Presentation is loading. Please wait.

Presentation is loading. Please wait.

Svend Hollensen GLOBAL MARKETING 4 th Edition Hierarchical modes and international sourcing decisions Lecture by Ewa Baranowska-Prokop, Ph.D.

Similar presentations


Presentation on theme: "Svend Hollensen GLOBAL MARKETING 4 th Edition Hierarchical modes and international sourcing decisions Lecture by Ewa Baranowska-Prokop, Ph.D."— Presentation transcript:

1 Svend Hollensen GLOBAL MARKETING 4 th Edition Hierarchical modes and international sourcing decisions Lecture by Ewa Baranowska-Prokop, Ph.D.

2 Hollensen, Global Marketing 4e, © Pearson Education 2008 Learning objectives (1)  Describe the main hierarchical modes  Compare and contrast the two investment alternatives: acquisition versus greenfield  Explain the different determinants that influence the decision to withdraw investments from a foreign market

3 Hollensen, Global Marketing 4e, © Pearson Education 2008 What is this? The entry modes by which the firm completely owns and controls the foreign entry mode are called ______. Hierarchical modes

4 Hollensen, Global Marketing 4e, © Pearson Education Hierarchical modes Domestic-based representatives Resident sales representatives Foreign sales subsidiary Sales and production subsidiary Region centres

5 Hollensen, Global Marketing 4e, © Pearson Education What is this? What type of sales representative resides in the home country of the manufacturer and travels abroad to perform the sales function? Domestic-based sales representative

6 Hollensen, Global Marketing 4e, © Pearson Education Figure 12.1 Domestic-based sales representatives/ manufacturer’s own sales force

7 Hollensen, Global Marketing 4e, © Pearson Education Figure 12.1 Resident sales representatives/ sales subsidiary

8 Hollensen, Global Marketing 4e, © Pearson Education What is this? What term is used to refer to a local company owned and operated by a foreign company under the laws and taxation of the host country? Subsidiary

9 Hollensen, Global Marketing 4e, © Pearson Education Figure 12.1 Sales and production subsidiary

10 Hollensen, Global Marketing 4e, © Pearson Education Reasons for establishing local production facilities  To defend existing business  To gain new business  To save costs  To avoid government restrictions

11 Hollensen, Global Marketing 4e, © Pearson Education Figure 12.1 Region centre

12 Hollensen, Global Marketing 4e, © Pearson Education Roles of regional headquarters Coordination role is to ensure that  country and business strategies are mutually coherent  One subsidiary does not harm another  Synergies are identified and exploited Stimulator role is to facilitate the  translation of global products into local country strategies  the development of local subsidiaries

13 Hollensen, Global Marketing 4e, © Pearson Education Figure 12.3 The lead country concept

14 Hollensen, Global Marketing 4e, © Pearson Education What is this? What term is used to refer to an organization which has integrated and coordinated its operations across national boundaries in order to achieve synergies on a global scale? Transnational organization

15 Hollensen, Global Marketing 4e, © Pearson Education Methods of establishing a wholly-owned subsidiary Acquisition Greenfield investment

16 Hollensen, Global Marketing 4e, © Pearson Education Site selection criteria (1) Corporate tax advantages Investment incentives Investment climate Company law Operational costs Workforce considerations Quality of living

17 Hollensen, Global Marketing 4e, © Pearson Education Site selection criteria (2) Infrastructure in place Business services available Sufficient office space Presence of other companies

18 Hollensen, Global Marketing 4e, © Pearson Education Strategic motives driving the location decision Mergers and acquisitions Internationalization of leadership and ownership Strategic renewal

19 Hollensen, Global Marketing 4e, © Pearson Education Summary of domestic-based sales representatives Advantages  Better control of sales  Close contact with customers Disadvantages  High travel expenses  Too expensive for markets far from home

20 Hollensen, Global Marketing 4e, © Pearson Education Summary of foreign sales, sales and production subsidiary Advantages  Full control of operation  Market access  Market knowledge  Reduced transport costs  Access to raw materials Disadvantages  High initial capital investment  Loss of flexibility  High risk  Taxation problems

21 Hollensen, Global Marketing 4e, © Pearson Education Summary of region centres Advantages  Synergies on regional/global scale  Scale efficiency  Ability to leverage learning on cross- national scale Disadvantages  Potential for increased bureaucracy  Limited national level responsiveness  Missing communication between head office and centre

22 Hollensen, Global Marketing 4e, © Pearson Education Summary of acquisition Advantages  Quick access to  Distribution channels  Labour force  Management experience  Local knowledge  Local contacts  Established brand names Disadvantages  Expensive option  High risk  Integration concerns

23 Hollensen, Global Marketing 4e, © Pearson Education Summary of greenfield investment Advantages  Optimum format possible  Optimum technology possible Disadvantages  High investment cost  Slow entry of new markets

24 Hollensen, Global Marketing 4e, © Pearson Education For discussion (1)  Is the establishment of wholly-owned subsidiaries abroad an appropriate international market development mode for SMEs?  Why is acquisition often the preferred way to establish wholly-owned operations abroad? What are limitations of acquisition as an entry method?  What are the key problems associated with profit repatriation from subsidiaries?

