Unit-2 Lecture-8

Tapping into Global Markets

A:Competing on a Global Basis
B:Decisions In International Marketing
C:Deciding How to Enter the Market
D:Deciding on the Marketing Program
C:Country-of-Origin Effects
 Learning Outcome
Students will be able
• to appraise market environment to decide to enter
offshore markets
• to learn about different global market entering
strategies
 A:Competing on a Global Basis

• Global industry
– Competitors’ strategic positions in major geographic
or national markets are affected by their overall
global positions
• Global firm
– Operates in more than one country and captures
R&D, production, logistical, marketing, and financial
advantages not available to purely domestic
competitors
B:Decisions in International Marketing
B:Decisions in International Marketing
a)Deciding Whether to Go Abroad
• Factors that draw companies into the international arena
– Some international markets present better profit
opportunities than domestic market
– Firm needs larger customer base to achieve
economies of scale
– Firm wants to reduce dependence on any one
market
– Firm counterattacks global competitors in home
markets
– Customers going abroad require international
service
B:Decisions in International Marketing
a)Deciding Whether to Go Abroad
• Before making a decision to go abroad, the company must
also weigh several risks
– Firm might not understand foreign preferences,
failing to offer competitively attractive product
– Firm might not understand foreign country’s culture
– Firm might underestimate foreign regulations and
incur unexpected costs
– Firm might lack managers with international
experience
– Foreign country might change commercial laws,
devalue currency, or expropriate foreign property
B:Decisions in International Marketing
a)Deciding Whether to Go Abroad
• Before making a decision to go abroad, the company must
also weigh several risks
– Firm might not understand foreign preferences,
failing to offer competitively attractive product
– Firm might not understand foreign country’s culture
– Firm might underestimate foreign regulations and
incur unexpected costs
– Firm might lack managers with international
experience
– Foreign country might change commercial laws,
devalue currency, or expropriate foreign property
B:Decisions in International Marketing
Internationalization Process

Stage 1: No export activities

Stage 2: Export via independent representatives

Stage 3: Establishment of sales subsidiaries

Stage 4: Establishment of production facilities abroad

B:Decisions in International Marketing
b)Deciding Which Markets to Enter
• How many markets to enter

Waterfall Approach

Sprinkler Approach

Born Global
B:Decisions in International Marketing
c) Evaluating Potential Markets

• Neighboring countries

• Psychic proximity/cultural
distance

• Fewer countries
B:Decisions in International Marketing
d) Succeeding in Developing Markets

• BRICS
– Brazil, Russia, India,
China, and South Africa
• CIVETS
– Columbia, Indonesia,
Vietnam, Egypt, Turkey,
and South Africa
B:Decisions in International Marketing
d) Succeeding in Developing Markets

• Brazil

✓ Biggest economy in Latin America

✓ Sixth largest economy in the world
✓ Fifth-largest country of digital users
✓ High cost of transporting products
✓ Crime and corruption exist
B:Decisions in International Marketing
d) Succeeding in Developing Markets

• India

✓ Lively democracy/youthful population

✓ World’s second most populous nation
✓ One of the youngest large economies
✓ Has fully embraced mobile technology
✓ Poor infrastructure/public services
Modes of Foreign Market Entry
C:Deciding How to Enter the Market

• 1-Indirect and Direct exporting

• Direct
– Working through independent intermediaries

Domestic-based Domestic-based
export merchants export agents

Cooperative Export-management
organizations Companies
C:Deciding How to Enter the Market
• 1-Indirect and Direct exporting
• Indirect
– Handling one’s own exports

Domestic-based export
department Overseas sales branch

Traveling export sales Foreign-based

representatives distributors
C:Deciding How to Enter the Market
2-Licensing
• Licensing
– Licensor issues a
license to a foreign
company to use a
manufacturing process,
trademark, patent, trade
secret, or other item of
value for a fee or royalty
C:Deciding How to Enter the Market
3-Joint ventures
– Foreign investors have often joined local investors
in a joint venture company in which they share
ownership and control
4-Direct Investment
– The foreign company can buy part or full interest in
a local company or build its own manufacturing or
service facilities
C:Deciding How to Enter the Market
5-Acquisition
– Acquiring local brands for their brand portfolio
D:Deciding on the Marketing Program
Advantages
• Economies of scale
• Lower marketing costs
• Power and scope
• Consistency in brand image
• Ability to leverage good
ideas
• Uniformity of marketing
practices
Disadvantages
• Differences in consumer
needs, wants, usage patterns
• Differences in consumer
response to marketing
programs
• Differences in brand
development process
• Differences in legal
environment
D:Deciding on the Marketing Program
a) Global similarities and differences
The Internet, cable and satellite TV, and global linking
of telecommunications networks have led to a
convergence of lifestyles
D:Deciding on the Marketing Program
b)Marketing Adaptation

