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Contents

Chapter 1: Introduction: Export Marketing Strategy . . . . . . . . . . . . . 1

Chapter 2: Assessing Company Readiness to Export. . . . . . . . . . . . . . 9

Chapter 3: Researching and Selecting Export Markets. . . . . . . . . . . 31

Chapter 4: Exploring International Entry Modes. . . . . . . . . . . . . . . 57

Chapter 5: Partnering Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Chapter 6: Developing an Export Marketing Plan. . . . . . . . . . . . . . 95

Chapter 7: Working With Facilitating and Support Firms . . . . . . . 113

Chapter 8: Budgeting for Exporting. . . . . . . . . . . . . . . . . . . . . . . . 143

Chapter 9: Analyzing the Legal Environment of Exporting . . . . . . 153

Chapter 10: Managing Logistics and Supply Chain in Exporting. . . 181

Chapter 11: Understanding Foreign Cultures. . . . . . . . . . . . . . . . . 189

Chapter 12: Product Adaptation . . . . . . . . . . . . . . . . . . . . . . . . . . 207

Chapter 13: Advertising and Promotion in Export. . . . . . . . . . . . . 217

Chapter 14: Export Costing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231

Chapter 15: Pricing for Export Markets. . . . . . . . . . . . . . . . . . . . . 253
Chapter 16: Financial Aspects and Payments in Exporting. . . . . . . 279

Chapter 17: Managing Export Operations. . . . . . . . . . . . . . . . . . . 303

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333

Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

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1

Chapter 1

Introduction:
Export Marketing Strategy
Upon completing this chapter, you should be able to
• u
nderstand the importance of exporting to your firm’s business
performance;
• understand the determinants of export performance, especially
the importance of export marketing strategy;
• follow an export marketing strategy framework to develop
suitable marketing strategies for your export venture in a
foreign market.

Importance of Exporting
In a globalized market, exporting plays an important role in a firm’s
growth and profitability. With trade barriers coming down, advances
in telecommunication, transportation, and data processing technolo-
gies, and increasing global travel, exporting is no longer the privilege of
large multinational corporations. In fact, a large number of small and
medium-size firms have become active and dynamic exporters in the
global market in the last few decades (Katsikeas, Bell, & Morgan, 1998).
Increasingly, exporting is becoming a very important strategic initiative
in the growth of many small and medium-size firms. For many firms,
exporting is a vital part of their business operations. Without success in
exporting, many firms may not survive in the saturated domestic market.

Determinants of Export Performance
Yet success in export marketing is by no means easy for small and
medium-size firms. While many firms have succeeded in international-
ization, examples of failure in export marketing are easy to find (Cavusgil,
Knight, & Riesenberger, 2008). To be successful in internationalization
and in export marketing, firms need to conduct a careful assessment of

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2 Export Marketing Strategy

their readiness to export, go through the learning process of internation-
alization, develop effective export marketing strategies that suit the for-
eign markets, and implement the strategies effectively.
Past research in export marketing has identified a number of deter-
minants of export performance. These include internal organizational
factors such as management’s commitment to exporting, international
experience, human and financial resources, research and development
(R&D) capabilities, product uniqueness, and organizational structure,
and external environmental factors such as competitive intensity, cultural
differences, market structure and turbulence, and government restric-
tions/regulations (Katsikeas, Piercy, & Ioannidis, 1996; Zou & Stan,
1998). However, the most important determinant of export performance
has been found to be a firm’s export marketing strategy (Cavusgil & Zou,
1994; Zou & Stan, 1998). It has been established that the fit between a
firm’s export marketing strategy and its internal organizational character-
istics and external market characteristics is what ultimately determines
its export performance (Cavusgil & Zou, 1994). This framework is sum-
marized in Figure 1.1.

Export Marketing Strategy and Export Performance
According to the above framework of determinants of export perfor-
mance, external market/industry characteristics and internal firm and

Figure 1.1. A framework of determinants of export performance.

Internal Characteristics

Firm
Characteristics

Product
Characteristics
Export Marketing
Export
External Characteristics Performance
Marketing
*Strategic
Strategy
*Financial
Industry
Characteristics

