Professional Documents
Culture Documents
International Marketing Strategy
International Marketing Strategy
M. Fatih Akkaya
Undersecretariat of Foreign Trade
Expert
Index:
1) Executive Summary
2) Global Marketing Strategies
3) Global Market Entry Strategies
4) Appendices
5) References
1) Executive Summary:
Usually, selling focuses on the needs of the seller, marketing on the needs of the buyer
(customer). The purpose of business is to get and keep a customer. Or, to use Peter
Drucker`s more refined construction to create and keep a customer. (through product
differentiation and price competition)
International marketing involves the marketing of goods and services outside the
organization`s home country. Multinational marketing is a complex form of international
marketing that engages an organization in marketing operations in many countries.
Global marketing refers to marketing activities coordinated and integrated across multiple
markets.
A firm`s overseas involvement may fall into one of several categories:
1- Domestic: Operate exclusively within a single country.
2- Regional exporter: Operate within a geographically defined region that crosses
national boundaries. Markets served are economically and culturally homogenous.
If activity occurs outside the home region, it is opportunistic.
3- Exporter: Run operations from a central office in the home region, exporting
finished goods to a variety of countries; some marketing, sales and distribution
outside the home region.
4- International: Regional operations are somewhat autonomous, but key decisions
are made and coordinated from the central office in the home region.
Manufacturing and assembly, marketing and sales are decentralized beyond the
home region. Both finished goods and intermediate products are exported outside
the home region.
The modern global corporation contrasts powerfully with the aging multinational
corporation. Instead of adapting to superficial and even entrenched differences within and
between nations, it will seek sensibly to force suitably (more or less) standardized
products and practices on the entire globe. (think globally, act locally)
2) Global Marketing Strategies:
Although some would stem the foreign invasion through protective legislation,
protectionism in the long run only raises living costs and protects inefficient domestic
firms (national controls). The right answer is that companies must learn how to enter
foreign markets and increase their global competitiveness. Firms that do venture abroad
find the international marketplace far different from the domestic one. Market sizes,
buyer behavior and marketing practices all vary, meaning that international marketers
must carefully evaluate all market segments in which they expect to compete.
Whether to compete globally is a strategic decision (strategic intent) that will
fundamentally affect the firm, including its operations and its management. For many
companies, the decision to globalize remains an important and difficult one (global
strategy and action). Typically, there are many issues behind a company`s decision to
begin to compete in foreign markets. For some firms, going abroad is the result of a
deliberate policy decision (exploiting market potential and growth); for others, it is a
reaction to a specific business opportunity (global financial turmoil, etc.) or a competitive
challenge (pressuring competitors). But, a decision of this magnitude is always a strategic
proactive decision rather than simply a reaction (learning how to business abroad).
Reasons for global expansion are mentioned below:
Tracking the development of the large global corporations today reveals a recurring,
sequential pattern of expansion. The first step is to understand the international marketing
environment, particularly the international trade system. Second, the company must
consider what proportion of foreign to total sales to seek, whether to do business in a few
or many countries and what types of countries to enter. The third step is to decide on
which particular markets to enter and this calls for evaluating the probable rate of return
on investment against the level of risk (market differences). Then, the company has to
decide how to enter each attractive market. Many companies start as indirect or direct
export exporters and then move to licensing, joint-ventures and finally direct investment;
this company evolution has been called the internationalization process. Companies must
next decide on the extent to which their products, promotion, price and distribution
should be adapted to individual foreign markets. Finally, the company must develop an
effective organization for pursuing international marketing. Most firms start with an
export department and graduate to an international division. A few become global
companies which means that top management plans and organizes on a global basis
(organization history).
Typically, these companies began their business development phase by entrenching
themselves first in their domestic markets. Often, international development did not occur
until maturity was reached domestically. After that phase, these firms began to turn into
companies with some international business, usually on an export basis. But, this process
may vary dramatically with the size of the domestic market. For example, when we
contrast the Netherlands market for Philips vs the US market for GE, we see that
smallness of Netherlands`s market resulted in rapid globalization of Philips` activities
when compared with GE`s activities in US. As the international side of their sales grew,
the companies increasingly distributed their assets into many markets and achieved what
was once termed the status of a multinational corporation (MNC). Pursuing multidomestic strategies on a market-by-market basis, companies began to enlarge and build
considerable local presence. Regions are treated as single markets and products are
standardized by region or globally; promotion projects a uniform image. Although this
orientation improves coordination and control, it often discounts national differences. The
French automobile industry offers a good illustration of the evolution of an international
marketing strategy. In the 1980s, according to an industry analyst for Eurofinance:
For years, the French industry depended on the domestic market. Then in the 1970s, it
developed a Europewide market. Now it finds it must crack the world market if it expects
to survive. And it is getting a late start.
