INTERNATIONAL MARKETING

200094

IM
200094
 OVERVIEW
– Discussion Question 1:
Internationalisation
– Discussion Question 2:
Choice of Market Entry Strategy
– Discussion Question 3:
Foreign Direct Investment
CHAPTER 7
Foreign market entry
 Learning objectives
1. Understand why firms internationalise.
2. Reflect on how firms internationalise.
3. Examine the factors influencing foreign direct
investment.
4. Identify the differing perspectives on foreign
direct investors.
MARKET ENTRY STRATEGIES

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 Why firms internationalise
• A variety of motivations push and pull firms to
the international path
• Proactive motivations – because they want to
• Reactive motivations – because they have to
Why firms go international
 Motivations to internationalise
• Internal change agents
 enlightened management
 new management or employees
 a significant internal event
• External change agents
 foreign demand (accidental exporters)
 competition
 domestic distributors
 governmental efforts
Discussion Question 1: Internationalisation

1. Discuss the difference between a proactive

and a reactive firm, focusing your discussion
on the international market.
2. What are the motivations to internationalise?
 How firms internationalise
• Distributors:
– purchase the products and exercise
independence
– specialise in product lines
– provide complete marketing services
• Agents:
– operate on a commission basis
– do not usually physically handle the goods
 Export intermediaries
• Indirect exporting:
– selling goods to a domestic firm that in turn
sells them abroad
• Direct exporting:
– the marketer takes direct responsibility for
goods sent abroad
 Export intermediaries
• Integrated distribution:
– requires the marketer to make an
investment into the foreign market so its
products can be sold there or in the region
 Licensing
• A firm permits another to use its intellectual
property:
– patents
– trademarks
– copyrights
– technology or technical know-how
– specific marketing skills
• Exchange for royalty payments
Licensing
Assessment of licensing: advantages
• No capital investment, knowledge or
marketing strength
• Huge profit potential
• Minimal risk of government intervention
Assessment of licensing: advantages
• A stage in internationalisation
• Pre-empt market entry before competition
• Increasing global protection of intellectual
property rights
Assessment of licensing: disadvantages
• International marketing experience for
licensee
• The licensor may create its own competitor
 Principal issues in negotiating
licensing agreements
• Product and/or patents rights
• Compensation needs to cover:
– transfer costs
– R&D costs
– opportunity costs
 Principal issues in negotiating
licensing agreements
• Licensee compliance:
– export control regulations
– confidentiality
– record keeping
 Principal issues in negotiating
licensing agreements
• Dispute resolution
• The term, termination and survival of rights
must be specified
• Important to study the government
regulations in the licensee’s market
 Trademark licensing
• Logos
• Literary characters
• Sports teams
• Movie stars appear on products such as
clothing, games, foods and beverages, gifts
and novelties, toys and home furnishings
• Substantial source of revenue
• Important to research consumer perceptions
regarding the brand’s positioning
 Franchising
• The franchisor grants the franchisee the right
to do business in a specified manner:
– manufacturer–retailer systems
– manufacturer–wholesaler systems
– service firm–retailer systems
• Many companies have a master franchising
system:
– foreign partner screening process
Franchising
 Benefits of franchising
• Market potential
• Financial gain
• Saturated domestic markets
• Reduces the risk; proven concept
• Governmental perspective
BEN & JERRY’S FRANCHISING
IN AUSTRALIA

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MCDONALD’S FRANCHISING IN
VIETNAM

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 Franchising concerns
• Identification of special capabilities
• Need for standardisation
• Protection of the total business system
• Government intervention
• Selection and training of franchisees
Discussion Question 2: Choice of Market Entry Strategy

1. How does a firm decide on a market

entry strategy?
2. What factors play a role?
The internationalisation process

30
 Foreign direct investment (FDI)
• The greatest commitment
• Carried out by multinationals
• Maintains a degree of control
• A major avenue for foreign market entry and
expansion
Major determinants of FDI
GLOBAL INVESTMENT
COMPETITIVENESS

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FDI IN VIETNAM VS.
PHILIPPINES

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 Reasons for FDI: marketing factors
• Desire for growth
• Political know-how and influence
• Operate abroad as a domestic firm
 Reasons for FDI: marketing factors
• Resource seekers look for natural or human
resources
• Market seekers look for better opportunities
• Efficiency seekers look for economic sources
of production
 Reasons for FDI: derived demand
• As the demand for a firm’s products or
services increases globally, other firms
(i.e. their suppliers) will also experience
increased demand
• Suppliers often invest abroad
 Reasons for FDI:
government incentives
• Governments need to provide jobs
• Fiscal incentives; for example, tax credits
• Financial incentives; for example, land,
buildings or loans
• Non-financial incentives; for example,
guaranteed government purchases and
special protection
 CAPITAL INFLOWS, FOREIGN
DIRECT INVESTMENT, PORTFOLIO
INVESTMENT IN AFRICA

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 COKE INVESTING IN
TRANSFORMED MYANMAR

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 Types of ownership: full ownership
• Is it necessary?
• Host government’s view, regulations and
actions
• Profit repatriation
• Market stability
 Types of ownership: joint ventures
• Advantages:
– preferred by the governments of host
countries
– overcomes market access restrictions
– pooling of resources
– better relationships with local organisations
 Types of ownership: joint ventures
• Disadvantages:
– governments’ FDI inexperience
– relationship maintenance
– partner loyalty
– profit-related disagreements
 Types of ownership:
strategic alliances
• A specific form of joint venture:
– ongoing flexibility
– helps to develop markets
– defends home markets
– spreads costs and risk
– transfers technology
– blocks competitors
TOYOTA AND MAZDA, JOINT
VENTURE

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 Types of ownership:
strategic alliances
• Find the right partner.
• Evaluate the effects on strategy and
competitiveness.
• Adapt to market conditions.
Discussion Question 3: Foreign Direct Investment

1. What are the different types of foreign

direct investment (FDI)?
2. What are the pros and cons for FDI?
3. What factors would favour FDI for the
country of your choice?