Transcript home market or export markets - Karelia-amk

Slide 2.1
Bases of International Marketing
International Business
Pertti Laitinen
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.2
The effects of imports
• Importing industrial products brings
about lower domestic costs of
production than would be possible
using only domestic suppliers
• Some raw material imports conserve
precious resources
• There are often no domestic supplies
of many industrial goods
– Copper, tin, oil etc.
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.3
Acquisition of technology
• Importing directly in the form of
capital and consumer goods
• Licensing technologies from those
who developed them
• Attract Foreign Direct Investment
(FDI)
– A multinational company can establish
production facilities within its borders
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.4
Negative effects of importing
• Country’s balance of payments
• Reduction in the amount of foreign
capital available for other needs
• Increased competition to locally
produced goods
• Labor can be affected due to lost
sales and profits and redundancy
– Intracompany sales hide part of these
situations
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.5
The effect of exports
• Selling abroad helps to gain
economy in production at home
– Lower prices to consumers of domestic
products
– Companies competitive position tends
to improve both domesticially and in
foreign markets
– Diversifies the risk inherent in
conducting business
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.6
Technology transfer
• The sending of new products,
processes and production inputs
from one country to another
• The developing countries of the
world are constantly seeking
technology from the developed
countries
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.7
The classical theory of international trade
• What a country exports and imports is not
determined in isolation but in relation to
those of its trading partners
• The concept of economic advantage
states that countries tend to specialise in
those products in which they have an
advantage
• A nation should not produce something
that can be imported at a cheaper price
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.8
Absolute advantage
• When one country has a cost
advantage over another country in
the production of one product while
the second country has a cost
advantage over the first in producing
a second product
• In a two-country two-product world,
international trade and will be
beneficial to both countries
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.9
Why costs differ among nations
• Productivities of factor inputs are the
major determinant of production cost
in different countries
• Natural advantages
– Climate, soil, mineral wealth
• Acquired advantages
– Special skills, technical and marketing
know-how, technology
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.10
Comparative advantage
• If one company has an absolute
advantage over another country in
the production of all products trade
will still be beneficiary to it if it has a
greater advantage in producing one
product
• Comparative advantage is often the
result of history and chance
• It can be created and supported
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.11
Table 2.1
Comparative advantage: gains from trade
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.12
Equal advantage
• One country has an absolute
advantage over another in
production of all products but no
superior advantage in the production
of any one product
• In the example Italy is twice as
efficient so neither country would
neither gain of loose by trading
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.13
Table 2.2
Production costs for shoes and clothing
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.14
The product life-cycle theory of international
trade
• Many manufactured products
undergo a trade cycle
– The innovator country of a new product
is initially an exporter
– Then loses its competitive advantage
against its trading partners
– May eventually become an importer of
the product some years later
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.15
• An innovating country’s monopoly
position may be prolonged by legal rights
(patents etc.) – it usually breaks down
over time
• Knowledge tends to be a free item in the
long run
• The trade cycle becomes complete when
the production process becomes
standardised and can be copied
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.16
Should a company market overseas?
• The key to success in foreign
markets is:
– Information
– Preparation
– Commitment
• International success is due to
management commitment, quality,
better marketing, innovation and
acculturation
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.17
Incentives to internationalise
• Growth and profit
• Sales in foreign markets can aid in
stabilising revenue/ turnover
fluctuations caused by seasonality,
technology changes, saturated
markets or economic conditions
• Production capacity usage improves
• Extending the product life cycles
• Increase competitiveness
• Gain tax advantages
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.18
Four steps to assess internationalisation
viability
• Gather information on which to base
decision:
– Study market characteristics (including
need and propensity to buy),
competition, possible entry barriers,
export / import regulations, customs
and licensing considerations of
targeted markets
– Evaluate company and product
strenghts and weaknesses by market
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.19
Four steps to assess internationalisation
viability
– Evaluate how to adapt products and
services to meet local requirements,
standards and tastes
– Anticipate export financing, pricing,
payment methods, and the additional
costs of doing business in foreign
markets
• Audit the foreign marketing knowhow, capabilities and expectations of
personnel, suppliers, and other
stakeholders
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.20
Export behavior theories and motives Export motives
• Basic goals; profit/nonprofit oriented
– Return on investment
– Return on sales
– Profit maximation
– Growth
– Stability
– Desired volume of sales
– Market share
– Serving customers
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.21
Specific reasons
• Different kinds of stimuli and inluences
cause a firm to engage in exporting
– Motivational factors can be internal to
the firm or caused by external
environment (home market or export
markets)
– Export activity can be reactive
behaviour to push factors or
proactive/agressive towards pull factors
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.22
Table 2.3
A classification of export motives
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.23
Managerial urge
• Reflects the desire, drive,
enthusiasm and commitment of
management towards exporting and
other types of international
marketing
– Favorable attitudes toward foreign
activities are an essential prerequisite
before companies go onto or expand in
international markets
– Managers who have lived/traveled
extensively in foreign countries are
usually more internationally minded
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.24
