CH20: Tapping into Global Markets

Question 1

reasons to enter international markets

Answer 1

• better profit opportunities
• economies of scale
• reduce dependence on a single market
• counterattack global competitors
• serve customers who require international service

Question 2

headwinds faced when going international

Answer 2

• new languages and laws
• volatility of currencies
• political and legal uncertainties
• different customer needs and expectations

Question 3

2 major types of risks associated with going abroad

Answer 3

• general risks
• specific risks (specific to that country)

Question 4

the 5 stages of decisions in international marketing

Answer 4

• whether to go abroad
• which markets to enter
• how to enter those markets
• what marketing program to use
• how to structure marketing organization

Question 5

waterfall approach to international marketing

Answer 5

gradually entering countries in sequence; allows firms to carefully plan expansion and is less likely to strain resources

Question 6

sprinkler approach to international marketing

Answer 6

entering many countries simultaneously; for use when first-mover advantage is crucial and there is a high degree of competitive intensity

Question 7

the main drawbacks to the sprinkler method

Answer 7

• substantial resources needed
• difficult to plan entry strategies for multiple diverse markets

Question 8

the 2 types of proximity

Answer 8

• physical proximity
• cultural proximity

Question 9

considerations when marketing to emerging economies

Answer 9

• smaller packaging and lower prices
• vast majority of customers buy from very small local shops

Question 10

the 5 modes of entry into foreign markets

Answer 10

• indirect exporting
• direct exporting
• licensing
• joint venture
• direct investment

Question 11

indirect exporting

Answer 11

the use of independent intermediaries to sell a company’s offerings in other countries

Question 12

the types of indirect exporters

Answer 12

• domestic-based export merchants
• domestic-based export agents
• cooperative organizations
• export-management companies

Question 13

domestic-based export merchants

Answer 13

buy the manufacturer’s products and sell them abroad

Question 14

domestic-based export agents

Answer 14

include trading companies; seek and negotiate foreign purchases for a commission

Question 15

cooperative organizations

Answer 15

conduct exporting activities for several producers, often of primary products like fruits and nuts; are partly under the administrative control of the producers

Question 16

export-management companies

Answer 16

agree to manage a company’s export activities for a fee

Question 17

the 2 advantages of indirect export

Answer 17

• less investment (no need to develop export department, sales force, etc.)
• less risk (intermediaries bring expertise, lowering chance of mistakes)

Question 18

direct exporting

Answer 18

the sale of a company’s offering in other countries by the company itself

Question 19

the main ways to perform direct exporting

Answer 19

• domestic-based export department or division (may become an independent profit center)
• overseas sales branch or subsidiary
• home-country-based traveling export sales reps

Question 20

licensing

Answer 20

granting permission to manufacture and sell a company’s offering in a specific market for a fee or royalty

Question 21

main advantages of licensing

Answer 21

• licensor gains market entry at little risk
• licensee gains production expertise and a well known product/brand

Question 22

main drawback of licensing

Answer 22

licensor has less control over the licensee than over its own facilities

Question 23

contract manufacturing

Answer 23

the firm hires local manufacturers to produce the product

Question 24

main advantage of contract manufacturing

Answer 24

offers a chance to start faster, with the opportunity to buy out the local manu later

Question 25

main drawback of contract manufacturing

Answer 25

less company control over the process; risk for loss of potential profits

Question 26

joint venture

Answer 26

a business enterprise engaged in by two or more otherwise separate entities; historically done by foreign investors who join with local investors

Question 27

reasons to enter a joint venture

Answer 27

- foreign firm may lack resources to undertake the venture alone - foreign government may require joint ownership as a condition for market entry

Question 28

drawbacks of joint ventures

Answer 28

- disagreements over investment, marketing, other policies - may prevent a multinational company from carrying out specific mfg or mktg policies on a worldwide basis

Question 29

direct investment

Answer 29

a foreign company buys part or full interest in a local company, or builds its own manufacturing or service facilities

Question 30

advantages of direct investment

Answer 30

- cost economies - job creation - deeper relationships with host country

Question 31

main disadvantages of direct investment

Answer 31

- opens company to economic risk like blocked/devalued currencies, worsening markets, or expropriation - company may be unable to adapt offerings to needs and preferences of local customers

Question 32

drawbacks of acquiring a local firm

Answer 32

- cash investment - cultural mismatch - long-term commitment no matter what

Question 33

standardized marketing program

Answer 33

a strategy that uses the same strategic and tactical approach across different markets and countries

Question 34

localized marketing program

Answer 34

an approach that tailors its marketing activities to individual target markets

Question 35

advantages of standardized marketing program

Answer 35

- economies of scale - lower marketing costs - brand image consistency - uniformity of marketing practices - leverage good ideas across markets

Question 36

what does a standardized marketing program not account for?

Answer 36

- differences in wants, needs, usage patterns - customer response to mktg - competitive differences - legal, cultural, political contexts

Question 37

straight extension product strategy

Answer 37

introducing the product to a foreign market without any changes (common with high-end or luxury goods)

Question 38

product adaptation product strategy

Answer 38

positioning products differently in different markets due to differences in consumer behavior, as well as historical market factors - changes should add more revenue than cost

Question 39

the 4 main types of localized product versioning

Answer 39

- regional version - country version - city version - retailer version

Question 40

product invention product strategy

Answer 40

developing new products for global markets

Question 41

counterfeit products

Answer 41

sophisticated overseas factories reproduce fakes of products; gray/black market goods

Question 42

brand adaptation

Answer 42

changing certain elements of a brand to the specifics of each particular market

Question 43

country-of-origin effects

Answer 43

perceptions that are the mental associations and beliefs triggered by a country (e.g. Italians are stylish); marketers want to use positive country-of-origin perceptions to their advantage

Question 44

the 2 main international pricing strategies

Answer 44

- uniform pricing - market-based pricing

Question 45

drawback of uniform pricing

Answer 45

price may be too low in richer countries, and too high in poorer countries

Question 46

the main considerations in adapting marketing comms for a market

Answer 46

- the comms must be legally and culturally acceptable - the comms must be considered appropriate (e.g. comparative ads are unacceptable in some countries) - the appeals of the comms may need to be varied per market

Question 47

gray market

Answer 47

the diversification of branded products from authorized distribution channels; e.g. a distributor sells to a different country to take advantage of pricing differences; create a free rider problem

Question 48

the 2 main ways to deter gray market activities

Answer 48

- severe penalties - timely detection of violations and meting out of punishments