Global Marketing (Chapt. 9)

Global Market Entry

Indirect Exporting

Products sold in Mexico but you (firm) are not involved in selling it

• Example: Costco buys your snack products and sells it in Mexico. You don’t know where it ends up in the store, how much effort they put into it, or even what its called

Piggyback Exporting

Use overseas distribution network of another company

• Application: You sell you product in Mexico, but use someone else’s distribution system

• Example: Wrigley entered India piggybacking on Parry’s (a confectioner) distribution setup

Direct Exporting

• You decide you want to manage the exporting yourself. You hire a team, manage shipping, and deal with retailers yourself

• Set up own exporting dept. and send product to foreign market

  • Hire a third party distributor in that country, but they will be distributing only your product

  • Sell it yourself

• Most common form of international marketing

Criteria for Examining Entry Methods

• Number of markets

• Market penetration

• Market feedback

• Learning

• Control

• Marketing Costs

• Profits

• Flexibility'

• Risk

• Speed

Comparing Exporting Methods: Indirect Export

Indirect Export

• Control: Low

• Cost: Low

• Risk: Low

• Speed: Fast

Comparing Exporting Methods: Piggyback

Piggyback

• Control: Medium

• Cost: Low

• Risk: Medium

• Speed: Fast

Comparing Exporting Methods: Direct Export

Direct Export

• Control: High

• Cost: High

• Risk: High

• Speed: Slow

Licensing

Licensor: Rent your brand/idea to someone in another country

• Example: Disney licensed to Tokyo Disneyland

Franchising

Legal and commercial arrangement where you pay to run someone else’s proven business

Franchisor Gives:

• Brand name

• Format

• System (how to run it)

• Support (training, ads)

Franchisee Gives:

• Fees + royalties

• Control: You follow their rules

Carrefour Franchise

• French retailer since 1959

• Largest in Europe

• Different formats: hypermarket, supermarket, wholesale/discount shop, convenience store

• Large initial investment plus 5% royalty fee paid monthly

Joint Ventures

Sharing of equity and other resources

Joint Ventures: Benefits

• Higher rate of return and more control over operations

• Creation of synergy

• Sharing of resources

• Contact with local suppliers and government officials

Joint Ventures: Caveats

• Lack of full control

• Lack of trust

• Conflicts arising over matters such as strategies, resource allocation, ownership of critical assets like technologies and brand names

Wholly Owned Subsidiaries (Acquisition or Greenfield): Benefits

• Greater control and higher profits

• Strong commitment to the local market

• Allows the investor to manage and control marketing, production, and sourcing decisions

Wholly Owned Subsidiaries (Acquisition or Greenfield): Caveats

• Risks of full ownership

• High resources commitment

• Risk of nationalization

• Host country issues