Project Description The new computer-controlled convey.docx

Project Description
The new computer-controlled conveyor belt is an exciting
project that moves and positions
items on the conveyor belt within 1 millimeter. The project will
produce a new system for
future installations, and for replacement o f those in the field,
at a low cost. The computer-
controlled conveyor belt has the potential to be a critical unit in
30 percent of the systems
installed in factories. The new system is also easier to update
with future technologies. Table 1
has been developed for you to use in completing the project
exercises.
Table 1 Conveyor Belt Project; WBS
Hardware Hardware specifications
Hardware design
Hardware documentation
Prototypes

Order circuit boards
Assemble preproduction models
Operating system Kernel specifications
Drivers
Disk drivers
Serial I/O drivers
Memory management
Operating system documentation
Network interface
Utilities Utilities specifications
Routine utilities
Complex utilities
Utilities documentation
Shell
System integration Architectural decisions
Integration first phase
System hard/software test
Project documentation

Integration acceptance testing
uary 1, Memorial
Day (last Monday in May),
July 4th, Labor Day (first Monday in September), Thanksgiving
Day (4th Thursday in
November), December 25 and 26.
an extra day off, and if it falls
on a Sunday, then Monday will be given as a day off.
-hour days, Monday through
Friday.
Part 1
1. Develop the WBS outline using the software available to you.
2. When is the project estimated to be completed?
3. How long will the project take?
4. What is the critical path(s) for the project?

5. Which activity has the greatest amount of slack?
Include the following printouts:
A schedule table reporting. ES, LS, EF, LF, and slack for
each activity.
Table 2 Conveyor Belt Project; Schedule
Activity Description Resource (one team each) Duration (days)
Preceding Activity
1 Architectural decisions Design 25 —
2 Hardware specifications Development, design 50 1
3 Kernel specifications Design 20 1
4 Utilities specifications Development, design 15 1
5 Hardware design Design, development 70 2
6 Disk drivers Assembly, development 100 3
7 Memory management Development 90 3
8 Operating system documentation Design, documentation 25 3
9 Routine utilities Development 60 4
10 Complex utilities Development 80 4
11 Utilities documentation Documentation, design 20 4
12 Hardware documentation Documentation, design 30 5
13 Integration first phase Assembly, development 50
6,7,8,9,10,11,12
14 Prototypes Assembly, development 80 13
15 Serial I/O drivers Development 130 13
16 System hard/software test Assembly 25 14,15

17 Order circuit boards Purchasing 5 16
18 Network interface Development 90 16
19 Shell Development 60 16
20 Project documentation Documentation, development 50 16
21 Assemble preproduction models Assembly, development 30
17F-S, lag 50 days
22 Integrated acceptance testing Assembly, development 60
18,19,20,21
Part 2
Remember the old saying, “A project plan is not a schedule
until resources are
committed.” All information is found in Tables 2 and 3.
Table 3 Organization Resources
Name Group Cost ($/hr)
Design R&D (2 teams) $100
Development R&D (2 teams) 70
Documentation R&D (1 team) 60
Assembly/test R&D (1 team) 70

Purchasing Procurement (1 team) 40
Part 2-A
Prepare a memo that addresses the following questions:
1. Which if any of the resources are overallocated?
2. Assume that the project is time constrained and try to resolve
any overallocation
problems by leveling within slack. What happens?
3. Assume the project is resource constrained and resolve any
overallocation problems by
leveling outside of slack. What happens? What are the
managerial implications?
Include a Gantt chart with the schedule table after leveling
outside of slack.
Note: No splitting of activities is allowed.
Part 2-B
When you show the resource-constrained network to top
management, they are visibly
shaken. After some explanation and negotiation, they make the

following compromise with
you:
ce, you may hire other teams from the
outside. The outside
team would cost $50 more per hour than your inside teams.
two internal t e a m s
u n i t s , then hire as few external teams as necessary. Select
the cheapest possibility!
Change as few activities as possible. It is recommended you
keep work packages,
which require cooperation of several organizational units inside
your company. You
decide how best to do this.
Hint: Undo leveling prior to adding new resources.
Once you have obtained a schedule that meets the time
constraints, prepare a memo that

