Unit18.

InternationalMarketplaceInternationalMarketplaceOnceacompanyhasdecidedtosellinaforeigncountry,itmustdeterminethebestmodeofentry.Itschoicesareexporting,jointventuring,anddirectinvestment.Figure18.1showsthreemarketentrystrategies,alongwiththeoptionseachoneoffers.Asthefigureonthenextchartshows,eachsucceedingstrategyinvolvesmorecommitmentandrisk,butalsomorecontrolandpotentialprofits.3DecidingHowtoEntertheMarket(SeeP306Fig.19.1)ExportingIndirectDirectJointventuring（JV）LicensingContractmanufacturingManagementContractingJointOwnershipDirectinvestmentAssemblyfacilitiesManufacturingfacilitiesAmountofCommitment,risks,controlandprofitpotentialinvolved

ExportingExportingisthesimplestwaytoenteraforeignmarketisthroughexporting.Thecompanymaypassivelyexportitssurplusesfromtimetotime,oritmaymakeanactivecommitmenttoexpandexportstoaparticularmarket.Ineithercase,thecompanyproducesallitsgoodsinitshomecountry.Itmayormaynotmodifythemfortheexportmarket.Exportinginvolvestheleastchangeinthecompany'sproductlines,organization,investments,ormission.Companiestypicallystartwithindirectexporting,workingthroughindependentinternationalmarketingintermediaries.Indirectexportinginvolveslessinvestmentbecausethefirmdoesnotrequireanoverseassalesforceorsetofcontacts.Italsoinvolveslessrisk.Internationalmarketingintermediaries—domestic-basedexportmerchantsoragents,cooperativeorganizations,andexport-managementcompanies—bringknow-howandservicestotherelationship,sothesellernormallymakesfewermistakes.Sellersmayeventuallymoveintodirectexporting,wherebytheyhandletheirownexports.Theinvestmentandriskaresomewhatgreaterinthisstrategy,butsoisthepotentialreturn.Acompanycanconductdirectexportinginseveralways:Itcansetupadomesticexportdepartmentthatcarriesoutexportactivities.Itcansetupanoverseassalesbranchthathandlessales,distribution,andperhapspromotion.Thesalesbranchgivesthesellermorepresenceandprogramcontrolintheforeignmarketandoftenservesasadisplaycenterandcustomerservicecenter.Thecompanycanalsosendhome-basedsalespeopleabroadatcertaintimesinordertofindbusiness.Finally,thecompanycandoitsexportingeitherthroughforeign-baseddistributorswhobuyandownthegoodsorthroughforeign-basedagentswhosellthegoodsonbehalfofthecompany.

JointVenturingAsecondmethodofenteringaforeignmarketisjointventuring—joiningwithforeigncompaniestoproduceormarketproductsorservices.Jointventuringdiffersfromexportinginthatthecompanyjoinswithahostcountrypartnertosellormarketabroad.Itdiffersfromdirectinvestmentinthatanassociationisformedwithsomeoneintheforeigncountry.Therearefourtypesofjointventures:licensing,contractmanufacturing,managementcontracting,andjointownership.Licensinghaspotentialdisadvantages,however.Thefirmhaslesscontroloverthe

