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Imm unit-04 (global market entry & export marketing)

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Imm unit-04 (global market entry & export marketing)

  1. 1. 07/06/10 1 By : Prof. Amit Kumar
  2. 2. 07/06/10 2 International marketing has become a major concern for business schools to develop global strategies to lead and sustain in the much expanded and competitive arena. Liberalization thus catalyzing market competition, poses challenge for the managers in handling the rigors of expanding global marketplace. Syllabus aims at providing contemporary knowledge & skills on issues of global marketing management. IILM-GSM Importance of this course Global Marketing Management
  3. 3. 07/06/10 3 Course: Global Marketing Management 1. Framework of Global Marketing Management 2. Global Marketing Research 3. Decision Making in International Marketing 4. Foreign Market Entry & Export Marketing 5. Product Planning & Development 6. Global Pricing Strategies 7. Global Distribution System 8. Promoting Product Internationally IILM-GSM Global Marketing Management
  4. 4. 07/06/10 4 IILM-GSM Global Marketing Management Global Market Entry & Export Marketing
  5. 5. 07/05/10 5 Contents • Concept of International Market Entry • Factors Affecting the Selection of Entry Mode • Entry Modes for ICICI Bank & Dr Reddy’s Laboratory • Modes of International Market Entry  On the Basis of Production in Home Country  On the Basis of Production in Foreign Country • Advantages & Disadvantages of Each Mode of Entry IILM-GSM Global Marketing Management Global Market Entry & Export Marketing
  6. 6. 07/05/10 6 Concept of International Market Entry In order to succeed in international markets, the decision to select an appropriate entry mode is a crucial and integral part of a firm’s international marketing strategy. The mode of entry into international markets varies from low-commitment indirect exports to high-commitment direct investment (wholly owned subsidiaries) in foreign markets. IILM-GSM Global Marketing Management Global Market Entry & Export Marketing
  7. 7. 7 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Internal Factor
  8. 8. 8 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Internal Factor Market Growth Market Size Govt. Regulation Level of Competition Level of Risk Production & Shipping Costs Physical Infrastructure
  9. 9. 9 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Internal Factor Availability of Company Resource Company Objectives Level of Commitment International Experience Flexibility
  10. 10. 10 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Internal Factor Market Growth Market Size Govt. Regulation Level of Competition Level of Risk Production & Shipping Costs Availability of Company Resource Company Objectives Level of Commitment International Experience Flexibility Physical Infrastructure
  11. 11. 07/05/10 11 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Market Size • One of the key factor, has to keep in mind while selecting an entry mode • Countries with large market size justify the modes of entry with long-commitment requiring higher level of investment, such as WOS. To take the advantage of market size, Indian company Ranbaxy entered in Chinese market in 1990, entered into a JV in 1994 and emerged as a market leader with brand Cifran.
  12. 12. 07/05/10 12 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Market Growth • Most of the large, established markets have reached to a point of saturation for consumer goods. • The overall growth in most of the US and EU markets is about 7%, while in emerging markets it is over 30%. Therefore, from the perspective of long-term growth, firms invest more resources in markets with high growth potential such as China, India, Thailand, Indonesia, Malaysia, Philippines etc. http://www.imf.org/external/pubs/ft/weo/2009/update/01/ http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
  13. 13. 07/05/10 13 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Govt. Regulation • UAE is a lucrative market for Indian firms but most firms operate there with a local partner. • Trade barriers such as ecological regulations and local content requirements also affect the mode of entry. It has been a major reason for increased foreign investment in Mexico, which is a part of NAFTA, in order to cater to the US market. It is due to high import tariff on automobiles that foreign firms were forced to set up plants in China.
  14. 14. 07/05/10 14 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Level of Competition • This is one of the major reasons behind auto companies setting up their operations in India and other emerging markets so as to effectively respond to the global competition.
  15. 15. 07/05/10 15 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Physical Infrastructure • Such as roads, railways, telecommunications, financial institutions and marketing channels are the pre-condition for a company to commit more resources to an overseas market. • The level of infrastructure development has been responsible for major investments in Singapore, Dubai and Hong Kong.
  16. 16. 07/05/10 16 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Level of Risk • Firms have greater inclination to invest resources in countries with stable governments & transparent legal systems. • Economic risk may arise due to volatility of exchange rate, upheavals in BOP that may affect the cost of other inputs for production, and high inflation rate • If the marketing system in foreign country is similar to that of firm’s home country, the firm has better understanding of operational problems. Political Risk Operational Risk Economic Risk http://www.rbi.org.in/scripts/sdds_viewdetails.aspx?id=5
  17. 17. 07/05/10 17 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing External Factor Production & Shipping Costs • Markets with substantial cost of shipping as in the case of low-value high-volume goods may increase the logistics cost. • The increased shipping cost may not only be due to the longer distance but also because of the lack of availability of competitive shipping lines as in case of shipping goods from India to most of the African and Latin American countries. • Many firms establish their manufacturing bases in developing countries, in order to take the advantage of lower production costs.
  18. 18. 07/05/10 18 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Internal Factor Company Objectives • Companies operating in domestic markets with limited aspirations generally enter foreign markets as a result of a reactive approach. In such cases, companies receive orders from acquaintances, firms and relatives based abroad, and they attempt to fulfill these export orders. • However, the strategic objectives of proactive companies make them enter into international markets through investment modes of entry. Reactive Proactive
  19. 19. 07/05/10 19 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Internal Factor Availability of Company Resource • Choices of an entry mode depends upon the financial strength of the firm. • It may be observed that Indian firms with good financial strength have entered international markets by way of wholly owned subsidiaries or equity participation.
