Marketing_Management_14th_Edition-min

TAPPING INTO GLOBAL MARKETS | CHAPTER 21 603
Busy ports, such as in Buenos
Aires, Argentina, are fueling the demand
for greater trade cooperation.
It often makes sense to operate in fewer countries, with a deeper commitment and penetration
in each. In general, a company prefers to enter countries that have high market attractiveness and
low market risk, and in which it possesses a competitive advantage. Consider how these firms have
assessed market opportunities:
• Coke and Suntory are looking for energy-drink distribution opportunities outside saturated
North America where Red Bull and Monster rule, focusing on less competitive markets in
Western Europe and Asia. Both companies are considering using their extensive distribution
networks to sell brands whose rights they have acquired, Monster and V, respectively. 32
• Jamaica-based Digicel has conquered politically unstable developing countries such as Papua
New Guinea, Haiti, and Tonga with products appealing to poor and typically overlooked consumers,
whose fierce loyalty helps protect Digicel from aggressive government interventions. 33
• Bechtel Corporation, the construction giant, does a cost-benefit analysis of overseas markets,
factoring in the position of competitors, infrastructure, regulatory and trade barriers, and corporate
and individual taxes. It looks for untapped needs for its products or services, a skilled
labor pool, and a welcoming environment (governmental and physical). 34
Deciding How to Enter the Market
Once a company decides to target a particular country, it must determine the best mode of entry.
Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct investment,
shown in Figure 21.2. Each succeeding strategy entails more commitment, risk, control,
and profit potential.
Indirect and Direct Export
Companies typically start with export, specifically indirect exporting—that is, they work through independent
intermediaries. Domestic-based export merchants buy the manufacturer’s products and
then sell them abroad. Domestic-based export agents, including trading companies, seek and negotiate
foreign purchases for a commission. Cooperative organizations conduct exporting activities for several
producers—often of primary products such as fruits or nuts—and are partly under their administrative
control. Export-management companies agree to manage a company’s export activities for a fee.
Indirect export has two advantages. First, there is less investment: The firm doesn’t have to develop
an export department, an overseas sales force, or a set of international contacts. Second,
there’s less risk: Because international marketing intermediaries bring know-how and services to
the relationship, the seller will make fewer mistakes.
Commitment, Risk, Control, and Profit Potential
|Fig. 21.2|
Direct
investment
Joint
ventures
Licensing
Direct
exporting
Indirect
exporting
Five Modes of Entry
into Foreign Markets