HONESTY IS
THE FIRST
CHAPTER OF
THE BOOK OF
WISDOM.
THOMAS JEFFERSON
BUDAPESTI GAZDASÁGI FŐISKOLA
INTERNATIONAL MARKETING
LECTURE- 6
In English
6th April 2012 – FRIDAY
0940hr –1110hr (E.F. 13-15)
Miklós
(Nicholas)
SOÓS
0630 265 9638
miklosoos@hotmail.com
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LECTURE DATES - TIMES - LOCATION
RE: Miklós (Nicholas) SOÓS
1. FEB. 17.
0940-1110 [E.F.13-15]
2. FEB. 24.
0940-1110 [E.F.13-15]
3. MARCH 2.
0940-1110 [E.F.13-15]
4. MARCH 9.
0940-1110 [E.F.13-15]
MARCH 16.
VACATION
MARCH 23.
VACATION
5. MARCH 30.
0940-1110 [E.F.13-15] – re. feb.10
6. APR. 6.
0940-1110 [E.F.13-15] (guest lect?)
7. APR. 13.
0940-1110 [E.F.13-15]
8. APR. 20.
0940-1110 [E.F.13-15]
8. APR. 27.
0940-1110 [E.F.13-15]
9. MAY 4.
0940-1110 [E.F.13-15]
10. MAY 11.
0940-1110 [E.F.13-15]
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CLASS ATTENDANCE
Lectures
No.
%
Lect. 1
16
24
Lect. 2
22
33
Lect. 3
30
45
Lect. 4
30
45
Lect. 5
35
52
Lect. 6
Lect. 7
Lect. 8
Lect. 9
Lect. 10
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Please ensure that you
personally sign the
attendance sheet every
time you attend a
lecture.
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The visual contents of lectures
will be available internally on
the following site:
K:\Hallgatok\ANGOL\Soós tanár úr
(available internally only)
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SOURCES, REFERENCES – SUGGESTED READINGS
The course is NOT based on any specific textbook. The following are recommended.
International Marketing, Cateora, P. & Graham, J. (2005) 12th edition, McGraw-Hill
Global Marketing, Hollensen, S. (2004) 3rd edition, Prentice Hall
International Marketing Strategy, Doole, I. & Lowe, R (2004) 4th edition Thomson
International Marketing and Export Management, Albaum G, Prentice Hall London
Principles of Marketing, Kotler P et. Al, 2nd European edition, Prentice Hall E. 2003
Principles of Marketing, Jobber D, McGraw-Hill
Principles of Marketing, Brassington F, Financial Times Prentice Hall, 2000
Marketing on the Internet: Principles of online marketing, Strauss J & Raymond
F, Prentice Hall,1999
Internet sites:
www.pmcinc.org/
www.tradeport.org
www.FAS.USDA.gov
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ASSESSMENT METHOD
End of year written examination
60%
Two (2) ‘mini’ exams of 20 min. duration
during unannounced lectures
40%
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Where we finished
last week.
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Social/cultural
Legal
ECONOMIC
Language, religion,
values, social
organisation, material
culture
Local domestic laws
International law
Home domestic laws
Developed economy
Emerging economy
Less developed econ
Currency movements
S
L
E
Ecology
rainfall,
temperature,
seasons
P
Political
Operational
restrictions
Discriminatory
restrictions Physical
actions
Environmental
influences
on
international
marketing
T
Technological
Satelite communctn
Internet
WWW
The electronic
superhighway
DOOLE & LOWE
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METHODS OF MARKET ENTRY
CHOICE OF ENTRY
Exporting
Indirect
Direct
Overseas production
Licensing
Contract
manufacture
JV
WOFE
Indirect – selling through middleman
JV – Joint venture
Direct - Supplier controls all activities
WOFE - Wholly Owned Foreign Enterprise
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MAJOR WAYS IN
WHICH COMPANIES
FIRST
1
Export
ENTER
INTERNATIONAL
MARKETS
2
Licensing
5
joint venture
4
manufacturing
3
Establish
sales offices
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MARKET ENTRY 1
EXPORTING TO FOREIGN MARKETS
Indirect export:
• domestic based export
merchant sells abroad
Direct export:
• domestic based export department,
• foreign based distributors, or agents
• overseas sales branch or subsidiary
Exporting seems the simplest way of entering a foreign market.
In reality an export order initiates a series of problems not typically faced
before. For example:
• application for export license from government
• payment arrangement – how will sales be paid for
• currency
• banking arrangements
• shipment and associated paper-work
These and other complications might give the sales manager second thought
despite the possible benefits. However the benefit of going international this
way is that risk can be controlled. One person could handle it and would have
little effect on organizational structure.
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MARKET ENTRY 2
LICENCING TO FOREIGN MARKETS
A foreign company is licensed to use a know how,
trademark, patent against royalty.
A form of licensing, franchiser offers a complete brand
concept and operating system.
As companies gain experience and find foreign operations
profitable, executives may look for foreign firms to manufacture
their products overseas.
This is usually done through licensing - giving foreign companies
permission to manufacture products for a fee.
This involves little risk as the company did not invest capital.
Licensing does, however, increase the complexity of the firm’s
operations. Such agreements frequently include provisions for
additional engineering or manufacturing advice
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LICENCING
The company enters into an agreement with a licensee in the foreign market.
For a fee or royalty, the licensee buys the right to use the company’s • manufacturing process,
• trademark, brands
• technical innovation
• patent
• trade secret or
• other items of value.
It usually involves an ‘upfront’ payment for the transfer of know-how and a
royalty linked to volume produced and sold in the foreign market.
