International Marketing Environment How to enter in Foreign Markets? Made By- Lalit Chikker
International Marketing Environment
How to enter in Foreign Markets?
Made By-Lalit Chikker
International marketing environment
International marketing environment is a set of controllable (internal) and uncontrollable (external) forces or factors that affect international marketing.
International marketing mix is prepared in light of this environment.
Global factors
Factors related to the world economy. Broader picture of global phenomenon
affects every decisions of international marketing.
Global factors include : Customer-related factors
Political and legal factors
Social factors
Cultural factors
Competition
Global relations among nations and degree of the worldwide peace.
Geographic/ecological/climate-related factors
Functioning of international organisations like UNO, World Bank, WTO, etc.
Availability of marketing facilities and functioning of international agencies,
etc.
Domestic factors
factors related to the economy of the nation. Overall economic, socio-cultural, demographic, political,
legal and other domestic aspects constitute domestic environment for international marketing.
Domestic factors include:
Political climate/stability/philosophy
Government approach and attitudes toward international trade
Legal system and business ethics
Availability and quality of infrastructural facilities
Availability and quality of raw-materials
Functioning of institutions and availability of facilities
Technological factors
Ecological factors, etc.
Internal or Organisational Factors:
These are internal and controllable factors. They are related to internal situation of the company dealing
with international trade. International marketer needs to use, adjust, and organize these
factors to satisfy needs and wants of the (international) target markets.
These factors include:
Objectives of company
Managerial philosophy of company
Personal factors related to management
Managerial attitudes toward other nations, customers, social welfare, etc.
Company’s policies and rules
Resource ability of company and marketing mix
Form of organisation and organizational structure.
Nature and types of employees
Internal relations with other departments
Company’s relations with other stakeholders and service providers.
EXPORTING
-indirect exporting-direct exports-intra-corporate
transfers
LICENSING
FRANCHISING
Different modes of entry
SPECIAL MODES-Contract manufacturing-Management Contracts-Turnkey projects
FDI without alliances
FDI with alliances
Indirect exporting
Direct exporting
Intra-corporated transfer
Forms of Exporting
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◦Indirect involvement means that the firm participates in international business through an intermediary and does not deal with foreign customers or markets directly.
◦Direct involvement means that the firm works directly with foreign customers or markets with the opportunity to develop a relationship.
Forms of Exporting
Exporting of goods and services through various home-based exporters◦Manufacturers’ export agents ◦Export commission agents ◦Export merchants ◦International firms
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Indirect Exporting – Eg.
China
• Company A
Malaysia
• Company B
Direct Exporting
U.K
• Company A
Malaysia
• Company A
Intra-corporate Transfer
Licensing is when a firm, called the licensor, leases the right to use its intellectual property—technology, work methods, patents, copyrights, brand names, or trademarks—to another firm, called the licensee, in return for a fee.
The property licensed may include: ◦ Patents ◦ Trademarks◦ Copyrights◦ Technology◦ Technical know-how◦ Specific business skills
Licensing
Under franchising, an independent organisation called the franchisee operates the business under the name of another company called the franchisor.
In such an arrangement the franchisee pays a fee to the franchisor.
Franchising is a form of Licensing but the Franchisor can exercise more control over the Franchisee as compared to that in Licensing.
Franchising
Franchisee has to pay a fixed amount and royalty based on sales.
Franchisee should agree to adhere to follow the franchisor’s requirements
Franchisor helps the franchisee in establishing the manufacturing facilities
Franchisor allows the franchisee some degree of flexibility.
Eg. McDonalds, Subway, KFC
Franchising Agreements
Management Contract
Turnkey Projects
Contract Manufacturing
Specialized Entry Modes
A management contract is an agreement between two companies whereby one company provides managerial assistance, technical expertise and specialised services to the second company for a certain period of time in return for monetary compensation.
Eg. Schools, sports facilities, hospitals, office buildings, malls and large businesses have on-site cafeterias, restaurants.
Management Contract
A turnkey project is a contract under which a firm agrees to fully design, construct and equip a manufacturing/business/service facility and turn the project over to the purchaser when its ready for operation, for a remuneration.
Turnkey Project
Contract manufacturing is outsourcing
entire or part of manufacturing operations. E.g.: pharmaceuticals, Personal Care
products etc The iPad and iPhone, which are products
from Apple Inc., are manufactured in China by Foxconn. Hence, Foxconn is a contract manufacturer and Apple benefits from a lower cost of manufacturing devices
Contract manufacturing
Companies enter the international market through FDI , invest their money, establish manufacturing and marketing facilities through ownership and control.
Greenfield strategy- the term Greenfield refers to starting of the operations of a company from scratch in a foreign market.
FDI without alliances
Strategic alliance is a cooperative and collaborative approach to achieve the larger goals.
Modes of FDI through alliances are: Mergers and acquisitions Joint ventures
FDI with strategic alliances
Merger : The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.
Acquisition : When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition.
HDFC Bank acquisition of Centurion Bank of Punjab for $2.4 billion
Mergers and Acquisitions
A joint venture is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and then they share in the revenues, expenses, and control of the enterprise.
Sony-Ericsson is a joint venture by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones
Joint Ventures
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