addresses the following questions:
1. What changes did you make and why?
2. How long will the project take?
3. How much will the project cost?
Include a Gantt chart with a schedule table presenting the new
schedule.
Include a monthly cash flow and a cost table for the project.
Part 3 (Bonus)
Prepare status reports for four quarter of the project (Fourth
Quarter, January 1, 2011)
given the information provided i n Table 4. This requires
saving your resource schedule as a
base- line and inserting the appropriate status report date in the
program. Assume that no
work has been completed on the day of the status report.
Your status report s ho ul d include a table containing t h e
PV, EV, AC, BAC, EAC, SV,
CV, and CPI for each activity and the whole project. The report
should also address the
following questions:

1. How is the project progressing in terms of cost and schedule?
2. What activities have gone well? What activities have not
gone well?
3. What do the PCIB and PCIC indicate in terms of how much
of the project has been
accomplished to date?
4. What is the forecasted cost at completion (EACf)? What is
the predicted VACf ?
5. Report and interpret the TCPI for the project at this point in
time.
6. What is the estimated date of completion?
Table 4 January 1, 2011
Activity Start Date Finish Date
Actual
Duration
Remaining
Duration
Hardware specifications 2/9/10 4/12/10 45 0
Hardware design 4/13/10 7/16/10 67 0
Hardware documentation 7/19/10 8/24/10 27 0

Prototypes 11/11/10 - 34 44
Kernel specifications 2/8/10 3/12/10 25 0
Disk drivers 3/15/10 8/17/10 110 0
Serial I/O drivers 11/11/10 - 34 119
Memory management 3/15/10 7/30/10 98 0
Op. systems documentation 3/15/10 4/16/10 25 0
Utilities specifications 3/8/10 3/29/10 16 0
Routine utilities 4/26/10 7/27/10 65 0
Complex utilities 3/30/10 8/11/10 95 0
Utilities documentation 5/3/10 6/2/10 22 0
Architectural decisions 1/4/10 2/5/10 25 0
Integration 1st phase 8/25/10 11/10/10 55 0
Part 4
You have received revised estimates for the remaining activities
at the end of the fourth quarter:
ypes will be completed on 3/8/11.

25 days.
will begin on 10/14/11 and
take 18 days.
take 55 days.
99 days.
ays.
and will take 54 days.
Prepare a memo that addresses the following questions:
1. What is the new EAC for the project? How long should the
project take given these revised
estimates?
2. What recommendations would you make?
Include a revised schedule, a Tracking Gantt chart, and cost
table with your memo.

Global Market-Entry Strategies: Licensing, Investment and
Strategic Alliances
Chapter 9
Global Marketing
WARREN J. KEEGAN/MARK C. GREEN Ninth
Edition, Global Edition
1
Learning Objectives
Explain the advantages and disadvantages of using licensing as
a market-entry strategy.
Compare and contrast the different forms that a company’s
foreign investments can take.
Discuss the factors that contribute to the successful launch of a
global strategic partnership.
Identify some of the challenges associated with partnerships in
developing countries.
Describe the special forms of cooperative strategies found in
Asia.
Explain the evolution of cooperative strategies in the 21st
century.
Use the market expansion strategies matrix to explain the
strategies used by the world’s biggest global companies.
Copyright © 2017 Pearson Education, Ltd.
9-2
From modest beginnings 45 years ago in Seattle’s Pike Street
Market, Starbucks Corporation has become a global marketing

