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Unformatted text preview: USC Marketing 307 #13 Global Marketing
1. Model. Global Marketing involves Domestic, Pipeline, and Foreign issues. Domestic marketing issues are what have been covered in this course so far.
Domestic Pipeline Foreign If the difficulty of doing business in the domestic market is d, doing business in foreign markets is d3 . 2. Enormous Market. EU 457 million and growing, EFTA 12.7 million, Former Soviet Bloc 400 million, Japan 127 million, China+India = 2.3 billion, SE and other Asia, Africa, South America, Other North America, Australia/New Zealand, Middle-East. Pipeline Issues. 3-1. Time zones and jet lag. One day for every hour of time difference. 3-2. Special packaging. For shipment over sea or via air freight. 3-3. Shipping costs and delivery times. Much larger and longer. 3-4. Currency fluctuations. Can make a profitable transaction unprofitable. 3-5. Travel times and expenses. Longer and larger. 3-6. Communications charges. More expensive for non-Internet or VoIP. 3-7. Weather interference. Can delay or prohibit delivery. 3-8. Customs, duties, tariffs, work permits. Can make price non-competitive. 3-9. Intermediaries. Freight forwarders, Customs house brokers, Banks, Insurance
companies, Customs officials. USA 295 million. 3. The difficulty comes from the part of the foreign + pipeline "iceberg" that is beneath the surface and not easy to see. Businesses often get into trouble because they forget the pipeline issues, which end up killing them. 3-10. Paperwork. Whereas a domestic transaction typically involves a sales order
and invoice, the average oversees transaction has 35 documents and 360 pages. 2006 Ira S. Kalb. All rights reserved. 1 USC Marketing 307 #13 Global Marketing
4. Foreign Issues. 4-1. Cultural. Language, time frames, customs, conversational distances and volumes, directional orientations, histories and hatreds, religion, body language, verbal and non-verbal communications, names and numbers, time frames, and meals. 4-2. Political. Transparency, risk assessment, nationalization record, civil/human rights, stability, climate. 4-3. Legal. Contracts; jurisdiction; language; court; patent, trademark, and ; payment methods and terms; binding arbitration. 4-4. Financial. Protecting assets, Irrevocable LC, Paid in hard currency, currency fluctuation protection, inflation, accounting practices, banking relationships. 4-5. Infrastructure. Utilities, Banking, Security, Legal, Government, Taxation. 4-6. Currency. Fluctuation and payment in hard currency. 4-7. Do your homework (part of your MIS). Investigate any foreign region with which you are thinking of doing business. 4-8. Employ people from that region educated in your country. It is best to employ, or use a distribution network comprised of, people who know the above issues really well. 4-9. Respect. Treat people with respect. Don t look down on anyone. 2006 Ira S. Kalb. All rights reserved. In England, Japan, ... they drive and walk on the left side of the road or walk. In many Far Eastern cultures, the number 4 means death as does the color green. Best to be paid in domestic currency to avoid fluctuation. Second best to be paid in hard currencies. $, , , . Conduct research using the Embassies and Consulates of target regions, Department of Commerce, CIA, Conference Board, World Bank, IMF, Large international banks (Bank Crdit Suisse) and insurance companies (Lloyd's of London) resources on the Internet and elsewhere. 2 USC Marketing 307 #13 Global Marketing
5. Country Economy Categories. 5-1. Developed countries (DCs). Include US, Japan, technicallydeveloped countries of Europe, Israel, English-speaking countries (Canada, Australia, and New Zealand), South Korea1, Singapore1. 5-2. Newly-Industrialized economies (NIEs). A subgroup of developing countries that have experienced rapid industrialization of their economies. Hong Kong, Taiwan, India, Argentina, Mexico, Brazil. 5-3. Newly Independent States (NIS). The successor states to the former Soviet Union (Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan,Turkmenistan,Ukraine, and Uzbekistan). 5-4. Lesser Developed Countries (LDCs). The "less developed"
countries include all of Africa, all of Asia except Japan, the Transcaucasian and Central Asian republics of the NIS, all of Latin America and the Caribbean, and all of Oceania except Australia and New Zealand. This category matches the "less developed country" classification employed by the United Nations. "Less developed" countries are also referred to in the report as "developing" countries.
Colored world map indicating Human Development Index (as of 2003). Countries colored yellow/orange exhibit medium human development, and those colored red exhibit low human development. Wikipedia. 2006 Ira S. Kalb. All rights reserved. World Bank, the International Monetary Fund (IMF) and the Central Intelligence Agency, generally agree that the group of developed countries based on the Human Development Index (HDI) of over 0.9 as well as the size of their economies. on the criteria used, South Korea and Singapore are sometimes put in the NIC category.
