International Markets Essay Example for Free

Inter issue Markets testifyOnce SAB Miller has decided to establish itself in the world-wide commercialize, it becomes necessary for the commercializeing manager to say and analyze the various options avail fitting to enter the internationalist commercialises and select the almost suitable oneness. The plectrum of the compliance mode is one of the most signifi messt decisions.SAB Miller takes in the process of internationalization, as it involves commitment of resources with long-run fiscal and structural implications. Mode of foundation whitethorn be be as an institutional appliance by which a faithful makes its returns or expediencys available to consumer in international trades. Root (1994) defines the market approach for international markets as a comprehensive plan which sets forth the objectives,goals,resources,and policies that guide a favorable clubs international argument operations oer a future period long sufficient to achieve sustainable fi ndth in world markets.FACTORS AFFECTING THE SELECTION OF ENTRY MODE orthogonal MODESMARKET SIZEMarket size of it is one of the key factors an international marketer has to develop to come on in mind when selecting an entry st targetgy.Countries with a large market size honourableify the modes of entry with investment, much(prenominal) as wholly owned subsiaries or equity participation. MARKET GROWTHMost of the large,established markets, much(prenominal) US,Europe and Japan, f all(prenominal) in more or little(prenominal) considered a point of saturation for consumer goods such as automobiles,consumer electronics. in that respectfore,the growth of markets in these countries is showing a declining trend.For instance,the general growth in most of the US and European market is rough 7% while emerging markets like India and China is over 30% which indicates tremendous market potential in time to come.Therefore,from the stance of long-term growth potential such as China,India,Tha iland,Indonesia etc.These markets be withal termed emerging markets. GOVERNMENT REGULATIONSThe selection of market entry modes to a great extent affected by the legislative framework of the oversea market,the administration of most of the Gulf countries defy make it mandatory for strange plastereds to cede topical anaesthetic partner.For instance,the UAE is a lucrative market for Indian firms but most firms operate there with a local partner. hatful barriers such as ecological regulations and local content requirements withal affect the mode of entry.It has been a major(ip) reason for ontogenyd orthogonal investment in Mexico,which is a part of the North American reposition Agreement(NAFTA),in order to cater to the US market. LEVEL OF COMPETITIONPresence of competitors and their direct of interest group in an overseas market is another(prenominal) crucial factor in deciding on an entry mode so as to effectively respond to competitive market force.This is one of the ma jor reasons behind auto companies background intimacy up their operations in India and other emerging markets so as to effectively respond to planetary competition. INTERNAL MODESCOMPANY OBJECTIVESCompanies operating in domestic help markets with especial(a) aspirations generally enter contrary markets as a gist of a reactive approach to international marketing oppurtunities.In such cases,companies receive unsoliated orders from acquaintances,firms and relatives ground abroad,and they attempt to fulfil these merchandise orders.This casual approach to entry international markets by air of producing in the homemarket and exportation overseas translates into regular(a) export if the firm has positive experience in its exports operation. AVAILABILTY OF COMPANY RESOURCESVenturing into international markts demand substantial commitment of financial and human resources and therefore choice of an entry mode depends upon the financial strength of a firm.It may be observed that Indian firms with good financial strength hire entered international markets by way of wholly owned subsidiaries or equity participation.LEVEL OF COMMITMENTIn view of the market potential,the entrustingness of the troupe to commit resources in a particular market as well as determines the entry mode choice.Companies need to evaluate various investment alternatives in a particular market also depends upon the way the comp any is willing to perceive and respond to competitive forces. INTERNATIONAL EXPERIENCEA community well exposed to the dynamics of the international marketing surroundings would be at ease when reservation a decision regarding entering into international markets with a highly intensive mode of entry such as joint venture and wholly owned subsidiaries. Below atomic number 18 different modes of market entry and they intromitEXPORTINGExporting is the simplest method of entering a exotic market.It is theprocess of sending goods or renovations from orbit to ot her countries for use or sale there. By exporting to a unlike orbit,a smart set is able to enter this agricultural without actually establishing itself in the country.The company must simply do harvest-feasts that can be shipped to the distant country.Export activities may take several(prenominal) mental strains,including mediate exporting,direct exporting,and intracorporate transfers. Direct exports represent the most basic mode of exporting, capitalizing on economies of scale in cropion concentrated in the home country and affording better reign over distribution. Direct export works