Professional Documents
Culture Documents
M. Fatih Akkaya
Undersecretariat of Foreign Trade
Expert
Index:
1) Executive Summary
4) Appendices
5) References
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1) Executive Summary:
Usually, selling focuses on the needs of the seller, marketing on the needs of the buyer
(customer). The purpose of business is to get and keep a customer. Or, to use Peter
Drucker`s more refined construction to create and keep a customer. (through product
International marketing involves the marketing of goods and services outside the
Global marketing refers to marketing activities coordinated and integrated across multiple
markets.
3- Exporter: Run operations from a central office in the home region, exporting
are made and coordinated from the central office in the home region.
Manufacturing and assembly, marketing and sales are decentralized beyond the
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home region. Both finished goods and intermediate products are exported outside
in a range of countries. While some key functions (R&D, sourcing, financing) are
decentralized, the home region is still the primary base for many functions.
be the primary base for any functional area. Each function including R&D,
Technology and globalization shape the world. The first helps determine human
preferences; the second, economic realities. Standardized consumer products, low price
The globalization of markets is at hand. With that, the multinational commercial world
nears its end, and so does the multinational corporation. The world`s needs and desires
have been irrevocably homogenized (market needs). This makes the multinational
corporation obsolete and the global corporation absolute. Nobody is safe from global
reach and the irresistable economies of scale (reduction of costs and prices) and scope.
The multinational and global corporation are not the same thing. The multinational
corporation operates in a number of countries and adjusts its products and practices in
each at high relative costs. The global corporation operates with resolute constancy at low
relative cost (price) as if the entire world (or major regions of it) were a single entity; it
sells markets the same high-quality things similarly everywhere. But, many global firms
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produce the same products the same way for a global market but tailor their selling
The modern global corporation contrasts powerfully with the aging multinational
corporation. Instead of adapting to superficial and even entrenched differences within and
between nations, it will seek sensibly to force suitably (more or less) standardized
products and practices on the entire globe. (think globally, act locally)
Although some would stem the foreign invasion through protective legislation,
protectionism in the long run only raises living costs and protects inefficient domestic
firms (national controls). The right answer is that companies must learn how to enter
foreign markets and increase their global competitiveness. Firms that do venture abroad
find the international marketplace far different from the domestic one. Market sizes,
buyer behavior and marketing practices all vary, meaning that international marketers
must carefully evaluate all market segments in which they expect to compete.
fundamentally affect the firm, including its operations and its management. For many
companies, the decision to globalize remains an important and difficult one (global
strategy and action). Typically, there are many issues behind a company`s decision to
begin to compete in foreign markets. For some firms, going abroad is the result of a
deliberate policy decision (exploiting market potential and growth); for others, it is a
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proactive decision rather than simply a reaction (learning how to business abroad).
the product life cycle, tax structures and peace. To succeed in global marketing
companies need to look carefully at their geographic expansion. To some extent, a firm
makes a conscious decision about its extent of globalization by choosing a posture that
may range from entirely domestic without any international involvement (domestic
focus) to a global reach where the company devotes its entire marketing strategy to global
Each level of globalization will profoundly change the way a company competes and will
and control of the international marketing effort. An industry in which firm competes is
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also important in applying different strategies. For example, when a firm which competes
in the pharmaeutical industry which is heavily globalized, it has to set its own strategies
Tracking the development of the large global corporations today reveals a recurring,
sequential pattern of expansion. The first step is to understand the international marketing
environment, particularly the international trade system. Second, the company must
consider what proportion of foreign to total sales to seek, whether to do business in a few
or many countries and what types of countries to enter. The third step is to decide on
which particular markets to enter and this calls for evaluating the probable rate of return
on investment against the level of risk (market differences). Then, the company has to
decide how to enter each attractive market. Many companies start as indirect or direct
export exporters and then move to licensing, joint-ventures and finally direct investment;
this company evolution has been called the internationalization process. Companies must
next decide on the extent to which their products, promotion, price and distribution
should be adapted to individual foreign markets. Finally, the company must develop an
effective organization for pursuing international marketing. Most firms start with an
companies which means that top management plans and organizes on a global basis
(organization history).
