8 Global Market Participation. Learning Objectives List and describe the five reasons why firms...
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Transcript of 8 Global Market Participation. Learning Objectives List and describe the five reasons why firms...
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 (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