Global Firm Definition

7/24/2019 Global Firm Definition

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1.0 Definition of Global Firm & 6 Major International Marketing

Decisions

1.1) Global Firm Definition

The term is used describe companies that operate in multiple countries across

continental borders. A global company is the opposite of a domestic business, which

operates in only one country.

Global companies are also known as multinational corporations, or MNCs. A company

extends beyond its domestic borders to become global to gain greater access to a

broader customer base and reenue streams. Additional specific moties may include!

Gaining traction in less competitie marketplaces

Gaining access to talent and resources not aailable in the home country

Ac"uiring new capital sources for use in expanding the business

#iersifying the risks present in operating in $ust one country

%ei&ing open market opportunities that align with core business competencies

'perating a global company inoles many more challengesthan operating a typical

domestic company. (igher costs in distribution, transportation, adertising, trael and

supply ac"uisition are common. )eyond that, global companies must establish a strong

network of partners and suppliers across the countries in which they operate. 'ther

challenges are present in particular business functions, including!

(uman resources! Creating a unified work culture when you hae employees

from many countries and cultural backgrounds is difficult. Global businesses often

try to identify a few shared, core alues to emphasi&e.

Marketing! The first key in global marketing is to choose between a global or

international strategy. A global strategy means your approach is basically the same

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in all countries. An international approach means you customi&e your brand or

communication in different countries. *egardless of the strategy, significant time

and inestment are needed to research the needs, preferences and alues of

customers in multiple countries.

+inance and accounting! +inance and accounting practices and ethical standards

ary across the world. Maintaining a consistent approach is important. Companies

must also consider the impact of currency rate fluctuation, which may cause higher

or lower profit results when bringing foreign reenue back to the home country.

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1.2) 6 Major International Marketing Decisions

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2.0 The Factors o !om"an# !onsier $hen Deciing on %ossible

Global Markets to nter

As globali&ations are increasing, a global strategic perspectie will be the

important thing for big companies that are starting in medium si&e. eople all around the

world that hae different tastes, preferences and lifestyle are keep changing as their

conscious with the fast flow of the information around the world. The companies that are

starting with the medium si&e, which is wanted to enter the global market in order to

expand their market si&e. Global market is the actiity of trade, buying and selling goods

and serices in all the countries of the world, or the alue of the goods and serices that

hae been sold. roper global marketing actiity can be the ability to boost a company

to the next leel such as succeed or fail. #ifferent marketing strategies are also included

within the different countries that hae been chosen by companies. (oweer, in order to

deciding to choose possible global markets to enter, companies should learn the factors

that would help them to choose their possible global market.

%econd factors that should be noted by the companies that wanted to enter the

global market are the political-legal enironment. olitical-legal or regulatory

enironment can be defined as the laws and regulation that companies should follow in

order to make sure the companies did not get caught, or hae the business fined for

noncompliance of some regulation. The laws are being by the politician who enacted

these laws based on the likelihood they will get re-elected. %ome countries are arying

greatly in their political-legal enironment. n order to do some market actiity in certain

country, a company should considers a factors such as the country/s attitude towards

international buying and selling, goernment bureaucracy, political stability and

monetary regulations. Attitude of the country political enironment towards foreigncompanies, products and citi&ens hae to be seriously considered. %ome of the nations

are ery receptie to foreign firms meanwhile others are less accommodating. +or

example %ingapore and Thailand, which are court foreign inestors and shower them

with incenties and faorable operating conditions. (oweer, the countries that hae

market attractieness such as 0ene&uela, but has unstable political and regulatory

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situation in economy such as inflation and steep public spending, this will increase the

risk the risk of doing business there. Next, the companies should consider the countries/

currencies regulations because they wanted to take profits in a currency of alue to

them. (oweer, they can accept the blocked currency which is being remoed from the

country is restricted by the buyer/s goernment if they can buy other goods in that

country that they need themseles or can sell elsewhere for a high risks for the seller.

