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International Marketing

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International Marketing ­ MKT630
VU
Lesson # 25
MODES OF ENTRY INTO INTERNATIONAL MARKETS
Countertrade, Specialized Modes and Direct Investment
Countertrade:
· The sale of a good, service, know-how or system in one direction is conditional upon the sale of a
good or service as part or full payment in the reverse direction.
· More than 20% of world trade is financed through countertrade transactions.
world debt crisis
­
circumvention of exchange controls
­
bilateralism
­
entry into new markets
­
major growth opportunities in emerging markets lacking hard currency and cash-strapped
­
countries
Forms of countertrade:
· Barter
­ simplest form of countertrade, in which each party simultaneously swaps its products or services
for the products or services of other party
· Compensation Deal
­ semi-barter or simple compensation - importer makes part payment in cash and balance in goods
or services
· Counterpurchase (Parallel Barter)
­ two separate contracts specifying products to be exchanged
­ one contract for payment of exported goods
­ second for exporter's counter-purchase obligation with penalty for non-fulfillment
· Advance Purchase
exporter buys goods in advance from countertrading country before making exports to that
­
country
· Buy-Back Agreement
also called compensation agreement
­
one party exports production equipment, machinery, technology, or turnkey plant to another party
­
- the exporter buys-back part of the output as compensation
· Offset Agreement
used often in military-related or technology purchases (air crafts)
­
exporting firm permits certain portion of purchase to be produced or assembled in the importing
­
country - called Direct Offset.
­ may take the form of co-production, licensing, subcontracting, or joint venture
­ Indirect Offsets do not relate to the purchase equipment - that is some other equipment is
produced or assembled in the importing country
· Clearing Accounts
­ a refined form of barter done at government level on log-term basis covering broad range of
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International Marketing ­ MKT630
VU
products
­ clearing accounts established to track credits and debits of trades
­ balance in accounts over the long run
· Switch Trading
­ three or more parties required to complete countertrade transactions
­ one party not willing to accept all the goods or clearing credits received in the transaction
­ professional switch trader or a bank steps in and provides a secondary market for the goods or
credits using own network of firms and personal contacts
Specialized entry modes:
Management Contracts
­ is an agreement where one firm provides managerial assistance, technical expertise or specialized
services to a second firm for some agreed period in return for a flat fee or a percentage of sales.
(such as hotels)
Turnkey Projects
­ is a contract under which a firm agrees to fully design, construct and equip a facility and then turn
the project over to the purchaser when it is ready for operation. (such as the motorway)
Turnkey projects:
· Turnkey Plus projects
­ may include feasibility study or management of the completed facility in the operational phase -
project operators may also be required to assist the client organization in securing sources of
finance or to be involved in equity participation in the completed facility.
· Turnkey failures
­ minimum investment required in the project by the turnkey supplies
­ commission gap due to contractor's emphasis on hardware and equipment rather than skills
transfer.
­ indigenization of operation of the facility done too soon.
Types of foreign direct investment:
An investment in foreign country that also brings at least 10% ownership rights (voting control) is
termed as a direct investment. Direct investment not only brings in capital, it also brings into a country
latest technologies and management expertise. Forms of direct investments are in the following;
Subsidiary establishment
­ the greenfield strategy
· starting a new operations from scratch
­ acquisition strategy
· buy an existing firm conducting business in the host country
Joint venture
­ when two or more firms agree to work together and create a jointly owned but separate firm to
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International Marketing ­ MKT630
VU
promote their mutual interests
Managing a joint venture:
A joint venture is usually managed in one of the three ways:
­ The parent firms may jointly share management with each firm appointing key personnel who
report back to the executives of the parent.
­ One parent may assume primary responsibility.
­ An independent team of managers may be hired to run the joint venture.
A non-joint venture strategic alliance may be formed merely to allow the partners to overcome a
particular hurdle that each faces in the short run.