25 Hollensen, Global Marketing 4e, © Pearson Education Subcontractors  A person or firm that agrees to provide semi-finished products or services needed by another party to perform another contract to which the subcontractor is not a party  Subcontractors differ from other SMEs in that  Products are usually part of the end product, but not the complete product  They do not have contact with end customers

26 Hollensen, Global Marketing 4e, © Pearson Education Figure 13.1 Subcontractor’s position in the vertical chain Refined materials Raw materials Components End products Markets for end products Customers Main contractors Sub-contractors Material suppliers Source: Source: adapted from Lehtinen, 1991, p. 22.

27 Hollensen, Global Marketing 4e, © Pearson Education What is this? An original equipment manufacturer (OEM) is the _____ of a _____. Customer of a subsupplier

28 Hollensen, Global Marketing 4e, © Pearson Education Reasons for international sourcing  Concentration on in- house core competences  Lower product/production costs  General cost efficiency  Increased potential for innovation  Fluctuating demand

29 Hollensen, Global Marketing 4e, © Pearson Education Figure 13.4 Typology of subcontracting Standard subcontracting High Degree of Coordination Low Low Task ComplexityHigh Simple subcontracting Expanded subcontracting Strategic development subcontracting Partnership- based subcontracting Source:Source: adapted from Blenker and Christensen, 1994.

30 Hollensen, Global Marketing 4e, © Pearson Education Organizational dimensions which influence the relationship between buyer and seller Characteristics of each firm’s technology Complexity of products sold Relationship characteristics

31 Hollensen, Global Marketing 4e, © Pearson Education Relationship development phases Awareness Exploration Expansion Commitment Dissolution

32 Hollensen, Global Marketing 4e, © Pearson Education Figure 13.7 The five-phase relationship model

33 Hollensen, Global Marketing 4e, © Pearson Education Causes of Dissolution  Operational and cultural differences  Incompatibility among other employees  Lack of capacity among other employees  Opposition from people in power below CEOs  Termination of personal relations

34 Hollensen, Global Marketing 4e, © Pearson Education What is this? What term is used to describe action on the part of the buyer to search for a supplier that is able to fulfill his or her needs? Reverse marketing

35 Hollensen, Global Marketing 4e, © Pearson Education Changes in the purchasing function  Reduction in the number of subcontractors  Shorter product life cycles  Upgraded demands on subcontractors  Purchase that no longer just serves the purpose of getting lower prices

36 Hollensen, Global Marketing 4e, © Pearson Education Routes of internationalization Route 1: Follow domestic customers Route 2: Internationalization through supply chain of MNC Route 3: Internationalization in cooperation with domestic or foreign suppliers Route 4: Independent internationalization

37 Hollensen, Global Marketing 4e, © Pearson Education Mazda splits its seat purchases between Delta Kogyo and Toyo Seat Company Source:

38 Hollensen, Global Marketing 4e, © Pearson Education What is this? What term refers to the complex international activity involving supplies or deliveries that contain a combination of hardware and software, which upon delivery, will constitute an integrated system that is able to produce the products the buyer requires? Project export

39 Hollensen, Global Marketing 4e, © Pearson Education Software in project exports  Software includes know-how and service.  Three types of know-how:  Technology  Project  Management

40 Hollensen, Global Marketing 4e, © Pearson Education Possible buyers in project exports Multilateral organizations Bilateral organizations Government institutions Private persons or firms

41 Hollensen, Global Marketing 4e, © Pearson Education Buyer-seller relationships, contractor perspective Advantages  Flexibility  Cheaper sources  Focus on in-house competences  Complement to product range  New ideas for product innovation Disadvantages  Questionable availability of suitable subcontractors  Less stable than in-house production  Less control  Potential to prepare competition  Quality concerns

42 Hollensen, Global Marketing 4e, © Pearson Education Buyer-seller relationships, subcontractor perspective Advantages  Access to new export markets  Exploit economies of scale  Learn product technology  Learn marketing practices Disadvantages  Risk of dependence on contractor

43 Hollensen, Global Marketing 4e, © Pearson Education Eaton: A case study  What are Eaton’s key challenges in establishing long-term relationships with its new global OEM-customers?  Why is the fast-changing marketing environment so crucial to Eaton’s international marketing plan?  What makes Eaton’s channel management challenging? Why does the company continue to sell through multiple global channels? Requires web access

44 Hollensen, Global Marketing 4e, © Pearson Education For discussion (1)  What are the reasons for the increasing level of outsourcing to international subcontractors?  Explain the shift from seller to buyer initiative in subcontracting.

45 Hollensen, Global Marketing 4e, © Pearson Education For discussion (2)  Explain the main differences between the US and the Japanese subsupplier systems.  How are project exports/turnkey projects different from general subcontracting in the industrial market?  Project export is often characterized by a complex and time-consuming decision-making process. What are the marketing implications of this for the potential sub-contractor?


Download ppt "Svend Hollensen GLOBAL MARKETING 4 th Edition Hierarchical modes and international sourcing decisions Lecture by Ewa Baranowska-Prokop, Ph.D."

Similar presentations


Ads by Google