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SDM-Ch 16
LEARNING OBJECTIVES
Understand differences with domestic markets Choosing the markets Economic, Legal & Cultural aspects of the environment Risks involved in International business Entry strategies for international markets Pricing, financial terms and payment methods Information gathering about target markets Differences in distribution channels and factors influencing the choice
SDM-Ch 16
Tata McGraw Hill Publishing Ltd
WHY GO INTERNATIONAL?
The WTO agreement has resulted in opening up of new areas for freer trade (Textiles, Services & Agricultural products) China, Russia, India & the East European countries have embraced free market policies resulting in huge opening up of underserved populations. Domestic competition has increased especially from imports. Outsourcing in manufacturing and services has increased due to cost pressures & improvement in infrastructure.
SDM-Ch 16
Tata McGraw Hill Publishing Ltd
SDM-Ch 16
SDM-Ch 16
SDM-Ch 16
SDM-Ch 16
SDM-Ch 16
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ENTRY STRATEGIES
Exporting through local agent Exporting through foreign agent Exporting to foreign importer / distributor Setting up local office / representative Licensing / Franchising Setting up Joint ventures for distribution / manufacture Setting up wholly owned manufacturing facilities
SDM-Ch 16
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SDM-Ch 16
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DISTRIBUTION
Distribution is a vital aspect of marketing ensuring availability of the product in the right quantity, at the right time and right place. More important in international markets due to distance and transportation time. Importers, manufacturers and retailers are increasingly asking for Just in Time deliveries. Distribution strategy varies from market to market depending on size and local conditions. Multiple channels may be used in countries.
SDM-Ch 16
Tata McGraw Hill Publishing Ltd
13
DISTRIBUTION OPTIONS
Depends on the volume of the business Positioning of the product Infrastructure of distribution in the country Local laws some countries insist on local companies in the distribution business Internet as a channel of sales and distribution
SDM-Ch 16
14
ROLE OF LOGISTICS
Very important aspect of international selling Logistics can make up over 15% of the cost of the product Involves multiple modes of transport land, sea and air Considerable paperwork and formalities to be completed in international trade Logistics providers now offer complete one stop solution including distribution, invoicing and collection of payment
SDM-Ch 16
Tata McGraw Hill Publishing Ltd
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SDM-Ch 16
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CURRENCY OF PRICING
The US Dollar is the most widely used currency for pricing international sales Importers in some countries may prefer invoicing in local currencies like Japanese Yen or Euro or Pound Sterling, Singapore Dollars or UAE Dirhams Saudi riyals etc. This reduces the risk of exchange rate fluctuations for the buyer Exchange fluctuation is a major risk for sellers and can be managed by hedging the currency.
SDM-Ch 16
Tata McGraw Hill Publishing Ltd
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MARKET INTELLIGENCE
Secondary data is very easy to gather from various publications, agencies like chambers of commerce, trade bodies, embassies, trade shows, internet, banks etc
Usually secondary data is sufficient to establish the feasibility of the market. Care must be taken to understand the data and the measures used before drawing conclusions.
SDM-Ch 16
Tata McGraw Hill Publishing Ltd
21
Key Learnings
Markets differ in culture, language, taste, consumption patterns, economic strength, level of development of market and distribution infrastructure The main risks in international business are political and commercial and financial Currency fluctuation is major risk. Risks can be mitigated by hedging or insuring Legal aspects of a country must be understood well before venturing in
SDM-Ch 16
Tata McGraw Hill Publishing Ltd
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Key Learnings
The organizing for international markets starts with choosing the market, planning suitable entry strategies, staffing with salespersons of appropriate profile, pricing the products in an acceptable currency, distributing the products based on the market needs and infrastructure, in suitable packing for efficient handling and consumer appeal. Payment terms must be acceptable to buyer and seller with minimum risk to both. Secondary market data can be collected from various sources before venturing into the market.
SDM-Ch 16
Tata McGraw Hill Publishing Ltd
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