Entrepreneurship and Small Business Management Chapter 10 Marketing Globally

Ch. 10 Performance Objectives Identify the reasons for ventures to market globally. Understand the various strategic options for global ventures. Explore the challenges to international trade. Learn about the types of support that are available for global ventures. Describe regional trade agreements that influence global trade.

Reasons to Market Globally Expand market opportunities. Acquire access to resources that are scarce or more competitive. Reduce costs for materials, labor, etc. Utilize advantages in a specific location such as skilled artisans, tax breaks, etc. Improve product/service quality levels.

Importing The sale of products produced in a foreign country to customers in your home country Consider importing to… Sell a product not produced at home Take advantage of better cost/quality factors Remain competitive Some information resources: Foreign embassies and consulates National Customs Brokers and Forwarders Association of America

Exporting Selling goods or services produced domestically to foreign customers Higher growth rates and lower failure rates reported by companies that export, compared to those that do not Trade intermediaries—serve as contract distributors of products between countries; have extensive trading networks and contacts

Reasons to Export Enhance competitiveness Increase sales and profits Gain global market share Reduce dependence on existing markets Exploit corporate technology and know-how Extend sales potential of existing products Stabilize seasonal market fluctuations Enhance potential for corporate expansion Sell excess production capacity Gain information about foreign competition

Exporting May Require You To: Subordinate short-term profits to long-term gains Hire staff to launch the export expansion Modify products or packaging Develop new promotional material Incur added administrative costs Dedicate personnel for traveling Wait longer for payments Apply for additional financing Obtain special export licenses

Strategic Global Alliances Strategic alliance—partnership between two or more firms in which each one provides a particular set of skills or resources International strategic alliance—partners from at least two countries; one partner is located in the targeted geographic area Benefits include: Reduced risks Greater potential rewards

Other Global Venture Strategies License products and processes globally to get the greatest benefits from intellectual property. Sell franchise units on an international scale to enter new, profitable markets. Operate international facilities to create better supply to regional customers.

Economic Risk of Global Trade Changes in a foreign country’s economy may cause financial or other harm to your business. Examples: Failure of payment by foreign customers Exchange-rate risk

Political Risk of Global Trade Changes in a foreign country’s political structure and policies may negatively impact your business. Examples: A ban on imports Prohibition of foreign direct investment Government seizure of foreign assets Regulations which reveal trade secrets

Organizational Capacity Will your firm have enough capacity to participate in international trade? Factors to consider: Management’s expectations and objectives Previous global trade experiences Personnel requirements (time and talent) Production capacity Financial capacity

Legal and Regulatory Barriers Tariffs—taxes or duties on goods and services imported into a country Quotas—limits on the amounts of specific products that can be imported into a country Embargo—a ban on the import of all products (or specific ones) from a particular nation Laws against dumping: When companies price products below cost and sell large quantities in foreign markets, it can harm domestic firms.

Cultural and Ethnic Considerations Culture—the values, perspectives, beliefs, and norms shared by a group of people An acceptable business practice in one country might be considered rude and inappropriate in another. Other factors include foreign peoples’… Language differences Perceived importance of personal relationships Expectations of product/service quality

Sources of Global Trade Support U.S. Department of Commerce International Trade Administration Export portal (http://www.export.gov) U.S. and Foreign Commercial Services Small Business Development Centers U.S. Export Assistance Centers District Export Councils Publications such as International Trade Forum and World Trade Magazine

Resources for Trade Leads The Federation of International Trade Associations has list of no-fee Web sites. Fee-based services will develop leads. Trade missions provide travel opportunities to countries of interest. Trade intermediaries can help with initial marketing and communications.

Forms of Financial Assistance Letters of credit Working Capital Loan Program (EWCP) Export Express Loan Program International Trade Loan Program Ex-Im Bank’s Export Working Capital Program Export Medium-Term Delegated Authority Program Ex-Im Bank’s Loan Guarantee Program

Trade Agreements Regional Trade Agreements (RTAs) Regulate trade between participating countries called Member States Help facilitate trade on a regional basis by cutting tariffs and reducing border barriers Regional Free Trade Agreements (RFTAs) Go beyond RTAs to increase market access Simplify regulations and reduce tariffs to zero

Significant RTAs and RFTAs European Union (EU or EC) European Free Trade Association (EFTA) North American Free Trade Agreement (NAFTA) Southern Common Market (Mercosur) Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA) Common Market of Eastern and Southern Africa (COMESA)