International Marketing Exam #2

factors facilitating market integration
-economic compatibility
-political compatibility
-geographical proximity
-socio-cultural compatibility
-absence of one factor can be balanced by a strength in another
implications of economic integration
-broadened scope of market
-changed nature of competition
-expansion of firms through mergers
-increased growth in the region and beyond
-support for local industries (subsidies)
-political sovereignty
political sovereignty
-how much power a country has to make a decision for trade, etc.
types of market agreements
-free-trade area
-customs union
-common market
-political union
major agreements in force
European Union
-founded by Treaty of Rome (1957)
-Benelux, France, Germany, Italy
-European Economic Community 1957
-Maastricht Treaty
-very close to a political union
key points in Maastricht Treaty
-monetary union – all countries share the Euro
-European Central Bank
-political union – common foreign and defense policies
-citizenship – freedom of movement within the community
-freedom to move around once you enter
the euro
criteria for joining:
-gov budget deficit less than 3%
-gov debt less than 60% of GDP
-low inflation – comparable to other Eurozone members
EU institutions
-European Parliament
-council of European Union
-Court of Justice
-Court of Auditors
council of the European Union
-represents the governments of members of states’ legislative bodies in collaboration with the parliament
European Commission
-driving force and executive body
-proposes legislation, policies, and programs of action and its responsible for implementing the decisions of Parliament and the Council
-executive sector
court of justice
-ensuring compliance with the EU laws
-“supreme court”
court of auditors
-ensuring sound and lawful management of the EU budget
-manages the EU budget
reform treaty
-a scaled down version of a constitution now in place
key provisions of NAFTA
-elimination of tariffs
-elimination of non-tariff barriers
-implementation of rules of origin
-uniform customs procedures and regulations
-investment provisions
-free trade in services
-protection of intellectual property
-government procurement (purchases)
-environmental and other standards
-free trade area
benefits of global marketing
-economies of scale in production and marketing
-transfer of experiences and know-how
-diversity of consumers
-spreading the portfolio of markets
-global R&D centers and scales network
-diversification (reduces the risk of foreign investments)
planning process
matching company and country needs –> defining market segment and adapting the marketing mix for target markets –> developing marketing plan –> implementation and control
market entry strategies
-foreign direct investment
-joint venture
-strategic alliance
-licensing and franchising
-exporting (direct and indirect)
market entry methods
-a means of establishing a foothold in foreign markets without large capital outlays
-provides a standard package of products, systems, and management services
-provides market knowledge, capital, and personal involvement in management
strategic international alliance
-business relationship between two or more companies to cooperate out of mutual need and to share risk in achieving a common objective
international joint venture
-a form of strategic alliance involving a partnership of two or more participating companies that have joined forces to create a separate legal entity
joint venture characteristics
1. JV’s are established, separate legal entities –>
2. partners share in the management of the JV –>
3. JV’s are partnerships between legally incorporated entities such as companies or governments and not between individuals –>
4. equity positions are held by each of the partners
foreign direct investment
-wholly owned subsidiaries
-purchase of/investments in an existing firm
-expansion of operations abroad
channels of distribution
-linking procedures and consumers
-direct channels:
-dealing directly with a foreign firm (B2B) or a foreign consumer (B2C)
-indirect channel:
-dealing with a home-country based intermediary
international channel members
-merchant intermediaries
-can be some exceptions
-do not take title to the product
-act on behalf of the manufacturer
merchant intermediaries
-take the title to the product
-act in their own name
indirect distribution through AGENTS
-manufacturer’s export agent (MEA)
-provides overseas marketing services for manufacturing commission-based, typically short-term relationship
-foreign freight forwarder
-freight forwarder = act as an exporter’s agent for scheduling, routing, consolidating shipments, prepping documents
-deal is based on commission
indirect distribution through MERCHANT INTERMEDIARIES
-export merchants
-export jobbers
-complementary marketers
-aka piggybacking
-partnership with another company who can market in a foreign country that is difficult to penetrate the market
-buying the product and the reselling it in the other country
-ex: Whirlpool using Sony in Japan
direct distribution through AGENT INTERMEDIARIES
-overseas manufacturers’ representatives
-overseas purchasing agents
-foreign-country brokers –> deal with commodities
-not legal ownership
direct distribution through MERCHANT INTERMEDIARIES
-foreign retailers
-foreign distributors
-trading companies
-located in the host country
factors in choice distribution channels
-nature of the product
-cost of operating the channel
-investment requirements
-level of control
-consumer products
-higher price
-B2B product
managing channel members
-locating middlemen
-controlling the middlemen
implications of fragmentation
-higher transaction costs
-financing may be necessary
-narrower assortment
-limited coverage
-less effective promotions/product displays
-point-of-purchase displays
global trends in distribution
-increasing size of retailers
-growth in discounting
-international franchising
-movement from fragmentation to centralization
-ex: Wal-Mart in India