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chapter 5 and 6 mkt exam


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exporting via piggybacking, consortia, export management companies, trading companies
Indirect exporting
using market country agent or distributor
using own sales subsidiary
Direct exporting
including mail order and telemarketing
direct marketing
Export management companies perform all the transactions relating to foreign trade for the firm and are_________________ working for the firm in overseas markets, going to fairs, and contacting distributors
independent agents
advantage of indirect exporting
firm avoids the overhead costs and administrative burden involved in managing their own export affairs
disadvantage of indirect exporting
the skills and know-how developed through experiences abroad are accumulated outside the firm, not in it
The firm is able to more directly influence the marketing effort in the foreign market
direct exporting
control of operations
advantage of direct exporting
Product Shipment 3 process:
(exporting funtion)
Clearing through Customs
The shipment of the product to the border of the country is usually handled by an independent freight forwarder
Unloaded at the national border, the product will go from the ship or airline to a customs-free depot before being processed through customs
Clearing through Customs
After entering the country, the goods will often require storage
Selling goods in some markets below cost
export option: dumping
Refers to the practice of selling products at home at prices below cost
export option: reverse dumping
An assessment levied on the foreign producer that brings the prices back up over production costs and imposes a fine
The usual penalty for manufactures found to violate antidumping laws
export option: Countervailing Duty
Illegal but common reason for dumping
Entry into a large competitive market by selling at very low prices when a company has overproduced and wants to sell the product in a market where it has no brand franchise
Local Currency
Repatriation, Hedging
Direct Exporting: Payment
Letter of Credit
Converting Funds
Direct Exporting: Payment
Export License
Transferring Title
Direct Exporting: Legal Issues
Hiring an Agent
Direct Exporting: Legal Issues
Often managed by the distributor, aided by the agent
Service, Parts Supply, Training

driect exporting; service
because after-sales service is important – and requires training the decision to establish ______________, staffed with locals and a few top managers from headquarters is often made
a sales subsidiary
Technical licensing
Contract manufacture
Turnkey contracts
types of licensing
Original equipment manufacture
Management contracts
types of licensing
Full-fledged manufacturing
Research and development
Wholly owned manufacturing subsidiary
Distribution alliance
Manufacturing alliance
R & D alliance
Joint venture
Strategic alliance
refers to offering a firm’s know-how or other intangible asset to a foreign company for a fee, royalty, and/or other type of payment
The need for local market research is reduced
The licensee may support the product strongly in the new market
Advantages for the new exporter in licensing
Can lose control over the core competitive advantage of the firm.
The licensee can become a new competitor to the firm
disadvantages for the new exporter in licensing
The basic “product” sold is a well-recognized brand name.
The franchisor provides various market support services to the franchisee
The local franchisee raises the necessary capital and manages the franchise
Careful and continuous quality control is necessary to maintain the integrity of the brand name.
A company enters a foreign market by selling its unbranded product or component to another company in the market country
Original Equipment Manufacturing (OEM)

Typically a collaborative arrangement between firms, sometimes competitors, across borders
Strategic Alliances (SAs)
Canon provides cartridges for Hewlett-Packard’s laser printers
Samsung sells unbranded television sets , microwaves, and VCRs to resellers such as Sears, Amana, and Emerson in the U.S.
examples of OEM
equity or non ?: Joint Ventures
Equity Strategic Alliances
equity or non ?:
Distribution Alliances
Manufacturing Alliances
Research and Development Alliances
Non-equity Strategic Alliances:
Involve the transfer of capital, manpower, and usually some technology from the foreign partner to an existing local firm.
Joint Ventures
Also called “piggybacking”, “consortium marketing”
SAS, KLM, Austrian Air, and Swiss Air
STAR Alliance (United Airlines, Lufthansa, Air Canada, SAS, Thai Airways, and Varig Brazilian Airlines)
Chrysler and Mitsubishi
Distribution Alliances
Examples include Rank-Xerox, 3M-Sumitomo, several China
entries where a government-controlled company is the partner.

