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Questions and Answers
What is a significant challenge when transporting products in international markets?
What is a significant challenge when transporting products in international markets?
Which aspect of international business ensures that disputes are resolved in accordance with local laws?
Which aspect of international business ensures that disputes are resolved in accordance with local laws?
Which market entry strategy involves collaborating with a local firm to share resources and expertise?
Which market entry strategy involves collaborating with a local firm to share resources and expertise?
What legal factor should an international business consider to safeguard its innovations?
What legal factor should an international business consider to safeguard its innovations?
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Which type of distribution is characterized by the use of all available outlets to sell a product?
Which type of distribution is characterized by the use of all available outlets to sell a product?
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What role does understanding political and cultural trends play in global business leadership?
What role does understanding political and cultural trends play in global business leadership?
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Which international market entry strategy is primarily based on licensing the rights to produce a product?
Which international market entry strategy is primarily based on licensing the rights to produce a product?
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What is a primary challenge faced by businesses when entering undeveloped markets?
What is a primary challenge faced by businesses when entering undeveloped markets?
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Which factor is least likely to influence market size assessment during international expansion?
Which factor is least likely to influence market size assessment during international expansion?
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Which of the following is a critical legal aspect to evaluate in a target market?
Which of the following is a critical legal aspect to evaluate in a target market?
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What is a key difference between highly developed and undeveloped markets?
What is a key difference between highly developed and undeveloped markets?
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Which consideration is essential when assessing logistical challenges in a new market?
Which consideration is essential when assessing logistical challenges in a new market?
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What should be prioritized when evaluating the size of a new international market?
What should be prioritized when evaluating the size of a new international market?
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How can cultural understanding impact international business strategies?
How can cultural understanding impact international business strategies?
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Which of the following is a common barrier faced by businesses entering foreign markets?
Which of the following is a common barrier faced by businesses entering foreign markets?
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In evaluating financial stability before market entry, which indicator is most relevant?
In evaluating financial stability before market entry, which indicator is most relevant?
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Which of the following are considered political risks in international business?
Which of the following are considered political risks in international business?
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What challenge is least likely to arise during negotiations with international partners?
What challenge is least likely to arise during negotiations with international partners?
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Which factor is crucial for successfully selling in international markets?
Which factor is crucial for successfully selling in international markets?
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Which aspect of international business does not typically influence marketing strategies?
Which aspect of international business does not typically influence marketing strategies?
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In what way does culture impact the negotiation process in international business?
In what way does culture impact the negotiation process in international business?
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What is one of the main reasons a company seeks international markets?
What is one of the main reasons a company seeks international markets?
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Which of the following best describes commercial risks in international business?
Which of the following best describes commercial risks in international business?
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How can understanding culture mitigate risks in international marketing?
How can understanding culture mitigate risks in international marketing?
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Which risk is associated with financial discrepancies in international business?
Which risk is associated with financial discrepancies in international business?
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Study Notes
International Sales and Distribution Management
- This chapter covers the management of international sales and distribution.
- Objectives include understanding necessary information for international sales teams, how distribution management varies based on international country types, factors affecting distribution when entering different countries, and regulations and compliance for international product distribution.
- The nature of international markets varies in terms of development levels.
- Undeveloped markets lack infrastructure, resources, and economic development, making them less attractive to investors and businesses.
- Highly developed markets are found in countries with high per capita income and stable political systems. These markets feature mature industries and diverse sectors like finance, technology, healthcare, and consumer goods.
- Choosing the market involves considering factors such as market size and growth potential, language and cultural differences, competition, and entry barriers.
- Larger markets present greater opportunities for increasing revenue.
- Effective communication strategies are needed to effectively interact with customers and partners.
- Strengths and weaknesses of competitors and potential market entry barriers should be assessed.
Nature of International Market
- International markets vary in terms of development.
- Undeveloped markets lack infrastructure, resources, and economic development, thus making them less appealing to investors and businesses.
- Highly developed markets typically have high per capita income, stable political systems, mature industries, and diverse sectors (e.g., finance, technology, healthcare, consumer goods).
Choosing the Market
- Market size and growth potential are crucial considerations when evaluating a new market.
- Language and culture must be considered for effective communication with potential customers and partners.
- The competitive landscape of the target market including strengths and weaknesses of competitors, and potential entry barriers should be assesssed.
Choosing the Market (Continued)
- Political access is determined by regulations and legal requirements that vary significantly between countries.
