To create Foreign market entry for taking an American Consumer product into a Fo
ID: 458737 • Letter: T
Question
To create Foreign market entry for taking an American Consumer product into a Foreign market using 8 outlines:
1. Size of market
2. Sociocultural acceptance of product.
3.Legal/Bureaucratic environment.
4.Competetion in Market.
5. Economic and political Climate for foreign business.
6. Methods of marketing adn distribution.
7. Managerial and labour climatic.
8. Financial Viability.
It should cover all the outline topics and it should be 20 pages double spaced Examples are maps of country tables and Charts.
Explanation / Answer
To create a foreign market entry for taking an American consumer product into a foreign market based on the following outlines are as follows:
As far as the size of the market is concerned, we are working on a foreign market. Thus, the size is diverged in all the verticals.
The decision of how to enter a foreign market can have a significant impact on the results. Expansion into foreign markets can be achieved via the following four mechanisms:
Exporting
Licensing
Joint Venture
Direct Investment
Exporting
Exporting is the marketing and direct sale of domestically-produced goods in another country. Exporting is a traditional and well-established method of reaching foreign markets. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses.
Exporting commonly requires coordination among four players:
Exporter
Importer
Transport provider
Government
Licensing
Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, and production techniques. The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance.
Because little investment on the part of the licensor is required, licensing has the potential to provide a very large ROI. However, because the licensee produces and markets the product, potential returns from manufacturing and marketing activities may be lost.
Joint Venture
There are five common objectives in a joint venture: market entry, risk/reward sharing, technology sharing and joint product development, and conforming to government regulations. Other benefits include political connections and distribution channel access that may depend on relationships.
Such alliances often are favorable when:
the partners' strategic goals converge while their competitive goals diverge;
the partners' size, market power, and resources are small compared to the industry leaders; and
partners' are able to learn from one another while limiting access to their own proprietary skills.
The key issues to consider in a joint venture are ownership, control, length of agreement, pricing, technology transfer, local firm capabilities and resources, and government intentions.
Potential problems include:
conflict over asymmetric new investments
mistrust over proprietary knowledge
performance ambiguity - how to split the pie
lack of parent firm support
cultural clashes
if, how, and when to terminate the relationship
Joint ventures have conflicting pressures to cooperate and compete:
Strategic imperative: the partners want to maximize the advantage gained for the joint venture, but they also want to maximize their own competitive position.
The joint venture attempts to develop shared resources, but each firm wants to develop and protect its own proprietary resources.
The joint venture is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control.
Foreign Direct Investment
Foreign direct investment (FDI) is the direct ownership of facilities in the target country. It involves the transfer of resources including capital, technology, and personnel. Direct foreign investment may be made through the acquisition of an existing entity or the establishment of a new enterprise.
Direct ownership provides a high degree of control in the operations and the ability to better know the consumers and competitive environment. However, it requires a high level of resources and a high degree of commitment.
2. Socio culture adaptations of the product:
It depends on the following factors:
Culture is the way that we do things around here. Culture could relate to a country (national culture), a distinct section of the community (sub-culture), or an organization (corporate culture). It is widely accepted that you are not born with a culture, and that it is learned. So, culture includes all that we have learned in relation to values and norms, customs and traditions, beliefs and religions, rituals and artefacts (i.e. tangible symbols of a culture, such as the Sydney Opera House or the Great Wall of China).
Values and Attitudes
Values and attitudes vary between nations, and even vary within nations. So if you are planning to take a product or service overseas make sure that you have a good grasp the locality before you enter the market. This could mean altering promotional material or subtle branding messages. There may also be an issue when managing local employees. For example, in France workers tend to take vacations for the whole of August, whilst in the United States employees may only take a couple of week’s vacation in an entire year.
3. Legal/Bureaucratic environment:
The legal/political aspect is very important in global marketing. "International law" can be defined as rules and principles that states and nations consider binding upon themselves. This raises two interesting characteristics of international law. The first is that "law" belongs to individual nations and international law only exists to the degree that individual nations are willing to relinquish their rights. The second is the lack of an adequate international judicial and administrative framework or a body of law which would form the basis of a truly comprehensive international legal system.
The international business is also subject to political decrees made by governments both in "home" and "host" countries. Home governments can apply pressure not to deal with disapproved parties. These measures may take the refusal to grant an export licence, or withdrawal of export guarantee cover. The host government may take measures like taxation, ownership controls, operating restrictions or expropriation.
