International marketing as

a strategic choice
Mid term revision
 Ansoff's growth vector

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We shall use this model to highlight possible future
corporate strategic options, Ansoffs growth vector matrix is
.shown in Figure 5.4

Market

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n his work on growth vectors, Ansoff suggests that:

Market penetration identifies a direction for growth based upon an

rganisation increasing the market share for its present product market
e., selling more of its existing products and services to its existing
ustomers.

Market development identifies new missions for the firms products

e., selling an organisations existing products or services to new
ustomers. It could be through selecting international marketing as a
trategic choice. International marketing option

Product development creates new products to replace current ones

e., anticipating changes in existing customer needs and developing the
ppropriate products to meet those needs.

Diversification, which Ansoff identifies as being distinctive as it involve

situation where both products and missions are new to the firm i.e.,
he firm moves into a completely new market or product area to that
hich 4it is used to competing in.
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For our purposes, therefore, Ansoff has
identified four distinct categories of options
for a firm concerned with determining
where it should compete:
its existing market with its existing
products;
a new market with its existing products;
its existing market with new products;
and a new market with a new product.
Having identified these categories of
corporate strategic option, we can now look
at how an organisation might pursue each,
some, or all of these options.
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Market penetration:
For Ansoff market penetration emphasises an
attempt to increase the amount or value (or both)
of the products or services sold as a means of
achieving growth.
It is possible in the following markets:
A growing market attracts a market penetration
strategy on the part of existing participants.
However, market penetration is also viable in mature
or stable markets where competition is likely to be well
established and the focus is upon obtaining market
share at the expense of competitors.
Market penetration is also possible in declining
markets, where existing firms aim to harvest the
remaining opportunities in the sector as other firms
decide it is no longer economically viable to compete
there.
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Market and product development:
In a market development strategy the
organisation takes its existing products and
services into new markets. These may be new
geographic markets, or new segments of existing
markets.
Firms may have different motivations for
pursuing a market development strategy.
this may be an appropriate way of securing a
foothold in a sector that is currently small, or where
the extent of demand is as yet unknown.
it may take the form of a major launch of a well
established brand in a completely new area.
Well-established companies may also seek to
establish a presence in mature but profitable markets
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where
7
they have no presence
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5.3: Economies of Scope and Synergy
Economies of scope operate in a similar way to
economies of scale, except that where
economies of scale result from increasing the
volume of production of a single product,
economies of scope can be seen as the cost
benefits resulting from using the same resource
across a range of outputs.
A simple example of a marketing economy of scope
would be using an established brand to launch a new
product, thereby saving the cost of establishing a
new brand.
Virgin Group in the UK, which has in the past used
the same brand name for its airline, retail outlets,
vodka, insurance, trains and many other
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products/services.
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The nature of International Marketing

What is International marketing?

Marketing of goods, services, and information
across political boundaries for a profit. It includes
all elements as domestic marketing but typically
more complex. Why?
The 3 basic decisions
Whether to engage in International marketing?
What specific Markets to be served?
How to serve?
Preliminary
Analysis
( PEST)

Defining market
segment and
adapting the
marketing mix
accordingly

Developing the
marketing plan

Implementation and
control
11-12
Phase 1: Preliminary Analysis
and Screening
A critical first step in the planning process is deciding in
which existing country market to make a market
investment
A companys strengths and weaknesses, products,
philosophies, modes of operation, and objectives must be
matched with a countrys qualities
First, countries are analyzed and screened to eliminate
those that do not offer sufficient potential for further
consideration
Second, screening criteria are established against which
prospective countries can be evaluated
Third, a complete analysis of the environment within
which a company plans to operate is made
Phase 2: Defining Target Markets
and Adapting the Marketing Mix
A more detailed examination of the components of the
marketing mix is the purpose of Phase 2
The primary goal of Phase 2 is to decide on a marketing
mix adjusted to the cultural constraints imposed by the
uncontrollable elements of the environment that
effectively achieves corporate objectives and goals
The answers to three major questions are generated in
Phase 2:
Are there identifiable market segments that allow for common
marketing mix tactics across countries?
Which cultural/environmental adaptations are necessary for
successful acceptance of the marketing mix?
Will adaptation costs allow profitable market entry?
Phase 3: Developing the
Marketing Plan
A marketing plan is developed for the target
marketwhether it is a single country or a
global market set
The marketing plan begins with a situation
analysis and culminates in the selection of an
entry mode and a specific action program for
the market
The specific plan establishes what is to be
done, by whom, how it is to be done, and when.
Included are budgets and sales and profit
expectations
Phase 4: Implementation and
Control
The planning process is a dynamic, continuous set of
interacting variables with information continuously
building among phases
An evaluation and control system requires
performance-objective action; bringing the plan back
on track should standards of performance fall short
The system encourages the decision maker to
consider all variables that affect the success of a
companys plan
It provides the basis for viewing all country markets
and their interrelationships as an integrated global
unit
What markets to enter?
This requires PEST or PESTLE
analysis. It includes:
Political and legal
Economic
Sociocultural
technological
The International Marketing Task

