Risk Levels for Global Entry Chapter 1 An Overview of Marketing Risk Levels for Global Entry Low risk/low return High risk/ high return Risk Return Export Licensing Contract Manu- facturing Joint Venture Direct Invest- ment Notes: Exhibit 4.1 diagrams the risk levels for entering the global marketplace. Five methods of entering global markets are shown on this slide, in order of risk. Exporting is usually the least complicated and least risky alternative for entering the global marketplace, however it also has the lowest rate of return. On the other hand, direct investment offers the highest rate of return, but is accompanied by the highest risk. The U.S. Commercial Service offers several programs to help beginning exporters, as well as established global businesses. Services include marketing research, trade events, locating qualified buyers and partners, and global business consulting. LO4

Entering the Global Marketplace Chapter 1 An Overview of Marketing Entering the Global Marketplace Licensing Legal process allowing use of manufacturing/patents/knowledge Contract Manufacturing Private-label manufacturing by a foreign country Joint Venture Domestic firm buys/joins a foreign company to create new entity Export Sell domestically produced products to buyers in other countries Direct Investment Active ownership of a foreign company/manufacturing facility Discussion/Team Activity: Discuss examples of companies that have entered the global marketplace in each of the ways described on this slide. LO4

Export Intermediaries Chapter 1 An Overview of Marketing Export Intermediaries Buyer for Export Assumes all ownership risks and sells globally for its own account. Export Broker Plays the traditional broker’s role by bringing buyer and seller together. Export Agent Acts like a manufacturer’s agent for the exporter in the foreign market. Notes: Instead of selling directly to foreign buyers, a company may decide to sell to intermediaries located in its domestic market. Three types of intermediaries are described on this slide. LO4

Place (Distribution) LO5 Adequate distribution is necessary for success in global markets Some countries have complicated systems Lack of distribution infrastructure and cultural differences create problems Innovative distribution systems can create competitive advantage LO5

Exchange Rates LO5 Exchange Rates The price of one’s currency in terms of another country’s currency. LO5

International Channel-of-Distribution Alternatives (The “Whole Channel” of Global Distribution) Home Country Foreign Country The foreign marketer or producer sells to or through Foreign consumer Domestic producer or marketer sells to or through 14-10 Open distribution via domestic wholesale middlemen Foreign agent or merchant wholesalers Foreign retailers Exporter Importer Export management company or company sales force Irwin/McGraw-Hill