ADMAS UNIVERSITY

INTERNATIONAL MARKETING
COMPILED AND PRESENTED
BY
INS. NATNAEL ASEFA(MBA&MSC)
AND
JULY 29,2022
ADDIS ABEBA
INTERNATIONAL MARKETING
 is the performance of business activities that
direct the flow of a company's goods and
services to consumers or users in more than one
nation."
 Yes, the definition sounds very similar to that of
marketing, for it is meant to be, the only
difference being that marketing task is carried
out in more than one nation
 DOMESTIC MARKETING:
…..

is marketing that is targeted exclusively at the home-

country market.
 A purely domestic company operates only domestically.
 A company engaged in domestic marketing may be doing
this consciously as a strategic choice or it may be
unconsciously focusing on the domestic market in order
to avoid the challenge of learning how to market outside
the home country
DOMESTICS VS INTERNATIONAL MARKETS

 i) Domestic/ Local market

 Local language
 One nation
 Common culture
 Homogeneous market
 Local language/single currency
 No problems on exchange controls, tariffs
 Relatively stable business
CON……

 Minimum government interference in business

decision
 Data in marketing research available, easily
collected, and accurate, etc.
INTERNATIONAL MARKETS

 ii) Different languages, nations, cultures

 Markets are diverse and fragmented
 Multiple currencies
 Challenges on exchange controls and tariffs
 Multiple and unstable business environments
 Due to national economic plans government influence usual in business
decisions
 Marketing research very difficult, costly and cannot give desired accuracy,
etc.
CHARACTERISTICS OF INTERNATIONAL MARKETING

 Broader market is available

 Involves at least two set of uncontrollable variables
 Requires broader competence
 Competition is intense
 International restrictions
 Sensitive character
 Involves high risk and challenges
 Large-scale operation
 Domination of multinationals and developed countries
BENEFITS OF INTERNATIONAL MARKETING

 Rapid economic growth

 Facing competition successfully
 Creates employment opportunities
 Increase in the standard of living
 Creates for an international collaboration
 Closer cultural relations
 Help in political stability
 Increased Network Opportunity
 Increased Revenue Potential
 Profitable use of natural resources
ADDITIONAL BENEFITS;
 To consumers:
 Consumption of unpronounced goods
 Consumption of goods at a low price
 Enjoying benefits of competition
 Consumption of new products
 Increase in consumption
TO PRODUCERS:

 Export of surplus production

 Expansion of market in foreign countries
 Production of goods at a low cost
 Increase in production
 More profitable
 Reduce business risk
 Reduce cost
FROM ECONOMIC POINT OF VIEW:

 Increases total production

 Increases export earnings
 Challenging natural calamities
 knowledge and cultural progress
 Increases international peace and assistantship
 Extension of industry
 Export of unusual goods
 Optimum utilization of natural resources
 Progress in technological knowledge
 Image development
From Domestic marketing to
Global Marketing
1. DOMESTIC MARKETING
 Marketing that is aimed at a single market, the
firm‘s domestic market, is referred to as domestic
marketing.
 In domestic marketing, the firm faces only one
set of competitive, economic, and market issues
 Domestic marketing is concerned with the
marketing practices with in a marketer‘s home
country.
2. EXPORT MARKETING

 The field of export marketing covers all those

marketing activities involved when a firm
markets its products outside its main (domestic)
base of operation and when products are
physically shipped from one market or country to
another.
 Under export marketing, the domestic marketing
operation remains of primary importance.
3. INTERNATIONAL MARKETING

 When practicing international marketing, a company

goes beyond exporting and becomes much more directly
involved in the local marketing environment within a
given country or market.
4. Multinational marketing
 Once a company establishes its manufacturing and

marketing operations in multiple markets, it begins to

consolidate its operations on regional basis so as to take
advantage of economies of scale in manufacturing and
marketing mix decisions
5. GLOBAL MARKETING
A global marketing strategy involves the creation of a
single strategy for a product, service, or company, for the
entire global market, that encompasses many markets or
countries simultaneously and is aimed at leveraging the
commonalties across many markets.
EPRG orientations
 The key assumption of EPRG is the degree of
internationalization to which the management is
committed or willing to move affects the specific
international strategies and decision rule of the firm.
A. Ethnocentric Orientation
B. Polycentric Orientation
C. Regiocentric Orientation
D. Geocentric Orientation