Four One

Thre
Two
e

1-17
Industry analysis: The Diamond - Four
Determinants of National Competitive Advantage

1. Factor conditions (i.e. the nation's position in

factors of production, such as skilled labour and
infrastructure),
2. Demand conditions (i.e. the nature of home-
market demand for the industry's product or
service, sophisticated customers in home market),
3. Related and supporting industries, the
presence or absence in the nation of supplier
industries and other related industries that are
internationally competitive.
4. Firm strategy, structure and rivalry (i.e.
conditions in the nation governing how
companies are created, organize, and managed,
as well as the nature of domestic rivalry).

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 Copyright Material Arab Open W2-12/10/2013
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 1. Factor Conditions
By factor condition: it is meat the nations position in
terms of factors of production such skilled labour or
infrastructure necessary to compete in a given industry.
Most of the factors of production that are required in
todays sophisticated and knowledge-intensive
industries are created factors (such as skilled human
resources or a scientific base). thus a nation does not
inherit (get) but instead creates the most important
factors of production. This is in contrast to the old
doctrine (guideline) of factors of production labour, land,
natural resources, capital, infrastructure. Even educated
workface is not enough what matters most is specialized
workface e.g. in chemical industries, optics.etc.
Governments may have an important role in creating or
supporting the creation of factors of production by
funding training and support specialized scientific
institutions.
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 2. Demand Conditions
Porter argues that a sophisticated domestic market is
an important element to producing competitiveness.
Firms that face a sophisticated domestic market are
likely to sell superior products because the market
demands high quality and a close proximity to such
consumers enables the firm to better understand the
needs and desires of the customers.
Nations gain competitive advantage in industries where
the home demand gives their companies a cleared or
earlier picture of emerging buyer needs, and where
demanding buyers pressure companies to innovate
faster and achieve more sophisticated competitive
advantages than their foreign rivals.
Demanding and sophisticated consumers in the home
market can pressure companies to meet high standards
and innovate faster that their foreign rivals.

Government policy can aid this process by instituting

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and strict product safety and environmental standards
3. Related and Supporting
Industries
Innovation may require consideration interaction
between, a firm, and its users or supplies and
between firms themselves. Geographies and cultural
closeness can be crucial factors in this process:
agents located near each other can take advantage
of shorter lines of communication and an on-going
exchange of ideas and information which may also be
helped by the development of dose and high-trust
working relationship.
The illustration of the Italian footwear cluster (fig.2-
Page 166) offers a graphic example of how a group of
dose-by, supporting industries creates competitive
advantage in a range of interconnected industries
that are all internationally competitive

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 4. Firm Strategy, Structure and
Rivalry
National circumstances and context create
strong tendencies in how companies are
created, organized, and managed, as well as
what the nature of domestic rivalry will be.
Government policy can influence a firms
behaviour through its taxation policies
towards long-term investment and through
the nature of its competition policies.
Competitiveness in a specific industry results
from convergence of the management
practices and organizational modes favoured
in the country and the sources of competitive
advantage in the industry.
A . Strategy ( such as Capital Markets )
B .23Structure Copyright Material Arab Open W2-12/10/2013
C . Rivalry University Egypt Branch_B301B
 A. Strategy ( such as Capital
Markets ) markets affect the strategy of
Domestic capital
firms. Some countries capital markets have a long-
run outlook, while others have a short-run outlook.
Industries vary in how long the long-run is. Countries
with a short-run outlook (like the U.S.) will tend to be
more competitive in industries where investment is
short-term (like the computer industry). Countries
with a long run outlook (like KSA) will tend to be
more competitive in industries where investment is
long term (like the Oil industry). Company goals
reflect the characteristics of national capital markets
and the compensation practices for managers

