Download International Marketing Part One The International Environment

International Marketing
Chapter 8
The Export Process
Motivations to Internationalize
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Proactive Motives
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Reactive Motives
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Profit advantage
Unique products
Technological advantage
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Competitive pressures
Overproduction
Declining domestic sales
Excess capacity
Saturated domestic markets
Proximity to customers and ports
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Exclusive information
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Managerial urge
Tax benefit
Economies of scale
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The Foreign Sales Corporation (FSC)
Change Agents
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Internal change agents
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External change agents
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Enlightened management
New management
Significant internal event
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Demand
Other firms
Distributors
Banks
Chambers of commerce
Export agents
Governmental activities
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Key Managerial Characteristics
Affecting Export Involvement
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Education
International Exposure
Expertise
International orientation
Commitment
Internationalization Stages
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Innate, or start-up, exporters
Partially interested exporter
Experimental exporter
Export adaptation
Internationalization concerns
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Stage 1:
Stage 2:
Stage 3:
Stage 4:
Stage 5:
Stage 6:
The completely uninterested firm
The partially interested firm
The exploring firm
The experimental exporter
The experienced small exporter
The experienced larger exporter
Main Corporate Concerns
for the Firm
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Financing
Information on business practices
Communication
Providing technical advice
Sales effort
Obtaining financial information
Handling documentation
Physical product
Marketing information gathering
Corporate Strategy and
Exporting
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The impact on the perception of risks
The impact on profits
Profit and Risk
During Export
Initiation
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Licensing: The licensor permits another firm to use its intellectual property
for compensation designated as a royalty
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Assessment of Licensing:
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Issues in Licensing
Requires neither a capital investment
nor knowledge and marketing in the target market
• Licensor
• Transfer costs to licensor
• R&D cost
• Opportunity cost (loss of direct exporting, foreign investment , etc.)
• Licensee and compliance to number of dimensions stipulated
• Export Control Regulations
• Confidentiality of the intellectual property
• Record keeping and provisions for licensor audits
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Trademark in Licensing
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Franchising: A form of licensing in which a parent company grants
another independent entity the right to do business in a prescribed manner.
Export Management Companies: Domestic firms that
specialize in performing international marketing services as commission
representatives or a distributors for several firms.
• As distributors: purchases the goods form domestic firms and assumes
trade risks. Greater risk , greater profit
• As agents: Developing the foreign market , sales strategies, and
establishing contacts abroad. It charges High commission on potential
high sales volume.
Power conflict between EMC and clients
Export trading companies (ETC)
Price Dynamics
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Skimming:
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Market Pricing: When similar
Highest possible
contribution in a short period of time
products exist
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Penetration Pricing:
Product is offered at a low price to generate
volume sales and achieve market share
Stages in
Setting of Prices
Stage 1
Target Market Analysis
Stage 2
Market Mix Composition
Stage 3
Pricing Policy Selection
Stage 4
Pricing Policy Determination
Stage 5
Selecting the Specific Price
Export Pricing Strategy
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Standard Worldwide Price
Dual Price: Domestic and Export prices are differentiated
Cost-Plus Method: True cost, fully allocating
domestic and foreign costs….too expensive?
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Marginal Cost Method: Considering the cost of
making the product without fixed costs, overhead, marketing,
administrative, etc.)….allows lower price
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Market-Differentiated Pricing:
dependent
Market
Export-related Costs
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The cost of modifying a product for a foreign
market
Operational costs of exporting (market research,
communications, promotions, etc.
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Cost incurred in entering the foreign market:
tariffs, buyer related risks, exchange risks, etc.)
Price Escalation
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Clear cut costs
Hidden costs
Terms of Sale
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Incoterms are the internationally accepted standard
definitions for terms of sale set by the International
Chamber of Commerce since 1936.
Incoterms:
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exworks (EXW)
free carrier (FCA)
free alongside ship
(FAS)
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free on board (FOB)
cost and freight (CFR)
delivered duty paid (DDP)
delivered duty unpaid
(DDU)
Considerations for Negotiating
Terms of Payment
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The amount of payment and the need for
protection
Terms offered by competitors
Practices in the industry
Capacity for financing international
transactions
Relative strength of the parties involved
The Risk Triangle
Most Advantageous
Consignment
High Risk/High Trust
Open Account
Documents against Acceptance
Letter of Credit
Confirmed Letter of Credit
Cash in Advance
Least Advantageous
Low Risk/Low Trust
The Letter of Credit
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Irrevocable versus revocable
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Confirmed versus unconfirmed
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Revolving versus nonrevolving
Draft: Most drafts are
documentary which means that
the buyer must have shipping
documents first before cashing
the check
Documentary Collection:
Bank is acting a the seller’s agent
Banker’s Acceptance
Discounting
Open Account
Consignment Selling
Adjusting to Foreign
Currency Fluctuations
Leasing
Forward Exchange Market
Price Manipulation
Price Negotiations
Leasing
Dumping
Ranges of Dumping
Predatory dumping
Unintentional
dumping
Remedies for Dumping
Antidumping duty
Countervailing duties