Stages/levels of International Marketing

E. Stage one: domestic in focus, with all activity
concentrated in the home market.
Stage two: home focus, but with exports (ethnocentric).
Probably believes only in home values, but creates an
export division; usually ripe for the taking by stage four
organizations.
Stage three: stage two organizations which realize that
they must adapt their marketing mixes to overseas
operations.
Stage four: Global organizations which create value by
extending products and programs and focus on serving
emerging global markets (geocentric).
Foreign Trade Theories
CON….
1. The Theory of Absolute Advantage
 A PERSON OR NATION CAN PRODUCE MORE OF
SOMETHING THAN ANOTHER PERSON OR NATION
USING THE SAME AMOUNT OF RESOURES
 BASED ON PRODACTIVITY AND EFFICIENCY
 TRADE IS POSTIVE SUM GAME
 GIVEN BY ADAM SMITHI 1776
 Absolute advantage is the ability of a nation to produce a good
more efficiently than any other nation (produce a greater output
using the same, or fewer, resources).
CON…
 Adam Smith reasoned that international trade should not be
burdened by tariffs and quotas, but should flow according to
market forces. A country should produce the goods in which
it holds an absolute advantage and trade with others to
obtain the goods it needs but does not produce efficiently
 IS WHEN A COUNTRY CAN PRODUCE A PRODUCT
MORE EFFICIENTLY THAN OTHER COUNTRY
 EXPORT GOODS OF PRODUCTIONADVANTAGE AND
IMPORT GOODS PRODUCTION DISADVANTAG
CON..
 Example, Nigeria can produce one unit of cocoa
with 10 labor hours and one unit of textile
material say lace with 20 labor hours while
Ethiopia can produce one unit of cocoa with 20
labor hours and one unit of lace textile material
with 10 labor hours.
CON….
One Unit of cocoa One unit of Textile

Ethiopia 20 labor hrs. 10 labor hrs.

Nigeria 10 labor hrs. 20 labor hrs.

CON…
 Note that from the above given example, it would be to
their mutual advantage. If Nigeria produces
 only cocoa and Ethiopia produced only lace textile
material with the former exporting her surplus cocoa to
Ethiopia while Ethiopia exported her surplus production
of lace textile material to Nigeria.
 This shows that there is absolute difference in terms of
cost since each country can produce one commodity
(Nigeria cocoa and Ethiopia lace textile material) at an
absolute lower cost than the other country.
The Theory of Comparative
Advantage
CON…
 IT IS EXTATION OF ABSOULUTE
ADVANTAGE THEORY.

 BY DAVID RICARDO IN 18 17

 IT IS POSTIVE SUM GAME

 OPPORTUNITY COST
CON…

Comparative advantage is the inability of a nation

to produce a good more efficiently than other
nations, but an ability to produce that good more
efficiently than it does any other goods.
 Thus trade is still beneficial even if one country
is less efficient in the production of two goods, as
long as it is less inefficient in the production of
one of the goods.
CON…
 If two countries, or instance Ethiopia and Togo
are two countries of the world. Ethiopia produces
coffee better than Togo and Togo is better at
producing fish.
 Ethiopia should specialize in the production of
coffee, while Togo concentrates its resources; on
the production of fish.
CON..
 They can trade their products. But even if Ethiopia is better than
Togo in the production of both coffee and fish, while Togo is at a
disadvantage, both countries can still benefit by each one
specializing in the production of the goods where it has the greater
comparative cost advantage or the least comparative cost advantage.
Suppose that Ethiopia now holds absolute advantages in the

production of both rice and tea. In Ethiopia, 1 resource unit
produces a ton of rice but 2 are needed to produce a ton of tea. In
Togo, 6 resource units still produce a ton of rice, and 3 units are still
needed to produce a ton of tea. Thus Ethiopia has absolute
advantages in producing both goods.
CON…
One ton of rice One ton of Tea

Ethiopia 1 labor hrs. 2 labor hrs.

