Chapter 8: Tapping into Global Markets

Global competition is intensifying in more product categories as new firms make their mark on the international
stage. Competition from developing-market firms is also heating up. Although opportunities to compete  in
international markets are significant, the risks can be high. Upon deciding to go abroad, a company needs to define
its international marketing objectives and policies. In this chapter, we review the major decisions in expanding into
global markets .
Deciding Whether to Go Abroad

Why International Market?:

• Some international markets present better profit opportunities than the domestic market.
• The company needs a larger customer base to achieve economies of scale.
• The company wants to reduce its dependence on any one market.
• The company decides to counterattack global competitors in their home markets.
• Customers are going abroad and require international service.
Strategic decisions in International Marketing:
Those firms planning to enter the global markets have to decide on following key decisions:
 International Markets Decision: Whether to go for international market?
 Market Selection Decision: To whom of which country to sell?
 Market Entry Decision: How to enter the international market?
 Marketing Mix Decision: Which type of marketing mix should a firm prepare?
 International HR & Organization Decision: What type of organization should be adopted by the firm
to manage international business? Major Decisions in
International Marketing
Risks of internationalization: Before making a decision to go abroad, the company must also weigh several risks:
⦿ Firm might not understand foreign preferences , Failing to offer competitively attractive product ⦿ Firm might not
understand foreign country’s culture ⦿ Firm might underestimate foreign regulations and incur unexpected costs ⦿ Firm
might lack managers with international experience ⦿ Foreign country might change commercial laws, devalue currency, or
expropriate foreign property .
Factors should a company review before deciding to go abroad:

Social & Cultural Market

factors Attractiveness
Affordability of
Attitude Evaluate Audit
products , Standard of Differences in
of Govt. Market resource and
Living Language & Customs
Economic Potential capabilities
Political & Firm
rs Legal Capabilities
Internationalization process:
Stage 1: No export activities Stage 2: Export via independent representatives. (Agent)
Stage 3: Establishment of sales subsidiaries
Stage 4: Establishment of production facilities abroad.
➼ First task is to move from stage 1 to stage 2 Most firms work with an independent agent and enter a nearby or similar country.
➼ Later, the firm establishes an export department to manage its agent relationships.
➼ Still later, it replaces agents with its own sales subsidiaries in its larger export markets. This increases investment and risk but also earning
potential.
➼ Next, to manage subsidiaries, the company replaces the export department with an international department or division.
➼ If markets are large and stable or the host country requires local production, the company will locate production facilities there. By this
time, the firm is operating as a multinational and optimizing its sourcing, financing, manufacturing, and marketing as a
global organization.
Deciding which markets to enter: How many countries to enter and how fast to expand.
Typical entry strategies are: -
⚫ Waterfall approach: Gradually entering countries in sequence. (e.g. BMW, Benetton, and The Body Shop); allows firms to
carefully plan expansion.
⚫ Sprinkler approach: high-risk, high-reward approach, price skimming technique. Entering many countries simultaneously
in a relatively short time.; beneficial when first-mover advantage is crucial and a high degree of competitive intensity prevails.
Microsoft sold 60 million licenses and upgrades over night.
⚫ Born Global: Especially technology-intensive firms or online ventures Increasingly are born global and firms have
viewed and leveraged the emergence of the Internet as a vehicle for rapid growth. e.g. Starlink, Netflix and Spotify.
Evaluating potential markets by: How does a company choose among potential markets to enter?
 Neighboring countries: Better understanding and control of the entry costs
 Psychic proximity/Cultural distance: Determines choices,Given more familiar language, laws, and culture, many U.S.
firms e.g. prefer to sell in Canada, England, and Australia rather than in larger markets such as Germany and France.
 Fewer countries: Countries that have high market attractiveness and low market risk with deep commitment.
Example Digicel has a very unusual market expansion strategy.
Succeeding in Developing Markets: Developing countries offer a unique set of opportunities and risks.
The unmet needs of the developing world represent huge potential markets for food, clothing, shelter, consumer electronics, appliances, etc.
 Developing markets account for about 82% of the world’s population, and 90% of future population growth is projected to occur there.
Developing markets: BRICS (Brazil, Russia,India,China,and S.Africa) , CIVETS (Columbia, Indonesia, Vietnam, Egypt, Turkey, and S. Africa)

