7. Offer by foreign distributor
8. Increasing growth rate
9. Smoothing out business cycles
Other empirical studies over a number of years have pointed to a wide variety of reasons
why companies initiate international involvement. These
the saturation of the domes-
tic market, which leads firms either to seek other less competitive markets or to take on the
competitor in its home markets; the emergence of new markets, particularly
the devel-
oping world; governmeJlt incentives to export; tax incentives offered by foreign govern-
ments to establish manufacturing plants in their countries in order to create jobs; the
availability of cheaper or more skilled labor; and an attempt to minimize the risks of a reces-
sion in
home country and spread risk 6
REASONS TO AVOID INTERNATIONAL MARKETS
most businesses do not enter foreign markets. The reasons
given for not going international are numerous. The biggest barrier to entering foreign
kets is seen to be a fear by these companies that their products are not marketabie over-
seas, and a consequent preoccupation with the domestic market. The following points were
highlighted by the find ings in the previously mentioned
by Barker and Kaynak, who
listed the most important barriers: 7
1. Too much red tape
2. Trade barriers
difficulties
4. Lack of trained personnel
5. Lack of incentives
6. Lack of coordinated assistance
7. Unfavorable conditions overseas
8. Slow payments by buyers
9. Lack of competitive products
10. Payment defaults
11. Language barriers
is the combinatioa of these factors that determines not only whether companies become
involved in
markets, but also the degree of
i:1Volvement.
THE STAGES OF GOING INTERNATIONAL
Earlier in our discussion on definitions, we identified several terms that relate to how
mitted a firm is to being international. Here we expand on these concepts and explain the
rationale behind this process. Two points should be noted. First, the process tends to be
ranked in order of "least risk and investment" to "greatest involvement." Second, these are not necessarily sequential steps, even though exporting is
most common as an
initial entry.
THE STAGES OF GOING INTERNATIONAL
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Firms typically approach involvement in international marketing rather cautiously,
and there appears to exist an underlying lifecycle that has a series of critical success fac-
tors that change as a firm moves through each stage. For small- and medium-sized firms
in particular, exporting remains the most promising alternative to a full-blooded interna-
tional marketing effort, since it appears to offer a degree of control over risk, cost, and resource commitment. Indeed, exporting, especially by the smaller
is often initiated as a response
to an unsolicited overseas order-these are often perceived to be less risky.
Exporting
In general, exporting is a simple and low risk-approach to entering foreign markets. Firms
may choose to export products for several reasons. First, products in the maturity stage of
their domestic lifecycle may find new growth opportunities overseas, as Perrier chose to
do in
U.S.
some firms find it less risky and more profitable to expand by export-
ing current products instead of developing new products. Third, firms who face seasonal
domestic demand may choose to sell their products to foreign markets when those prod-
ucts are "in season" there. Finally, some firms may elect to export products because there is less competition overseas .
A firm can export its products in one of three ways:
exporting, semi-direct
expOlting, and direct exporting. Indirect exporting is a common practice among firms that are just beginning their exporting . Sales, whether foreign or domestic, are treated as domestic sales. All sales are made through the firm's domestic sales department, as there is no
export department. indirect exporting involves very little investment, as no overseas sales
force or other types of contacts need be developed. Indirect exporting also involves little
risk , as international marketing intermediaries have knowledge of markets and will
fewer mistakes than sellers.
In semi-direct exporting, an American exporter usually initiates the contact through
agents, merchant middlemen, or other manufacturers in the U.S. Such semidirect export-
ing can be handled in a variety of ways: (1) a combination export manager, a domestic agent intermediary that acts as an exporting department for several noncompeting firms; (2) the
manufacturer's export agent (MEA) operates very much like a manufacturer's agent in domestic marketing settings ; (3) a Webb-Pomerene Export Association may choose to limit cooperation
advertising, or it may handle the exporting of the products of the association's
members and; (4) piggyback exporting, in which one manufacturer (carrier) that has export facilities and overseas channels of
handles the exporting of another
(rider)
noncompeting but complementary
When direct exporting is the means of entry into a foreign market, the manufacturer establishes an export department to sell directly to a foreign film. The exporting
con-
ducts
research, establishes physical
and obtains all necessary export
documentation. Direct exporting
greater investment and also carries a greater risk.
However, it also provides greater potential return and greater control of its marketing program.
Licensing
Under a licensing agreement, a finn (licensor) provides some technology to a foreign finn (licensee) by granting that firm the right to use the licensor's manufacturing process, brand
name, patents, or sales knowledge in return for some payment. The licensee obtains a com-
petitive advantage in this arrangement, while the licensor obtains inexpensive access to a
foreign market.
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