MKTG 469 Midterm 1 study guide.docx

This increases investment and risk but it also makes

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larger export markets. This increases investment and risk, but it also makes more earning potential Next, the company replaces the export department with an international department or division. If markets are large and stable or the host country requires local production, the company will locate production facilities there At stage 4, the firm is operating as a multinational and optimizing its sourcing, financing, manufacturing and marketing as a global organization - What is the psychic proximity? Can you give an example of the problems that could arise from overemphasizing on psychic proximity? (see review slides). Psychic proximity Many US companies prefer to sell in Canada, the UK, and Australia rather than in larger markets such as China or Indonesia due to the similarities in cultures and language But the benefit of cultural similarity should be balanced against the market size E.g., Air France flies to more African cities than any other non- African airline, but some have argued that Air France has lost out on bigger growth markets in Asia In other words, companies may overlook growing markets Another problem is the overestimation of the degree of similarity between markets Just because foreign consumers speak English, it does not mean the markets operate the same Starbucks’s strategy in the US was to find the best corners in the best markets to locate its stores This approach was too expensive in Britain because real estate prices were higher Psychic-distance paradox This refers to the culture shock experienced by managers entering foreign countries with high psychic proximity May be more common among producers of customized products than among producers of more standardized products - Explain the difference between indirect and direct exporting (see review slides). Indirect exporting The company sells to a buyer (importer or distributor) in the home country, which in turn exports the product Walmart or Sears
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Direct exporting The company sells to a customer in another country Most common among companies taking their first international step because of lower risks of financial loss Difference between them is that, in indirect exporting, markets can be reached through an intermediary located in the exporter’s home country. In direct exporting, markets can be reached through an intermediary located in the foreign market or can be reached directly - Explain the difference between export selling and export marketing (p246, Chapter 8). Export selling Export selling involves selling the same product, at the same price, with the same promotional tools in a different place In other words, export selling does not involve tailoring the product, the price, or the promotional material to suit the requirements of global markets The only marketing mix element that differs is the place (the country where the product is sold) This approach may work for unique products with little or no international competition
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