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Table of Contents:
  1. OVERVIEW OF INTERNATIONAL MARKETING:Domestic marketing, Multinational marketing, Globalization of markets
  2. INETRNATIONAL MARKETING PROCESS:Situation Analysis, Implementation and Control, Relationship
  3. INETRNATIONAL MARKETING PROCESS:The Product Concept, The Societal Marketing Concept
  4. INETRNATIONAL MARKETING PROCESS
  5. ENGAGING IN INETRNATIONAL MARKETS:Expansion of technology, Merchandize export and import
  6. INTERNATIONAL TRADE & INVESTMENT THEORIES:Theory of Comparative Advantage, Country Similarity Theory
  7. INTERNATIONAL TRADE & INVESTMENT THEORIES:Global Strategic Rivalry Theory,
  8. INTERNATIONAL MARKETING INFORMATION REQUIREMENTS:Foreign exchange info
  9. INTERNATIONAL MARKETING INFORMATION REQUIREMENTS:The Product
  10. FOREIGN NATIONAL ENVIRONMENTS:Political systems in the world, Political risks in international markets
  11. FOREIGN NATIONAL ENVIRONMENTS:Types of legal systems,
  12. FOREIGN NATIONAL ENVIRONMENTS:Conciliation, Mediation, Global relevance
  13. ROLE OF GOVERNMENTS IN INTERNATIONAL MARKETS:Industry-level needs, Promotion of exports by governments
  14. INTERNATIONAL CULTURAL AND SOCIAL ENVIRONMENTS:The concept of culture, Attitudes & beliefs,
  15. INTERNATIONAL CULTURAL AND SOCIAL ENVIRONMENTS:Culture is a human medium
  16. DETERMINING EXPORT POTENTIAL IN INTERNATIONAL MARKETS:Political Environment
  17. DETERMINING EXPORT POTENTIAL IN INTERNATIONAL MARKETS:Product Potential
  18. INTERNATIONAL MARKETING RESEARCH PROCESS:market structure, Implementing the research plan
  19. INTERNATIONAL MARKETING RESEARCH PROCESS:Identify alternative information sources
  20. INTERNATIONAL MARKETING RESEARCH PROCESS:Issues with primary global research:
  21. INTERNATIONAL MARKETING RESEARCH PROCESS:Problems with data, Comparative Analysis
  22. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Export intermediaries, Export and import management
  23. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Licensing contract, Licensing risks
  24. MODES OF ENTRY INTO INTERNATIONAL MARKETS:The franchiser’s balance,
  25. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Forms of countertrade, Specialized entry modes
  26. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Demand factors, Political factors
  27. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Drivers behind successful joint ventures
  28. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Distribution agreements, Critical mass & optimism traps
  29. INTERNATIONAL STRATEGIC ALLIANCES:Impetus for international alliances, Management of strategic alliances
  30. INTERNATIONAL CONSUMER MARKETS:Model of Consumer BehaviorThe Buyer Decision Process
  31. INTERNATIONAL BUSINESS MARKETS:Nature of buying unit, Major influences on international business buyers
  32. INTERNATIONAL TARGET MARKETING:Market segmentation, Market positioning
  33. INTERNATIONAL MARKET SEGMENTATION:Geographic, Behavioral, Situational factors
  34. INTERNATIONAL MARKET SEGMENTATION:Basis for country segmentation, Stages of economics development
  35. INTERNATIONAL MARKET SEGMENTATION:Cultural Variables,
  36. INTERNATIONAL MARKET SEGMENTATION:Market coverage strategy, Socio-economic variables
  37. INTERNATIONAL MARKETING MIX - PRODUCT POLICY:Individual product decisions, Branding
  38. INTERNATIONAL MARKETING MIX – PRODUCT POLICY:
  39. INTERNATIONAL MARKETING MIX - PRODUCT POLICY:Modular Approach
  40. INTERNATIONAL MARKETING MIX – PRODUCT POLICY:Issues in labeling, Pricing, Distribution
  41. INTRODUCING NEW PRODUCTS IN INTERNATIONAL MARKETS:The new product development process
  42. PRICING IN INTERNATIONAL MARKETS:Factors influencing international pricing,
  43. ITERNATIONAL MARKETING CHANNELS:Channel membership, Vertical marketing, Control over distribution
  44. PROMOTING IN INTERNATIONAL MARKETS:Advertising, Direct marketing, Public Relationing
  45. REVISION