  20. 20. 07/05/10 20 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Internal Factor Level of Commitment • In view of the market potential, the willingness of the company to commit resources in a particular market also determines the entry mode choice.
  21. 21. 07/05/10 21 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Internal Factor International Experience • Well exposed to the dynamics of the international marketing environment. • It may be observed that only those Indian companies, such as Ranbaxy, Tata Tea, Asian paints etc. which have substantial experience in foreign markets have opted for equity participation or wholly owned subsidiaries in international markets.
  22. 22. 07/05/10 22 Factors Affecting the Selection Of Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Internal Factor Flexibility • Companies should also keep in mind exit barriers when entering international markets. • The markets which are difficult to forecast may necessitate an exit strategy over a period of time and therefore may need to be approached by the way such as licensing and franchising, where the companies’ stake are low and the exit is easy.
  23. 23. 07/05/10 23 Choosing the Right International Market Entry Mode IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Entry Mode Pros Cons Export - Indirect - Direct Piggybacking Exporting Providing Offshore Services International Franchising International Licensing Strategic Alliances Contract Manufacturing Wholly Owned Subsidiaries
  24. 24. 07/05/10 24 International Market Entry Mix IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Country Market WOS JV Franchising Licensing Exporting Country-1 Country-2 Country-3 Country-4 Country-5 Country-6
  25. 25. 07/05/10 25 Entry Modes: Case of ICICI Bank IILM-GSM Global Marketing Management Global Market Entry & Export Marketing In order to reach out to Indians living abroad, ICICI Bank entered the international market in 2003 using a mix of entry modes. It has established subsidiaries in London and Toronto with an investment of US$ 50 million and US$ 20 million respectively. It opened offshore branches in Singapore and Bahrain. Representative offices in Dubai, Shanghai and Hong Kong.
  26. 26. 07/05/10 26 Entry Modes: Case of ICICI Bank IILM-GSM Global Marketing Management Global Market Entry & Export Marketing These different modes of entry have been adopted by ICICI Bank because of differing governmental regulations, as a number of countries require banks to first run either representative offices or offshore branches for a few years before a subsidiary is allowed.
  27. 27. 07/05/10 27 Entry Modes: Case of Dr Reddy Lab IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Dr Reddy’s Laboratory has gone for wholly owned subsidiaries in the US, France, Singapore and the Netherlands, Hong Kong because of the large market size, potential for growth and lower risk factors. China offer huge market potential, but because of the level of difficulty involved in responding to local environment conditions and risks, the company has entered into JV with local partners. Market with relatively low potential such as Ukraine, Romania, Vietnam and Sri Lanka are being served by resident offices.
  28. 28. 07/05/10 28 Routes of Globalization The usual routes of globalizations are exports and imports, use of assets, performance of services…….. Presence in Foreign Markets Foreign Investment High High Low Low Exports & Imports Tourism & Transportation Use of Assets Performance of Services Direct Investment IILM-GSM Global Marketing Management Global Market Entry & Export Marketing
  29. 29. 07/05/10 International Market Entry Modes IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Production in Home Country Production in Foreign Country Export Offshore Services Indirect Direct Piggybacking Export Contractual Mode Investment Mode Overseas Assembly Or Mixing JV WOS L F Turnkey Projects Mgt. Contracts GSA Contract Manufacturing
  30. 30. 07/05/10 30 Production in Home Country Export: Indirect IILM-GSM Global Marketing Management Global Market Entry & Export Marketing When a firm does not have much exposure to foreign markets, and has limited resources to invest in export development, indirect exporting is a recommended strategy for entering. Indirect export can be defined as the process of selling products to an export intermediary in the company’s home market who would in turn sell the products in overseas markets. Indirect exports may occur by the way of: 1. Selling to foreign firm or buying agent in India 2. Exporting through a merchant intermediary
  31. 31. 07/05/10 31 Production in Home Country Export: Indirect IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Some of the functions carried out by trading houses are: 1. Market selection and market research 2. Customer identification and evaluation 3. Commercial and technical negotiations 4. Vendor development 5. Import items required by export production 6. Counter trading 7. Ensure timely payments 8. Export documentation and shipping 9. Manages crisis and disasters 10. Create distribution networks abroad 11. Foster special relationship with the government
  32. 32. Production in Home Country Export: Indirect IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Classification of various trading houses under EXIM policy, Category Avg. FOB value of export made during preceding 3 years FOB value of export made during preceding licensing years Avg. net forex value of export made during preceding 3 years Net forex value of export made during preceding licensing years Export House 15 22 12 18 Trading House 75 112 62 90 Star Trading House 375 560 312 450 Super Star Trading House 1125 1680 937 1350
  33. 33. 07/05/10 33 Production in Home Country Export: Indirect IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Major trading houses in India include: 1. Tata International 2. Adani Exports 3. Reliance India Ltd. 4. Metals & Minerals Trading Corporation (MMTC) 5. State Trading Corporation (STC) 6. Ruchi International 7. Surya Global
  34. 34. 07/05/10 34 Production in Home Country Export: Direct IILM-GSM Global Marketing Management Global Market Entry & Export Marketing In direct exports a firm’s products are sold directly to importers in overseas markets. Direct export does not mean selling products directly to end-users. Direct exports are accomplished through foreign-based independent market intermediaries such as agents and distributors. Direct exporting is far more complex than indirect exporting.