phenomenon. Today, Starbucks is the world’s leading specialty
coffee retailer, with 2014 revenues of $16.4 billion. Starbucks
founder and chairman Howard Schultz and his management
team have used a variety of market-entry approaches—direct
ownership, licensing, and franchising—to create an empire of
more than 21,000 coffee cafés in 65 countries. In addition,
Schultz has licensed the Starbucks brand name to marketers of
noncoffee products such as ice cream. The company has even
made forays into movies and recorded music.
2
Investment Cost of Marketing Entry Strategies
9-3
The various entry mode options form a continuum. As shown
on this slide, the level of involvement, risk, and financial
reward increases as a company moves from market entry
strategies such as licensing to joint ventures and ultimately,
various forms of investment. When a global company seeks to
enter a developing country market, there is an additional
strategy issue to address: Whether to replicate the strategy that
served the company well in developed markets without
significant adaptation. To the extent that the objective of
entering the market is to achieve penetration, executives at
global companies are well advised to consider embracing a
mass-market mind-set. This may well mandate an adaptation
strategy.
3

Which Strategy Should Be Used?
It depends on:
Vision
Attitude toward risk
Available investment capital
How much control is desired
9-4
Starbucks plans to have 1,500 stores in China by 2015.
Licensing
A contractual agreement whereby one company (the licensor)
makes an asset available to another company (the licensee) in
exchange for royalties, license fees, or some other form of
compensation
Patent
Trade secret
Brand name
Product formulations
Worldwide sales of licensed goods
totaled $241.5 billion in 2014
9-5
Disney is the world’s top licensor.
Licensing is a contractual arrangement whereby one company
(the licensor) makes a legally protected asset available to
another company (the licensee) in exchange for royalties,
license fees, or some other form of compensation. The licensed

asset may be a brand name, company name, patent, trade secret,
or product formulation.
Some companies use licensing extensively: Apparel designers
(Hugo Boss, Bill Blass, Ralph Lauren), Coca-Cola, Disney,
Caterpillar, and the National Basketball Association. Licensing
agreements allow companies to extend their brands and generate
substantial revenue. It can contribute ROI if performance levels
are stated in contracts.
There are two key advantages associated with licensing as a
market entry mode. First, because the licensee is typically a
local business that will produce and market the goods on a local
or regional basis, licensing enables companies to circumvent
tariffs, quotas, or similar export barriers discussed in Chapter 8.
Second, when appropriate, licensees are granted considerable
autonomy and are free to adapt the licensed goods to local
tastes.
According to the international Licensing Industry
Merchandisers Association (LIMA), worldwide sales of licensed
goods totaled $241.5 billion in 2014. LIMA also has reported
that the United States and Canada account for about 60 percent
of licensed goods sales.
Licensing allows Disney to create synergies based on its core
theme park, motion picture, and television businesses. Its
licensees are allowed considerable leeway to adapt colors,
materials, or other design elements to local tastes. In China,
licensed goods were practically unknown until a few years ago;
by 2001, annual sales of all licensed goods totaled $600 million.
Industry observers expect that figure to grow by 10% or more in
the next few years.
5
Advantages to Licensing
Provides additional profitability with little initial investment

Provides method of circumventing tariffs, quotas, and other
export barriers
Attractive ROI
Low costs to implement
Licensees have autonomy to adapt products to local tastes
License agreements should have cross-technology agreements to
share developments and create competitive advantage for each
party
9-6
Licensing is a global market-entry and expansion strategy with
considerable appeal. It can offer an attractive return on
investment for the life of the agreement, provided that the
necessary performance clauses are included in the contract. The
only cost is signing the agreement and policing its
implementation.
Two key advantages are associated with licensing as a market-
entry mode. First, because the licensee is typically a local
business that will produce and market the goods on a local or
regional basis, licensing enables companies to circumvent
tariffs, quotas, or similar export barriers discussed in Chapter 8.
Second, when appropriate, licensees are granted considerable
autonomy and are free to adapt the licensed goods to local
tastes. Perhaps the most famous example of the opportunity
costs associated with licensing dates back to the mid-1950s,
when Sony co-founder Masaru Ibuka obtained a licensing
agreement for the transistor from AT&T's Bell Laboratories.
Ibuka dreamed of using transistors to make small, battery-
powered radios. However, the Bell engineers with whom he
spoke insisted that it was impossible to manufacture transistors
that could handle the high frequencies required for a radio; they
advised him to try making hearing aids. Undeterred, Ibuka