France`s Renault was moving quickly into the world market. It purchased 10 percent of
Sweden`s Volvo and planned to design a new car in conjunction with Volvo. But, the
Volvo deal fell apart which is one of the reasons that they went to Nissan. Only during
their latest phase have these firms begun to transform themselves into global marketing
behemoths whose marketing operations are closely coordinated across the world market
rather than developed and executed locally. This traditional sequencing of the growth
from domestic to international, to multi-domestic or multinational to global seems to be
followed by most firms and also by many newly formed companies. However, some
newer firms are jumping right into the latest or global category and not necessarily going
through the various stages of development (management vision).
greater uncertainty and fluctuation. The issues are infrastructure such as transportation,
technology, telecommunications, stable banking, convertibility of currency, protection of
Intellectual Property Rights, enforceability of contracts, and transparency in the legal
system (government agencies&systems, laws and ordinances, etc.). Moreover, huge
foreign indebtedness, unstable governments, foreign exchange problems, foreign
government entry requirements, tariffs and other trade barriers, corruption, bureaucracy,
technological pirating and high cost of product and communication adaptation can be
issues in those countries. Furthermore, the frequently changing political situations in
developing countries (war, nationalism, etc.) often affect operating results negatively. As
a result, some markets that may have experienced high growth for some years may
suddenly experience drastic reductions in growth. In many situations, however, the higher
risks are compensated for by higher returns, largely because competition is often less
intense in those markets. Consequently, companies need to balance the opportunity for
future growth in the developing nations with the existence of higher risk.
The economic liberalization of the countries in Eastern Europe opened a large new
market for many international firms. The market typically represents about 15 percent of
the worldwide demand in a given industry, about two-thirds of that accounted for by
Russia and other countries of the former Soviet Union.
Although many companies consider this market as long-term potential with little profit
opportunity in the near term, a number of firms have moved to take advantage of
opportunities in areas where they once were prohibited from doing business. Many
countries are changing from a centrally planned economy to a market-oriented one. East
Germany has made the fastest transformation because its dominant western half was
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already there. Eastern European nations like Hungary and Poland have also been moving
quickly with market reforms. Many of the reforms have increased foreign trade and
investment. For example, in Poland, foreigners are now allowed to invest in all areas of
industry, including agriculture, manufacturing and trade. Poland even gives companies
that invest in certain sectors some tax advantages.
At some point, the development of any global marketing strategy will come down to
selecting individual countries in which a company intends to compete. There are more
than two hundred countries and territories from which companies have to select, but very
few firms end up competing in all of these markets. The decision on where to compete,
the country selection decision is one of the components of developing a global marketing
strategy.
Why is country selection a strategic concern for global marketing management? Adding
another country to a company`s portfolio always requires additional investment in
management time and effort and in capital. Although opportunities for additional profits
are usually the driving force, each additional country also represents both a new business
opportunity and risk. It takes time to build up business in a country where the firm has
not previously been represented and profits may not show until much later on.
Consequently, companies need to go through a careful analysis before they decide to
move ahead. They can analyze the investment climate of the country and determine
market attractiveness of it.
In the context of selecting markets for special emphasis, the lead market concept can help
in identifying those countries. Lead market is the market where a company should place
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extra emphasis. It is essential for globally competing firms to monitor lead markets in
their industries or better yet to build up some relevant market presence in those markets.
As global marketers eye the array of countries available for selection, they soon become
aware that not all countries are of equal importance on the path to global leadership.
Markets that are defined as crucial to global market leadership, markets that can
determine the global winners among all competitors, markets that companies can ill
afford to avoid or neglect-such markets are must win markets. Contrary to other
markets, must win markets can not be avoided if global market leadership is at stake.
Firms need to understand their competitors because corporate success results from
providing more value to customers than the competition. Industry structure is the
framework within which companies compete. Five forces determine the attractiveness of
an industry: the threat of new entrants, the bargaining power of suppliers, the bargaining
power of buyers, the presence of substitute products and the intensity of the rivalry
between firms in the industry. Firms need to manage these factors so that industry
structure is favorable.
