Global Marketing
Dr. Nazatul Shima Abdul Rani (PhD)
Learning Outcomes
After studying this chapter, you should be able to:
- Describe the potential of small firms as global enterprises.
- Identify the basic forces prompting small firms to engage in global expansion.
- Understand and compare strategy options for global businesses.
- Explain the challenges that global enterprises face.
- Recognize the sources of assistance available to support international business efforts.
Introduction
Globalization: The expansion of international business, encouraged by converging market preferences, falling trade barriers, and the integration of national economies.
Small Businesses as Global Enterprises
Research has shown that recent startups and even the smallest of businesses continue to expand overseas, despite the recent global economic slowdown.
Born-global firms: Small companies launched with cross-border business activities in mind.
Basic Forces Driving Global Expansion
Expanding Markets
Traditional: Extend the product life cycle.
Emerging: Find buyers for highly specialized products.
Cutting Costs
Traditional: Reduce labor and transportation costs.
Emerging: Obtain tariff reductions.
Gaining Access to Resources
Traditional: Find new materials.
Emerging: Obtain human resources.
Capitalizing on Special Features of Location
Traditional: Profit from unique local features (e.g., Italian design flair).
Emerging: Follow large client firms that locate abroad.
Strategy Options for Global Enterprises
Challenges to Global Businesses
Political Risk
The potential for political forces in a country to negatively affect the performance of businesses operating within its borders.
Economic Risk
The probability that a country’s government will mismanage its economy in ways that hinder the performance of firms operating there.
Exchange rate: The value of one country’s currency relative to that of another country.
The "Ease of Doing Business Index"
This index shows the large impact that regulatory conditions have on economic growth and development.
Green
"Go" countries
Yellow
"Proceed with caution"
Red
"Stop and think carefully"
Assistance for Global Enterprises
1. Analyzing Markets and Planning Strategy
Finding international markets that fit the company’s unique potentials and putting together a game plan for entry into the target markets.
2. Connecting with International Customers
Trade leads: Essential in identifying potential customers in target markets.
Trade mission: A trip organized to help small business owners meet with potential foreign buyers and establish strategic alliances.
Trade intermediaries: An agency that distributes a company’s products on a contract basis to customers in another country.
3. Financing
Private banks: Commercial banks have loan officers handling foreign transactions.
Letter of credit: An agreement issued by a bank to honor a draft or other demand for payment when specified conditions are met.
Bill of lading: A document indicating that a product has been shipped and the title to that product has been transferred.
Small Business Administration (SBA)
Trade Intermediaries for Small Business
| Intermediary | Description |
|---|---|
| Confirming House (Buying Agent) | Works for foreign firms, "shops" for the lowest price, and is paid a commission. |
| Export Management Company (EMC) | Acts as an export department, transacts business for producers for a commission/salary, and may provide immediate payment. |
| Export Trading Company (ETC) | Acts as an export department or takes title to export under its own name. Can be set up by producers. |
| Export Agent, Merchant, or Remarketer | Purchases products directly, sells them overseas under its own name, and assumes all risks. |
| Piggyback Marketer | A manufacturer or service firm that distributes another firm’s product or service. |
References
Petty, J.W., Palich, L.E., Hoy, F., and Longenecker, J.G. (2012). Managing Small Business: An Entrepreneurial Emphasis, 16th edition, South Western-Cengage Learning.