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 B. Structure
Porter argues that the best
management styles vary among
industries. Some countries may be
oriented toward a particular style of
management. Those countries will tend
to be more competitive in industries for
which that style of management is
suited. Individual motivation to work
and expand skills is also important to
competitive advantage.
For example, Germany tends to have
hierarchical management structures
composed of managers with strong
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 C . Rivalry
Porter argues the presence of strong local
rivals is a final, and powerful, stimulus to the
creation and persistence of competitive
advantage. Competition is particularly strong
in Japan, where many companies compete
strongly in most industries. Domestic rivalry,
like any rivalry, creates pressure on
companies to innovate and improve. Local
rivals push each other to lower costs, improve
quality and service, and create new products
and processes, also will keep each other
honest in obtaining government support

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Legal and Political environment:
and chapters 2 , 6 and 7
General policy towards
internationalization whether
protectionism
Tariff and non-tariff barriers
Stability of government policies
Forms of government
Political risks of globalization:
confiscation, expropriation and
domestication
Political Risks of Global Business
Confiscation
the most severe political risk, is the seizing of a
companys assets without payment

Expropriation
is where the government seizes an investment,
but some reimbursement for the assets is made;
often the expropriated investment is nationalized
to become a government run entity
Domestication
occurs when the government mandates local
ownership and greater national involvement in a
foreign companys management

28-6
 Legal environment: what law
governing international transactions
Common Law
Civil or Code Law
Islamic Law
Commercial Legal System in
Marxist-Socialist economies or
states
Common
Code Law
Law
Based on an all-
Based on tradition,
inclusive system of
past practices and
written rules (codes)
legal precedents set
of law. Legal system
by courts through
is divided into 3
interpretation of past
codes: commercial,
.rulings/statutes, etc
.civil & criminal

Considered complete
catchall provisions
Not All-Inclusive Some broad
interpretations are
.possible

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Common
Code Law
Law
Based on an all-
Ownership is inclusive
determined by Ownership is
use determined by
registration

Agreements may Agreements may

be binding so not be
long as proof of enforceable
the agreement unless properly
can be notarized or
established. registered.

31-7
Common
Code Law
Law
Impossibility of Acts of God are not
performance does not necessarily limited to
excuse non- acts of nature but
compliance with the include
provisions of the unforeseeable human
contract, unless it was acts such as labor
.an act of God .strikes or riots

Common Law
countries are codifying
.Commercial Law

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Jurisdiction in International
Legal Disputes
Determining whose legal system has jurisdiction
when a commercial dispute arises is another
problem of international marketing.
The World Court at The Hague and the
International Court of Justice resolve
international disputes between sovereign nations
of the world rather than between private
citizens.
Legal disputes can arise in three
situations:
1. between governments,
2. between a company and a government,
3. and between two companies
Jurisdiction in International
Legal Disputes
The World Court can adjudicate disputes
between governments, but disputes in
situations 2 and 3 must be handled in the
courts of the country of one of the parties
involved or through arbitration.
When international commercial disputes
must be settled under the laws of one of
the countries concerned, the paramount
question in a dispute is: Which law
governs?
International Dispute Resolution

1. Conciliation
2. Arbitration
3. Litigation
Conciliation. 1
Conciliation or mediation is a non-binding
agreement between parties to resolve
disputes by asking a third party to
mediate differences.
Discussion between parties and mediator
are confidential and statements made by
either party may not be used in future
litigation or arbitration.
It is not legally binding.
2. Arbitration
Parties select a disinterested and
informed party as a referee to
determine the merits of the case and
make a judgment both parties agree
to honor.
Litigation. 3
Fear of creating a poor image
Fear of unfair treatment in a foreign
court
Difficulty in collecting a judgment
Cost and time
Loss of confidentiality
Protection of Intellectual Property:
Counterfeiting and Piracy
Firms spend millions of dollars establishing brand
names or trademarks to symbolize quality and
design only to be counterfeited and pirated
Piracy and counterfeiting leads to lost sales from
the unauthorized use of U.S. patents, trademarks,
and copyrights which amount to about $60 billion
annually as well as lost jobs
Counterfeited pharmaceutical drugs can also lead
death and bad publicity
 Culture and its effect: chapter 4
and 5
Three Definitions of Culture
Culture is the sum of the values, rituals, symbols,
beliefs, and thought processes that are learned, shared
by a group of people, and transmitted from generation
to generation
software of the mind, problem-solving tool (Hofstede)
An invisible barrier a completely different way of
organizing life, of thinking, and of conceiving the
underlying assumptions about the family and the state,
the economic system, and even Man himself (Hall)
?Why analyzing culture is important
Cultural analysis often pinpoints market opportunities, gives
companies a competitive edge
To successfully deal with individuals, firms, or authorities in
foreign countries, managers should exhibit:
open tolerance,
flexibility,
humility,
justice/fairness,
ability to adjust to varying tempos,
curiosity/interest,
knowledge of the country,
liking for others,
ability to command respect, and
ability to integrate oneself into the environment
The Importance of Culture differences in
Business Ethics