presented the challenge to his Japanese engineers who spent
many months improving high-frequency output. Sony was not
the first company to unveil a transistor radio; a U.S.-built
product, the Regency, featured transistors from Texas
Instruments and a colorful plastic case. However, it was Sony's
high quality, distinctive approach to styling and marketing
savvy that ultimately translated into worldwide success.
6
Disadvantages to Licensing
Limited market control
Returns may be lost
The agreement may be short-lived
Licensee may become competitor
Licensee may exploit company resources
9-7
First, licensing agreements offer limited market control.
Because the licensor typically does not become involved in the
licensee’s marketing program, potential returns from marketing
may be lost. The second disadvantage is that the agreement may
have a short life if the licensee develops its own know-how and
begins to innovate in the licensed product or technology area. In
a worst-case scenario (from the licensor’s point of view),
licensees—especially those working with process
technologies—can develop into strong competitors in the local
market and, eventually, into First, licensing agreements offer
limited market control. Because the licensor typically does not
become involved in the licensee’s marketing program, potential
returns from marketing may be lost. The second disadvantage is
that the agreement may have a short life if the licensee develops

its own know-how and begins to innovate in the licensed
product or technology area. In a worst-case scenario (from the
licensor’s point of view), licensees—especially those working
with process technologies—can develop into strong competitors
in the local market and, eventually, into industry leaders.
Companies may find that the upfront easy money obtained from
licensing turns out to be a very expensive source of revenue. To
prevent a licensor-competitor from gaining unilateral benefit,
licensing agreements should provide for a cross-technology
exchange among all parties. At the absolute minimum, any
company that plans to remain in business must ensure that its
license agreements include a provision for full cross-licensing
(i.e., that the licensee shares its developments with the
licensor). Overall, the licensing strategy must ensure ongoing
competitive advantage. For example, license arrangements can
create export market opportunities and open the door to low-risk
manufacturing relationships. They can also speed diffusion of
new products.
7
Special Licensing Arrangements
Contract manufacturing
Company provides technical specifications to a subcontractor or
local manufacturer
Allows company to specialize in product design while
contractors accept responsibility for manufacturing facilities
May open the firm to criticism if manufacturers operate with
harsh working conditions or have low wages
Franchising
Contract between a parent company-franchisor and a franchisee
that allows the franchisee to operate a business developed by
the franchisor in return for a fee and adherence to franchise-
wide policies
Used by the specialty retailing & fast-food industries

9-8
Another advantage of contract manufacturing includes limited
commitment of financial and managerial resources and quick
entry into target countries, especially when the target market is
too small to justify significant investment. One disadvantage, as
already noted, is that companies may open themselves to public
scrutiny and criticism if workers in contract factories are poorly
paid or labor in inhumane circumstances. Timberland and other
companies that source in low-wage countries are using image
advertising to communicate their corporate policies on
sustainable business practices.
Franchising has great appeal to local entrepreneurs anxious to
learn and apply Western-style marketing techniques.
The specialty retailing industry favors franchising as a market-
entry mode. For example, The Body Shop has more than 2,500
stores in 60 countries; franchisees operate about 90 percent of
them. Franchising is also a cornerstone of global growth in the
fast-food industry; McDonald’s reliance on franchising to
expand globally is a case in point. The fast-food giant has a
well-known global brand name and a business system that can
be easily replicated in multiple country markets. Crucially,
McDonald’s headquarters has learned the wisdom of leveraging
local market knowledge by granting franchisees considerable
leeway to tailor restaurant interior designs and menu offerings
to suit country-specific preferences and tastes.
8
Franchising Questions
Will local consumers buy your product?