  35. 35. 07/05/10 35 Production in Home Country Export: Direct IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Agents represents the exporting company in a given market and finds wholesaler and retailers for its products. Agents may be exclusive, semi-exclusive and non-exclusive. Overseas distributors is a foreign-based merchant who buys the products on his own account and resells them to wholesalers and retailers to make profit. Distributors are generally sole importers of the firm’s product in the market.
  36. 36. 07/05/10 36 Production in Home Country Export: Direct IILM-GSM Global Marketing Management Global Market Entry & Export Marketing The disadvantages of direct exporting include higher commitment of resources as considerable investment is needed for marketing, logistics and administrative cost and higher risk exposure. A transition from indirect to direct exporting has to be well planned and gradual.
  37. 37. 07/05/10 37 Production in Home Country Export: Piggybacking or Complementary Export IILM-GSM Global Marketing Management Global Market Entry & Export Marketing In piggybacking exports, overseas distribution channels of another firm are used by the company to make its product available in the overseas market. Exporting company know as ‘Rider’, uses a foreign company which has an established distribution network in foreign market, known as ‘Carrier’. Normally, the piggybacking arrangement is made for products from unrelated companies that are complementary (allied) but non-competitive.
  38. 38. 07/05/10 38 Production in Home Country Export: Piggybacking or Complementary Export IILM-GSM Global Marketing Management Global Market Entry & Export Marketing An Indian confectionery firm Parry’s distribution network was used in a piggybacking arrangement by Wrigley’s a US based chewing-gum company- to enter the Indian market. It provides immediate access to over 250,000 retail outlets. Tanishq sells its jewellery in India exclusively through company-controlled retail outlets whereas it has tied up with Highglow, a jewellery retail chain in the US, to utilize the latter’s distribution channels.
  39. 39. 07/05/10 39 Production in Home Country Export-Import Trade Statistics IILM-GSM Global Marketing Management Global Market Entry & Export Marketing
  40. 40. 07/05/10 40 Production in Home Country Providing Offshore Services IILM-GSM Global Marketing Management Global Market Entry & Export Marketing A company based in India can provide offshore services to overseas clients with the help of information and telecommunication technology. India enjoys a distinct cost advantage in this regard. The cost benefit of shifting a routine work from US to India may result in saving of up to 30-40%, as a skilled worker in India earns around US$ 6-8 an hour as opposed to US$ 12 in the US.
  41. 41. 07/05/10 41 Production in Home Country Providing Offshore Services IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Business sectors which provide opportunities for offshore services include: 1. Insurance: Claim processing, call centers 2. Banking & Finance: Loan processing, call centers 3. Airlines: Revenue accounting, call centers 4. Telecom: Billing, Customer relations, call centers 5. Automotive: Engineering & design, accounts 6. Other sectors: Transportation, etc
  42. 42. 07/05/10 42 Production in Home Country International Global Sourcing Powers IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Leader Up & Comers Challengers Beginners Belarus Brazil Caribbean Egypt Estonia Ukraine Venezuela Singapore New Zealand Lithuania Ghana Cuba Korea Malaysia Mauritius Sri Lanka Vietnam Thailand Nepal Taiwan Canada China Hungary Mexico Philippines Poland Russia South Africa INDIA
  43. 43. 07/05/10 43 Production in Home Country Providing Offshore Services IILM-GSM Global Marketing Management Global Market Entry & Export Marketing As per Nasscom- Mckinsey estimates, out of the estimated global BPO of US$ 250 billion by 2006, India has the potential to provide offshore services of about US$ 21-24 billion by 2008 with employment potential of about 11 lakh persons. Gartner places India as the leading global sourcing power.
  44. 44. 07/05/10 44 Production in Foreign Country Contractual Mode: Licensing IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • Under a License Agreement, one firm permits another to use its intellectual property for compensation called royalty, as it happened between Arrow Company and Arvind Clothing Ltd. • The firm that makes the offer is the licensor and the recipient firm is act as the licensee. • The property licensed generally includes such assets as patent, trademarks, copyrights, trade- secrets, technical know-how, business skills.
  45. 45. 07/05/10 45 Production in Foreign Country Contractual Mode: Licensing IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Life Cycle of Benefits of Licensing
  46. 46. 07/05/10 46 Production in Foreign Country Contractual Mode: Licensing IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Few disadvantages of licensing are: • Possible loss of quality control • Risk of technology being stolen • Licensing fees are likely to be lower than FDI profits. • Possible loss of opportunity to enter the licensee’s market with FDI later.
  47. 47. 07/05/10 47 Production in Foreign Country Contractual Mode: Franchising IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • Franchising which involves the granting of right by a parent company (franchiser) to another (franchisee) to do business in a prescribed manner. • This right can take the form of selling the franchiser’s products, using its name, production and marketing techniques or using its general business approach. • Franchising is adaptable to the international arena, it can result in a highly profitable business. In fast foods- McDonald’s, In Hotel business-Le Meridian, and others like Midas, GE and Coca-Cola.
  48. 48. 07/05/10 48 Production in Foreign Country Contractual Mode: Franchising IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • Franchising agreement typically involves the payment of a fee upfront and then a percentage on sales. In return, the franchiser provides assistance, and in some instances, may require the purchase of goods or supplies to ensure the same quality of goods and services worldwide.
