International Management Combination
Price
used to make product attractable. Plays off competition
Business issue- termination of alliance
-Basic decision to exit -People-related issues -Relations with the host government
Legal Issues- termination of alliance
-Conditions of termination -Disposition of assets and liabilities -Dispute resolution -Distributorship ownership -Protection of proprietary property -Sales territory rights -Obligations to customers
Integrative techniques
-Developing good relations with host government and other local political groups -Producing as much of product locally as possible with use of in-country suppliers and subcontractors -Creating joint ventures and hiring local people to manage and run operation -Doing as much local R&D as possible -Developing effective labor-management relations
The Alliance Challenge- Motivating Factors
-Faster entry and payback -Economies of scale and rationalization -Complementary technologies and patents -Co-opting or blocking competition
Types of Ownership control risks
-Foreign-ownership limitations -Pressure for local participation -Confiscation -Expropriation -Abrogation of proprietary rights
Other strategies for Responding to Political Risk
-Formal lobbying -Campaign financing -Seeking advocacy through the embassy and consulates of home country -Formal public relations and public affairs activities such as grassroots campaigning and advertising -Political interventions designed to shape and influence political decisions prior to impact on firm
Macro Risk Issues
-Freezing the movement of assets out of the host country -Placing limits on the remittance of profits or capital- -Devaluing the currency -Appropriating assets -Refusing to abide by the contractual terms of agreements previously signed with MNC -Industrial piracy (counterfeiters) -Political turmoil -Government corruption
Factors that are typically quantified
-Political and economic environment -Domestic economic conditions -External economic conditions
Types of Operational Risks
-Price controls -Financing restrictions -Export commitments -Taxes -Local sourcing requirements
The risk factor is assigned based on sector, technology, and ownership
-Primary sector industries usually have highest risk factor, service sector industries have next highest; industrial sector industries have lowest -Firms with technology that is not available to the government should the firm be taken over have lower risk than those with technology that is easily acquired -Wholly owned subsidiaries have higher risk than partially owned subsidiaries
Micro Risk Issues
-Some MNCs are treated differently than others -Industry regulation -Taxes on specific types of bsiness activity -Restrictive local laws -Impact of WTO and EU regulations on American MNCs -Government policies that promote exports and discourage imports
Quantifying Political Risk
-Some firms try to quantify political risk as part of their effort to manage it -Each variable is given a minimum or maximum score; scores tallied for overall evaluation of risk
Managing Alliances
-Some partners may be current or former state-owned enterprises; others may be controlled or influenced by government agencies. -MNCs must manage the relationships inherent in their alliances with other organizations including current or former state-owned enterprises. -Alliance and joint ventures can significantly improve the success of MNC entry and operation, especially in emerging economies. -Managing the relationships inherent in alliances, especially when governments are involved, can be especially challenging.
Types of Transfer Risks
-Tariffs on exports and imports -Restrictions on exports -Dividend remittance -Capital repatriation
Expropriation
-The seizure of businesses by a host country with little, if any, compensation to owners. -Greastest risk: extractive, agricultural, infrastructural industries.
Risk with international marketing
-lack of understanding the foreign business culture -lack of understanding foreign customers -lack of understanding of foreign regulation -lacks managers with international experience
5 conditions for an exchanged
1) must be 2 parties 2)each party has something of value to the other party 3)each party is capable of communication and delivery 4)each party is free to accept or reject the exchange offering 5)each party feels its appropriate or desirable to deal with the other party
International Marketing objectives and actions
1)Find global customer needs 2)Satisfying global customers 3)Being better than competitors 4)Coordinating marketing activities 5)Recognizing the constraints of the global environment
Company expand market share
1)attracting new customers 2)increasing business with existing customers 3)retaining current customers
Product lifestyle
1)production in home country 2)importing countries gain familiarity with product 3)importing country gains experience with producing the product 4)importing country has sufficient production experience and does not need the imports
Types of Terrorism
1. Classic 2. Amateur 3. Religiously Motivated
Three sectors of economic activity
1. Primary sector: agriculture, forestry, mineral exploration and extraction 2. Industrial sector: manufacturing 3. Service sector: transportation, finance, insurance, and related industries
Three Basic categories of political risks
1. Transfer risk 2. Operational risk 3. Ownership control risks
Three related corporate political strategies for Responding to Political Risk
1.Relative bargaining power analysis 2.Integrative, protective, and defensive techniques 3.Proactive political strategies
Managing Political Risk and Government Relations
A comprehensive framework can help companies manage their political risk
Conglomerate investment
A type of high-risk investment in which goods or services produced are not similar to those produced at home; high risk
The Alliance Challenge
Alliances are an arena where both value-claiming activities and value-creating activities take place. Value-claiming: competitive, distributive negotiation Value-creating: collaborative, integrative negotiation
Horizontal investment
An MNC investment in foreign operations to produce the same goods or services as those produced at home; not likely to be takeover targets
Micro political risk analysis
Analysis directed toward government politics and actions that influence selected sectors of the economy or specific foreign businesses in the country
Macro political risk analysis
Analysis that reviews major political decisions likely to affect all enterprises in the country
Proactive political strategies
Broadly, strategies may include leveraging bilateral, regional, and international trade and investment agreements, drawing on bilateral and multilateral financial support, and using project finance structures to separate project exposure from overall firm risk.
