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MB0046 : Management of Sai Systems Pvt. Ltd. has decided to enter international marketing scenario. What methods are applicable to the company to enter international markets and what should be the approach?

Posted on: September 27, 2011

MB0046  : Management of Sai Systems Pvt. Ltd. has decided to enter international marketing scenario. What methods are applicable to the company to enter international markets and what should be the approach?

Answer: – Sai Systems Pvt. Ltd. should follow an International Market Entry Strategies:-

To enter  international marketing  Sai Systems Pvt. Ltd. know the answers for some basic questions like –

a. In how many countries would the company like to operate?

b. What are the types of countries it plans to enter?

That’s why companies evaluate each country against the market size, market growth, and cost of doing business, competitive advantage and risk level.

Once the market is found to be attractive, Sai Systems Pvt. Ltd. should decide how to enter this market. Sai Systems Pvt. Ltd. can enter the international market by adopting any one of the following strategies. They are

a. Exporting

b. Licensing

c. Contract manufacturing

d. Management contract

e. Joint ownership

f. Direct investment

Exporting is the technique of selling the goods produced in the domestic country in a foreign country with some modifications. For example, Gokaldas textiles export the cloth to different countries from India. Exporting may be indirect or direct. In case of indirect exporting, company works with independent international marketing intermediaries. This is cost effective and less risky too. Direct exporting is the technique in which organization exports the goods on its own by taking all the risks. Maruti Udyog Limited, India’s leading car manufacturer exports its cars on its own. Company can also set up overseas branches to sell their products. Adani Exports, another leading exporter from India has international office in Singapore.

Licensing: According to Philip Kotler, licensing is a method of entering a foreign market in which the company enters into an agreement with a license in the foreign market, offering the right to use a manufacturing process, trademark, patent, or other item of value for a fee or royalty. For example, Torrent Pharmaceuticals has license to sell the cardiovascular drugs of Chinese manufacturer Tasly. Licensing may cause some problems to the parent company. Licensee may violate the agreement and can use the technology of the parent company.

Contract manufacturing: Company enters the international market with a tie up between manufacturer to produce the product or the service. For example, Gigabyte Technology has contract manufacturing agreement with D- link India to produce and sell their mother boards.

Management contracting: In this case, a company enters the international market by providing the knowhow of the product to the domestic manufacturer. The capital, marketing and other activities are carried out by the local manufacturer.

Joint ownership: A form of joint venture in which an international company invests equally with a domestic manufacturer. Therefore it also has equal right in the controlling operations. For example, Barbara, a lingerie manufacturer has joint venture with Gokaldas Images in India.

Direct Investment: In this method of international market entry, Company invests in manufacturing or assembling. The company may enjoy the low cost advantages of that country. Many manufacturing firms invested directly in the Chinese market to get its low cost advantage. Some governments provide incentives and tax benefits to the company which manufactures the product in their country.

Approaches to International Marketing

The three common approaches used in the international market are –

a. Domestic market extension approach.

b. Multi domestic market orientation.

c. Global market orientation.

Domestic market extension approach: Companies that adopt this strategy think international markets are secondary to its domestic markets. For example, HSBC advertises its banking services with a tag line “the world’s local bank”.

Multi domestic market orientation: In the international market each country has its uniqueness. Their preference varies. The consumer profile is different from domestic operation. Companies develop different market plans for such markets. For example, in France, men use more cosmetics than the women, whereas in India women use more cosmetics than men. A cosmetics company should change the product positioning differently.

Global market orientation: In this approach, company thinks that products’ needs are universal in nature irrespective of country where they work. Here company tries to standardize their products or services. For example, Sony Walkman is same across the world. The product information brochure contains explanation in different languages of different countries. The final product is same in all the countries.

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