Togo 6 labor hrs. 3 labor hrs.

CON…
 Although Togo has absolute disadvantages in rice and tea, it
has a comparative advantage in tea; Togo produces tea more
efficiently than it produces rice.
 By specializing and trading, Togo gets double the rice than if
it produced the rice itself, and Ethiopia gets twice as much tea
than if it produced the tea itself.
 Richardo took the application of the law to trade between two
countries and conclude that both countries will benefit if each
of them concentrates on producing the commodity where it
can perform more efficiently and exchange the product with
the one it can produce less efficiently.
The Theory of
Mercantilism
CON…
 IT IS BASED ON ZERO SUM GAME
 TJIS THEORY IS GIVEN BY THOMAS MUN
 IT ASSUMES GOLD AS A MEASURE OF COUNTRYS
WEALTH
 PRIMARY GOAL IS TO INCREASE THE WEALTH OF THE
NATION BY ACQUIRING GOLD
 COUNTRY SHOULD INCREASE GOLD BY PROMOTING
EXPORTS AND DISCOURAGING IMPORTS
 DRAWBACK: THIS THEORY DID NOT RECOGNIZE
ANYTING EXCEPT GOLD AS A MEASURE OF COUNTRYS
WEALTH.
CON…
 States that nations should accumulate financial
wealth, usually in the form of gold, by
encouraging exports and discouraging imports.
 Other measures of a nation‘s well-being, such as
living standards or human development, are
irrelevant. Practiced from around 1500 to the late
1700‘s by European nations, including Britain,
France, the Netherlands, Portugal, and Spain.
CON…
 The more gold and silver a nation had, the richer and
more powerful it was.
 They argued that government should do everything
possible to maximize exports and minimize imports.
However, since all nations could not simultaneously
have an export surplus and the amount of gold and silver
was limited at any particular point of time, one nation
could gain only at the expense of other nations.
 In other words, mercantilists believed that trade was a
zero sum game (i.e. one‘s gain is the loss of another).
Heckscher–Ohlin model
CON…
 In the early 1900‘s, a theory of international trade was
developed by two Swedish economists, Eli Heckscher
and Bertil Ohlin.
 This theory has subsequently been known as the
Heckscher–Ohlin model (H–O model).
 The results of the H–O model are that countries will
produce and export goods that require resources
(factors) which are relatively abundant and import
goods that require resources which are in relatively
short supply.
CON…
 In the Heckscher–Ohlin model the pattern of
international trade is determined by differences in factor
endowments. It predicts that countries will export those
goods that make intensive use
of locally abundant factors and will import goods that
make intensive use of factors that are locally scarce.
 The H–O model makes the following core assumptions:
 Labor and capital flow freely between sectors
 The amount of labor and capital in two countries differ
(difference in endowments)
CON…
 Technology is the same among countries (a long-
term assumption)
 Tastes are the same
 The study showed that the United States was
more abundant in capital compared to other
countries, therefore the United States would
export capital-intensive goods and import labor-
intensive goods.
CHAPTER TWO