  49. 49. 07/05/10 49 Production in Foreign Country Contractual Mode: Turnkey Projects IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • International businesses earn money in the form of fees for service rendered. This is true in banking, insurance, rentals, engineering, management services. • Turnkey Operations are typical modes for earning such fees. Here, the company contracts with a foreign entity to design and build an entire operations. On completion, the operation is handed over to the owner who can use the facilities straightway.
  50. 50. 07/05/10 50 Production in Foreign Country Contractual Mode: Turnkey Projects IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • The Italian company, Fiat, for example constructed a complete automobile plant in the Russia under this type of agreement. • Tata Consulting engineers, India, are specialists in executing turnkey projects. like, 3*60 MW hydro-electric project in Iran,180 room hotel project in Yemen etc.
  51. 51. 07/05/10 51 Production in Foreign Country Contractual Mode: Management Contracts IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • Companies also earn fees through management contracts - arrangements in which one firm contracts with a foreign corporation or government to manage an entire project or undertaking for a specific period. • Most management contracts provide for training of local personnel who will eventually take over the management responsibilities.
  52. 52. 07/05/10 52 Production in Foreign Country Contractual Mode: Management Contracts IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • An example, Disney receives management fees from managing theme parks in France & Japan. • For a ten-year period(1969-79), Citibank had lent its managerial expertise to Grindlays Bank.
  53. 53. 07/05/10 53 Production in Foreign Country Contractual Mode: Global Strategic Alliance IILM-GSM Global Marketing Management Global Market Entry & Export Marketing GSA refers to the relationship between two or more firms that cooperate with each other to achieve common strategic goals but not form a separate company. Parent Company X Parent Company Y Company Z (Joint Venture) Company X Company Y Contractual Agreement
  54. 54. 07/05/10 54 Production in Foreign Country Contractual Mode: Global Strategic Alliance IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Tata Motors has launched its range of Indica cars in the UK under the brand name City Rover using the marketing channels of the MG Rover Group. The company has also forged a strategic alliance with Honda Motor Co. Ltd, Japan, to manufacture its ‘Accord’ model of car in India. In order to develop the medicine market in Poland, Ranbaxy has forged SA for marketing its products with Glaxo SmithKline. Nestle has SA with Coca-Cola to market its ready to drink coffee and tea under the brand name Nescafe and Nestea.
  55. 55. 07/05/10 55 Production in Foreign Country Contractual Mode: Contract Manufacturing IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Under CM, the manufacturing operations of an international firm are carried out at offshore locations on a contractual basis. The international firm takes care of marketing in international markets whereas the contracted manufacturer limits itself to production activities. A number of global companies outsource their manufacturing activities to low-cost locations.
  56. 56. 07/05/10 56 Production in Foreign Country Contractual Mode: Contract Manufacturing IILM-GSM Global Marketing Management Global Market Entry & Export Marketing CM has also been used as a strategic tool for economic development in a number of countries such as Korea, Mexico, Thailand, China etc. • Taiwan is a world leader in semi-conductor manufacturing. • China produces 30% of air conditioners, 24% of washing machines and 16% of refrigerators sold in the US. • Nike, the leading international shoe brand gets its manufacturing done through CM throughout the world.
  57. 57. 07/05/10 57 Production in Foreign Country Contractual Mode: Contract Manufacturing IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Indian pharmaceutical companies find CM a significant means of maintaining a high-growth rate in view of limited resources for R&D. • Ranbaxy and Lupin Laboratories were among the first Indian companies to get manufacturing contracts from MNCs like, Eli Lilly and Cynamid. • Subsequently, Wockhardt India, Cadila Health Care, Sun Pharma and Dr Reddy’s Lab Ltd have also entered into contract manufacturing with several overseas firms.
  58. 58. 07/05/10 58 Production in Foreign Country Investment Mode: Overseas Assembly or Mixing IILM-GSM Global Marketing Management Global Market Entry & Export Marketing In order to avoid the high cost of shipping and high import tariffs, counter non-tariff barriers for import, and to take advantage of cheap labor in overseas markets, a company exports various components of the product in completely knocked down (CKD) condition and assembles them overseas. In case of machines and food products, the equivalent of assembling is mixing the ingredients while importing from the home country.
  59. 59. 07/05/10 59 Production in Foreign Country Investment Mode: Overseas Assembly or Mixing IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Most of the Japanese automobile companies entered the European market by establishing their assembling operations in Europe to overcome import barriers. Tata Motors has forged a strategic alliance with Nita Company Ltd, Bangladesh, for assembly and sale of its commercial vehicles in Bangladesh.
  60. 60. 07/05/10 60 Production in Foreign Country Investment Mode: Joint Venture IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • A direct investment is one that allows the investor a controlling interest in a foreign company. FDI is another name for direct investment. FDI may take the form of a joint venture or a wholly owned subsidiary. • Joint Venture is a shared ownership in a foreign business. Generally, the venture is 50-50 ownership in which there are two parties, each of which holds a 50 % ownership stake and contributes a team of managers to share operating control.
  61. 61. 07/05/10 61 Production in Foreign Country Investment Mode: Joint Venture IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • Fuji-Xerox is one of the most enduring and successful joint ventures between two companies of different countries. • There are 868 Indian joint ventures abroad, out of which 286 are in operations. Joint venture works well if an international business finds a right local partner.
