class 14 Flashcards
Why go global?
At a certain point you saturate the market of your home country– sold everything you can sell pretty much
Canada is a relatively small marker (39 million population)
Small market size and potential
The world population is 8 billion
Rising globalization, technological trends make the world more open to companies
Reacting to global competition and costs→ firms can lower costs due to economies of scale, firms can often compete better in their home markets if they reduce costs in host markets
risk diversification, more potential, may not have any more oopprutnites left in the country you are currently in, competitive advantage
how to rank markets by indicators (scanning the environmental)
Stp: focus on regions where your audiences found
3cs: research competitors in each local
Distribution channels: develop region based strategies and partnerships
branding/ promotions: localize your branding and campaigns
Overall: be aware of cultural and language differences
Global STP is more complicated than domestic STP for a few reasons:
Firms considering a global expansion have more difficulty understanding the cultural nuances of other countries
Subcultures within each country also must be considered
Consumers often view products and their role as consumers differently in different countries (a product/service often must be positioned differently in different markets)
When a firm identifies its positioning within the market, it then must decide how to implement its marketing strategies by using the marketing mix
Just like firms adjust their products/services to meet the needs of national target markets, they must adjust their marketing mix to serve the needs of global markets
political/ regulatory forces
Political stability
Industry priorities
Government regulations
Trade sanctions, boycotts→ could make it impossible to do business in a certain region
Trade agreements→ could be attractive to go to a country if you have one
Tariffs → lower tariffs when goods cross certain countries borders, taxes on imported goods
economic forces
Economic development and infrastructure
Consumer income and purchasing power
Income distribution; projected growth
Exchange rate
real income
3 main things
general economic environment
market growht
real income
socio cultural forces
Emotionally expressive
Confrontational
Building trust
different cultures (values, beliefs that a re shared)
have to. be aware of the cultures when you visit somewhere else
technological forces
Transportation
Distribution channels
communications
Commerce
Production
have to have a system to transport goods m distribution channels have to deliver p[roducts in a good way, good communication system and have to be legal
Marketers are especially concerned with 4 key elements: transportation, distribution channels, communications and commerce
demographic forces
Size of population
Rate of population growth
Degree of urbanization
Population density
Language
Age structure/composition of the population
what is standardizing
Treat the entire world as a single entity
Consistent strategy across countries
Products, messaging campaigns, prices, distribution channels
pros of standardization
Economies of scale
Lower r&d expense
Lower advertising expense
what is customizing
Adjusting marketing strategy according to the market→ adapt to cultural, regional and national differences
pros of customizing
closer to local customers wants/needs (but more complex, resource-intensive)
Deciding how to enter that market: International entry strategies
Exporting
Licensing
3. Joint venture
4. (Foreign) Direct investment
what is exporting
Producing goods in one country and selling them in another country
lets risky, hard to achieve economies to scale
indirect vs direct exrpoting
indirect: through intermediaries
direct: through own distibtuon
pros and cons of exporting
Pros
make the least number of changes in marketing strategies, low risk especially when using indirect exporting
Disadvantage
Less local employment in the host country (might be exposed to criticism along those lines)
what is licensing
Offering the right to use a trademark, patent, or other similarly valued items of intellectual property in return for a fee
Types: contract manufacturing, contract assembly, franchising
Licensing is a business arrangement where one company (the licensor) gives another company (the licensee) permission to use its intellectual property,
pros and cons of licensing
Advantage
Low risk and capital-free
Licensee gains exclusivity and competitive advantage
Creates local employment
Cons
Licensor forgoes control and obtains less profit
Licensee may gain bargaining power over time
what is a joint venture
Agreements between two or more firms to invest together to create a local business, sharing ownership, control, and profits of the new company
conflicts could arise
A joint venture is formed when a firm entering a new market pools its resources with those of a local firm to form a new company in which ownership, control, and profits are shared
pros and cons of a joint venture
Advantage
Greater control
Leverage local partners resources
Disadvantages
Require financial, physical and managerial resources to enter
Endure higher risk
Disagreement on strategic decisions
Differences in organizational cultures, management styles, and leadership, as well as disagreements about marketing and investment policies could seriously affect the performance
also if the political envriomenht changes of the partner country, could be a huge threat
foreign direct investment
A firm invests in and owns a foreign subsidiary or division, either establishing business operations or acquiring business assets in the foreign country.
has 100% ownership
A dramatic economic downturn, political instability, or changes in the country’s laws can increase a foreign entrant’s risk considerably
Foreign direct investment (FDI) is when a company from one country invests in and owns a business in another country. This usually involves either establishing new business operations or acquiring existing business assets in the foreign country. One key aspect of FDI is that the investing company typically has 100% ownership of the foreign subsidiary or division.
HIGHEST POTENTIAL BUT NEED STHE MOST AMOUNT OF WORK. when you own all of the faicitiws and everything in the the other countries, get all the profits
pros and cons of foreign direct investment
Advantage
Most control
Cost savings
Better understanding of local market conditions
Less affected fluctuations in the exchange rates
Disadvantages
Highest risk
Highest financial commitment
Most sensitive to local environmental factors (ex: strikes, unions, education)
what is globalization
increased flow of goods, services, people, technology, capital, information and ideas around the world
how ro asses global markets
politica, economic, technology and ingfraystuce, sociocyiyral