International Marketing
Environment
 Introduction

 What make markets are the differences in the

marketing environment.
 Such strategic decisions as whether a company should
enter a given foreign market or not, what market entry
strategy should it employ, what strategy it should adopt
in respect of product, promotion, pricing and
distribution, etc. are based on two sets of factors, viz.,
1. the company related factors and
2. the foreign market related factors.
 The company related factors refer to such factors
as the company objectives, resources, and
international orientation.
 The foreign market related factors which are
relevant to the international business strategy
formulation or which affect the international
business are often described as the international
business environment.
CON…
 In short, it is the differences in the marketing
environment which may make the international
business strategy different from the domestic
one.
CON…
The key difference between domestic marketing and
marketing on an international scale is the
multidimensionality and complexity of the many
foreign country markets a company may operate in.
An international manager needs a knowledge and
awareness of these complexities and the implications
they have for international marketing management.
CON…
 There are many environmental analysis models which the
reader may have come across. For the purposes of this
textbook, we will use the SLEPT approach and examine
the various aspects and trends in the international
marketing environment through the
1.social/cultural
2. legal
3. economic
4. political and
5. technological dimensions,
1. Social/cultural environment

 Culture means many things to many people

because the concept encompasses norms, values,
customs, art, and mores.
 Culture is also the total way of life and thinking
patterns that are passed from generation to
generation.
 culture is a set of traditional beliefs and values
that are transmitted and shared in a given
society.
CON…
 Cultural differences and especially language
differences have a significant impact on the way a
product may be used in a market, its brand name and
the advertising campaign.
 Initially, Coca-Cola had enormous problems in
China as Coca-Cola sounded like ‗Kooke Koula‘
which translates into ‗A thirsty mouthful of candle
wax‘.
 They managed to find a new pronunciation ‗Kee Kou
Keele‘ which means ‗joyful tastes and happiness‘.
CON…
 Other companies who have experienced problems
are General Motors whose brand name ‗Nova‘ was
unsuccessful in Spain (‘no va’ in Spanish means
‘no go’).
 Pepsi Cola had to change its campaign ‘Come Alive
With Pepsi’ in Germany as, literally translated, it
means ‘Come Alive Out of the Grave’. In Japan
McDonald‘s character Ronald McDonald failed
because his white face was seen as a death mask.
CON…
 Operating effectively in different countries requires
recognition that there may be considerable differences in
the different regions.
 The dominance of a number of world brands such as
Microsoft, Intel, Coca-Cola, McDonald‘s, Nike etc., all
competing in global markets that transcend national and
political boundaries, are testimony to the convergence of
consumer needs across the globe.
 However, it is important not to confuse globalization of
brands with the homogenization of cultures.
INFLUENCE OF CULTURE ON CONSUMPTION

Consumption patterns, lifestyles, and the priority of

needs are all dictated by culture. Culture prescribes
the manner in which people satisfy their desires.
For example , Hindus and some Chinese do not
consume beef at all, believing that it is improper to
eat cattle that work on farms, thus helping to
provide foods such as rice and vegetables.
CON..
 Not only does culture influence what is to be consumed, but it also
affects what should not be purchased. For example , Jews require
kosher (―pure‖) food.
 Kosher rules about food preparation prohibit pork or shellfish,
and there is no mixing of milk and meat products. Coca-Cola was
declared kosher in 1935.
 Likewise, Muslims do not eat pork, and foods cannot be
processed with alcohol and non-halal animal products (e.g.,
lard/fat).
 Muslims do not purchase chickens unless they are halal. They also
do not smoke or use alcoholic beverages, a rule shared by some
strict Protestants.
 INFLUENCE OF MATERIAL CULTURE

 Material culture relates to the way in which a

society organizes and views its economic
activities. It includes the techniques and know-
how used in the creation of goods and services,
the manner in which the people of the society use
their capabilities, and the resulting benefits.
 When one refers to an 'industrialized' or a
'developing' nation, one is really referring to a
material culture. For example ,
CON…
 The material culture of a particular market will affect
the nature and extent of demand for a product.
 Whereas a luxury item, such as a sophisticated piece
of computer hardware, may have a ready market in a
country such as France, demand for it may be non-
existent in a developing country which is hampered by
inadequate facilities and/or foreign exchange
shortages.
 The material culture of a country may also necessitate
modifications to the product.
CHANGING ROLES IN THE HOUSEHOLD

