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U.S. Globalization
Many U.S. companies have made the world their market.
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Groups of nations organized to work toward common goals in the regulation of international trade.
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Discussion Question
like to see higher tariffs and what types would like to see lower tariffs or no tariffs? Why is this the case?
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Industrial Structure
Shapes a countrys product and service needs,
income levels, and employment levels.
Subsistence Economies Raw Material Exporting Economies
Industrializing Economies
Industrial Economies
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Political-Legal Environment
Attitudes Toward International Buying Government Bureaucracy
Political Stability
Monetary Regulations
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Cultural Environment
Sellers must examine the ways consumers
in different countries think about and use products before planning a marketing program. Business norms vary from country to country. Companies that understand cultural nuances can use them to advantage when positioning products internationally.
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Cultural Differences
When Nike learned that this stylized Air logo resembled Allah in Arabic script, it apologized and pulled the shoes from distribution.
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Using aggressive promotional and educational programs, Colgate has expanded its market share from 7% to 35% in less than a decade.
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Approaches:
Licensing Contract manufacturing Management contracting Joint ownership
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Joint Ownership
KFC entered Japan through a joint ownership venture with Japanese conglomerate Mitsubishi.
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In India, McDonalds serves chicken, fish, and vegetable burgers, and the Maharaja Mactwo all-mutton patties, special sauce, lettuce, cheese, pickles, onions, on a sesame-seed bun.
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Product Adaptation:
Adapting a product to meet local conditions or wants in foreign markets.
Product Invention:
Creating new products or services for foreign markets.
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domestic prices because of price escalation. Companies may become guilty of dumping a foreign subsidiary charges less than its costs or less than it charges in its home market.
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International Pricing
European Union countries have adopted the euro as a common currency, creating pricing transparency and forcing companies to harmonize their prices throughout Europe.
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Nestl is the worlds biggest marketer of infant formula, powdered milk, instant coffee, chocolate, soups, and mineral water
The Nestl way is to dominate its markets can be summarized in four points: think and plan long term decentralize stick to what you know, and adapt to local tastes
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Economies of scale in production and marketing can be important competitive advantages for global companies Unifying product development, purchasing, and supply activities across several countries it can save costs Transfer of experience and know-how across countries through improved coordination and integration of marketing activities Diversity of markets by spreading the portfolio of markets served brings an important stability of revenues and operations to many global firms
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Structurally, planning may be viewed as (1) corporate, (2) strategic, or (3) tactical International corporate planning is essentially long term, incorporating generalized goals for the enterprise as a whole Strategic planning is conducted at the highest levels of management and deals with products, capital, and research, and long- and short-term goals of the company Tactical planning, or market planning, pertains to specific actions and to the allocation of resources used to implement strategic planning goals in specific markets
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The answers to three major questions are sought in Phase 2: (a) Are there identifiable market segments that allow for common marketing mix tactics across countries? (b) Which cultural/environmental adaptations are necessary for successful acceptance of the marketing mix? (c) Will adaptation costs allow profitable market entry?