Generic strategies are general classifications of prototype strategies that help us
understand different approaches to globalization. The concept has been widely used by
writers on business and corporate strategies including Michael E. Porter.
Generic strategies such as differentiation, cost leadership and the like are archetypes that
describe fundamentally different ways to compete. Creating and sustaining a competitive
advantage can be achieved by offering superior value through a differential advantage or
managing for cost leadership. Firms can gain a competitive advantage through
differentiation of their product offering or marketing mix which provide superior
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customer value or by managing for lowest delivered cost. These two means of
competitive advantage when combined with the competitive scope of activities (broad vs
narrow) result in four generic strategies: differentiation, cost leadership, differentiation
focus and cost focus. The differentiation and cost leadership strategies seek competitive
advantage in a broad range of market or industry segments whereas differentiation focus
and cost focus strategies are confined to a narrow segment. When we consider the idea of
sustainability of competitive advantage here, many of these advantages are only
temporary and can easily be copied.
The sources of competitive advantage are the skills and resources of the company.
Analysing these factors can lead to the definition of the company`s core competences.
These are the skills and resources at which the company excels and can be used to
develop new products and markets.
To many readers, the term global marketing strategy probably suggests a company
represented everywhere and pursuing more or less the same marketing strategy.
However, global marketing strategies are not to be equated with global standardization,
although they may be the same in some situations. A global marketing strategy represents
the application of a common set of strategic marketing principles across most world
markets. It may include but does not require similarity in products or in marketing
processes. A company that pursues a global marketing strategy looks at the world market
as a whole rather than at markets on a country-by-country basis which is more typical for
multinational firms. Globalization deals with the integration of the many country
strategies and the subordination of these country strategies to one global framework. As a
result, it is conceivable that one company may have a globalized approach to its
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marketing strategy but leave the details for many parts of the marketing plan to local
subsidiaries.
Few companies will want to globalize all of their marketing operations. The difficulty
then is to determine which marketing operations elements will gain from globalization.
Such a modular approach to globalization is likely to yield greater return than a total
globalization of a company`s marketing strategy.
To a large extent, international firms operating as multi-domestic firms have organized
their businesses around countries or geographic regions. Although some key strategic
decisions with respect to products and technology are made at the central or head office,
the initiative of implementing marketing strategies is left largely to local-country
subsidiaries. As a result, profit and loss responsibility tends to reside in each individual
country. At the extreme, this leads to an organization that runs many different businesses
in a number countries-therefore the term multi-domestic. Each subsidiary represents a
separate business that must be run profitably. Multinational corporations tend to be
represented in a large number of countries and the world`s principal trading regions.
Many of today`s large internationally active firms may be classified as pursuing multidomestic strategies. Companies might globalize production or "back office" operations
while maintain multiple local brands. Economic conditions, changes in consumer
attitudes and behavior and the rise of generic brands have all contributed to a decline in
brand loyalty. More consumers have been selecting products from among manufacturers`
brands, distributors` brands and generic products. Often a coupon, price special or a
desire for variety will influence the purchase decision.
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companies have several choices to make: first, the global focus strategy and second, the
global business unit.
Formulating Global Focus Strategies: Geographic extension is one of two key
dimensions in the strategy of an international company. The second dimension is
concerned with the range of a firm`s product and service offerings. To what extent should
a company become a supplier of a wide range of products aimed at several or many
market segments? Should a company become the global specialist in a certain area by
satisfying one or a small number of target segments, doing this in most major markets
around the world?
Even some of the largest companies can not pursue all available initiatives. Resources for
most companies are limited, often requiring a tradeoff between product expansion and
geographic expansion strategies. Resolving this question is necessary to achieve a
concentration of resources and efforts in areas where they will bring the most return. We
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can distinguish between two models: on the one hand, we have the broad-based firm
marketing a wide range of products to many different customer groups, both domestic
and overseas; on the other hand, we have the narrowly-based firm marketing a limited
range of products to a homogenous customer group around the world. Both types of
companies can be successful in their respective markets.