Foreign Market
Characteristics

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Introduction: Export Marketing Strategy 3

product characteristics impose pressure for a firm to respond in its export
venture. A firm that can respond with effective export marketing strategy
that fits the internal and external environments will experience improved
export performance.
Export performance can be assessed along two different dimensions:
strategic and financial (Zou, Taylor, & Osland, 1998). Strategic export
performance can be viewed as the extent to which a firm’s strategic
objectives of exporting are achieved in the foreign market. When a firm
decides to export, it may set some strategic objectives such as setting up a
strategic foothold in the important foreign markets, gaining competitive
advantages through market diversification, exploiting the product and
technological strengths in the foreign market, increasing market share,
preempting competition, gaining international experience, and building
brand awareness and brand equity in foreign markets (Cavusgil & Zou,
1994). Achievement of such objectives will enhance the firm’s strategic
market position and increase its competitiveness, leading to long-term
business success.
A firm may also set financial objectives when it decides to export.
These may include increasing sales of existing products, making profits
through exporting to foreign markets, and reducing the cost via increas-
ing the scale. Accomplishing these objectives will lead to improved finan-
cial performance of the firm. Depending on the situation of the firm,
strategic export performance or financial export performance may be the
focus of the firm’s export ventures.
The framework suggests that when a firm’s export marketing strat-
egy fits its internal environment and external environment, its strategic
export performance and financial export performance will be improved.
To achieve a good fit of export marketing strategy to the internal and
external environments, a firm can engage in a conscious effort to adapt
its marketing strategies to these environments. In other words, adapta-
tion is a central means to achieve a fit between export marketing strat-
egy and the firm’s internal and external environments (Cavusgil, Zou, &
Naidu, 1993). The adaptation may involve various components of the
firm’s marketing strategy, including market targeting, brand positioning,
product promotion, distribution, and pricing.

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4 Export Marketing Strategy

Product adaptation is a key export marketing strategy that influences
a firm’s export performance (Cavusgil & Zou, 1994). In a foreign market,
political/regulatory, cultural, and economic environments can be very
different. Product standards, safety standards, and technical specifica-
tions in foreign markets can be quite different from those in the domestic
market. In order to market a product successfully in the foreign market,
an exporter needs to properly adapt its product to the foreign market’s
requirements. Sometimes the product may be culture specific or unique
to domestic market demand. To market it successfully in the foreign mar-
ket, the product also needs to be adapted to make it more appealing to
foreign market demand. There are two types of product adaptation that
can be pursued by exporters: mandatory adaptation and discretionary
adaptation (Czinkota & Ronkainen, 2002). Mandatory product adapta-
tion is the minimum level of adaptation of a product in order to make
the product acceptable in the export market. It may be prompted by the
local regulatory environment or physical and educational characteristics.
Discretionary product adaptation, on the other hand, is pursued at the
exporter’s discretion to make the product more appealing to customers in
the export market. It is usually done by the exporter to gain a competitive
advantage over its rivals in the export market.
Promotion adaptation is another major export marketing strategy that
is important to export performance. Laws and regulations about adver-
tising, cultural values and norms, and advertising infrastructure in the
foreign market can be very different from those in the domestic market
(Cavusgil et al., 2008). As a result, effective advertising in the domestic
market may not work well in the foreign market, leading to the need
to adapt the advertising’s theme, message, media, and evaluation in the
foreign market. Sales promotion may also need to be adapted to fit the
foreign environment. In many countries, the retailing structure is domi-
nated by small and independent stores, making it hard for exporters to
use coupons to promote sales. In some countries, face saving is an impor-
tant value in the culture, making price discounts, coupons, and rebates
ineffective for promoting sales because consumers may shy away from
these tools in their effort to project a positive affluent image. Language
difference also makes it necessary to adapt the firm’s advertising and pro-
motion (Czinkota & Ronkainen, 2002).

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Introduction: Export Marketing Strategy 5

Adaptations to channels of distribution may be necessary in some for-
eign countries due to unique local distribution structures. Indeed, most
countries in the world still lack the modern American type of large-scale
distribution channels in which mega-retailers and chain stores dominate
retail sales. In these countries, long and inefficient distribution channels
with multiple levels of wholesaling and small-scale retailing are preva-
lent (Czinkota & Ronkainen, 2002). In addition, cultural differences also
lead consumers to shop in different types of outlets. To succeed in such
markets, exporters must adapt their distribution strategy to fit the charac-
teristics of the export market.
Price adaptation may be necessary in order to market a product effec-
tively in foreign markets. There are several factors that may necessitate
price adaptation. First, the added costs of exporting, such as international
freight charges, insurance, tariffs and duties, and exporting specialists,
have to be covered in order for export ventures to be profitable, leading
to possible price increases. Second, the long and less efficient distribution
channels in many foreign markets may increase the price of exported prod-
ucts to foreign consumers due to distributors’ margins and higher costs of
transportation and storage. To control such price increases, exporters may
have to reduce their quoted price to foreign importers/distributors to
remain competitive. Third, product adaptation and promotion adapta-
tion that are necessary to market the product in the export market require
investment that need to be recovered through price adaptation. Exporters
may consider charging a higher price to cover such investments. Finally,
income levels in many export markets may be relatively low or competi-
tion may be intense. Consumers may not be able to afford the regularly
priced products or have competing products to choose from. As a result,
the price of the exported product may have to be reduced to make the
product viable in foreign markets (Cavusgil, 1988).
In addition to export marketing strategy, a firm’s internal organi-
zational resources and capabilities may also have a direct effect on its
export performance. Top management commitment, international
experience, organizational and financial resources, and competencies in
product and process technologies can all directly influence export per-
formance (Zou & Stan, 1998). In fact, successful exporters are those
that have considerable top management commitment, international

