Global Marketing Management A European Perspective

1. Global MarketingManagementA European Perspective Market Selection & Market Entry Alternatives - Exporting Warren J. Keegan Bodo B. Schlegelmilch

2. Selecting Foreign Markets Market Selection Criteria A Scoring Model for International Market Selection Visiting the Potential Market Market Entry Alternatives Exporting - A Developmental Process The „Born Globals“ Methods of Export Financing Summary Overview

3. To identify criteria suitable for the selection of foreign target markets. To appreciate which market entry alternatives are available to companies. To recognise export activities as a process developing over time. To understand different ways of export financing and methods of payment. Learning Objectives

4. ... should be based on a number of criteria, for example market-related characteristics, such as product fit, market size and potential, cost-related aspects, such as transportation costs, the regulatory framework tariffs, duties and non-tariff trade barriers the importance of these selection criteria depends upon the industry and the markets taken into account Selecting Foreign Markets

5. 1.Who buys our product? 2.Who does not buy our product? 3.What need or function does our product serve? 4.What problem does our product solve? 5.What are customers currently buying to satisfy the need and/or solve the problem for which our product is targeted? 6.What price are they paying for the products they are currently buying? 7.When is our product purchased? 8.Where is our product purchased? 9.Why is our product purchased? Critical Questions for a Product-Market Profile: The „9 W´s“

6. A Multi-Stage Selection Process Source: adapted from D.J.G. Schneider, and R.U. Müller, Datenbankgestützte Marktselektion: Eine methodische Basis für Internationalisierungs-strategien, Stuttgart, 1989

7. A Scoring Model for International Market Selection

8. ... is essential after assessment and selection of potential market(s) goals: to confirm (or contradict) assumptions regarding market potential to gather additional (primary) data; eg meeting potential distributors face to face to develop a marketing plan in co-operation with the local agent or distributor Visiting the Potential Market

9. Market Entry Alternatives Source: Adapted from Günther Müller-Stewens and Christoph Lechner, ”Unternehmensindividuelle und gastlandbezogene Einflußfaktoren der Markteintrittsformen,” in: Klaus Macharzina and Michael-Jörg Oesterle (eds.), Handbuch Internationales Management, Gabler, Wiesbaden, 1997, p. 237; Gunter Stahr, Auslandsmarketing, Vol. 1, Kohlhammer, Stuttgart, 1979, p. 162

10. Direct market representation via wholesalers or retailers or directly to the consumers Independent representation independent distributor Piggyback marketing distribution through another distributor´s channel Direct Exporting

11. The firm 1. ... is unwilling to export. 2. ... fills unsolicited export orders (export seller). 3. ... explores the feasibility of exporting (this stage may bypass stage 2). 4. ... exports to one or more markets on a trial basis. 5. ... is an experienced exporter to one or more markets. 6. ... pursues country or region focused marketing. 7. ... evaluates the global market potential. All markets, domestic and international, are regarded as equally worthy of consideration. Exporting: A Developmental Process

12. = global start-ups = international new ventures ... do not follow the traditional developmental process ... are small firms which, at a very early stage of their business, already target international markets ... are innovative and take advantage of new technologies to excel in service to their customers ... in most cases achieve more than a quarter of their sales in foreign markets after 2 years in business The „Born Globals“

13. Logistics Legal procedure Servicing exports Sales promotion Foreign market intelligence Export-Related Problems

14. The World’s Leading Exporting and Importing Nations Source: „World Trade Growth Accelerated in 1997, Despite Turmoil in Some Asian Financial Markets“, World Trade Organisation 1998

15. 1. How many resources and what investment are necessary to enter the market? 2. How much control of activities in the foreign market is desired? 3. How much market knowledge can the manufacturer gain by a specific market entry alternative? Market Entry Decision:3 Key Questions

16. Export Financing/ Methods of Payment Non-Documentary Payment against Bank Guarantees Countertrade Payments Documents Electronic Funds Transfer Documentary Collection Bid Bonds Barter Cheques Letter of Credit Performance Bonds Counterpurchase Payments in Cash ... Down Payment Guarantees Offset ..... .... Compensation Trading Cooperation Agreements Hybrid Countertrade Arrangements Switch Trading Methods of Export Financing Short - Term Financing Middle to Long - Term Financing

17. Examples: Letter of credit: Substitutes a bank’s creditworthiness for that of the buyer. Issued by the bank on behalf of the buyer to a seller, it assures payment if the seller complies with the terms set forth in the letter of credit. Countertrade: Full or partial payment is taken in some form other than money. It flourishes when hard currency is scarce. Methods of Export Financing

18. The choice of potential foreign markets must be based on a thorough evaluation of criteria which influence the potential success abroad; eg market potential, market access, or product fit. Once the potential foreign target market(s) is selected, a company has to decide how to enter this market. The options range from exporting to a wholly owned susidiary.The 3 key criteria: resources, control and market knowledge. Summary