Presentation is loading. Please wait.

Presentation is loading. Please wait.

Marketing Management Of International Trade October - December 2011 Ing. Ilona Bergquist, MBA.

Similar presentations


Presentation on theme: "Marketing Management Of International Trade October - December 2011 Ing. Ilona Bergquist, MBA."— Presentation transcript:

1 Marketing Management Of International Trade October - December 2011 Ing. Ilona Bergquist, MBA

2 Page 1 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Unit 1: Forms of market entry –Forms of market entry, advantages and disadvantages –Organizational structures Unit 2: International strategies –Developing international strategies –Preparing analysis of the market

3 Page 2 LESSON 1: INTRODUCTION TO INTERNATIONAL TRADE Approaches to Foreign Market Entry Amount of resources committed to foreign market Level of control over foreign activities Indirect export Export through agent or distributor Joint venture with local partner Licensing Franchising Wholly owned subsidiary (Greenfield or Acquisition strategy) Three-pronged strategy for intl markets: 1. company owned stores 2. JV 3. Licensees 1. Owned breweries 2. JV 3. in USA keeps importing SPECIAL MODES: Contract mfg Turnkey projects FOREIGN DIRECT INVESTMENT DECISION FACTORS: -Ownership advant. -Location advant. -Need for control -Resources avail. -Global strategy

4 Page 3 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Unit 1: Forms of market entry Exporting through trading companies –Link buyers and sellers in different countries but are not involved in manufacturing (acts like a wholesaler) –TC buy products in one country (at the lowest price and consistent quality) and sell them to buyer in another country –Important function of TC – it takes title to products and performs all activities necessary to move products to the targeted foreign country – –24 hour a day online world trade system that connects 20 million co. in 245 countries, offering more than 60 mil products and services, handling online payments, customs, tariffs, inspection of goods AdvantagesDisadvantages Risk reduction / gradual market entry Avoids restrictions on foreign investment, TC provides producers with info on products that meet quality & price expectations in intl markets, TC may offer other services (consulting, m. research, advert., insurance, legal assistance, warehousing) Vulnerability to tariffs Potential conflicts with distributors Logistical complexities 3MM firem z 66 zemí

5 Page 4 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Licensing –Leasing a legally protected property –Leasing a legally protected property (such as a trademarked or copyrighted name, logo, likeness, character, phrase or design) to another party in conjunction with a product, service or promotion –Contractual agreement between licensor (owner of the property) and licensee (manufacturer or retailer). The licensee pays commissions/ royalties on sales or supplies used in manufacturing; licensee may also pay initial down payment when licensing agreement is signed –Alternative to direct investment (lack of resources, strategic or political reasons, or when the core competencies of the company are not related to the products being sold (Intl Olympic Committee) – ROOSEVELT CHINA NVESTMENT CORP. Excusive license to produce and sell Pepsi Cola in NL AdvantagesDisadvantages Low financial risk (way of assessing mrkt potential) Avoiding tariffs or restriction on foreign investment Licensees provide knowledge of local markets Steady stream of royalties Limited profits Dependence on licensee Potential conflicts with licensee Possibility of creating future competitor

6 Page 5 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Franchising –Form of licensing –Form of licensing in which a company (franchiser) grants a franchisee the right to market its product, using its name/logo/methods of operations, advertising, products and other elements associated with franchisers business in return for a financial commitment (fee) and agreement to conduct business MORE CONTROL MORE SUPPORT –Difference from licensing: Franchiser has MORE CONTROL THAN WITH LICENSING (agreement ensures certain standard of behavior from franchisees which protects the franchisers name Franchisee gets MORE SUPPORT from franchiser AdvantagesDisadvantages Low financial risk Avoiding tariffs or restriction on foreign investment Franchisees provide knowledge of local markets Consistent revenue stream thru fixed fee & royalties Limited profits Dependence on franchisee Potential conflicts with franchisee Possibility of creating future competitor

7 Page 6 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Franchising McDonald In CR: Straight Franchise: 14mil CZK Bus. Facilities Lease: 2mil CZK, renting for 3Y

