CBS2113 Introduction to International Business & Ethics - Ch 06: Global Marketplaces

Opportunities & Threats in Global Marketplaces

• Market Expansion:
  • Access to larger customer bases and diversified markets.
• Cost Efficiency:
  • Potential for lower production and operational costs in certain regions.
• Resource Access:
  • Obtain specific resources or talents unavailable domestically.
• Innovation Boost:
  • Exposure to new ideas, products, and business processes.

Threats in the Global Marketplace

• Cultural Differences:
  • Challenges in understanding and adapting to local cultures.
• Foreign Competition:
  • Local competitors might have a deeper understanding of the market.
• Political & Economic Instability:
  • Potential for abrupt changes in foreign countries.
• Regulatory Challenges:
  • Different rules, regulations, and business practices across countries.

Product Standardisation Strategies

• Definition:
  • Offering a uniform product, unchanged across all markets. Pricing strategy is similar with adjustments to exchange rates, purchasing power, and taxes.
• Advantages:
  • Economies of scale, consistent brand image, and simplified operations.
• Disadvantages:
  • Different laws, rules, and regulations
  • May not meet specific needs/preferences of all customer and consumer markets.

Product Localisation Strategies (aka: Adaptation, Customisation)

• Definition:
  • Adapting products to meet the needs and preferences of specific markets. Pricing strategy is similar with adjustments to exchange rates, purchasing power, and taxes.
• Advantages:
  • Tailored approach can lead to higher local acceptance and sales.
• Disadvantages:
  • Increased operational complexity & costs
  • Potential for brand dilution.

International Product Pricing Strategies

• Market Skimming:
  • Setting a high price for a new innovative product to make substantial profits from the segment willing to pay a premium and then lower it over time to capture price-sensitive markets.
• Penetration Pricing:
  • Setting a low initial price to quickly gain market share and deter competition.
• Cost-Plus Pricing:
  • Adding a standard margin to the cost of producing the product.
• Purchasing Power Parity (PPP):
  • Setting prices based on the purchasing power of the target market.
• Competitive Pricing:
  • Setting prices based on competitors' strategies, prices, and market trends.

Tax Considerations

• Tariffs:
  • Taxes imposed on imports or exports. Can impact pricing and profitability.
• Double Taxation:
  • Occurs when profits are taxed in both the country of earnings and the home country. Some countries have treaties to prevent this.

Transportation Considerations

• Mode Selection:
  • Deciding between air, sea, rail, or road based on costs, speed, and product type.
• Freight Rates:
  • Costs associated with shipping goods, influenced by distance, volume, and mode.
• Incoterms:
  • Standardized terms defining responsibilities and risks of buyers and sellers in international trade (e.g., FOB, CIF).