8-1

Export selling basically presents an extension strategy whereby products are offered for sale
outside the home country without adaptation. The mindset of export selling is, “Here’s the
product, take it or leave it.” One symptom of export selling would be providing sales literature in
the home country language only. Export marketing, by contrast represents willingness to adapt
one or more of the marketing mix elements as required by the characteristics of the target
market.

8-2
Seven stages:
1. The firm is unwilling to export.
2. The firm fills unsolicited export orders but does not pursue unsolicited orders.
3. The firm explores the feasibility of exporting.
4. The firm exports to one or more markets on a trial basis.
5. The firm is an experienced exporter to one or more markets.
6. The firm pursues country- or region-focused marketing based on certain criteria (e.g., all
countries where English).
7. The firm evaluates global market potential before screening for the “best” target markets to
include in its marketing strategy and plan.

8-3
First and foremost, governments can impose duties on imports. In addition, most
governments utilize nontariff trade barriers that serve as deterrents or obstacles to imports from
other countries. NTBS include quotas, discriminatory procurement policies, restrictive customs
procedures,
8-4
Ad valorem duties are expressed as a percentage of the customs value of particular goods.
For example, China has imposed a 60 percent duty pm 35mm imports; the U.S. imposes a 25
percent duty on light trucks imported from Japan.
Specific duties are expressed as a specific amount (in the importing country’s currency) per
some unit of measurement. For example, prior to NAFTA, the specific duty on Mexican tomato
imports into the United States was 1.4 cents per pound; after NAFTA passed, the duty was
lowered to 1 cent per pound.
Antidumping duties are imposed on products from producers that have set export prices at
unfairly low prices. Pasta makers in Italy and Turkey were assessed antidumping duties after the
International Trade Administration ruled the companies were selling pasta below fair value and
injuring American producers.
Countervailing duties are designed to offset government subsidies in the exporting country.
8-5
The global financial crisis is undermining the ability of firms of all sizes to get the financing
they depend on for trade. Compounding the problem is the fact that the trade fiancé is drying up
in key emerging markets.

8-6
A letter of credit constitutes an agreement whereby an importer’s bank assumes the
obligation of payment on behalf of the importer. The seller is assured of payment, because the
bank guarantees payment as long as the seller complies with the terms in the L/C. A
documentary collection is a negotiable bill of exchange that can be transferred from one party to
another. When a bill of exchange is used, banks are involved but do not bear financial risk. Other
forms of payment include cash in advance (usually via wire transfer), sales on open account, and
sales on a consignment basis.

Chapter 9
9-1
Advantages: 1. Low cost entry alternative
2. Allows licensor to circumvent tariffs, quotas, or similar export barriers
3. Limits political risk and risk of expropriation
Disadvantages: 1. A limited form of participation; licensor generally has no control on marketing
program associated with product produced under license.
2. Financial upside limited by royalty rate.
3. Licensees can become competitors.

9-2
Assuming XYZ is a small manufacturer with limited international experience, and
if the picture for both market and sales (market share) potential are promising, licensing can be
an attractive entry mode. Possibly entry into the Japanese market could be expedited by
following this approach, especially if distribution would be a problem. However, XYZ must
carefully study the geographic scope of the agreement. Should licensed product be marketed
only in Japan? Another concern for XYZ is that the licensee will become a stronger competitor
once it has absorbed XYZ’s know-how. XYZ may wish to investigate other potential licensees
before making a final decision. XYZ must also ensure that its patents are protected in Japan.
Overall, as Root (1994, 119) notes, “managers can rationally choose licensing as a primary
entry mode only when they compare the expected profitability of a proposed licensing venture
with the expected profitability of alternative entry modes.” Root suggests profit contribution
analysis based on projections of incremental revenues and incremental costs associated with the
licensing agreement.
Incremental revenues (excluding royalty revenues) for life of agreement:
Lump-sum royalties; Technical-assistance fees; Engineering/construction fees; Equity
shares in licensee; Dividends on equity shares
Incremental costs for life of agreement:
Opportunity costs: Loss of current export revenues (if company currently exports)
Start-Up Costs: Target market research; Acquisition of local patent/trademark protection;
Negotiation of licensing agreement; Training licensee’s employees
Ongoing Costs: Periodic training/updating of licensee; Maintaining local patent/trademark
protection; Quality supervision and tests