Unique product / technology competence
• A firm producing superior products
is more likely to receive inquiries
from foreign markets
• Significant factors in export
products:
– Degree of standardisation
– Degree of complexity
– Distribution of revenues between
hardware and software
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.25
Risk diversification
• Exporting companies usually face
less total market risk because they
have diversified geographical
markets
– Typically countries do not face the
same type and timing of business cycle
– Selling in several markets (market
spreading) reduces the risk associated
with declining sales and profits in any
one market
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.26
Foreign market opportunities
• Good market opportunities have a strong
influence upon willingness to export
• A firm has to have the resources or the
possibility to acquire those resources
needed to respond to the opportunities
– Decision makers usually consider a
limited amount of foreign market
opportunities
– Overseas marketing opportunities
which have similarities to opportunities
in the home market are explored most
often
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.27
Change agents/promoters of export activities
•
•
•
•
•
Government agencies
Industrial trade associations,
Banks
Chambers of commerce
Port authorities
– Giving and guaranteeing loans, providing
credit facilities and insurance, publishing
basic market data on foreign markets,
exhibiting at trade fairs and exhibitions,
sponsoring and participating in trade
missions, providing trade leads and reports on
individual companies and being party to a
trade agreement or convention
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.28
Foreign marketing advantages
•
•
•
•
A good and perhaps unique product
A strong sales force
An efficient marketing infrastructure
Good service technical support
system
– Marketing advantages can serve as
entry bariers for potential competitors
in foreign markets
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.29
Extend sales of seasonal products
• Seasonality in production and
demand conditions can lead to
foreign market exploration:
– To remove fluctuations in the product
cycle
– Eroding of the home market may force
pursuit of export markets to secure
continued growth and profitability
– Selling seasonal products where the
seasons are opposite can help to
achieve greater stability in sales
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.30
Economies of scale
• If scale economies exist in
production, advertising, distribution
or other areas a broader market
scope can help in reducing in unit
costs of products produced
• The fixed costs from administration,
facilities, equipment, staff work and
R&D can be spread over more units
• Some companies can also benefit
from the possibility to standardize
the marketing mix internationally
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.31
Excess capacity of resources
• When the domestic market is unable
or unwilling to absorb the output that
the firm is capable of producing or is
actually producing
– Both domestic and foreign competition
often force a firm to seek overseas
markets
• Additional production can often be obtained
from existing equipment and labor without
adding greatly to cost
• Causes an increase in the productive
efficiency of the firm
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.32
Unsolicited foreign orders
• The receipt of an unsolicited inquiry
for product, price or distribution
information can open opportunities
– Advertising in trade journals that have a
worldwide circulation or through
exhibitions etc.
– Firm’s technology, product mix,
experience and present exposure in the
marketplace
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.33
Small domestic market
• Domestic markets may be unable to
offer suficient economies of scale
and scope and therefore they include
export markets as part of their
market entry strategy
– Industrial products with few easily
located customers located throughout
the world
– Specialised consumer goods with small
national segments in many countries
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.34
Stagnant or declining home market
• Home market saturation
– Company is receiving declining
marginal revenues from its marketing
effort
– The required incremental sales revenue
is less than the costs of the related
incremental marketing effort
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.35
Resources
• The ability to undertake any for of
international activity is limited by the
means available to the firm to cary
them out
– Production and financial capacities
– Export knowledge
– Ability to make personal contacts
– Willingness to take risks
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.36
Multinational, global, world companies
• Decisions are made on the basis of
comparative opportunities worldwide
• Markets are not limited to the
confines of any political entity
• Global resources are utilised
• Extensively market driven in their
strategic and tactical decision
making
• Marketing, selling and manufacturing
in many countries
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.37
Multinational, global, world companies
• Global marketing means a fully
integrated worldwide strategy based
on consistent brand selling
• Examples of these progressive and
expansive companies:
• General Motors (US), Philips
(Netherlands), Samsung (Korea),
Intel (US), Nestle(Switzerland)
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.38
Other goals
• Marketing internationally can
enhance the development of
management personnel and
stimulate the development of
improved products and methods
• Setting up an ”offshore plan” in a
developing country can provide
cheap labour, tax benefits etc.
– Maquilalora operations, mainly in the
electronics industry are located in
Mexico in designated duty-free areas
alredy since the 1970’s
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.39
Other goals
• Related to the ”offshore production
phenomenon as a objective for
exporters sourcing overseas is
buying overseas (importing) because
quality is better and/ or prices are
lower.
• For example in 1989 a subsidiary of
Johnson&Johnson bought a
waterpurification system from a
Finnish company because the
system was better than anything that
was available in the US
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.40
The development of export in the firm:
internationalisation stages
• A company that increases its level of
international involvement often starts
offering deeper and more diverse
products/services
– Expansions within existing product
lines
– New product lines
– Changing the whole product concept to
include non-material components such
as services, technology, know-how
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.41
The stages of internationalisation for a
manufacturing company
1.
2.
3.
4.
Export operation stage
Foreign sales subsidiary stage
Licensing and contracting alliances
Foreign production subsidiary or
alliance stage
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008
Slide 2.42
Exhibit 2.3
Levels of exporting
Albaum and Duerr, International Marketing and Export Management, 6th Edition © Pearson Education Limited 2008