8 Page 7 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS

9 Page 8 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Contract Manufacturing –Hiring a foreign firm to produce a designated volume of the cos products (or a component of a product) to specification and the final product carries the domestics firm name –Marketing can be handled by the contract manufacturer or the contracting company –Most popular forms of contract manufacturing: outsourcing - contracting noncore operations with org. that specializes in that operation (can be product or service) offshoring - moving a process that was done domestically at the local factory to a foreign country (can be done by its own subsidiary or third party) offshore outsourcing - contracting with an organization to perform some or all business functions in a country other than where the product/service will be sold AdvantagesDisadvantages Lowering cost (resources to manufacturing) Lowers financial risk Reduced control (may effect quality, delivery schedules…), Reduced learning potential Potential PR problems (need to monitor working conditions)

10 Page 9 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Joint Venture (in Intl Mktg) –Partnership between domestic firm and a foreign firm or government –Partnership between domestic firm and a foreign firm or government; control may be split or one party may have the decision making power –Typical situations when JV formed: large capital investment required political necessity due to government restrictions on foreign ownership ( eBay closed its online auction site and entered into JV with Chinese firm Tom Online) acquisition is not feasible or the risks/constraints leave no other alternative –JV are assuming greater global importance (cost advantages and the number of inexperienced firms entering foreign markets) AdvantagesDisadvantages good knowledge privileged access to local resources Local partner has good knowledge of the economic and socio-political situation, and may have privileged access to local resources Requires trust …unintentional transfer of know- how

11 Page 10 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Joint Venture (in Intl Mktg) –Strategic Alliances –Strategic Alliances: partnerships to create competitive advantage on a worldwide basis (unlike JV, they typically mean working together – mean more involvement than in JV) –Typically large companies from developed countries, may be rivals in certain markets while working together in other markets. Partners often keep their identities, each bringing core competency. –Predominant means of competing in automobile, computer and airline industries (Sky Team Alliance). –Strategic Alliances first created by Japanese automobile co. to overcome issues with import quotas to US (Mitsubishi/Chrysler, Toyota/GM, Mazda/Ford)

12 Page 11 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Direct Ownership –Company owns subsidiaries or other facilities overseas Chinas largest oil producer and refiner Chinas top power company, provides energy to 1 bil people in CH, founded in 2002 AdvantagesDisadvantages High profit potential Maintaining control Acquiring knowledge of local market Avoiding tariffs High financial and managerial investment Higher exposure to political risk Vulnerability to restrictions on foreign investment Greater managerial complexity

13 Page 12 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Organizational structure has to support the intl marketing strategy Three basis structures of intl organization: 1.Export departments 1.Export departments - exporting, using trading companies, licensing 2.International divisions - 2.International divisions - exporting, TC, licensing, franchising, contract mfg and JV (typically organized on the basis of geography for int div.). Should be used when the company a) intends to market only a small portion of products internationally, and b) when foreign sales account for only a small portion of total sales 3.Internationally integrated organizations 3.Internationally integrated organizations Most likely among org. with direct ownership in foreign operations a)Product division structures a)Product division structures – used by most MNC, high degree of diversification (e.g. P&G). Each division is a self-contained entity responsible for its operations, HQ are in charge of strategic direction for the firm b)Geographic areas structures b)Geographic areas structures – firms with low degree of diversification (Accenture). Ensures local responsiveness, but NOT ideal for reducing global cost and transferring knowledge across regions c)Global matrix structures c)Global matrix structures – designed to achieve global integration and local responsiveness. Means that employees belong to two divisions and often report to two managers (poorly implemented can result in added bureaucracy)

14 Page 13 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Unit 1: Forms of market entry –Forms of market entry, advantages and disadvantages –Organizational structures Unit 2: International strategies –Developing international strategies –Preparing analysis of the market

15 Page 14 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS The Levels of Strategy CORPORATE STRATEGY Single BusinessRelated DiversificationUnrelated Diversification BUSINESS UNIT STRATEGY Differentiation Overall Cost Leadership Focus strategy FUNCTIONAL STRATEGY Hyundai LG electronics Cadbury Schweppes Root Beer SalesMarketing R&D Finance HROperations

