Exam 4 IBUS 380 WSU

Barriers to Retailer Success Abroad

-Culture and language barriers -Consumer loyalty to indigenous retailers -Legal and regulatory barriers -Developing local sources of supply

Know-How Licensing

-Involves a contract in which the focal firm provides technological or management knowledge about how to design, manufacture, or deliver a product or a service. -The licensor makes its patents, trade secrets, or other know-how available to a licensee in exchange for a royalty.

Risks of Global Sourcing

-Lower-than-expected cost savings , -Environmental factors such as exchange rate fluctuations, trade barriers, and labor strikes, -Weak legal environment which can affect protection of intellectual property, -Inadequate or low-skilled workers, -Overreliance on suppliers, -Risk of creating competitors, -Erosion of morale and commitment among home-country employees due to outsourcing jobs

Step one: Assess Global Market Opportunity

-Managers assess the firm's readiness to internationalize and choose the most appropriate country markets and partners

Step four: Implement exporting strategy

-Managers make decisions about product adaption, marketing, communications adaption, pricing, and support to foreign intermediaries or subsidiaries

Step two: Organize for exporting

-Mangers make decisions about the degree of the firm's involvement, resources to be committed, and the type of domestic abd foreign intermediaries

Exporting of Services

-Many pure services cannot be exported because they cannot be transported. -Retailers offer their services by establishing retail stores abroad, via FDI. Retailing requires direct contact with customers. -Overall, most services are provided to foreign customers via entry strategies other than exporting, especially FDI. Examples: Architecture, education, banking, insurance, entertainment, information. Pure services: Cannot be transported because they cannot be transported

Efficiency seeking motives

-Reduce sourcing and production costs by accessing inexpensive labor and other cheap inputs to the production process -Locate production near customers -Take advantage of government incentives -Avoid trade barriers

Step three: Acquire needed skills and competencies

-The firm acquires skills and competencies to handle export operations, trains staff, and engages appropriate facilitating firms (such as freight forwarders, bankers, and international trade attorneys.)

Methods of Payment

Cash in Advance: -Best for the seller. -Risky from the buyer's standpoint, and thus unpopular; tends to discourage sales. Open Account: -Easy for the exporter, who simply bills the buyer, who is expected to pay at some future time as agreed. -Risky unless there is strong established relationship between exporter and buyer. Letter of Credit: -A contract between the banks of the buyer and the seller. Largely risk-free, it helps establish instant trust. -Requires following a strict protocol, specified in the contract. Can involve much paperwork.

Resource or asset seeking motives

- Access raw materials - Gain access to knowledge or other assets - Access technological and managerial know-how available in a key market

Nature of Foreign Direct Investment

- The most advanced, expensive, complex, and riskiest entry strategy, involving the establishment of manufacturing plants, marketing subsidiaries, or other facilities abroad. -Undertaken by firms from both the advanced economies and emerging markets. - Target countries are both advanced economies and emerging markets. -Occasionally raises patriotic sentiments among citizens (e.g., Haier and Maytag; Dubai Ports).

Exporting as an entry strategy

- usually the firms first foreign entry strategy - low risk, low cost, and flexible - popular with SMEs - when we talk about trade, trade deficits, trade surpluses, we're talking about exporting - most involve merchandise Export channels: -Independent distributor Firm's own marketing subsidiary abroad

Copyright Licensing

-A copyright gives the owner the exclusive right to reproduce art, music, literature, software, and other such works, as well as prepare derivative works, distribute copies, or perform or display the work publicly. -The term of protection varies by country, but the creator's life plus 50 years is typical. -Many countries offer little or no copyright protection.• -Thus, it is wise to investigate local copyright laws before publishing a work abroad.

counter trade

-An international business transaction in which all or partial payments are made in kind rather than cash. Similar to barter.• -Used when conventional means of payment are difficult, costly, or nonexistent.• -Accounts for between 10% and 1/3 of all world trade.• -Common in large-scale government procurement.• -Risky. May involve inferior or hard-to-price goods; may lead to price padding; Can be complex, cumbersome, and time-consuming.

Success Factors for Retailers

1. Advance research and planning 2. Establish logistics and purchasing networks in each market 3. Assume entrepreneurial, creative approach 4. Adjust business model to suit local conditions

Two key decisions regarding global sourcing

1. Decision 1: Outsource or Not? Decide whether each value-adding activity should be conducted in-house or by an independent supplier. Known as the 'make or buy' decision. Firms usually internalize activities that are part of their core competence or that involve the use of valuable intellectual property. 2. Decision 2: Where in the World Should Value-Adding Activities Be Located? Firms configure their value-chain activities in specific countries to cut costs, reduce transit time, access favorable factors of production, and access competitive advantages.

Key Features of Foreign Direct Investment

1. Represents substantial resource commitment. 2. Implies local presence and operations. 3. Firms invest in countries that provide specific comparative advantages. 4. Substantial risk and uncertainty. 5. Direct investors deal more intensively with specific social and cultural variables in the host market.