Objectives
The objectives are:
· To give an understanding of the major factors which must be considered in the legal/political environment when planning to market globally
· To describe the "Terms of Access" and show the importance of these as vital elements of facilitating trade
· To give, in detail, a description of the main elements of the latest GATT Round
· To show the importance of legal/political aspects in global marketing.
By looking at the major factors which the marketer must consider in assessing vulnerability to the legal/political environment. It then goes on to describe in detail the major elements of the legal environment and Terms of Access, including both tariff and non tariff barriers. A major section of the chapter is devoted to the main provisions of the new GATT Round (1995) and an assessment of its impact on the global marketer.
Laws, rules, and standards
All agricultural exports operate within an institutional environment, which is made up of a set of political, social and legal ground rules. These ground rules form the laws of all production, exchange and distribution and give rise to certain expectations and assurances about the actions of others, and give order and stability to the means of doing business. The most important rules in any system are those defining, allocating and enforcing property rights, and rules and conventions defining allowable and non-allowable forms of cooperation and competition (standards, rules of contract, fair trading etc). Well defined and enforced systems regarding property rights are essential. Articulated ownership and rights to use, trade and alter assets is vital to market development, since this assigns to individuals the right to benefits and losses in production and marketing activities.
4. Competition in Market:
As protectionist barriers crumble in emerging markets around the world, multinational companies are rushing in to find new opportunities for growth. Their arrival is a boon to local consumers, who benefit from the wider choices now available. For local companies, however, the influx often appears to be a death sentence. Accustomed to dominant positions in protected markets, they suddenly face foreign rivals wielding a daunting array of advantages: substantial financial resources, advanced technology, superior products, powerful brands, and seasoned marketing and management skills. Often, the very survival of local companies in emerging markets is at stake.
Strategists at multinational corporations can draw on a rich body of work to advise them on how to enter emerging markets, but managers of local companies in these markets have had little guidance. How can they overcome—and even take advantage of—their differences with competitors from advanced industrial countries? Many of these managers assume they can respond in one of only three ways: by calling on the government to reinstate trade barriers or provide some other form of support, by becoming a subordinate partner to a multinational, or by simply selling out and leaving the industry. We believe there are other options for companies facing stiff foreign competition.
In markets from Latin America to Eastern Europe to Asia, we have studied the strategies and tactics that successful companies have adopted in their battles with powerful multinational competitors. Vist in Russia and Shanghai Jahwa in China, for example, have managed to successfully defend their home turfs against such multinationals as Compaq and Unilever. Others, including Jollibee Foods in the Philippines and Cemex in Mexico, have built on strength at home and launched international expansion strategies of their own. By studying these examples, managers of other companies from emerging markets can gain insight into their own strategic options.
5. Economic and political Climate for foreign business:
A country may operate in a market economy where private individuals own most of the property and operate most of the businesses. A market economy is usually the best economic environment for a foreign business because of the protection of private property and contract rights.
Some countries lean more towards a socialist economy where many industries and businesses are owned by the state. Operating businesses in this environment will be more difficult, but products can still be produced and sold as people still pick their jobs and earn money.
A few countries operate under a communistic economic system where the state pretty much controls all aspects of the economy. Conducting business in this environment ranges from difficult to impossible.
Of course, the reality is that all economies are mixed economies that take parts from two or more of the 'pure' economic systems. For example, you can conduct business in communist China in Hong Kong and other special areas where a market economy is allowed to operate.
Businesses also must often contend with different governmental systems. Examples include democracies, authoritarian governments, and monarchies. Some governments are easier to work with than others. Democracies, for example, are answerable to their citizens and the rule of law.
Authoritarian regimes are usually answerable to no one, including the law. It is less risky to conduct business in democracies and constitutional monarchies, a monarchy with a constitution that protects the public and subjects the monarch to the rule of law, than in countries with authoritarian regimes.
The next major factor is trade agreements. Countries often enter into trade agreements to help facilitate trade between them. If your country has entered into a trade agreement with another country, conducting business in that country will usually be easier and less risky because the trade agreement will provide some predictability and protection. One great advantage, for example, is that your products will be subjected to fewer trade barriers that serve as obstacles to exporting your products into the country.
A trade barrier is simply anything that makes it harder for a company to export products to a foreign country. Formal trade barriers are enacted by governments for the purpose of restricting imports to protect a country's domestic industries. Formal trade barriers include tariffs, which are taxes on imports that helps make domestic products more competitive, and product quotas that limit the number of products imported into the country.
Businesses may also have to deal with informal trade barriers. Governments may impose regulations that aren't primarily promulgated as barriers to trade but have the same effect. Examples can include specific product standards and health and safety standards that businesses will be required to meet before the products can be sold.
