Lecture 7: Target Markets and Modes of Entry

Question 1

describe ethiopia as a potential emerging market (with regards to government mostly)

Answer 1

*1974 – 1991 ruled by Soviet-backed military.
- Suffered a serries of famines
Known for poverty
- Not a great destination for MNCs

*1991 – the page turns
- Democratic party rules
- New constitution, new government
- Single party state = stability
- Privatization of state-owned enterprises
- Tax cuts
- Creating favorable situation for foreign investment

Question 2

describe ethiopia from 2003-2013 as a potential emerging market

Answer 2

*Population: +30% to 94 million people
*GDP: from B$8.6 to B$47.5
*Growing services and agriculture sectors
*Ranked 6th out of 54 sub-Saharan Africa in terms of market opportunities
*Massive gov investment in key industries, still.
Gov. monopolies in certain sectors and unfair competition.
*Protectionist policies parallel to FDI

Question 3

what are the 4 main things to consider with regards to measuring market attractiveness?

Answer 3

1. Market size and growth rate
2. Institutional context
3. Competitive environment
4. Distances

Question 4

what are the five components of institutional context?

Answer 4

1. Political & social systems
2. Openness
3. Product markets
4. Labor markets
5. Capital markets

Question 5

What are the four kinds of distances?

Answer 5

1. Cultural distance
2. Administrative distance
3. Geographic distance
4. Economic distance

Question 6

Using Ethiopia as an example, what are some points to consider before investing in a new, especially emerging, market? (7)

Answer 6

1. Infrastructure
2. Human resources
3. Limited Competition
4. Fragmented distribution channels
5. Cross-cultural adaption and customer relations
6. Intellectual Property
7. Corruption

Question 7

What are some modes of entry?

Answer 7

1. local agent or importer
2. Licensing agreement
3. Joint venture
4. subsidiary (greenfield)