themselves first in their domestic markets. Often, international development did not occur
until maturity was reached domestically. After that phase, these firms began to turn into
companies with some international business, usually on an export basis. But, this process
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may vary dramatically with the size of the domestic market. For example, when we
contrast the Netherlands market for Philips vs the US market for GE, we see that
when compared with GE`s activities in US. As the international side of their sales grew,
the companies increasingly distributed their assets into many markets and achieved what
was once termed the status of a multinational corporation (MNC). Pursuing multi-
considerable local presence. Regions are treated as single markets and products are
orientation improves coordination and control, it often discounts national differences. The
“For years, the French industry depended on the domestic market. Then in the 1970s, it
developed a Europewide market. Now it finds it must crack the world market if it expects
France`s Renault was moving quickly into the world market. It purchased 10 percent of
Sweden`s Volvo and planned to design a new car in conjunction with Volvo. But, the
Volvo deal fell apart which is one of the reasons that they went to Nissan. Only during
their latest phase have these firms begun to transform themselves into global marketing
behemoths whose marketing operations are closely coordinated across the world market
rather than developed and executed locally. This traditional sequencing of the growth
followed by most firms and also by many newly formed companies. However, some
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newer firms are jumping right into the latest or global category and not necessarily going
confronted with the task of setting a geographic or regional emphasis. A company may
countries in Latin America, Africa or Asia. Management must make a strategic decision
to direct business development in such a way that the company`s overall objectives are
congruent with the particular geographic mix of its activities. Other factors in this
national product (GNP) and tend to create many new companies. In particular, firms with
Although competition from both other international firms and local companies is usually
preferred over doing business in developing nations. Because the business environment is
and by the level of economic development. Markets in Latin America, Africa, the Middle
East and Asia are also characterized by a higher degree of risk than markets in developed
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countries. Because of the less stable economic climates (income, employment, prices,
greater uncertainty and fluctuation. The issues are infrastructure such as transportation,
government entry requirements, tariffs and other trade barriers, corruption, bureaucracy,
technological pirating and high cost of product and communication adaptation can be
developing countries (war, nationalism, etc.) often affect operating results negatively. As
a result, some markets that may have experienced high growth for some years may
suddenly experience drastic reductions in growth. In many situations, however, the higher
risks are compensated for by higher returns, largely because competition is often less
intense in those markets. Consequently, companies need to balance the opportunity for
future growth in the developing nations with the existence of higher risk.
The economic liberalization of the countries in Eastern Europe opened a large new
market for many international firms. The market typically represents about 15 percent of
the worldwide demand in a given industry, about two-thirds of that accounted for by
Although many companies consider this market as long-term potential with little profit
opportunity in the near term, a number of firms have moved to take advantage of
opportunities in areas where they once were prohibited from doing business. Many
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countries are changing from a centrally planned economy to a market-oriented one. East
Germany has made the fastest transformation because its dominant western half was
already there. Eastern European nations like Hungary and Poland have also been moving
quickly with market reforms. Many of the reforms have increased foreign trade and
investment. For example, in Poland, foreigners are now allowed to invest in all areas of
industry, including agriculture, manufacturing and trade. Poland even gives companies
At some point, the development of any global marketing strategy will come down to
selecting individual countries in which a company intends to compete. There are more
than two hundred countries and territories from which companies have to select, but very
few firms end up competing in all of these markets. The decision on where to compete,
the country selection decision is one of the components of developing a global marketing
strategy.
Why is country selection a strategic concern for global marketing management? Adding
management time and effort and in capital. Although opportunities for additional profits
are usually the driving force, each additional country also represents both a new business
opportunity and risk. It takes time to build up business in a country where the firm has
not previously been represented and profits may not show until much later on.
move ahead. They can analyze the investment climate of the country and determine
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In the context of selecting markets for special emphasis, the lead market concept can help
in identifying those countries. Lead market is the market where a company should place
extra emphasis. It is essential for globally competing firms to monitor lead markets in
their industries or better yet to build up some relevant market presence in those markets.
As global marketers eye the array of countries available for selection, they soon become
aware that not all countries are of equal importance on the path to global leadership.
Markets that are defined as crucial to global market leadership, markets that can
determine the global winners among all competitors, markets that companies can ill
afford to avoid or neglect-such markets are “must win” markets. Contrary to other
markets, “must win” markets can not be avoided if global market leadership is at stake.
Firms need to understand their competitors because corporate success results from
providing more value to customers than the competition. Industry structure is the
framework within which companies compete. Five forces determine the attractiveness of
an industry: the threat of new entrants, the bargaining power of suppliers, the bargaining
power of buyers, the presence of substitute products and the intensity of the rivalry
between firms in the industry. Firms need to manage these factors so that industry
structure is favorable.
understand different approaches to globalization. The concept has been widely used by
Generic strategies such as differentiation, cost leadership and the like are archetypes that
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managing for cost leadership. Firms can gain a competitive advantage through
customer value or by managing for lowest delivered cost. These two means of
competitive advantage when combined with the competitive scope of activities (broad vs
focus and cost focus. The differentiation and cost leadership strategies seek competitive
and cost focus strategies are confined to a narrow segment. When we consider the idea of
The sources of competitive advantage are the skills and resources of the company.
Analysing these factors can lead to the definition of the company`s core competences.