  62. 62. 07/05/10 62 Production in Foreign Country Investment Mode: Joint Venture IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • A local partner can provide competent management to the venture. • If the host country requires local participation in the equity, wholly owned subsidiary will not help. • The local partner understand the culture of the local market. An international business takes years to acquire such knowledge if it enters a foreign market through wholly owned subsidiary. • Sometimes, another name for joint venture is being used as strategic alliances. Advantages:
  63. 63. 07/05/10 63 Production in Foreign Country Investment Mode: Joint Venture IILM-GSM Global Marketing Management Global Market Entry & Export Marketing Disadvantages: • A foreign firm’s apprehension about a local partner’s interference in managerial decisions and actions. • Likely increase in political risk, if a wrong partner is selected. • Transfer pricing on products or components bought from or sold to related companies triggers conflict.
  64. 64. 07/05/10 64 Production in Foreign Country Investment Mode: Wholly Owned Subsidiaries IILM-GSM Global Marketing Management Global Market Entry & Export Marketing • A wholly owned subsidiary can be set up in a foreign market in either of two ways: the company can set up a totally new operation or can acquire an established firm and use the firm to promote its product. • The subsidiary that is established starting from the ground up is called Greenfield investment. • Compared to Greenfield investment, a cross-border Acquisition has a number of benefits. First, acquisition is quicker than establishing a firm. Second, it takes less time to gain a presence. • In a wholly owned subsidiary, the company owns 100 % of the equity.

Hinweis der Redaktion

  • To arm or prepare in advance of a conflict
    The part of the arm between the wrist and the elbow.
  • Annual increase in product sales or population within a given market. The market growth rate is a factor to be considered when evaluating the performance of a particular product in a particular market.
    Example: market was £6.3 million in 2001 & is £34 million in 2006 34,000,000 - 6,300,000 = 27,700,000 (27,700,000/6,300,000) x 100 = 439.7% market growth
    To calculate annual percentage growth rate is simply divided by N, the number of years. For example: growth rate for 10 years is 80%; then the annual growth rate = 80% / 10 = 8 %
    Market growth…Example: Calculating Market Growth
    Question:The market value was $9 million in 2007, and was $7 million in 2009. How to calculate market growth rate between 2007-2009?Answer:Vb = $7 millionVa = $9 millionMarket Growth Rate = (Vb - Va) / Va x 100% = ($7 million - $9 million) / $9 million x 100%= -$2million / $9 million x 100%= -2,22%It means the market was declining.
  • Ranbaxy's joint venture with Nippon Chemiphar in Japan (Nihon Pharmaceutical Industry Limited) launches - Vogseal for diabetes, the first product of the joint
    All the IT company from india entered into the european market…bcz of big market potential..
  • Overall in a sence ..over the past few years or past 5 years..
    The world economy, or global economy, generally refers to the economy, .... (market exchange rates) – $60.69 trillion (2008); GDP – real growth rate: 3.2%
    India 1.4 T, US 15.9 T..china 3.00 T
    Such as automobiles, consumer electronics…therefore the growth of the markets in these countries US, europe and japan ..showing a declining trend.
    Emerging mkts like india, china
    A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households. The CPI is defined by the United States Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services."[1]
    The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. Sub-indexes and sub-sub-indexes are computed for different categories and sub-categories of goods and services, being combined to produce the overall index with weights reflecting their shares in the total of the consumer expenditures covered by the index. It is one of several price indices calculated by most national statistical agencies. The annual percentage change in a CPI is used as a measure of inflation. A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values. In most countries, the CPI is, along with the population census and the USA National Income and Product Accounts, one of the most closely watched national economic statistics.
  • Chinese are more in exporting..very very less in importing bcz they put high import taxes..check the BOP for india nad china..compare it..for india all the time negative( negative in current balance and positive in capital balance) while for china it is positive..also the reasons why china have 3 times more gdp than india..study net export in GDP calculations..
    In india..world major retail gaints wal mart, IKEA..carrfour like to entered..but FDI rules in retails says that..u need to ahev a local partners and max stake they can get is 51% …
    The govt of the most of gulf countries have made it mandatory for foreign firms to have a local partners.
    lucrative adj. Producing wealth; profitable: a lucrative income; a lucrative marketing strategy.
    In india ..in retail industry..multi brand retailing not allowed through FDI…..Wal mart does through C & F….cash and carry..in single brand retailing upto 51% FDI allowed
    Insurance Sector: FDI in Insurance sector in India
    FDI up to 26% in the Insurance sector is allowed on the automatic route subject to obtaining licence from Insurance Regulatory & Development Authority (IRDA)
    Telecommunication: FDI in Telecommunication sector
    In basic, cellular, value added services and global mobile personal communications by satellite, FDI is limited to 49% subject to  licensing and security requirements
    Power: FDI In Power Sector in India
    Up to 100% FDI allowed in respect of projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants. There is no limit on the project cost and quantum of foreign direct investment.
    Drugs & Pharmaceuticals 
    FDI up to 100% is permitted on the automatic route for manufacture of drugs and pharmaceutical, provided the activity does not attract compulsory licensing or involve use of recombinant DNA technology, and specific cell / tissue targeted formulations.
    Roads, Highways, Ports and Harbors
    FDI up to 100% under automatic route is permitted in projects for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbors.
     
    Pollution Control and Management
    FDI up to 100% in both manufacture of pollution control equipment and consultancy for integration of pollution control systems is permitted on the automatic route.