Protective and defensive techniques
Discourage the host government from interfering in operations -Doing as little local manufacturing as possible and conducting all research and development outside the country -Limiting responsibility of local personnel and hiring only those who are vital to operation -Raising capital from local banks and the host government as well as outside sources -Diversifying production of the product among a number of countries
Marketing
Doing research within a market place to figure out the demands and wants of the consumer and then developing a product to meet those wants and demands. After getting the product out there and attempting to make a profit off of it.
GATT
General Agreement on Tariffs and Trade
Relationship Marketing
focuses on keeping up and improving relationships with current customers
Operational risks
Government policies and procedures that directly constrain management and performance of local operations
Ownership control risks
Government policies or actions that inhibit ownership or control of local operations
Transfer Risks
Government policies that limit the transfer of capital, payments, production, people, and technology in and out of country
The Role of Host Governments in Alliances
Having alliance or joint-venture partners may be advantageous to MNC entry and expansion. -Highly regulated industries such as banking, telecommunications, and health care -Cope with emerging markets environments characterized by arbitrary and unpredictable corruption -May be required by host government -Host government may be unwilling to permit alliance to terminate. -Host governments have a substantial role in the terms under which alliances are initially formed, the way in which they are managed, and even the terms of their dissolution.
MNCs are disinclined to set up operations in countries with high terrorism risk
MNCs must assess political risk, instal modern security, compile crisis plans, and prepare employees for possible situations.
Global Linkages
formed by world trade
Sales seeks profitability
through sales volume
The four P's
Price, Product, Promotion, Place
Marketing Philosophy
Production, Sales, Market, Societal
Indigenization laws
Require nations to hold a majority interest in an operation
G-20
The Group of 20
Relative bargaining power analysis
The MNC works to maintain a bargaining power position stronger than that of host country
Vertical investment
The production of raw materials or intermediate goods that are to be processed into final products; risk of being taken over by the government
Political risk
The unanticipated likelihood that a business's foreign investment will be constrained by a host government's policies
Terrorism
The use of force or violence against others to promote political or social views
External Marketing environmental
Things that are constantly changing. Examples are: social, economic, political and legal
Capital account
Transactions with all countries
Sales
What can we sell more aggressively?
Societal
What do customers want and need, and how can it benefit society?
Market
What do the customers want and need?
WTO
World Trade Organization
Demographic
an external factor that is the study of peoples vital statistics
Sales product aimed
at everyone
Market product aimed
at specific group
social factors
attitudes, values, and lifestyles
needs
basic human requirements
Place
centered around where you want to sell the product
Exchange rate
determine the level of trade
economic factors
directly impact citizens and companies
Commercial policy
established trade laws that favor nationals and discriminate against other countries (tariffs, quotas, exchange control, administrative regulations)
Why international Marketing is needed
globalization, must have a global vision to remain competitive at home as well, global firms offer lower prices and better products, reduces dependency on any one market, customers going abroad need international service
Integrative, protective, and defensive techniques
help overseas operation become part of host country's infrastructure
Promotion
helps sells the product and makes it known
Current account
home country
International trade
how the international market trades because different countries have different resources and production cost due to the differences in supply
Market define business
in terms of benefits its customers seek
Sales define business
in terms of goods and services
Target segments
individuals present similar responses to marketing activities
political and legal factors
laws and restrictions (legislation)
Comparative Advantage
looking at what goods should be imported and what should be exported (export the goods that has the greater comparative advantage and import the goods that have the least comparative advantage) so that it is looking to have the best standard of living
Consumer Price Index
measurement of weighted average of prices of a basket of consumer goods and services
Gross Domestic Product
measures the wealth of the nation by the goods and services produced in a nation in a specific time period
Export>Import
positive good relation
Marketing Management
process of planning and executing the conception, pricing, promotion, and distribution of the products
Sales is mainly
promotional
Quota
quantitative restriction
Currency flows
set exchange rate
Value
strongly held and enduring belief
Balance of Payment
summary statements of all the transactions between 1 country and all other countries over a period of time
Tariff
tax for an imported product
Sales orientation focus
tends to be inward looking
Market orientation focus
tends to be outward looking
Costumer satisfaction
the customers evaluation of the good on the basis of it meeting the needs and expectations
Customer Value
the difference between costs and benefits to the customer
Market is mainly
the four P's
Product
the offerings
Unemployment rate
the percent of the total labor force that is unemployed BUT actively seeking employment and willing to work
International Marketing
the process of planning and conducting transactions across national borders to create exchanges that satisfy the objectives of individuals and organizations
Market sees profitablility
through customer value
Marketers influence
wants BUT do not create needs
demands
wants for specific products backed by an ability to pay
Production
what can we make or do best?
Environmental Management
when a company implements strategies that attempt to shape the external environment
wants
when directed at a specific object that may satisfy you