These are the skills and resources at which the company excels and can be used to
To many readers, the term “global marketing strategy” probably suggests a company
represented everywhere and pursuing more or less the same marketing strategy.
However, global marketing strategies are not to be equated with global standardization,
although they may be the same in some situations. A global marketing strategy represents
the application of a common set of strategic marketing principles across most world
markets. It may include but does not require similarity in products or in marketing
processes. A company that pursues a global marketing strategy looks at the world market
as a whole rather than at markets on a country-by-country basis which is more typical for
multinational firms. Globalization deals with the integration of the many country
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strategies and the subordination of these country strategies to one global framework. As a
result, it is conceivable that one company may have a globalized approach to its
marketing strategy but leave the details for many parts of the marketing plan to local
subsidiaries.
Few companies will want to globalize all of their marketing operations. The difficulty
then is to determine which marketing operations elements will gain from globalization.
Such a modular approach to globalization is likely to yield greater return than a total
their businesses around countries or geographic regions. Although some key strategic
decisions with respect to products and technology are made at the central or head office,
subsidiaries. As a result, profit and loss responsibility tends to reside in each individual
country. At the extreme, this leads to an organization that runs many different businesses
represented in a large number of countries and the world`s principal trading regions.
Many of today`s large internationally active firms may be classified as pursuing multi-
attitudes and behavior and the rise of generic brands have all contributed to a decline in
brand loyalty. More consumers have been selecting products from among manufacturers`
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brands, distributors` brands and generic products. Often a coupon, price special or a
halfway point between multi-domestic and truly global strategy types. Conceptually, they
are not global because the coordination takes place across one single region only, with
pan-European strategies standing out as the first real regional marketing strategies created
The marketing research surveys study and analyze various factors within foreign markets
and their importance to the decision about which foreign markets to enter. These factors
companies have several choices to make: first, the global focus strategy and second, the
concerned with the range of a firm`s product and service offerings. To what extent should
market segments? Should a company become the global specialist in a certain area by
satisfying one or a small number of target segments, doing this in most major markets
Even some of the largest companies can not pursue all available initiatives. Resources for
most companies are limited, often requiring a tradeoff between product expansion and
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geographic expansion strategies. Resolving this question is necessary to achieve a
concentration of resources and efforts in areas where they will bring the most return. We
can distinguish between two models: on the one hand, we have the broad-based firm
marketing a wide range of products to many different customer groups, both domestic
and overseas; on the other hand, we have the narrowly-based firm marketing a limited
range of products to a homogenous customer group around the world. Both types of
Creating Global Business Units: Many firms have come to realize that a strong global
presence in one given product was becoming a strategic requirement. Since traditional
multinational firms often competing through a multi-domestic strategy have realized the
weakness of their unfocused patterns of global coverage, they have begun to assemble
business units that have a better global focus. Many are striving to change their business
to reflect more a coherent market position whereby a business consists of strong units in
major markets. Avoiding globally unfocused strategies, international firms have either
retrenched to become regional specialists or changed their business focus to adopt global
their business units. Selective globalization is adopted by firms that globalize several or
many businesses but also exit from others because financial resources may be limited.
Global niche strategies are selected by firms that focus on one or very few businesses
worldwide and exit from others to make up for a lack of resources. In general, companies
with a narrow product or business focus but globally marketed perform better than firms
with a broad product line. Since the establishment of strong global marketing positions
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requires substantial resources, many firms have begun to adopt the narrow focus model
by spinning off business no longer viewed as part of the company`s core operations.
A global marketing strategy that totally globalizes all marketing activities is not always
global marketing strategies were assumed to be of one type only, offering the same
marketing strategy across the globe. As marketers gained more experience, many other
types of global marketing strategies became apparent. Some of those were much less
more common approach is for a company to globalize its product strategy (product lines,
product designs and brand names) and localize distribution and marketing
communication.
marketing strategy, most elements of the marketing strategy have been globalized.
Globalization includes not only the product but also the communications strategy, pricing
and distribution as well as such strategic elements as segmentation and positioning. Such
a strategy may be advisable for companies that face completely globalized customers
along the lines. It also assumes that the way a given industry works is highly similar
everywhere, thus allowing a company to unfold its strategy along similar paths in country
by country. One company that fits the description of an integrated global marketing
strategy to a large degree is CocaCola. That company has achieved a coherent, consistent
and integrated global marketing strategy that covers almost all elements of its marketing
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program from segmentation to positioning, branding, distribution, bottling, advertising
and more.