Creating Global Business Units: Many firms have come to realize that a strong global
presence in one given product was becoming a strategic requirement. Since traditional
multinational firms often competing through a multi-domestic strategy have realized the
weakness of their unfocused patterns of global coverage, they have begun to assemble
business units that have a better global focus. Many are striving to change their business
to reflect more a coherent market position whereby a business consists of strong units in
major markets. Avoiding globally unfocused strategies, international firms have either
retrenched to become regional specialists or changed their business focus to adopt global
niche strategies, selective globalization or complete globalization.
A strategy of complete globalization is selected by firms that essentially globalize all of
their business units. Selective globalization is adopted by firms that globalize several or
many businesses but also exit from others because financial resources may be limited.
Global niche strategies are selected by firms that focus on one or very few businesses
worldwide and exit from others to make up for a lack of resources. In general, companies
with a narrow product or business focus but globally marketed perform better than firms
with a broad product line. Since the establishment of strong global marketing positions
requires substantial resources, many firms have begun to adopt the narrow focus model
by spinning off business no longer viewed as part of the company`s core operations.
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Reality tells us that completely integrated global marketing strategies will continue to be
the exception. However, there are many other types of partially globalized marketing
strategies; each may be tailored to specific industry and competitive circumstances.
Global Product Category Strategy: Possibly the least integrated type of global marketing
strategy is the global product category strategy. Leverage is gained from competing in the
same category country after country and may come in the form of product technology or
development costs. Selecting the form of global product category implies that the
company while staying within that category will consider targeting different segments in
each category or varying the product, advertising and branding according to local market
requirements. Companies competing in the multi-domestic mode are frequently applying
the global category strategy and leveraging knowledge across markets without pursuing
standardization. That strategy works best if there are significant differences across
markets and when few segments are present in market after market. Several traditional
multinational players who had for decades pursued a multi-domestic marketing approachtailoring marketing strategies to local market conditions and assigning management to
local management teams- have been moving toward the global category strategy. Among
them are Nestle, Unilever and Procter&Gamble, three large international consumer goods
companies doing business in food and household goods.
Global Segment Strategy: A company that decides to target the same segment in many
countries is following a global segment strategy. The company may develop an
understanding of its customer base and leverage that experience around the world. In both
consumer and industrial industries significant knowledge is accumulated when a
company gains in-depth understanding of a niche or segment. A pure global segment
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strategy will even allow for different products, brands or advertising although some
standardization is expected. The choices may consist of competing always in the upper or
middle segment of a given consumer market or for a particular technical application in an
industrial segment. Segment strategies are relatively new to global marketing.
Global Marketing Mix Element Strategies: These strategies pursue globalization along
individual marketing mix elements such as pricing, distribution, place, promotion,
communications or product. They are partially globalized strategies that allow a company
that customize other aspects of its marketing strategy. Although various types of
strategies may apply, the most important ones are global product strategies, global
advertising strategies and global branding strategies. Typically companies globalize those
marketing mix elements that are subject to particularly strong global logic forces. A
company facing strong global purchasing logic may globalize its account management
practices or its pricing strategy. Another firm facing strong global information logic will
find it important to globalize its communications strategy.
Global Product Strategy: Pursuing a global product strategy implies that a company has
largely globalized its product offering. Although the product may not need to be
completely standardized worldwide, key aspects or modules may in fact be globalized.
Global product strategies require that product use conditions, expected features and
required product functions be largely identical so that few variations or changes are
needed. Companies pursuing a global product strategy are interested in leveraging the
fact that all investments for producing and developing a given product have already been
made. Global strategies will yield more volume, which will make the original investment
easier to justify.
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Global Branding Strategies: Global branding strategies consist of using the same brand
name or logo worldwide. Companies want to leverage the creation of such brand names
across many markets, because the launching of new brands requires a considerable
marketing investment. Global branding strategies tend to be advisable if the target
customers travel across country borders and will be exposed to products elsewhere.
Global branding strategies also become important if target customers are exposed to
advertising worldwide. This is often the case for industrial marketing customers who may
read industry and trade journals from other countries. Increasingly, global branding has
become important also for consumer products where cross-border advertising through
international TV channels has become common. Even in some markets such as Eastern
Europe, many consumers had become aware of brands offered in Western Europe before
the liberalization of the economies in the early 1990s. Global branding allows a company
to take advantage of such existing goodwill. Companies pursuing global branding
strategies may include luxury product marketers who typically face a large fixed
investment for the worldwide promotion of a product.
