8 Global Market Participation

Learning Objectives List and describe the five reasons why firms internationalize. Differentiate between born-global firms and other companies. Explain the difference between a standalone attractive market and a globally strategic one. Cite the advantages and disadvantages of targeting developed countries, developing countries, or transitional economies. List and describe the filters used for screening national markets. Explain the pros and cons of choosing markets on the basis of market similarity.

Chapter Overview Internationalizing marketing operations Geographic market choices Country selection

Internationalizing Marketing Operations Internationalization = a firm’s expansion from its domestic market to foreign markets

Internationalizing Opportunistic expansion Pursuing potential abroad Following customers abroad

Internationalizing (cont.) Exploiting different market growth rates Globalizing for defensive reasons

Born Globals Firms that recognize from inception that their markets are global Especially true of high-tech start-ups Small percentage of firms

The Costs of Going Global Firms are internationalizing more quickly than in the past But it takes TIME and MONEY –Starbucks expanded internationally in 1996 – first profit 2004; 1650 international stores = only 7% of revenue!

Stand-Alone Market Attractiveness Factors –Market and target segment(s) size –Growth rate –Strength of competition –Market share potential –Government incentives Low taxes Incentives

Strategic Importance of Markets Current and future battlegrounds where global competitors engage each other May not necessarily be attractive as a stand alone market but strategically important

Targeting Lead Markets Vary by industry Major R&D Sites Have demanding customers who push for quality and innovation Examples: –Plastics = Japan –Italy = Textiles, Clothing –France = Wine

Attractiveness of Developing Markets Latin America, Africa, the Middle East and parts of Asia Trade and investment liberalization Market growth may be higher Middle class growth Remittances enhance buying power Competition may be less intense

Challenges of Developing Markets Political risk Economic risk – Big ups and downs; volatility Some trade and investment restrictions remain Middle class may still be small – Predominated by small elite and large impoverished classes

Country Selection Which particular country markets should a firm enter? Each additional country demands –More financial investment –More management time and effort

Geographic Indicators Size of country, in terms of geographic area Climatic conditions Topographical characteristics

Demographic Characteristics Total population Population growth rate Age distribution of the population Degree of population density

Economic Characteristics Total gross national product Per-capita income (also income growth rate) Personal or household disposable income Income distribution

Other Criteria Political conditions Competition Market similarity –The less the psychic distance the lower the risk –But similarities can be overestimated Canadian retailers in the USA

Selecting a Global Marketing Strategy Global product category strategy Global segment strategy Global marketing mix strategies –Fully integrated –Partially integrated