9-3
1. Joint Ventures:
Advantages: (a) Allows for sharing of risk and combining complementary strengths, especially
local market knowledge of target market partner.
(b) May be the entry mode most strongly supported by target market government.
Disadvantages: (a) Corporate cultures and other interests of foreign partner and local partner
may clash.
(b) Lack of mutual understanding frequently leads to “divorce.”
(c) Sharing means less control than in 100 percent ownership.
2. Direct Investment/Acquisition/Ownership:
Advantages: (a) Acquisition can profit instant market access.
(b) Provides opportunities for technology transfer to parent.
Disadvantages: (a) Problems may arise from efforts to integrate acquisitions into parent company.
(b) Requires greatest commitment of capital and managerial effort.
(c) Investment and ownership may evoke suspicion about foreign company
exploitation. American companies in particular may be targets of accusations about “cultural
imperialism.” Political risk is higher compared with other entry modes.

1. What is meant by the phrase global strategic partnership? In what ways does this form of
market entry strategy differ from more traditional forms such as joint ventures?
The three key characteristics are independence subsequent to the formation of the alliance, a
sharing of benefits as well as control over task performance, and ongoing contributions by both
participants to technology-to-technology and other key strategic areas.
The type of joint ventures described in the chapter represents market entry strategies for a
particular country market. For example, a great deal of the foreign direct investment in joint
ventures in emerging markets such as India and China is for the purpose of gaining market access
and serving the local market. GSPs such as Snecma are designed to serve world markets. The
partners pool information, technology, and resources.
According to Perlmutter and Heenan, in a true GSP:
Two or more companies develop long-term strategies for achieving world leadership. The
relationship is reciprocal. Vision and efforts are truly equal. Lateral transfer of resources is
essential. Participants continue to compete as distinct entities in markets not included in the
agreement.
The success factors discussed in the chapter include the following:
Mission that crates win-win situation. One company may form different GSPs with various
partners; strategy must be thought out in advance. Partners must be on equal footing in matters
of governance. Differences in corporate cultures must be explicitly recognized and managed
accordingly. Some conflict is to be expected. Innovative designs (matrix etc.) may be required.
Appropriate decision-making processes must be adopted.

9-4
In its most general sense, the word keiretsu refers to connections between different companies.
Japanese Keiretsu consists of a group of large companies with ties to a powerful bank, such as
Mitsubishi Group. In Japan’s automobile industry, keiretsu take the form of vertical hierarchical
relationships between the automakers and various component-manufacturing groups. Toyota is
cited as an example in the chapter; other keiretsu include Nissan and Honda. In the consumer
electronics industry, keiretsu alliances are forged between manufacturers and retailers.
Matsushita is a case in point; other keiretsu in the electronics industry are the Hitachi Group, the
Toshiba Group, and the Sony Group.
The presence of keiretsu can make it difficult for foreign companies to gain access to the
Japanese market.

2. Which strategic options for market entry or expansion would a small company be likely to
pursue? A large company?
Companies must address issues of marketing and value chain management before deciding to
enter or expand their share of global markets by means of licensing or some form of direct
investment. The particular market entry strategy company executives choose depends on their
vision, attitude toward risk, how much investment capital is available, and how much control is
sought.

Chapter 10
1. What is the difference between a product and a brand?
A product can be defined as a collection of tangible and intangible attributes. The former
include physical features, design attributes, and packaging. The chrome on a Harley-Davidson
motorcycle is a physical attribute, as are cup holders in a minivan. Intangible product attributes
include such things as reputation, mystique, or a distinguished heritage.
A brand is defined in the text as a symbol about which consumers have beliefs or
perceptions. A more complete definition would describe a brand as a complex bundle of images,
promises, and experiences in the customer’s mind that represent a promise by a particular
company about a particular product. In other words, brand represents the relationship that
marketing has established with a customer.