Letter of Credit Cycle

1. Sales contract: -From the Exporter to the importer 2. Request to open a letter of credit: -from the Importer to the Importers bank 3. Letter of credit issued: -From the Importers bank to the Exporters bank 4. Letter of credit confirmed: -From exporters bank to the Exporter 5. Products go from the Exporter to the Importer 6. Documents go from the Exporter to the Exporters bank 7. Documents go from the Exporters Bank to the importers Bank 8. Payment goes from the Importers bank to the Exporters bank 9. Payment goes from the importer to the importers bank to pay them back.

Drivers of global sourcing

1. Technological advances in communications, especially the Internet and international telephony. 2. Falling costs of international business. 3. Entrepreneurship and rapid economic transformation in emerging market countries.

Licensing

A licensing agreement specifies the nature of the relationship between the licensor (owner of intellectual property) and the licensee (the user). •In a typical deal, the licensee pays the licensor a fixed amount upfront and an ongoing royalty (usually 2-5%) on gross sales generated from using the licensed asset. •The fixed amount covers the licensor's initial costs of transferring the licensed asset to the licensee, including training, engineering, or adaptation. •Certain types of licensable assets, such as copyrights and trademarks, have much lower transfer costs. Examples: •Intel licensed the right to a new process for manufacturing computer chips to a firm in Germany. •Warner licenses images from the Harry Potter books and movies to companies worldwide. •Disney licenses the right to use its cartoon characters in producing shirts and hats to clothing manufacturers in Asia.

global marketing strategy

A plan of action for foreign markets that guides the firm in deciding: -how to position itself and its offerings -which customer segments to target -the degree to which it should standardize or adapt its marketing program elements.

Global branding

A strong global brand: -Increases the efficiency and effectiveness of marketing programs -Stimulates brand loyalty -Allows the firm to charge premium prices -Increases the firm's leverage with intermediaries and retailers -Enhances the firm's competitive advantage in global markets Well-known global brands include: -- Electronics (iPad) -- Personal care products (Gillette Fusion) -- Toys (Barbie) -- Furniture (IKEA) -- Food (Cadbury chocolate) -- Beverages (Coca-Cola) -- Credit cards (Visa) -- Movies (e.g., Spider-Man) -- Pop stars (Lady Gaga) -- Sports stars (David Beckham)

Standardization and Adaption

Adaptation: -Modifying elements of the marketing program to accommodate specific customer requirements in individual foreign markets. E.g., Industries in automaking, publishing, and furniture. Standardization: -Efforts to make marketing program elements uniform, so as to target entire regions of countries, or even the global marketplace, with a similar product or service. However, targeting the same product everywhere is not usually feasible. Management tries to strike some ideal balance between adaptation and standardization.

Advantages and Disadvantages of franchising for Franchisee

Advantages for franchisee: •Gain a well-known brand •Acquire training and know-how •Tested business Disadvantages for franchisee: •Investment and royalty payment •Franchisor has the power •Purchase from the franchisor

Advantages and Disadvantages of franchising for Franchisor

Advantages for franchiser: •Low investment; •Can internationalize quickly to many markets; •Low effort, once established; and •Can leverage franchisees' local knowledge. Disadvantages for franchiser: •Maintaining control over franchisees may be difficult; •Franchiser has limited control over its assets abroad; and •Risks creating a future competitor. •Brand Image

Main Advantages and Disadvantages of Licensing

Advantages for licensor: • Low investment •Low involvement• Low effort, once established •Low-cost initial entry strategy •Low Risk •Trade Barriers •Testing a market •Appropriate for the countries with substantial country risk. Disadvantages for licensor: •Performance depends on the foreign licensee •Licensor has limited control over its asset(s) abroad •Runs the risk of creating a future competitor •Modest revenue •Intellectual Property Rights

Advantages and Disadvantages of Equity joint Ventures

Advantages: -Afford greater control over future directions -Facilitate transfer of knowledge between the partners -Common goals drive the joint venture Disadvantages: -Complex management structure -Coordination between the partners may be a concern -Difficult to terminate -Greater exposure to political risk

Advantages and Disadvantages of Project-based nonequity Ventures:

Advantages: -Easy to setup -Simple management structure; can be adjusted easily -Takes advantage of partners' respective strengths -Can respond quickly to changing technology and market conditions -Easy to terminate Disadvantages: -Knowledge transfer may be less straightforward between the partners -No equity commitment; thus, puts greater emphasis on trust, good communications, and developing relationships -Conflicts may be harder to resolve -Division of costs and benefits may strain relationship

Other types of Collaborative Ventures

Consortium: -Project-based, usually non-equity venture with multiple partners fulfilling a large-scale project. Cross-licensing agreement: -Type of a project-based, non-equity venture where partners agree to access licensed technology developed by the other, on preferential terms. E.g., Telecommunications industry for inventing new technologies.