 As more women enter the workforce and household

compositions change, typical household roles are altered.
 No longer are financially supporting the household and
developing a career solely the responsibility of men. No
longer are household chores, child care, or grocery shopping
solely the responsibility of women. In many households, roles
have shifted and distinctions have become blurred.
 More men spend time on household and shopping chores, and
many women are involved in career development and provide
much or most of the financial resources for a household.
 2. Economic Environment

 Firms need to be aware of the economic policies of

countries and the direction in which a particular market is
developing economically in order to make an assessment
as to whether they can profitably satisfy market demand
and compete with firms already in the market.
The economic environment includes factors and trends
related to income levels and the production of goods and
services.
 Economic trends affect the purchasing power of the
markets.
CON…

For example , Amongst the 194 countries in the

world, there are varying economic conditions,
levels of economic development and Gross national
income (GNI) per capita. Gross national income in
the world is US$62 trillion (purchasing power
parity [ppp]); however, it is not shared equitably
across the world.
3. Political/legal environment

 The political/legal environment encompasses

factors and trends related to governmental
activities and specific laws and regulations that
affect marketing practice.
 pressures from the social environment, such as
ecological or health concerns, or the economic
environment, such as slow economic growth or
high unemployment, typically motivate legislation
intended to improve the particular situation.
CON…
The political environment in which the firm
operates (or plan to operate) will have a
significant impact on a company's international
marketing activities.
 The greater the level of involvement in a foreign
markets, the greater the need to monitor the
political climate of the countries business is
conducted.
INTERNATIONAL POLITICAL TRENDS

 In today‘s world economy, international political events

greatly affect marketing activities. Here are the trends of
the current global political environment:
 One significant trend is a move from government-
dominated economies and socialist political systems
toward free market economies and, in many countries,
democratic governments.
 A second important political trend is movement toward
free trade and away from protectionism.
 TYPES OF POLITICAL RISKS

The types of action that governments may take which constitute potential
political risks to firms fall into three main areas:
1. Operational restrictions. These could be exchange controls,
employment policies, insistence on locally shared ownership and
particular product requirements.
2. Discriminatory restrictions. These tend to be imposed on purely
foreign firms and, sometimes, only firms from a particular country.
3.

4. Physical actions. These actions are direct government interventions

such as confiscation without any payment of indemnity, a forced
takeover by the government, expropriation, nationalization or even
damage to property or personnel through riots and war.
CON..
A. Blockage of Funds
An issue associated very closely with the subject of political
risk is a temporary or permanent blocking of funds. Blockage
of funds refers to the fact that although a business entity may
own the funds and still hold property rights, it cannot export
its earnings.
B. Expropriation
The most extreme case of political vulnerability is
expropriation. Expropriation refers to the government
confiscation of property with or without proper
reimbursement.
CON….
C. Confiscation
 Confiscation is the process of a government‘s taking

ownership of a property without compensation. After

property has been confiscated or expropriated, it can be
either nationalized or domesticated.


Nationalization involves government ownership, and it is the

government that operates the business being taken over.
 In the case of domestication, foreign companies
relinquish control and ownership, either completely or
partially, to the nationals.
CON…
. Based on this classification, four sets of political risks may be identified:
general instability risk, ownership/control risk, operation risk, and transfer
risk.
 General instability risk is related to the uncertainty about the future viability
of a host country‘s political system.
 Ownership/control risk is related to the possibility that a host government
might take action (e.g., expropriation) to restrict an investor‘s ownership and
control of a subsidiary in that host country.
 Operation risk proceeds from the uncertainty that a host government might
constrain the investor‘s business operations in all areas, including production,
marketing, and finance.
 Transfer risk applies to any future acts by a host government that might
constrain the ability of a subsidiary to transfer payments, capital, or profit out
of the host country back to the parent firm.
 THE LEGAL ENVIRONMENT

