Chapter 20- Tapping into global markets

A company’s inability to understand consumer needs

General risks associated with entering a new market

Not understanding the nuances of foreign country’s business culture

Specific risks associated with doing business in a different country

Waterfall approach

Gradually entering countries in sequence

Sprinkler approach

Entering many countries simultaneously

Sprinkler

The ____ approach is better for competition

Waterfall

The ___ approach allows firms to carefully plan expansion and is less likely to strain human and financial resources

Born global

Market to the entire world from the start

Physical proximity

Companies sell to neighboring countries because they understand these countries better and can control their entry costs

Cultural proximity

More familiar language, laws, and culture

Indirect exporting

The use of independent intermediaries to sell a company’s offering in other countries

Domestic-based export merchants

Buy the manufacturer’s products then sell them abroad

Domestic-based export agents

Seek and negotiate foreign purchases for a commision

Cooperative organizations

Conducting exporting activities for several producers

Export-management companies

Agree to manage a company’s export activities for a fee

Less investment and less risk

What are the two advantages for indirect exporting?

Direct exporting

The sale of a company’s offering in other countries by the company itself

Licensing

Granting permission to manufacture and sell a company’s offering in a specific market

Indirect and direct exporting

What type of mode of entry is used to “test the waters”

Contract manufacturing

The firm hires local manufacturers to produce the product

Joint ventures

A business enterprise engaged by two or otherwise separate entities

Direct investment

The process by which a foreign company can buy a partial or full interest in a local company or build its own manufacturing or service facilities

Exposes a large investment to risks

What is the disadvantage to direct investments?

Standardized marketing program

A strategy that uses the same strategic and tactical approach across different markets and countries

Localized marketing program

An approach that tailors it’s marketing activities to individual target markets

Straight extension

Introduces the product in the foreign market without any change

Production adaptation

Changing product to fit local tastes or conditions

Product invention

Creating a new product for specific foreign market

Uniform price everywhere

Same price in all markets

Market-based price in each country

Prices adjusted to local market conditions

Straight extension

Introduces the product in the market without any changes

Product adaptation

Changing product to fit local tastes or conditions

Product invention

Creating a new product for specific foreign market

Uniform price everywhere

Same price in all markets

Market-based price in each country

Prices adjusted to local market conditions

Gray market

Diverts branded(genuine) products from authorized distribution channels either in-country or across international boarders

Channel differences

• Various distribution systems vary by country

• Size and character of retail units