Foundation Concepts

Contractual entry strategies in international business: -Cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract. Intellectual property: -Ideas or works created by firms or individuals, such as patents, trademarks, and copyrights. Includes such knowledge-based assets of the firm or individuals as industrial designs, trade secrets, inventions, works of art, literature, and other "creations of the mind".

Advantages of Standardized Marketing

Cost reduction. -Standardization reduces costs through economies of scale in design, sourcing, manufacturing, and marketing. Offering a similar marketing program globally is more efficient than adapting products and marketing for each of the numerous individual markets. Improved planning and control. -Fewer offerings simplify quality control and reduce the number of replacement parts. Global marketing is easier to manage than having to develop numerous campaigns. Ability to portray a consistent image and build global brands. -Standardized marketing increases customer interest and reduces the customer confusion.

Adaption is Needed Due to:

Differences in national preferences. -Companies adapt their products to suit the specific, unique wants and needs of customers in individual markets. Differences in living standards and economic conditions. -Firms adjust the pricing and complexity of their products to accommodate differing income levels worldwide. Differences in laws and regulations. -E.g., Germany and Norway restrict advertising directed at children. Packaged foods in Europe are often labeled in several languages, including English, French, and Spanish. Differences in national infrastructure. -The quality and reach of transportation and communications systems, and of general infrastructure differ worldwide.

Examples of Incoterms

EXW Exworks (named place): -Delivery takes place at the seller's premises or another named place (i.e., works, factory, or warehouse). -EXW represents minimal obligation for the seller; the buyer bears all costs and risks involved in claiming the goods from the seller's premises. -Buyer arranges shipping. FOB Free on board (named port of shipment): -Delivery takes place when the goods pass the ship's rail at the named port of shipment, the port of origin in the seller's home country. -The buyer bears all the costs and risks of loss or damage upon delivery. The seller clears the goods for export. -Buyer arranges shipping. CIF Cost, insurance, and freight (named port of destination): -Seller pays the cargo insurance and delivery of goods to the named port of destination. From the desti-nation port, buyer is responsible for customs clearance and other costs and risks. -The seller pays for freight and insurance to transport the goods to the named port of destination. At that point, responsibility for the goods transfers from the seller to the buyer. -Seller arranges shipping and insurance.

Equity vs. Project-Based Joint Ventures

Equity joint ventures: -are normally formed when no one party has all the assets needed to exploit an opportunity. Typically, the local partner contributes a factory, market navigation know-how, connections, or low-cost labor. A project-based joint venture: -has a narrow scope and limited timetable. No new legal entity is created. Typically, partners collaborate on joint development of new technologies, products, or share other expertise with each other. Such cooperation helps them catch up with rivals in technology development.

Nature of ownership

Equity participation: -acquisition of partial ownership in an existing firm. Wholly owned direct investment: -Investor fully owns the foreign assets Equity joint ventures: -Partnership in which a separate firm is created through the investment of assets by two or more parent firms that gain joint ownership of a new legal entity.

FDI provides economies of scale

Falling fixed costs: -Many industries and productive tasks have high per-unit fixed costs that decline the more the task is performed. FDI helps concentrate production and/or results in high sales volumes. Managerial resource efficiencies: -Highly international firms employ a relatively fixed number of headquarters staff across more subsidiaries and affiliates. Specialization of labor: -FDI facilitates hiring more specialized workers, which increases efficiencies. Financial economies: -Large firms with extensive international operations usually can access capital at lower cost.

FDI and Collaborative Ventures

Foreign direct investment (F D I): -Strategy in which the firm establishes a physical presence abroad by acquiring productive assets such as capital, technology, labor, land, plant, and equipment. International collaborative venture: -A cross-border business alliance in which partnering firms pool their resources and share costs and risks of a venture. Joint venture (J V): -A form of collaboration between two or more firms to create a jointly-owned enterprise.

Franchising as an entry strategy

Franchisor Provides to Franchisee: 1. Trademark protected business concept 2. Everything needed for its implementation (patents, know-how, training services, products) Franchisee provides the Franchisor compensation through: 1. Lump-sum payment 2. Down-payment plus royalty 3. Other mark-ups and contributions (finance charges, sale of related products)

Global Supply Chain Management

Global supply chain: -The firm's integrated network of sourcing, production, and distribution, organized on a world scale, and located in countries where competitive advantage can be maximized. •Sourcing from numerous suppliers scattered around the world requires efficient supply-chain management. •Third party logistics providers (3P Ls): - as well as independent logistics service providers such as FedEx, T N T, and U P S are useful facilitators.

Greenfield Investment vs. M&As

Greenfield investment: -The firm invests to build a new manufacturing, marketing or administrative facility, as opposed to acquiring existing facilities. Acquisition: -Direct investment or purchase an existing company or facility. Merger: -Special type of acquisition in which two firms join to form a new, larger company.

