International MarketingInternationalisation

Chapter 2, ”Essentials of Global Marketing”, Svend Hollensen

Internationalisation - topics :

• Initiation of internationalisation

• Internationalisation theories

• Deciding which market to enter

• The choice of entry mode

Today1. Question from what you have read?

2. Initiation of Internationalisation (the pdf.-file chapter 2) – short introduction:• Motives for internationalising

• The triggers for export initiation

• The company’s export readyness

• Barriers to internationalisation

3. Assignment/Study question

4. Internationalisation theories (the pdf.-file – chapter 3)

4

Internationalisation Motives

Proactive:• Profit and growth goals• Managerial urge• Technological competence/unique product• Foreign market opportunities/market information• Consumer preferences internationalise• Economies of scale• Tax benefits

5

Internationalisation Motives

Reactive:• Competitive pressure

• Small and saturated home market

• Overproduction/excess capacity

• Unsolisited foreign orders

• Extend sales of seasonal products

• Proximity to international customers (psycological distance)

Discussion – 2 and 2:

• How would you prioritise the mentioned export motives regarding what is most important if a company want international success?

• Can you imagine other export motives other than those mentioned?

Triggers of export initiation (change agents)

Internal triggers:• The management’s knowledge and experience on export• Specific internal event• Import as inward internationalisation

External triggers• Market demand• Competing firms• Trade associations• Outside experts

Discussion

• What do ”change agent” mean when talking about Global Marketing”? Do you have an example…

Initiation of internationalisation

• Information and knowledge – a critical factor for SMEs when initiating export

• Translation of information

• Conclusion – internationalisation or not?

Export preparedness

• includes an analysis of a number of factors in order to assess whether the company has the ability to start exporting to a new market

• A companys export preparedness include:– The company’s capital and finances

– Management commitment an export experience

– Language skills

– Knowledge og export procedures (eg. Customs etc.)

– Other relevant factors

The 4 internal P’iesThe company’s export preparedness

Product• Suitable for export• Possible to customiseProduction• Capacity• Flexibility

Personal – including management• Education – know-how, culture,

language etc.• Motivation• Experience• The management’s approach to

export• The management’s kompetencyMoney – the financial situation• Liquidity• Profitability• Capital• Financing opportunities

Barriers hindering internationalisation initiation (internal):

• Insufficient finance

• Insufficient knowledge

• Lack of foreign connections

• Lack of export commitment

• Lack of capital or finance expansion into foreign markets

• Lack of productive capacity to dedicate to foreign markets

• Lack of foreign channels of distribution

• Management emphasis on developing domestic markets

• Cost escalation due to high export manufacturing, distribution and financing expenditure

Barriers hindering internationalisation initiation (external):

• General market risks:– Competition, difference in buying behaviour, language and culture,

distribution channels available, product specifications …

• Kommercial risks:– Exchange rates, customers ability to pay, delays in delivery or

distribution …

• Political risks:– Restriction, national export policy, lack of help overcomming export

barriers, high foreign tariffs on foreign products, complexity in trade documents, confusing foreign import regulations and procedures …