the best if the volumes atomic number 18 small. Types of direct exporting areSales representatives that represent remote suppliers/manufacturing businesss in their local markets for an established commission on gross revenue. pr expand support services to a manufacturer regarding local advertising, local sales presentations, customs clearance formalities, court-ordered requirements. Im porting distributors purchase product in their own right and resell it in their local markets to undividedsalers, retailers, or both.Indirect ExportingIndirect export is the process of exporting by domestically based export intermediaries. Indirect methods of exporting requires less marketing investment, but, as the exporter has no rig over its products in the hostile market, the company lose substantial control over the marketing process. Types or methods of validatory exporting areFilling orders from domestic buyers who then export the product Seeking out domestic buyers who represent foreign customersExporting through an Export Management connection (EMC)Exporting through an Export Trading Company (ETC)INTRACORPORATE TRANSFERSA third form of export activity is the intracorporate transfer,which has become more important as the sizes of MNCs have increased.An intracorporate transfer is the sale of goods by a firm in one country to an affiliated firm in another. LICENCINGLice nse is a contract to identify what is being licensed trademarks, patents, designs, copyrights or software. Licensing allows rapidly entering into the chosen foreign market and reduces capital requirements to establish manufacturing facilities overseas. Your contract does not violation of the host countrys animate laws and regulations.a licensor in the home country makes limited rights or resources available to the licensee in the host country. The rights or resources may include patents, trademarks, managerial skills, engine room, and others that can make it possible for the licensee to manufacture and sell in the host country a similar product to the one the licensor has already been producing and selling in the home country without requiring the licensor to light a wise operation overseas.The licensor earnings usually take forms of one time payments, technical fees and royal house payments usually calculated as a percentage of sales. As in this mode of entry the transfer of cutledge between the erectal company and the licensee is strongly present, the decision of making an international license intellect depend on the respect the host government show for intellectual property and on the tycoon of the licensor to choose the right partners and avoid them to compete in each other market. Licensing is a relatively elastic work agreement that can be customized to fit the needfully and interests of both, licensor and licensee. FranchisingThe franchising system can be defined as A system in which semi-independent business owners (franchisees) pay fees and royalties to a name company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business set and system. Compared to licensing, franchising agreements tends to be longer and the franchisor purposes a broader package of rights and resources which usually includes equipment, managerial systems, operation manual, initial t rainings, site adulation and all the support necessary for the franchisee to run its business in the kindred way it is done by the franchisor. In addition to that, while a licensing agreement involves things such as intellectual property, trade secrets and others while in franchising it is limited to trademarks and operating k forthwith-how of the business. TYPES OF FRANCHISESThere are three available vitrines of franchises.The first type is the dealership,a form commonly found in the automobile industry.Here,the manufacturers use franchises to distribute their product lines.These dealership act as the retail stores for the manufacturer.In some distance,they are required to allude quotas established by the manufacturers,but as is the case for any franchise,they benefit from advertising and management support provided by the franchisor.The most common type of franchise is the type that offers a name,image and method of doing business,such as McDonalds,KFC,Holiday Inn.There are ma ny of these types of franchises,and their listings,with pertinent information can be found in various sources. A third type of franchise offers services.These include personnel agencies,income tax revenue preparation companies and satisfying estate agencies.These franchises have established names and reputation and methods of doing business.In some distances,such as real estate,the franchisee has actually been operating a business and then applies to become a member of the franchise. CONTRACT MANUFACTURING bowdlerise manufacturing refers to a situation where a business will engage the services of an independent party to dress a specified duty for the business. In terms of manufacturing, contract manufacturing refers to a situation where a manufacturer will engage the services of an independent party to perform a specified job. There are various reasons for this type of engagement by manufacturers, all of which involve the maximization of profit. The process of contract manufactur ing also has some negative considerations that include the risk of un receivedty and lack of control over the process. WHOLLY have SUBSIDIRIESEntering a foreign market with a wholly owned subsidiary involves creating a local firm without the aid of a local partner. There are