ENGAGING IN INETRNATIONAL MARKETS:Expansion of technology, Merchandize export and import

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InternationalMarketing MKT630

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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InternationalMarketing MKT630

· 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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