GLOBAL

Why Firms Go International: Internationalization Drivers

To take advantage of global market opportunities and reach a larger market To keep pace with the competition To increase sales and market share To prolong the product life cycle

Drivers of International Expansion

Competition Regional Economic and Political Integration Technology Improvements in Transportation and Telecommunication Economic Growth and Emerging Market Economies Converging Consumer Needs

Facilitators of International Trade: The World Trade Organization

Largest and most influential international trade organization
Ensures free flow of trade

Functions:
Provides assistance to developing and transition economies Offers help for export promotion Promotes regional trade agreements and economic cooperation Reviews members trade policies and engages in routine notification of new trade measures

The World Trade Organization

WTO agreements represent trade rules and regulations and act as contracts guaranteeing countries trade rights and binding governments to free trade policies.

Facilitators of International Trade: Group of Seven (Eight)G7 (G8)

Members from the most industrialized countries: Canada, France, Germany, Italy, Japan, United Kingdom, United States, and Russia
Yearly meetings involve heads of state, government ministers, and directors of central banks. Addresses: Biotechnology, food safety, economic development, disarmament, arms control, organized crime, drug trafficking, terrorism, environmental issues, and trade

Facilitators of International Trade: The Development Banks

The World Bank
Largest international bank that sponsors economic development Employs international specialists in economics, finance, sectoral development Focus on health and information technology African Development Bank Asian Development Bank European Bank for Reconstruction and Devt Inter-American Development Bank

Regional Economic and Political Integration

Determinants of Integration
Shared culture Shared history Regional proximity Similarity in level of economic development

Types of Integration
Bilateral Agreements, Multilateral Forums and Agreements
General agreements between two or more countries, typically industry specific OPEC, NATO, Commonwealth of Independent States

Customs Union
Trade association that eliminates or greatly reduces all trade restrictions for member countries, also adopts common external tariffs on products imported from outside the area: NAFTA

Common Market
Eliminate all tariff and barriers to trade, adopt common external tariffs, and allow for free movement of capital and labor within the common market: Andean Common Market, Southern Cone Common Market (MERCOSUR)

Types of Integration (cont.)

Monetary Union
Involves a common monetary policy, the creation of a unified central bank, and the use of a single currency: Euroland

Political Union
Common governing and legislative bodies, and enforcement powers: example: European Union

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Religion
Defined as societys relationship to the supernatural and determines dominant values and attitudes Firms must adapt their offering to the local religion.

Culture
Culture influences consumption. Elements of culture vary greatly across countries.

and other obstacles: Government Barriers Local governments control international market entrants using arguments for protectionism: Excess productive capacity Excess labor Infant industry argument and industrialization Natural resources conservation and environmental protection Consumer protection National defense Tariffs, Quotas, Licenses Discourage imports of particular goods Penalize countries that are not politically aligned with the importing country Generate revenues Nontariff barriers are used by countries in the WTO, NAFTA, and EU.

International Competition
Competitors can erect entry barriers to entry. Effective entry barriers include:
Price cuts Blocking distribution channels Binding retailers to exclusive contracts

Levels of International Marketing Involvement

Domestic marketing Export Marketing International marketing

Global marketing

International Entry Mode Selection

Exporting: Either direct or indirect, low risk but low control Licensing: More risks, greater control. Involves a licensor who offers the knowhow or brand name, and a licensee, who pays royalties. Franchising: Is service industrys equivalent of licensing. Joint Ventures: Involve a foreign company joining with a local company to set up a new corporate entity Wholly Owned Subsidiaries: Assumes long-term commitment and has a high level of risks, but can be extremely profitable Branch Offices: Not separate entities, but part of the international company. High level of control and lower risk than subsidiary Strategic Alliance: All joint ventures, licensing, and franchising agreements, as well as low-commitment agreements

The International Marketing Mix

Standardization versus adaptation Product
Country of Origin Effects

Place (Distribution)
Established vs. New Channels

Promotion
Use of English Restrictions

Price
Dumping Parallel imports (gray marketing)

The International Product Lifecycle

Introduction and Growth
MNC manufactures in developed countries, exports to developing countries

Early Maturity
MNC moves production to developing countries, begins importing to home country

Late Maturity
Competitor from developing country exports product to MNC home country.

Decline

Developing countries remain viable target markets; Home-country market is diminishing.

Sales

Time