Exam Notes

International Strategy

  • Low global integration, high local reactivity.
  • Centralized decision-making at headquarters.
  • Key operations in home country, exporting standardized products.
  • Also known as "exporting strategy."

International Marketing

  • Adapting products/services to local markets.
  • Objective: global brand presence with localized strategies.
  • Marketing localization is key.

International Expansion Entry Modes

  • Exporting: Fast entry, low risk but low control.
  • Licensing/Franchising: Fast entry, low cost, but less control; licensee could become competitor.
  • Partnering/Strategic Alliance: Shared costs, reduced risk, but integration issues.
  • Acquisition: Fast entry, established operations, but high cost and integration issues.
  • Greenfield Venture: High control, local market knowledge, but high cost and slow entry.

Market Entry Strategies: Exporting

  • Direct Exporting: Selling directly to international market.
    • Higher profits, complete control, and close customer relationships.
  • Indirect Exporting: Selling via a third party.
    • Use intermediaries to deal with language barriers, cultural differences, or unfamiliar business environment.

Indirect Exporting Methods

  • Buying Agents: Agents take orders on commission; company handles promotion, pricing, shipping, and payment collection.
  • Distributors: Buy product and sell at a markup; handle distribution and marketing.
  • Management/Trading Companies: Purchase products or work on commission; handle market research and transportation but less control over sales.
  • Piggybacking: Using another company's export system to sell complementary products.

Licensing

  • Allows a foreign company (licensee) to use intellectual property (patents, trademarks, copyrights) in exchange for royalties.
  • Low investment for licensor, large return on investment potential.
  • Limited control and moderate returns.

Franchising

  • Grants a foreign company (franchisee) the right to use a brand name and sell products/services, following the franchiser's business model.

Export Management Company (EMC)

  • Acts as intermediary between manufacturers and foreign markets.
  • Handles market research, logistics, and compliance.

Types of EMC Models

  1. Exclusive Agent: Sole representative in a specific market.
  2. Distributor: Buys and resells products.
  3. Combination: Agency and distribution.

Benefits of Engaging an EMC

  1. Immediate Market Entry.
  2. Reduced Overhead.
  3. Enhanced Focus on Core Competencies.
  4. Resource Optimization.
  5. Market Intelligence.

Advantages of Using an EMC

  1. Expertise and Experience.
  2. Cost-Effective.
  3. Time-Saving.
  4. Market Access.
  5. Risk Mitigation.
  6. Scalability

When to Consider an EMC?

  • Small and Medium Enterprises (SMEs).
  • Exploring New Markets.
  • Specialized Markets.

Foreign Direct Investment (FDI)

  • Ownership stake in a foreign company.
  • Key element in international economic integration.

Types of FDI

  • Horizontal: Establishing the same type of business in a foreign country (e.g., a U.S. cellphone provider buying a chain of phone stores in China).
  • Vertical: Acquiring a complementary business in another country (e.g., a U.S. manufacturer acquiring a raw material supplier in another country).
  • Conglomerate: Investing in an unrelated foreign business, often via a joint venture.

Advantages and Disadvantages of FDI

  • Advantages: Fosters economic growth and job creation.
  • Disadvantages: Political risks due to regulation across multiple governments.

Inter-firm Cooperation

  • Firms engage in joint activities to develop new technologies and capabilities.

Globalization

  • Transfer of commodities, services, capital, and technology across nations.
  • Political, economic, and cultural dimensions.

Multinational Corporations (MNCs)

  • Operate production in more than one country.
  • Impact local and global economies.

Role of MNCs in Globalization

  • Connect economies and promote global investment.
  • Establish production in areas with inexpensive labor.
  • Provide funds and technology to local businesses.
  • Facilitate technology transfer and human resources development.

Mergers and Acquisitions (M&A)

  • Ways companies are combined.
  • Acquisition: One company purchases another outright.
  • Merger: Combination of two firms into a new legal entity.