     
    Call Centers in India / Call Centres in India
    FDI up to 100% is allowed subject to certain conditions. 
       
     
    Business Process Outsourcing BPO in India
    FDI up to 100% is allowed subject to certain conditions. 
    Hotel & Tourism: FDI in Hotel & Tourism sector in India
    100% FDI is permissible in the sector on the automatic route.
  • If level in competition in that mkt is more..firm will try to set up manufacturing unit..like hyundi , south korea set up plant in chennai
    In this huge compettion era..to gain more and more market share..minize the gap between demand and supply..they are forcing to set up plant in the low cost locations…
  • As a result these places have developed as international marketing hubs in asian regions…thses are known as asian tigers
  • Operational challenges…like overcoming the language and cultural diversity..different management policy
    A firm should evaluate Political, Economic & Operational Risk..also technology related risk..like IPRs protections..have have seen global political and economic index GPEI by eurasia group..put india at 64 index…64% stability in india
    Unstable in pakistan, argentina, fiji….
    Political system in developed country like Us, Uk, japan and Australia is more or less stable..besides the judiciary is largely independent of political interference in developed countries
    It is difficult to manage the oprations in makts where the inflation rate is very high…a state of hyper inflation. For instance, companies have experienced such a situation in the commonwealth of independent states (CIA), argentina and brazil…this explains why most companies prefer to enter thsee markets by the way of licencing and franchising rather than equity participation…
    Operational risk..for examplethe absence of organized retailing system in india provides indian exporters a strategic edge when operating in other developing countries, which do not have organized retailing system…this is also true for promotion and communication strategies
    upheavalsplural of up·heav·al (Noun)
    1. A violent or sudden change or disruption to something.
    2. An upward displacement of part of the earth's crust
    A balance of payments (BOP) sheet is an accounting record of all monetary transactions between a country and the rest of the world.[1] These transactions include payments for the country's exports and imports of goods, services, and financial capital, as well as financial transfers. The BOP summarizes international transactions for a specific period, usually a year, and is prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as a negative or deficit item.
    When all components of the BOP sheet are included it must balance – that is, it must sum to zero – there can be no overall surplus or deficit. For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counter balanced in other ways – such as by funds earned from its foreign investments, by running down reserves or by receiving loans from other countries.
    While the overall BOP sheet will always balance when all types of payments are included, imbalances are possible on individual elements of the BOP, such as the current account.
    Expressed with the standard meaning for the capital account, the BOP identity is:
    The balancing item is simply an amount that accounts for any statistical errors and assures that the current and capital accounts sum to zero. At high level, by the principles of double entry accounting, an entry in the current account gives rise to an entry in the capital account, and in aggregate the two accounts should balance. A balance isn't always reflected in reported figures, which might, for example, report a surplus for both accounts, but when this happens it always means something has been missed—most commonly, the operations of the country's central bank.[3]
    An actual balance sheet will typically have numerous sub headings under the principal divisions. For example, entries under Current account might include:
    Trade – buying and selling of goods and services
    Exports – a credit entry
    Imports – a debit entry
    Trade balance – the sum of Exports and Imports
    Factor income – repayments and dividends from loans and investments
    Factor earnings – a credit entry
    Factor payments – a debit entry
    Factor income balance – the sum of earnings and payments.
    Especially in older balance sheets, a common division was between visible and invisible entries. Visible trade recorded imports and exports of physical goods (entries for trade in physical goods excluding services is now often called the merchandise balance). Invisible trade would record international buying and selling of services, and sometimes would be grouped with transfer and factor income as invisible earnings.[1]
    For lungs filling with excessive air, see Hyperaeration.
    Sweeping up the banknotes from the street after the Hungarian pengő was replaced in 1946
    Certain figures in this article use scientific notation for readability. In economics, hyperinflation is inflation that is very high or "out of control". While the real values of the specific economic items generally stay the same in terms of relatively stable foreign currencies, in hyperinflationary conditions the general price level within a specific economy increases rapidly as the functional or internal currency, as opposed to a foreign currency, loses its real value very quickly, normally at an accelerating rate.[1] Definitions used vary from the International Accounting Standards Board's a cumulative inflation rate over three years approaching 100% (26% per annum compounded for three years in a row) to Cagan's (1956) "inflation exceeding 50% a month." [2] As a rule of thumb, normal monthly and annual low inflation and deflation are reported per month, while under hyperinflation the general price level could rise by 5 or 10% or even much more every day.
    A vicious circle is created in which more and more inflation is created with each iteration of the ever increasing money printing cycle.
    Hyperinflation becomes visible when there is an unchecked increase in the money supply (see hyperinflation in Zimbabwe) usually accompanied by a widespread unwillingness on the part of the local population to hold the hyperinflationary money for more than the time needed to trade it for something non-monetary to avoid further loss of real value. Hyperinflation is often associated with wars (or their aftermath), currency meltdowns like in Zimbabwe
  • If you are making low value fmcg product like toothpaste in you are exporting from india to european country where the requirement is high..better you choose to setup a plant over than rather than paying too much logistics costs
    We made separate slides for the international shipping routes..ckeck that
  • relatives based abroad, and they attempt to fulfill these export orders….this causal appraoch to entering international markets by way of producing in the home market and exporting overseas translates into regular exporting if the firm has positive experience in its export operations.
