PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Part 4 Focusing on the Customer: Marketing Growth Strategies Global Marketing

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 17–2 Looking Ahead After studying this chapter, you should be able to: 1. Describe the potential of small firms as global enterprises. 2. Identify the basic forces prompting small firms to engage in global expansion. 3. Identify and compare strategy options for global businesses. 4. Explain the challenges that global enterprises face. 5. Recognize the sources of assistance available to support international business efforts.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 17–3 Small Firms as Global Enterprises Recent startups and even the smallest of businesses are internationalizing at an increasing rate. Small companies called born-global firms are increasingly being launched with cross-border business activities in mind. Small business owners who decide to go global must study the cultural, political, and economic forces in the foreign markets to figure out how best to adapt products and ensure smooth entry. Trade barriers are falling in some regions of the world, making it easier for small businesses to go global.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 17–4 Global Expansion Since more than 95 percent of the world’s population lives outside the United States, globalization greatly expands the size of a firm’s potential market. The 10 Big Emerging Markets are attracting small firms that wish to tap their enormous market potential. Small businesses with a highly differentiated product may need an international market in order to increase sales enough to recover product development costs. Going global can accelerate gains from experience curve efficiencies (resulting from learning effects and economies of scale), especially for startups based on complex technologies.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 17–5 Global Expansion (cont’d.) Sometimes small businesses go global to gain access to resources, including raw materials and skilled labor. Another reason small firms enter foreign markets is to cut their costs in such areas as labor, transportation, or tariffs. Small businesses may want to capitalize on special features of an international location: exploiting the unique features of a local environment, taking advantage of favorable government policies, establishing a presence within an emerging trade area, or following a large client firm.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 17–6 Strategy Options for Going Global Exporting is the international strategy most commonly used by small firms. It can be facilitated by using the Internet to increase their international visibility and joining trade missions that help them make contacts abroad. Importing involves selling goods from abroad in the home market. It is a strategy that should be used when products manufactured abroad have market potential at home.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 17–7 Strategy Options for Going Global (cont’d.) Non-export strategies include foreign licensing, international franchising, international strategic alliances, and locating facilities abroad. They can be more complex than export strategies, but some (especially licensing) are actually the safest options for the small global business.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 17–8 Challenges for Global Enterprises Political risk is the potential for a country’s political forces to negatively affect the performance of small businesses operating there. Political risk varies greatly across nations. Economic risk is the probability that a government will mismanage its economy and change the business environment in ways that hinder the performance of firms operating there (most notably through inflation and fluctuations in exchange rates). Globalization raises numerous concerns related to every function of the firm, thus stretching managerial skills and resources to the limit.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 17–9 Sources of Assistance Numerous public and private organizations provide assistance to small businesses in analyzing markets and planning a strategy. Small businesses can connect with international customers by reviewing sources of trade leads, joining trade missions, or using the services of trade intermediaries. For assistance in financing its entry into a foreign market, a small firm can turn to private banks (which can issue letters of credit) and programs initiated by the Small Business Administration.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 17–10 Key Terms Bidmix.com Meetbuyer.com TradeLeads.com World Bank FundLine World Trade Markets World Trade Zone ASIA: Asian Sources On-Line EUROPE: ECeurope.com Australia: Australia on Display India: India Trade Board Ireland: ITW, Business to Business