Success Factors in Collaborative Ventures:

Half of all global collaborative ventures fail in the first five years of operations due to unresolved disagreements, confusion, and frustration. Thus, partners should: -Be aware of cultural differences; -Pursue common goals; -Pay attention to planning and management of the venture; -Safeguard core competencies; and -Adjust to shifting environmental circumstances.

global sourcing from subsidiaries vs. independent suppliers

In global sourcing, the focal firm has two major choices. It can source from: - Independent suppliers, or - Company-owned subsidiaries and affiliates. • Global sourcing from independent suppliers involves outsourcing production to a third-party provider abroad. Captive sourcing: -is sourcing from the firm's own production facilities located abroad. Production is carried out at a foreign facility that the focal firm fully or partly owns through direct investment.

Export Options

Indirect exporting: -Contracting with an intermediary in the firm's home country to perform all export functions, often an Export Management Company or a Trading Company. -Common to firms new to exporting -smaller exporters Direct Exporting: -Contracting with intermediaries in the foreign market to perform export functions, such as distributors or agents. -They perform downstream value-chain in the target market Main advantage: -it gives the exporter greater control over the export process and potential for higher profits, as well as allowing a closer relationship with foreign buyers abd the market place. Company-owned foreign subsidiary: -Similar to direct exporting, except the exporter owns the foreign intermediation operation; the most advanced option.

Organizing Framework for Marketing in the International Firm

International Marketing Program standardization and Adaption: -Global Branding and Product Development -International Pricing -International Distribution -International Marketing Communications Global Marketing Strategy: -Targeting Customer Segments and Positioning The Environment of International Business: -Diverse cultural, Political, Legal, Monetary, and Financial Environment of the Firm

Trademark Licensing

Involves a firm granting another firm permission to use its proprietary names, characters, or logos for a specified period of time in exchange for a royalty.

Contractual Relationships

Licensing: -An arrangement in which the owner of intellectual property grants another firm the right to use that property for a specified period of time in exchange for royalties or other compensation. Franchising: -Arrangement in which the firm allows another the right to use an entire business system in exchange for fees, royalties or other compensation. Royalty: -A fee paid periodically to compensate a licensor for the temporary use of its intellectual property, often based on a percentage of gross sales generated from the use of the licensed asset. These relationships can create: -dynamic, flexible choice, where firms may use contractual agreements to make their initial entry in foreign markets. Then, as conditions evolve, they switch to another entry strategy, such as F D I. -Can reduce perceptions of the firm as a foreign enterprise. -Generate consistent earnings from foreign operations

Licensing as a Foreign Market Entry Strategy

Licensor provides a combination of to the Licensee: 1. Intellectual property (patent, trademark, design copyright, or know-how) 2. Supporting products (parts, components, raw materials) Licensee does local sales and exports: Licensee compensates the licensor through a combination of: 1. Lump sum Payment 2. Down-payment plus royalty 3. Products 4. Know-how 5. Cross-licensing

Factors to consider in selecting FDI locations:

Market Factors: -Size and Growth of National Market Human Resource Factors: -Cost, Availability, and productivity of skilled labor Infrastructural factors: -Availability and quality of local manufacturing Profit retention factors: -Types and level and taxes Economic Factors: -Cost of land and facilities Legal and Regulatory factors: -Regulations on FDI and Technology transfer Political and Government Factors: -Political stability

Motives for Foreign Direct Investment

Market-seeking motives: -gain access to new markets or opportunities Resource or asset-seeking motives: -Access raw materials Efficiency-seeking motives: -Reduce sourcing and production costs Gain access to new market opportunities: -The existence of a large market motivates many firms to produce goods at or near customer locations. Follow Key customers: -Firms often follow their key customers abroad to preempt other vendors from servicing them. Compete with key rivals in their own markets: -Some M N Es choose to compete with competitors directly in their home markets.

Franchising

Most typical arrangement is business format franchising, in which franchisor transfers to the franchisee a total business method - including production and marketing methods, sales systems, procedures, training, and the use of its name. Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies •More comprehensive and longer-term than licensing. Master franchiser: -An independent company authorized to establish, develop, and manage the entire franchising network in its market. E.g., McDonald's in Japan.

Comparing Ocean, Land, and Air Transport

Ocean Transport: • Accounts for about 90 percent of international shipments Relatively slow •Relatively inexpensive •Revolutionized by the development of 40-foot shipping containers Land Transport: -Usually more expensive than ocean transport but cheaper than air •Exporters often opt for ocean shipping even when land transport is available. For example, some Mexican firms send goods to Canada by ship. Air Transport: •Accounts for only 1 percent of international shipments. •Fast and predictable• Expensive •Used mostly for: -perishable products (e.g., food, flowers) -products with a high value-to-weight ratio (laptop computers) -urgently needed goods (medicines, emergency supplies).

