1. Global Market Entry Strategies:
Export Marketing & Licensing, Investment, Strategic Alliances

2. Global Market Entry

3. Introduction : Export Selling vs. Export Marketing
Export selling involves selling the same product, at the same price, with the same promotional tools in a different place
Export marketing tailors the marketing mix to international customers
the integrated marketing of goods and services that are destined for customers in international markets

4. Requirements for Export Marketing
An understanding of the target market environment
The use of market research and identification of market potential
Decisions concerning product design, pricing, distribution and channels, advertising, and communications

5. Organizational Export Activities
The firm is unwilling to export; it will not even fill an unsolicited export order
The firm fills unsolicited export orders but does not pursue unsolicited orders. Such a firm is an export seller.
The firm explores the feasibility of exporting (this stage may bypass stage 2).
The firm exports to one or more markets on a trial basis.

6. Organizational Export Activities
The firm is an experienced exporter to one or more markets
After this success, the firm pursues country- or region-focused marketing based on certain criteria
The firm evaluates global market potential before screening for the “best” target markets to include in its marketing strategy and plan

7. Potential Export Problems

8. National Policies Governing Exports and Imports
Most nations encourage exports and restrict imports
Goods and services imported into the U.S. almost doubled in seven years
In 2008, the total was $2.5 trillion

9. Share of U.S. Apparel Market by Exporting Country, 2008
China 35.4
India 5.6
Mexico 5.5
Vietnam 5.3
Indonesia 4.3
Bangladesh 3.6
Pakistan 3.2
Honduras 2.7
Cambodia 2.4
Italy

10. Government Programs that Support Exports
Tax incentives
Subsidies
Governmental assistance
Free trade zones
The Miami Free Trade Zone, near the airport and port of Miami, manages transactions of over $1 billion of trade a year.

11. Governmental Actions to Discourage Imports and Block Market Access
Tariffs
Import controls
Nontariff barriers ğ any measure other than a tariff that is a deterrent or obstacle to the sale of products in a foreign market.
Quotas
Discriminatory procurement policies
Restrictive customs procedures
Arbitrary monetary policies
Restrictive regulations

12. Tariff Systems Single-column tariff Two-column tariff
Simplest type of tariff
Schedule of duties in which rate applies to imports from all countries on the same basis
Two-column tariff
General duties plus special duties apply

13. Sample Rates of Duty for U.S. Imports
Tariff Systems
Sample Rates of Duty for U.S. Imports

14. Preferential Tariff
Reduced tariff rate applied to imports from certain countries
GATT prohibits the use, with three exceptions:
Historical preference arrangements already existed
Preference is part of formal economic integration treaty
Industrial countries are permitted to grant preferential market access to LDCs

15. Customs Duties Ad valorem duty
Expressed as percentage of value of goods
Specific duty
Expressed as specific amount of currency per unit of weight, volume, length, or other unit of measurement
Compound or mixed duties
Apply both ad valorem and specific on the same items

16. Other Duties and Import Charges
Anti-dumping Duties
Dumping is the sale of merchandise in export markets at unfair prices
Special import charges equal to the dumping margin
Countervailing Duties: additional duties levied to offset subsidies granted in the exporting country.

17. Other Duties and Import Charges
Variable import levies: applies to certain categories of imported agricultural products.
If prices of imported products would undercut those of domestic products, the effect of these levies would be to raise the price of imported products to the domestic price level.
Temporary surcharges: introduced from time to time by certain countries, to provide additional protection for local industry and, in particular, in response to balance-of-payments deficits.

18. Key Export Participants
Foreign purchasing agents
Export brokers
Export merchants
Export management companies
Export distributor
Export commission representative
Cooperative exporter
Freight forwarders
Manufacturer’s export representatives

19. Organizing for Exporting in the Manufacturer’s Country
Exports can be handled
As a part-time activity performed by domestic employees
Through an export partner
Through an export department
Through an export department within an international division
For multi-divisional companies; each possibility exists for each division

20. Organizing for Exporting in the Market Country
Direct market representation
Advantages: control and communications
Representation by independent intermediaries
Advantages: best for situations with small sales volume

21. Appendix --
Useful links for exporting activities

22. Undersecretariat of the Prime Ministry for Foreign Trade (www.dtm.gov.tr)

24. Export Promotion Center (İhracatı Geliştirme Merkezi - www. igeme. org
Export Promotion Center (İhracatı Geliştirme Merkezi -

25. Exporter Unions (İhracatçı Birlikleri)

26. Istanbul Exporter Unions (www.iib.org.tr)

27. İstanbul Tekstil ve Konfeksiyon İhracatçı Birlikleri (www. itkib. org
İstanbul Tekstil ve Konfeksiyon İhracatçı Birlikleri (

28. İstanbul Maden ve Metaller İhracatçı Birlikleri (www.immib.org.tr)

29. Export Financing and Methods of Payment
Documentary credits (letter of credit)
Documentary collections (bill of exchange)
Cash in advance
Sales on open account
Sales on consignment basis

30. Flow Chart of Documentary Credit

32. Sourcing
Must emphasize benefits of sourcing from country other than home country
Must assess vision and values of company leadership
Advantage can be gained by
Concentrating some of the marketing activities in a single location
Leveraging company’s know-how
Tapping opportunities for product development and R&D

33. Factors that Affect Sourcing
Management Vision
Factor costs and conditions
Customer Needs
Logistics
Country infrastructure
Political risk
Exchange rate, availability, and convertibility of local money

34. Market Entry Modes Trade barriers are falling around the world
Companies need to have a strategy to enter world markets
Starbucks has used direct ownership, licensing, and franchising for shops and products
In 2008, Starbucks had 12,000 cafes in 35 countries and sales of $10.8 billion.

