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Svend Hollensen
GLOBAL MARKETING4th Edition
2 Initiation of internationalization
2-2Hollensen, Global Marketing 4e, © Pearson Education 2008
Learning objectives
Discuss the reason why firms go international
Explain the difference between proactive and reactive motives
Analyse the triggers of export initiation
2-3Hollensen, Global Marketing 4e, © Pearson Education 2008
Learning objectives (2)
Explain the difference between internal and external triggers of export initiation
Describe different factors hindering export initiation
Discuss the critical barriers in the process of exporting
2-4Hollensen, Global Marketing 4e, © Pearson Education 2008
Figure 2.1 Stages of internationalization
2-5Hollensen, Global Marketing 4e, © Pearson Education 2008
Motives for internationalization
Proactive Profit and growth goals Managerial urge Technology competence Foreign market
opportunities Economies of scale Tax benefits
Reactive Competitive pressures Domestic market Overproduction Unsolicited foreign orders Extend sales of seasonal
products Proximity to international
customers
2-6Hollensen, Global Marketing 4e, © Pearson Education 2008
Haier Group responded to proactive and reactive motives
Source: http://www.haier.com/
2-7Hollensen, Global Marketing 4e, © Pearson Education 2008
Nidek faced a variety of motives
Source: http://www.nidek.com
2-8Hollensen, Global Marketing 4e, © Pearson Education 2008
What is this?
Internal or external events taking place to initiate internationalization are known as ______.
Internationalization triggers
2-9Hollensen, Global Marketing 4e, © Pearson Education 2008
Triggers of export initiation
Internal triggersPerceptive
managementSpecific internal eventImporting as inward
internationalization
External triggersMarket demandCompeting firmsTrade associationsOutside experts
2-10Hollensen, Global Marketing 4e, © Pearson Education 2008
Figure 2.2 Inward/outward internationalization
2-11Hollensen, Global Marketing 4e, © Pearson Education 2008
Outside experts
Exportagents
Governments
Chambers of commerce
Banks
2-12Hollensen, Global Marketing 4e, © Pearson Education 2008
Barriers hindering export initiation
Insufficient finances Insufficient
knowledge Lack of foreign
market connections Lack of export
commitment Lack of capital
Lack of productive capacity
Lack of foreign channels of distribution
Management emphasis on developing domestic markets
Cost escalation
2-13Hollensen, Global Marketing 4e, © Pearson Education 2008
Barriers hindering the process of internationalization
General market risks
Commercial risks
Political risks
2-14Hollensen, Global Marketing 4e, © Pearson Education 2008
General market risks
Comparative market risksCompetition from other firmsDifferences in product usage Language and cultural differencesDifficulties in finding the right distributorDifferences in product specificationsComplexity of shipping services
2-15Hollensen, Global Marketing 4e, © Pearson Education 2008
Commercial risks
Exchange rate fluctuationsFailure of export customers to pay due to
contract disputes, bankruptcy, refusal to accept product, or fraud
Delays and/or damage in the export shipment and distribution process
Difficulties in obtaining export financing
2-16Hollensen, Global Marketing 4e, © Pearson Education 2008
Political risks (1)
Foreign government restrictions National export policyForeign exchange controls imposed by
host governmentsLack of governmental assistance in
overcoming export barriersLack of tax incentives
2-17Hollensen, Global Marketing 4e, © Pearson Education 2008
Political risks (2)
High value of domestic currency relative to export markets
High foreign tariffs on imported productsConfusing foreign import regulations and
proceduresComplexity of trade documentationEnforcement of national legal codes regulating
exportsCivil strife, revolution, and wars disrupting foreign
markets
2-18Hollensen, Global Marketing 4e, © Pearson Education 2008
Risk-management strategies
Avoid exporting to high-risk markets
Diversify overseas markets
Insure risks when possible
Structure export business so that buyer bears most risk
2-19Hollensen, Global Marketing 4e, © Pearson Education 2008
For discussion (1)
Export motives can be classified as reactive or proactive. Give examples of each group of export motives. How would you prioritize these motives? Can you think of motives other than those mentioned in the chapter? What are they?
What is meant by ‘change agents’ in global marketing? Give examples of different types of change agent.
2-20Hollensen, Global Marketing 4e, © Pearson Education 2008
For discussion (2)
Discuss the most critical barriers to the process of exporting.
What were the most important change agents in the internationalization of Haier (Exhibit 2.2)?
What were the most important export motives in Japanese firms (Exhibit 2.1)?
2-21Hollensen, Global Marketing 4e, © Pearson Education 2008
NIDEK: A case study
What have been the key barriers in the early days of internalization, for example, when entering the US market?
What have been the driving forces for the early internationalization?
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