Criteria for evaluating export intermediaries:

Organizational Strengths: • Ability to finance sales and growth in the market • Ability to provide financing to customers • Management team quality • Reputation with customers • Connections with influential people or government agencies in the market Product-Related Factors: • Knowledge about the exporter's product -Quality and superiority of all product lines handled by the intermediary • Ability to ensure security for patents and other intellectual property rights • Extent to which intermediary handles competing product lines Marketing Capabilities: • Experience with the product line and customers • Extent of geographic coverage provided in the target market • Quality and quantity of sales force • Ability to formulate and implement marketing plans Managerial Commitment: • Percent of intermediary's business consisting of a single supplier • Willingness to maintain inventory sufficient to fully serve the market • Commitment to achieving exporter's sales targets

global sourcing

Procurement of products or services from suppliers located abroad for consumption in the home country or a third country • Also called global outsourcing, global procurement or global purchasing; it amounts to importing. • Involves a contractual relationship between the buyer and the foreign supplier, in which the performance of a specific value-chain activity is subcontracted to the firm's own subsidiary or to an independent supplier.

Reshoring and Nearshoring

Reshoring: -refers to the return of a business process or entire manufacturing facility to the home country. • Dissatisfaction with global sourcing has led companies to return production operations to the home country. • Many MNEs have underestimated the costs and logistical planning required to locate production abroad. Firms must weigh the pros and cons of global sourcing. Nearshoring: - refers to the offshoring or relocation of processes or manufacturing to a nearby country, often sharing a border with the home country.

Retailers: A special Case of Internationalization

Retailers typically internationalize via FDI and collaborative ventures. Retailing takes various forms: •Department stores (e.g., Marks & Spencer, Macy's); •Specialty retailers (Body Shop, Gap, Disney Store); •Supermarkets (Sainsbury, Safeway, Sparr); •Convenience stores (Circle K, 7-Eleven, Tom Thumb); discount stores (Zellers, Tati, Target); •"Big box stores" (Home Depot, IKEA, Toys "R" Us). •Wal-Mart has more than 400 stores and 100,000 employees in China, sourcing almost all its merchandise locally and providing thousands of local jobs.

segmentation, targeting, and positioning (STP)

Segmentation: -Identifying meaningfully different groups of customers Targeting: -Selecting which segment to serve Positioning: - Implementing chosen image and appeal to chosen segment: This happens through: -Product, Price, Distribution, Promotion

Tradeoffs between Standardization and Adaption

Standardization: -Exemplifies global integration and is more appropriate in global industries Pursue when: -Similar market segments exist across countries -Customers seek similar features -Products have universal specifications Advantages of Complete Standardization: -Cost Reduction -Improved planning and control -Ability to portray a consistent image and build global brands Adaption: -Exemplifies local responsiveness and is more appropriate in multidomestic industries Pursue when there are distinct: -National Preferences -Laws and Regulations -Living standards and economic conditions -National infrastructure Advantages of Complete Adaption: -Meet needs of customers more precisely -Enjoy unique appeal -Comply with government regulations -Achieve greater success in combating customer resistance

Systematic apporach to exporting

Step one: -Assess global market opportunity Step two: -Organize for exporting Step three: Acquire needed skills and competencies Step four: -implement exporting strategy

International Marketing

The cultural, social, political, legal, and regulatory environment of international markets influences the way the firm develops, adapts, and markets products and services. It affects pricing, distribution, and marketing communications. E.g., In high-inflation countries, the firm must review its prices frequently.

Infringement of Intellectual Property

The unauthorized use, publication, or reproduction of products or services protected by a patent, copyright, trademark, or other intellectual property right. •Especially a problem in emerging markets and developing economies, where people are especially vulnerable. •Negatively affects consumer attitudes about the branding and quality of legitimate goods. •The quality of counterfeit goods is almost always inferior to that of original, proprietary goods. •Hinders company inventiveness and innovation.

Types of export documentations

There are the official forms and other paperwork required to transport exported goods and clear customs. •Quotation or pro forma invoice: Issued on request to advise a potential buyer about the price and description of the exporter's product or service. •Commercial invoice: Actual demand for payment issued by the exporter when a sale is concluded. •Bill of lading: Basic contract between exporter and shipper. Authorizes the shipping company to transport the goods to the buyer's destination. •Shipper's export declaration: Lists the contact information of the exporter and buyer, full description, declared value, and destination of the products being shipped. Used by governments to collect statistics. •Certificate of origin: The "birth certificate" of the goods, showing country where the product originated. •Insurance certificate: Protects the exported goods against damage, loss, pilferage and, sometimes, delay.

Other Contractual Arrangements

Turnkey contracting: -Arrangement where a firm plans, finances, organizes, manages, and implements all phases of a project abroad, and hands it over to a foreign country after training local personnel. Typical in the construction and engineering services industries. Under a management contract, a contractor: -supplies managerial know-how to operate a hotel, resort, airport, hospital, or other facility, in exchange for compensation.