Global Advertising Strategy: Globalized advertising is generally associated with the use
of the same brand name across the world. However, a company may want to use different
brand names partly for historic purposes. Many global firms have made acquisitions in
other countries resulting in a number of local brands. These local brands have their own
distinctive market and a company may find it counterproductive to change those names.
Instead, the company may want to leverage a certain theme or advertising approach that
may have been developed as a result of some global customer research. Global
advertising themes are most advisable when a firm may market to customers seeking
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similar benefits across the world. Once the purchasing reason has been determined as
similar, a common theme may be created to address it.
Composite Global Marketing Strategy: The above descriptions of the various global
marketing models give the distinct impression that companies might be using one or the
other generic strategy exclusively. Reality shows, however, that few companies
consistently adhere to only one single strategy. More often companies adopt several
generic global strategies and run them in parallel. A company might for one part of its
business follow a global brand strategy while at the same time running local brands in
other parts. Many firms are a mixture of different approaches, thus the term composite.
Competitive Global Marketing Strategies:
Two types of approaches emerge as of particular interest to us. First, there are a number
of heated global marketing duels in which two firms compete with each other across the
entire global chessboard. The second, game pits a global company versus a local
company- a situation frequently faced in many markets.
One of the longest running battles in global competition is the fight for market dominance
between CocaCola and PepsiCo, the world`s largest soft drink companies.
Global firms are able to leverage their experience and market position in one market for
the benefit of another. Consequently, the global firm is often a more potent competitor for
a local company.
Although global firms have superior resources, they often become inflexible after several
successful market entries and tend to stay with standard approaches when flexibility is
called for. In general, the global firms` strongest local competitors are those who watch
global firms carefully and learn from their moves in other countries. With some global
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firms requiring several years before a product is introduced in all markets, local
competitors in some markets can take advantage of such advance notice by building
defenses or launching a preemptive attack on the same segment.
3) Global Market Entry Strategies:
Exporting as an Entry Strategy:
Exporting represents the least commitment on the part of the firm entering a foreign
market (See appendix 2). Exporting to a foreign market is a strategy many companies
follow for at least some of their markets. Since many countries do not offer a large
enough opportunity to justify local production, exporting allows a company to centrally
manufacture its products for several markets and therefore to obtain economies of scale.
Furthermore, since exports add volume to an already existing production operation
located elsewhere, the marginal profitability of such exports tends to be high.
A firm has two basic options for carrying out its export operations. The form of exporting
can be directly under the firm`s control or indirect and outside the firm`s control. It can
contact foreign markets through a domestically located (in the exporter`s country of
operation) intermediary-an approach called indirect exporting. Alternatively, it can use an
intermediary located in the foreign market-an approach termed direct exporting.
Indirect Exporting: Indirect exporting includes dealing through export management
companies of foreign agents, merchants or distributors. 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.
Particularly, for companies with little or no experience in exporting, the use of a domestic
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intermediary provides the exporter with readily available expertise. The most common
types of intermediaries are brokers, combination export and manufacturers` export
agents. Group selling activities can also help individual manufacturers in their export
operations.
Direct Exporting: Direct exporting includes setting up an export department within the
firm or having the firm`s sales force sell directly to foreign customers or marketing
intermediaries. A company engages in direct exporting when it exports through
intermediaries located in the foreign markets. Under direct exporting, an exporter must
deal with a large number of foreign contacts, possibly one or more for each country the
company plans to enter. Although a direct exporting operation requires a larger degree of
expertise, this method of market entry does provide the company with a greater degree of
control over its distribution channels than would indirect exporting. The exporter may
select from two major types of intermediaries: agents and merchants. Also, the exporting
company may establish its own sales subsidiary as an alternative to independent
intermediaries. Successful direct exporting depends on the viability of relationship built
up between the exporting firm and the local distributor or importer. By building the
relationship well, the exporter saves considerable investment costs.
The independent distributor earns a margin on the selling price of the products. Although
the independent distributor does not represent a direct cost to the exporter, the margin the
distributor earns represents an opportunity that is lost to the exporter. By switching to a
sales subsidiary to carry out the distributor`s tasks, the exporter can earn the same
margin. With increasing volume, the incentive to start a sales subsidiary grows. On the
other hand, if the anticipated sales volume is small, the independent distributor will be
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more efficient since sales are channeled through a distributor who is maintaining the
necessary staff for several product lines. The lack of control frequently causes exporters
to shift from an independent distributor to wholly owned sales subsidiaries.