Reality tells us that completely integrated global marketing strategies will continue to be
the exception. However, there are many other types of partially globalized marketing
Global Product Category Strategy: Possibly the least integrated type of global marketing
strategy is the global product category strategy. Leverage is gained from competing in the
same category country after country and may come in the form of product technology or
development costs. Selecting the form of global product category implies that the
company while staying within that category will consider targeting different segments in
each category or varying the product, advertising and branding according to local market
the global category strategy and leveraging knowledge across markets without pursuing
standardization. That strategy works best if there are significant differences across
markets and when few segments are present in market after market. Several traditional
multinational players who had for decades pursued a multi-domestic marketing approach-
local management teams- have been moving toward the global category strategy. Among
them are Nestle, Unilever and Procter&Gamble, three large international consumer goods
Global Segment Strategy: A company that decides to target the same segment in many
understanding of its customer base and leverage that experience around the world. In both
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consumer and industrial industries significant knowledge is accumulated when a
strategy will even allow for different products, brands or advertising although some
standardization is expected. The choices may consist of competing always in the upper or
Global Marketing Mix Element Strategies: These strategies pursue globalization along
communications or product. They are partially globalized strategies that allow a company
that customize other aspects of its marketing strategy. Although various types of
strategies may apply, the most important ones are global product strategies, global
advertising strategies and global branding strategies. Typically companies globalize those
marketing mix elements that are subject to particularly strong global logic forces. A
company facing strong global purchasing logic may globalize its account management
practices or its pricing strategy. Another firm facing strong global information logic will
Global Product Strategy: Pursuing a global product strategy implies that a company has
largely globalized its product offering. Although the product may not need to be
Global product strategies require that product use conditions, expected features and
required product functions be largely identical so that few variations or changes are
needed. Companies pursuing a global product strategy are interested in leveraging the
fact that all investments for producing and developing a given product have already been
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made. Global strategies will yield more volume, which will make the original investment
easier to justify.
Global Branding Strategies: Global branding strategies consist of using the same brand
name or logo worldwide. Companies want to leverage the creation of such brand names
across many markets, because the launching of new brands requires a considerable
customers travel across country borders and will be exposed to products elsewhere.
Global branding strategies also become important if target customers are exposed to
advertising worldwide. This is often the case for industrial marketing customers who may
read industry and trade journals from other countries. Increasingly, global branding has
become important also for consumer products where cross-border advertising through
international TV channels has become common. Even in some markets such as Eastern
Europe, many consumers had become aware of brands offered in Western Europe before
the liberalization of the economies in the early 1990s. Global branding allows a company
strategies may include luxury product marketers who typically face a large fixed
Global Advertising Strategy: Globalized advertising is generally associated with the use
of the same brand name across the world. However, a company may want to use different
brand names partly for historic purposes. Many global firms have made acquisitions in
other countries resulting in a number of local brands. These local brands have their own
distinctive market and a company may find it counterproductive to change those names.
Instead, the company may want to leverage a certain theme or advertising approach that
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may have been developed as a result of some global customer research. Global
advertising themes are most advisable when a firm may market to customers seeking
similar benefits across the world. Once the purchasing reason has been determined as
Composite Global Marketing Strategy: The above descriptions of the various global
marketing models give the distinct impression that companies might be using one or the
other generic strategy exclusively. Reality shows, however, that few companies
consistently adhere to only one single strategy. More often companies adopt several
generic global strategies and run them in parallel. A company might for one part of its
business follow a global brand strategy while at the same time running local brands in
other parts. Many firms are a mixture of different approaches, thus the term composite.
Two types of approaches emerge as of particular interest to us. First, there are a number
of heated global marketing duels in which two firms compete with each other across the
entire global chessboard. The second, game pits a global company versus a local
One of the longest running battles in global competition is the fight for market dominance
between CocaCola and PepsiCo, the world`s largest soft drink companies.
Global firms are able to leverage their experience and market position in one market for
the benefit of another. Consequently, the global firm is often a more potent competitor for
a local company.
Although global firms have superior resources, they often become inflexible after several
successful market entries and tend to stay with standard approaches when flexibility is
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called for. In general, the global firms` strongest local competitors are those who watch
global firms carefully and learn from their moves in other countries. With some global
firms requiring several years before a product is introduced in all markets, local
competitors in some markets can take advantage of such advance notice by building
Exporting represents the least commitment on the part of the firm entering a foreign
market (See appendix 2). Exporting to a foreign market is a strategy many companies
follow for at least some of their markets. Since many countries do not offer a large
manufacture its products for several markets and therefore to obtain economies of scale.
A firm has two basic options for carrying out its export operations. The form of exporting
can be directly under the firm`s control or indirect and outside the firm`s control. It can
contact foreign markets through a domestically located (in the exporter`s country of
international markets or buyers. The major advantage for managers using a domestic
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intermediary lies in that individual`s knowledge of foreign market conditions.
Particularly, for companies with little or no experience in exporting, the use of a domestic
intermediary provides the exporter with readily available expertise. The most common
agents. Group selling activities can also help individual manufacturers in their export
operations.
