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Chapter 8 Exp MKT

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moonballlse
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Export and Non Export

Entry Modes
Export Marketing
Spring 2024
Export Entry Mode: Introduction
• Choice between using direct and indirect
exporting organizational forms involves:

– Cost of performing functions.

– Transaction costs of organizing activities or


contracting with others.
Entry modes

Direct Entry Modes Indirect Entry Modes


• Exporting • Export Intermediary
• Licensing • Strategic Alliance
• Franchising • Subsidiary Operations
• Joint ventres
INDIRECT EXPORT
• Home Country Based Merchants
– Export merchant
– Trading Company
– Export Desk Jobber
• Home Country Based Agents
– Export commission House
– Confirming House
– Resident buyer
– Broker
– Export management company
– Manufacturer Export agent
Indirect export
• Uses independent organizations in the
producer’s own country
• A given company may both use indirect export
and a cooperative organization
Trading Company
Export Desk Jobber
•An export desk jobber is an intermediary who facilitates the export of goods
between producers and international buyers.
•They typically operate within a specific industry or product category.
•Export desk jobbers often specialize in sourcing products from multiple producers
and selling them to international markets.
•They handle negotiations, logistics, and documentation related to export
transactions.
•Example: XYZ Export Desk Jobber
•XYZ specializes in exporting agricultural products from various producers in
South America to buyers in Europe and Asia.
•They negotiate contracts and pricing with both producers and buyers.
•XYZ manages shipping arrangements and ensures compliance with
international trade regulations.
•They provide support services such as quality control and packaging to meet
buyer requirements.
Difference
Export Desk Jobber Trading Company
WHAT IS SOGO SHOSHA?
HOME COUNTRY BASED AGENTS
RESIDENT BUYER:
•A resident buyer is a representative of a foreign company who resides in a specific country
to procure goods or services locally on behalf of their employer.
•They have a deep understanding of the local market, culture, and business practices, which
allows them to identify suitable suppliers and negotiate favorable terms.
•Resident buyers often establish long-term relationships with local suppliers, facilitating
ongoing procurement needs for their employer.
•An example of a resident buyer could be a purchasing manager stationed in China by an
American electronics company to source components from local manufacturers.
•Resident buyers play a crucial role in international procurement by ensuring efficient
sourcing, cost-effectiveness, and quality control for their employers.
A manufacturer export agent (MEA) is an individual or entity appointed by a
manufacturer to handle its export operations.

MEAs typically assist manufacturers in finding overseas buyers, negotiating contracts,


and managing logistics for exporting goods.

They act as intermediaries between manufacturers and foreign buyers, facilitating


smooth communication and transactions.

An example of a manufacturer export agent is Smith Export Agency, which represents


a textile manufacturer in India, assisting in finding buyers in Europe and managing
export logistics.

MEAs play a crucial role in helping manufacturers expand their global reach and
increase sales in international markets.
Cooperative Organization
Piggyback marketing:
Export Combination
•Export combination refers to the cooperative effort of multiple
exporters or producers to enter foreign markets together.
•By pooling resources and expertise, exporters can benefit from
economies of scale, reduced costs, and increased market
penetration.
•Export combinations may involve joint marketing efforts, shared
distribution networks, or coordinated export strategies.
•This approach allows exporters to overcome barriers to entry
and compete more effectively in international markets.
Direct export

• Direct exporting occurs when a manufacturer or


exporter sells directly to an importer or buyer located
in a foreign market.

• A manufacturer may use more than one of the


alternative methods of direct export.
Direct Export

• Home-country based department


– Built-in-department
– Separate Export Department
– Export Sales Subsidiary
• Foreign Sales Branch
• Storage or Warehousing Facilities
• Foreign Sales Subsidiary
• Traveling Salesperson
Foreign based distributors and
representatives
• A distributor is a merchant who takes title
(ownership of goods)
• A representative does not take title.
• Unfortunately, terms are often incorrectly
used/interchanged
• In direct exporting, use of exclusive agents or
distributors is easiest and least costly
Licensing

• Involve technology, trademark, designs, knowledge, patents


and trade secrets, etc.
– Trademarks
• A trademark is a word, phrase, symbol, and/or design that identifies and
distinguishes the source of the goods of one party from those of others.
– Patent
• A patent is grant of exclusive rights for an invention to make, use and sell
the invention for a limited period of 20 years.

• Involves various payments and fees: Initial payments, Annual


minimums, Annual percentage fees, and Additional fees.

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Licensing

• In May 2018, Nestle and Starbucks entered into a


$7.15 billion coffee licensing deal. Nestle (the
licensee) agreed to pay $7.15 billion in cash to
Starbucks (the licensor) for exclusive rights to sell
Starbucks’ products (single-serve coffee, teas, bagged
beans, etc.) around the world through Nestle’s global
distribution network. Additionally, Starbucks will
receive royalties from the packaged coffees and teas
sold by Nestle.
Franchising

• Franchising is a special type of licensing in which the


franchiser usually supplies an important ingredient.

• Franchising in Pakistan
– SBP limits the initial franchise fee up to $100,000
(regardless of the number of outlets) for lifetime.
– SBP also limits the continuing franchise fee to 5% of their
monthly net sales.
Contracting

• Contract Manufacturing:
– Contracting for the manufacture or assembly of products
by manufacturers established in overseas markets
– Advantages
• Minimum investment of cash, time, and executive talent
• Control over marketing, after-sales service and
protection of trademark.
– Disadvantages
• Potential competitor
• Control of manufacturing quality
Joint Venture

• A joint venture entails establishing a firm that is


jointly owned by two or more independent firms.

• Four characteristics of JVs


– Separate legal entities
– Sharing responsibilities of management
– Partnership between legally incorporated entities
– Equity position held by each of the partners
Non- Export Entry Modes:
Alternative Modes of Entry
• Modes of entry:
– Manufacturing
– Assembly
– Strategic Alliances

• Strategic focus:
– Expanding sales volume
– Improving productivity and cost reduction

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Gray Market Exporting

• Also known an “parallel importation” or


“product diversion”.
Measuring Performance
Manufacturing Facilities:
General Considerations
• Setting up manufacturing facilities seldom a
company’s first international operation.
• Large investment in capital and personnel problems.
• Many advantages:
– Control and flexibility
– Better image in host country

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Manufacturing Facilities:
General Considerations
• Three questions to answer:
– Location of facility
• Climate of the foreign capital
• Production considerations
• Special condition
– Degree of ownership
• Wholly owned
• Partially owned
– Implementation of the decision
• Start from scratch
• Use the acquisition route
Assembly Operations

• Cross between exporting and overseas manufacturing

• May provide cost savings under the right conditions

• May be a marketing tool where buyers simply prefer


products ‘made’ in the home country

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Strategic Alliances:
Nature of Strategic Alliances
• Companies from two or more countries forming long-term
collaborative arrangements for mutual gain
• Core dimensions:
– Goal compatibility
– Strategic advantage
– Interdependence
– Commitment
– Communication and conflict resolution
– Coordination of work and planning
• Strategic alliances are necessary because of increasing
competition
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