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Selecting country market Choosing entry mode Deciding entry timing Making marketing decisions
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Motivations to Internationalize
Proactive Motivations Profit advantage Unique products Technological advantage Exclusive information Managerial urge Tax benefit of a Foreign Sales Corporation (FSC) Economies of scale
Reactive Motivations Competitive pressures Overproduction Stagnant or declining domestic sales Excess production or service capacity Saturated domestic markets Proximity to customers and ports
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Change Agents
Exporting
Direct exporting - firm handles all tasks
to sell within host countries Indirect exporting - firm delegates the exporting tasks to an intermediary
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Exporting
Advantages
Minimizes political risk Useful when market potential is hard to assess Offers channel flexibility Prepares firm for greater involvement Offers ease in market withdrawal
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Exporting
Disadvantages
Exchange rate fluctuations and governmental intervention can affect earnings Lack of market presence can affect response time Loss of marketing control can affect corporate image
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Potential Export Problems Logistics Legal Procedure Servicing Exports Promotion Foreign Market Intelligence
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Exporting
Government Programs That Discourage Imports
Tariffs Ad Valorem Duties Specific Duties Nontariff Barriers Quotas Discriminatory Procurement Policies Restrictive Custom Procedures Selective Monetary Controls Restrictive Administrative and Technical Regulations
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Exporting
Government Programs That Discourage
Imports Duties and Import Charges Antidumping Duties Countervailing Duties Temporary Import Surcharge Compensatory Import Taxes
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Export Intermediaries
Specialize in bringing firms or their products and
services to the global market. Cover the international marketing knowledge and performance gaps of firms Provide contacts with buyers abroad, call on customers, and handle delivery of goods
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Export Intermediaries
Examples of facilitating intermediaries
Export Management Companies (EMCs) Webb-Pomerene Associations Trading Companies
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Webb-Pomerene Associations
Associations of firms which are legally
permitted under an antitrust exemption to cooperate in market allocation, quota fixing, and selection of distributors and brokers in international markets so long as such activities do not reduce competition within the United States.
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Trading Companies
Early trading companies
East India Company of the Netherlands British East India Company French East India Company
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ETC legislation has improved the performance of small- and medium-sized firms. An ETC can
deliver a wide variety of services. be an agent. purchase products. act as a distributor abroad. An ETC must balance the demands of the market and the supply of the members to be successful.
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Differentiated
Requires a AboveAverage Capability in Promotion, but an Average Capability in Market Contact, and Consolidation
Requires a AboveAverage Capability in Promotion, Market Contact, and Consolidation
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Where to Enter?
Location-Specific Advantages Location-Specific Advantages
Geographical features difficult to match by others. Singapore, Austria, Turkey, Miami Clustering of economic activities (agglomeration). Knowledge spillover among closely located firms
Where to Enter? Cultural/Institutional Distances and Foreign Entry Locations Cultural Distance The difference between two cultures along some identifiable dimensions (such as power distance). Institutional Distance The extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries. Firms from common-law countries are more likely to be interested in other common-law countries Colony-colonizer links boost trade by 900% (e.g. Great Britain Commonwealth countries and France West Africa)
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When to Enter?
Although first movers may have an opportunity to gain advantage, pioneering status is not a birthright for success
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How to Enter?
Scale of Entry: Commitment and Experience Large-Scale Entries
Benefits A demonstration of strategic commitment to
certain markets, which both assures local customers and suppliers and deters potential entrants.
elsewhere. Entrants must incur sizable losses if the largescale entry bet turns out to be wrong.
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Given the complexity, strategists must prioritize by considering only a few manageable key variables first and then consider other variables later.
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Source: Adapted from Y. Pan & D. Tse, 2000, The hierarchical model of market entry modes (p. 538), Journal of International Business Studies, 31: 535554.
Figure 6.3
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The crucial first step: equity or non-equity modes This is what defines a multinational enterprise (MNE) and
a non-MNE Equity modes: Through foreign direct investment (FDI) Direct control and management of value-adding activities overseaskey word is direct, as opposed to foreign portfolio investment (FPI) If a firm does not have FDI, it can still engage in international business (through non-equity modes), but it is not an MNE.
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Competitive Situation
Product Strategies
New Product
Product development Product introduction Product performance management
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Product Uniqueness
Type of Product
Firms International Experience Product Adaptation - Upon Entry - After Entry Product Adaptation - Upon Entry Promotion Adaptation - After Entry - Positioning Promotion Adaptation - Packaging/Labeling Positioning - Promotional Approachh Packaging/Labeling
Entry Scope
Source: S.T. Cavusgil, Shaoming Zou, and G.M. Naidu. Product and Promotion Adaptation in Export Venturs: An Empirical Investigation, Journal of International Business Studies 24, no 3, (1993,485. 15-69
Interface i.n
Subsystem C
Subsystem B
Commondesign Design Rules and Tools Common Rules and Tools
Competencies
Market Insights
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25 20 15 10 5 0
After Before
Shapes
Fragrances
Packages
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