How tough is the local competition?
Does the government respect trademark and franchiser rights?
Can your profits be easily repatriated?
Can you buy all the supplies you need locally?
Is commercial space available and are rents affordable?
Are your local partners financially sound and do they
understand the basics of franchising?
9-9
By addressing these issues, franchisers can gain a more realistic
understanding of global opportunities. In China, for example,
regulations require foreign franchisers to directly own two or
more stores for a minimum of 1 year before franchisees can take
over the business. Intellectual property protection is also a
concern in China.
9
Investment
Partial or full ownership of operations outside of home country
Foreign Direct Investment (FDI)
Forms
Joint ventures
Minority or majority equity stakes
Outright acquisition
9-10

Foreign direct investment (FDI) figures reflect investment flows
out of the home country as companies invest in or acquire
plants, equipment, or other assets. Foreign direct investment
allows companies to produce, sell, and compete locally in key
markets. Examples of FDI abound: Honda built a $550 million
assembly plant in Greensburg, Indiana; Hyundai invested $1
billion in a plant in Montgomery, Alabama.
At the end of 2000, cumulative foreign investment by U.S.
companies totaled $1.2 trillion. The top three target countries
for U.S. investment were the United Kingdom, Canada, and the
Netherlands. Investment in the United States by foreign
companies also totaled $1.2 trillion; the United Kingdom,
Japan, and the Netherlands were the top three sources of
investment.
10
Joint Ventures
Entry strategy for a single target country in which the partners
share ownership of a newly-created business entity
Builds upon each partner’s strengths
Examples: Budweiser and Kirin (Japan), GM and Toyota, GM
and Daewoo in S. Korea, Ford and Mazda, Chrysler and BMW
9-11
A joint venture with a local partner represents a more extensive
form of participation in foreign markets than either exporting or
licensing. Strictly speaking, a joint venture is an entry strategy
for a single target country in which the partners share
ownership of a newly created business entity.

11
Joint Ventures
Advantages
Allows for risk sharing–financial and political
Provides opportunity to learn new environment
Provides opportunity to achieve synergy by combining strengths
of partners
May be the only way to enter market given barriers to entry
Disadvantages
Requires more investment than a licensing agreement
Must share rewards as well as risks
Requires strong coordination
Potential for conflict among partners
Partner may become a competitor
9-12
Joint venture investment is growing rapidly. China is a case in
point; for many companies, the price of market entry is the
willingness to pursue a joint venture with a local partner.
Procter & Gamble has several joint ventures in China. China
Great Wall Computer Group is a joint-venture factory in which
IBM is the majority partner with a 51 percent stake.
As one global marketing expert warns, "In an alliance you have
to learn skills of the partner, rather than just see it as a way to
get a product to sell while avoiding a big investment." Yet,
compared with U.S. and European firms, Japanese and Korean
firms seem to excel in their ability to leverage new knowledge
that comes out of a joint venture. For example, Toyota learned
many new things from its partnership with GM—about U.S.

supply and transportation and managing American workers—
that have been subsequently applied at its Camry plant in
Kentucky. However, some American managers involved in the
venture complained that the manufacturing expertise they
gained was not applied broadly throughout GM. To the extent
that this complaint has validity, GM has missed opportunities to
leverage new learning. Still, many companies have achieved
great successes in joint ventures.
12
Investment via
Equity Stake or Full Ownership
Equity stakes is an investment
Minority ˂ 50%, Majority˃ 50%, Full ownership =100%
Start-up of new operations
Greenfield operations or
Greenfield investment
Merger with an existing enterprise
Acquisition of an existing enterprise
Examples: Roche acquired Genentech in 2008 for $43 billion
9-13
Large-scale direct expansion by means of establishing new
facilities can be expensive and require a major commitment of
managerial time and energy. However, political or other
environmental factors sometimes dictate this approach. As an
alternative to greenfield investment in new facilities,
acquisition is an instantaneous—and sometimes, less
expensive—approach to market entry or expansion. Although
full ownership can yield the additional advantage of avoiding

communication and conflict of interest problems that may arise
with a joint venture or co-production partner, acquisitions still
present the demanding and challenging task of integrating the
acquired company into the worldwide organization and
coordinating activities.
If government restrictions prevent 100 percent ownership by
foreign companies, the investing company will have to settle for
a majority or minority equity stake. In China, for example, the
government usually restricts foreign ownership in joint ventures
to a 51 percent majority stake. However, a minority equity stake
may suit a company’s business interests. For example, Samsung
was content to purchase a 40 percent stake in computer maker
AST. As Samsung manager Michael Yang noted, “We thought
100 percent would be very risky, because any time you have a
switch of ownership, that creates a lot of uncertainty among the
employees.” In other instances, the investing company may start
with a minority stake and then increase its share.
13
Examples of Market Entry &
Expansion by Joint Venture
9-14
Examples of Equity Stake
9-15