35. Investment Cost of Market Entry Strategies

36. Which Strategy Should Be Used?
It depends on:
Vision
Attitude toward risk
Available investment capital
How much control is desired

37. Licensing
A contractual agreement whereby one company -the licensor- makes an asset available to another company -the licensee - in exchange for royalties, license fees, or some other form of compensation
Patent
Trade secret
Brand name
Product formulations

38. Advantages to Licensing
Provides additional profitability with little initial investment
Provides method of circumventing tariffs, quotas, and other export barriers
Attractive ROI
Low costs to implement
License agreements should have cross-technology agreements to inequities

39. Disadvantages to Licensing
Limited participation
Returns may be lost
Lack of control
Licensee may become competitor
Licensee may exploit company resources

40. Special Licensing Arrangements
Contract manufacturing
Company provides technical specifications to a subcontractor or local manufacturer
Allows company to specialize in product design while contractors accept responsibility for manufacturing facilities
Franchising
Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies

41. Worldwide Franchise Activity

42. Franchising Questions
Will local consumers buy your product?
How tough is the local competition?
Does the government respect trademark and franchiser rights?
Can your profits be easily repatriated?
Can you buy all the supplies you need locally?
Is commercial space available and are rents affordable?
Are your local partners financially sound and do they understand the basics of franchising?

43. Minority or majority equity stakes
Investment
Partial or full ownership of operations outside of home country
Foreign Direct Investment
Forms
Joint ventures
Minority or majority equity stakes
Outright acquisition
IKEA, with affordable furniture and housewares, spent $2 billion in Russia.

44. Direct Foreign Investment and the U.S.
Top Foreign Countries
Investing in the U.S.
United Kingdom
Japan
The Netherlands
2000 investment by foreign companies in U.S. = $1.2 trillion
Top Target Countries
for U.S. Investment
United Kingdom
Canada
The Netherlands
2000 cumulative total by U.S. companies = $1.2 trillion

45. Joint Ventures
Entry strategy for a single target country in which the partners share ownership of a newly-created business entity
Builds upon each partner’s strengths
Examples: Budweiser and Kirin (Japan), GM and Toyota, GM and Russian government, Ericsson’s cell phones and Sony, Ford and Mazda, Chrysler and BMW

46. Joint Ventures Advantages Disadvantages
Allows for risk sharing–financial and political
Provides opportunity to learn new environment
Provides opportunity to achieve synergy by combining strengths of partners
May be the only way to enter market given barriers to entry
Disadvantages
Requires more investment than a licensing agreement
Must share rewards as well as risks
Requires strong coordination
Potential for conflict among partners
Partner may become a competitor

47. Investment via Direct Foreign Investment
Start-up of new operations
Greenfield operations or
Greenfield investment
Merger with an existing enterprise
Acquisition of an existing enterprise
Examples: Volkswagen, 70% stake in Skoda Motors, Czech Republic (equity), Honda, $550 million auto assembly plant in Indiana (new operations)

48. Global Strategic Partnerships
Possible terms:
Collaborative agreements
Strategic alliances
Strategic international alliances
Global strategic partnerships
The Star Alliance is a GSP

49. The Nature of Global Strategic Partnerships

50. The Nature of Global Strategic Partnerships
Participants remain independent following formation of the alliance
Participants share benefits of alliance as well as control over performance of assigned tasks
Participants make ongoing contributions in technology, products, and other key strategic areas

51. Five Attributes of True Global Strategic Partnerships
Two or more companies develop a joint long-term strategy
Relationship is reciprocal
Partners’ vision and efforts are global
Relationship is organized along horizontal lines (not vertical)
When competing in markets not covered by alliance, participants retain national and ideological identities

52. Success Factors of Alliances
Mission: Successful GSPs create win-win situations, where participants pursue objectives on the basis of mutual need or advantage.
Strategy: A company may establish separate GSPs with different partners; strategy must be thought out up front to avoid conflicts.
Governance: Discussion and consensus must be the norms. Partners must be viewed as equals.

53. Success Factors
Culture: Personal chemistry is important, as is the successful development of a shared set of values.
Organization: Innovative structures and designs may be needed to offset the complexity of multi-country management.
Management: Potentially divisive issues must be identified in advance and clear, unitary lines of authority established that will result in commitment by all partners.

54. Alliances with Asian Competitors
Four common problem areas
Each partner had a different dream
Each must contribute to the alliance and each must depend on the other to a degree that justifies the alliance
Differences in management philosophy, expectations, and approaches
No corporate memory

55. Cooperative Strategies in Japan: Keiretsu
Inter-business alliance or enterprise groups in which business families join together to fight for market share
Often cemented by bank ownership of large blocks of stock and by cross-ownership of stock between a company and its buyers and non-financial suppliers
Keiretsu executives can legally sit on each other’s boards, share information, and coordinate prices

56. Cooperative Strategies in South Korea: Chaebol
Composed of dozens of companies, centered around a bank or holding company, and dominated by a founding family
Samsung LG
Hyundai
Daewoo

57. 21st Century Cooperative Strategies: Targeting the Digital Future
Alliances between companies in several industries that are undergoing transformation and convergence
Computers
Communications
Consumer electronics
Entertainment

58. Beyond Strategic Alliances
Next stage of evolution of the strategic alliance
Super-alliance
Virtual corporation

59. Market Expansion Strategies
Companies must decide to expand by:
Seeking new markets in existing countries
Seeking new country markets for already identified and served market segments