This was the typical arrangement in past alliances – the equity investment allowed both partners to share both risks
examples of joint ventures
type of equity that is more common today
Today non-equity alliances are common.
Improved capacity load
Wider product line
Each partner can concentrate on what they do best
Distribution Alliances- advantage
Time arrangement can limit growth for the partners
Can hinder learning more about the market, creating obstacles to further inroads
Distribution Alliances- disadvantage
Inexpensive access to a market
Quick access to a market
Assets are complimentary
Distribution Alliances- advantage
Money saving
Manufacturing Alliances -advantage
The organization must deal with two principals in charge of production, harder to communicate customer feedback
Can put constraints on future growth
Manufacturing Alliances -disadvantage
Provide favorable economics, speed of access, and managerial resources and are intended to solve critical survival questions for the firm
R&D Alliances
Used to be seen as particularly risky, since technological know-how is often the key competitive advantage of a global firm
R&D Alliances
Availability of goods can be guaranteed, delays may be eliminated
More uniform quality of product or service
Manufacturing Subsidiaries-advantage
Higher risk exposure
Heavier pre-decision information gathering & research evaluation
Manufacturing Subsidiaries-disadvantage
Political risk
“Country-of-origin” effects can be lost by manufacturing elsewhere.
Manufacturing Subsidiaries-disadvantage
Local production lessens transport/import-related costs, taxes & fees
Manufacturing Subsidiaries-advantage
Instead of a “greenfield” investment, the company can enter by acquiring an existing local company.
Existing product line and new products to be introduced might not be compatible
Can be looked at unfavorably by the government, employees, or others
Disadvantages- fdi
Speed of penetration
Quick market penetration of the company’s products
advantages- fdi
Firms tend to enter countries close to home culturally and geographically.
Create very natural “biases,” which are not necessarily counterproductive
Cultural Distance⬝ Effect
firms enter markets further away culturally, managers learn more about how to do business internationally.
One rationale for choosing countries to enter
International Learning Curve
Internationalization Stages
Stage 1 and 2
Stage 1 – Indirect exporting, licensing
Stage 2 – Direct exporter, via independent distributor
Internationalization Stages
Stage 3 and 4
Stage 3 – Establishing foreign sales subsidiary
Stage 4 – Local assembly
Internationalization Stages
Stage 5
Stage 5 – Foreign production
Born Globals
Firms that form the outset view of the world as one market
Typically small technology-based businesses
The firm gradually moves into overseas markets
Waterfall Strategy
startegy that it may be too slow in fast-moving market
Waterfall Strategy-disadvantage
startegy that expansion can take place in an orderly manner and it is relatively less demanding in terms of resource requirements
Waterfall Strategy-advantage
strategy that it ismuch quicker way to market penetration across the globe and it generates first-mover advantages
Sprinkler Strategy
strategy that the amount of managerial, financial, and other resources is required
Sprinkler Strategy
The firm tries to enter several country markets simultaneously or within a limited period of time
Sprinkler Strategy
any obstacle making it more difficult for a firm to enter a product/service market
Customs duties enforced on imported products (final products or intermediate products)
Different tariff rates for different countries and different products
May be adjusted by political influence from trade associations
Include all other entry barriers
E.g. transportation costs, slow customs procedures, etc
Limited distribution access
Bureaucratic inertia
Government regulations
Limited access to technology
Local monopolies
Intense competition among several differentiated brands
Strong brand names charging a premium price over generic competitors
Pro-domestic sentiment favoring local brands
Government regulations, limited distribution access, tariff barriers
Competition among differentiated brands, all companies compete on equal footing.
When barriers are ______, the firm will be likely to enter via exporting
When barriers are ______, alternative modes of entry have to be chosen.
License a local producer
Create a joint venture
Engage in a distribution alliance
Invest in a wholly owned subsidiary

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