Global Marketing Management A European Perspective

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Global MarketingManagementA European Perspective
Market Selection Market Entry Alternatives -
Exporting

• Warren J. Keegan
• Bodo B. Schlegelmilch

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Overview

• Selecting Foreign Markets
• Market Selection Criteria
• A Scoring Model for International Market
  Selection
• Visiting the Potential Market
• Market Entry Alternatives
• Exporting - A Developmental Process
• The Born Globals
• Methods of Export Financing
• Summary

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Learning Objectives

• To identify criteria suitable for the selection
  of foreign target markets.
• To appreciate which market entry alternatives are
  available to companies.
• To recognise export activities as a process
  developing over time.
• To understand different ways of export financing
  and methods of payment.

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Selecting Foreign Markets

• ... should be based on a number of criteria, for
  example
• market-related characteristics, such as product
  fit, market size and potential,
• cost-related aspects, such as transportation
  costs,
• the regulatory framework
• tariffs, duties and non-tariff trade barriers
• the importance of these selection criteria
  depends upon the industry and the markets taken
  into account

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Critical Questions for a Product-Market Profile
The 9 Ws

• 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?

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A Multi-Stage Selection Process
Source adapted from D.J.G. Schneider, and R.U.
Müller, Datenbankgestützte Marktselektion Eine
methodische Basis für Internationalisierungs-strat
egien, Stuttgart, 1989
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A Scoring Model for International Market
Selection
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Visiting the Potential Market

• ... is essential after assessment and selection
  of potential market(s)
• goals
• to confirm (or contradict) assumptions regarding
  market potential
• to gather additional (primary) data eg meeting
  potential distributors face to face
• to develop a marketing plan in co-operation with
  the local agent or distributor

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Market Entry Alternatives
Source Adapted from Günther Müller-Stewens and
Christoph Lechner, Unternehmensindividuelle 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
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Direct Exporting

• Direct market representation
• via wholesalers or retailers or directly to the
  consumers
• Independent representation
• independent distributor
• Piggyback marketing
• distribution through another distributors channel

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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.

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The Born Globals

• global start-ups international new ventures
• ... do not follow the traditional developmental
  process
• ... are small firms which, at a very early stage
  of their business, already target international
  markets
• ... are innovative and take advantage of new
  technologies to excel in service to their
  customers
• ... in most cases achieve more than a quarter of
  their sales in foreign markets after 2 years in
  business

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Export-Related Problems

• Logistics
• Legal procedure
• Servicing exports
• Sales promotion
• Foreign market intelligence

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The Worlds Leading Exporting and Importing
Nations
Source World Trade Growth Accelerated in 1997,
Despite Turmoil in Some Asian Financial Markets,
World Trade Organisation 1998
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Market Entry Decision3 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?

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Methods of Export Financing
Short
-
Term Financing
Middle
to
Long
-
Term Financing
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Methods of Export Financing

• Examples
• Letter of credit Substitutes a banks
  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.
• Countertrade Full or partial payment is taken in
  some form other than money. It flourishes when
  hard currency is scarce.

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Summary

• 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.
• 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.