CH20: Tapping into Global Markets Flashcards
reasons to enter international markets
- better profit opportunities
- economies of scale
- reduce dependence on a single market
- counterattack global competitors
- serve customers who require international service
headwinds faced when going international
- new languages and laws
- volatility of currencies
- political and legal uncertainties
- different customer needs and expectations
2 major types of risks associated with going abroad
- general risks
- specific risks (specific to that country)
the 5 stages of decisions in international marketing
- whether to go abroad
- which markets to enter
- how to enter those markets
- what marketing program to use
- how to structure marketing organization
waterfall approach to international marketing
gradually entering countries in sequence; allows firms to carefully plan expansion and is less likely to strain resources
sprinkler approach to international marketing
entering many countries simultaneously; for use when first-mover advantage is crucial and there is a high degree of competitive intensity
the main drawbacks to the sprinkler method
- substantial resources needed
- difficult to plan entry strategies for multiple diverse markets
the 2 types of proximity
- physical proximity
- cultural proximity
considerations when marketing to emerging economies
- smaller packaging and lower prices
- vast majority of customers buy from very small local shops
the 5 modes of entry into foreign markets
- indirect exporting
- direct exporting
- licensing
- joint venture
- direct investment
indirect exporting
the use of independent intermediaries to sell a company’s offerings in other countries
the types of indirect exporters
- domestic-based export merchants
- domestic-based export agents
- cooperative organizations
- export-management companies
domestic-based export merchants
buy the manufacturer’s products and sell them abroad
domestic-based export agents
include trading companies; seek and negotiate foreign purchases for a commission
cooperative organizations
conduct exporting activities for several producers, often of primary products like fruits and nuts; are partly under the administrative control of the producers
export-management companies
agree to manage a company’s export activities for a fee
the 2 advantages of indirect export
- less investment (no need to develop export department, sales force, etc.)
- less risk (intermediaries bring expertise, lowering chance of mistakes)
direct exporting
the sale of a company’s offering in other countries by the company itself
the main ways to perform direct exporting
- domestic-based export department or division (may become an independent profit center)
- overseas sales branch or subsidiary
- home-country-based traveling export sales reps
licensing
granting permission to manufacture and sell a company’s offering in a specific market for a fee or royalty
main advantages of licensing
- licensor gains market entry at little risk
- licensee gains production expertise and a well known product/brand
main drawback of licensing
licensor has less control over the licensee than over its own facilities
contract manufacturing
the firm hires local manufacturers to produce the product
main advantage of contract manufacturing
offers a chance to start faster, with the opportunity to buy out the local manu later
main drawback of contract manufacturing
less company control over the process; risk for loss of potential profits
joint venture
a business enterprise engaged in by two or more otherwise separate entities; historically done by foreign investors who join with local investors
reasons to enter a joint venture
- foreign firm may lack resources to undertake the venture alone
- foreign government may require joint ownership as a condition for market entry
drawbacks of joint ventures
- disagreements over investment, marketing, other policies
- may prevent a multinational company from carrying out specific mfg or mktg policies on a worldwide basis
direct investment
a foreign company buys part or full interest in a local company, or builds its own manufacturing or service facilities
advantages of direct investment
- cost economies
- job creation
- deeper relationships with host country
main disadvantages of direct investment
- opens company to economic risk like blocked/devalued currencies, worsening markets, or expropriation
- company may be unable to adapt offerings to needs and preferences of local customers
drawbacks of acquiring a local firm
- cash investment
- cultural mismatch
- long-term commitment no matter what
standardized marketing program
a strategy that uses the same strategic and tactical approach across different markets and countries
localized marketing program
an approach that tailors its marketing activities to individual target markets
advantages of standardized marketing program
- economies of scale
- lower marketing costs
- brand image consistency
- uniformity of marketing practices
- leverage good ideas across markets
what does a standardized marketing program not account for?
- differences in wants, needs, usage patterns
- customer response to mktg
- competitive differences
- legal, cultural, political contexts
straight extension product strategy
introducing the product to a foreign market without any changes (common with high-end or luxury goods)
product adaptation product strategy
positioning products differently in different markets due to differences in consumer behavior, as well as historical market factors
- changes should add more revenue than cost
the 4 main types of localized product versioning
- regional version
- country version
- city version
- retailer version
product invention product strategy
developing new products for global markets
counterfeit products
sophisticated overseas factories reproduce fakes of products; gray/black market goods
brand adaptation
changing certain elements of a brand to the specifics of each particular market
country-of-origin effects
perceptions that are the mental associations and beliefs triggered by a country (e.g. Italians are stylish); marketers want to use positive country-of-origin perceptions to their advantage
the 2 main international pricing strategies
- uniform pricing
- market-based pricing
drawback of uniform pricing
price may be too low in richer countries, and too high in poorer countries
the main considerations in adapting marketing comms for a market
- the comms must be legally and culturally acceptable
- the comms must be considered appropriate (e.g. comparative ads are unacceptable in some countries)
- the appeals of the comms may need to be varied per market
gray market
the diversification of branded products from authorized distribution channels; e.g. a distributor sells to a different country to take advantage of pricing differences; create a free rider problem
the 2 main ways to deter gray market activities
- severe penalties
- timely detection of violations and meting out of punishments