Deciding How to Enter the Market

Once a company decides to target a particular country, it must choose the best mode of entry with its brands.
Each succeeding strategy entails more commitment, risk, control, and profit potential.
1. Indirect and Direct Export: Suggested by Philip Kotler, include:
i. Export Department: A company maintains a full-fledged export department to sell its products in foreign
markets.
ii. Opening Branch in Foreign Market: open their branches or shops in foreign markets to serve
consumers. The head of the branch is responsible for all activities related to promotion and distribution of
the company’s products.
iii. Appointing Traveling Sales representative: Appoint salesmen to search customers in foreign market and
serve them. They collect orders and manage necessary procedures. They can help develop relations with
foreign agencies, retailer, and customers.
iv. Appointing Distributors: In this entry option, a firm appoints agents, representatives, or middlemen in
foreign markets. They are responsible to carry out all activities to promote and sell the company’s products.
Licensing: Licensing arrangements vary
à Licensor issues a license to a foreign company to use a manufacturing
process, trademark, patent, trade secret, or other item of value for a fee or royalty;
Forms are:
- Contract manufacturing: the firm hires local manufacturers to produce the
product
- Franchising: a more complete form of licensing; The franchisor offers a
complete brand concept and operating system. In return, the franchisee
invests in and pays certain fees to the franchisor.
o Joint ventures: may be necessary or desirable for economic or political reasons
à Foreign investors have often joined local investors in a joint venture company
in which they share ownership and control
2. Licensing: Licensing arrangements vary à Licensor issues a license to a foreign company to use a
manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty;
a. Contract manufacturing: the firm hires local manufacturers to produce the product,
e.g. GlaxoSmithKline(GSK) for producing Metered Dose Inhaler product partnerships with BPL(Beximco Pharma.) 
b. Franchising: The franchisor offers a complete brand concept and operating system. In return, the franchisee
invests in and pays certain fees to the franchisor. e.g. KFC in Bangladesh.
3. Joint ventures: May be necessary or desirable for economic or political reasons à Foreign investors have
often joined local investors in a joint venture company in which they share ownership and control. Kellogg
and Wilmar Int’l Ltd.
Direct Investment: offers distinct advantages if the market is large enough
à The foreign company can buy part or full interest in a local company or build
its own manufacturing or service facilities
4. Direct Investment: offers distinct advantages if the market is large enough à The foreign company can buy part or
full interest in a local company or build its own manufacturing or service facilities. Example: Cisco second
headquarters in Bangalore.
Deciding on the Marketing Program: Standardization or adaptation

Global Similarities and Differences : Increasingly shared needs and wants have created global markets for more
standardized products while simultaneously the Internet, cable and satellite TV, and global linking of
telecommunications networks have led to a convergence of lifestyles.
Example : Doughnuts don’t appeal to British consumers for breakfast, while Kenyans need to be convinced that cereal is a good option.
Consumer behavior may reflect cultural differences that can be pronounced across countries.

Hofstede identifies four cultural dimensions that differentiate countries:

1. Individualism versus collectivism—In collectivist societies, the self-worth of an individual is rooted more in the social system
than in individual achievement (high collectivism: Japan; low: United States).
2. High versus low power distance—High power distance cultures tend to be less egalitarian (high: Russia; low: Nordic
countries)
3. Masculine versus feminine—This dimension measures how much the culture reflects assertive characteristics more often
attributed to males versus nurturing characteristics more often attributed to females (highly masculine: Japan; low: Nordic
countries).
4. Weak versus strong uncertainty avoidance—Uncertainty avoidance indicates how risk-aversive people are (high avoidance:
Greece; low: Jamaica)
Marketing Adaptation : Standardization vs. adaptation
Because of all these differences, most products require at least some adaptation (e.g. Coca-Cola or Nutella differs slightly in
its taste from country to country)
Company should review the following elements and determine which add more revenue than cost if adapted:
• Product features • Labeling • Colors • Materials • Sales promotion • Prices • Advertising media • Brand name •
Packaging • Advertising execution • Advertising themes.

Global product strategies

o Product standardization:
- Some products cross borders
without adaptation better than
others à
While mature products have
separate histories or positions in
different
markets, consumer knowledge
about new products is generally the
same
everywhere because perceptions
have yet to be formed
- Many leading Internet brands—
such as Google, eBay, Twitter,
Amazon.com and Facebook—made
quick progress in overseas markets
- High-end products also benefit
from standardization, because
quality
and prestige often can be marketed
similarly across countries
- Food and beverage marketers
find it more challenging to
standardize
given widely varying tastes and
cultural habits.
Global product strategies
Product standardization:
- Some products cross borders without adaptation better than others à While mature products have separate histories or positions
in different markets, consumer knowledge about new products is generally the same everywhere because perceptions have yet to be formed .
- Many leading Internet brands—such as Google, eBay, Twitter, Amazon.com and Facebook—made quick progress in overseas markets .
- High-end products also benefit from standardization, because quality and prestige often can be marketed similarly across countries - Food
and beverage marketers find it more challenging to standardize given widely varying tastes and cultural habits.

Standardization vs. adaptation of products: Strategy of adapted standardization

 Standardize when possible and adapt when necessary
- à Japanese automobiles are similar across various markets with regard to the basic characteristics (e.g., engine).
- In foreign markets drivers have different preferences with regard to design.

Product and communication

strategies
o Warren Keegan’s five product
and communication adaptation
strategies:
Product and communication strategies
Warren Keegan’s five product and communication adaptation strategies:
- Straight extension introduces the product in the foreign
market without any change .
- Product adaptation alters the product to meet local
conditions or preferences .
- Flexible manufacturing makes it easier to do so on several
levels - Communication adaptation is the process of
changing marketing communications for each local market .
 - If it adapts both the product and the communications, the company engages in dual adaptation.
Global pricing strategies: Companies have 4 choices for setting prices in different countries
Price Escalation A Gucci handbag may sell for $120 in Italy and $240 in the United States. Why? Gucci must add the cost of
transportation, tariffs, importer margin, wholesaler margin, and retailer margin to its factory price.
1. Set a uniform price everywhere.
2. Set a market-based price in each country.
3. Set a cost-based price in each country.
Global Distribution Strategies :
1. Channel Entry : three links between the seller and the final buyer.
2. Channel Differences : Distribution channels across countries vary considerably in size and character.
Seller  Seller's international marketing headquarters  Channels between nations 
Channels within foreign nations  Final buyers
Strategic decisions- Organisation Decision: Organization structures suit with international marketing such as:
i. Product-wise Organisation ii. Country-wise Organisation, iii. Customer-wise Organisation
iv. Place-wise organisation v. Matrix or Mix Organisation, etc