TAPPING INTO GLOBAL MARKET

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TAPPING INTO GLOBAL MARKET

TAPPING INTO GLOBAL MARKET
Introduction:
Joan: With faster communication, transportation and financial
flows, the world is rapidly shrinking. Products developed in one
country can find enthusiastic market in others. A German
businessman may wear an Armani suit to meet an English friend
at a Japanese restaurant, who later returns home to drink
Russian vodka and American soap on TV.
Although the opportunities for companies to enter and compete
in foreign market are significant, the risks can also be high.
Companies selling in global industries, however, really have no
choice but to internationalize their operations.
Emerging from a highly protected economy and an insulated
business environment, many companies in India have come a
long way in their quest to become global players. Indian
companies have started to venture into the global businesses
arena by acquisition, joint venturing, and direct investments.
Nemark: Competing on a Global Basis:
A global industry is an industry in which the strategic positions
of competitors in major geographic or national markets are
fundamentally affected by their overall global positions. A global
firm is a firm that operates in more than one country and
captures R&D, production, logistical, marketing and financial
advantages in its costs and reputation that are not available to
purely domestic competitors.
For a company of any size to go global, it must make a series of
decisions. We will examine each of these decisions here.
Junven: Major Decisions in International Marketing
Deciding Whether to Go Abroad:
Business would be easier and safer while going global. Yet

several factors are drawing more and more companies into the
international arena:

Higher profit opportunities

Larger customer base
Reduce dependence on any one market
Counterattacking on competitors in their home markets
Customers are requiring international services

Before making a decision to go abroad, the company must

weigh several risks:
Co. might not understand foreign customer
Co. might not understand foreign countrys business culture
Co. might underestimate foreign regulations
Lack of managers with international experience
Problems with commercial laws, currency, politics and foreign
property
Crisanto: Deciding Which Market to Enter:
In deciding to go abroad, the company needs to define its
marketing objectives and policies.
How Many Markets to Enter:
The company must decide how many countries to enter and
how fast to expand.
Developed v/s. Developing Markets:
o Regional Free Trade Zones: group of nations organized to
work toward common goals in the regulation of international
trade.
One such community is the European Union (EU).

The European Union

NAFTA
MERCOSUL
APEC

SAFTA and Indias Trade Partnership: The ultimate objective of

SAFTA is to form a South Asian Union with a common currency,
similar to EU. Under this agreement, tariffs will be reduced
significantly.
Evaluating Potential Markets: Suppose, a company has
assembled a list of potential market to enter. How does it
choose among them? Many countries prefer to sell to
neighboring countries because they understand these countries
better and can control their costs more effectively.

Nemark: Deciding How to Enter the Market:

Once a company decides to target a particular country, it has to
determine the best mode of entry. Its broad choices are indirect
exporting, direct exporting, licensing, joint ventures and direct
investment.
Indirect and Direct Export: The normal way to get involved in
an international market is through export.
Using a Global Web Strategy: With the web, it is not
necessary to attend trade shows to show ones wares: Electronic
communication via the internet is extending the reach of
companies large and small to worldwide markets.
Licensing: Licensing is the simple way to become involved in
international marketing. The licensor issues a license to a
foreign company to use a manufacturing process, patent, trade
secrets, or other item of value for a fee or royalty.
Joint Ventures: Foreign investors may join with local investors
to create a Joint Venture company in which they share
ownership and control.
For instance: Tata AIG, Birla SunLife, ICICI Prudential, HDFC
Standard etc.
Direct Investment: The ultimate form of foreign involvement
is direct ownership of foreign based assembly or manufacturing
facilities. The foreign company can buy part or full interest in a
local company or build its own facilities.
Junven: Deciding on the Marketing Program:
International companies must decide how much to adapt their
marketing strategy to local conditions. At one extreme are
companies that use a globally standardized marketing mix
worldwide. Standardization of the product, communication, and
distribution channels promises the lowest costs. At the other
extreme is an adapted marketing mix, where the producer
adjusts the marketing program to each target market.
Cultural differences cam often be pronounced across countries.
Hofstede identifies four cultural dimensions that can
differentiate countries:

Individualism v/s collectivism

High v/s low power distance
Masculine v/s feminine
Weak v/s strong uncertainty avoidance

Product: Some type of products travel better across borders

than others food and beverages marketers have to contend

with widely varying tastes.
Straight Extension means introducing the product in the foreign
market without any change.
Product Adaptation involves altering the product to meet local
conditions or preferences.
Product Invention consists of creating something new. It can
take two forms,
Backward Invention is reintroducing earlier product forms that
are well adapted to a foreign countrys need.
Forward Invention is creating a new product to meet a need in
another country.
Communications: Companies can run the same marketing
communications programs as used in the home market or
change them for each local market, a process called
communication adaptation. If it adapts both the product and the
communications, the company engages in dual adaptation.
Price: Multinationals face several pricing problems when
selling abroad. They must deal with price escalation, transfer
prices, dumping charges, and gray markets. When companies
sell their goods abroad, they face price escalation problem.
Because the cost escalation varies from country to country, the
question is how to set the prices in different countries.
Companies have three choices:
1) Set a uniform price everywhere
2) Set a market-based price in each country
3) Set a cost-based price in each country
Distribution Channels: Companies should pay attention to
how the product is distributed within a foreign country. They
should take a whole channel view of the problem of distributing
products to final users.
SELLERS
HEAD QUARTERS
CHANNEL BETWEEN NATIONS

CHANNEL WITHIN FOREIGN NATIONS

FINAL BUYERS
Deciding on the Marketing Organization:
Companies manage their international marketing activities in
three ways: through export departments, international
divisions, or a global organization.
Export Department: A firm normally goes into international
marketing by simply shipping out its goods. If its international
sales expand, the company organizes an export department
consisting of a sales manager and a few assistants.
International Division: Many companies become involved in
several international markets and ventures. Sooner or later they
will create international divisions to handle all their international
activity. The international division is headed by a division
president, who sets goals and budgets and is responsible for the
companys international growth.
Global Organization: Several firms have become truly global
organizations. The global operating units report directly to the
chief executive or executive committee, not the head of
international division.
Bartlett and Ghosal have proposed circumstances under which
different approaches work best. They distinguish three
organizational strategies:
1) A global strategy treats the world as a single market
2) A multinational strategy treats the world as a portfolio of
national opportunities
3) A glocal strategy standardizes certain core elements and
localizes other elements