A. Culture Differences in Management Styles Around

the World
1. Authority and Decision Making
In high-PDI countries subordinates are not likely to contradict
bosses, but in low-PDI countries they often do
Three typical patterns exist:
1. top-level management decisions,
2. decentralized decisions, and
3. committee or group decisions
2. Management Objectives and Aspirations
Security and Mobility
Personal Life
Affiliation and Social Acceptance
Power and Achievement
A. Culture Differences in Management
Styles Around the World

3. Differences in Communication Styles

Face to Face Communication
Internet Communication
* According to Edward T. Hall, the symbolic meanings of
time, space, things, friendships, and agreements, vary
across cultures
* Hall places eleven cultures along a high-context/low-
context continuum
* Communication in a high-context culture depends heavily
on the contextual (who says it, when it is said, how it is
said) or nonverbal aspects of communication
* Communication in a low-context culture depends more
on explicit, verbally expressed communications
A. Culture Differences in Management
Styles Around the World

4. Formality and Tempo

Level of formality in addressing business
clients by first name
Level of formality in addressing your
boss by first name
Tempo or speed in getting down to
business
Perception of time varies in many
cultures
A. Culture Differences in Management
Styles Around the World

5. P-Time versus M-Time

M-time, or monochronic time, typifies most
North Americans, Swiss, Germans, and
Scandinavians
Most low-context cultures operate on M-
time concentrating on one thing at a time
P-time, or polychronic time, is more
dominant in high-context cultures
P-time is characterized by multi-tasking
and by a great involvement with people
A. Culture Differences in Management
Styles Around the World

6. Negotiations Emphasis
Differences with respect to the product, its
price and terms, services associated with
the product, and finally, friendship between
vendors and customers
7. Market Orientation
American companies are embracing the
market orientation philosophy
Other countries are still in the traditional
production, product and selling orientations
B. Gender Bias in International
Business
The gender bias against women
managers exists in some countries
Women are not easily accepted in upper
level management roles in Asia, Middle
East, and Latin America (although this is
changing)
Gender bias poses significant
challenges in cross-cultural
negotiations
C. Business Ethics
Business ethics is complex in the
international marketplace because
value judgments differ widely among
culturally diverse groups
Corruption varyingly defined from
culture to culture
C. Business Ethics
Existence of different levels of
corruption, bribery, and fraud
The Foreign Corrupt Practices Act 1977:
Imprisonment for bribery
Bribery creates a major conflict
between ethics and profitability
C. Business Ethics

Bribery: Variations on a Theme

1- Bribery
Voluntarily offered payment by someone
seeking unlawful advantage
2- Extortion
Payments are extracted under duress by
someone in authority from a person
seeking only what they are lawfully
entitled
C. Business Ethics

3- Lubrication
Involves a relatively small sum of cash, a
gift, or a service given to a low-ranking
official in a country where such offerings
are not prohibited by law
4- Subornation
Involves giving large sums of money
frequently not properly accounted for
designed to entice an official to commit
an illegal act on behalf of the one offering
the bribe; involves breaking the law
A Framework for Ethical
Principles
Does the action optimize the
(1) common good or benefits of
Utilitarian all constituencies? And, who
are the pertinent
ethics ?constituencies

Rights( 2) Does the action respect the

of the rights of the individuals
?involved
parties
Justice( 3) Does the action respect the
or canons of justice or fairness to
?all parties involved
fairness
 Origin of culture
Technology
Social institutions
Political economy
 Family
Behaviors

Religious School
Value &
Systems Education
Social
Institutions

Government
Media
Policies

Corporations

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Origins of Culture: Social Institutions

Social institutions including family,

religion, school, the media,
government, and corporations all
affect culture
The family, social classes, group
behavior, age groups, and how
societies define decency and civility
are interpreted differently within
every culture
Origins of Culture: Social Institutions

1. Family behavior varies across the world,

e.g., extended families living together to
Dad washing dishes
2. Religious value systems differ across the
world, e.g., Muslims not allowed to eat
pork to Hindus not allowed to consume
beef
3. School and education, and literacy rates
affect culture and economic growth
Origins of Culture: Social Institutions