2. How do local, international, and global products differ? Cite examples.

 A local product or brand is perceived to have potential in a single national or regional market.
Coca-Cola’s Georgia-brand canned coffee is an example cited in the text. Vegemite is a vegetable
food spread popular only in Australia. International products or brands are those originally
intended for a single home-country market or a specific geographic region; however, marketers
are aware of extension possibilities. For example, GE recently experienced success in exporting
full-sized refrigerators to Japan where consumers have responded favorably to the simple designs.
A typical Japanese refrigerator from Matsushita has three doors and a special chilling
compartment for fish. The Smart car is an example of an international product; it was specifically
designed for the needs of the European market. If the European launch is successful, Smart may
be exported to the U.S. and other markets. Global products are designed to meet the needs of a
global market rather than the needs of an individual country market or a well-defined regional
market. The Sony Walkman, Colgate’s Total toothpaste, and Cisco Systems’ network routers are
all examples of products developed for the global market.

3. What are some of the elements that make up a brand? Are these elements tangible or
intangible?
At the heart of the brand is a person’s expertise with it. In addition, the brand name and
logo, company name, packaging, after-sales service, and attitudes of family and friends help
define the brand. These elements are intangible; however, many brands include tangible aspects.
Examples include the contoured Coke bottle, the three-pronged Mercedes hood ornament.

4. What criteria should global marketers consider when making product design decisions?
A standardized global product platform can offer potential cost savings. Customer
preferences, costs, country laws and regulations, and environmental compatibility are all noted in
the text as factors affecting design decisions. For example, Europe’s Single Market means a
common harmonized standard for many products. This creates an opportunity for many
companies to design pan-European products, subject to remaining cultural differences between
European countries. However, product safety provisions in Europe are still established on a
country-by-country basis.

5. How can buyer attitudes about a product’s country of origin affect marketing strategy?
In its most general sense, the word keiretsu refers to connections between different
companies. Japanese Keiretsu consists of a group of large companies with ties to a powerful bank,
such as Mitsubishi Group. In Japan’s automobile industry, keiretsu take the form of vertical
hierarchical relationships between the automakers and various component-manufacturing
groups. Toyota is cited as an example in the chapter; other keiretsu include Nissan and Honda. In
the consumer electronics industry, keiretsu alliances are forged between manufacturers and
retailers. Matsushita is a case in point; other keiretsu in the electronics industry are the Hitachi
Group, the Toshiba Group, and the Sony Group.
The presence of keiretsu can make it difficult for foreign companies to gain access to the
Japanese market.

7. Briefly describe various combinations of product-communication strategies available to

global marketers. When is it appropriate to use each?
Keegan’s product-communication strategy mix is a conceptual tool that has been widely
cited in the marketing literature.
Four strategies and their uses include:
(1) Product-Communication Extension, used when a product fulfills the same function and
use conditions are the same
(2) Product Extension/Communication Adaptation, used when a product fulfills the same
function but use conditions are different.
 (3) Product/Communication Adaptation, used when both need to be fulfilled and use
conditions are different.
(4) Invention, used to satisfy needs on a worldwide basis using a new communications
strategy.

8. Compare and contrast the three categories of innovation discussed in the chapter. Which
type of innovation do flat-panel widescreen HDTVs represent?
The 3 different types of innovations are: Dynamically continuous innovations; Continuous
innovations; Discontinuous innovations
(1) Dynamically continuous innovations refer to products that share certain features with earlier
generations while incorporating new features (e.g., Sony\'s Walkman). Such products cause
relatively smaller disruptions of previously existing consumption patterns.
(2) Continuous innovation refers to products that are “new and improved” versions of existing
ones and require less R&D expenditure to develop than dynamically continuous innovations.
Continuous innovations cause minimal disruption of existing consumption patterns and require
the least amount of learning.
The Flat-screen TV is a continuous innovation although it represents a departure from the
cathode-ray tube (CRT) technology. Thanks to innovative liquid-crystal display (LCD) and
plasma-gas technologies used to manufacture screens for personal computers, TV sets are sleek,
sexy, and cool. With their sharper, brighter pictures, they enhance the enjoyment of viewing
wide-screen DVD movies at home.
(3) These types of innovations include the totally new inventions or innovations, where it a new
concept altogether and involves sufficient learning on part of the user. These are called
discontinuous innovations since they are ‘new and different’ and represent a ‘break’ with the
past. The introduction of the VCR in the 1970s is an example of disc
ontinuous innovation.