1. Copyright © 2001 by Harcourt, Inc.. All rights reserved. Requests for permissions to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt, Inc., 6277 Sea Harbor Drive, Orlando, Florida 32887-6777. INTERNATIONAL MARKETING 6e The Export Process Chapter 8

2. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-2 Motivations to Internationalize Proactive Motivations u Profit advantage u Unique products u Technological advantage u Exclusive information u Managerial urge u Tax benefit of a Foreign Sales Corporation (FSC) u Economies of scale Reactive Motivations u Competitive pressures u Overproduction u Stagnant or declining domestic sales u Excess production or service capacity u Saturated domestic markets u Proximity to customers and ports

3. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-3 Change Agents u Internal change agents Enlightened managementEnlightened management New managementNew management Significant internal eventSignificant internal event u External change agents Foreign demandForeign demand Other firms and distributorsOther firms and distributors Banks and other service firmsBanks and other service firms Chambers of commerceChambers of commerce Export agentsExport agents Governmental activitiesGovernmental activities

4. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-4 Export Involvement u Key managerial characteristics affecting the desire for export involvement EducationEducation International ExposureInternational Exposure ExpertiseExpertise International orientationInternational orientation CommitmentCommitment

5. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-5 Exporting and Internationalization u Internationalization stages Innate, or start-up, exportersInnate, or start-up, exporters Partially interested exporterPartially interested exporter Experimental exporterExperimental exporter Export adaptationExport adaptation u Firm-level stages of internationalization Stage 1: The completely uninterested firmStage 1: The completely uninterested firm Stage 2: The partially interested firmStage 2: The partially interested firm Stage 3: The exploring firmStage 3: The exploring firm Stage 4: The experimental exporterStage 4: The experimental exporter Stage 5: The experienced small exporterStage 5: The experienced small exporter Stage 6: The experienced larger exporterStage 6: The experienced larger exporter

6. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-6 The Partially Interested Firm and Exporting u Main corporate concerns FinancingFinancing Information on business practicesInformation on business practices CommunicationCommunication Providing technical adviceProviding technical advice Sales effortSales effort

7. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-7 The Exploring Firm and Exporting u Main corporate concerns CommunicationCommunication Sales effortSales effort Marketing information gatheringMarketing information gathering Information on business practicesInformation on business practices Obtaining financial informationObtaining financial information

8. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-8 The Experimental Exporter u Main corporate concerns Sales effortSales effort Obtaining financial informationObtaining financial information Physical productPhysical product Marketing information gatheringMarketing information gathering Information on business practicesInformation on business practices

9. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-9 The Experienced Small Exporter u Main corporate concerns CommunicationCommunication Sales effortSales effort Marketing information gatheringMarketing information gathering Obtaining financial informationObtaining financial information Handling documentationHandling documentation

10. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-10 The Experienced Larger Exporter u Main corporate concerns CommunicationCommunication Sales effortSales effort Marketing information gatheringMarketing information gathering Providing repair serviceProviding repair service Information on business practicesInformation on business practices

11. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-11 A Model of the Export Development Process Domestic Expansion Uninterested Firms Change Agents ExternalExternal InternalInternal Alternative Strategies Indirect Exporting LicensingFranchising Export Awareness Export Interest Export Trial Export Evaluation Export Adaptation Information Experience Perception Further Activity Direct Foreign Investment Concerns InformationInformation MechanicsMechanics CommunicationCommunication Sales EffortSales Effort ServiceService DeliveryDelivery RegulationsRegulations Stimuli ExternalExternal InternalInternal

12. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-12 Corporate Strategy and Exporting u The perception of rising risks during export initiation u The decrease in immediate, short-term profitability associated with the costs of initiating exporting activities u The long-term decrease in risk due to market diversification, away from “domestic only” with greater profit potential in expanded markets u Focus on export effectiveness, efficiency, and competitive strength

13. Copyright © 2001 by Harcourt, Inc. All rights reserved. 8-13 Profit and Risk During Export Initiation Market Gap Profit Risk Export Experience (Transactions x Customers