Professional Documents
Culture Documents
Learning Objectives:
I.
With the onset of globalization and liberalization encompassing almost every industry of the
world, industries are gradually opening up on the world stage from the narrow confines of its
national boundaries. The firms operating in the industries now have to take production
decisions depending on global demand and market conditions and depending on the
economic scenario in world markets.
Global Industry is an industry in which the strategic positions of competitors in major
geographic or national markets are fundamentally affected by their overall global positions.
The key industries where the marks of global industry behaviour are felt include: (a) energy
sector; (b) financial services; (c) education; (d) retail and consumer goods; (e) transport
sector; and (f) information and communication technology.
Global firm is a firm that operates in more than one country and captures R&D, production,
logistical, marketing, and financial advantages in its costs and reputation that are not
available to purely domestic competitors.
Major decisions:
Deciding whether to go abroad
Deciding which markets to enter
Deciding how to enter the market
Deciding on the marketing program
Deciding on the marketing organization
II.
Most companies would prefer to remain domestic if their domestic market were large
enough. Managers would not need to learn other languages and laws, deal with volatile
currencies, face political and legal uncertainties, or redesign their products to suit different
customer needs and expectations. Business would be easier and safer. Yet several factors
are drawing more and more companies into the international arena:
Pros:
Global firms offering better products or lower prices can attack the companys
domestic market. The company might want to counterattack these competitors in
their home markets.
The company discovers that some foreign markets present higher profit opportunities
than the domestic market.
The company needs a larger customer base to achieve economies of scale.
The company wants to reduce its dependence on any one market.
III.
Many countries prefer to sell to neighboring countries because they understand these
countries better. Example: The largest US Market is Canada and Mexico, US neighbors.
Australias market would be Papua New Guinea & other Asian countries.
Five Modes of Entry into Foreign Market:
a. Direct export is when company handles its own exports, through a domestic
department, overseas sales branch, traveling representatives, or foreign-based
distributors and agents.
The advantages of exporting are:
Mainly that one can be at the "mercy" of overseas agents and so the lack of
control has to be weighed against the advantages.
Good way to start in foreign operations and open the door to low
risk manufacturing relationship.
Linkage of parent and receiving partner interests means both get
most out of marketing effort.
Capital not tied up in foreign operation and
Options to buy into partner exist or provision to take royalties in
stock.
d. Joint venture is joining with local investors to share ownership and control.
Once the market and format of entering in the market are finalized, it is time for the company
to work out the marketing strategy. Company has to work out the option between
standardized marketing of one size fits all or come out with completely new strategy for the
new market. Alternatively, companies can choose to mix and match in product, promotion,
price and place.
a. Standardized marketing mix involves selling the same products and using the same
marketing approaches worldwide.
b. Adapted marketing mix involves adjusting the marketing mix elements in each target
market, bearing more costs but hoping for a larger market share and ROI.
At product level, company may choose to enter the global market without changes in the
original product, or company may choose to modify the product as per the local market taste
and preference or company may decide to introduce completely new products.
a. Straight extension is the practice of releasing an existing product without making any
changes to it while releasing it to a foreign market.
b. Product adaptation is the process of modifying an existing product so it is suitable for
different customers or markets.
c. Product invention is when new products are designed from scratch for the
international marketplace.
d. Backward invention is the reintroduction of an earlier product form that can be
adapted to a foreign company's needs.
e. Forward invention is form of invention where a new product is created to meet a need
in another country.
For promotion company may choose standard or may modify as per the local market needs.
a. Communication adaptation is the process of changing marketing communications
programs for each local market.
b. Dual adaptation is the adaption of both the product and the communications to a
local market.
Pricing is a tricky issue. Therefore, companies can set uniform price across global market or
introduce market-based price in each market or use cost based approach to set the price.
There are several issues in regards with pricing in international markets:
International price escalation refers to the problem of end-user prices reaching
exorbitant levels in the export market caused by multi-layered distribution channels,
intermediary margins, tariffs, and other international customer costs. International
price escalation may mean that the retail price in the export market may be two or
three times the domestic price, creating a competitive disadvantage for the exporter.
Transfer pricing refers to the practice of pricing intermediate or finished products
exchanged among the subsidiaries and affiliates of the same corporate family located
in different countries.
Gray market activity is the legal importation of genuine products into a country by
intermediaries other than authorized distributors.
At distribution channel level company have to figure the best way to reach the market. The
firms distribution channel goes through with: (a) an international marketing headquarters; (b)
channels between nations; and (c) channels within foreign nations.
VI.
The company needs to choose which marketing organization fits it. The company may
choose among the three global strategies:
An international strategy entails that the organizations objectives relate primarily to
the home market. However, we have some objectives with regard to overseas activity
and therefore need an international strategy. The competitive advantage important in
strategy development is developed mainly for the home market.
References
Kotler, P. & Keller, K. (2008). Marketing Management. 13th ed. Prentice Hall
EconomyWatch.
(2010,
June
29).
Global
Industry.
http://www.economywatch.com/world-industries/global-industry.html
Rao, S. (2007, September
http://www.citeman.com/
25).
Competing
on
Global
Basis.
Retrieved
Retrieved
from
from
Bradley, F. (2005). International Marketing Strategy. 5th ed. Person Education Limited,
England