Exam 8: Managing Entry and Exit Decisions

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Benefits
As a pioneering company entering Myanmar, KFC could gain first-mover advantages:
1. As the first global brand, KFC may attract a sizable group of customers and gain brand reputation. It has achieved similar brand recognition with McDonald's in China and Vietnam.
2. KFC may potentially build sales volume faster than later entrants, leading to cost advantages based on economies of scale and learning benefits. Thanks to its early entry, KFC's operations in China are much bigger than McDonald's.
3. Early movers may get priority access to local resources, such as scarce materials, distribution channels, infrastructure, and government support. As the first American restaurant in China and Vietnam, KFC enjoyed favorable public attention.
4. Once KFC developed its market power, the company could shape industry structure and preempt rivals.
Drawbacks
However, there are also disadvantages associated with early entry:
1. When entering a newly opened country, early movers often suffer from environment uncertainty.
2. Due to unfamiliarity with the foreign market, early movers must bear the pioneering costs (e.g., educating customers, adapting products, mistakes and failures).
3. Early movers may create learning opportunities for later entrants. For instance, McDonald's could learn from KFC's successes and mistakes and improve their own entry strategy.

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A home replication strategy may be used when a company has a proprietary product or service that faces limited competition abroad. In Canada, however, Target faced unexpected operational costs, different consumer preferences, and increased competition from established retailers.
1. Business costs are generally higher in Canada. Some unique local regulations require additional costs. The country's relatively small market makes it harder to obtain economies of scale. Eventually, Target stores in Canada charged higher prices and offered less merchandise.
2. Although many Canadians shop across borders, their preferences can be quite different from U.S. shoppers. Walmart's Canadian unit carries only 20% of the products sold in its U.S. stores, but offers a variety of products that are popular in Canada. As the Nordstrom executive stated, "You can't just say that we are close in proximity or we both speak English, so it should be the same."
3. Target's stores in Canada faced competition from their own stores in the U.S. as most Canadians live near the border and can easily shop in the U.S. for lower prices. Also, to fend off Target, established retailers increased their competitive efforts.
Given these considerations, the home replication strategy was not right for Target in Canada. Canada did present some opportunities for Target due to the country being geographically close, but Target had previously established brand recognition among cross-border shoppers. Acquisition seemed a more appropriate entry mode. Due to a shortage of retail spaces in prime locations, Target acquired Zellers stores to obtain an immediate presence in Canada.