Direct Exporting: Direct exporting includes setting up an export department within the
firm or having the firm`s sales force sell directly to foreign customers or marketing
intermediaries located in the foreign markets. Under direct exporting, an exporter must
deal with a large number of foreign contacts, possibly one or more for each country the
company plans to enter. Although a direct exporting operation requires a larger degree of
expertise, this method of market entry does provide the company with a greater degree of
control over its distribution channels than would indirect exporting. The exporter may
select from two major types of intermediaries: agents and merchants. Also, the exporting
up between the exporting firm and the local distributor or importer. By building the
The independent distributor earns a margin on the selling price of the products. Although
the independent distributor does not represent a direct cost to the exporter, the margin the
sales subsidiary to carry out the distributor`s tasks, the exporter can earn the same
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margin. With increasing volume, the incentive to start a sales subsidiary grows. On the
other hand, if the anticipated sales volume is small, the independent distributor will be
more efficient since sales are channeled through a distributor who is maintaining the
necessary staff for several product lines. The lack of control frequently causes exporters
Many companies export directly to their own sales subsidiaries abroad, sidestepping
independent intermediaries. The sales subsidiary assumes the role of the independent
advertising and promoting the products, selling to buyers and assuming the credit risk.
The sales subsidiary offers the manufacturer full control of selling operations in a foreign
market. Such control may be important if the company`s products require the use of
special marketing skills such as advertising or selling. The exporter finds it possible to
transfer or export not only the product but also the entire marketing program that often
for the financing of account receivables and inventory. Also, the operation of a sales
subsidiary entails a number of general administrative expenses that are essentially fixed
Many companies realize that to open a new market and serve local customers better,
exporting into that market is not a sufficiently strong commitment to realize strong local
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presence. As a result, these companies look for ways to strengthen their base by entering
receives specifications for producing products locally, but the licensor generally receives
a set fee or royalty rather than finished products. Licensing may offer the foreign firm
manufactured. Under licensing, a company assigns the right to a patent (which protects a
another company for a fee or royalty. Using licensing as a method of market entry, a
company can gain market presence without an equity (capital) investment. The foreign
company, or licensee gains the right to commercially exploit the patent or trademark on
basis. Due to advantages of low risk and low investment, licensing is a particularly
attractive mode for small and medium-sized firms. Licensing also is an effective mode
for testing the future viability of more active involvement with a foreign partner.
Licenses are signed for a variety of time periods. Depending on the investment needed to
enter the market, the foreign licensee may insist on a longer licensing period to pay off
the initial investment. Typically, the licensee will make all necessary capital investments
(machinery, inventory and so forth) and market the products in the assigned sales
territories, which may consist of one or several countries. Licensing agreements are
subject to negotiation and tend to vary considerably from company to company and from
industry to industry.
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Companies use licensing for a number of reasons. For one, a company may not have the
knowledge or the time to engage more actively in international marketing. The market
potential of the target country may also be too small to support a manufacturing
operation. A licensee has the advantage of adding the licensed product`s volume to an
ongoing operation thereby reducing the need for a large investment in new fixed assets. A
company with limited resources can gain advantage by having a foreign partner market
its products by signing a licensing contract. Licensing not only saves capital because no
concentrated on more lucrative markets. Also, some smaller companies with a product in
high demand may not be able to satisfy demand unless licenses are granted to other
In some countries where the political or economic situation appears uncertain, a licensing
agreement will avoid the potential risk associated with investments in fixed facilities.
make a greater involvement risky. Both commercial and political risks are absorbed by
the licensee. In other countries governments favor the granting of licenses to independent
cases, a foreign manufacturer may prefer to team up with capable licensee despite a large
licensee to produce revenues and thus royalties usually paid as a percentage on sale
volume only. Once a license is granted, royalties are paid only if the licensee is capable
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of performing an effective marketing job. Since the local company`s marketing skills
company`s image may suffer if a local licensee markets a product of substandard quality.
Ensuring a uniform quality requires additional resources from the licenser that may
Thus, the producer loses some control in certain situations. The risk of losing control of
disadvantage of licensing.
Another potential problem is that the licensee may adapt the licensed product and
compete head on with the licensor. The possibility of nurturing a potential competitor is
to a specific time period, a company has to guard against the situation in which the
licensee will use the same technology independently after the license has expired and
Although there is a great variation according to industry, licensing fees in general are
substantially lower than the profits that can be made by exporting or local manufacturing.