6. Methods of marketing and distribution:
The methods for marketing and distribution of such products can be done by using the tools of foreign market entry modes as explained.
7. Managerial and labor climatic conditions:
CEOs and top management teams of large corporations, particularly in North America, Europe, and Japan, acknowledge that globalization is the most critical challenge they face today. They are also keenly aware that it has become tougher during the past decade to identify internationalization strategies and to choose which countries to do business with. Still, most companies have stuck to the strategies they’ve traditionally deployed, which emphasize standardized approaches to new markets while sometimes experimenting with a few local twists. As a result, many multinational corporations are struggling to develop successful strategies in emerging markets.
Part of the problem, we believe, is that the absence of specialized intermediaries, regulatory systems, and contract-enforcing mechanisms in emerging markets—“institutional voids,” we christened them in a 1997 HBR article—hampers the implementation of globalization strategies. Companies in developed countries usually take for granted the critical role that “soft” infrastructure plays in the execution of their business models in their home markets. But that infrastructure is often underdeveloped or absent in emerging markets. There’s no dearth of examples. Companies can’t find skilled market research firms to inform them reliably about customer preferences so they can tailor products to specific needs and increase people’s willingness to pay. Few end-to-end logistics providers, which allow manufacturers to reduce costs, are available to transport raw materials and finished products. Before recruiting employees, corporations have to screen large numbers of candidates themselves because there aren’t many search firms that can do the job for them.
Because of all those institutional voids, many multinational companies have fared poorly in developing countries. All the anecdotal evidence we have gathered suggests that since the 1990s, American corporations have performed better in their home environments than they have in foreign countries, especially in emerging markets. Not surprisingly, many CEOs are wary of emerging markets and prefer to invest in developed nations instead. By the end of 2002—according to the Bureau of Economic Analysis, an agency of the U.S. Department of Commerce—American corporations and their affiliate companies had $1.6 trillion worth of assets in the United Kingdom and $514 billion in Canada but only $173 billion in Brazil, Russia, India, and China combined. That’s just 2.5% of the $6.9 trillion in investments American companies held by the end of that year. In fact, although U.S. corporations’ investments in China doubled between 1992 and 2002, that amount was still less than 1% of all their overseas assets.
Many companies shied away from emerging markets when they should have engaged with them more closely. Since the early 1990s, developing countries have been the fastest-growing market in the world for most products and services. Companies can lower costs by setting up manufacturing facilities and service centers in those areas, where skilled labor and trained managers are relatively inexpensive. Moreover, several developing-country transnational corporations have entered North America and Europe with low-cost strategies (China’s Haier Group in household electrical appliances) and novel business models (India’s Infosys in information technology services). Western companies that want to develop counterstrategies must push deeper into emerging markets, which foster a different genre of innovations than mature markets do.
If Western companies don’t develop strategies for engaging across their value chains with developing countries, they are unlikely to remain competitive for long. However, despite crumbling tariff barriers, the spread of the Internet and cable television, and the rapidly improving physical infrastructure in these countries, CEOs can’t assume they can do business in emerging markets the same way they do in developed nations. That’s because the quality of the market infrastructure varies widely from country to country. In general, advanced economies have large pools of seasoned market intermediaries and effective contract-enforcing mechanisms, whereas less-developed economies have unskilled intermediaries and less-effective legal systems. Because the services provided by intermediaries either aren’t available in emerging markets or aren’t very sophisticated, corporations can’t smoothly transfer the strategies they employ in their home countries to those emerging markets.
8. Financial Viability:
may not be able to deliver the goods and services which are specified in the contract; or
may not be able to fulfil guarantees or warranties provided for in the contract.
Assessing Project Financial Viability Risk
The nature of the goods or services: level of complexity
Projects involving a complex procurement, such as payroll services and centralised information technology services, are higher risk than simple supplies procurements. More complex, high value and relatively important projects will normally be subject to a formal risk management process. This should include consideration of the need for and scope of financial viability assessment.
Value of the procurement
Projects involving a large value procurement are generally more risky than those involving a small value procurement. However, procurement value should not be used as the sole indicator of project risk.
In assessing financial viability risk, the value of a procurement within a project should be considered both in the context of relative value to the entity, and in the context of relative value to the likely tenderers or potential suppliers.
Other factors
general economic factors;
the tightness of the labour market;
levels of demand for the required service;
understanding of profit margins in the relevant industry;
maturity of the relevant industry; and
the capacity of businesses to supply.
Thus, these are the basic outlines for a foreign product to enter into a foreign market for the first time as a new entrant.
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