dickens ways of doing this. The first is through what is called greenfield development. This involves creating a new organization in the foreign country from the ground up. The second method is what is referred to as brownfield development. This involves purchasing an existing company in a foreign country. Brownfield developments can be beneficial because they offer local expertise, but they can be difficult because there may be resistance from those in the companyto new ownership. JOINT VENTUREA market entry option which the exporter and a domestic company in the target country join together to form a new corporate company. Both parties provide equity and resources to the JV and contend in the management, profits and losses. The JV be limited to the life of a particular project. This option is popular in countries where there are restrictions on foreign ownership, eg. China and Vietnam PIGGYBACKINGPiggyback marketing low cost market entry strategy in which two or more firms represent one anothers complementary (but non-competing) products in their respective market. Or, in other words, it is an arrangement, where two or more companies help each other to market their products, where the products have to be complementary and not competing against each other.LEVEL OF INVOLVEMENT IN INTERNATIONAL MARKETSNo direct foreign marketingA company in this stage does not actively cultivate customers outside national boundaries however this companys products may reach foreign markets. Sales may be made to employment companies as well as foreign customers who come directly to the firm. Or products may reach foreign markets via domestic wholesalers or distributors who sell abroad without explicit encouragement or even knowledge of the conjurer. As companies develop web sites on the internet, many receive orders from international Web surfers. Often an unsolicited order from a foreign is what piques the interest of a company to seek additional international sales. singular Foreign marketingTemporary surpluses caused by variations in production levels or demand may result in infrequent marketing overseas. The surpluses are characterized by their temporary nature therefore sales to foreign markets are made as goods are available, with little or no intention of maintaining continuous market representation. As domestic demand increases and absorbs surpluses, foreign sales activity is withdrawn. In this stage, little or no change is seen in company organization or product lines. However, few companies today fit this mould because customers around the world increasingly seek long term commercial family relationships. Further, evidence exists that financial returns from initial international expansions are limited. Regular Foreign marketingAt this level, the firm has permanent productive capacitor devoted to the production of goods to be marketed in foreign markets. A firm may employ foreign or domestic overseas intermediaries or it may have its own sales force or sales subsidiaries in important markets. The primary focus of operations and production is to service domestic market needs. However, as overseas demand grows, production is allocated for foreign markets, and products may be adapted to meet the needs of individual foreign markets. Profit expectations from foreign markets move from being seen as a bonus to regular domestic profits to a position in which the company becomes dependent on foreign sales and profits to meet its goals.International marketingInternational marketing is the export, franchising, joint venture or large direct entry of a marketing organization into another country. This can be achieved by exporting a companys product into a nother view, entry through a joint venture with another firm in the target country, or foreign direct investment into the target country. The development of the marketing blend in for that country is then required international marketing. It can be as straightforward as victimisation existing marketing strategies, mix and tools for export on the one side, to a highly complex relationship strategy including localization, local product offerings, pricing, production and distribution with customized promotions, offers, website, social media and leadership. Internationalization and international marketing meets the needs of selected foreign countries where a companys value can be exported and there is inter-firm and firm learning, optimization and efficiency in economies of scale and kitchen stove. The firm does not need to export or enter all world markets to be considered an international marketer. Global MarketingGlobal marketing is a firms ability to market to almost all countr ies on the planet. With extensive reach, the need for a firms product or services isestablished. The global firm retains the capability, reach, knowledge, staff, skills, insights, and expertise to deliver value to customers worldwide. The firm understands the requirement to service customers locally with global standard solutions or products, and localizes that product as required to maintain an optimal balance of cost, efficiency, customization and localization in a control-customization continuum to best meet local, national and global requirements to position itself against or with competitors, partners, alliances, substitutes and defend against new global and local market entrants per country, arena or city. The firm will price its products appropriately worldwide, nationally and locally, and promote, deliver access and information to its customers in the most cost-effective way. The firm also needs to understand, seek, measure and develop loyalty for its set and global brand equity (stay on brand) for the long term.b)OULINE ADVANTAGES AND DISAVANTAGES OF EACH STRATEGY.Advantages of direct exporting-Control over selection of foreign markets and choice of foreign representative companies. -Good information feedback from target market.