Alternative Organizational Arrangements for exporting

Using intermediaries: -Goes from Exporter to Domestic Intermediary (Trading Company, Export management company, online intermediary) -Then goes to the Foreign intermediary (Sales representative, Foreign distributor, Broker, online intermediary) -This then goes to the Foreign Buyer if the Wholesaler and Retailer -This can all be skipped by the exporter going straight to the Foreign Buyer Using Exporter own staff: -Goes from the exporter to the staff -The goes to the company-owned subsidiary located in the foreign market -then can go to either the wholesaler and retailer, or straight to the foreign buyer

level of integration

Vertical integration: -The firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product. -E.g., Toyota owns some Toyota car dealerships around the world. Ford once owned steel mills that produced steel used to make Ford cars.• Horizontal integration: -Arrangement whereby the firm owns, or seeks to own, the activities involved in a single stage of its value chain. -E.g., Microsoft acquired a Montreal-based firm that makes software used to create movie animation.

Typical Types of Intellectual Property

patent: -provides the right to prevent others from using an invention for a fixed period. It is granted to anyone who invents a new process, product, or useful improvement. trademark: -is a distinctive design or symbol that identifies a product or service. E.g., Nike's swoosh symbol. copyright: -protects original works of authorship. Typically covers works of music, art, literature, movies, or software.

Business Process Outsourcing (BPO)

• Outsourcing of business functions to independent suppliers such as accounting, human resource functions, I T services, and customer service. • B P O includes:- -Back-office activities, including internal, upstream business functions such as payroll and billing, and HR - Front-office activities, which includes down-stream, customer- related services such as marketing or technical support.

How to work with Foreign intermediaries:

• The exporter relies on intermediaries for much of the marketing, physical distribution, and customer service activities in the export market. • The exporter should cultivate mutually beneficial, bonding relations; respond to the intermediary's needs; demonstrate commitment; and build trust. • Intermediaries prefer handling good, profitable products, and desire various types of support.

Global Market Segmentation

•A group of customers that share common characteristics across many national markets. •Firms target these buyers with relatively uniform marketing programs, regarding product, pricing, communications, and distribution. •Such segments often follow global media, embrace new fashions or trends, and have much disposable income.

International Collaborative Venture

•A partnership between two or more firms. •Includes equity joint ventures and non-equity, project-based ventures. •Sometimes called partnerships or strategic alliances. •Collaboration helps overcome the often substantial risk and high costs of international business. It makes possible the achievement of projects that exceed the capabilities of the individual firm.

Incoterms (International Commercial Terms)

•A system of universal, standard terms of sale and delivery. •Commonly used in international sales contracts and price lists to specify how the buyer and the seller share the cost of freight and insurance, and at which point the buyer takes title to the goods. Commonly used in international sales contracts, specify how the buyer and the seller share the cost of freight and insurance, and at which point the buyer takes title to the goods. Most export transactions involve shipping products from the exporter's factory to a nearby seaport or airport, and from there by ship or airplane to a foreign port, to be transferred to land-based transportation and conveyed to the customer. Of course some shipments to bordering countries are transported entirely overland by rail or truck. Throughout the delivery process the exporter incurs transportation costs and carries insurance against damage or loss during transit.

Standardization and Adaptation: A Balancing Act

•Adaptation is costly, often requiring major changes to the marketing mix, especially when many national markets are involved. Thus, managers usually err on the side of standardization, that is, they adapt marketing elements only when necessary. •Some firms pursue a regional strategy, in which marketing elements are formulated across a geographic region. •Dell balances standardization and adaptation - the basic machines are identical worldwide, while the keyboards and software are adapted to suit local conditions.

Offshoring

• A natural extension of global sourcing, it refers to the relocation of a business process or entire manufacturing facility to a foreign country. • MNEs shift production of goods or processes to foreign countries to enhance their competitive advantages. • Common in the service sector, including banking, software writing, legal services, and customer service activities. • Example: -Large legal hubs have emerged in India that provide services such as drafting contracts and patent applications with lawyers in North America and Europe costing $300 an hour or more, Indian firms can cut legal bills by 75 percent.

Contract manufacturing

• Arrangement in which the focal firm contracts with an independent supplier to manufacture goods according to well-defined specifications. E.g., Nike, I K E A. Example: -Patheon is a leading contract manufacturer in the pharmaceutical industry, providing drug development and manufacturing for pharmaceutical and biotechnology firms worldwide. Operates 11 factories in North America and Europe, producing over-the-counter drugs and numerous top prescription drugs for leading pharmaceutical firms.

Types of countertrade

• Barter: Goods are directly exchanged, without the transfer of any money. • Compensation deal: Payment in goods and cash. • Counter purchase: Entails two distinct contracts. In the first, the seller agrees to a set price for goods and receives cash from the buyer, contingent on a second contract in which the seller agrees to purchase goods from the buyer. • Buy-back agreement: Seller agrees to supply technology or equipment to construct a facility and receives payment in the form of goods produced by it

Examples of Countertrade

• Boeing traded aircraft for oil, in Saudi Arabia. • Caterpillar received caskets in Colombia and wine in Algeria, in exchange for earthmoving equipment. • Goodyear traded tires for minerals, textiles, and agricultural products. • Coca-Cola received tomato paste from Turkey, oranges from Egypt, and beer from Poland, in exchange for Coke.

