International Marketing Decisions
Today due to the rapid growth rate of globalization, all types of businesses are seeking to expand their operations across borders into the global market place. A firm after several considerations can choose an entry strategy to enter a foreign market, among the modes of entry is: Exporting, Lincencing, Joint venture and direct investment, strategic alliances among others that will be discussed later. Reasons why firms get involved in international markets:
Chain of supply(in terms of raw materials),if there are shortage of raw materials in the domestic market ,a firm may opt for the international market, also if the firm has abundant resources the firm can produce locally and export to foreign markets. Optimistic response: the managers and the share holders may have the ambition of going global as a strategic objective. When the product cannot be sold in the local or domestic market: the product may have reached the maturity stage of its product life cycle, hence the need to find new markets for it where it can be rejuvenated and introduce it as a new product. Additional volume: the firm may have surplus production which it may consider for the foreign markets for example in Uganda companies like Mukwano Group of Companies is now exporting to the Great lakes region. Spreading business risks across wider markets, sometimes a firm may not want to keep it‘ eggs” in one”basket”especially when it has the capital base to operate in the foreign market for example Simba Telecom has extended its distribution and Telecom business to other African markets. Gaining access to new markets, firm may have the objective of increasing its market share and the alternative to the domestic market is to go international. A firm may go global with an objective of achieving lower costs and enhancing competitiveness. Factors considered before going international:
The planning process: This is important because it helps decision makers to examine all the factors that can affect the success of international marketing programmes. The company’s objectives and Resources: for a company to succeed in an international market it must evaluate is a parent company’s resource in relation to the international market it wants to enter. Level of commitment: the firm must determine whether it is ready in terms personnel, financial and time commitment. Philosophical orientation: this has to relate to the corporate objectives of the firm, this includes: polycentrism, ethnocentrism, geocentrism and regionalcentrism. The firm has to study the external environment by the use of tools like SLEPT (PESTEL) or SWOT analysis to understand the industry and the perceived risks. MARKET ENTRY DECISION STRATEGIES:
There are various market entry strategies a firm can consider when entering an international market. There is no universal strategy but the best strategy would be one circumstantially chosen after vivid scrutiny of factors that should be considered before choosing a market entry mode as discussed above. The choice of the entry mode depends on the following factors: Internal factors/conditions:
Objectives of the firm regarding sales volumes, time scale and market coverage. If the objective of the firm is of low sales volume for a limited period of time establishing a foreign owned production facility may be appropriate relative to other modes of entry kike exporting. Need for control: The level of control of marketing activities varies greatly from modes of entry. If the firm requires absolute control, establishing a wholly foreign owned investment (subsidiary) is preferred to other modes like indirect exporting which offer virtually no control. The firm’s resources: Resource requirements in terms of human and financial vary according to the modes...