-Better protection of trademarks, patents, goodwill, and other intangible property. Potentially great sales than with indirect exporting.Disadvantages of direct exporting Higher start-up costs and higher risks as opposed to indirect exporting Greater information requirements Longer time-to-market as opposed to indirect exporting.Advantages of the international franchising mode-Low governmental risk-Low cost-Allows simultaneous expansion into different regions of the world -Well selected partners bring financial investment as well as managerial capabilities to the operation. Advantages of indirect exporting-Its an almost risk-free way to begin.-It demands minimal involvement in the export process.-It allows you to continu e to concentrate on your domestic business.-Youhave limited liability for product marketing problems theres always someone else to point the finger at -You learn as you go about international marketing.-Depending on the type of intermediary with which you are dealing, you dont have to concern yourself with shipment and other logistics. Disadvantages of indirect exporting-Your profits are lower.-You lose control over your foreign sales.-You genuinely rarely know who your customers are, and then lose the opportunity to tailor your offerings to their evolving needs. -When you visit, you are a step re locomote from the actual transaction. You tonus out of the loop. -The intermediary might also be offering products similar to yours, including directly competitive products, to the same customers instead of providing exclusive representation. -Your long-term outlook and goals for your export program can change rapidly, and if youve put your product in someone elses hands, its hard to r edirect your efforts accordingly. Advantages of licensing-Obtain extra income for technical know-how and services-Reach new markets not well-disposed by export from existing facilities-Quickly expand without much risk and large capital investment-Pave the way for future investments in the market-Retain established markets closed by trade restrictions-Political risk is minimized as the licensee is usually 100% locally owned-Is highly attractive for companies that are new in international business. Disadvantages of licensing-Lower income than in other entry modes-Loss of control of the licensee manufacture and marketing operations and practices leading to loss of whole tone-Risk of having the trademark and reputation ruined by an incompetent partner-The foreign partner can also become a competitor by selling its production in places where the kick upstairsal company is already in. -investment to attract prospects and support and manage franchisees. Advanatges of Frachising-Franchis ing provide knowledge of the local markets.A franchise provides franchisees with a trusted level of independence where they can operate their business.A franchise provides an established product or service which may already enjoy widespread brand-name recognition. This gives the franchisee the benefits of a pre-sold customer base which would ordinarily takes years to establish.A franchise increases your chances of business success because you are associating with proven products and methods.Franchises may offer consumers the attraction of a certain level of quality and consistency because it is mandated by the franchise agreement. Disadvantages of franchising-Franchisees may turn into future competitors.-Demand of franchisees may be scarce when starting to franchise a company, which can lead to making agreements with the wrong candidates -A wrong franchisee may ruin the companys name and reputation in the market -Dependence on franchisee.-Potential passage of armss with franchisee .Advantages of Joint go-Accessing additional financial resources Asset sharing is one of the best advantages about joint venture. Since, you are able to use larger funds to facilitate the production and operation of projects and products, you facilitate growth. In other words, you increase profit margin and increase your revenue potential.-Sharing the economic risk with co-venturer It pays to have someone sharing the accountability with you in case you end up in deep troubles. This is also true with joint venture. Since you are sharing assets, the risk of losing a great deal of coin is divided to both parties.-Widening economic scope fast Building reputation is often difficult, not to mention time consuming and expansive. At a joint venture, you are able to widen your economic scope without spending too much money and waiting for a long time. Tapping newer methods, technology, and approach you do not have In order to grow and expand, you need resources in the forms of methods , technology, and approach. For that matter, it would help a lot if you will be able to partner with an entity that instanter has the things you dont and the things you need. Joint venture opens up the venue for such need.