An equity stake is simply an investment; if the investor owns
fewer than 50 percent of the shares, it is a minority stake;
ownership of more than half the shares makes it a majority.
15
Examples of Acquisitions
9-16
Issues in Acquisitions
Globalization is driving acquisitions; smaller firms cannot
expand without a partner
“It was very clear to us that Helene Curtis did not have the
capacity to project itself in emerging markets around the world.
As markets get larger, that forces the smaller players to take
action.”
Ronald Gidwitz, CEO Unilever, on acquiring Helene Curtis
Ownership circumvents tariffs & quota barriers, gets new
markets, allows technology transfers and gain new
manufacturing methods.
9-17
Several of the advantages of joint ventures also apply to
ownership, including access to markets and avoidance of tariff
and quota barriers. Like joint ventures, ownership also permits
important technology experience transfers and provides a
company with access to new manufacturing techniques.

17
Alternatives for Market Entry
Licensing, joint ventures, minority or majority equity stake, and
ownership—are points along a continuum of alternative
strategies for global market entry and expansion.
Companies may use a combination
Ex. Borden Foods stopped licensing for branded food products
in Japan and set up its on production, distribution & marketing
but kept JVs in non-food products
9-18
. The overall design of a company’s global strategy may call for
combinations of exporting–importing, licensing, joint ventures,
and ownership among different operating units. Avon Products
uses both acquisition and joint ventures to enter developing
markets. A company’s strategy preference may change over
time. For example, Borden Inc. ended licensing and joint
venture arrangements for branded food products in Japan and
set up its own production, distribution, and marketing
capabilities for dairy products. Meanwhile, in nonfood products,
Borden has maintained joint venture relationships with Japanese
partners in flexible packaging and foundry materials.
18
Global Strategic Partnerships
Possible terms:
Collaborative agreements
Strategic alliances
Strategic international alliances
Global strategic partnerships

Oneworld is a GSP made up of American Airlines and other
airlines around the world.
9-19
Recent changes in the political, economic, sociocultural, and
technological environments of the global firm have combined to
change the relative importance of those strategies. Trade
barriers have fallen, markets have globalized, consumer needs
and wants have converged, product life cycles have shortened,
and new communications, technologies, and trends have
emerged. Although these developments provide unprecedented
market opportunities, there are strong strategic implications for
the global organization and new challenges for the global
marketer. Such strategies will undoubtedly incorporate—or may
even be structured around—a variety of collaborations. Once
thought of only as joint ventures with the more dominant party
reaping most of the benefits (or losses) of the partnership,
cross-border alliances are taking on surprising new
configurations and even more surprising players.
19
The Nature of
9-20
The terminology used to describe the new forms of cooperation
strategies varies widely. The phrases collaborative agreements,
strategic alliances, strategic international alliances, and global

strategic partnerships (GSPs) are frequently used to refer to
linkages between companies from different countries who
jointly pursue a common goal. A broad spectrum of inter-firm
agreements, including joint ventures, can be covered by this
terminology. However, the strategic alliances discussed here
exhibit three characteristics which are highlighted in this
diagram and discussed on the next slide.
20
Characteristics of
Participants remain independent following formation of the
alliance
Participants share benefits of alliance as well as control over
performance of assigned tasks
Participants make ongoing contributions in technology,
products, and other key strategic areas
9-21
Five Attributes of True
Two or more companies develop a joint long-term strategy
Relationship is reciprocal
Partners’ vision and efforts are global
Relationship is organized along horizontal lines (not vertical)
When competing in markets not covered by alliance,
participants retain national and ideological identities
9-22

