PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Part 4 Focusing on the Customer: Marketing Growth Strategies Global Marketing

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–2 Looking Ahead After studying this chapter, you should be able to: 1. Describe the potential of small firms as global enterprises. 2. Identify the basic forces prompting small firms to engage in global expansion. 3. Identify and compare strategy options for global businesses. 4. Explain the challenges that global enterprises face. 5. Recognize the sources of assistance available to support international business efforts.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–3 Small Businesses as Global Enterprises Globalization –The expansion of international business, promoted by converging market preferences, falling trade barriers, and the integration of national economies Size does not limit a firm’s international activity, and small companies often become global competitors to take advantage of their unique resources.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–4 Questions to Consider Before Going Global What are management’s objectives? –Reasons, commitment, expected payoff How prepared is management to go global? –In-house expertise, responsibility for and time allocated to international operations, organizational structure Is there sufficient production capacity? –Present capacity, effect of international operations on local production Is there enough financial capacity? Source: U.S. Department of Commerce, A Basic Guide to Exporting, cited in John B. Cullen, Multinational Management: A Strategic Approach (Cincinnati, OH: Thomson Business & Professional Publishing, 2002), p Exhibit 17.1

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–5 Before Going Global Decide if firm is up to the task of globalization. Study the different cultures, trading systems, and political and business practices in foreign markets. –North American Free Trade Agreement (NAFTA) –European Union (EU) Be prepared to modify products to meet design specifications that may vary from country to country.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–6 Forces Driving Global Enterprises Exhibit 17.2

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–7 Big Emerging Markets Source: The World Bank Group, “World Development Indicators, 2003,” June 4, Exhibit 17.3

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–8 Expanding the Market: Making the Most of Experience Experience Curve Efficiencies –Per-unit savings gained from the repeated production of the same good Learning Effects –Insights gained from experience that lead to improved work performance Economies of Scale –Efficiencies that result from the expansion of production

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–9 Strategy Options for Global Enterprises Exhibit 17.4

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–10 Strategy Options for Global Firms Exporting –Selling products in the home country to customers in another country –Trade mission A trip organized to help small business owners make direct contact with potential buyers abroad and learn about cultural and regulatory obstacles in foreign markets Importing –Selling goods produced in another country to buyers in the home country

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–11 Strategy Options for Global Firms (cont’d.) Foreign Licensing –Allowing a company in another country to purchase the right to manufacture and sell a company’s products in international markets –Licensee The company buying the licensing rights –Licensor The company selling the licensing rights –Royalties Fees paid by the licensee to the licensor for each unit produced under a licensing contract

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–12 Strategy Options for Global Firms (cont’d.) International Franchising –Selling a standard package of products, systems, and management services to a company in another country

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–13 Strategy Options for Global Firms (cont’d.) International Strategic Alliances –A combination of efforts and/or assets of companies in different countries for the sake of pooling resources and sharing the risks of an enterprise

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–14 Strategy Options for Global Firms (cont’d.) Locating Facilities Abroad –Cross-border acquisition The purchase by a business in one country of a company located in another country –Greenfield venture A wholly owned subsidiary formed “from scratch” in another country

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–15 “Country Risk Rankings” Map Source: Paul Pedzinksi and Andrew Newby, “Risk Improvement Defies Politics,” Euromoney, Vol. 35, No. 419, March 2004, pp. 128–134. Exhibit 17.5

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–16 Challenges to Global Business Political Risk –The potential for political forces in a country to negatively affect the performance of businesses operating within Economic Risk –The probability that a government will mismanage its economy and thereby change the business environment in ways that hinder the performance of firms operating there Exchange rate—the value of one country’s currency relative to that of another country

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–17 Challenges to Global Business (cont’d.) Managerial Limitations –Product planning –Marketing –Finance –Management –Accounting –Legal issues

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–18 Assistance for Global Enterprises Analyzing Markets and Planning Strategies –Small Business Administration resources Office of International Trade U.S. Export Assistance Centers (USEACs) Publications –Opportunities in Exporting – SBA Guide to Exporting –Department of Commerce International Trade Administration –Speak to a recent returnee –Visit the foreign country

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–19 Assistance for Global Enterprises (cont’d.) Connections With International Customers –Trade Leads –Trade Missions –Trade Intermediaries An agency that distributes a company’s products on a contract basis to customers in another country –Export management companies –Export trading companies –Export agents, merchants, or remarketers –Piggyback marketers

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–20 Assistance for Global Enterprises (cont’d.) Financing –Private banks Letter of credit—an agreement issued by a bank to honor a draft or other demand for payment when specified conditions are met Bill of lading—a document indicating that a product has been shipped and the title to that product has been transferred

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 17–21 Key Terms Bidmix.com Meetbuyer.com TradeLeads.com World Bank FundLine World Trade Markets World Trade Zone ASIA: Asian Sources On-Line EUROPE: ECeurope.com Australia: Australia on Display India: India Trade Board Ireland: ITW, Business to Business