International Marketing Environment

How to enter in Foreign Markets?

Made By-Lalit Chikker

International marketing environment

 International marketing environment is a set of controllable (internal) and uncontrollable (external) forces or factors that affect international marketing. 

International marketing mix is prepared in light of this environment.

Global factors

Factors related to the world economy. Broader picture of global phenomenon

affects every decisions of international marketing.

Global factors include : Customer-related factors

Political and legal factors

Social factors

Cultural factors

Competition

Global relations among nations and degree of the worldwide peace.

Geographic/ecological/climate-related factors

Functioning of international organisations like UNO, World Bank, WTO, etc.

Availability of marketing facilities and functioning of international agencies,

etc.

Domestic factors

 factors related to the economy of the nation.  Overall economic, socio-cultural, demographic, political,

legal and other domestic aspects constitute domestic environment for international marketing.

Domestic factors include:

 Political climate/stability/philosophy

Government approach and attitudes toward international trade

Legal system and business ethics

Availability and quality of infrastructural facilities

Availability and quality of raw-materials

Functioning of institutions and availability of facilities

Technological factors

Ecological factors, etc.

Internal or Organisational Factors:

These are internal and controllable factors. They are related to internal situation of the company dealing

with international trade. International marketer needs to use, adjust, and organize these

factors to satisfy needs and wants of the (international) target markets.

These factors include:

Objectives of company

Managerial philosophy of company

Personal factors related to management

Managerial attitudes toward other nations, customers, social welfare, etc.

Company’s policies and rules

Resource ability of company and marketing mix

Form of organisation and organizational structure.

Nature and types of employees

Internal relations with other departments

Company’s relations with other stakeholders and service providers.

EXPORTING

-indirect exporting-direct exports-intra-corporate

transfers

LICENSING

FRANCHISING

Different modes of entry

SPECIAL MODES-Contract manufacturing-Management Contracts-Turnkey projects

FDI without alliances

FDI with alliances

Indirect exporting

Direct exporting

Intra-corporated transfer

Forms of Exporting

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◦Indirect involvement means that the firm participates in international business through an intermediary and does not deal with foreign customers or markets directly.

◦Direct involvement means that the firm works directly with foreign customers or markets with the opportunity to develop a relationship.

Forms of Exporting

Exporting of goods and services through various home-based exporters◦Manufacturers’ export agents ◦Export commission agents ◦Export merchants ◦International firms

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Indirect Exporting – Eg.

China

• Company A

Malaysia

• Company B

Direct Exporting

U.K

• Company A

Malaysia

• Company A

Intra-corporate Transfer

Licensing is when a firm, called the licensor, leases the right to use its intellectual property—technology, work methods, patents, copyrights, brand names, or trademarks—to another firm, called the licensee, in return for a fee.

The property licensed may include: ◦ Patents ◦ Trademarks◦ Copyrights◦ Technology◦ Technical know-how◦ Specific business skills

Licensing

Under franchising, an independent organisation called the franchisee operates the business under the name of another company called the franchisor.

In such an arrangement the franchisee pays a fee to the franchisor.

Franchising is a form of Licensing but the Franchisor can exercise more control over the Franchisee as compared to that in Licensing.

Franchising

Franchisee has to pay a fixed amount and royalty based on sales.

Franchisee should agree to adhere to follow the franchisor’s requirements

Franchisor helps the franchisee in establishing the manufacturing facilities

Franchisor allows the franchisee some degree of flexibility.

Eg. McDonalds, Subway, KFC

Franchising Agreements

Management Contract

Turnkey Projects

Contract Manufacturing

Specialized Entry Modes

A management contract is an agreement between two companies whereby one company provides managerial assistance, technical expertise and specialised services to the second company for a certain period of time in return for monetary compensation.

Eg. Schools, sports facilities, hospitals, office buildings, malls and large businesses have on-site cafeterias, restaurants.

Management Contract

A turnkey project is a contract under which a firm agrees to fully design, construct and equip a manufacturing/business/service facility and turn the project over to the purchaser when its ready for operation, for a remuneration.

Turnkey Project

Contract manufacturing is outsourcing

entire or part of manufacturing operations. E.g.: pharmaceuticals, Personal Care

products etc The iPad and iPhone, which are products

from Apple Inc., are manufactured in China by Foxconn. Hence, Foxconn is a contract manufacturer and Apple benefits from a lower cost of manufacturing devices

Contract manufacturing

Companies enter the international market through FDI , invest their money, establish manufacturing and marketing facilities through ownership and control.

Greenfield strategy- the term Greenfield refers to starting of the operations of a company from scratch in a foreign market.

FDI without alliances

Strategic alliance is a cooperative and collaborative approach to achieve the larger goals.

Modes of FDI through alliances are: Mergers and acquisitions Joint ventures

FDI with strategic alliances

Merger : The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.

Acquisition : When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition.

HDFC Bank acquisition of Centurion Bank of Punjab for $2.4 billion

Mergers and Acquisitions

A joint venture is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and then they share in the revenues, expenses, and control of the enterprise.

Sony-Ericsson is a joint venture by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones

Joint Ventures

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