4. Media (magazines, TV, the Internet)

influences culture and behavior
5. Government policies influence the
thinking and behaviors citizens of adult
citizens, e.g., the French government
offers new birth bonuses of $800 given
to women as an incentive to increase
family size
6. Corporations influence culture via the
products they market, e.g., MTV
 Cultural.1
Values

Thought.5
Rituals.2
Processes
Elements
of
Culture

Beliefs.4 3.Symbols

58-4
Cultural Values.1
Hofstede, who studied over 90,000 people
in 66 countries, found that the cultures
differed along four primary dimensions
A. Individualism/Collective Index (IDV),
which focuses on self-orientation
B. Power Distance Index (PDI), which
focuses on authority orientation
C. Uncertainty Avoidance Index (UAI),
which focuses on risk orientation; and
D. Masculinity/Femininity Index (MAS),
which focuses on assertiveness and
achievement
.We shall only focus on A.B. and C
A.
Individualism/Collective
Index
1. The Individualism/Collective Index refers to the
preference for behavior that promotes ones
self-interest
2. High IDV cultures reflect an I mentality and
tend to reward and accept individual initiative
3. Low IDV cultures reflect a we mentality and
generally subjugate the individual to the group
4. Collectivism pertains to societies in which
people from birth onward are integrated into
strong, cohesive groups, which protect them in
exchange for unquestioning loyalty
B. Power Distance Index
1. The Power Distance Index measures power
inequality between superiors and
subordinates within a social system
2. Cultures with high PDI scores tend to be
hierarchical and value power and social
status
3. High PDI cultures the those who hold
power are entitled to privileges
4. Cultures with low PDI scores value equality
and reflect egalitarian views
C. Uncertainty Avoidance
Index
1. The Uncertainty Avoidance Index measures
the tolerance of uncertainty and ambiguity
among members of a society
2. High UAI cultures are highly intolerant of
ambiguity, experience anxiety and stress,
accord a high level of authority to rules as a
means of avoiding risk
3. Low UAI cultures are associated with a low
level of anxiety and stress, a tolerance of
deviance and dissent, and a willingness to
take risks
2.Rituals and 3.Symbols
Rituals are patterns of behavior and
interaction that are learned and
repeated vary from country to
country
e.g., extended lunch hours in Spain and
Greece
Language as Symbols: the
languages of time, space, things,
friendships, and agreements
Rituals and 4.Symbols.3
In Canada, language has been the
focus of political disputes
Differences in language vocabulary
varies widely, even English is
different in different countries
Aesthetics as Symbols
the arts, folklore, music, drama, and
dance of a culture influences marketing
Beliefs.5
Beliefs, which mainly stem from
religious training, vary from culture
to culture
The western aversion to the number 13
or refusing to walk under a ladder
Japanese concern about Year of the Fire
Horse
The Chinese practice of Feng Shui in
designing buildings
6.Thought Processes
Thought processes also vary across
cultures
Asian and Western thinking
Other examples?
Cultural Sensitivity and
Tolerance
Successful foreign marketing begins
with cultural sensitivity being
familiar with nuances
A new culture can be viewed
objectively, evaluated, and
appreciated.
Cultural Sensitivity Has to Be
Cultivated
Cultural sensitivity can be developed by
acquiring knowledge about a culture
including:
Different meanings of colors, and different
tastes
General facts about a culture
It can also be developed by learning the
more in-depth meaning of cultural facts:
The meaning of time, and attitudes toward
people
Developing a degree of insight
Resistance to Change
Although some cultures embrace
change others are resistant to it
Working women in masculine societies
like Saudi Arabia
Lack of acceptance of GM foods (or
Frankenfood) in Europe
After scanning the country
environment
After PEST is done and industry
analysis is done, then entry modes
should be decided
Alternative Market-Entry
Strategies (modes)
A company has four different modes of
foreign market entry from which to select:
1.Exporting,
2.Contractual agreements,
3.Strategic alliances, and
4.Direct foreign investment
The amount of equity required by the
company to use different modes affects the
risk, return, and control that it will have in
each mode
1.Exporting
Exporting accounts for some 10 percent
of global economic activity.
Exporting can be either direct or
indirect:
With direct exporting , the company sells
to a customer in another country
With indirect exporting usually means
that the company sells to a buyer (importer
or distributor) in the home country, which in
turn exports the product
1.Exporting
The Internet
The Internet is becoming increasingly important as a
foreign market entry method
Should not be overlooked as an alternative market
entry strategy by the small or large company
Direct Sales
A direct sales force may be required particularly for
high-technology and big ticket industrial products
It may mean establishing an office with local and/or
expatriate managers and staff, depending of course
on the size of the market and potential sales
revenues.
2.Contractual Agreements
Contractual agreements are long-term, non
equity associations between a company and
another in a foreign market.
Contractual agreements generally involve the
transfer of technology, processes, trademarks,
and/or human skills. In short, they serve as a
means of transfer of knowledge rather than
equity.
Forms of Contractual Agreements are
A. Licensing
B. Franchising
2.Contractual Agreements:
A. Licensing
Licensing is a means of establishing in foreign
markets without large capital outlays
Includes patent rights, trademark rights, and the
rights to use technological processes
2.Contractual Agreements:

Advantages of Risks of Licensing

Licensing choosing the wrong
capital is scarce partner
import restrictions
quality and other
forbid other means of
entry production
a country is sensitive to problems
foreign ownership or payment problems
patents and trademarks contract
must be protected
enforcement and
against cancellation for
nonuse. loss of marketing
control

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2.Contractual Agreements:
B. Franchising
Franchising is a rapidly growing form of licensing
The franchiser provides a standard package of
products, systems, and management services, and the
franchisee provides market knowledge, capital, and
personal involvement in management
The combination of skills permits flexibility in dealing
with local market conditions and yet provides the
parent firm with a reasonable degree of control.
The franchiser can follow through on marketing of the
products to the point of final sale
It is an important form of vertical market integration
2.Contractual Agreements:
The franchise system provides an effective blending of
skill centralization and operational decentralization
In spite of the economic downturn, franchising is still
expected to be the fastest growing market-entry
strategy
Franchises were often among the first types of foreign
retail business to open in the emerging market
economies of eastern Europe, the former republics of
Russia, and China
The franchising system combines the knowledge of the
franchiser with the local knowledge and
entrepreneurial spirit of the franchisee
3.Strategic International Alliances
(SIAs)
A strategic international alliance (SIA) is a business relationship
established by two or more companies to cooperate out of mutual need
and to share risk in achieving a common objective
Strategic international alliances are sought as a way to shore up
weaknesses and increase competitive strengths; complementarity is key.
Firms enter into SIAs for several reasons:
opportunities for rapid expansion into new markets
access to new technology
more efficient production and innovation
reduced marketing costs
strategic competitive moves and
access to additional sources of products and capital.

Forms of Strategic International Alliances

A. International Joint Ventures
B. Consortia
3.Strategic International Alliances
(SIAs)
A. International Joint Ventures (IJVs)
A joint venture is different from other types of
strategic alliances or collaborative relationships in that a
joint venture is a partnership of two or more
participating companies that have joined forces to
create a separate legal entity.
Four characteristics define joint ventures:
JVs are established, separate, legal entities
they acknowledge intent by the partners to share in the
management of the JV
they are partnerships between legally incorporated entities
and not between individuals and
equity positions are held by each of the partners
3.Strategic International Alliances
(SIAs)
B. Consortia
Consortia are similar to joint ventures and
except for two unique characteristics:
they typically involve a large number of participants
they frequently operate in a country or market in
which none of the participants is currently active
Consortia are developed to pool financial and
managerial resources and to lessen risks
One firm usually acts as the lead firm, or the
newly formed corporation may exist
independently of its originators
4.Direct Foreign Investment
Direct foreign investment is direct investment
within a foreign country
Companies may invest locally to:
capitalize on low cost labor
avoid high import taxes
reduce the high costs of transportation to market
gain access to raw materials and technology or
as a means of gaining market entry
Firms may either invest in or buy local
companies or establish new operations facilities
4.Direct Foreign Investment
Several factors have been found to influence the
structure and performance of direct investments:
timingfirst movers have advantages but are more
risky
the growing complexity and contingencies of
contracts
transaction cost structures
technology and knowledge transfer
degree of product differentiation
the previous experiences and cultural diversity of
acquired firms
advertising and reputation barriers
Organizing for Global
Competition
Companies are usually structured around
one of three alternatives
global product divisions responsible for product
sales throughout the world
geographical divisions responsible for all products
and functions within a given geographical area
a matrix organization consisting of either of these
arrangements with centralized sales and
marketing run by a centralized functional staff, or
a combination of area operations and global
product management