16 Page 15 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Components of Intl strategy (Corp. and BU Level) Distinctive Competence Distinctive Competence: What do we do exceptionally well compared to local competitors? (cutting edge technology, well-know/respected brand names, efficient distribution network…) Scope of Operations Scope of Operations: May be defined in geographical terms or market /product terms (ex. Disney theme park in US, Japan, France, Hong Kong while movie distribution and merchandise in 200 countries) Resource Deployment Resource Deployment: How will we allocate resources to these markets? (Production, R&D resources focused to few countries) Synergy Synergy: How can different elements of our business benefit each other? (The whole is greater than the sum of the parts.)

17 Page 16 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Developing International Strategies Organizations purpose, direction. Wells Fargo: Satisfy all our customers financial needs, help them succeed financially, be known as one of Americas great companies and be the number one financial service provider in each of our markets. External analysis of markets (PEST), competitors, production costs, labor productivity etc. Internal analysis of strengths and weaknesses. Can be done by the value chain (Mktg, Sales, Service, IT, HR, R&D, Sourcing/Logisitcs) Strategic goals for intl markets: should be Specific, Measurable, Acceptable, Realistic, Time-limited (i.e. number of customers in Y1, getting certain project/state commission, launching new line of products, etc) Tactics for markets and business units, including product lines, marketing mix, distribution channels, etc. KPI - can be sales /profit goals, market share, visitors attendance (# of customers), distribution levels, etc.

18 Page 17 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS External Analysis

19 Page 18 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS External Analysis

20 Page 19 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Marketing Planning (developing tactical plans) Cooperation needed Cooperation needed with other functional dept. (production, finance, sales…) Product categories Product categories needs to be based on what customer needs/ wants are – key strategic brands vs. cash cows; launch support vs. maintanance Target groups Target groups can be defined based on mktg research segments Small firms 5-10 segments, while large firms can have 50 (ie. CocaCola) Pricing Pricing – based on fixed and variable costs, competitive pricing, demand, effect (pressure) of retailers (listing fees, etc) Prices can vary – home country 100%, country X at 80%, country Y at 120% (i.e. medication US/CZ) Distribution Distribution – convenient to customers, mix of distr. channels (internet, retailers, direct sales..) … For some distr. channels the firm can have different products

21 Page 20 LESSON 2: ENTRY MODES AND STRATEGIES FOR INT. BUSINESS Marketing Planning Communication Development Communication Development Frequent Mistakes Frequent Mistakes – no skilled marketing managers, not using advertising or graphic design firms, driven by own perceptions from home country and not getting local knowledge a full-service ad agency Smaller firms better off with a full-service ad agency (PR, promo, web, in-store…) cooperate with distributors Possibility to cooperate with distributors or local sales people on promo activities Types of marketing communication: Advertising (TV, print, radio, billboards, digital signage) Direct Sales/Mktg (door-to-door selling, exhibitions, catalogs, telemarketing) Promo activities (sweepstakes, shows, coupons, sales, samples, grand openings, loyalty programs….) PR (sponsorships, PR articles, events with celebrities/Brand advocates…) Exhibitions Exhibitions – verify structure of customers from past years, secure good placement of the booth, have relevant promo material/samples, secure quality personal at the booth, leverage additional programs taking place there

22 Page 21 Next Session Key topic areas: International trade development, role in the economy, benefits for companies Entry modes for international business and developing international strategies International marketing International marketing Marketing Research; Creating and leveraging knowledge Managing business plans; Managing HR Home work: Readings 1. Connect and Develop: Inside P&Gs New Model for Innovation 2. Tap Your Subsidiaries for Global Reach Case Studies The Global Branding of Stella Artois Hitting the Wall: Nike and International Labor Practices


Download ppt "Marketing Management Of International Trade October - December 2011 Ing. Ilona Bergquist, MBA."

Similar presentations


Ads by Google