Svend Hollensen

GLOBAL MARKETING4th Edition

Initiation of internationalization

Lecture by Ewa Baranowska-Prokop, Ph.D.

Hollensen, Global Marketing 4e, © Pearson Education 2008 2-2

Learning objectives

Discuss the reason why firms go international

Explain the difference between proactive and reactive motives

Analyse the triggers of export initiation

Hollensen, Global Marketing 4e, © Pearson Education 2008 2-3

Learning objectives (2)

Explain the difference between internal and external triggers of export initiation

Describe different factors hindering export initiation

Discuss the critical barriers in the process of exporting

Hollensen, Global Marketing 4e, © Pearson Education 2008 2-4

Figure 2.1 Stages of internationalization

Hollensen, Global Marketing 4e, © Pearson Education 2008 2-5

Motives for internationalization

Proactive Profit and growth goals Managerial urge Technology competence Foreign market

opportunities Economies of scale Tax benefits

Reactive Competitive pressures Domestic market Overproduction Unsolicited foreign orders Extend sales of seasonal

products Proximity to international

customers

Hollensen, Global Marketing 4e, © Pearson Education 2008 2-6

What is this?

Internal or external events taking place to initiate internationalization are known as ______.

Internationalization triggers

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Triggers of export initiation

Internal triggersPerceptive

managementSpecific internal eventImporting as inward

internationalization

External triggersMarket demandCompeting firmsTrade associationsOutside experts

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Figure 2.2 Inward/outward internationalization

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Outside experts

Exportagents

Governments

Chambers of commerce

Banks

Hollensen, Global Marketing 4e, © Pearson Education 2008 2-10

Barriers hindering export initiation

Insufficient finances Insufficient

knowledge Lack of foreign

market connections Lack of export

commitment Lack of capital

Lack of productive capacity

Lack of foreign channels of distribution

Management emphasis on developing domestic markets

Cost escalation

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Barriers hindering the process of internationalization

General market risks

Commercial risks

Political risks

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General market risks

Comparative market risksCompetition from other firmsDifferences in product usage Language and cultural differencesDifficulties in finding the right distributorDifferences in product specificationsComplexity of shipping services

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Commercial risks

Exchange rate fluctuationsFailure of export customers to pay due to

contract disputes, bankruptcy, refusal to accept product, or fraud

Delays and/or damage in the export shipment and distribution process

Difficulties in obtaining export financing

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Political risks (1)

Foreign government restrictions National export policyForeign exchange controls imposed by

host governmentsLack of governmental assistance in

overcoming export barriersLack of tax incentives

Hollensen, Global Marketing 4e, © Pearson Education 2008 2-15

Political risks (2)

High value of domestic currency relative to export markets

High foreign tariffs on imported productsConfusing foreign import regulations and

proceduresComplexity of trade documentationEnforcement of national legal codes regulating

exportsCivil strife, revolution, and wars disrupting foreign

markets

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Risk-management strategies

Avoid exporting to high-risk markets

Diversify overseas markets

Insure risks when possible

Structure export business so that buyer bears most risk

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For discussion (1)

Export motives can be classified as reactive or proactive. Give examples of each group of export motives. How would you prioritize these motives? Can you think of motives other than those mentioned in the chapter? What are they?

What is meant by ‘change agents’ in global marketing? Give examples of different types of change agent.

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For discussion (2)

Discuss the most critical barriers to the process of exporting.

What were the most important change agents in the internationalization of Haier (Exhibit 2.2)?

What were the most important export motives in Japanese firms (Exhibit 2.1)?