CH 1 Global Marketing in a firm

Globalization: trends of firms buying, developing, producing and selling products in most
countries and regions in the world
Internationalization: doing business in many countries in the world but often limited to a
certain region
5 stages decision-model in global marketing:
1. The decision to internationalize
2. Deciding which markets to enter
3. Market entry strategies
4. Designing the global marketing program
5. Implementing and coordinating the global marketing program
4 orientations of a firms business activities worldview:
o Ethnocentric: the home country is superior and the needs of the home country are
most relevant. HQ extends ways of doing business to its foreign affiliates, highly
centralized control
o Polycentric (multidomestic): each country is unique and should be targeted in a
different way. Beda lokasi bed acara produksi, marketing, etc. Highly
decentralized
o Regiocentric: the world consists of regions. Integrate and coordinate its marketing
program within regions
o Geocentric (global): the world is getting smaller and smaller. Offer global product
concepts but with local adaptation
Global marketing: the firms commitment to coordinate its marketing activities across
national boundaries to satisfy global customer needs better than the competition.
Glocalization: development and selling products intended for the global market but
adapted to suit local culture and behavior
Major drivers for firms to shift towards integrated global marketing/global integration
(recognizing the similarities between intl markets and integrating them into overall global
strategy)
o Removal of trade barriers
o Global accounts/customers
o Relationship management/network organization
o Standardized worldwide technology
o Worldwide markets
o Global village (worlds population shares commonly recognized cultural
symbols, eg Nike, Coke, Levis)
o Worldwide communication
o Global cost drivers
 Major drivers for firms to increase market responsiveness (responding to each market
needs and wants):
o Cultural differences
o Regionalism/protectionism
o Deglobalization
Value chain: categorization of the firms activities providing value for the customers and
profit for the company
Competitive advantage: providing comparable buyer calue more efficiently than
competitors (lower cost) or performing activities at comparable cost but in unique ways
that create more cust value than the competitors (differentiation).
Primary activities: inbound logistics, operations, outbound logistics, marketing and sales,
services.
Support activities: Procurement, technology development, HRM, infrastructure
Firm can be described as a pyramid::
o Strategic level (mission formulation, objectives, selecting corporate strategy)
o Managerial level (translating corporate objectives into functional and unit
objectives)
o Operational level
2 new models of value creation:
o Value shops: a model for solving problems in a service environment (value is
created by mobilizing resources and deploying them to solve a specific customer
problems)
o Value networks: the formation of several firms value chains into a network,
where each company contributes a small part to the total value chain
Primary activities in value shop are:
1. Problem finding
2. Problem solving
3. Choice
4. Execution
5. Control and evaluation
Hard vs soft services.
o Hard services: those where production and consumption can be decoupled (dibuat
banyak)
o Soft services: those where production and consumption occur simultaneously, the
customer acts as a coproducer, decoupling is not viable.
Virtual value chain: an extension of the conventional value chain, where the information
processing itself can create value for cutomers.
4 ways of using information to create business value:
o Managing risks
o Reducing costs
 o Offering products and services
o Inventing new products

Ch 2 Initiation of Internationalisation

Internationalization motives:
o Proactive motives (stimuli to attempt strategy change):
Profit and growth goals
Managerial urge
Technology competence/unique product
Foreign market opportunities/market information
Economies of scale
Tax benefits
o Reactive motives (the firm reacts to pressure or threats in home or foreign
market):
Competitive pressure
Domestic market is small and saturated
Overproduction/excess capacity
Unsolicited foreign orders
Extend sales of seasonal products
Proximity to international customers/psychological distance
Internationalization triggers (internal or external evemnts taking place to initiate
internationalization):
o Internal triggers:
Perceptive management
Specific internal event
Importing as inward internationalization
o External triggers:
Market demand
Competing firms
Trade associations
Outside experts (e.g. export agents, governments, chambers of commerce,
banks)
Barriers hindering internationalization initiation:
o Insufficient finances or knowledge
o Lack of foreign market connections
o Lack of export commitment
o Lack of capital to finance expansion into foreign markets
o Lack of productive capacity to dedicate to foreign markets
o Lack of foreign channels of distribution
o Management emphasis on developing domestic market
 o Cost escalation due to high export manufacturing, distribution and financing
expenditures
Barriers hindering the further process of internationalization
o General market risks
Comparative market distance
Competition from other firms in foreign markets
Differences in product usage in foreign markets
Language and cultural differences
Difficulties in finding the right distributor in the foreign market
Differences in product specs in foreign market
Complexity of shipping services to overseas buyers
o Commercial risks
Failure of export custs to par due to contract dispute, bankruptcy, refusal
to accept the product or fraud
Delays or damage in the export shipment and distribution process
Difficulties in obtaining export financing
Exchange rate fluctuations
o Political risks
Foreign govt restrictions
National export policy
Lack of governmental assistance in overcoming export barriers
Lack of tax incentives for companies that export
Complexity of trade docs
Civil strife, revolution and wars disrupting foreign markets
Risk management to overcome risks above:
o Avoid exporting to high risk market
o Diversify overseas market and dont be overdependent on 1 country only
o Insure risks when possible
o Structure export business so that the buyer bears most of the risk