Depending on the product, licensing fees may range anywhere between 1 percent and 20
percent of sales, with 3 to 5 percent being more typical for industrial products.
licensing fees exceeds the incremental revenues of any other entry strategy such as
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required to estimate potential revenues from any one of the entry strategies under
consideration.
total marketing program available including the brand name, logo, products and method
differs from licensing principally in the depth and scope of quality controls placed on all
phases of the franchisee`s operation. The franchise concept is expanding rapidly beyond
its traditional businesses (such as service stations, restaurants and real-estate brokers) to
include less traditional formats such as travel agencies, used car dealers, the video
industry and professional and health improvement services. About 80 percent of all
McDonald`s restaurants are franchised and as of 1999 the firm operated about 24,500
Local Manufacturing: A common and widely practiced form of market entry is the local
manufacture locally instead of supplying the particular market with products made
elsewhere. Numerous factors such as local costs, market size, tariffs, laws and political
considerations may affect a choice to manufacture locally. The actual type of local
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Under contract manufacturing, a company arranges to have its products manufactured by
production. Afterward, products are turned over to the international company which
usually assumes the marketing responsibilities for sales, promotion and distribution. In a
way, the international company rents the production capacity of the local firm to avoid
establishing its own plant or to circumvent barriers set up to prevent the import of its
products. Contract manufacturing differs from licensing with respect to the legal
relationship of the firms involved. The local producer manufactures based on orders from
the international firm but the international firm gives virtually no commitment beyond the
specifications to the foreign firm, sets production volume and guarantees purchase.
Lower labor costs abroad are the major incentive for using this entry mode.
potential combined with high tariff protection. In such situations, local production
appears advantageous to avoid the high tariffs, but the local market does not support the
volume necessary to justify the building of a single plant. These conditions tend to exist
in the smaller countries in Central America, Africa and Asia. Of course, whether an
international company avails itself of this method of entry also depends on its products.
is widely available and where the marketing effort is of crucial importance in the success
of the product.
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By moving to an assembly operation, the international firm locates a portion of the
manufacturing process in the foreign country. Typically, assembly consists only of the
heavy use of labor rather than extensive investment in capital outlays or equipment.
Motor vehicle manufacturers and electronics industries have made extensive use of
Often, companies want to take advantage of lower wage costs by shifting the labor-
intensive operation to the foreign market; this results in a lower final price of the
products. In many cases, however, the local government forces the setting up of assembly
dependable access to imported parts. This is often not guaranteed and in countries with
To establish a fully integrated local production unit represents the greatest commitment a
company can make for a foreign market. Since building a plant involves a substantial
companies may have any number of reasons for establishing factories in foreign
countries. Often, the primary reason is to take advantage of lower costs in a country, thus
providing a better basis for competing with local firms or other foreign companies
already present. Also, high transportation costs and tariffs may make imported goods
uncompetitive.
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Some companies want to build a plant to gain new business and customers. Such an
aggressive strategy is based on the fact that local production represents a strong
commitment and is often the only way to convince clients to switch suppliers. Local
Many times, companies establish production abroad not to enter new markets but to
protect what they have already gained through exporting. Changing economic or political
factors may make such a move necessary. The Japanese car manufacturers who had been
subject to an import limitation of assembled cars imported from Japan, began to build
factories in United States in the 1980s to protect their market share. As mentioned above,
Japanese manufacturers` reasons for the local production were partly political as the
United States imposed import targets for several years. Also, with the value of the yen
increasing to one hundred yen per US dollar, exports from Japan became uneconomical
compared with local production. Thus, to defend market positions, Japanese car
companies instituted a longer-term strategy of making cars in the region where they are
sold.
Moving with an established customer can also be a reason for setting up plants abroad. In
near customer locations; when customers build new plants elsewhere, suppliers move too.
Ownership Strategies:
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Companies entering foreign markets have to decide on more than the most suitable entry
strategy. They also need to arrange ownership, either as a wholly owned subsidiary, in a
foreign firm, allowing the investing firm to affect management decisions of the foreign
firm. Under a joint venture (JV) arrangement, the foreign company invites an outside
partner to share stock ownership in the new unit. The particular participation of the
partners may vary, with some companies accepting either a minority or majority position.
In most cases, international firms prefer wholly owned subsidiaries for reasons of control;
once a joint venture partner secures part of the operation, the international firm can no
longer function independently, which sometimes lead to inefficiencies and disputes over
responsibility for the venture. If an international firm has strictly defined operating
procedures, such as for budgeting, planning and marketing, getting the JV company to
accept the same methods of operation may be difficult. Problems may also arise when the
capital of the JV has to be increased and one side is unable to raise the required funds.
Experience has shown that JVs can be successful if the partners share the same goals with
one partner accepting primary responsibility for operations matters. Despite the potential
for problems, joint ventures are common because they offer important advantages to the
foreign firm. By bringing in a partner the company can share the risk for a new venture.
