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International marketing - entering and operating in international markets
International marketing - entering and operating in international markets
Modes of entry
Indirect exporting
An organisation may choose to start by exporting indirectly through an independent organisation based in the organisation’s domestic market
Buying its goods and selling it abroad - selling them on behalf of the organisation as an agent
Allowing the organisation to use its distribution or as a
cooperative acting for a number of producers
Enables an organisation to utilise the independent organisation’s exporting expertise, so requires less investment and less risk
Direct exporting
Where an organisation exports its offerings itself and manages contracts in its international markets, transportation and documentation and the marketing mix
Exporting may be handled by a domestic-based or foreign-based office, through intermediaries in the international markets and/or via the internet
The use of intermediaries may be easier however, it may be expensive or difficult to terminate a contract with them
Domestic- or foreign-based offices offer more control and demonstrate greater commitment to a market, but the size of the market needs to justify the expense
The internet enables organisations to export directly to consumers in foreign markets with offerings showcased through a website.
The market in any given country may be quite small, with pockets of customers widely dispersed, so a manufacturer might export through small local businesses in foreign markets and/or online
Joint ventures
Two or more organisations forming a partnership, in which the costs, risks and profits are shared between the domestic and foreign organisations
Equity joint venture (contractual joint venture)
If they create a separate entity for the partnership
Close partnership in many areas
Joint ventures is so-called ‘metal neutrality’ which is achieved through close cooperation in capacity and price planning as well as revenue management.
Joint ventures are subject to much stricter legal regulations
The prerequisite for such close coordination is antitrust immunity from the competition authorities based on the contractual arrangements governing the joint ventures
Advantages of joint ventures
Better use of available capacity
There is still a single point of contact
Reduces economic risk with more opportunities
Strategic alliances
Similar to joint ventures
Def -
Cooperation between two or more industrial corporations, belonging to different countries, whereby each partner seeks to add to its competencies by combining its resources with those of its partner
Distinguishing feature being that the partners involved may have previously been competitors
Global strategic partnerships
Def -
link-ups between companies from two or more regions which jointly decide to pursue a marketing opportunity, share resources and combine ideas
Common in high technology, automotive and power technology industries
Partners sometimes dividing up markets between them or each using their own brand but the same technology or design to pursue market opportunities individually
Licensing
An organisation selling the rights to use its technology, patent, trademark or know-how to one or more organisations in foreign markets for an agreed time period in exchange for royalty payments based on the volume of sales or some other consideration.
Franchising
A type of licensing
Companies in foreign markets pay to use the product or trade name belonging to an organisation
Allows an organisation to enter foreign markets using resources and local knowledge supplied by the franchisees
Key difference - agreements offer an organisation more control over the use of its intellectual property than licensing through the provision of support services
Contract manufacturing
Contracting a manufacturer in a foreign market to produce an organisation’s product or service
Saves an organisation on plant investment and transportation and may reduce tariff costs, but at the expense of some reduction in control
Management contracting
The export of management services rather than products
The domestic organisation supplies the know-how and the foreign organisation provides the capital
Direct investment
Involves the greatest level of commitment to a foreign market and the highest level of control through ownership of a foreign subsidiary or division
Entails many risks
Foreign subsidiaries may operate with a high degree of autonomy that enables them to adapt to local market
Globalisation versus customisation
Traditional view of globalisation
Involves rolling out the same offering across the globe using the same ingredients, brand name and marketing communication
Been replaced with 'think locally, act globally'
Organisation have come to recognise that they need to adapt their offering and communications to local preferences and conditions
EOS can still be exploited and brand identity and
equity still confer advantages across borders
Local adaptation of the marketing mix is required
What does globalisation involve?
Involves the permeability across borders of more than just
goods and services
Also involves social and cultural trends
Organisations need to decide how to standardise their approach and how much adaptation is needed when entering foreign markets
Different segments/customer groups have differing
characteristics and the same applies when serving international markets; they cannot be treated as having identical needs and preferences
There is a continuum from standardisation to adaptation which helps to visualise the sliding scale and the balance that needs to be found that is appropriate for an organisation’s proposition in a given market, taking into account both macro and micro environments
A new product is invented for an international market
Recognising the needs of different groups of people should be incorporated to ensure that the distribution is vast
Marketing communications will also need to be adapted
Some advertisements are suitable to use in all international markets, whereas others need tailoring to cultural conventions and national contexts
There are international differences in the use and reach of marketing communications channels
EG - in developing vs developed countries
Different types of humour, language etc must be considered
The cost to service international markets
Higher owing to the need to transport goods, pay tariffs
Customers in foreign markets may or may not be able to pay higher prices, so the formulation of the product may need to be adjusted to provide cheaper versions
Distribution networks can vary considerably in different international markets
Depending on local customs and infrastructure
EG transport networks and retail patterns in certain areas
Companies considering entering emerging markets need to consider the characteristics of three main market segments
Premium segment
Customers with high purchasing power, a willingness to pay or internationally admired brands and seeking high end products with advanced features
Middle market segment
Customers with a mid-level income, seeking value and choosing products with a ‘good enough’ performance versus price ratio
Low end segment
Customers only able to pay for basic products at a meagre price
Expanding into ‘good enough’ markets is becoming increasingly attractive to multinational corporations (MNCs) as premium markets shrink
MNCs may find it difficult to compete against local companies in low-end segments, but this segment does not encourage innovation
Developing and emerging markets present a range of challenges
A lack of operational infrastructure
Weak legal protection for intellectual property
Limited capabilities among suppliers, including unpredictable customer behaviour
Potential weakening of a premium brand image
Ethical issues