Lecture 8 Flashcards
The classic internationalisation process
Export through an agent or distributor => Export through a sales rep or a sales and logistics subsidiary => Local assembly or packaging => Foreign direct investment
From a passive exporter to and active marketeer
- gradual process
- Learning and experience curve
What influences the choice of an export market?
- vicinity (location)
- cultural identification
- past experience
- opportunity (e.g. an export contract)
- rational analysis – market research (?)
Traditional motivations - market entry
- Need to secure key supplies
- Market-seeking behavior
- Access to low-cost factors
Emerging motivations
- Scale economies
- Increasing R&D investments
- Shortening product life-cycles
=> global interconnected structures - Scanning opportunities and learning on a global scale
- Competitive positioning (cross-subsidization)
Born global Phenomenon
“Instant international”
“Micronational”
“International new venture”
Greenfield
Creating a new operation in a foreign country from the ground up
Where to locate - which analysis
Scanning, detailed analysis
Scanning location
- compare available statistics
- Long list of countries
- take into account business critical variables
- Quantitative information
Detailed analysis
- Short list of countries
- visits to the countries together with local distributors, interviews with analysts, evaluation of possible partners
- Qualitative information
Escalation of commitment
The longer and more resources are invested in the analysis of a given alternative, the more probable it becomes to choose for that alternative, regardless of its merits
too much invested to quit
The assessment of alternative countries/markets must contemplate
- Opportunities for sales expansion
- Needs of allocation of resources
- Risks
- Costs
Information for decision - Opportunities for sales expansion
Assessment of
- economic and
- demographic variables, such as
- product obsolescense,
- prices,
- competitors,
- social inequalities,
- cultural factors,
- consumer tastes.
Information for decision - Needs of allocation of resources
- labour costs,
- availability of technicians,
- loyalty of agentsand distributors,
- quality of infrastructures,
- transports and communications,
- availablity of warehousing,
- government attitudes (national and municipal).
Information for decision - risks
Assessment of political risk, forex risk, operational risk, regulatory risk, legal risk (litigation, independence and effectiveness of courts of justice).