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6 Export Marketing Strategy

experience, and organizational and financial resources, and superior com-
petencies in product and process technologies. Exporting represents a
significant commitment by a firm to enter the international market. A
firm with high-level management commitment to exporting, adequate
staff with international experience, and sufficient financial resources is
more likely to meet the demand of export market development and avoid
prematurely aborting export operations in the face of temporary market
turmoil (Aaby & Slater, 1989). In the long run, successful exporters must
develop and sustain distinctive competencies in product development
and process improvement, as the export market will become mature and
competition will catch up. Moreover, exporters must capitalize on their
gained experience in an export market by expanding their operations and
establishing themselves as dominant competitors in the export market.

Development of Export Marketing Strategy
Given the importance of export marketing strategy in determining a firm’s
export performance, it is very important that a systematic process be fol-
lowed to develop an export marketing strategy that is properly adapted to
the firm’s internal and external environments. To be effective, an exporter
should conduct a thorough Strengths, Weaknesses, Opportunities, and
Threats (SWOT) analysis before deciding on the degree of adaptation of
its marketing strategy for the export market. Specifically, the following
are examples of a firm’s strengths, weaknesses, opportunities, and threats
in the foreign market (Czinkota & Ronkainen, 2002):

Strengths
• A strongly differentiated product
• Distinctive competencies in the industry
• Strong brand name and reputation
• An attractive customer base
• Superior intellectual capital and international experience
• Innovative marketing capabilities
• Quality management
• Technological and financial resources
• Cross-cultural competencies
• Strong alliances with foreign partners

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Introduction: Export Marketing Strategy 7

Weaknesses
• Lack of distinctive competencies
• Higher costs or weak differentiation
• Weak brand and customer base
• Weak distribution network
• Lack of intellectual capital and international experience
• Limited financial resources
• Lack of cross-culturally competent personnel
• Lack of strategic vision

Opportunities
• Rising demand, especially from the export market
• Existence of underserved market segments in the export market
• Opportunity to utilize existing skills and resources in the export
market
• Falling trade barriers and attractive foreign markets
• Opportunity to increase scale from foreign operations
• Possibility of exploiting a relationship with foreign business
partner or government officials

Threats
• Intense competition in the foreign market
• Slowing market growth
• Growing bargaining power of foreign businesses or governments
• Shift in customer demand
• Costly new government regulations
• Likely entry by formidable competitors into the foreign market
• Technology changes fast in the industry

After a careful SWOT analysis, the firm should seek to adapt its mar-
keting strategies in such a way as to capitalize on its strengths, overcome
its weaknesses, exploit opportunities, and avoid threats. In other words, a
firm should align its strengths with market opportunities when adapting
its marketing strategies to the export market. Once a close fit is achieved

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8 Export Marketing Strategy

between its export marketing strategy and its internal and external environ-
ments, its export performance will be improved (Cavusgil & Zou, 1994).

The Objectives of This Book
In this book we seek to present a comprehensive guide for firms interested
in participating and succeeding in export marketing. Drawing on the
authors’ sustained research stream in export marketing and our knowl-
edge of the export marketing literature, we will introduce a systematic
process for a firm to assess its readiness to export, identify and select viable
export markets, explore suitable forms to enter foreign markets, develop
an effective export marketing plan, work with export facilitating firms,
set an export budget, manage the supply chain and logistics in export-
ing, analyze foreign cultures, adapt the product, adapt the promotion,
set export prices, get paid in exporting, and manage export transactions.
We attempt to cover various aspects of a successful export marketing
program, discuss the detailed tasks and considerations involved in each
aspect, and present a set of practical guidelines for firms to follow when
making export marketing decisions.
By reading this book, business managers will master the art and sci-
ence of successful exporting and understand the complete process and
decision-making tasks involved in export marketing. More importantly,
they will learn a strategic approach to helping their firms participate in
exporting, develop properly adapted export marketing strategies, man-
age export operations, and improve export performance. Eventually they
will help their firms survive and prosper in the ever-changing global
market environment.
Throughout this book we attempt to balance strategic considerations
with operational issues in export marketing. We also balance the theoreti-
cal rationales with practical applications of export marketing knowledge.
Readers with different levels of knowledge and preparation in export mar-
keting should benefit from this book by focusing more or less on certain
chapters. To our knowledge this is the first comprehensive book focused
specifically on export marketing strategy and operations. We believe it
will be an invaluable addition to the export marketing literature.

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