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UGA MARK 4700 - Exam 1 Study Guide
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MARK 4700 Exam # 1 Study GuideForeign Market Selection - Determining Demand (Size of Market) o Population Indicators Absolute size (total population) - People (consumers) are needed to make a market  Population Growth Rates - Trends (growth or decline) over time indicate future market potential - Western Europe v. SE Asia/Africa  Distribution of Population - Characteristics like age, density and gender - Population pyramid o Income indicators  Distribution- Wide differences exists across and within countries o Ex: top 10%, bottom of pyramid, etc - Gini Indexo Aka Gini coefficient, this is a common indicator of income distribution such that the higher the number, the greater the income inequality between people in a country  Per Capita- Roughly equates to a country’s level of economic development and is a good indicator of the size or quality of a market - PPP measures of per capita income attempt to get better measures of the actual purchasing power in a country - Some goods (ex: industrial goods) may not correlate with per capita income National Income- Exchange rateo A number in the same unit (currency is required to compare country incomes) o Often, the US dollar is used as a common currency o Purchasing power parity (PPP) takes into account relative price differences and purchasing power between countries- Gross Domestic Product (GDP) o All products and services produced in a country in one year- Gross National Income (GNI)o National income while including items that come in from other counties  Comparison of Income across countries - See Chart in Powerpoint- Ranking Foreign Markets o Market Screening  1) Identifying indicators for the selection criteria  2) Converting the data into comparable indicators  3) Weighing each indicator  4) Analyzing the results Foreign Market Entry - Foreign Entry Mode Types o Indirect Exporting  A foreign market entry mode in which the manufacturer is not the exporter; instead, a third party conducts the export transaction  Upside: offers benefits of additional sales without risk and cost of direct involvement nor prior experience  Downside: Provides the manufacturer with very little control or feedback and prevents the manufacturer from gaining important internationalization knowledge  Types - Piggybacking o One product “rides” on the back of another from one national market to another - Export Management Companies (EMCs) o Companies that specialize in exporting and handle the export transaction on behalf of the manufacturer - Export Trading Companies (ETCs) o Companies that specialize in international trade, generally organized as vertically or horizontally integrated entities o Prevalent in some SE Asian markets—Japan, South Korea  Advantages - No experience required - Faster to market - Low cost  Disadvantages - Limited control - Limited feedback o Direct Exporting  The manufacturer is the exporter and directly sells to an importer in another country The foreign importer may be the final consumer or an intermediary like an agent or distributor  Direct exporting offers greater control and feedback than indirect exporting but the costs and risks are greater  Direct exporting varies by the type of foreign partner used such as: - Agents o Individual or organization located in the foreign market that makes the international sale on behalf of the manufacturer - Distributors o An organization located in the foreign market that takes title (ownership) of the manufacturer’s product and sells the product - Direct sales o Such as through the internet o Occurs when a manufacturer sells direct to foreign buyers o B-2-C  Advantages - Greater control - Greater feedback - Gain market knowledge  Disadvantages - More costly - More time and efforto Direct Exporting with FDI  Foreign Direct Investment (FDI) means a financial investment in a foreign market involving ownership of foreign assets and/or foreign offices and employees  Factors Forcing FDI- Barriers to export success o Cost of transportation o Cost of local import barriers - Need for increased control and feedback o May need additional control and feedback to maximize returns o Increased success may lead to increased market involvement (ex: customer support) - Sales and Customer Needs o The firm itself may be best able to serve customers rather than training an intermediary  Types of FDI - Overseas offices for marketing and saleso To maximize its effectiveness in managing overseas marketing and sales, a firm may elect to open an overseas office o Overseas offices allow greater market participation in tradeshows, selling seminars, training events, and marketing efforts - Overseas Distribution o A firm may also open a distribution to the local market andadjacent foreign markets o The firm can then ship greater quantities and get lower shipping costs o Allows for more control of inventory and better ability to make local adaptations  Advantages - Greater control - Greater feedback - Better meet customer needs  Disadvantages - More complex - More time and effort o Foreign Manufacturing/ Foreign Sales and Distribution Foreign Assembly - Occurs when a firm produces domestically all or most of the components or ingredients of its product and ships them to foreign markets for assembly - May occur when transportation costs or tariffs are high - May be direct or through licensing  Contract Manufacturing - When a firm’s product is produced in a foreign market by another producer under contract with the firm - Marketing is handled by the firm, not the contract manufacturer - Works best when marketing is the firm’s competitive advantage - Quality control and limited profits are drawbacks  Wholly Owned Foreign Production - Acquiring o An existing local manufacturer is quicker, eliminates a potential competitor, and takes advantage of existing contacts with labor and govt - Greenfield o Build from the ground up; takes longer but enables the useof the latest technology, avoids organizational culture clashes, and a ‘fresh start’ on building the brand- Advantages o Greater percentage of the profits, more control, and increased experience and feedback - Disadvantages o Costly in terms of capital and management resources and put the firm at greater economic and political risk  Advantages - Full


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UGA MARK 4700 - Exam 1 Study Guide

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