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InternationalMarketing
MKT630
VU
Lesson
# 5
ENGAGING
IN INETRNATIONAL MARKETS
Why
companies engage in
internationalbusiness:
Companies
engage in international
businessfor a variety of
reasons.Identifying these
reasonsfor any
firm
is important to understand the nature and direction
of its motivation to engage I
international
marketing.
Some
of the major reasons
whycompanies engage in
internationalmarketing are as
follows:
To
expand sales of the
firm
To
acquire resources / technology /
skillsfrom foreign
countries
To
diversify their sources of
sales and supplies
To
capitalize on incentives from
governments, local and foreign
To
follow existing customerswho
have movedoverseas
Reasonsfor
recent growth of business in
internationalmarkets:
Internationalbusiness
has increase on a rapid
pace, especially after the
2nd world war of
1940's.This
expansion
in international business
hasbeen due to host of
reasons.Some of the key
reasonsfor
expansion
of international business are as
follows;
Expansion
of technology
Quicker
and cheaper transportation
·
Communications
enable controls
fromafar
·
Liberalization
of cross-border movements of
goods,services and factors of
production,such
as
labor, capital andtechnology
etc
Development
of supporting institutional arrangements
forinternational exchange of
goods
andfunds
Increase
in global competition forcing firms to expand in
international markets
Convergence
of world markets in terms of
tastes,distribution
infrastructure,technologies
andtrade
regulations.
Supportfrom
national governmentsfor
internationalization of local firmsand
for
attractingforeign
direct investments.
Growth
of resources available to mnc's
andwith large pool of
fundsands and
other
resourcesfirms
could easily
expandbusinesses in
worldmarkets.
Benefits
of doing business in
internationalmarkets:
A
country and its
peoplebenefit from selling
to or even buying from
internationalmarkets.
Exports
·
Propelcountry's
economic growth as itsfirms
increase sales and
profits
·
Exports of
quality products and services support or
create better jobs (average
export-related
jobpays
more than averagenational
job)
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Virtual University of Pakistan
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InternationalMarketing
MKT630
VU
·
Selling to
international markets diversifies a
country's economy and hence hedges
against
economic
downturns
Imports
·
Consumers
gainfrom lower costs,
betterquality and greater
variety products on the shelves
·
Also
createessential competition
forlocal companies which
thenimprove their products
and
processes
·
Keep levels of
prices and hence
inflationlow as with open
importsprices of products in
domestic
markets would depend on the
lowerprices of the products in
internationalmarkets
Means
of engaging in
internationalmarkets:
A
company may engage in
internationalmarkets in a number of ways.
These are categorized in
the
following;
Merchandize
export and import
Services
export and import
Travel,tourism
and transportation
·
Performance
of services
·
Fees in
banking, insurance, rentals etc., turnkey
operations, management
contractsetc.
·
Use of
assetsfor royalties
Licensing
·
Use of
assetssuch as trademarks, patents,
copyrights, or expertise under
contracts
Franchising
·
Franchiser sells/leases the
use of assets and
alsoassists the franchisee on a
continuing
basis
in operations
Investments
·
Directinvestment - with
controlling interest (at least
10% of voting or ownership
control)
Whollyowned
Jointventure
Mixedventure
(when a governmentjoins as a
partner)
·
Portfolioinvestment -
non-controlling interest
Equityinvestment
Stockmarket
investment - funds
Bonds
& loans
Moneymarket
investment
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Virtual University of Pakistan
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