Chapter 8:

Global
Market
Participation

INTERNATIONALIZING MARKETING OPERATIONS

Opportunistic Expansion
Pursuing Potential Abroad and Diversifying
Risk
Exploiting Different Market Growth Rates
Following Customers Abroad
Globalizing for Defensive Reasons
Born Globals
Is There a First-Mover Advantage?
EVALUATING NATIONAL MARKETS
Standalone Attractive Markets
Globally Strategic Markets

GEOGRAPHIC MARKET CHOICES

Targeting Developed Economies
Targeting Developing Countries
Targeting Transitional Economies
Targeting BRIC
COUNTRY SELECTION
The Screening Process
Criteria for Selecting Target Countries
Listing Selection Criteria
Grouping International Markets

Internationalizing
-Is the term use for a firms expansion from its domestic market
into foreign markets
-Is a strategic decision that affects any firm, including its
operation and management

Two directions of Internalization:

Increasing movement of the firm in the
individual foreign country
Successive establishment of operations
in new countries

Motives Ranging behind a companys

decision:
* Opportunistic
* Strategic
Opportunistic expansion is an internalization
strategy that is adopted:
a. in response to unsolicited orders from
overseas customers
b. for defensive reasons
c. due to saturation in the domestic markets
d. due to the need to expand higher growth rate
markets

Reasons Of Companies expanding

internationally:
(1)Lure of increasing sales and profits from entering
new markets
(2)Possibility of avoiding risks inherent to operating in
only one market

Born-Globals
-term referring to a firm that establishes
marketing and other businesses operations
abroad upon formation of the firm or
immediately thereafter.
-this is the organizations that from inception,
seeks to derive significant competitive
advantage from the use of resources and the
sale of outputs in multiple countries.

Difference of Born-Globals from

International Organizations:
They originate internationally
Have a global focus and commit their
resources to international ventures
Begin with a borderless world view and
immediately develop.
Strategies to expand themselves abroad.
Have many distinctive features that allow
them to start and thrive in the
international area.

First Mover Advantage

- a market advantage relating to
brand awareness, sales and profits
that accrues to the first significant
competitor to enter a new market.

II. EVALUATING NATIONAL MARKETS

Whether a domestic firm is first internationalizing or
an established multinational is looking to extend its
global bench, deciding which markets to enter and
prioritizing those markets, is a major requirement for
successful global marketing strategy.
National Market can appear attractive in
number of ways:
1. The potential primary market need to be assessed
2. The size of the market and its growth rate

* The less competitive a national market, the better

chance to attain a larger market share.
Globally Strategic Markets are the current and
future battlegrounds where global competitors
engage one another.
Must-win Markets Markets crucial to a firms
global market leadership.
Multinationals
have major sales in their home markets and
consequently want global suppliers to understand
and supply their needs those markets.

Lead Markets
- Countries or regions that posses major
research and development sites for an industry
or are recognized for being trendsetters.

They are characterized as having demanding

customers who push for quality and innovation.
Lead Markets may be:
1. Global
2. Regional

III. Geographic Market Choices

Developed Countries

Developing Countries

Transitional Economies

Richest market

Poor markets

Many close to Western

Europe

Potential sources of
major profits

Great variation in
national markets

Some members are of

European Union

Lead markets

Generally higher growth

potential

Educated population

Major markets of key

competitors

Poorer markets are

usually less competitive

Cultural distance from

West varies across
countries

Home markets of many

global customers

Cultural distance is
higher for triad firms but
lower for regional
competitors

Higher growth potential,

especially for Russian
Federation

Lower political risk

Government incentives
may be available for less
attractive markets

Less developed legal

infrastructure relating to
business and marketing

Higher political risk

Higher political risk

Some developing
countries emerging as
lead markets and home
markets of global
competitors

Developed
countrieshave
post-industrial
economies,meaningthe service sector provides more
wealth than the industrial sector. They are contrasted
withdeveloping countries, which are in the process of
industrialization, or undevelopedcountries, which are
pre-industrial and almost entirely agrarian.
10
1.
2.
3.
4.
5.

