Chapter 9 Market Entry and Expansion

Major International Motivations of Small and Medium-Sized Firms: Proactive Motivations Profit advantage Unique Products Technological advantage Exclusive information Managerial urge Tax benefit Economies of scale Reactive Motivations Competitive pressures Overproduction Declining domestic sales Excess capacity Saturated domestic markets Proximity to customers and ports

Change Agents in the International Process: Firm Internal Enlightened management New management Significant Internal event Firm External Demand Other firms Distributors Banks Chambers of commerce Export agents Governmental activities

Key Managerial Characteristics Affecting Export Involvement: Education International exposure Expertise International orientation Commitment

Export Intermediaries Specialize in bringing firms or their products and services to the global market. Cover the international marketing knowledge and performance gaps of firms. Provide contacts with buyers abroad, call on customers, and handle delivery of goods. Facilitating intermediaries are Export Management Companies Trading Companies

Export Management Companies Domestic firms that specialize in performing international marketing services as commission representatives or distributors. Two primary forms of operation Take title to goods and operate internationally. Perform service as agents. Example- Cadbury, Nutri- C, Rolex, Parker  Kollol Group Dabur Honey Asian Consumer Care Ltd. Gillette  MGH

Trading Companies Trading companies are businesses working with different kinds of products which are sold for consumer, business or government purposes. Trading companies buy a specialized range of products, maintain a stock or a shop, and deliver products to customers. When talking about "trading companies", today we refer mainly to global B2B traders, highly specialized in one goods category and with a strong logistic organization.

The sogoshosha of Japan  The seven major sōgō shōsha currently in operation are Mitsubishi Corporation, Mitsui & Co., Sumitomo Corporation, Itochu, Marubeni, Toyota Tsusho and Sojitz. sōgō shōsha have shifted their business focus to services such as finance, insurance, transportation, project management and real estate development, with much of this business conducted outside Japan through local subsidiaries and affiliates Reasons for the success of the sogoshosha Development of information systems to identify market opportunities. Economies of scale in the vast transaction volume to obtain preferential treatment. Large internal global markets creating opportunities for barter trade. Access to vast quantities of capital on a global scale.

Licensing Advantages of licensing The licensor permits the licensee to use its intellectual property (an intangible) in exchange for a royalty payment. Advantages of licensing No capital investment, knowledge, or marketing strength. Huge profit potential, recovered costs. Minimal risk of government intervention. A stage in internationalization. Preempt market entry before competition. Increasing intellectual property rights protection.

Principle Issues in Negotiating Licensing Agreements: Scope of the rights conveyed (product and/or patent rights) Compensation (Transfer costs, R&D costs, and opportunity costs) Licensee compliance (export control regulations, confidentiality of the intellectual property and technology, record keeping and provisions for licensor audits) Dispute resolution (Under the Rules of Conciliation and Arbitration of the International Chamber of Commerce) The term and termination of the agreement

Trademark Licensing: Companies who trade on their names and characters Trademark Licensing: Companies who trade on their names and characters. For example, the name and logos of designers, sports teams, movie stars appear on clothing, games, toys, beverages, etc.

Reasons for Global Franchising Market potential Financial gain Saturated domestic markets

Major forms of franchising Manufacturer-retailer systems Manufacturer-wholesaler systems Service firm-retailer systems

Franchising Global franchise sales by almost 16,000 franchisors and more than 1 million franchisees were estimated to be close to $1.5 trillion. A form of licensing arrangement where the franchiser grants the franchise the right to do business in a prescribed manner. The franchisee benefits from the reduced risk of implementing a proven concept.

Franchising Concerns Companies need to know what their special capabilities are. The need for standardization. Protection of the total business system. Government intervention. Selection and training.