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Market Offering
Objectives
Factors to Consider Before Going Global Selecting Foreign Markets The Major Ways of Foreign Market Entry Product Adaption for Global Marketing Management & Organization of Global Activities
A global firm
A global firm is a firm that operates in more than one country and captures R&D, logistical, marketing and financial advantages in its cost and reputations that are not available to purely domestic competitors. Global firms plan, operate and coordinate their activities on a worldwide basis.
Several factors are drawing more and more companies into the international arena:
1. Global firms offering better products or lower prices can attack the company's domestic market. The company might want to counterattack these competitors in their home markets. 2. The company discovers that some foreign markets present higher profit opportunities than the domestic market.
Several factors are drawing more and more companies into the international arena:
3. The company needs a larger customer base to achieve economies of scale. 4. The company wants to reduce its dependence on any one market. 5. The company's customers are going abroad and require international servicing.
Before making a decision to abroad, the company must weight several risks:
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 country 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 foreign property
Indirect Exporting
Direct exporting
Licensing
Joint ventures
Direct investment
1. Indirect export: They work through independent intermediaries. Domestic based export merchants buy the manufacturer's products and then sell them abroad. Has two advantage:
It involves less investment, the firm does not have a develop and export department, and overseas sales force, or a set of foreign contacts. It involves less risk; because international marketing intermediaries bring know how and services to the relationship, the seller will normally make fewer mistakes.
2. Direct export:
A company may decide to handle their own exports and can carry on direct exporting in several ways: Domestic-based export department or division. Overseas sales branch or subsidiary.
3.
Licensing: The simple way to become involved in international marketing. The licensor licenses a foreign company to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty. Advantages: The licensor gains entry at little risk; the licensee gains production expertise or a well-known product or brand name. Disadvantages: Less control over the licensee If and when the contract ends, the company might find that it has created a competitor.
Contract Manufacturing:
The firm hires local manufacturers to produce the product. It gives the company less control over the manufacturing process It offers a chance to start faster, with less risk and with the opportunity to form a partnership or buy out the local manufacturer later. It offers a chance to start faster, with less risk and with the opportunity to form a partnership or buy out the local manufacturer later.
Franchising: More complete form of licensing. The franchiser offers a complete brand concept and operating system. In return the franchisee invests in and pays certain fees to the franchiser.
6. Joint Ventures: Foreign investor may join with local investors to create a joint venture company in which they share ownership and control May be necessary and desirable for economic or political reasons The foreign firm might lack the financial, physical or managerial resources to undertake the venture alone. The foreign government might require joint ownership as a condition for entry The partners might disagree over investment, marketing or other policies.
Disadvantages
Differences in consumer needs, wants, and usage patters for products Differences in consumer response to marketing-mix elements Differences in brand and product development and the competitive environment Differences in marketing institutions Differences in administrative procedures.
Adapted Marketing Mix Where the producer adjusts the marketing program to each target market. The argument for adaptation is that every market is different and victory will go to the competitor who best adapts the offer to the local market.
Adapt product
Straight extension
Product adaptation
Product invention
Promotion
Adapt promotion
Communication adaptation
Dual adaptation
Dual adaptation when the company adapts both the product and communication Product invention consists of creating something new for the foreign market (Backward invention , Forward invention).
Pricing Challenges
Multinationals face several pricing problems when selling abroad. 1. Price Escalation 2. Transfer Prices 3. Dumping Charges 4. Gray Markets
Price Escalation
1. Set a uniform price everywhere This strategy would result in the price being too high in poor countries and not high enough in rich countries. 2. Set a market-based price in each country: It could lead to a situation in which intermediaries in low-price countries reship their Coca-Cola to high-price countries. 3. Set a cost based price in each country: This strategy might price the company out of the market in countries where its costs are high.
Transfer Price
If the company charges too high a price to a subsidiary, it may end up paying higher tariff duties, although it may pay lower income taxes in the foreign country. If the company charges too low a price to its subsidiary, it can be charged with dumping.
Dumping charges
It occurs when a company charges either less than its costs or less than it charges in its home market, in order to enter or win the market.
Gray Market
Consists of branded products diverted from normal or authorized distributions channels in the country of product origin or across international borders. Dealers in the lowprice country find ways to sell some of their products in higher-prices countries.
Distribution Channels
Seller
Sellers international marketing headquarters
2. The more favorable a countrys image, the more prominently the Made in lable should be displayed. 3. The impact of country of origin varies with the type of product. 4. Certain countries enjoy a reputation for certain goods. 5. Sometimes country of-origin perception can encompass an entire countrys products.
Export Department
A firm normally gets into international marketing by shipping out its goods. If its sales expand, the company organizes an export department consisting of a sales manger and a few assistants. As sales increases, the export department is expanded to include various marketing services. If the firms moves into joint ventures or direct investment, the export department will no longer be adequate to manage international operations.
International Division
When companies become involved in several international markets and ventures they will create international divisions to handle all their international activity, this division is headed by a division president, who sets goals and budgets and is responsible for the company's international growth. The international divisions corporate staff consists of functional specialists who provide services to various operating units.
Global Organization
Three organizational strategies: 1. a global strategy treats the world as a single market This strategy is warranted when the forces for global integration are strong and the forces for national responsiveness are weak. This is true of the consumer electronics market.
A global strategy standardizes certain core elements and localize other elements
This strategy makes sense for an industry (such as telecommunications) where each nation requires some adaptation of its equipment, but the providing company can also standardize some of the core components.