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7/29/2019 Entering Global Market
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AMAs Definition of Marketing:Marketing is the process of planning and
executing the conception, pricing,
promotion, and distribution of ideas,goods, and services to create exchanges
that satisfy individual and organizational
objectives
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Global Marketing:
the coordinated performance of
marketing activities to create exchanges
across countries that satisfy individual,
organizational , and societal objectives.
Global marketing is conducted across
countries (not domestic or foreign)
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Global marketing coordinates activities
across different country markets
Global marketing should be motivated by
individual, organizational, and societal
goals
Economic, Financial, Political, and
Cultural Environmental of Each CountryAffect marketing
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Why Should Firms Engage in Global
Marketing?
To Survive and Grow
1. Learn to satisfy consumers in diverseconditions
2. Manage marketing tasks more efficiently andeffectively
3. Preempt or counter competitive attacks in
more than one market4. Expand customer base to include developedand developing nations
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To Diversify Product and Market
Portfolios and Improve competitiveness1. Effects of seasonal and cyclical
fluctuations in one market offset by others
2. Diversification increases market size and
enhances economies of scale
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To Capitalize on the Attractiveness of
Additional Country Markets
1. The U.S. is attractive-but wont
accommodate unlimited growth2. Expand market size by expanding into
other countries
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To Operate Within a Global Marketplace
1. Goods, services, capital, technology, and
labor are going global
2. Reduced government restrictions areaffecting global marketing
3. Bilateral and multilateral negotiations
are reducing restrictions
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Global Market Entry Strategies:
Exporting as an Entry Strategy:
Exporting represents the least commitment onthe part of the firm entering a foreign market
Since many countries do not offer a largeenough opportunity to justify localproduction, exporting allows a company to
centrally manufacture its products for severalmarkets and therefore to obtain economies ofscale.
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Indirect Exporting:
Several types of intermediaries located in the
domestic market are ready to assist a
manufacturer in contacting international
markets or buyers.
The major advantage for managers using a
domestic intermediary lies in that individual`s
knowledge of foreign market conditions.
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Direct Exporting:
Direct exporting includes setting up an exportdepartment within the firm or having the firm`ssales force sell directly to foreign customers ormarketing intermediaries.
A company engages in direct exporting when itexports through intermediaries located in theforeign markets.
this method of market entry provides thecompany with a greater degree of control over itsdistribution channels than would indirectexporting.
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Foreign Production as an Entry
Strategy:
Many companies realize that to serve
local customers better, exporting into
that market is not a sufficiently strongcommitment to realize strong local
presence. As a result, these companies
look for ways to strengthen their base byentering into one of several ways to
manufacture.
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Licensing:
Licensing is similar to contract manufacturing,
as the foreign licensee receives specifications
for producing products locally, but the licensor
generally receives a set fee or royalty rather
than finished products.
Licensing may offer the foreign firm access to
brands, trademarks, trade secrets or patentsassociated with products manufactured.
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Using licensing as a method of market entry, a
company can gain market presence withoutan equity (capital) investment.
The foreign company, or licensee gains the
right to commercially exploit the patent ortrademark on either an exclusive (the
exclusive right to a certain geographic region)
or an unrestricted basis.
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Franchising:
Franchising is a special form of licensing inwhich the franchiser makes a total marketingprogram available including the brand name,
logo, products and method of operation. Usually the franchise agreement is more
comprehensive than a regular licensingagreement
About 80 percent of all McDonald`srestaurants are franchised
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Local Manufacturing:
Many companies find it to their advantage tomanufacture locally instead of supplying theparticular market with products made
elsewhere. Numerous factors such as local costs, market
size, tariffs, laws and political considerationsmay affect a choice to manufacture locally.
it may be contract manufacturing, assembly orfully integrated production.
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Under contract manufacturing, a companyarranges to have its products manufactured by an
independent local company on a contractualbasis.
A firm contracts with a foreign firm tomanufacture parts or finished products or toassemble parts into finished products.
The manufacturer`s responsibility is restricted toproduction. Afterward, products are turned over
to the international company which usuallyassumes the marketing responsibilities for sales,promotion and distribution.
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Lower labor costs abroad are the major incentivefor using this entry mode.
In an assembly operation, the international firmlocates a portion of the manufacturing process inthe foreign country. Typically, assembly consistsonly of the last stages of manufacturing and
depends on the ready supply of components ormanufactured parts to be shipped in fromanother country.
Assembly usually involves heavy use of laborrather than extensive investment in equipments.
Motor vehicle manufacturers and electronicsindustries have made extensive use of assemblyoperations in numerous countries.
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Establishing a fully integrated local productionunit involves the greatest commitment a
company can make for a foreign market. Since building a plant involves a substantial outlay
in capital, companies only do so where demandappears assured.
the primary reason is to take advantage of lowercosts in a country, thus providing a better basisfor competing with local firms or other foreigncompanies already present.
Also, high transportation costs and tariffs maymake imported goods uncompetitive.
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Ownership Strategies:
Joint Ventures: In a joint venture, an investing
firm owns roughly 25 to 75 percent of a foreign
firm, allowing the investing firm to affect
management decisions of the foreign firm.
the foreign company invites an outside partner to
share stock ownership in the new unit. The
particular participation of the partners may vary,with some companies accepting either a minority
or majority position
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A company whose common stock is 100%
owned by another company, called the parentcompany. A company can become a wholly
owned subsidiary through acquisition by the
parent company.
This arrangement is common among high-tech
companies who want to retain complete
control and ownership of their technology.
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Strategic Alliances: In an alliance, two entire
firms pool their skills and resources directly in
a collaboration and each expects to profit
from the other`s experience.
Although a new entity may be formed, it is not
a requirement.
Alliances can be in the forms of technology-
based alliances, production-based alliances or
distribution-based alliances.
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Entering Markets Through Mergers
and Acquisitions:
the need to enter markets more quickly than throughbuilding a base from scratch or entering some type ofcollaboration has made the acquisition route extremelyattractive.
A major advantage of acquisitions is that they canquickly position a firm in a new business. By purchasingan existing player, a firm does not have to take the timeto establish its presence.
Acquiring an existing firm also takes a potential
competitor out of the market. acquisitions can be a very expensive way to enter a
market.