1. International Market Research and Planning Which country should be entered and how?

2. International Planning Process Phase 1: Preliminary screening to match company/country needs Consider company issues such as objectives, resource, management style and expertise, financial limitations, management and marketing skills, products, philosophy

3. Home country and Host country issues such as economic development, level of technology, legal constraints, cultural issues, political situation

4. Market Research Use international market research to help decide which country market should be entered

5. Commonly Used Macro Indicators of Market Size Demographic Characteristics Total Population Population Growth Age distribution Economic Characteristics Per Capita Income Income Growth Rate Personal or Household disposable income Income Distribution

6. Geographic Characteristics Climate Topographical Characteristics

7. Economic Indicators Gross Domestic Product (GDP) The value of all goods and services produced in the country. This measures the overall strength of an economy. GDP per capita This is a measure of the average income per person in a country. This is found by dividing the total GDP by the population.

8. GNI – Gross National Income per capita GNI per capita is the gross national income (GNI) in current U.S. dollars as divided by the mid-year population. It’s a measure of individual income. Low income countries have less consumer demand and less infrastructure to make production and distribution reliable

9. Total GDP 2004 (millions of US dollars) 1 United States11,667,515 2 Japan 4,623,398 3 Germany 2,714,418 4 U.K. 2,140,898 5 France 2,002,582 6 Italy 1,672,302 7 China 1,649,329 8 Spain 991,442 9 Canada 979,764 10 India 691,876

10. Source: WorldBank http://siteresources.worldbank.org/DAT ASTATISTICS/Resources/GDP.pdf

11. Income Distribution Markets can be characterized by the distribution of income among the population. This tries to measure how many of the population has money and in what percentage. It can also refer to low, middle and upper income class.

12. Income group: Economies are divided according to 2003 GNI per capita, calculated using the World Bank Atlas method.Atlas method low incomelow income = $765 or less lower middle incomelower middle income = $766 - $3,035 upper middle incomeupper middle income = $3,036 - $9,385 high incomehigh income = $9,386 or more

14. A. Gross National/Domestic Product 1. Total 2. Rate of growth (real GNP or GDP) B. Personal Income per capita C. Average family income D. Distribution of wealth 1. Income classes 2. Proportion of the population in each class 3. Is the distribution distorted

15. Commonly Used Micro Indicators of Market Size Consumer Spending Consumer expenditures for related products (movies, alcohol, travel) Percentage of households owning related products (radios, TV’s, telephones) Industrial Production Steel production Rice production

16. Infrastructure Hospitals/Physicians Number of Farms Hotel beds Electricity Consumption Telephone lines Roads available Airports

17. Other Host country items to research Financial issues Legal constraints Cultural issues Political situation Competition levels

18. Market Potential Screening Process for GE Medical Filter 1Country macro factors – readily available information Filter 2Country micro factors – relevant information Filter 3 – Factors affecting profitability Filter 4 – Corporate fit

19. Screening Process for Kidney Dialysis Equipment Filter 1 Macro Level Research GDP over $15 billion GDP/capita over $1500 28 countries left

20. Filter 2 Market Relating to Product Less than 200 people per hospital bed Less than 1000 people per doctor Gov’t expenditures for health over $100 million Gov’t expenditures for health over $20 per capita 19 countries

21. Filter 3 Factors Affecting Profit Kidney related deaths over 1000 Patients use of dialysis equipment growth exceeds 40% 3 countries

22. Filter 4 Corporate fit Number of competitors Presences of other US firms SPAIN

23. Phase 2: Adapting the marketing mix to target markets Consider the product, price, promotion, and distribution

24. ProductPricePromotionDistribution Brand nameCreditAdvertisingLogistics FeaturesDiscountsMessageChannel ServiceMedia WarrantyPromotion Packaging

25. Nestlé Country fact book analyzes culturally related questions about coffee High or low per capita consumption? –Sweden = 18 lbs. of coffee per person per year –Japan = ½ gram How is coffee consumed? –France: morning coffee is with milk; noon coffee is black (two different coffees)

26. Do people prefer dark roasted or blond coffee? At what age do people drink coffee? –England: form of rebellion among the young –France: traditional beverage –Japan: high priced gift item End result is 200 different types of instant coffee produced and $50 million per year is spent in four research laboratories

27. Phase 3: Develop the marketing plan Develop objectives, goals, strategies, budgets, and action programs

28. Phase 4: Implement the plan and control

29. Market Entry Methods Exporting Licensing Franchising Joint Venture Management Contracts Wholly-Owned Subsidiary Foreign Direct Investment

30. Exporting Selling and shipping products across borders Easiest and most common first step All size companies use this strategy Direct exporting: Company actively seeks exporting Indirect exporting: Casual exporting which uses agents or intermediaries

31. Advantages: Risk of loss minimized because not much is invested Product can remain unchanged Can be used to get rid of excess inventory or gain additional sales

32. Disadvantages: May not make the most of an opportunity Strongly dependent on exchange rates Examples: Producer sells to Wal-Mart which ships overseas Stora Enso sells paper products to Canada

33. Licensing Domestic company allows foreign company to use trademarks, patents, copyrights, processes, or technical knowledge for a fee Establishes foothold in foreign market without a big investment Favorite strategy of small to medium size companies Often use in addition to exporting

34. Advantages: Foothold in foreign marketing without big investment Formal agreement in licensing contract Avoids import restrictions

35. Disadvantages: Hard to protect intellectual property May be least profitable means of entry Examples: Nestle makes food products with Disney characters

36. Joint Ventures Legal agreements between two or more companies to conduct business together Creates an alliance that combines strengths and accomplishes goals more efficiently 2 nd most frequently used strategy behind exporting

37. Advantages: Less capital investment required from each partner Shared risks Access to skills of partner With a local partner may allow access to markets which are forbidden to foreigners

38. Disadvantages: Shared control complicates decision making Agreements require frequent review Could create competitor Share revenue

39. Franchising Franchisor provides standardized products and management processes while franchisee provides capital, management personnel and knowledge of local markets Fastest growing market entry strategy More than 30,000 franchises throughout the world

40. Advantages: Allows skills to be located with franchisor while operations are spread over franchisees Expands company quickly with little investment by franchisor Foreign laws are friendly because of local ownership

41. Disadvantages: Must share profits Poor franchisee can ruin image

42. Wholly-Owned Subsidiary Domestic company owns 100% of the stock of another company Can buy en existing business (easiest method that takes advantages of existing strengths) or start from scratch

43. Advantages: Can take advantage of low cost labor Avoid high import taxes Can gain access to raw materials May cut transportation costs to market

44. Disadvantages: High investment High risk May suffer backlash from country Many countries restrict foreign direct investment Examples Nike Stora Enso

45. Foreign Direct Investment Direct investment in business operations in another country May purchase shares of stock in another company, land, or other resources Does not have to refer to market entry

46. Management Contracting Company sells management skills and runs a foreign operation Main advantage is that it’s low risk Main disadvantage is that there is low profit potential and lack of a long-term presence in market Example: DBS Asia (Thailand) awarded a contract to Favorlangh Communication (Taiwan) to set up and run digital tv programming in Taiwan

47. Turnkey Operation One company designs, constructs and tests a production facility for a client firm for a fee Often used by governments Ex: Turkey’s government had two consortiums of international firms build four hydroelectric dams

48. Unz & Co. Guide to Exporting http://www.unzco.com/basicguide/toc. html http://www.unzco.com/basicguide/toc. html Small Business Administration Guide http://www.sba.gov/OIT/info/Guide- To-Exporting/ http://www.sba.gov/OIT/info/Guide- To-Exporting/