Tapping into Global Markets

Chapter Objectives

• Steps in going global• Modes of entry into global markets

Global Firm

A firm that operates in more than onecountry and captures R&D, production,

logistical, marketing, and financial advantages in its costs and

reputation that are not available to purelydomestic competitors.

• Factors drawing companies into the international arena:– Global firms offering better products or lower prices

can attack the company’s domestic market.– The company discovers that some foreign markets

present higher profit opportunities than the domestic market.

– The company needs a larger customer base to achieve economies of scale.

– The company wants to reduce its dependence on any one market.

– The company’s customers are going abroad and need servicing.

Deciding Whether To Go Abroad

Deciding Whether To Go Abroad• Before going abroad, the company must weigh

several risk:– The company might not understand foreign customer

preferences and fail to offer a competitively attractive product.

– The company might not understand the foreign country’s business culture or know how to deal effectively with foreign nationals.

– The company might underestimate foreign regulations and incur unexpected costs.

– The company might realize that it lacks managers with international experience.

– The foreign country might change its commercial laws, devalue its currency, or undergo a political revolution and expropriate property.

Blunders in International MarketingHallmark cards failed when they were introduced in France. The French Hallmark cards failed when they were introduced in France. The French dislike syrupy sentiment and prefer writing their own cards.dislike syrupy sentiment and prefer writing their own cards.

Philips began to earn a profit in Japan only after it had reduced the size of Philips began to earn a profit in Japan only after it had reduced the size of its coffeemakers to fit into smaller Japanese kitchens and its shavers to fit its coffeemakers to fit into smaller Japanese kitchens and its shavers to fit smaller Japanese hands.smaller Japanese hands.

Coca-Cola had to withdraw its two-liter bottle in Spain after discovering Coca-Cola had to withdraw its two-liter bottle in Spain after discovering that few Spaniards owned refrigerators with large enough compartments to that few Spaniards owned refrigerators with large enough compartments to accommodate it.accommodate it.

General Foods’ Tang initially failed in France because it was positioned as General Foods’ Tang initially failed in France because it was positioned as a substitute for orange juice at breakfast. The French drink little orange a substitute for orange juice at breakfast. The French drink little orange juice and almost none at breakfast.juice and almost none at breakfast.

Major Decisions in International Marketing

Deciding whether to go

Deciding which markets to enter

Deciding how to enter

Deciding on the marketing program

Deciding on the marketing organization

Four Stages of Internationalization

No regular export activities

Export via independent agents

Establish sales subsidiaries

Establish production facilities abroad

Deciding How to Enter the Market

Five Modes of Entry into Foreign Markets

Five Modes of Entry into Foreign Markets

Indirect exporting

Directexporting

LicensingJoint

venturesDirect

investment

Commitment, Risk, Control, Profit Potential

Indirect Exporting Methods

• Domestic based export merchants• Domestic based export agents• Cooperative organizations• Export management companies

+ Less investmentless risk

Direct Exporting Methods

• Domestic-based export department• Overseas sales branch or subsidiary• Traveling export sales representatives• Foreign-based distributors or agents

• Licensing– Management contracts– Contract manufacturing– Franchising

Deciding How to Enter the Market

Deciding How to Enter the Market

• Joint ventures• Direct investment• The Internationalization Process

– Johanson and Wiedersheim-Paul identified four stages in the internationalization process:

• No regular export activities• Export via independent representatives (agents)• Establishment of one or more sales subsidiaries• Establishment of production facilities abroad

Deciding on the Marketing Program

• Standardized marketing mix• Adapted marketing mix

Five International Product and Promotion Strategies

McDonald’s Franchises Are Sold Worldwide

Global Marketing

Advantages• Economies of scale• Lower marketing costs• Power and scope• Consistency in brand

image• Ability to leverage• Uniformity of marketing

practices

Disadvantages• Differences in consumer

needs, wants, usage patterns

• Differences in consumer response to marketing mix

• Differences in brand development process

• Differences in environment