entering global market

7/29/2019 Entering Global Market

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AMAs Definition of Marketing:Marketing is the process of planning and

executing the conception, pricing,

promotion, and distribution of ideas,goods, and services to create exchanges

that satisfy individual and organizational

objectives


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Global Marketing:

the coordinated performance of

marketing activities to create exchanges

across countries that satisfy individual,

organizational , and societal objectives.

Global marketing is conducted across

countries (not domestic or foreign)


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Global marketing coordinates activities

across different country markets

Global marketing should be motivated by

individual, organizational, and societal

goals

Economic, Financial, Political, and

Cultural Environmental of Each CountryAffect marketing


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Why Should Firms Engage in Global

Marketing?

To Survive and Grow

1. Learn to satisfy consumers in diverseconditions

2. Manage marketing tasks more efficiently andeffectively

3. Preempt or counter competitive attacks in

more than one market4. Expand customer base to include developedand developing nations


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To Diversify Product and Market

Portfolios and Improve competitiveness1. Effects of seasonal and cyclical

fluctuations in one market offset by others

2. Diversification increases market size and

enhances economies of scale


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To Capitalize on the Attractiveness of

Additional Country Markets

1. The U.S. is attractive-but wont

accommodate unlimited growth2. Expand market size by expanding into

other countries


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To Operate Within a Global Marketplace

1. Goods, services, capital, technology, and

labor are going global

2. Reduced government restrictions areaffecting global marketing

3. Bilateral and multilateral negotiations

are reducing restrictions


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Global Market Entry Strategies:

Exporting as an Entry Strategy:

Exporting represents the least commitment onthe part of the firm entering a foreign market

Since many countries do not offer a largeenough opportunity to justify localproduction, exporting allows a company to

centrally manufacture its products for severalmarkets and therefore to obtain economies ofscale.


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Indirect Exporting:

Several types of intermediaries located in the

domestic market are ready to assist a

manufacturer in contacting international

markets or buyers.

The major advantage for managers using a

domestic intermediary lies in that individual`s

knowledge of foreign market conditions.


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Direct Exporting:

Direct exporting includes setting up an exportdepartment within the firm or having the firm`ssales force sell directly to foreign customers ormarketing intermediaries.

A company engages in direct exporting when itexports through intermediaries located in theforeign markets.

this method of market entry provides thecompany with a greater degree of control over itsdistribution channels than would indirectexporting.


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Foreign Production as an Entry

Strategy:

Many companies realize that to serve

local customers better, exporting into

that market is not a sufficiently strongcommitment to realize strong local

presence. As a result, these companies

look for ways to strengthen their base byentering into one of several ways to

manufacture.


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Licensing:

Licensing is similar to contract manufacturing,

as the foreign licensee receives specifications

for producing products locally, but the licensor

generally receives a set fee or royalty rather

than finished products.

Licensing may offer the foreign firm access to

brands, trademarks, trade secrets or patentsassociated with products manufactured.


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Using licensing as a method of market entry, a

company can gain market presence withoutan equity (capital) investment.

The foreign company, or licensee gains the

right to commercially exploit the patent ortrademark on either an exclusive (the

exclusive right to a certain geographic region)

or an unrestricted basis.


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Franchising:

Franchising is a special form of licensing inwhich the franchiser makes a total marketingprogram available including the brand name,

logo, products and method of operation. Usually the franchise agreement is more

comprehensive than a regular licensingagreement

About 80 percent of all McDonald`srestaurants are franchised


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Local Manufacturing:

Many companies find it to their advantage tomanufacture locally instead of supplying theparticular market with products made

elsewhere. Numerous factors such as local costs, market

size, tariffs, laws and political considerationsmay affect a choice to manufacture locally.

it may be contract manufacturing, assembly orfully integrated production.


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Under contract manufacturing, a companyarranges to have its products manufactured by an

independent local company on a contractualbasis.

A firm contracts with a foreign firm tomanufacture parts or finished products or toassemble parts into finished products.

The manufacturer`s responsibility is restricted toproduction. Afterward, products are turned over

to the international company which usuallyassumes the marketing responsibilities for sales,promotion and distribution.


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Lower labor costs abroad are the major incentivefor using this entry mode.

In an assembly operation, the international firmlocates a portion of the manufacturing process inthe foreign country. Typically, assembly consistsonly of the last stages of manufacturing and

depends on the ready supply of components ormanufactured parts to be shipped in fromanother country.

Assembly usually involves heavy use of laborrather than extensive investment in equipments.

Motor vehicle manufacturers and electronicsindustries have made extensive use of assemblyoperations in numerous countries.


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Establishing a fully integrated local productionunit involves the greatest commitment a

company can make for a foreign market. Since building a plant involves a substantial outlay

in capital, companies only do so where demandappears assured.

the primary reason is to take advantage of lowercosts in a country, thus providing a better basisfor competing with local firms or other foreigncompanies already present.

Also, high transportation costs and tariffs maymake imported goods uncompetitive.


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Ownership Strategies:

Joint Ventures: In a joint venture, an investing

firm owns roughly 25 to 75 percent of a foreign

firm, allowing the investing firm to affect

management decisions of the foreign firm.

the foreign company invites an outside partner to

share stock ownership in the new unit. The

particular participation of the partners may vary,with some companies accepting either a minority

or majority position


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A company whose common stock is 100%

owned by another company, called the parentcompany. A company can become a wholly

owned subsidiary through acquisition by the

parent company.

This arrangement is common among high-tech

companies who want to retain complete

control and ownership of their technology.


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Strategic Alliances: In an alliance, two entire

firms pool their skills and resources directly in

a collaboration and each expects to profit

from the other`s experience.

Although a new entity may be formed, it is not

a requirement.

Alliances can be in the forms of technology-

based alliances, production-based alliances or

distribution-based alliances.


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Entering Markets Through Mergers

and Acquisitions:

the need to enter markets more quickly than throughbuilding a base from scratch or entering some type ofcollaboration has made the acquisition route extremelyattractive.

A major advantage of acquisitions is that they canquickly position a firm in a new business. By purchasingan existing player, a firm does not have to take the timeto establish its presence.

Acquiring an existing firm also takes a potential

competitor out of the market. acquisitions can be a very expensive way to enter a

market.

entering global market

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