Initiation of internationalization

Learning objectives

• Discuss the reason why firms go international

• Explain the difference between proactive and reactive motives
• Analyse the triggers of export initiation

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 Learning objectives
• Explain the difference between internal and external triggers of
export initiation
• Describe different factors hindering export initiation
• Discuss the critical barriers in the process of exporting

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Marketing and
Global Marketing Defined
• Marketing: “the activity, set of institutions, and
processes for creating, communicating, delivering,
and exchanging offerings that have value for
customers, clients, partners, and society at large”
• Marketing Mix: The 4 Ps
• Global Marketing: The scope of activities outside the
home market

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What is Global Marketing

• Global vs. “Regular” Marketing

- Scope of activities are outside the home-country market

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Value Chain and Value Proposition

• Value Chain • Value Proposition

Marketing, along • Perceived value to
with all other the customer
functional business • The firm’s promise to
the customer
areas, create value
for the customer

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Customer Perceived Value

• Create value for customers by improving

benefits or reducing price
– Improve the product
– Find new distribution channels
– Create better communications
– Cut monetary and non-monetary costs and prices

Value=Benefits/
Price

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Globalization
“Economic globalization constitutes
integration of national economies into the
international economy through trade, direct
foreign investment (by corporations and
multinationals), short-term capital flows,
international flows of workers and humanity
generally, and flows of technology.”

~Jagdish Bhagwati~
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Global Industries
• An industry is global to the extent that a company’s
industry position in one country is interdependent
with its industry position in another country
Indicators of globalization:
• Ratio of cross-border investment to total
capital investment
• Proportion of industry revenue generated
by all companies that compete in key
world regions
• Ratio of cross-border trade to worldwide
production

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 Competitive Advantage
• When a company succeeds in creating more value for customers than
its competitors do
• Measured relative to industry rivals
• “Created when a firm has value-creating strategy not simultaneously
being implemented by an current or potential competitors.” ~ Jay
Barney

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Competitive Advantage, Globalization
& Global Industries
• Focus
• Concentration and attention on core business and
competence

“Nestle is focused: We are food and beverages. We are not

running bicycle shops. Even in food we are not in all fields.
There are certain areas we do not touch…We have no soft
drinks because I have said we will either buy Coca-Cola or
we leave it alone. This is focus.”

~Helmut Maucher, former chairman

of Nestlé
SA~
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GLOBAL MARKETING: What It Is
& What It Isn’t
Single Country Global Marketing
Marketing Strategy Strategy

• Target Market Strategy • Global Market Participation

• Marketing Mix Development
• Marketing Mix
• 4 P’s: Adapt or Standardize?
• Product
• Concentration of Marketing
• Price
Activities
• Promotion
• Coordination of Marketing
• Place
Activities
• Integration of Competitive Moves

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Standardization Vs. Adaptation
• Globalization (Standardization)
– Developing standardized products marketed worldwide
with a standardized marketing mix
– Essence of mass marketing

• Global localization (Adaptation)

– Mixing standardization and customization in a way that
minimizes costs while maximizing satisfaction
– Essence of segmentation
– Think globally, act locally

Copyright © 2017 Pearson Education, Ltd.

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Stages of internationalization

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 Motives
for internationalization
Proactive
Reactive
• Competitive
Profit and growth
pressures
goals
• Managerial
Domestic market
urge
• Technology competence
Overproduction
• Foreign market
Unsolicited foreign
opportunities
orders
• Economies
Extend salesofofscale
seasonal products
• Tax benefits
Proximity to international customers

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 Haier Group responded to
proactive and reactive motives

Source: http://www.haier.com/
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 What is this?

Internal or external events taking place to

initiate internationalization are known as
______.

Internationalization triggers

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 Triggers of export initiation
External triggers
Internal triggers
• Market
Perceptive
demand
management
• Competing
Specific internal
firmsevent
• Trade
Importing
associations
as inward internationalization
• Outside experts

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Inward/outward internationalization

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 Outside experts

Export
agents

Banks Governments

Chambers
of commerce

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 Barriers hindering
export initiation
• Lack
Insufficient
of productive
finances
capacity
• Lack
Insufficient
of foreign
knowledge
channels of distribution
• Management
Lack of foreignemphasis
market connections
on developing domestic markets
• Cost
Lack escalation
of export commitment
• Lack of capital

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 Barriers hindering the
process of internationalization

General market risks

Commercial risks

Political risks

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 General market risks

• Comparative market risks

• Competition from other firms
• Differences in product usage
• Language and cultural differences
• Difficulties in finding the right distributor
• Differences in product specifications
• Complexity of shipping services

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 Commercial risks

• Exchange rate fluctuations

• Failure of export customers to pay due to contract disputes,
bankruptcy, refusal to accept product, or fraud
• Delays and/or damage in the export shipment and distribution
process
• Difficulties in obtaining export financing

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 Political risks

• Foreign government restrictions

• National export policy
• Foreign exchange controls imposed by host governments
• Lack of governmental assistance in overcoming export barriers
• Lack of tax incentives

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 Political risks
• High value of domestic currency relative to export
markets
• High foreign tariffs on imported products
• Confusing foreign import regulations and procedures
• Complexity of trade documentation
• Enforcement of national legal codes regulating
exports
• Civil strife, revolution, and wars disrupting foreign
markets

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Risk-management strategies

Avoid exporting to high-risk markets

Diversify overseas markets

Insure risks when possible

Structure export business so that buyer bears most risk

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 For discussion
• Export motives can be classified as reactive or proactive. Give
examples of each group of export motives. How would you prioritize
these motives? Can you think of motives other than those
mentioned in the chapter? What are they?
• What is meant by ‘change agents’ in global marketing? Give
examples of different types of change agent.

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