The legal environment in international marketing is

more complicated than in domestic markets since it
has three dimensions:
(1) local domestic law;
(2) international law;
(3) domestic laws in the firm‘s home base.
CON….
 Local domestic laws. These are all different! The only way to find a
route through the legal maze in overseas markets is to use experts on the
separate legal systems and laws pertaining in each market targeted.
 International law. There are a number of international laws that can
affect the organization‘s activity. Some are international laws covering
piracy and hijacking, others are more international conventions and
agreements and cover items such as the
 International Monetary Fund (IMF) and World Trade Organization
(WTO) treaties, patents and trademarks legislation and harmonization of
legal systems within regional economic groupings, e.g. the European
Union.
 Domestic laws in the home country. The organization‘s domestic (home
market) legal system is important for two reasons.
4. Technological Environment

Technology can be defined as the method or

technique for converting inputs to outputs in
accomplishing a specific task.
 . Technological innovation, then, refers to the
increase in knowledge, the improvement in skills,
or the discovery of a new or improved means that
extends people's ability to achieve a given task.
High technology has become like a force of
nature.
CON…
 The technological environment includes factors
and trends related to innovations that affect the
development of new products or the marketing
process.
 Rapid technological advances make it imperative
that marketers take a technology perspective.
CON…
 Technological developments offer marketers both
opportunities and threats. Although firms can
offer customers a wider array of advanced
products, changes in technology also mean that
there may be more than one technical solution to
a customer‘s needs.
 Increased technological development accelerates
the speed of obsolescence.
CON…
 The risks from technological changes have
meant that firms are increasingly entering into
‗strategic alliances‘ with customers, suppliers
and even competitors.
 Indeed, there has been an increasing emphasis
on open, long-term relationships, based on trust
between customers and suppliers.
 This is expected to help in the development of
products and the management of technological
 CHAPTER 3

Entry Modes in International

Marketing
CON…..
 A mode of entry into an international market is
the channel which your organization employs to
gain entry to a new international market.
Types of entry modes
There are a number ways businesses can sell their
products in international markets.
The most appropriate method will depend on the
business, its products, the outcome of its Marketing
Types of entry modes

1. Exporting
2 Turnkey project
3.licensing
4.Franchising
5.Joint venture
6.Wholly owned subsidiary
1. How much of our resources such as money, time and
personnel are we willing to commit
2. how much control do we wish to retain
1. EXPORTING

Refers to the selling and sending of goods or

service to another country.
 No investment in foreign production facilities are
needed
Advantages
1. Low cost
2. High efficiency
3. Favorable government policies
DISADVANTAGE

1. it can be expensive
2. High transportation costs and long lead time
Could take anywhere from weeks to months
3. Tariff barriers can make exporting risky
4. Foreign exchange risk
5. Foreign agents loyalty concern
Local agents often carry product from multiple
different suppliers in the same industry
2. TURNKEY PROJECT
 The contractor agrees to handle every detail of
the project for a foreign ,including the training of
operating personnel
 At completion of the contract, the foreign client
is handed the key to a plant that is ready for full
operation, hence the term turnkey
 Commonly used in the chemical, pharmaceutical,
petroleum-refining, and metal –refining industry
 ADVANTAGES

1. More revenue (short term

2. less risk
Disadvantages
1. Possible revenue loss(long term

2. 2. unintended competition
3. 3.the potential loss of a competitive advantage
3, LICENSING
 An arrangement whereby a licensor grants the
right to intangible property to the license for a
specified period, and in return, the licensor
receives a royalty fee from the licensee.
 E.g formulas ,process, copyright ,design, patents.
Trade secret etc…e.g Disney
ADVANTAGES
 1. income without overhead
 2.potentially better marketing

 3. the ability to enter foreign markets more easily

Disadvantages
1. 1. Risk of IP theft

2. 2,. No guarantee of revenue

3. 3. risk of diminished reputation

4. FRANCHISING
 Is basically a specialized form of licensing in
which the franchiser not only sells IP to the
franchise but also insists that the franchisee agree
to abide by strict rules regarding how they do
business.
 Licensing for manufacturing franchising
for service
 FRANCHISING
 E.g MACDONALD,
BURGERKING,MARRIOTT , UPS
ETC….
ADVANTAGES
1. LOW RISK