Strategies from Minimizing Risk In global Sourcing:

• Choose suppliers carefully: - There are many options to choose from. A sourcing broker can help. • Emphasize communications and collaboration with suppliers: -Minimize problems by developing clear and effective relations with suppliers. • Safeguard interests: -in terms of maintaining the firm's reputation, building a stake for the supplier, keeping open options for finding alternate partners if needed, and withholding key intellectual property.

Common disputes with intermediaries

• Compensation arrangements. • Pricing practices. • Advertising and promotion practices and the extent of advertising support. • After-sales service. • Return policies. • Adequate inventory levels. • Incentives for promoting new products. • Adapting the product for local customers.

Types of exporting intermediaries

• Foreign distributor: Based in the foreign market. Works under contract for the exporter, takes title to, and distributes the exporter's products in a national market or territory, often performing marketing functions such as sales, promotion, and after-sales service. • Manufacturer's representative: Contracted by the exporter to represent and sell its merchandise or services in a designated country or territory. • Trading company: Engages in import and export of a variety of commodities, products, and services. • Export management company (EMC): Based in the home market. Acts as an export agent on behalf of a client firm.

Sources of Export financing

• Intra-corporate financing • Commercial banks. • Distribution channel intermediaries. • Buyers. • Suppliers. • Government assistance programs. • SBA • EXIM Bank

Leading Destination for FDI:

•Advanced economies in Europe (especially Britain), Japan, and North America, are popular F D I destinations, mainly as attractive markets. •In recent years, emerging markets and developing economies have gained appeal as F D I destinations. •Firms target China, Mexico, and Eastern Europe to do low-cost manufacturing and to easily access huge adjoining regional markets.

Franchising in Emerging Markets

•China and India are home to more than 2.5 billion people and are promising markets for fast-food franchising. E.g., KFC and Pizza Hut are big in China. •Most residents of developing economies and emerging markets lack sufficient income to patronize restaurants. •Most do not live in the major urbanized areas where international franchisors are concentrated. •Laws in such countries vary and often evolve quickly. •Food and eating habits are rooted in national culture. •Successful franchisors carefully study economic, demographic, legal, and cultural dimensions before targeting foreign countries them with franchises.

Disadvantages of exporting

•Compared to F D I, exporting offers fewer opportunities to learn about customers, competitors, and other aspects of foreign markets. •Firm must acquire and dedicate new capabilities in international sales contracts and transactions, international financing methods, and logistics and documentation, all of which can strain organizational resources. •Exposes the firm to tariffs and other trade barriers as well as fluctuating exchange rates.

advantages of global sourcing

•Cost Efficiency, due to lower wages abroad, leading to improve profitability. • Ability to Achieve Strategic Goals - Faster corporate growth. - Access to qualified personnel. - Improved productivity and service. - Business process redesign. - Increased speed to market. - Access to new markets. - Technological flexibility.

Service Multinationals:

•Firms that offer services -Such as lodging, construction, and personal care -must offer them when and where they are consumed. Service firms establish either a permanent presence via F D I e.g., retailing), or a temporary relocation of personnel (e.g., construction industry). Many support services: -Advertising, insurance, accounting, and package delivery are best provided at the customer's location.

Corporate Social Responsibility

•Global sourcing can lead to three major problems in the home country: - Job losses - Reduced national competitiveness - Declining living standards • M N Es may be ineffective or indifferent about: - Protecting the environment - Promoting human rights - Labor practices and working conditions abroad

Useful public Policy from Minimizing the Harm of Global Sourcing

•Global sourcing involves creative destruction. It may eliminate jobs, but it creates new advantages and opportunities, that benefit firms, increase profits, and often lead to the ability to create better jobs. Governments should strive to: - Keep the cost of doing business low (e.g., via appropriate economic and fiscal policies). - Ensure a strong educational system, that supplies engineers, scientists, and knowledge workers. - Maximize worker flexibility to help those who lose jobs find other positions.

Unique Aspects of Contractual Relationships

•Governed by a contract that provides the firm a moderate level of control over the foreign partner. Control reflects the ability of the firm to influence the decisions, operations, and strategic resources of a foreign venture. •Typically involves exchange of intangibles (intellectual property) and services. Examples include technical assistance, know-how, and trademarks. •Can be pursued independently or with other foreign market entry strategies, such as F D I and exporting.

Managing Collaborative Ventures: Key Questions

•How dependent will we be on our partner? •How will responsibilities and competencies be shared with the partner? •Are our assets at risk? How can we protect them? •What other risks do we face by partnering? •Will we close growth opportunities due to this venture? •How will the venture be managed? What burdens will be created on managerial, financial, or other resources?

Global Product Development

•In developing international products, managers emphasize their commonalities across countries rather than the differences between them. •A basic product incorporates only core features that are then varied at the margins for individual markets. •A global new-product planning team is a group within a firm that determines which product elements will be standardized and which will be adapted locally, and how products will be launched.