    Reactive..in a short term gain….through..indirect or sometimes direct exporting
    Proacive..a long term gain…generally through investment FDI
  • Like L & T…they are good in technoligy, management philosphy, manpower, resources, having enough money to invest in the surrounding asian countries..they are running many turnkey projevts…management contracts...they have green field investment in Dubai
    Like Tata…Reliance…
    Wipro has many subsidirires in malaysia nad thailand
  • Somwwaht re;ated to the EPRG framework or dofferent orientation of the company in international mkting
    EPRG ..if ethnocenric approac means…home counrty orientation..no need to have local customization of partcipation…through exporting it is possible.
    But if polycentric means host county orientation..you need to do customization and understand local customs,,culture so JV is a good options…or GSA
    If highly committed then..through green field projects..works
  • A company well exposed to the dynamics of int.mkting enviornment take a decsion to enter into int mkts through JV or wholly owned subsidiaries
  • A market which presently apopears attractive may not necessarily continue to be so, say over the next 10 years..new emerging economy will come in existance..it could be due to cahnges in politicala nd legal structure, changes in customer preferences, , emergence of new mkt segments..or changes in the competitive intensity of the mkt.
  • This is market entry strategy..helps in decision making and analyzing various alternatives maodes of foreign mkt entry
  • In india before 1991..no froign bank allowed to open a branch office…after 1991 they allowed..now in new policy..givt is forcing all the foreign banks to change from branch office to wholly owned subsidiaries
  • deletion. (May 2010) Dr. Reddy's Laboratories Ltd., trading as Dr. Reddy's, founded in 1984 by Dr. K. Anji Reddy, has become India's second biggest pharmaceutical company. Dr. Anji Reddy had worked in the publicly-owned Indian Drugs and Pharmaceuticals Ltd. Reddy's manufactures and markets a wide range of pharmaceuticals in India and overseas. The company has over 190 medications, 60 active pharmaceutical ingredients for drug manufacture, diagnostic kits, critical care, and biotechnology products.
    Dr. Reddy's began as a supplier to Indian drug manufacturers, but it soon started exporting to other less-regulated markets that had the advantage of not having to spend time and money on a manufacturing plant that that would gain approval from a drug licensing body such as the U.S. Food and Drug Administration (FDA). By the early 1990s, the expanded scale and profitability from these unregulated markets enabled the company to begin focusing on getting approval from drug regulators for their formulations and bulk drug manufacturing plants in more-developed economies. This allowed their movement into regulated markets such as the US and Europe.
  • merchant intermediary i.e export house, a trading house
    Fireign firm or company buying agents..foreign firm may have branch office in indias or they may appoint some biung agent on commission
  • Counter trading have different forms..one is barter sysatem, then offsetting and others
  • FOB value is value of goods excluding carriage, insurance and freight, i.e. roughly speaking, the domestic price in ... in the country of origin. We have 12 incoterms like exwork, C & F etcValues in Rs Crore
    Source is ministry of commerce and industry, Dept of commerce, Govt of India
    The govt of india confers the status of star trading house..super star and golden super star trading house .….under its eximpolicy which offers a numer of incentives.
  • more complex than indirect exporting…bcz all the work dine by trading house..they have to do by own like doing makt resaerch, identify buyers, establish contacts, handle documentation and transporattion and deciding the makt mix for the different overseas mkts.
  • An agent works on commission basis…and they provide makt intelligence and informations on the financial position of the importers
    An exclusive agent has exclusive rights to sell the company’s products in a specified sales territories.
    A semi agent handles exporters goods along with the other companies non-competiting goods
    and a non exclusive agent handles a wide variety of goods including competiting products
    Foreign based merchant like trading house, or export house
  • Advt of direct export: as no intermediary involved, exporters get more profit. Over a period of time, the firm involved directly in exports, develops in-house skills for export operations; they get the real mkt intelligence and informations etc
  • make its product available in the overseas market…thus it provides immediate access to the well developed distribution channels of another company.
    know as ‘Rider’…with inadequate experience of operating marketing channels uses a foreign company
    Talk abt advantage of both the rider and career..
    It allow a rider access to overseas mkts without establishing its own distribution channels..besides, it also gives the rider a chance to learn and understand the entire process, which later on assists it in setting up its own export mkting channels.
    Distribution channel like direct, 1 degree (including only retailer)..2 degree etc
    On other hand, it facilitates the filling of gaps in the product line of the carrier by way of offereing a wider product range..they can design more attractive sales package and increasing econmoies of scale.
    Complementary….like LCD with DTH services, laptop with battery, ..complementary package ..like tour package with candle light dinner..like morning breakfast is complementary in 5 star hotel….i was in dubai for 15 days training
    Complementary colors are pairs of colors that are of “opposite” hue in some color model. Or Supplying mutual needs or offsetting mutual lacks.
  • Confectionary means..items like dalmoot, bhujia...chewinggum chocolates etc
  • Project Exports, in essence, connotes setting up of projects overseas as construction and/or engineering projects.  It does also involve the export of engineering consultancy or other engineering services / goods complement as desired by the project owner.
    Most of the overseas projects  are contracted, in dollars, and large engineering contractors who have been operating overseas for quite some time have learnt the mechanism of necessary safeguards against fluctuations in dollars. 
    A decade in the history of Indian Project Exports has just gone by - in which Indian engineering contractors and consultants have  not only established an impressive array of clientele in diverse fields of operation across the globe but have also covered almost all sectors of civil engineering and industrial projects, most multilaterally funded and involved international competitive bidding procedure.