Furthermore, the JV partner may have important skills or contacts of value to the
international firm. Sometimes, the partner may be an important customer who is willing
to contract for a portion of the new unit`s output in return for an equity participation. In
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other cases, the partner may represent important local business interests with excellent
contacts to the government. A firm with advanced product technology may also gain
market access through the JV route by teaming up with companies that are prepared to
distribute its products. Many international firms have entered Japan, China and Eastern
Europe with JVs. But, not all joint ventures are successful and fulfill their partners`
expectations. Despite the difficulties involved, it is apparent that the future will bring
many more joint ventures. Successful international and global firms will have to develop
the skills and experience to manage JVs successfully often in different and difficult
environmental circumstances. And in many markets, the only viable access to be gained
strategic alliances. Alliances are different from traditional joint ventures in which two
partners contribute a fixed amount of resources and the venture develops on its own. In
an alliance, two entire firms pool their resources directly in a collaboration that goes
beyond the limits of a joint venture. Although a new entity may be formed, it is not a
both of the partners. In an alliance, each partner brings a particular skill or resource-
usually they are complementary-and by joining forces, each expects to profit from the
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Although many alliances have been forged in a large number of industries, the evidence
is not yet in as to whether these alliances will actually become successful business
ventures. Experience suggests that alliances with two equal partners are more difficult to
manage than those with a dominant partner. In particular, it is important to recognize that
the needs and aspirations of partners may change over the life of an alliance and do so in
divergent ways. Predicting what the goals and incentives of the various parties will be
observers question the value of entering alliances with technological competitors, such as
between western and Japanese firms. The challenge in making an alliance work lies in the
creation of multiple layers of connections or webs that reach across the partner
organizations out of the cooperating parts of the partners. In that sense, alliances may
very well be just an intermediate stage until a new company can be formed or until the
have always made acquisitions, the need to enter markets more quickly than through
building a base from scratch or entering some type of collaboration has made the
acquisition route extremely attractive. This trend has probably been aided by the opening
of many financial markets, making the acquisition of publicly traded companies much
easier. Most recently even unfriendly takeovers in foreign markets are now possible.
A major advantage of acquisitions is that they can quickly position a firm in a new
business. By purchasing an existing player, a firm does not have to take the time to
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establish its presence or develop for itself the resources it does not already possess. This
can be particularly important when the critical resources are difficult to imitate or
accumulate. Acquiring an existing firm also takes a potential competitor out of the
market. Despite these advantages, acquisitions can have serious drawbacks. First and
foremost, acquisitions can be a very expensive way to enter a market. In addition to the
contain bundles of assets and capabilities, only some of which are of interest to the
acquirer. Disposing of unwanted assets or maintaining them in the portfolio is often done
at significant cost, either in real terms or in management time. Although these obstacles
are serious, a number of acquisitions fail on another account: the post acquisition
Of course, assembling accurate data is the cornerstone of any entry strategy analysis. The
necessary sales projections have to be supplemented with detailed cost data and financial
need projections on assets (managerial, financial, etc. resources). The data need to be
assembled for all entry strategies under consideration. Financial data are collected not
only on the proposed venture but also on its anticipated impact on the existing operations
of the international firm. The combination of the two sets of financial data results in
incremental financial data incorporating the net overall benefit of the proposed move for
For best results, the analyst must take a long-term view of the situation. Asset
requirements, costs and sales have to be evaluated over the planning horizon of the
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proposed venture, typically three to five years for an average company. Furthermore, a
assuming several scenarios of international risk factors that may adversely affect the
success of the proposed venture. The financial data can be adjusted to reflect each new
set of circumstances. One scenario may include a 20 percent devaluation in the host
country, combined with currency control and difficulty of receiving new supplies from
foreign plants. Another situation may assume a change in political leadership to a group
less friendly to foreign investments. With the help of a sensitivity analysis approach, a
company can quickly spot the key variables in the environment that will determine the
outcome of the proposed market entry. The international company then has the
opportunity to further add to its information on such key variables or at least to closely
monitor their development. It is assumed that any company approaching a new market is
looking for profitability and growth. Consequently, the entry strategy must support these
goals. Each project has to be analyzed for the expected sales level, costs and asset levels
that will eventually determine profitability. Sales, costs and assets levels have to be
estimated before. Also, profitability has to be estimated (past sales analysis, market test
and assessing total company impact are required. Market research that focuses on buying
(survey of buyers` intentions, composite of sales force opinion, expert opinion) (SWOT
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In reality, most entry strategies consist of a combination of different formats. We refer to
the process of deciding on the best possible entry strategy mix as entry strategy
configuration.
Rarely do companies employ a single entry mode per country. A company may open up a
subsidiary that produces some products locally and imports others to round out its
product line. The same foreign subsidiary may even export to other foreign subsidiaries,
combining exporting, importing and local manufacturing into one unit. Furthermore,
many international firms grant licenses for patents and trademarks to foreign operations,
even when they are fully owned. This is done for additional protection or to make the
transfer of profits easier. In many cases, companies have bundled such entry forms into a
single legal unit, in effect layering several entry strategy options on top of each other.
