MKT 3035

International Marketing of Textiles &

Apparels
Chapter 1
International Market Entry

These slides are not necessarily be an original work rather these are a compilation of different
sources- Sanuwar (Mr.)

Process of International
Marketing
Commitment to Export
Analyze

Internal Factors
-Product

External Factors
Decide on

-Resources
International Market Involvement
Market Identification & targeting
Entry mode selection
Marketing Mix
*Product *Price *Distribution
*Promotion

-Market
Environment
-Competitive
Profile

Set Targets
Implemen
t
Organize
Department
Subsidiary
Jt. Venture
Export House

Export

Review
Modify
Set new
target

Allocate Resources
*Product
*Arrange Resources

WHY COMPANIES GO INTERNATIONAL?

Two Factors: Pull factors

: Push Factors
Pull factors: Proactive reasons forces of attraction pulls the
business to foreign markets profit, growth etc.
Push factors: Reactive reasons compulsion of domestic market
prompts companies to internationalize saturation etc.
Profit Motive:
International business profitable than domestic market
investment in low cost locations.

Strategic
Vision

Growth

Profitability

Spin - off
benefits

Economies of
scale

Govt. Policies &

Regulations

Why Should a Firm

Enter International
Markets?

Competition in
Domestic
market

Spreading Risk

Access to
Imported inputs
Spreading
R&D
Cost

Marketing
Opportunities
Due to life
Cycle

Uniqueness of
Product or
services

Market Entry Methods

Marketing Entry

Export Entry

Contractual Entry

Investment Entry

-Assembly
Indirect

Direct

Export Houses

Agents

-Contract
Manufacturing
-Licensing
-Franchising
-Co-production
agreement

Commission Agent

Exporters Agent Abroad -Management Joint Venture Wholly Owned Subsidiary

contract

Major

Minor

50:50
Acquisition Establishing own unit

The Concept of International Market Entry

An institutional mechanism by which a firm makes its products
and services available to consumers in overseas markets
Franklin Roots defines the market
entry
strategy
as a
comprehensive plan which sets forth the objectives, goals,
resources and policies that guide a companys international
business operations for achieving sustainable growth in world
markets.
Once a firm has decided to establish itself in global marketit
becomes necessary that the Company studies and analyzes the
various options available to enter the international markets and
select the most suitable one.
This decision is to be taken with utmost careNot only is the
financial resources in stake but the extent to which the
companys marketing strategy can be employed in the new
market also depends on this decision.
Mode of entry varies from low -risk ,low-control modes with
minimum resource commitment eg. indirect exports to highrisk, high control modes with a higher level of

Alternative Entry Modes

Production
Country
Exports

Indirec
t

Internation
al
Licensing

B&T

in

Production
Country

Home

Providing Offshore
Services

Contractual
Mode

Direct

Internation
al
Franchising
BOT

Overseas
Assembly
or Mixing

Turnkey
Projects

Manageme
nt Contract

Internation
al Strategic
Alliance

in

Foreign

Investment
Mode

Joint
Venture

Contract
Manufacturin
g

BOO
Distribution
Access

Technology
Alliance

Production
Alliance

Wholly
Owned
Foreign
Subsidiari
es

Production in Home Country

Export Entry
A firm has two basic options for carrying out
export operation.
--Market contacted through a domestically located
intermediaryan approach called
Indirect Exporting
--Market can be reached through an intermediary
located in
foreign market--an approach termed
as Direct Exporting

Indirect Export
--When firms do not have much exposure and has limited
resources
Indirect Exports

Indirect exports occur

home

-Selling to a domestic broker/ foreign buying agent in

country
-Exporting through merchant intermediary-export house

Direct Exports
A firms product
distributor

is

directly

sold

to

importers-Sole

Foreign country based intermediaries--Agents

Company owned Sales Offices

Production in foreign country

Contractual Entry

Licensing
A company assigns the right to a patent (which protects a
product, technology or process) or a trademark( which
protects a product name) to another company for a royalty
Licenser gives technology, manufacturing right, brand and
also marketing right (unlike contract Manufacturing)
Licensee gains marketing right- Exclusive basis or Unrestricted
basis
Variety of time period 5 to 15 years
Licensee makes all capital investments
Licensing agreements subject to negotiation vary from Co. to
Co. and industries to industries

International Franchising

A special form of licensing in which a home company

(Franchiser) makes a total programme of operation
available to an overseas company (Franchisee)

It includes the brand name, logo, products and method of

operation

Mc. Donalds, KFC, Burger King, Holiday INN, Hertz,

Carrefour, Benetton, Coca Cola (trade mark, recipe, and
advertising)-independent bottlers around the world

It is a transfer of the entire system from one country to

another

ifference between Licensing and Franchising

Licensing

Franchising

Royalty

Management Fees

Products are major source of

concern

Covers all aspects of business

including goodwill, trade
marks, IPR etc

15-20 years

5/10 Years renewable

Licensing tends to be self selecting.