Many companies export directly to their own sales subsidiaries abroad, sidestepping
independent intermediaries. The sales subsidiary assumes the role of the independent
distributor by stocking the company's products and/or services, sometimes jointly
advertising and promoting the products, selling to buyers and assuming the credit risk.
The sales subsidiary offers the manufacturer full control of selling operations in a foreign
market. Such control may be important if the company`s products require the use of
special marketing skills such as advertising or selling. The exporter finds it possible to
transfer or export not only the product but also the entire marketing program that often
makes the product a success.
The operation of a subsidiary adds a new dimension to a company`s international
marketing operation. It requires the commitment of capital in a foreign country, primarily
for the financing of account receivables and inventory. Also, the operation of a sales
subsidiary entails a number of general administrative expenses that are essentially fixed
in nature. As a result, a commitment to a sales subsidiary should not be made without
careful evaluation of all the costs involved.
Foreign Production as an Entry Strategy:
Many companies realize that to open a new market and serve local customers better,
exporting into that market is not a sufficiently strong commitment to realize strong local
presence. As a result, these companies look for ways to strengthen their base by entering
into one of several ways to manufacture.
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operation. A licensee has the advantage of adding the licensed product`s volume to an
ongoing operation thereby reducing the need for a large investment in new fixed assets. A
company with limited resources can gain advantage by having a foreign partner market
its products by signing a licensing contract. Licensing not only saves capital because no
additional investment is necessary but also allows scarce managerial resources to be
concentrated on more lucrative markets. Also, some smaller companies with a product in
high demand may not be able to satisfy demand unless licenses are granted to other
companies with sufficient manufacturing capacity.
In some countries where the political or economic situation appears uncertain, a licensing
agreement will avoid the potential risk associated with investments in fixed facilities.
Representing an export of technology rather than goods (as in exporting) or capital,
licensing is an attractive mode in markets where political and economic uncertainties
make a greater involvement risky. Both commercial and political risks are absorbed by
the licensee. In other countries governments favor the granting of licenses to independent
local manufacturers as a means of building up an independent local industry. In such
cases, a foreign manufacturer may prefer to team up with capable licensee despite a large
market size, because other forms of entry may not be possible.
A major disadvantage of licensing is the company`s substantial dependence on the local
licensee to produce revenues and thus royalties usually paid as a percentage on sale
volume only. Once a license is granted, royalties are paid only if the licensee is capable
of performing an effective marketing job. Since the local company`s marketing skills
may be less developed, revenues from licensing may suffer accordingly.
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firm. Under a joint venture (JV) arrangement, 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.
In most cases, international firms prefer wholly owned subsidiaries for reasons of control;
once a joint venture partner secures part of the operation, the international firm can no
longer function independently, which sometimes lead to inefficiencies and disputes over
responsibility for the venture. If an international firm has strictly defined operating
procedures, such as for budgeting, planning and marketing, getting the JV company to
accept the same methods of operation may be difficult. Problems may also arise when the
JV partner wants to maximize dividend payout instead of reinvestment or when the
capital of the JV has to be increased and one side is unable to raise the required funds.
Experience has shown that JVs can be successful if the partners share the same goals with
one partner accepting primary responsibility for operations matters. Despite the potential
for problems, joint ventures are common because they offer important advantages to the
foreign firm. By bringing in a partner the company can share the risk for a new venture.
Furthermore, the JV partner may have important skills or contacts of value to the
international firm. Sometimes, the partner may be an important customer who is willing
to contract for a portion of the new unit`s output in return for an equity participation. In
other cases, the partner may represent important local business interests with excellent
contacts to the government. A firm with advanced product technology may also gain
market access through the JV route by teaming up with companies that are prepared to
distribute its products. Many international firms have entered Japan, China and Eastern
Europe with JVs. But, not all joint ventures are successful and fulfill their partners`
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expectations. Despite the difficulties involved, it is apparent that the future will bring
many more joint ventures. Successful international and global firms will have to develop
the skills and experience to manage JVs successfully often in different and difficult
environmental circumstances. And in many markets, the only viable access to be gained
will be through JVs.