Developed Countries:
United States 6. Netherlands
Canada 7. Sweden
United Kingdom8. Switzerland
Germany
9. Japan
France 10. Australia

Developed
economies
account
for
a
disproportionately large share of world gross
national product (GNP) and thus tend to attract
many companies. Competition from both
international firms and local companies is usually
more intense in these markets, developed
countries are often deemed to be more
standalone attractive than are most developing
countries.
Three parts of the triad:
1. United States
2. Europe
3. Japan

* The importance of the triad countries in

international trade, global companies go to great
lengths to balance their presence such that their
sales begin to mirror the relative size of the three
regions.
Developing countries
- May appear to be attractive markets for several
reasons
- Market growth can sometimes be higher than in
the triad, as a result of higher population growth

Middle-class consumers
- are appearing in markets once seen as consisting
of a small elite and a large impoverished
underclass.
Developing Countries:
* Latin America * Middle East
* Africa * some parts of Asia
BRIC
- Brazil, Russia, India and China

IV. Country Selection

The Screening Process is used to identify
good prospects.
Two common errors that companies make in
screening process:
1. Ignoring countries that offer good
potential for the companys product
2. Spending too much time investigating
countries that are poor prospects
Stages of the Selection Process:
3. Using maroindicators to discriminate
between countries that represent basic
opportunities and those that either little
or no opportunity or involve risk.

Macroindicators
- describe the total market in terms of economic,
social, geographic, and political information.
- This data are useful in estimating the total
market size of a country or region
2. The screening process focuses on microlevel
considerations, such as competitors, ease of entry,
cost of entry and profit potential.
3. Evaluation and rank-ordering of the potential
target countries on the basis of corporate
resources objectives and strategies.

Criteria for Selecting target Countries

Market Size and Growth

Measures of market size and growth can be

made on both macro and micro basis.
Macro Basis may be determined that the
country needs a minimum set of potential
resources to be worth further consideration
Micro indicators usually indicate actual
consumption of a companys product or
similar product, therefore signaling a
perceived need.
- Can be used to estimate market size further

 Political Conditions

Indicators of Political Risk

*probability of nationalization
*percentage of voters who are
* bureaucratic delays communist
*number of expropriations
* restriction on capital movement
*number of riots or assassinations
* government intervention
*political executions
* limits on foreign ownership
*soldier/civilian ratio
Competition

 Market Similarity
-managers believe that their success in the
home market is more easily transferrable to
markets similar to the one in which they already
compete.
Psychic Distance the perceived degree of
similarity between markets.
Two dangers of choosing markets on the basis of
similarity:
1. The benefits of similarity need to be balanced
against the market size.

2. Selecting national markets based on perceived

similarity is the fact that firms can overestimate
the degree od similarity between markets.
Psychic- Distance paradox
- a phenomenon in which a market thought to be
similar to another market turns out to be
dissimilar
-culture shock experienced by managers entering
foreign markets that they have perceived to be
similar to their own.

Grouping International Markets

Two principles that drive the need for larger market
groupings:
1. Critical Mass - used in physics and military
strategy, embodies the idea that a certain minimum
amount of effort is necessary before any impact will
be achieved.
- the minimal effort and investment needed to
compete effectively in a market.
2. Economies of Scale is a term used in
production situations; it means that the greater levels
of production result in lower costs per unit, which
obviously increases profitability.
- profitability gained through the phenomenon that as
the size of a production run increases,
per-unit
costs decrease

Four reasons why the costs of marketing

products within a group of countries are lower
than the costs of marketing products to the
same number of disparate countries:
1. The potential volume to be sold in a group of
countries is sufficient to support a full marketing
effort.
2. Geographic proximity makes it easy to travel from
one country to another, often in two hours or less.
3. The barriers to entry are frequently the same in
countries within an economic group.
4. In pursuing countries with similar markets, a
company gains leverage with marketing programs.