- Financial stability, measured by a country's GDP, is another important criterion for determining market size and purchasing power.
- Proximity of the markets, especially logistics and infrastructure, are critical when expanding internationally.
Cultural and International Business
- Culture encompasses shared values, beliefs, customs, and practices within a group of people.
- It significantly influences international business practices, including communication styles, business conduct, consumption patterns, and organizational interactions with global markets.
Importance of Culture in International Marketing
- Understanding culture is vital in international marketing to gain insight into target audience preferences, behaviors, and expectations.
- Marketing strategies should be adapted to align with local consumption patterns.
- Navigating cultural nuances fosters strong relationships with partners and customers, while avoiding miscommunication that could harm prospects.
How Culture Impacts Business Practice
- Culture impacts multiple aspects of international business, including communication, negotiation styles, dress codes, time management, and business formalities and courtesies.
Risks Involved in Doing Business Internationally
- The three main risks are political risks, commercial risks, and financial risks.
- Political risks include disruptions in contracts or payments due to political instability (e.g., coups, wars).
- Commercial risks involve sudden changes in a buyer's country, such as currency shortages. This can affect the availability of foreign exchange to pay invoices.
- Financial risks involve the inability of a buying company to fulfill its contractual obligations due to bankruptcy.
Selling in International Market
- Trade between countries occurs due to various reasons including lack of available products locally, cost advantages associated with importing, and product differentiation compared to local products.
- Companies may expand internationally due to limited domestic market growth or to take advantage of profitable opportunities. Companies with excess domestic capacity may also decide to expand overseas.
- A considerable cost advantage over international competitors and increased competition in the domestic market can be motivators for companies to enter international markets.
Entry Strategies for International Market
- Direct export strategies involve the sale of products directly to consumers in foreign markets. Strategies include using agents, distributors, governments, or overseas subsidiaries.
- Indirect export strategies involve collaboration with parties like trading companies, export management companies, or other entities to support sales in foreign markets. Also includes strategies like piggyback and countertrade.
- Foreign production strategies may include licensing, franchising, joint ventures, or setting up export processing zones.
Aspects of Doing International Business
- Success in international business requires a savvy business leadership team with knowledge of markets and the ability to understand political and cultural trends.
- Expanding into global markets involves supply chains, economic knowledge, knowledge of markets, and the ability to understand political and cultural trends.
Legal Aspects of International Business
- Legal knowledge is crucial for dispute resolution and protection of intellectual property rights in case of legal disputes.
- Businesses need to understand the legal specifics of the target market to ensure smooth business operations
Profile of International Salesperson
- International salespersons require specific qualities:
- Bilingualism or multilingualism
- Cultural adaptability
- Independence and decisiveness
- Professionalism and amiability
- Understanding of products, pricing, financing options, payment instruments, and foreign exchange risks
Distribution Channel in Doing Business Internationally
- The chosen distribution channel depends on product attributes, position in the target market, and brand image.
- Intensive distribution channels involve using all available outlets for distributing the product.
- Selective distribution channels involve choosing specific outlets to distribute a specific product.
- Exclusive distribution channels involve carefully selecting a few dealers allowed to sell the product.
Role of Distribution in Doing Business Internationally
- Distribution's role becomes more critical in global operations due to distance between the manufacturing base and market, time for product transport, and required procedures. Considerations are needed for completing business procedures across national borders.
Pricing and Payment in International Trade
- Pricing products for international markets may utilize different terms. Standard practice is the Ex-Works arrangement, where the product is ready at the factory. Free on Truck (FOT) includes packaging, palletization, and loading on the truck at the factory but not port charges.
- Other pricing terms include FAS (free alongside ship), FOB (free on board), CFR (cost and freight), CIF (cost, insurance, and freight), and DDP (delivered duty paid). Each term involves a different level of responsibility and risk between buyer and seller.
Currency in Pricing
- Exports are usually priced in hard currencies (e.g., USD, Euros), potentially including Japanese yen or Indian rupees.
- Fluctuations in currency values affect the price that buyers and sellers pay for products and services in international markets.
Packing and Shipping
- Cultural practices related to packing and shipping must be considered and understood.
Market Intelligence and Research
- Global trade and economics involve movement of goods, services, capital and investments across national borders. Such activity requires companies to gather market intelligence including knowledge of trends and country-specific regulations.
- International financial markets include global currencies and shares, and economic trends affect operations globally. Market research is needed to assess opportunities and risks.
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