They are often established businesses
and can demonstrate that they are in a
strong position to operate the license
in question.
A licensee can often pass a license
to an associate with little or no
reference back to the original licensor.

The franchisee is selected by

the franchiser. Even
replacement is controlled by
franchiser.

Licensing

Franchising

Concerned
with
specific Franchisor passes to the
existing
products
and franchisee the benefits of
technologies
on-going research programs
There is no goodwill attached Although franchisor does
to the licensing as it is totally retain the goodwill, the
retained by licensor
franchisee picks up an
element
of
localized
goodwill
Licensee enjoys substantial
measure of fee negotiation

Standard fee structure. Any

variation will cause
confusion

Lesser control

Exerts higher control

Overseas Turnkey Projects

Companies utilize technical expertise to enter international

markets

Types of Turnkey Projects

Build and Transfer (Conceptualizes, designs, builds, testing
and transfer the
project to the owner
Build/Operate and transfer (BOT) (Build the
project and
manage for
the contracted period before transferring to
the foreign owner)

- Build, operate,
own (BOO) (Firm buys
the project, once it has
nternational
Management
Contracts
been built)
Company provides its technical and managerial expertise for
a specific duration to an overseas firm.
Low risk, low cost mode of entry.
Earn foreign exchange and optimally utilize its skilled
manpower

Strategic Alliance

Refers to the relationship between two or more firms that

cooperate with each other to achieve common goals but do not
form a separate company.

Firms focus on their core competencies

Difference between strategic alliance and joint venture

- In Joint Venture two partners contribute
a fixed amount of
Joint
resources and the venture develops on its own
Parent CompanyVenture
X

Parent Company
Y

Company Z
(Joint
Venture)

-In strategic alliance each partner brings a particular skill or resource

usually they are complementary and by joining forces each expects
to profit from the others experience-No equity participation

Strategic Alliance
Contractual

Company X

Agreement

Company Y

Contract Manufacturing

An international firm arranges to have its products

manufactured by an offshore local company on contractual
basis
Local manufacturers responsibility is only production
Marketing responsibility is on Parent company
No legal bindings change contracted manufacturers to
improve quality and cost effectiveness
A number of global companies outsource manufacturing
activities to low cost locations.

Globalization of business technologies and increasing pressure

on international firms to be globally competitive in costs,
product offering, speed to bring new products driving
force of international contract manufacturing

Economic development of a number of countries

depend on contract manufacturing like China, Korea,
Mexico, Thailand, Taiwan, Now Indonesia, Vietnam and India

Nike shoe entirely manufactures through contractual basis

Local Manufacturing
A common and widely practiced form of entry is local production of
companys products.

Types:

Overseas Assembling

Joint Venture

Wholly
Subsidiaries

Owned

Reasons for Local Production

Local cost, market size, tariffs, laws and political consideration
may affect a choice to manufacture locally
Sometimes cost cutting rather than market entry
International firms establish plants in Taiwan, Malaysia, Vietnam,
China little intention to enter the market export to third
country

Wholly- owned subsidiary

Tata Tea entered into JV with Tetley group, UK in 1994,acquired
Tetley in 2000
Asian paints has 27 manufacturing plants in 24 countries
Aditya Birla Group has wholly owned manufacturing base in
Establishing
local operation to gain new
south east Asia

business
An aggressive

strategy a strong commitment in

international operation often the only way to convince
clients to switch suppliers
Important strategy in industrial market service and
reliability of supply main factors in the choice of suppliers

Establishing Foreign production to defend existing

business
Changing economic or political factors necessitate such a move
E.g. Japanese car manufacturers, that had been subject to an
import limitations of assembled cars, from USA imported from
Japan, began to build factories in USA to protect their market.
In 1982 Honda became the first Japanese manufacturer to set
up production in USA

Assembly

A firm locates a portion of the manufacturing process in

the foreign country

Assembling consist of the last stage of the manufacturing

and depends on a ready supply of components or
manufactured parts to be shipped from another country

Involves heavy use of labor rather than expensive

investment of capital outlets

In order to save in shipping costs and high import tariffs

and counter non tariff barriers and take advantage of
cheap labour cos exports components in CKD condition
and assembles them overseas e.g Mahindra &Mahindra,
has entered Kenya by assembling operation

Tata motors assembling operations with Nita Company

Ltd in Bangladesh for commercial vehicles

Japanese automobile cos have entered European market

by assembling to overcome import barriers

Sometimes Cos may use some of the local resources

Joint Venture
Under a joint venture arrangement a foreign company invites an
outside partner to share stock ownership in the new unit
minority or majority or 50:50share

Reasons for JV

By bringing in new partner , company share the risk for a

new venture

JV partner may have important skills or contacts of value to

the firm

Local firm has good contacts with the

represents local business interests

Provide greater
Examples:
functions

government and

control over production and marketing

During 1960-70 Japanese market was viewed as a difficult

environmentgovt regulationsJV
Mc Donalds entered Japan in 1971 through JV with Fujita &Co
Mc Donalds in India through JV

Wholly
-owned
foreign
In order to have complete control and ownership of international
subsidiaries
operations, a firm opts for foreign direct investment to own
foreign operations.

