Test 44/3Entry Mode and Internal Factors- Export readiness: the organization’s ability to conduct international trade includingo Prior experienceo Management commitment to international expansiono The firm’s financial strengtho International knowledge: Foreign market knowledge Internationalization process knowledgeo Low Readiness = less intense entry modes (e.g., indirect export or export without FDI)o High Readiness = more intense entry modes (e.g., FDI)- Competitive Positiono Strong domestic market position and strong brand help foster international success- Macro/Industry Issueso Government policies such as product certifications and standards (e.g., CE Mark) or allowed foreign ownership- Current and Future Market Potentialo Greater market potential usually means more involved modesIndirect Exporting- Exporting is manufacturing a product in one country and shipping it to another for final sale- Indirect exporting is when a third party, and not the manufacturer, conducts the export- Types of indirect exporting include piggybacking and export management companies (EMCs)- Indirect exporting offers benefits of additional sales without risk and cost of direct involvement nor prior experience- Indirect exporting provides the manufacturer with very little control or feedback and prevents the manufacturer from gaining important internationalization knowledgeMajor Modes of Market Entry- Indirect Exporting- Direct Exporting- Direct Exporting with FDI- Foreign Manufacturing, Sales, and/or Distribution- Licensing- Joint Ventures and Strategic AlliancesFDI: Foreign Manufacturing- Wholly Owned Foreign Productiono Acquisition vs. Greenfield Acquiring an existing local manufacturer is quicker, eliminates a potential competitor, and takes advantage of existing contacts with labor and government Greenfield (building from the ground up) takes longer but enables the use of the latest technology, avoids organizational culture clashes, and a ‘fresh start’ on building the brando Wholly owned operations result in a greater percentage of the profits, more control, andincreased experience and feedbacko However, wholly owned operations are costly in terms of capital and management resources (e.g., time and energy) and put the firm at greater economic and political riskPartner Selection- Financial and Pricing Considerationso What margins or commissions are needed?o Which currency will be used?o What payment terms will be used?- Marketing Support Considerationso What is the appropriate level of advertising and promotion?o How much training of the partner is necessary?- Communicationo What amount (frequency) and level (email, phone face-to-face) of communication is necessary?o Should regional and/or global sales meetings be held?- Market Exclusivityo How to balance exclusivity with a partner’s motivation and capabilities?Finding Foreign Partners- Step 1: Identify as many potential partners as possibleo Primary and secondary research using online databases, identifying distributors of complementary products, and making use of trade associations, trade shows, and trade missionso Government resources such as the U.S. Commercial Service’s Gold Key or state-based resources- Step 2: Visit the country and meet with potential partnerso Meetings can be arranged at trade shows and trade missionso Meetings should include a visit to partner’s facilityContract Negotiations- Cultural Considerationso Differences in cultures impact how individuals negotiate- Expectations of Each Partnero What does each partner want?- Win-Win or Win-Lose?o Win-win is best for both parties- Distributor Agreementso Should spell out responsibilities and interests of each party- Exclusive or Nonexclusive?o Exclusive allows for greater motivation (in theory)o Nonexclusive may be more common when experiencedDistribution Environment and Strategy- Distribution Strategyo Standardization or adaptation? Which channels in each market are most profitable Economies of scale and market similarity favor standardized approaches Local differences in regulations and availability of channels favor adaptation The firm’s preferred level of involvement also impacts distribution choiceso Direct vs. indirect channels Direct channels are more effective and make sense when the potential sales volume is high, however direct channels are more resource intensiveo Selective vs. intensive distribution Intensive is selling through any retailer that wants the product Selective is selling through only limited retailers4/8Research New Product- 50/50 chance of making it in the first 36 months- Select mkts/co.Product Life Cycle- **have to add in R&D before start and the profit line will initially be a loss at this stageo It is all costsBankCustomsInternational carrierDomestic carrierPort/TerminalConsulateChamber of CommerceExporter/ImporterCustomerInsurance Companyo If something is considered a novelty what does it look like? Bring it in and it does extremely well in intro and then drops- Intro- Growth- Maturity- Decline- **the time between each stage is NOT equalo It will vary from market to marketo Have to look at the numbers to see when you go from one stage to another- **evoked set: brands that are in the same price classGet Tuesday notes4/17No Notes…Handout4/22/14Product-Line Extensions- Product- line extensions are the use of one product upon which further, closely related products are developed- Product-line extensionso Broaden the appeal of a brand to customerso Offer additional products to domestic and international markets- However, the downside is that product-line extensionso May become “filler” products without high value addedo May have a limited impact on the firm’s sales- Table 9-4 in the textbook has more Pros and Cons of Product-Line ExtensionsManaging New Product Development- A Step-Wise Approach to Manage NPDo Utilizes a project approval team (PAT) composed of employees from multiple departmentso The PAT evaluates the NPD project in several phases 1. Idea generation 2. Feasibility study (including market potential and return on investment) 3. Product development (prototyping and initial manufacturing for testing) 4. Product Launcho This approach balances technological, financial, and marketing issues but may be difficult to coordinate if the PAT is globally geographically divided- The Japanese Model of Managing NPDo Success factors include job rotation of engineers, direct transfer of