Bundling of entry strategies is the process of providing just one legal unit in a given
country or market. In other words, the foreign company sets up a single company in one
country and uses that company as a legal umbrella for all its entry activities. However,
such strategies have become less typical-particularly in larger markets, many firms have
different companies. The local manufacturing plant may be incorporated separately from
the sales subsidiary. When this occurs, companies may select different ownership
strategies, for instance, allowing a JV in one operation while keeping full ownership in
another part. Such unbundling becomes possible in the larger markets such as the United
States, Germany and Japan. It also allows the company to run several companies or
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product lines in parallel. Global firms granting global mandates to their product divisions
will find that each division will need to develop its own entry strategy for key markets.
Portal or E-Business Entry Strategies: The technological revolution of the Internet with
its wide range of connected and networked computers has given rise to the virtual entry
strategy. Using electronic means, primarily web pages, e-mail, file transfer and related
communications tools, firms have begun to enter markets without ever touching down. A
company that establishes a server on the Internet and opens up a web page can be
connected from anywhere in the world. Consumers and industrial buyers who use modern
Internet browsers, such as Netscape, can search for products, services or companies and
in many instances even make purchases online. Whatever the forecasts, most experts
agree that the opportunity for Internet-based commerce will be huge. The Internet will
eliminate some of the hurdles that plagued smaller firms from competing beyond their
borders. Given the low cost of the Internet, it is very likely that many more established
firms will use the Internet as the first point of contact for countries where they do not yet
have a major base. However, there are many challenges to would-be Internet-based
global marketers. One of the biggest is language. The second big challenge is the
fulfillment side of the e-business. Here, we are dealing with completing a sale, shipping,
collecting funds and providing after-sales service to customers all over the world.
Exit Strategies:
Circumstances may make companies want to leave a country or market. Other than the
failure to achieve marketing objectives, there may be political, economic or legal reasons
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International companies have to be aware of the high costs attached to the liquidation of
employees and any loss of credibility in other markets can hurt future prospects.
Sometimes, an international firm may need to withdraw from a market to consolidate its
operations. This may mean a consolidation of factories from many to fewer such plants.
Production consolidation when not combined with an actual market withdrawal is not
really what we are concerned with here. Rather, our concern is a company`s actual
abandoning its plan to serve a certain market or country. This is differentiation between
Changing political situations have at times forced companies to leave markets. Changing
government regulations can at times pose problems, prompting some companies to leave
a country. Exit strategies can also be the result of negative reactions in a firm`s home
market.
Several of the markets left by international firms over the past decades have changed in
attractiveness, making companies reverse their exit decisions and enter those markets a
second time.
Summary:
and exploitation of global market opportunities consistent with and supportive of its short
In this paper, I tried to analyze the ways a company competes in global environment by
using different tactics. Those tactics differ in a way a company’s capabilities and
39
willingness permit. A company must be careful in using those tactics before globalizing
its operations. Because sometimes those tactics may fail and result in loss of profit or
I suggest to reader to obtain additional information about this subject. For example, they
Commerce or any other public or private organization located in Turkey or abroad. They
Ozet: (Turkce)
Global pazarlama, bir orgutun kaynaklarinin onun kisa ve uzun donemli stratejik
odaklanmasi surecidir.
Bu calismada, bir sirketin global cevrede farkli taktikleri kullanarak rekabet etme
yollarini analiz etmeye calistim. Bu taktikler, bir sirketin yetenek ve istekliliginin izin
verdigi bir yolla degisir. Bir sirket, faaliyetlerini globallestirmeden once bu taktikleri
kullanmada dikkatli olmalidir. Cunku, bazen bu taktikler basarisiz olabilir ve kar kaybi
Okuyucuya bu konu hakkinda ilave bilgi bulmasini oneriyorum. Ornegin, onlar benim
kurumum Dis Ticaret Mustesarligiyla, en yakin Ticaret Odasiyla, veya herhangi diger
Turkiye`de veya yurtdisinda yerlesik kamu veya ozel kurumla temasa gecebilirler. Onlar
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4) Appendices:
Appendix 1:
Economic-Financial Factors:
• Inflation rate
Political-Legal Factors:
• Stability of government
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• Laws and regulations affecting business activities (acceptance of foreign
investment, etc.)
Cultural Factors:
Demographic Factors:
• WTO
• EU
• NAFTA
• APEC
• MERCOSUR
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• CIS
Appendix 2:
Exporting
Contract Manufacturing
Joint Venturing
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5) References:
June 1983
October 1975
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11) David Gertner, Ph.D., International Marketing Management (IMM) Course Slides
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