8Global Market Participation

Learning Objectives

• List and describe the five reasons why firms internationalize.

• Differentiate between born-global firms and other companies.

• Explain the difference between a standalone attractive market and a globally strategic one.

• Cite the advantages and disadvantages of targeting developed countries, developing countries, or transitional economies.

• List and describe the filters used for screening national markets.

• Explain the pros and cons of choosing markets on the basis of market similarity.

Chapter Overview

• Internationalizing marketing operations

• Geographic market choices

• Country selection

Internationalizing Marketing Operations

Internationalization = a firm’s expansion from its domestic market

to foreign markets

Internationalizing

• Opportunistic expansion• Pursuing potential abroad• Following customers abroad

Internationalizing (cont.)

• Exploiting different market growth rates• Globalizing for defensive reasons

Born Globals

• Firms that recognize from inception that their markets are global• Especially true of high-tech start-ups• Small percentage of firms

The Costs of Going Global

• Firms are internationalizing more quickly than in the past• But it takes TIME and MONEY

– Starbucks expanded internationally in 1996 – first profit 2004; 1650 international stores = only 7% of revenue!

Stand-Alone Market Attractiveness

• Factors– Market and target segment(s) size– Growth rate– Strength of competition– Market share potential– Government incentives

• Low taxes

• Incentives

Strategic Importance of Markets

• Current and future battlegrounds where global competitors engage each other

• May not necessarily be attractive as a stand alone market but strategically important

Targeting Lead Markets

• Vary by industry• Major R&D Sites• Have demanding customers who push for

quality and innovation• Examples:

– Plastics = Japan

– Italy = Textiles, Clothing

– France = Wine

Attractiveness of Developing Markets

• Latin America, Africa, the Middle East and parts of Asia

• Trade and investment liberalization

• Market growth may be higher

• Middle class growth

• Remittances enhance buying power

• Competition may be less intense

Challenges of Developing Markets

• Political risk

• Economic risk – Big ups and downs; volatility

• Some trade and investment restrictions remain

• Middle class may still be small – Predominated by small elite and large impoverished classes

Country Selection

• Which particular country markets should a firm enter?

• Each additional country demands– More financial investment– More management time and effort

Geographic Indicators

• Size of country, in terms of geographic area

• Climatic conditions• Topographical characteristics

Demographic Characteristics

• Total population

• Population growth rate

• Age distribution of the population

• Degree of population density

Economic Characteristics

• Total gross national product• Per-capita income (also income growth rate)• Personal or household disposable income• Income distribution

Other Criteria

• Political conditions

• Competition

• Market similarity– The less the psychic distance the lower the

risk– But similarities can be overestimated

• Canadian retailers in the USA

Selecting a Global Marketing Strategy

• Global product category strategy

• Global segment strategy

• Global marketing mix strategies – Fully integrated – Partially integrated