Third factor that company should learn before entering the right global marketing

for them is cultural enironment. 1ach country in the world has their own naties and

people that follow their own folkways, norms and taboos. The companies should

consider on how the culture would affect the consumers reactions towards each of the

global marketing strategies that hae been made. Companies that are ignoring the

cultural norms and differences can make some ery expensie and embarrassing

mistakes. +or example, the companies that hae make mistake with racial issues.

)usiness norm and behaiors are also arying from country to country. They hae

differences in how to approach in person in each country. )y understanding this type of

factor, this can help companies to aoid embarrassing mistakes but also take adantage

of cross-cultural opportunities.

'ther factors that companies should know before entering new market

enironment is market attractieness that can be assessed by ealuating the market

potential in terms of reenues that can be generated, access to the market in terms of

the host country being warm to inestments. The reenue and profit potential of a

market can be $udged on the basis of the leel of initial inestment re"uired in

establishing the operations, the gestation period, the industry structure, and the number

and degree of obstacles that the company must face besides competition, for example

micro-enironment factors. A big market with a rapid growth can be ery attractie and

big-upfront inestments can be $ustified in such market.

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2astly, a companies that decided to go to global should reali&e their capability to

enter the global market. They need to prepare the audit of their capabilty and their

resources. They also need to hae the clear competitie adantages in terms of market

knowledge, technology, portfolio of their products, reliable partners and other relaible

parameters. They should hae the experiences towards foreign country especially the

country the wanted to enter for marketing.

'.0 ' $a#s to nter Foreign Markets

There are three ways to enter foreign markets is exporting, $oint enturing and direct

inestment.

'.1) ("orting

+or the first one is exporting that refers to the commercial process of selling and

shipping goods to the foreign country and as the simplest way to enter the foreign

market. t also the most common entry approached for a small firm.

There can be categori&ed to direct and indirect, for direct exporting can be relate the

company which whereby the firm handle their own export and the inestment and risk is

greater but it has potential return.

After that, indirect exporting that inoles less inestment because the firm does not

re"uire an oerseas marketing organi&ation and also less risk. Thus, it usually means

the company that sells to a buyer in the country who in charge in exports the product.

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'.2) oint *ent+ring

The second ways is $oint enturing which can be related on $oining with a foreign

company to produce or market products or serices. t differs from exporting in the

company which $oins with a host country partner to sell market abroad. There are four

types of $oint entures that is licensing, contract manufacturing, management

contracting and $oint ownership.

i. ,icensing

2icensing can be relate on a simple way for manufacturer to enter international

market. Thus, it inoles the agreement with a licensee in foreign market. +or the

payment, the licensee buys the right to use the company manufacturing in the

process, trademark, patent, trade secret and other item alue.

ii. !ontract Man+fact+ring

Can be defines as the company contract with manufacturers in the foreign market to

produce or proide the serice. This enture allows for a fast start up, less risk,

howeer there are decreased control oer the manufacturing process and loss of

potential profits.

iii. Management !ontracting

Management contracting is the domestic firm supplies management know-how to a

foreign company that supplies the capital. t also refers on the domestic company

exports management serices rather than products. This is a low risk strategy

method which allows an income right from its initial set-up.

i-. oint /nershi"

3oint ownership consisted of one company $oining forces with foreign inestors to

create a local business in which they share $oint ownership and control. A company

would likely use this option to enter a foreign market if they lack the financial,

physical, or managerial resources to undertake the enture alone.

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'.') Direct In-estment

The third way to enter the foreign market is direct inestment which is the deelopment

of foreign-based assembly or manufacturing facilities. t is likely an option is far more

likely to be undertaken by large corporations because of the huge capital re"uirements.

An adantage of direct inestment is a likely lowering of costs by utili&ing cheaper labor

and raw materials, reducing transportation costs, aoiding high import taxes, and

accessing foreign goernment inestment incenties.

Generally, this method leads to better business relationships with the foreign countries

as it uses local suppliers, customers, and distributors.

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Global Firm Definition

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