Strategic Alliances: A more recent phenomenon is the development of a range of
strategic alliances. Alliances are different from traditional joint ventures in which two
partners contribute a fixed amount of resources and the venture develops on its own. In
an alliance, two entire firms pool their resources directly in a collaboration that goes
beyond the limits of a joint venture. Although a new entity may be formed, it is not a
requirement. Sometimes, the alliance is supported by some equity acquisition of one or
both of the partners. In an alliance, each partner brings a particular skill or resourceusually they are complementary-and by joining forces, each expects to profit from the
other`s experience. Typically, alliances involve either distribution access, technology
transfers or production technology with each partner contributing a different element to
the venture. Alliances can be in the forms of technology-based alliances, productionbased alliances or distribution-based alliances.
Although many alliances have been forged in a large number of industries, the evidence
is not yet in as to whether these alliances will actually become successful business
ventures. Experience suggests that alliances with two equal partners are more difficult to
manage than those with a dominant partner. In particular, it is important to recognize that
the needs and aspirations of partners may change over the life of an alliance and do so in
divergent ways. Predicting what the goals and incentives of the various parties will be
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contain bundles of assets and capabilities, only some of which are of interest to the
acquirer. Disposing of unwanted assets or maintaining them in the portfolio is often done
at significant cost, either in real terms or in management time. Although these obstacles
are serious, a number of acquisitions fail on another account: the post acquisition
integration process fails. Integrating an acquired company into a corporation is probably
one of the most challenging tasks confronting top management.
Preparing An Entry Strategy Analysis:
Of course, assembling accurate data is the cornerstone of any entry strategy analysis. The
necessary sales projections have to be supplemented with detailed cost data and financial
need projections on assets (managerial, financial, etc. resources). The data need to be
assembled for all entry strategies under consideration. Financial data are collected not
only on the proposed venture but also on its anticipated impact on the existing operations
of the international firm. The combination of the two sets of financial data results in
incremental financial data incorporating the net overall benefit of the proposed move for
the total company structure.
For best results, the analyst must take a long-term view of the situation. Asset
requirements, costs and sales have to be evaluated over the planning horizon of the
proposed venture, typically three to five years for an average company. Furthermore, a
thorough sensitivity analysis must be incorporated. Such an analysis may consists of
assuming several scenarios of international risk factors that may adversely affect the
success of the proposed venture. The financial data can be adjusted to reflect each new
set of circumstances. One scenario may include a 20 percent devaluation in the host
country, combined with currency control and difficulty of receiving new supplies from
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foreign plants. Another situation may assume a change in political leadership to a group
less friendly to foreign investments. With the help of a sensitivity analysis approach, a
company can quickly spot the key variables in the environment that will determine the
outcome of the proposed market entry. The international company then has the
opportunity to further add to its information on such key variables or at least to closely
monitor their development. It is assumed that any company approaching a new market is
looking for profitability and growth. Consequently, the entry strategy must support these
goals. Each project has to be analyzed for the expected sales level, costs and asset levels
that will eventually determine profitability. Sales, costs and assets levels have to be
estimated before. Also, profitability has to be estimated (past sales analysis, market test
method). In order to do this, assessing international risk factors, maintaining flexibility
and assessing total company impact are required. Market research that focuses on buying
patterns, customer segmentation on ability to pay especially in developing countries, etc.
(survey of buyers` intentions, composite of sales force opinion, expert opinion) (SWOT
Analysis-strenghts, weaknesses, opportunities, threats)
Entry Strategy Configuration:
In reality, most entry strategies consist of a combination of different formats. We refer to
the process of deciding on the best possible entry strategy mix as entry strategy
configuration.
Rarely do companies employ a single entry mode per country. A company may open up a
subsidiary that produces some products locally and imports others to round out its
product line. The same foreign subsidiary may even export to other foreign subsidiaries,
combining exporting, importing and local manufacturing into one unit. Furthermore,
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many international firms grant licenses for patents and trademarks to foreign operations,
even when they are fully owned. This is done for additional protection or to make the
transfer of profits easier. In many cases, companies have bundled such entry forms into a
single legal unit, in effect layering several entry strategy options on top of each other.
Bundling of entry strategies is the process of providing just one legal unit in a given
country or market. In other words, the foreign company sets up a single company in one
country and uses that company as a legal umbrella for all its entry activities. However,
such strategies have become less typical-particularly in larger markets, many firms have
begun to unbundle their operations.
