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Market Analysis.
Market potential. Economic growth. Availability of natural resources. Availability of labor. Political risk. Market access & trade barrier.
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Creating a product market profile 9 Ws. Who buys our product? Who does not buy our product? What need or function does our product serve? What problem does our product solve? What are customers currently buying to satisfy the need or solve the problem for which our product is targeted? What price are they paying for the products they are currently buying? When is our product purchased? Where is our product purchased? Why is our product purchased?
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Market selection criteria. Market potential. Market access. Shipping cost & time. Potential competition. Service requirement. Product fit. Visit the potential market.
A. Exporting.
a. Exporting is appropriate strategy when one of more of the following conditions prevail. The volume of foreign business is not large enough to justify production in the foreign market. Cost of production in the foreign market is high. The foreign market is characterized by production bottlenecks like infrastructural problems, material supplies etc. There are political or other risks of investment in the foreign country. The company has no permanent interest in the foreign market or there is no guarantee of the market available for a long period.
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Foreign investment is not favored by the foreign country concerned. Licensing or contact manufacturing is not a better alternative. Export marketing requires. An understanding of target market environment. The use of marketing research & the identification of market potential. Decisions concerning product design, pricing, distributions & channels, advertising & communication.
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a. o o o o o o o b. o o o o
Export related problems. Logistics. Arranging transportation. Transport rate determination. Handling documents. Obtaining financial information. Distribution co-ordination. Packaging. Obtaining insurance. Legal procedure. Government red tape. Product liability. Licensing. Customer / Duty.
c. o o o o d. o o o e. o o o
Servicing Export. Providing parts availability. Providing repair service. Providing technical advice. Providing ware housing. Sales Promotion. Advertising. Sales effort. Marketing information. Foreign market intelligence. Locating markets. Trade restrictions. Competition overseas.
a.
Organizing for exporting. Organizing in the manufacturers country. In house export organization. The possible arrangement for handling exports include the following. 1. As a part time activity performed by domestic employee. 2. Through an export partner affiliated with the domestic marketing structure that takes possession of the goods before they leave the country. 3. Export department. 4. Export department within an international division.
External independent organization. Export trading company. Export management company. Export merchant. Export brokers. Combination export managers. Manufacturers export representatives or commission agent. 7. Export distributors. 1. 2. 3. 4. 5. 6.
b.
Organizing in the market country. Direct representation. Advantages. o Direct representation by a companys own employee in the market control & communication. o Direct representation allows decisions regarding program development, resource allocation & price changes. Independent representation. Criteria. o Smaller markets. o Independent representation handles numerous other products. Piggyback marketing.
B. Sourcing.
a. b. c. d. e. f. The opposite of exporting is importing. Sourcing decisions factors. Factor cost & conditions. Logistics. Country infrastructure. Political risk. Market access. Exchange rate, availability & convertibility of local money.
C. Licensing.
Licensing is an agreement that permits foreign company to use industrial property (i.e. patents, trademarks & copyrights), technical know-how & skills (i.e. feasibility studies, manuals, technical advice), architectural & engineering design or any combination of these in a foreign market. Licensing is not only restricted to tangible products.
Reduced profit with reduced risk. Manufacturer may be nurturing competitor. When licensee performs poorly. Agreement can also prevent the licensor from entering that market directly. Inconsistent product quality can injure the reputation of the product. Even when exact product formulations are followed, licensing can still sometimes can damage the products image Psychologically.
o A prudent licensor does not assign a trademark to a licensee. o A licensing should be considered a two way street because a license also allows the original licensor to gain access to the licensees technology & product. o Over licensing or under licensing is not desirable. o Under licensing results in potential profit being lost where as over licensing leads to a weakened market through over exposure.
D. Joint Venture.
o A joint venture is a simply a partnership at corporate level & it can be domestic or international. A joint venture is an enterprise formed for a specific business purpose by two or more investors sharing ownership & control.
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The second investment process occurs when the local firms political leverage, through government persuasion, halts or reverses the natural economic process.
Partners committed to joint ventures is a function of perceived benefits (satisfaction & economic performance.) of the relationship.
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E. Manufacturing.
o Manufacturing process can be employed as a strategy involving all or some manufacturing in foreign country. One kind of manufacturing process known as Sourcing, which involves manufacturing operations in host country not so much to sell there, but for the purpose of exporting from that country to the companys home country or to other countries.
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Methods.
Complete manufacturing to contract manufacturing. Partial manufacturing.
o Lower labor cost. o Other factors of production like labor, energy & other inputs. o To reduce the transportation cost. o To minimize or avoid import taxes & other trade barriers.
Marketing consideration.
o Product image deserves attention. o Competition. o Resources of various countries to determine comparative advantage. o Relative labor cost. o Types of products made. o Taxation. o Investment climate. o Chip unskilled labor importance is diminishing due to technology development.
F. Assembly operations.
o Assembly means the fitting or joining together of fabricated components.
Strategy.
Parts or components produced in various countries.
Capital intensive parts may be produced in advance nations. Labor intensive assemblies may be produced in LDC.
Assembly operations allow company products to enter many markets without being subject to tariffs & quotas. Host country objects for screw driver assembly.
G. Management contract.
o In some cases government pressure & restriction force a foreign company either to sell its domestic operation or to relinquish control. The other way to generate revenue is to sign a management contract.
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Acquisition.
When manufacturer wants to enter a foreign market rapidly & yet retain maximum control, direct investment through acquisition should be considered.
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Reasons.
Product / Geographical diversification. Acquisition of expertise (Technology, Marketing, Management). Rapid entry.
Government welcomes foreign investment that starts up a new enterprise (Green Field Enterprise) since that investment increases employment & enlarges tax base.
Acquisition fails to do this. Value of currency may either reduce or increase the cost of an acquisition.
J. Strategic Alliance.
o o A relatively new organizational form of market entry & competitive co-operation is strategic alliance. Strategic alliance may be the result of mergers, acquisitions, joint ventures & licensing agreements. Unlike joint ventures which requires two or more partners to create a separate entity, a strategic alliance does not necessarily require a new legal entity. Strategic alliance may be more of a contractual arrangement where by two or more partners agree to co-operate with each other & utilize each partners resources & expertise to achieve rapid global market penetration.