Benefits

Develops a foreign market with growth potential by way of

product differentiation and competitive response
Helps in overcoming import barriers-high tariffs, quota
Gets benefits of incentives provided by host countries
Helps a firm to spread risks over various markets
Take advantage of lower cost of production in host
countriesraw material. labor
Avoids conflicts with overseas partners

Limitations:

Need substantial financial and other operational

resources
Need
substantial international exposure
before
establishing WOS.

Ways of establishing WOS

Acquisition
Greenfield operation

Acquisition

A company
can acquire a foreign company and all its
resources in a foreign market

Acquisition provides speedy access to the resources of a

foreign company such as skilled man power , the companys
product and brand and its distribution channels

Green field operation

The firm creates the production and marketing facilities on its
own from scratch
Green field operations preferred under following situations
Smaller firms with limited resources
Have the option of selecting own location on the basis of their
own screening criteria.

Chapter 2:
Globalized Apparel Supply Chain Managemen

Supply Chain Management

Tier 2
Suppliers

Tier 1
Customer

Tier 3rd to n
supplier

Initial Supplier

2
n
1
n

2
1

2
2

1
2

3
n
1
n

Focal
Firm

1
n

1
2
n

Consumer or end
customers

Tier 1
Suppliers

Tier 3
Tier 2 Customers
Customers

Tier 3 to n
customer

Tier 3 to
Initial
suppliers

3Bs of Supply Chain Network

Boxes (Material Flow)

Bytes (Information Flow)&
Bucks (Financial Flow)

Approaches of Supply
Chain
AGILE

VOLUME

LEAN

LEAN
PLAN &
EXECUTE

LONG LEAD TIME

LEAGILE

PREDICTABLE

CONTINIOUS
REPLENISHMENT

POSTPONEMENT

UNPREDICTABLE

SHORT LEAD TIME

LEAN

LEAGILE

AGILE
QUICK
RESPONSE

Hybrid Approach (LEAGILE) Of SC

Supplier

Customer

Buy-to-order
Make-to-order
Assemble-to-order
Make-to-stock
Ship-to-stock
Lean Supply Chain

Agile Supply Chain

Perceived Customer
Value
Meeting Customer
requirement

Customer Support
Product Service

Elimination of wastage
Continuous
improvement
QUALITY

Flexibility to meet
customer demand
& market change
SERVICE

Value
COST

LEAD TIME

Design &
Engineering
Conversion &
Distribution
Inventory

Time to Market

Order entry to Del.

Response to market
forces
Lead time

THE VALUE CHAIN

Product &
service
specification
Infrastucture
supoort

Insource /
outsource?
Manage
variety,
quality
& costs

Brand
Development
&
Management
Market
development

Distributor
liaison
Product &
service
liability

Value
Delivery

LOGISTICS
SUPPLY CAHIN
STRATEGY
SUPPLY CHAIN
OPERATIONS

SUPPLY CHAIN
PLANNING

LOGISTICS

PRODUCT
LIFECYCLE
MGT.

SUPPLY CHAIN
MANAGEMENT

SC
ENTERPRISE
APPLICATION

PROCUREMENT

LOGISTICS- THE KEY SUCCESS FACTOR

IBM- IT based Organization

WMS (Warehouse management

system)

BENETTON- Fashion Based Branded

Manufacturer and retailer

EDI (Electronic Data

Interchange)

TMS (Transportation management WIDE (World wide Integrated

systems)

Distribution Enterprise.)

RFID (Radio Frequency

ROBOTIC Distribution Centre.

Identification)

Integration of ICT with

innovative
manufacturing process CAD,

TRP (Transportation Resource

Planning)

CAM

Information Flow
Tier 2

Supplier

Tier 1
Supplier

Logistics
Purchasing

Marketing
& Sales

Customer

Product flow
Production

R&D

Finance

Customer relationship Management

Customer Service Management
Demand Management
Order fullfilment
Manufacturing Flow Management
Procurement
Product Development and commercialization
Returns
Supply Chain Business Processes

Customer/
End Customer