Advantages of Exporting

•Increase sales volume; improve market share. •Generate better profit margins. •Increase economies of scale. •Diversify customer base. •Stabilize sales fluctuations. •Minimize market entry costs. •Minimize risk. •Maximize flexibility. •Leverage the capabilities of foreign distributors. The Global Trend feature describes how SMEs are increasingly active in exporting

Guidelines for Safeguarding Intellectual Property

•Intellectual property laws are weak in many countries. Key international treaties include: -Paris Convention for the Protection of I P. -Berne Convention for the Protection of Literary and Artistic Works. -Rome Convention for the Protection of Performers and Broadcasting Organizations. •The W T O created the Agreement on Trade Related Aspects of Intellectual Property Rights (T R I P S).

Examples of Contractual Relationships

•Japanese company Sanrio has licensed "Hello Kitty" to many manufacturers of cosmetics, food, calendars, toys, clothing, and numerous other products. •CBS signed a licensing deal with PPTV, China's leading video streaming service, to give streaming rights for CBS and Showtime programming in China. •Pfizer (US) and Novartis (Switzerland) periodically license pharmaceutical inventions to each other. •7-Eleven has some 67,000 stores in 17 countries. While the parent firm in Japan owns most of the stores, many stores in Canada, Mexico, Asia, and Europe operate via licensing or franchising agreements.

Management of Licensing and Franchising

•Licensing and franchising are complex undertakings, requiring skillful research, planning, and execution. •The firm must research in advance the host country's laws on intellectual property rights, repatriation of royalties, and contracting with local partners. •Key challenges include: -establishing whose national law takes precedence for the contract; -deciding whether to grant an exclusive or nonexclusive arrangement; -and determining the geographic scope of territory to be granted to the foreign partner.

Safeguarding Intellectual Property

•Research I P laws and protections in target countries. •Register core I P in top countries for business. •Separate value-chain activities to maintain I P secrecy. E.g., Keep R & D and manufacturing separate so no one can learn the entire production process. •Emphasize leading-edge or hard-to-understand technologies, which are usually harder to imitate. •Hire employees who maintain high ethical standards. •Collaborate with ethical partners. Choose reputable suppliers with no history of I P violations. •Regularly educate employees and partners about the harm of violating IP rights. •Include provisions in partner contracts to protect I P. •Develop trusting relations with partners. •Perform audits to ensure partners protect your I P. •Pursue I P violators via prosecution, other legal means. •Educate customers on the harm of infringing on I P. •Cultivate contacts in local and national governments involved in I P laws and enforcement. •Lobby governments for stronger I P protections.

Standardized Marketing is Appropriate When:

•Similar market segments exist across countries. •Customers seek similar features in the product or service. •Products have universal specifications. •Business customers have converging expectations or needs regarding specifications, quality, performance, and other product attributes.

Features of Global Supply Chain Management:

•The costs of physically delivering a product to an export market may account for as much as 40% of the total cost. •Firms use information and communications technologies (I C Ts) to streamline operations, reducing costs and increasing distribution efficiency. •Logistics involves physically moving goods through the supply chain. Incorporates information, transportation, inventory, warehousing, materials handling and similar activities associated with the delivery of raw materials, parts, components, and finished products.

intellectual property rights

•The legal claim through which the proprietary assets of firms and individuals are protected from unauthorized use by other parties. •Provide inventors with a monopoly advantage, for a specified period of time, so they can exploit their inventions and create commercial advantage. •Without legal protection and the assurance of commercial rewards, most firms and individuals would have little incentive to invent.

Example Turnkey Projects

•The most popular projects are extensions and upgrades to metro systems, such as bridges, roadways, and railways. Other projects include airports, oil refineries, and hospitals. •One of the world's largest publicly-funded turnkey projects is in Delhi, India, to build roads and tunnels that run through the city. •In Abu Dhabi, a collection of M N E s are under contract to build an integrated processing plant for natural gas. •The spectacular Petronas Twin Towers complex in Kuala Lumpur, Malaysia, was a seven-year turnkey project built by Bovis Lend Lease, one of the world's leading project management and construction companies. Among the firms with offices in the Towers are Accenture, Al Jazeera English, Huawei Technologies, Microsoft, and Reuters.

Market Segmentation

•The process of dividing the firm's total customer base into homogeneous clusters that allows management to formulate unique marketing strategies for each group. •Within each market segment, customers exhibit similar characteristics regarding income level, lifestyle, demographic profile, or desired product benefits. •Internationally, common market segment variables include income level, culture, legal system, etc.

Counterfeiting

•Total value of counterfeit and pirated goods traded internationally exceeds U.S. one trillion dollars, which is roughly 5 percent of U.S. G D P. •Typical knockoffs include clothing, fashion accessories, watches, medicines, and appliances. •While companies such as Rolex, Louis Vuitton, and Tommy Hilfiger are well-known victims, counterfeiting is widespread even in industrial products. •Other examples: pharmaceutical products, medical devices, car parts.