International Marketing

International marketing strategies Market entry strategies

Why internationalise? (and why globalise?)

Proactive and reactive motives of

internationalisation Competition in the global markets Benefits of global orientation

Economies of scale Transfer of experience Uniform global image control and coordination

Global Motivators
Motivators for International Business

PROACTIVE (want)
Profit advantage Unique products Technological advantage Exclusive information Tax benefit Economies of scale

REACTIVE (need)
Competitive pressures Overproduction Declining domestic sales Excess capacity Saturated domestic markets Proximity to customers and parts

Why Go Global?
Earn additional profits Leverage a unique product or technological

advantage
Possess exclusive market information
Saturated domestic markets Excess capacity

Utilize economies of scale

Factors influencing international marketing strategy

Strategic planning
Making things happen Strategic planning is a systematise way of

relating to the future. It is an attempt to manage the effects of external, uncontrollable factors on the firms strengths, weaknesses, objectives and goals to attain a desired end. Further, it is a commitment of resources to a country market to achieve specific goals.

Activities and planning process of international marketing

Decide whether to

internationalise
Assess international market Preliminary analysis and

opportunities Consider how to enter the market

Design the international mix

screening: matching company/country

Adapting the marketing mix

to target markets Developing the marketing plan

Implementing the mix Implementation and control
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Identify the various ways of entering the global marketplace

Risk Levels for Global Entry

Risk
Joint Contract Venture ManuExport Licensing facturing

Direct Investment

High risk/ high return

Low risk/ low return

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Return

Entering the Global Marketplace

Export Licensing Contract Manufacturing
Joint Venture Sell domestically produced products to buyers in other countries.

Legal process allowing use of manufacturing/patents/knowledge. Private-label manufacturing by a foreign company Domestic firm buys/joins a foreign company to create new entity.
Active ownership of a foreign company/manufacturing facility.

Direct Investment
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Factors Influencing Market Entry Strategy

International environment: economic cultural legal Firms overall strategy

Global market opportunity assessment: country screening industry potential company sales potential

Entry strategy choices: export licensing joint ventures manufactures

Market entry planning Product adaptation Channel selection Customer service

Positioning
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Pricing

International Market Entry

1. 2. 3. 4.

Exporting Licencing & Franchising Joint Venture Merger & Acquisition

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Exporting-is appropriate if
1. 2. 3. 4. 5.

The volume of foreign business is not large enough to justify production in the foreign market. Cost of production in foreign market is high. There are political or other risks investment in foreign country. Foreign investment is not favoured by foreign country concerned. Licencing or contract manufacturing is not a better alternative.

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Contd..

Exporting is attractive than other modes particularly when underutilised capacity exists even when there is no excess capacity, expansion of existing facility may sometimes be easier & less costly then the setting up production facilities abroad. Govt. provides incentives for estabilishing facilities for export production. Ways of exporting can be both direct & indirect.

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Licensing & Franchising

Under a licensing agreement, one firm permits another to use its intellectual property for compensation designated as royalty. The recipient firm is licensee. The property licensed might include patents, trademarks, copyrights, technology, technical know how or specific business skills. Licensing may be called as export of intangibles.

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Assessment of Licensing
No capital investment or detailed involvement with foreign customers is required. 2. Licensing provides a means by which foreign market can be tested without major involvement of capital. 3. Licensors can make milions of dollars with little effort, while licensees can produce a brand or product that consumers will recognise immediately. 4. A special form of licensee is trademark licensing, which has become a substantial source of worldwide revenue for cos that can trade on well known names & characters.
1.

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Franchising
Franchising is granting of right by a parent co. to another, independent entity to do business, in prescribed manner. 2. Right can take form of selling franchisors products, using its name, production & marketing techniques. 3. Major form of franchising are manufacturer retailer system (such as car dealership), manufacturerwholesaler system(such as soft drink cos) & service firm retailer systems (fast food outlets).
1.

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Contd..
4.

Firms must be able to offer unique products or unique selling proposition. Problem can be foreign govt interventions.

5.

As an entry strategy in requires neither capital investment nor knowledge & marketing strength in foreign markets.

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Joint Venture

A JV can be defined as participation of 2 or more countries in an enterprise in which each party contributes assets, has some equity & shares risk. In some JV each partner contribution typically consisting of funds, technology, plant or labor also vary. The key to JV is the sharing of common business objective, which makes the arrangement more than a customer-vendor relationship but less than an outright acquisition.

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Joint Venture

One major commercial reason to participate in JV is the desire to minimize the risk of exposing long term investment capital, while at the same time maximizing the leverage on the capital invested. JV may be the only way in which a firm can profitably participate in a particular market. NUMMI New United Motor Manufacturing Inc GM Benefited from technology & Mgt approaches provided by its Japanese market. Toyota - Needed direct access to US market.

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JV are not necessarily meant to be permanent. They are meant to serve specific objectives within a period of time & once the objectives are achieved the continuation depends on the reassessment of the situation by partners. A JV can succeed only if both partners have something definite to offer to the advantage of the other & reap definite advantages & have mutual trust & respect.

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M &A

M&A have been very important market entry strategy as well as expansion strategy. Several Industries such as automobiles, pharmaceuticals, banking telecom have undergone a global restructuring as a result of cross border M&As.

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Advantages of M & A
1. 2.

It provides instant access to markets & distribution. Imp objective is to obtain access to new technology or a patent right. M&A also competition. has the advantage of reducing

3.

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Problems of M & A
1. 2. 3. 4. 5. 6.
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Evaluation of case for Acquisition Cost of acquisition may be unrealistic high. Financial crunch Cultural clash Employees unsecurity Integration problems

Strategic Alliance
1.

This strategy seeks to enhance long term competitive advantage of firm by forming alliance with its competitors, existing or potential in critical areas instead of competing with each other. A US pharmaceutical firm may use the sales promotion & distribution infrastructure of a Japanese pharmaceutical firm to sell its products in Japan.

2.

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Strategic alliance which enables companies to increase resource productivity & profitability by avoiding unnecessary fragmentation of resources & duplication of investment & effort are growing in popularity & are very conspicious in such industries as pharmaceuticals, compute etc. which are characterised by high fixed costs in R & D & manufacturing &/or high & fast changing technology.

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Global Market Entry: Choice of Entry Mode

Type of Entry
Exporting Licensing

Characteristics
High cost, low control Low cost, low risk, little control, low returns

Strategic alliances

Shared costs, shared resources, shared risks, problems of integration Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations Complex, often costly, time consuming, high risk, maximum control, potential above-average returns

Acquisition

New wholly owned subsidiary

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