licenseethanitwouldoveritsownproductionfacilities.LicensingLicensingisasimplewayforamanufacturertoenterinternationalmarket.Thecompanyentersintoanagreementwithalicenseeintheforeignmarket.Forafeeorroyalty,thelicenseebuystherighttousethecompany'smanufacturingprocess,trademark,patent,tradesecret,orotheritemofvalue.Thecompanythusgainsentryintothemarketatlittlerisk;thelicenseegainsproductionexpertiseorawell-knownproductornamewithouthavingtostartfromscratch.Coca-Colamarketsinternationallybylicensingbottlersaroundtheworldandsupplyingthemwiththesyrupneededtoproducetheproduct.InJapan,BudweiserbeerflowsfromKirinbreweries,LadyBordenicecreamischurnedoutatMeijiMilkProductsdairies,andMarlborocigarettesrolloffproductionlinesatJapanTobacco,Inc.OnlinebrokerageE*TRADEhassetupE*TRADE-brandedWebsitesunderlicensingagreementsinCanada,Australia/NewZealand,andFrance.AndTokyoDisneylandisownedandoperatedbyOrientalLandCompanyunderlicensefromtheWaltDisneyCompany.The45-yearlicensegivesDisneylicensingfeesplus10percentofadmissionsand5percentoffoodandmerchandisesales.Furthermore,ifthelicenseeisverysuccessful,thefirmhasgivenuptheseprofits,andifandwhenthecontractends,itmayfindithascreatedacompetitor.ContractManufacturingAnotheroptioniscontractmanufacturing—thecompanycontractswithmanufacturersintheforeignmarkettoproduceitsproductorprovideitsservice.SearsusedthismethodinopeningupdepartmentstoresinMexicoandSpain,whereitfoundqualifiedlocalmanufacturerstoproducemanyoftheproductsitsells.Thedrawbacksofcontractmanufacturingaredecreasedcontroloverthemanufacturingprocessandlossofpotentialprofitsonmanufacturing.Thebenefitsarethechancetostartfaster,withlessrisk,andthelateropportunityeithertoformapartnershipwithortobuyoutthelocalmanufacturer.ManagementContractingUndermanagementcontracting,thedomesticfirmsuppliesmanagementknow-howtoaforeigncompanythatsuppliesthecapital.Thedomesticfirmexportsmanagementservicesratherthanproducts.Hiltonusesthisarrangementinmanaginghotelsaroundtheworld.Managementcontractingisalow-riskmethodofgettingintoaforeignmarket,andityieldsincomefromthebeginning.Thearrangementisevenmoreattractiveifthecontractingfirmhasanoptiontobuysomeshareinthemanagedcompanylateron.Thisarrangementisnotsensible,however,ifthecompanycanputitsscarcemanagementtalenttobetterusesorifitcanmakegreaterprofitsbyundertakingthewholeventure.Managementcontractingalsopreventsthecompanyfromsettingupitsownoperationsforaperiodoftime.JointOwnershipJointownershipventuresconsistofonecompanyjoiningforceswithforeigninvestorstocreatealocalbusinessinwhichtheysharejointownershipandcontrol.Acompanymaybuyaninterestinalocalfirm,orthetwopartiesmayformanewbusinessventure.Jointownershipmaybeneededforeconomicorpoliticalreasons.Thefirmmaylackthefinancial,physical,ormanagerialresourcestoundertaketheventurealone.Oraforeigngovernmentmayrequirejointownershipasaconditionforentry.KentuckyFriedChicken(KFC)enteredJapanthroughajointownershipventurewithJapaneseconglomerateMitsubishi.KFCsoughtagoodwaytoenterthelargebutdifficultJapanesefast-foodmarket.Inturn,Mitsubishi,oneofJapan'slargestpoultryproducers,understoodtheJapanesecultureandhadmoneytoinvest.Together,theyhelpedKFCsucceedinthesemi-closedJapanesemarket.Inthesameway,KFCfirstenteredtheChinesefast-foodmarketduringtheearly1990’sandby2005therewereover1000restaurantsinthebigcitiesofChina.Similarly,manybigautomakersenteredtheChineseautomarketandstartedoperationbyformingjointventuresfirmswithChineseauto-makers.Jointownershiphascertaindrawbacks.Thepartnersmaydisagreeoverinvestment,marketing,orotherpolicies.Whereasmanybigmultinationalcompaniesfromdevelopedcountriesliketoreinvestearningsforgrowth,localfirmsoftenprefertotakeouttheseearnings;andwhereasbigmultinationalfirmsemphasizetheroleofmarketing,localinvestorsmayrelyonselling.Inshort,ajointventurearrangementallowsorganizationswithlimitedcapitaltoexpandintointernationalmarkets,andprovidesthemarketerswithaccesstoitspartner’sdistributionchannels.Keyissuesinajointventureareownership,control,lengthofagreement,pricing,technologytransfer,localfirmcapabilitiesandresources,andgovernmentintentions.Potentialproblemsinclude(1)conflictovernewinvestments,(2)mistrustoverproprietaryknowledge,(3)howtosplitthepie,(4)lackofparentcompanysupport,(5)culturalclashes,and(6)whenandhowtoterminatetherelationshipifitisnecessarytotakesuchaction.DirectForeignInvestmentThebiggestinvolvementinaforeignmarketcomesthroughdirectforeigninvestment—thedevelopmentofforeign-basedassemblyormanufacturingfacilities.Ifacompanyhasgainedexperienceinexportingandiftheforeignmarketislargeenough,foreignproductionfacilitiesoffermanyadvantages.Thefirmmayhavelowercostsintheformofcheaperlabororrawmaterials,foreigngovernmentinvestmentincentives,andfreightsavings.Thefirmmayimproveitsimageinthehostcountrybecauseitcreatesjobs.Generally,afirmdevelopsadeeperrelationshipwithgovernment,customers,localsuppliers,anddistributors,allowingittoadaptitsproductstothelocalmarketbetter.Finally,thefirmkeepsfullcontrolovertheinvestmentandthereforecandevelopmanufacturingandmarketingpoliciesthatserveitslong-terminternationalobjectives.Themaindisadvantageofdirectinvestmentisthatthefirmfacesmanyrisks,suchasrestrictedordevaluedcurrencies,fallingmarkets,orgovernmentchanges.Insomecases,afirmhasnochoicebuttoaccepttheserisksifitwantstooperateinthehostcountry.Companiesthatoperateinoneormoreforeignmarketsmustdecidehowmuch,ifatall,toadapttheirmarketingmixestolocalconditions.Atoneextremeareglobalcompaniesthatuseastandardizedmarketingmix,sellinglargelythesameproductsandusingthesamemarketingapproachesworldwide.Attheotherextremeisanadaptedmarketingmix.Inthiscase,theproduceradjuststhemarketingmixelementstoeachtargetmarket,bearingmorecostsbuthopingforalargermarketshareandreturn.Thequestionofwhethertoadaptorstandardizethemarketingmixhasbeenmuchdebatedinrecentyears.Themarketingconceptholdsthatmarketingprogramswillbemoreeffectiveiftailoredtotheuniqueneedsofeachtargetedcustomergroup.Ifthisconceptapplieswithinacountry,itshouldapplyevenmoreininternationalmarkets.Consumersindifferentcountrieshavewidelyvariedculturalbackgrounds,needsandwants,spendingpower,productpreferences,andshoppingpatterns.Becausethesedifferencesarehardtochange,mostmarketersadapttheirproducts,prices,channels,andpromotionstofitconsumerdesiresineachcountry.However,globalstandardizationisnotanall-or-nothingpropositionbutratheramatterofdegree.Companiesshouldlookforwaystostandardizetohelpkeepdowncostsandpricesandtobuildgreaterglobalbrandpower.Buttheymustnotreplacelong-runmarketingthinkingwithshort-runfinancialthinking.Althoughstandardizationsavesmoney,marketersmustmakecertainthattheyofferwhatconsumersineachcountrywant.Manypossibilitiesexistbetweentheextremesofstandardizationandcompleteadaptation.Forexample,althoughWhirlpoolovens,refrigerators,clotheswashers,andothermajorappliancessharethesameinteriorsworldwide,theirouterstylingandfeaturesaredesignedtomeetthepreferencesofconsumersindifferentcountries.Coca-ColasellsvirtuallythesameCoca-ColaClassicbeverageworldwide,positionedtohavebroadcross-culturalappeal.However,Coca-Colaislesssweetorlesscarbonatedincertaincountries.Thecompanyalsosellsawidevarietyofotherbeveragescreatedspecificallyforlocalmarketsandmodifiesitsdistributionchannelsaccordingtolocalconditions.Similarly,McDonald'susesthesamebasicoperatingformulainitsrestaurantsaroundtheworldbutadaptsitsmenutolocaltastes.Forexample,ituseschilisauceinsteadofketchuponitshamburgersinMexico.InVienna,itsrestaurantsinclude"McCafes,"whichoffercoffeeblendedtolocaltastes,andinChina,SouthKoreaandothercountries,itsellsroastporkonabunwithagarlickysoysauce.InIndia,wherecowsareconsideredsacred,McDonald'sserveschicken,fish,vegetableburgers,andtheMaharajaMac—twoall-muttonpatties,specialsauce,lettuce,cheese,pickles,onionsonasesame-seedbun.24ReviewofKeyTermsandConceptsadaptedmarketingmix:Aninternationalmarketingstrategyforadjustingthemarketing-mixelementstoeachinternationaltargetmarket,bearingmorecostsbuthopingforalargermarketshareandreturn.適應性營銷組合contractmanufacturing:Ajointventureinwhichacompanycontractswithmanufacturersinaforeignmarkettoproduceitsproductorprovideitsservice合約生產directforeigninvestment:

