Mkt 4134 International Marketing Fourth Year First Semester

MKT 4134 International Marketing Fourth Year First Semester

Unit 01. Internationalization • • • •

Exporting and Importing marketing and International Marketing Environmental Market scanning “SLEPT” Improving exports, trading operations Strategic considerations of direct and indirect involvement

Chapter 01

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Exporting and Importing marketing and International Marketing

Improving exports and trading operations

Contents • • • •

Export marketing Small business Success factors Small business failures • Attracting small business • Government actions for exporting MKT 4134 International Marketing

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Export Selling vs. Export Marketing • Export selling: involves selling the same product, at the same price, with the same promotional tools in a different place.

• Export marketing: the integrated marketing of goods and services that are destined for customers in international markets. It tailors the MKT 4134 International Marketing marketing mix to

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Characteristics of export market decisions May involve large capital outlay Takes time to build May involve substantial organisational changes May involve intercultural competence development Can be costly to reverse MKT 4134 International Marketing

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Why export???? • Micro Benefits Backward & forward linkages Economies of scale and scope Improved knowledge Improved innovation potential

• Macro Benefits Foreign exchange Opportunity to buy abroad Employment creation Widening tax base Economic growth Welfare

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Defining small business Defining a small business is a difficult task and defining what is meant by a small business across various countries even more difficult. • It has only a small share of its market • It is managed in a personalized way by its owners or part-owners and does not have an elaborate management structure • It is not sufficiently large to have access to the capital market for the public issue or placing of securities MKT 4134 International Marketing

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Characteristics of exporting activities of Small firms Export market research used by minority – the norm is for overseas orders to arise by chance and to be met, but that market is not then pursued further. Fairly low expenditure commitment. Prime selling techniques are personal visits, use of fairs and exhibitions, and employment of agents. MKT 4134 International Marketing 9 General ignorance of government.

Problems for small exporters       

A relatively large domestic market and lack of exposure to other cultures, making, the selection of markets and identification of customers abroad difficult. The lack of management time and general resources Reaching the foreign markets; selecting and innovating ‘arms length’ commission agents. Controlling the foreign operation, channel policy, and physical distribution. Paperwork and management of export operations. Cost of overseas offices may not be justified by the sales potential of particular territorial markets. Different safety and quality standards overseas may involve a small company in expensive modifications to achieve compatibility. MKT 4134 International Marketing

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Problems for small exporters…. Greatest difficulties in Exporting 14.3 26.2 10.1

8.3 14.4

2.9 9.4

Product suitability

14.4 Representations

Cost/profitability

Language

Other

Market information

Export paperwork

Delays in payment

Source: Keng,K.A. and Jiuan,T.S.(1989), MKT Medium 4134 International Marketing and Non-Exporting firms’, 11 ‘differences between Small and sized exporting International Marketing.

Factors in the success of small firms High technology Substantial research and development (R&D) Sophisticated marketing Advanced form of organizational design McDonald’s “Big Mac” MKT 4134 International Marketing

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Criteria for success Geographic expansion of operations Degree of identification with the local market/country Sales growth per market Profit growth per market: • Per market • Intentional as a percentage of total profits

• Quality of corporate identity/reputation in local markets. • Corporate ‘will’ MKT 4134 International Marketing

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International orientation as a precondition for export success Firms condition

Conducive

Non-conducive

Decision makers

(Small firms)

Foreign oriented

Exporters

Domestically oriented

Occasional exporters

(Large firms)

(weakness in management)

Occasional exporters (weakness in firm condition)

Domestically oriented firms

MKT 4134 International Marketing Source: Dichtl,E., Koeglmayr,H,-G., and Mueller,S.(1990), Journal of International Business studies.

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Contributing factors towards success Factors which contribute towards success as per the study undertaken by Kirpalani and Mackintosh(1980) Government assistance does not act as motivator although its absence Top management effort and backing are required. Pricing and promotion are most important Firms with one or two products are more successful Mature products, if modified for export, can compete successfully. Sophistication of a firm’s manufacturing process is not a prerequisite for exporting success. MKT 4134 International Marketing 15

Main reasons for the failure of Exporting firms

Incorrect analysis of true market potential. Inappropriate company structure for the host country based on country-of-origin model. Start-up cost control. Too rapid staff changes. Too fast tie-ups with rural party distributors and representatives. MKT 4134 International Marketing 16 Lack of an international career Source: Monk,K.(1989) Go international, McGraw-Hill, Maidenhead.

The exporting consortium alternative The group can deploy resources beyond the budget limits of the individual companies, and with a joint turnover which will justify the expenditure. On-the-spot professional top caliber a sales staff arrange feedback, aftersales service, local distribution, and provide permanent, sales presence. Concentrating on specific markets MKT 4134 International Marketing 17 minimizes the language problem.

Attracting more small firms into exporting More small firms could be attracted into exporting by improving the trading environment and simplifying operations. Firm characteristics, export management practices and manager perceptions were each found to be correlated with exporting success thus supporting the basic contention MKT 4134 International Marketing

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Improving the trading environment This could be achieved by • Elimination the distrust among small businessmen of government departments by making the latter more responsive to the needs of small business. • Correcting the mistaken perception of non-exporters who view the cost factors. • Encouraging exporters to be proactive rather than reactive in their approach to international marketing. • Encouraging trade associations to participate in exporting on behalf of their members, also to develop export market MKT 4134 International Marketing 19 research databanks.

Simplifying trading operations Simplifying and reducing paperwork. Arranging

export

credit

and

documentation may be a small task for the large company but for the small

company

but

for

the

small

company taking its first large export order, the export preparations can be MKT 4134 International Marketing

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Government programs that support Exports Tax incentives Subsidies Governmental assistance

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Governmental Actions to Discourage Imports and Block Market Access • Tariffs • Import controls • Non-tariff barriers

any measure other than a tariff that is a deterrent or obstacle to the sale of products in a foreign market. Quotas Discriminatory procurement policies Restrictive customs procedures Arbitrary monetary policies Restrictive regulations MKT 4134 International Marketing

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Key Export Participants Foreign purchasing agents Export brokers Export merchants Export management companies Export distributor Export commission representative

• Cooperative exporter • Freight forwarders • Manufacturer’s export representatives

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Organizing for Exporting in the Manufacturer’s Country • Exports can be handled – As a part-time activity performed by domestic employees – Through an export partner – Through an export department – Through an export department within an international division – For multi-divisional companies, each possibility exists for each division MKT 4134 International Marketing

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Organizing for Exporting in the Market Country  Direct market representation – Advantages: control and communications

 Representation by independent intermediaries – Advantages: best for situations with small sales volume MKT 4134 International Marketing

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Thank You.

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Any questions ?

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