  • Sources…Ian Marriott, ‘The Changing shape of outsourcing’, Gartner Research, June 2003,p.13..also www.soft-outsourcing.com
  • National association of software and services companies…member 1200 global IT companies..headquarter in New Delhi…like TRAI for telecom
    about 11 lakh persons…it opens tremendous opportunities for developing country like India to become the back office of the world.
    Beginners are bangadesh, taiwan,thailand malaysia
    Upcomers are brazil, singapore, new zealand, ukraine, caribbean
  • The verb license or grant license means to give permission. The noun license (licence in British and Canadian spelling) refers to that permission as well as to the document memorializing that permission. License may be granted by a party ("licensor") to another party ("licensee") as an element of an agreement between those parties. A shorthand definition of a license is "an authorization (by the licensor) to use the licensed material (by the licensee)."
    [edit] Intellectual property
    A licensor may grant license under intellectual property laws to authorize a use (such as copying software or using a (patented) invention) to a licensee, sparing the licensee from a claim of infringement brought by the licensor.[1]
    A license under intellectual property commonly has several component parts beyond the grant itself, including a term, territory, renewal provisions, and other limitations deemed vital to the licensor.
    Term: many licenses are valid for a particular length of time. This protects the licensor should the value of the license increase, or market conditions change. It also preserves enforceability by ensuring that no license extends beyond the term of IP ownership.
    Territory: a license may stipulate what territory the rights pertain to. For example, a license with a territory limited to "North America" (United States/Canada) would not permit a licensee any protection from actions for use in Japan.
    [edit] Mass licensing of software
    Main article: Software license agreement
    Mass distributed software is used by individuals on personal computers under license from the developer of that software. Such license is typically included in a more extensive end-user license agreement (EULA) entered into upon the installation of that software on a computer.
    Under a typical end-user license agreement, the user may install the software on a limited number of computers.
    The enforceability of end-user license agreements is sometimes questioned.
    [edit] Trademark and brand licensing
    A licensor may grant permission to a licensee to distribute products under a trademark. With such a license, the licensee may use the trademark without fear of a claim of trademark infringement by the licensor.
  • Above is licensee ponit of view not licensor.
    Firms with superior tech and limited financial resource…can rapidly enterd into international markets through international licencing..and earn extra profits.
    Lowe and Crawford indicate that licensing in technology improves the net cash flow of the licensee but lowers profits in the long run.
    So the immediate benefits of the L is quick access to new tech, lower developmental cost and relatively early positive cash flows to the licensee.
  • Franchising is the practice of using another person's business model. The franchisor grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee. Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor. Agreements typically last from five to thirty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees.
    Franchising has been around for many centuries but did not come to prominence until the 1930s in the United States, when the establishment of electricity, vehicles, and, in the 1950s, the Interstate Highway system helped propel modern franchising, most notably franchise-based food service establishments. According to the International Franchise Association approximately 4% of all businesses in the United States are franchises.
    Australia
    In Australia, franchising is regulated by the Franchising Code of Conduct, a mandatory code of conduct made under the Trade Practices Act 1974.
    In the United States, franchising falls under the jurisdiction of a number of state and federal laws. Franchisors are required by the Federal Trade Commission to provide a Franchise Disclosure Document to disclose essential information to potential franchisees about their purchase
    [edit] Event franchising
    Event franchising is the duplication of public events in other geographical areas, while retaining the original brand (logo), mission, concept and format of the event.[29] As in classic franchising, event franchising is built on precisely copying successful events. Good example of event franchising is the World Economic Forum, or just Davos forum which has regional event franchisees in China, Latin America etc. Likewise, the alter-globalist World Social Forum has launched many national events.
  • Franchising is the practice of using another person's business model. The franchisor grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee. Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor. Agreements typically last from five to thirty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees.
    Franchising has been around for many centuries but did not come to prominence until the 1930s in the United States, when the establishment of electricity, vehicles, and, in the 1950s, the Interstate Highway system helped propel modern franchising, most notably franchise-based food service establishments. According to the International Franchise Association approximately 4% of all businesses in the United States are franchises.
    Australia
    In Australia, franchising is regulated by the Franchising Code of Conduct, a mandatory code of conduct made under the Trade Practices Act 1974.
    In the United States, franchising falls under the jurisdiction of a number of state and federal laws. Franchisors are required by the Federal Trade Commission to provide a Franchise Disclosure Document to disclose essential information to potential franchisees about their purchase
    [edit] Event franchising
    Event franchising is the duplication of public events in other geographical areas, while retaining the original brand (logo), mission, concept and format of the event.[29] As in classic franchising, event franchising is built on precisely copying successful events. Good example of event franchising is the World Economic Forum, or just Davos forum which has regional event franchisees in China, Latin America etc. Likewise, the alter-globalist World Social Forum has launched many national events.
  • Disavdv..differences in opinion and conflicts with allainces partners..also giving access to the company’s resources and informations to allainces partners, which are capable of becoming future competitors.
  • Intel is in semi conductor and microchip. Microporcessor and they outsouce manuf from taiwan for semi conductor
  • Major advt of CM…operations can be done at competitive low-cost locations…exit cost is very low..it provides the international firm with an opportunities to change contracted manufacturer so as to improve quality and cost competitiveness.
    India is not in a position to outsource its business activities to offshore locations in order to generate exports due to various reason..avg monthly wage in India is very low…
  • a complete knock-down (CKD), which is a complete kit needed to assemble a product..we have semi knock dowm

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