Enteringaforeignmarketbydevelopingforeign-basedassemblyormanufacturingfacilities.對外直接投資25jointownership:

Ajointventureinwhichacompanyjoinsinvestorsinaforeignmarkettocreatealocalbusinessinwhichthecompanysharesjointownershipandcontrol.合營jointventuring：

Enteringforeignmarketsbyjoiningwithforeigncompaniestoproduceormarketaproductorservice.合資Licensing：

Amethodofenteringaforeignmarketinwhichthecompanyentersintoanagreementwithalicenseeintheforeignmarket,offeringtherighttouseamanufacturingprocess,trademark,patent,tradesecret,orotheritemofvalueforafeeorroyalty.許可證（協議）directforeigninvestment:

Enteringaforeignmarketbydevelopingforeign-basedassemblyormanufacturingfacilities.對外直接投資managementcontracting：Ajointventureinwhichthedomesticfirmsuppliesthemanagementknow-howtoaforeigncompanythatsuppliesthecapital;thedomesticfirmexportsmanagementservicesratherthanproducts.管理合約

standardizedmarketingmix：

Aninternationalmarketingstrategyforusingbasicallythesameproduct,advertising,distributionchannels,andotherelementsofthemarketingmixinallthecompany'sinternationalmarkets.標準化營銷DiscussionandReviewQuestions1.Whatisthesimplestwayofenteringtheinternationalmarket?2.Whatiscontractmanufacturingbydefinition?Provideanexample.3.Underwhatconditionacompanyusesstandardizedmarketingmixininternationalmarketing?4.Underwhatconditionacompanyusesadaptedmarketingmixininternationalmarketing?5.Partofthegoalofmarketingistocommunicatethevalueofaproductorservicetopotentialcustomers.Theproverbial“sellingicetoEskimos”canonlyhappenifthemarketingefforttakesintoaccounttheneedsoftheEskimosandhowtheinfluxoficewouldanswerthatneed.Commentonthis.6.Whatarethekeyi