-Building relationship with vital contacts apart from economic territory, another advantage of joint venture is the ability to give you business relationships with vital contacts. This is just like automatically befriending your partners influential friend that can give you access to lots of things such as business opportunities and a pass to vital information.Disadvantages of Joint Venture-Shared profit Since you share assets, you also share the profit. The profit of both parties usually depends on the size of the share to the venture or may be defined on the agreement.-Diminished control over some important matters Operational control and decision making are sometimes compromised in joint ventures. Since there is an agreement that divides which one will take over a particular operation, the other may not be satisfied with how the things are worked out with another. This leads us to another disadvantage of a joint venture. -Undesired outcome of the quality of the product or project Since one party may not have control on the supervision of the production or the accomplishment of one part of the system, this can happen. This often leads to disputes and lawsuits. To avoid this, both parties agree on specific expand about the whole operation process.-Uncontrolled or unmonitored increase in the operating cost Again, defined control over the operation may lead to this disadvantage. It is important therefore to make sure that all things are clarified on the paper before singing in the joint venture agreement. Advantages of contract manufacturing-Low financial risks contract manufacturing allows companies to save costs by manufacturing a particular item at a cheaper rate than what it would cost them If they decided to undertake the manufa cturing process themselves. it allows the company doing the outsourcing to shave some time off the whole process, giving them quicker returns and turnovers. Where a company is less effective than another in manufacturing an item, contract manufacturing will allow it to concentrate on that in which it is the most efficient. Disadvantages of contract manufacturing-Reduced learning potential-Potential public relations problems may need to monitor working conditions. -The company doing the outsourcing faces some degree of risk if it fails to do its research properly. This is because outsourcing the manufacturing to the wrong company could end up costing the company more, rather than less, if the outsourced company fails to deliver as expected. Advantages of wholly owned subsidiariesOn the positive side, a wholly-owned subsidiary that does its business in a location different from the parent companys is able to remain in its locale. With the business world spanning so many countries, t his can serve as a great advantage in international situations. Name recognition is another positive reason for maintaining a wholly-owned subsidiary. If a particular brand name is well known and popular, the parent company has no reason to absorb the subsidiary entirely. Wholly-owned status allows the subsidiary to retain its name brand, thus avoiding hindering its sales. Diversity for the parent company is another perk created by maintaining a wholly-owned subsidiary. This status allows the parent company to branch out into different products and markets, building strength in diversification. Disadvantages of wholly owned subsidiariesa wholly-owned subsidiary are more business oriented. The holding company runs a definite risk in assuming control of another company while allowing its management to continue to operate independently of the parent companys. The level of investment and allocation of funds and resources required is also very high. A parent company must spend a great de al of time and money to smoothly integrate the new subsidiary.All of these factors require commitment and dedication on the part of the holding company and willingness to form that partnership on the part of the subsidiary. Advantages of piggybackingreduced financial costslimited riskquick, easy access to the market. Generally, the supported company can make immediate profits on the new market. The SME can, thus save time (3-5 years), compared to the convention length of time necessary to establish itself reduced logistical and administrative operations benefit of the brand image that the supporting company brings to its products immediate availability of a sales force structure slender market knowledge of the supporting company.Disadvantages of piggybackingweak motivation of large companies to become supporters difficulty in purpose partners offering a compatible product and distribution network risk of market loss, which can be reduced due to the complementarity of the produ ct, and commercial follow-up between the partners occasional difficult relations because of differences in size or culture risk of lack of mutual confidence and of lack of involvement risk of conflict of interest (e.g. local agents could systematically put the interests of the supporting company before those of the supported company) occasional very rigid requirements and conditions of access to the commercial networks of large companies. These conditions can be qualitative (e.g. product quality) and quantitative (minimum level of annual turnover, high commissions, etc.).Macro Environmental Influences That Can Affect SAB MillersSABMillers origins date back to the foundation of fastness Breweries in 1895 as to serve a growing market of miners and prospectors in and around Johannesburg, South Africa. dickens years later, it became the first industrial company to list on the Johannesburg Stock Exchange and the year aft(prenominal) (1898) it listed on the London Stock Exchange. F rom the early 1990s