Some of the disadvantages:
-limited return; especially when licensee does fully develop market potentials
-agreement usually for fixed term; during this period firm prevented from entering
-risk of licensee becoming a competitor
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FRANCHISING
Based on the concept of selling the right to sell the company’s product or
services.
The franchisor gives the franchisee the right to undertake business in a
specific manner under the franchisor’s name in return for royalty payment
that usually takes the form of a fee or a percentage of sales.
Successful franchising involves the establishment of performance standards
and mechanism for monitoring and control. Because of this, franchising can
often be more resource intensive than licensing. Three systems: 1
2
Manufacturer-sponsored
Manufacturer-sponsored
retail franchise system wholesale franchise system
e.g. BMW licenses
dealers to sell its cars;
dealers are independent
who agree to meet
various conditions of
sales and service.
e.g. Coca-Cola licenses
bottlers in various markets,
who buy C-C syrup and
then carbonate, bottle and
sell finished product to
local market retailers.
3
Service-firm-sponsored
retail franchise system
A service firm licenses a
system of retailers.
e.g. in fashion business;The body shop, Benetton;
car rental business; -Hertz
Avis; fast food business;
McDonald’s, Burger King
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CONTRACT MANUFACTURING
The company contracts with manufacturers in the foreign market to
produce its product(s) or provide its service(s).
Advantages: chance to start fast
minimal risks
cheaper production cost
tariff avoidance
extra capacity
opportunity to form partnership
opportunity to buy out local manufacturer
Disadvantages: decreased control over manufacturing process
loss of potential profit on manufacturing
no control of process or cost
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FOREIGN ASSEMBLY
Home company exports the parts, or sub-assemblies, or basic
ingredients to foreign producer, who assembles/ constitutes the
finished product.
Advantages:
• lower distribution costs
• tariff avoidance
• lower final assembly costs
Disadvantages:
• capacity limitation
• dependency
• lack of coherent marketing strategy
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MANAGEMENT CONTRACTING
The firm supplies management knowhow to a foreign company that supplies
the capital. The domestic firm exports
management rather than products.
It is a low risk method of getting into a
foreign market, and yields income from
the beginning.
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JOINT OWNERSHIP
Joint-ownership ventures consist of one company joining
forces with foreign investors to create a local business in
which they share joint ownership and control.
A company may buy an interest in a local firm, or the two
parties may form a new business venture.
A foreign government may require joint ownership as a
condition for entry.
Disadvantage: - partners may disagree over investment,
marketing or other policies,
Collaborators must clarify their expectations and
objectives and work hard to secure a win-win outcome for
all parties concerned.
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FULL OWNERSHIP
Home company acquires a foreign company or develops
a new company in a foreign market on a “green-field”
basis.
Advantages of total control;
Disadvantages of “foreign” perception, increased risk.
Acquisition is usually a better alternative.
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MARKET ENTRY STRATEGIES
AN OVERALL SUMMARY
EXPORTING
JOINT VENTURING
DIRECT INVESTMENT
Indirect
Direct
Licensing/Franchising
Contract manufacturing
Management contracting
Joint ownership
Assembly facilities
Manufacturing
facilities
Amount of commitment, risk, control and profit potential
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MARKET ENTRY ALTERNATIVES
high
Control & foreign market presence
Acquisition/
wholly-owned
subsidiary
Joint
ventures
Franchising
Licencing
Direct
exporting
Indirect
exporting
Production in the
home market
Production abroad
low
low
Resource deployment
high
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THE REALITY OF INTERNATIONAL MARKETING
-
TO RE-ENFORCE THE BACKGROUND -
Since foreign market entry is often quite accidental, firms frequently
lack experienced international managers, and decisions are made
haphazardly.
IMPORTANT QUESTIONS:
Who in the organization should have responsibility for international
operation?
Where within the organization should this individual be placed?
As the company gains experience & international sales increase,
decisions are continually reviewed and revised.
The basic objective of these alterations is to allow for
adjustments to the need of the marketplace & at the same
time keeping international activities coordinated with the
company’s other activities.
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ISSUES RELATING TO THE DESIGN OF
INTERNATIONAL ORGANISATION
1. Where in the domestic or head office operations
should responsibility for foreign activities be placed?
2. What are the legal requirements for operating in the
selected foreign market?
3. What relationship should exist between foreign and
domestic operations, and what organizational
arrangements need to be made to assure that this
relationship is maintained?
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COMPLEXITY FACTORS THAT ADD TO
INTERNATIONAL OPERATIONS
• Much wider differences in cultures exist between
countries than within even diverse nations such as USA or
Australia.
• Physical distances between countries can make
communications and corporate control more difficult.
• Obvious language differences
• Business practices and customs vary in unfamiliar ways
among countries.
• Differences between currency (money) increases financial
risk for international companies, demanding more care.
• Many companies lack experience in dealing with foreign
customers and firms.
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STEPS AND STRATEGIES OF GOING INTERNATIONAL
Most often, there are no rigid organizational patterns or guidelines
that guarantee success on the international market.
Businesses, even those in same line of activities, differ in their
approach to organization.
The organizational structure of a company evolves as its interest and
experience broaden and especially as the volume, significance, and
complexity of international operations increase.
Firms with major international divisions usually arrive at this stage of
development through a process of trail and error or through gradual
growth.
Managers want to benefit from international opportunities BUT at the
same time they want to have foreign operations tightly coordinated
with the domestic side.
Most companies go through certain stages as they evolve in
international business – moving from simplest to more complex
patterns of involvement.
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CHOOSE A JOB
YOU LOVE AND
YOU WILL NEVER
HAVE TO WORK IN
YOUR LIFE.
CONFUCIUS
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