Global Marketing Management A European Perspective Market Selection

Global Marketing Management A European Perspective Market Selection & Market Entry Alternatives Exporting Warren J. Keegan Bodo B. Schlegelmilch

Overview z Selecting Foreign Markets y. Market Selection Criteria y. A Scoring Model for International Market Selection y. Visiting the Potential Market z Market Entry Alternatives y. Exporting - A Developmental Process y The „Born Globals“ y. Methods of Export Financing z Summary Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 2

Learning Objectives z To identify criteria suitable for the selection of foreign target markets. z To appreciate which market entry alternatives are available to companies. z To recognise export activities as a process developing over time. z To understand different ways of export financing and methods of payment. Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 3

Selecting Foreign Markets z. . . should be based on a number of criteria, for example ymarket-related characteristics, such as product fit, market size and potential, ycost-related aspects, such as transportation costs, ythe regulatory framework ytariffs, duties and non-tariff trade barriers z the importance of these selection criteria depends upon the industry and the markets taken into account Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 4

Critical Questions for a Product-Market Profile: The „ 9 W´s“ 1. Who buys our product? 2. Who does not buy our product? 3. What need or function does our product serve? 4. What problem does our product solve? 5. What are customers currently buying to satisfy the need and/or solve the problem for which our product is targeted? 6. What price are they paying for the products they are currently buying? 7. When is our product purchased? 8. Where is our product purchased? 9. Why is our product purchased? Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 5

A Multi-Stage Selection Process Source: adapted from D. J. G. Schneider, and R. U. Müller, Datenbankgestützte Marktselektion: Eine methodische Basis für Internationalisierungs-strategien, Stuttgart, 1989 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 6

A Scoring Model for International Market Selection Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 7

Visiting the Potential Market z. . . is essential after assessment and selection of potential market(s) z goals: yto confirm (or contradict) assumptions regarding market potential yto gather additional (primary) data; eg meeting potential distributors face to face yto develop a marketing plan in co-operation with the local agent or distributor Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 8

Market Entry Alternatives Source: Adapted from Günther Müller-Stewens and Christoph Lechner, ”Unternehmensindividu elle und gastlandbezogene Einflußfaktoren der Markteintrittsformen, ” in: Klaus Macharzina and Michael-Jörg Oesterle (eds. ), Handbuch Internationales Management, Gabler, Wiesbaden, 1997, p. 237; Gunter Stahr, Auslandsmarketing, Vol. 1, Kohlhammer, Stuttgart, 1979, p. 162 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 9

Direct Exporting z Direct market representation yvia wholesalers or retailers or directly to the consumers z Independent representation yindependent distributor z Piggyback marketing ydistribution through another distributor´s channel Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 10

Exporting: A Developmental Process The firm 1. . is unwilling to export. 2. . fills unsolicited export orders (export seller). 3. . explores the feasibility of exporting (this stage may bypass stage 2). 4. . exports to one or more markets on a trial basis. 5. . is an experienced exporter to one or more markets. 6. . pursues country or region focused marketing. 7. . evaluates the global market potential. All markets, domestic and international, are regarded as equally worthy of consideration. Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 11

The „Born Globals“ z = global start-ups = international new ventures z. . . do not follow the traditional developmental process z. . . are small firms which, at a very early stage of their business, already target international markets z. . . are innovative and take advantage of new technologies to excel in service to their customers z. . . in most cases achieve more than a quarter of their sales in foreign markets after 2 years in business Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 12

Export-Related Problems z Logistics z Legal procedure z Servicing exports z Sales promotion z Foreign market intelligence Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 13

The World’s Leading Exporting and Importing Nations Source: „World Trade Growth Accelerated in 1997, Despite Turmoil in Some Asian Financial Markets“, World Trade Organisation 1998 Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 14

Market Entry Decision: 3 Key Questions 1. How many resources and what investment are necessary to enter the market? 2. How much control of activities in the foreign market is desired? 3. How much market knowledge can the manufacturer gain by a specific market entry alternative? Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 15

Methods of Export Financing/ Methods of Payment Non-Documentary Payments Payment against Documents Electronic Funds Transfer Cheques Payments in Cash. . . Documentary Collection Letter of Credit. . . Short-Term Financing Bank Guarantees Bid Bonds Performance Bonds Down Payment Guarantees. . Countertrade Barter Counterpurchase Offset Compensation Trading Cooperation Agreements Hybrid Countertrade Arrangements Switch Trading Middle to Long-Term Financing Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 16

Methods of Export Financing Examples: z Letter of credit: Substitutes a bank’s creditworthiness for that of the buyer. Issued by the bank on behalf of the buyer to a seller, it assures payment if the seller complies with the terms set forth in the letter of credit. z Countertrade: Full or partial payment is taken in some form other than money. It flourishes when hard currency is scarce. Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 17

Summary z The choice of potential foreign markets must be based on a thorough evaluation of criteria which influence the potential success abroad; eg market potential, market access, or product fit. z Once the potential foreign target market(s) is selected, a company has to decide how to enter this market. The options range from exporting to a wholly owned susidiary. The 3 key criteria: resources, control and market knowledge. Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 8 / 18