A developing country is a country with a relatively low standard of living, undeveloped industrial base, and moderate to low Human Development Index (HDI). The term has tended to edge out earlier ones, including the Cold War-defined "Third World".
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6. Ways of Doing Business in a Foreign Region. 6-1. License. The owner of the product or idea, called the licenser, allows the licensee to manufacture and market the product in a given market territory in exchange for a license fee. 6-2. Foreign Distributor. Contract with best distributors + manufacturer s reps who operate in the foreign market and know the local turf. 6-3. Joint Venture. Set up a joint venture with a foreign company, individual, or government who has considerable experience and contacts in doing business in that territory. Both parties share ownership and management of joint-venture offspring. 6-4. Sales/Marketing Operation. Open your own foreign sales branch in the foreign territory. 6-5. Wholly owned Subsidiary. domestic company establishes its own manufacturing and marketing presence in a foreign territory. 6-6. Multinational Corporation. Operates internationally, has a headquarters in one country with large operations and significant business in other countries. 6-7. Direct. With the advent of new communications and transportation technology, it is becoming feasible for companies to sell their products direct to foreign buyers via the Internet, catalogues, direct mail, trade shows, and other direct methods.
Overseas shipment of physical goods is expensive but any product that can be in electronic form (consulting and legal advice, books, music, movies, videos) can be easily sold around the world.
4 It is best to get a fully paid-up license so you don't have to police the transaction. A good place to identify and meet the best resellers are major global trade shows. 2006 Ira S. Kalb. All rights reserved. USC Marketing 307 #13 Global Marketing
7. Protecting your Foreign Assets. 7-1. Irrevocable Letter of Credit. Do business overseas on a pre-paid, cash or Irrevocable Letter of Credit basis. 7-2. Transfer assets to your home country. Keep minimal financial assets in the foreign country and transfer large balances quickly. 7-3. Get paid your you domestic currency. This will eliminate losses from currency fluctuations, but you may be able to make money if the foreign currency is moving up relative to the domestic currency. 7-4. Keep assets liquid. Liquid assets can be moved quickly. 7-5. Do business with reputable companies only. Doing business with well-intentioned organizations will avoid problems. 7-6. Maintain good relations with foreign governments and agencies. Good relations with the governments can save you from a lot of trouble. You do this by marketing to them too. They are one of your publics. 7-7. Maintain good relations with international organizations. The World Bank, IMF, Conference Board, and other international organizations have departments and people who can help you out of a jam. 7-8. Risk Reward. Make sure the risk/reward ratio is favorable wherever you do business so you are compensated for greater risk. 7-9. Incentives. Get incentives and subsidies from the governments. 7-10. Risk Management. Have a good risk management plan (insurance). 2006 Ira S. Kalb. All rights reserved. An ILC means that as soon as the goods leave your dock, your customer's bank pays your bank for the transaction. Marketing needs to be done to Governments as important publics. Governments give businesses incentives to create jobs and transfer skills -- i.e. Ireland. Minimize the risk and cover the balance with insurance.
5 USC Marketing 307 #13 Global Marketing
8. Outsourcing. Due to increasing labor costs, many skilled jobs are outsourced. 8-1. Focus on quality. Outsourcing works if the quality of product and service does not deteriorate. 8-2. Make goals and strategies clear. The outsource company needs to know your marketing plan and how they fit in. 8-3. Market to your publics. Be sure you know how to communicate your outsourcing as a benefit to labor unions, government officials, your customers and other constituencies. 8-4. Keep good communications with outsourced resources. You need to market to the employees of the outsourced company. 8-5. Train outsourced resources. Make sure outsourced resources are trained to understand your products, company, policies and procedures. 8-6. Maintain good relations with foreign governments and agencies. Good relations with the governments can save you from a lot of trouble. You do this by marketing to them too. They are one of your publics. 8-7. Expect to use your rumor and fact procedures. From Session #4, number 7, you will have to use both rumor and fact procedures to protect your image when the media, unions or others decide to use your outsourcing against you. 9. Benefit from Global business. Global marketing will continue to grow rapidly. Those who know how to do it properly will be the winners.
6 Too many companies just look at the obvious labor costs, but forget about the others. You need to compare the total cost. The highest cost to any business is losing customers. The late, great Peter Drucker says, jobs are lost because of lowered demand not automation, or outsourcing. 2006 Ira S. Kalb. All rights reserved. ...
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- Fall '08