• Product features • Advertising media

• Labeling • Brand name
• Colors • Packaging
• Materials • Advertising execution
• Sales promotion • Advertising themes
• Prices
D:Deciding on the Marketing Program
c) Global product strategies

• Product features • Advertising media

• Labeling • Brand name
• Colors • Packaging
• Materials • Advertising execution
• Sales promotion • Advertising themes
• Prices
D:Deciding on the Marketing Program
d) Product standardization
D:Deciding on the Marketing Program
e) Product & Communication Strategies
D:Deciding on the Marketing Program
f) Product invention

Backward invention: reintroduces earlier

product forms well adapted to a foreign
country’s needs

Forward invention: creates a new

product to meet a need in another country
D:Deciding on the Marketing Program
G:Global Pricing Strategies
• Companies have three choices for setting prices
in different countries

Uniform price everywhere

Market-based price

Cost-based price
D:Deciding on Strategies
G:Global Pricing the Marketing Program

• Transfer price

• Dumping

• Arm’s-length price

• Gray markets

• Counterfeit products
 D:Deciding on Strategi
G:Global Pricing the Marketing Program

h) Global Distribution Strategies

Channel entry
– Figure: Whole-Channel
Concept for International
Marketing
Channel differences
– Various distribution systems
– Size and character of retail
units
E-Country-of-Origin Effects
• Mental Associations and Beliefs triggered by a
country
 Mcq’s
•1) Which of the following can induce a firm to
expand into the international arena?
•A) Consumer preferences in the domestic market vary
widely.
•B) Average income level of domestic consumers is high.
•C) The firm operates in an industry that caters to the
mass market.
•D) The firm finds that the domestic market is almost
saturated.
 Mcq’s
•2) Zodiac Inc. is one of the leading producers of
designer bags in its country. The company is
considering shifting some of its production to
India. Which of the following could have prompted
this move?
•A) People in India prefer imported designer bags.
•B) Zodiac can target a niche market of high-profile
consumers who have a high income.
•C) Zodiac can improve its market share if it can offer
better prices than its competitors.
•D) People in the home country have an ethnocentric
approach.
 Mcq’s
•3) Microsoft sold more than 60 million licenses
and upgrades of Windows 8 in the first 10 weeks
after its October 26, 2012, global launch.
Marketing spanned 42 countries with TV, print,
and banner ads, outdoor posters, and branded
entertainment. They used a ________ approach
for the launch.
•A) shotgun
•B) continuous
•C) born global
•D) sprinkler
 Mcq’s
•4) Which of the following modes of entry into a
foreign market involves the maximum
commitment and risk?
•A) franchising
•B) direct investment
•C) joint ventures
•D) licensing
 Mcq’s
•5) GE Capital, GE's lending arm, uses ________
with financial institutions in South Korea, Spain,
Turkey, and elsewhere to reach more geographic
and technological markets and to diversify
investments and risk.
•A) licensing deals
•B) direct investment
•C) indirect exporting
•D) joint ventures
 Mcq’s
•6) A market survey by LG revealed that Indians
preferred not to mix vegetarian and non-
vegetarian food items. Hence, LG refrigerators in
India include a special convertible box with
separate compartments to store and control the
temperature of vegetarian and non-vegetarian
food. This is an example of customizing
________ to local needs.
•A) advertising media
•B) product features
•C) packaging
•D) brand name
 Mcq’s
•7) Various governments force companies to
charge the ________ price, which is charged by
other competitors for the same or a similar
product.
•A) gray market
•B) implicit
•C) arm's-length
•D) authorized
 Mcq’s
•8) Which of the following is likely if the
distribution channel for a product in the foreign
country is long?
•A) The foreign country buyers pay a high price.
•B) The consumer will pay arms-length price.
•C) The profit margin of the sellers increases.
•D) The intermediaries are motivated to reship the
product to another country to earn higher profits.