1. 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

2. 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

3. 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

4. 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

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

6. 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