CHAPTER THREE

INTERNATIONAL MARKET ENTRY DECISIONS

 1. Analyzing international marketing
Indicators of International Marketing Opportunity
 Broadly speaking, international marketing opportunities could be identified by recognizing the
existence of unfulfilled demand in a foreign country that your company can effectively
service; or, by recognizing the existence of goods and services in foreign markets that your
company can obtain to fulfill domestic demand.
 In other words, international marketing opportunities exist in one of these two forms:
1. Existing, latent, or incipient demands in foreign countries that a firm can effectively fulfill
through its offerings.
2. An opportunity to source goods and services from foreign countries to fulfill demand in
domestic markets and/or other foreign countries.
 Existing Demand in foreign Countries
o The primary indicators of international marketing opportunity are the demand and supply situation for
products; in foreign country, moderated by the international marketer's ability to effectively service
those markets.
o When there are already existing demand for certain products and services in foreign countries, you may
choose to serve that market by offering products and services that meet the current demand.
o Your marketing task, in this context, is to offer superior value to the customers, whereby their preferences
can be channeled in favor of your company's offerings.
 Latent Demand in foreign Countries
 Latent demand may exist in foreign markets because of unavailability of certain products
that will fulfill the need or want of a substantial number of people in the country.
 Such unavailability of products could be due to the lack of technological solutions for
certain problems. In many countries, we can see this, in the need for drugs or vaccines to
cure AIDS or prevent cancer.
 In other cases, latent demand may exist when technological solutions are available but
marketers have not yet developed liable products to meet customer needs. For example, in
most parts of the world there is latent demand for efficient automobiles that can operate
without expensive gasoline.
 Incipient Demand in foreign Countries
 Incipient markets are usually characterized by emerging demand for certain products and
services. They provide early signals for a high market growth that one would expect to
follow in the near future.
 Incipient demand usually corresponds with the emerging and growth stages of market
evolution. Servicing incipient demand is both challenging and exciting as it involves market
development activities as well as the threat of new entrants into the marketplace.
2. An opportunity to source goods and services from foreign countries to fulfill demand in
domestic markets and/or other foreign countries.
In this situation you need to assess the supply position of the foreign country and, your ability
to acquire the foreign goods and services to fulfill demand in domestic markets and other
foreign countries.
Sourcing as an international marketing opportunity
 The following factors are indicative of international sourcing opportunities.
When the price of a product or service- is significantly lower in a foreign country than
in domestic or third country markets for comparable quality goods or services;
Where superior quality goods are available in another country and have the potential to
better meet the needs of domestic and/or third country markets, given comparable prices;
If there is shortage of supply in domestic market or another foreign country.
Among the indicators of sourcing opportunities are the changing preference of people
towards foreign goods and services.
 3.2. International Marketing Entry Evaluation Process
The International Marketing Entry Evaluation Process is a five stage process, and its
purpose is to gauge which international market or markets offer the best
opportunities for our products or services to succeed. The five steps are Country
Identification, Preliminary Screening, In-Depth Screening, Final Selection and Direct
Experience.
Step One – Country Identification
 You can choose any country to go into. So you conduct country identification –
which means that you undertake a general overview of potential new markets.
Step Two – Preliminary Screening
 Now you begin to score, weight and rank nations based upon macro-economic
factors such as currency stability, exchange rates, level of domestic consumption
and so on.
 Now you have the basis to start calculating the nature of market entry costs.
Step Three – In-Depth Screening
• The countries that make it to stage three would all be considered feasible for market entry.
• So it is vital that detailed information on the target market is obtained so that marketing
decision-making can be accurate.
o Now one can deal with not only micro-economic factors but also local conditions such as
marketing research in relation to the marketing mix i.e. what prices can be charged in the
nation? – How does one distribute a product or service?
Step Four – Final Selection
• Now a final shortlist of potential nations is decided upon.
• A final scoring, ranking and weighting can be undertaken based upon more focused criteria.
• After this exercise the marketing manager should probably try to visit the final handful of
nations remaining on the short, shortlist.
Step Five – Direct Experience
Personal experience is important. Marketing manager or their representatives should travel to a
particular nation to experience firsthand the nation’s culture and business practices.
 On a first impressions basis at least one can ascertain in what ways the nation is similar or
dissimilar to your own domestic market or the others in which your company already
3.3. Forms Of Entry
There are basically different ways to enter a foreign market:
1. Exporting
 Exporting can be defined is a strategy in which a company, without any marketing or
production organization overseas, exports a product from its home base.
Exporting takes two forms:
Indirect Export
 Companies typically starts with indirect exporting that is they work through independent
intermediaries to export their products. There are four types of intermediaries.
Domestic – based export merchant
Buys the manufacturer’s products and then sells them abroad.
Domestic based export agent
Seeks and negotiate foreign purchases and is paid a commission.
Cooperative organization
Carries on exporting activities on behalf of several producers and is partly under
their administrative control.
Often used by producers of primary product – fruits, nuts and so on.
Export – management company
Agrees to manage a company’s export activities for a fee.
 Direct Export
The investment and risk are somewhat greater. The company can carry on direct exporting in
several ways;
Domestic based export department or division
The department might evolve into a self – contained export department performing all the
activities involved in export and operating as a profit center.
Overseas sales branch or subsidiary
An overseas sales branch allows the manufacturer to achieve greater presence and
programs control in the foreign market. The sales branch handles sales and distribution and
might handle warehousing and promotion as well.
It often servers as a display center and customer – service center also.
Traveling export sales representation
The company sends home – based sales representatives abroad to find business.
Foreign – based distributors or agents
• The company can hire foreign based distributors or agents to sell the company’s goods.
• These distributors and agents might be given exclusive rights to represent the manufacturer
in that country or only limited rights.
Whether companies decide to enter foreign markets through or indirect exporting, one of the
best ways to initiate or extend export activities is by exhibiting at an overseas trade show.
2.Licensing
 A licensing agreement is an arrangement whereby a licensor grants the rights to intangible
property to another entity (the licensee) for a specified period of time, and in return, the
licensor receives a royalty fee from the licensee.
 The licensor license a foreign company to use a manufacturing process, trademark, patent, or
other item of value for a fee or royalty.
3. Franchising
A company can enter a foreign market through franchising, which is a more complete form of licensing.
 Franchising - is an agreement to sell company products exclusively in a particular area or
to operate a business that carries company name.
 Franchisee- is an individual or company that is granted a license to do a business under the
franchisers trade mark, trade name, by the franchiser
 Franchisor- the company that allows an individual ( known a franchisee) to run the
location of the their business.
Here the franchiser offers a franchisee a complete brand concept and operating system. In return,
the franchisee invests in and pays certain fees to the franchiser.
4. Joint Venture
 Foreign investors may join with local investors to create a joint venture in which they share
ownership and control.
o Forming a joint venture might be necessary or desirable for economic or political reasons.
 The foreign firm might lack the financial, physical or managerial resources to undertake
the venture alone.
5. Foreign Direct Investment
• The ultimate form of foreign involvement is direct ownership of foreign-based assembly or
manufacturing facilities. The foreign company can buy part or full interest in a local
company or build its own facilities.
 The main disadvantages of direct investment is that a firm exposes its large investment to
risks such as blocked or devalued currencies, worsening markets, or expropriation.