onwards, the company increasingly expanded internationally, making several acquisitions in both emerging and developed markets. In 1999, it formed a new UK-based holding company, SAB plc, and moved its primary listing to London.In May 2002, SAB plc acquired Miller Brewing, forming SABMiller plc. It is very important that SAB Miller considers its environment before going into international the market. In fact, environmental analysis should be continuous and feed all aspects of their homework to go international The macro-environment refers to the major external and uncontrollable factors that ascertain an organizations decision making, and affect its performance and strategies. These factors include the Political (and legal) forces, Economic forces, Sociocultural forces, and Technological forces. These are known as the PEST factors.PEST depth psychologyPolitical Factors The political environment revolves around the current government in a particular country in w hich SAB Miller manufactures or trades, and also laws/legislation operate or within their home market as well as overseas. If their government is socialist then perhaps there is a form _or_ system of government to tax more and to invest in the public sector. On the other hand if SAB Millers have a more conservative or Republican government then the free-market is left to take control, taxation is less and there is often a smaller public sector. The political arena has a huge influence upon the regulation of the business, and the spending power of consumers and other businesses. SAB Miller must consider issues like How stable is the political environment in that country? Will government policy of that country influence laws that regulate or tax SAB Miller? What is the governments position on marketing ethics?What is the governments policy on the rescue?Does the government have a view on culture and holiness?Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others? Economic FactorsThe economic environment is a direct influence on all businesses. Obviously if you are studying marketing there is a huge element of economics within the topic itself, and you should be no stranger to the principles of economics. As we saw from our lesson on the marketing environment there is a macro environment, and internal environment and the microenvironment. More specifically youll be at looking elements such as where a business is in terms of the current business cycle, and whether or not they are trading in a recession. SAB Millers marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at 1. bear on rates.2. The level of inflation Employment level per capita.3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on. Sociocultural FactorsThe Sociocultural environment embodies everything which is socia l and cultural within a nation or society. There are plenty of examples of society and culture on the marketing teacher website, so we recommend that you go to our lesson store and look through some of the consumer behaviour pages. Some notable examples would include the influence of learning, memory, sense and perception, motivation, lifestyle and attitude and consumer culture.Have a look at the six living generations in America, social environment and class, the impact of your birth order on how you behave as a consumer and take a look at the eight types of online shoppers. In a more general sense consider influences such as the increase in life expectation of Western consumers, and demographics which is the study of populations. The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include 1. What is the dominant religion?2. What are attitudes to foreign products and services?3. Does language i mpact upon the diffusion of products onto markets?4. How much time do consumers have for leisure?5. What are the roles of men and women within society?6. How long are the population living? be the older generations wealthy?7. Do the population have a strong/weak opinion on green issues? Technological FactorsTechnological factors are a multifaceted influencer. Lets just think about the sorts of technology that you come in touch with almost daily. Smart phones such as Android and iphone are now common all garden, and we are used to being able to access information and communication technology instantly no matter where we are. During studies or at work we have access to information on quick PCs and over the Internet, with faster broadband connections arriving in many parts of the world. Technology also surrounds business processes. As we saw from our lesson on the functions within an organisation all departments use information technology or technology in one form or another. Our ma nufacturing operations will use technology to produce goods and services.Our logistics and warehousing functions use forklifts and Lorries as well as order tracking technology and software. The customer service department will use communication technology to talk to customers but will also have access to internal systems, such as technology to simplify credit control and stock control for example. There are many, many more examples of technology. Technology is vital for competitive advantage, and is a major device driver of globalization. Consider the following points 1. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2. Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc? 3. How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc? 4. Does technology offer companies a new w ay to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?