Reaching Global Markets

1
Reaching Global Markets

• Chapter 7

2
Strategies For Global Market-Entry

• Exporting
• Licensing
• Joint Venture
• Direct Investment

3
Exporting

• Producing goods in one country and selling them
  in another county.
• Advantage
• Avoids substantial costs
• Helps firm establish experience curve
• Disadvantage
• May not be appropriate if lower-cost alternatives
  exist
• High transportation and tariff costs
• Indirect Exporting Sells domestic goods to
  foreign country through an intermediary.
• Direct Exporting Sells goods without an
  intermediary.

4
Exporting

• The Use of Third Party

1. Importer Obtains Banks Promise to Pay on
Importers Behalf
2. Bank Promises Exporter to Pay on Behalf of
Importer
French Importer
Bank
U.S. Exporter
6. Importer Pays Bank
4. Bank Pays Exporter
5. Bank Gives Merchandise
3. Exporter Ships to the Bank
5
Licensing

• An arrangement whereby a licensor grants the
  rights to intangible property (patents,
  inventions, formulas designs, etc.) to another
  entity for a specific period.
• Advantages
• Low development costs and risks
• Disadvantages
• Lack of control over management, marketing, and
  strategy
• Lost control of technological know-how

6
Joint Venture

• Entails the establishment of a firm that is
  jointly owned by two or more otherwise
  independent firms.
• Advantages
• Benefit from partners knowledge of conditions,
  culture, and competition
• Political considerations
• Disadvantages
• Giving control of technology to partner
• Can lead to conflicts and battles for control

7
Direct Investment

• Entails a domestic firm actually investing in and
  owning a foreign subsidiary or division.
• Advantages
• Tight control over technology and operations
• Realized localization and experienced curves of
  economy
• Disadvantages
• Most risky and costly

8
Adapting to the Market

• Product
• Promotion
• Distribution
• Pricing

9
Product

• Product Extension Selling virtually the same
  product in other countries.
• Product Adaptation Changing the product in some
  way to make it more appropriate for a countrys
  climate or consumer preference.
• Product Invention Inventing a totally new
  product designed to satisfy common needs across
  countries.

10
Promotion

• Push versus Pull
• Push Emphasizes Personal Selling
• Pull Relies on Mass Media
• Media Availability?
• Example Vadafone English Mobile Phone Company

11
Distribution

• Distribution Strategy depends on the countrys
  stage in economic development.
• Retail Concentration (Fragmented or
  Concentrated)
• Car Ownership, households with refrigerators, two
  income households
• Channel Length Fragmented retail systems are
  longer.
• Channel Exclusivity Difficulty for outsiders to
  access.

12
Pricing

• Price Discrimination Consumers in different
  countries are charged different prices for the
  same product.
• Keep National Markets Separate
• Gray Market
• Elasticity of Demand
• Dumping when a firm sells a product for a price
  that is less than the cost of producing it.

13
Current World Trade Issues

• Decline of Protectionism
• Economic Integration
• Global Companies

14
Decline of Protectionism

• Protectionism the practice or shielding one or
  more sectors of a country's economy from foreign
  competition through the use of tariffs or quotas.
  
• World Trade Organization
• Decides on trade disputes
• Issues binding decisions

15
Economic Integration

• European Union
• 30 European Countries
• 4 Applicant Countries
• NAFA
• Effective since 1994
• Asian Free Trade Agreement

16
Global Companies

• International Firms
• Multinational Firms
• Multidomestic Marketing Strategies
• Transnational Firms
• Global Marketing Strategy