When a company unbundles, it essentially divides its operations in a country into
different companies. The local manufacturing plant may be incorporated separately from
the sales subsidiary. When this occurs, companies may select different ownership
strategies, for instance, allowing a JV in one operation while keeping full ownership in
another part. Such unbundling becomes possible in the larger markets such as the United
States, Germany and Japan. It also allows the company to run several companies or
product lines in parallel. Global firms granting global mandates to their product divisions
will find that each division will need to develop its own entry strategy for key markets.
Portal or E-Business Entry Strategies: The technological revolution of the Internet with
its wide range of connected and networked computers has given rise to the virtual entry
strategy. Using electronic means, primarily web pages, e-mail, file transfer and related
communications tools, firms have begun to enter markets without ever touching down. A
company that establishes a server on the Internet and opens up a web page can be
connected from anywhere in the world. Consumers and industrial buyers who use modern
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Internet browsers, such as Netscape, can search for products, services or companies and
in many instances even make purchases online. Whatever the forecasts, most experts
agree that the opportunity for Internet-based commerce will be huge. The Internet will
eliminate some of the hurdles that plagued smaller firms from competing beyond their
borders. Given the low cost of the Internet, it is very likely that many more established
firms will use the Internet as the first point of contact for countries where they do not yet
have a major base. However, there are many challenges to would-be Internet-based
global marketers. One of the biggest is language. The second big challenge is the
fulfillment side of the e-business. Here, we are dealing with completing a sale, shipping,
collecting funds and providing after-sales service to customers all over the world.
Exit Strategies:
Circumstances may make companies want to leave a country or market. Other than the
failure to achieve marketing objectives, there may be political, economic or legal reasons
for a company to want to dissolve or sell an operation (management myopia).
International companies have to be aware of the high costs attached to the liquidation of
foreign operations; substantial amounts of severance pay may have to be paid to
employees and any loss of credibility in other markets can hurt future prospects.
Sometimes, an international firm may need to withdraw from a market to consolidate its
operations. This may mean a consolidation of factories from many to fewer such plants.
Production consolidation when not combined with an actual market withdrawal is not
really what we are concerned with here. Rather, our concern is a company`s actual
abandoning its plan to serve a certain market or country. This is differentiation between
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39
Ozet: (Turkce)
Global pazarlama, bir orgutun kaynaklarinin onun kisa ve uzun donemli stratejik
hedefleriyle uyumlu ve destekleyici global pazar firsatlarinin secimi ve kullanimina
odaklanmasi surecidir.
Bu calismada, bir sirketin global cevrede farkli taktikleri kullanarak rekabet etme
yollarini analiz etmeye calistim. Bu taktikler, bir sirketin yetenek ve istekliliginin izin
verdigi bir yolla degisir. Bir sirket, faaliyetlerini globallestirmeden once bu taktikleri
kullanmada dikkatli olmalidir. Cunku, bazen bu taktikler basarisiz olabilir ve kar kaybi
veya sirketin kapanmasiyla bile sonuclanabilir.
Okuyucuya bu konu hakkinda ilave bilgi bulmasini oneriyorum. Ornegin, onlar benim
kurumum Dis Ticaret Mustesarligiyla, en yakin Ticaret Odasiyla, veya herhangi diger
Turkiye`de veya yurtdisinda yerlesik kamu veya ozel kurumla temasa gecebilirler. Onlar
herhangi kutuphane veya internet kaynaklarini da kullanabilirler.
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4) Appendices:
Appendix 1:
Economic-Financial Factors:
Inflation rate
Political-Legal Factors:
Stability of government
Cultural Factors:
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Demographic Factors:
WTO
EU
NAFTA
APEC
MERCOSUR
CIS
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Appendix 2:
Entry modes into international markets:
Exporting
Contract Manufacturing
Licensing
Joint Venturing
Wholly Owned Subsidiaries
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5) References:
2)1)
1998
7)2)
5) Joel R. Evans, Barry Berman, Marketing6) Philip Kotler, Ronald E. Turner, Marketing Management- seventh edition, 1993
7) Subhash C. Jain, International Marketing Management- 5th edition, 1996
8) Theodore Levitt, Harvard Business Review, The Globalization of Markets-MayJune 1983
10)9)
September-October 1975
10) Thomas C. Kinnear, Kenneth L. Bernhardt, Principles of Marketing11) David Gertner, Ph.D., International Marketing Management (IMM) Course Slides
and Notes, Thunderbird, The American Graduate School of International
Management- Summer 2001
44