counterattack these competitors in their home markets to tie up their resource, the company’s customers may be expanding abroad and require international servicing, or international markets may simply provide better opportunities for growth.Before going abroad, the company must weigh several risks and answer many questions about its ability to operate globally: Can the company learn to understand the preferences and buyer behaviour of consumers in other countries? Can it offer competitively attractive products? Will it be able to adapt to other countries’ business cultures and deal effectively with foreign nationals? Do the company’s managers have the necessary international experience? Has management considered the impact of regulations and the political environments of other countries?
Companies must be careful not to spread themselves too thin or expand beyond their capabilities by operating in too many countries too soon.Possible global markets should be ranked on several factors, including market size, market growth, the cost of doing business, competitive advantage, and risk level.Once a company has decided to sell in a foreign country, it must determine the best mode of entry: exporting, joint venturing, anddirect investmentExporting:Entering a foreign market by selling goods produced in the company’s home country, often with little modification.Exporting involves the leastchange in the company’s product lines, organization, investments, or mission.Joint venturing:Entering foreign markets by joining with foreign companies to produce or market products or services. There are four types of joint ventures:oLicensing:A method of entering a foreign market in which the company enters into an agreement with a licensee in the foreign market.oContract manufacturing:A joint venture in which a company contracts with manufacturers in a foreign market to produce its product or provide its service.oManagement contracting:A joint venture in which the domestic firm supplies the management know-how to a foreign company that supplies the capital; the domestic firm exports management services rather than products.oJoint ownership:A joint venture in which a company joins investors in a foreign market to create a local business in which the company shares joint ownership and control.Joint ownership has certain drawbacks, however. The partners may disagree over investment, marketing, or other policies.Direct investment:Entering a foreign market by developing foreign-based assembly or manufacturing facilities; the firm may improve its image in the host country because it creates jobs.The main disadvantage of direct investment is that the firm faces many risks, such as restricted or devalued currencies, falling markets, or government changesStandardized global marketing:An international marketing strategy that basically uses the same marketing strategy and mix in all of the company’s international markets.
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