2. 2. FAST EXPANSION
3. .DISADVANTAGES
QUALITY CONTROL
5. JOINT VENTURES

Is business arrangement in which two or more parties

agree to pool their resources for the purpose of
accomplishing a specific task.
 Each the participants is responsible for the profits,
losses and costs associated with it.
 e.g VOLVO AND UBER

Advantages
1. Sharing risk and costs
 2. gaining support from a local partner
DISADVANTAGES

1. the risk of losing core technology

2. not having total control
3. a possible clash between partners
6. WHOLLY OWNED SUBSIDIARY
 Set up a new operation in a foreign country (a
greenfield venture)
 Acquire on established firm in the host nation
(Acquisition)
 Advantages
 1. less risk of losing core technology
 2. tight control
DISADVANTAGES

1. huge sunk costs and big risk

2. a lack of local support
CON……

Other advantages of exporting includes:

 Need for limited finance

 Less Risk
 Motivation for exporting

 Ease in implementing the strategy

 Foreign Direct
Investment (FDI)
FOREIGN DIRECT INVESTMENT (FDI)
 is the direct ownership of facilities in the target country.
 It involves the transfer of resources including capital,
technology, and personnel.
 Direct foreign investment may be made through the
acquisition of an existing entity or the establishment of
a new enterprise.
CON….
• Foreign direct investment (FDI) is direct investment
into production in a country by a company in another
country, either by buying a company in the target
country or by expanding operations of an existing
business in that country.
• Foreign direct investment is done for many reasons
including to take advantage of cheaper wages, and/or for
special investment privileges such as tax exemptions
offered by the country as an incentive to gain tariff-free
access to the markets of the country or the region.
MOTIVES FOR FDI

1. resource seeking
Physical resource , cheap and diligent unskilled or
semiskilled labor
2. market seeking
Save production cost and transaction costs
3. efficiency seeking
4. favorable government policy
low interest loan , tax
BENEFITS OF FDI
 INCREASED EMPLOYEMENT
 HRD

 PROVISION OF FINACE AND

TECHNOLOGY
 AN INCRESE IN EXPORT

 THE CREATION OF A COMPETATIVE

MARKET
 STIMULATION OF ECONOMIC
DEVELOPMENT
DRAW BACK
 IT CAN REPLACE LOCAL BUSINESS

 IT CAN CONTRIBUT TO BULLUTION

 IT CAN PROMOT CULUTURAL EROSION

 IT CAN ENCOURAGE POLITICAL

CORRUPTION
 SELECTING ENTRY
 Firms should consider several strategic factors
when selecting an entry mode.
 Cultural differences can reduce managers‘
confidence in their ability to control operations in
the host country.
 A lack of cultural familiarity can cause a firm to
avoid investment entry and pursue exporting or
contractual entry.
POLITICAL INSTABILITY
 Political instability in a host country increases
the risk exposure of assets. Political uncertainty
can cause companies to avoid investment entry in
favor of other modes. But a target market‘s laws
can encourage investment if, for example, it
imposes high tariffs or low quota limits on
imports
MARKET SIZE
 is often a determining factor in entry mode
choice.
 Rising incomes can encourage investment to
help a firm better understand the target market
and prepare for growing demand.
 For example, companies are undertaking
enormous investments in China, but making far
more modest investments or pursuing exporting
and contractual entry in smaller markets.
CON…
 Low-cost production and shipping can give a
company an advantage by helping it control total
costs.

 If producing in a host country lowers a firm‘s

total production costs, it can encourage
investment, licensing, or franchising.
CON….
 As international experience grows, a firm may
select entry modes that require deeper
involvement, but which also involve greater
exposure to risk.
CON..

Modes of entry

Exporting Contractual Joint Venture Acquisition Greenfield

Agreement Investment

Risk Low Low Moderate High High

Return Low Low Moderate High High

Control Moderate Low Moderate High High

Integration Negligible Negligible Low Moderate High
THANKS