For instance, MillerCoors is a joint venture formed by SABMiller and Molson Coors to manage and distribute their beer brands in the United States and Puerto Rico. This partnership allows both companies to consolidate their resources and expertise to reach these markets effectively.

Franchising involves granting a foreign entity the right to operate under the brand name for a fee. McDonald's successfully uses this low-investment, high-control strategy. It enables rapid international expansion but risks diluting brand value if standards are not maintained.

• Global Entry Strategy - Methods used by firms to enter foreign markets while controlling risks and operations.
• Management Contracting - Strategy of providing managerial expertise to foreign businesses for a fee.
• Joint Venture - A partnership formed to share resources, ownership and control over business objectives.
• Franchising - Granting foreign entities the right to operate under a company's brand name.
• Market Entry Strategies - Tactics that businesses develop to enter new markets effectively.

• Define Global Entry Strategy - Explain the methods used by companies to enter foreign markets (e.g., Franchising, Management Contracting).
• Contrast Joint Ventures vs Franchising - Highlight key differences between shared partnerships and granting usage rights (e.g., shared resources vs maintaining brand standards).
• Explore Examples - Describe instances of global market entry strategies (e.g., Marriott International's Management Contracting).
• Explain the process of forming a Joint Venture - Highlight how companies form collaborative partnerships.
• Application of Global Entry Strategy - Discuss how these strategies can be practically implemented.

• What are global entry strategies and how do they help in tackling operational and financial risks?
• How does management contracting contribute to the global market entry strategy?
• What is the difference between joint ventures and franchising in terms of risk and control?

• Business Students – Understand how global entry strategy can shape business growth and expansion
• Entrepreneurs - Provides insight into how operational risks can be mitigated while venturing into foreign markets
• Market Researchers - Assists in formulating effective strategies for entering new markets
• Economists - Helps in studying the effects of business strategies on global economies