CH 3 Internationalization Theories

Historical development of internationalization:

o The traditional marketing approach. The penrosian tradition: traditional marketing
focus on the firms core competences combined with opportunities in the foreign
environment.
o Life cycle concept for international trade. Vernons product cycle hypothesis:
firms go through an exporting phase first before switching to market-seeking FDI
and then to cost0oriented FDI. Vernons hypothesis is that producers in advanced
countries are closer to the markets than producers elsewhere and the 1st prod
facility will be in the advanced countries.
 o Uppsala internationalization model: Additional market commitments are made in
small incremental steps: choosing additional geographic markets with small
psychic distances combined with choosing entry modes with few additional risks.
o Dunnings eclectic approach (Ownership-Location-Internationalization or OLI).
The propensity of a firm to engage itself in international production increases if
these are being satisfied:
Ownership advantages. Firm that owns foreign production facilities has
bigger ownership advantages compared to firms of other nationalities, incl
intangible assets such as know-how
Locational advantages. It must be profitable for the firm to continue these
assets with factor endowments (labour, energy, materials, transport etc) in
the foreign markets. If not the foreign markets will be served by exports
Internationalization advantages. It must be more profitable for the firm to
use its advantages rather than selling them, or the right to use them, to a
foreign firm
o The network approach. The international firm cannot be analysed as an isolated
actor but has to be viewed in relation to other actors in the international
environment
Cultural distance vs psychic distance
o Cultural distance: cultural level of a country and is defined as the degree to which
cultural values in one country are different from those in another country
o Psychic distance: the individual managers perception of the differences between
the home and the foreign market and is a highly subjective interpretation of a
reality
The Uppsala internationalization model
o 1st, companies will begin their operations abroad in fairly nearby markets and
only gradually penetrated more far-flung markets. 2nd, it appeared companies
entered new markets through exports
o 4 different modes of entering an international market:
1. No regular export activities (sporadic export)
2. Export via independent representatives (export modes)
3. Establishment of a foreign sales subsidiary
4. Foreign production/manufacturing units
o Market commitment contain 2 factors: the amount of resources committed and the
degree of commitment (the difficulty of finding an alternative use for the
resources and transferring them to the alternative use)
o 6 dimensions of internationalization by Welch and Loustarinen:
1. Sales objects (what?): goods, services, know-how and systems
2. Operations methods (how?): agents, subsidiaries, licensing, franchising
 3. Markets (where?): political/cultural/psychic/physical distance differences
between markets
4. Organizational structure: export dept, international division
5. Finance: availability of international finance sources to support
international activities
6. Personnel: international skills, experience, training
Transaction cost analysis (TCA) model
o A firm will tend to expand until the cost of organizing an extra transaction within
the firm will become equal to the cost of carrying out the same transaction by
means of an exchange on the open market
o Predicts that a firm will perform internally those activities it can undertake at
lower cost through establishing an internal (hierarchical) management control and
implementation system while relying on the market for activities in which
independent outsiders have a cost advantage
o Transaction cost: the friction between buyer and seller which is explained by
opportunistic behavior
o Opportunistic behavior: self-interest with guile such as misleading, confusion,
disguise, distortion
o TCA: if the friction between buyer and seller is higher than through an internal
hierarchical system then the firm should internalize (integrate an external partner
into ones own organization)
o Transaction costs forms:
Ex ante costs:
Search costs: the costs of gathering information to identify and
evaluate potential export intermediaries
Contracting costs: costs associated with negotiating and writing an
agreement between seller and buyer
Ex post costs:
Monitoring costs: costs associated with monitoring the agreement
to ensure that buyer and seller fulfill the predetermined set of
obligations
Enforcement costs: costs associated with the sanctioning of a
trading partner who doesnt perform in accordance with the
agreement
The network model: the relationships of a firm in a domestic network can be used as
bridges to other networks in other countries
Born global firm: a firm that from its birth globalizes rapidly without any preceding long
term internationalization period

CH 4 Development of the Firms International Competitiveness

 3 stages model of the development of a firms international competitiveness
1. Analysis of national competitiveness (Porter diamond) macro level
2. Competition analysis in an industry (porters 5 forces) meso level
3. Value chain analysis (competitive triangle and benchmarking) micro level
Porters diamonds. The characteristics of the home base play