Companies forming GSPs must keep these factors in mind.
Moreover, successful collaborators will be guided by the
following four principles. First, despite the fact that partners
are pursuing mutual goals in some areas, partners must
remember that they are competitors in others. Second, harmony
is not the most important measure of success; some conflict is
to be expected. Third, all employees, engineers, and managers
must understand where cooperation ends and competitive
compromise begins. Finally, as noted earlier, learning from
partners is critically important.
Two or more companies develop a joint long-term strategy
aimed at achieving world leadership by pursuing cost
leadership, differentiation, or a combination of the two.
Samsung and Sony are jockeying with each other for leadership
in the global television market. One key to profitability in the
flat-panel TV market is being the cost leader in panel
production. S-LCD is a $2 billion joint venture that produces
60,000 panels per month.
2. The relationship is reciprocal. Each partner possesses
specific strengths that it shares with the other; learning must
take place on both sides. Samsung is a leader in the
manufacturing technologies used to create flat-panel TVs. Sony
excels at parlaying advanced technology into world-class
consumer products; its engineers specialize in optimizing TV
picture quality. Jang Insik, Samsung’s chief executive, says, “If
we learn from Sony, it will help us in advancing our
technology.”
3. The partners’ vision and efforts are truly global, extending
beyond home countries and the home regions to the rest of the
world. Sony and Samsung are both global companies that
market global brands throughout the world.
4. The relationship is organized along horizontal, not
vertical, lines. Continual transfer of resources laterally between

partners is required, with technology sharing and resource
pooling representing norms. Jang and Sony’s Hiroshi Murayama
speak by telephone on a daily basis; they also meet face-to-face
each month to discuss panel making.
5. When competing in markets excluded from the partnership,
the participants retain their national and ideological identities.
Samsung markets a line of high-definition televisions that use
digital light processing (DLP) technology. Sony does not
produce DLP sets. When developing a DVD player and home
theater sound system to match the TV, a Samsung team headed
by head TV designer Yunje Kang worked closely with the
audio/video division. At Samsung, managers with responsibility
for consumer electronics and computer products report to digital
media chief Gee-sung Choi. All the designers work side by side
on open floors. As noted in a company profile, “the walls
between business units are literally nonexistent.” By contrast, in
recent years Sony has been plagued by a time-consuming,
consensus-driven communication approach among divisions that
have operated largely autonomously.
22
9-23
Success Factors of Alliances
Mission: Successful GSPs create win-win situations, where
participants pursue objectives on the basis of mutual need or
advantage.
Strategy: A company may establish separate GSPs with different

partners; strategy must be thought out up front to avoid
conflicts.
Governance: Discussion and consensus must be the norms.
Partners must be viewed as equals.
9-24
24
Success Factors (Con’t)
Culture: Personal chemistry is important, as is the successful
development of a shared set of values.
Organization: Innovative structures and designs may be needed
to offset the complexity of multi-country management.
Management: Potentially divisive issues must be identified in
advance and clear, unitary lines of authority established that
will result in commitment by all partners.
9-25
Alliances with Asian Competitors
Western companies must learn from Asian firms’ excellence in
manufacturing, overcome NIH syndrome, become students, not
teachers
Four common problem areas
Each partner had a different dream
Each must contribute to the alliance and each must depend on
the other to a degree that justifies the alliance
Differences in management philosophy, expectations, and

approaches
No corporate memory
9-26
NIH means Not Invented Here
A 1991 report by McKinsey and Company shed additional light
on the specific problems of alliances between Western and
Japanese firms. Oftentimes, problems between partners have
less to do with objective levels of performance than with a
feeling of mutual disillusionment and missed opportunity.
The first problem is that each partner has a “different dream”;
the Japanese partner sees itself emerging from the alliance as a
leader in its business or entering new sectors and building a new
basis for the future; the Western partner seeks relatively quick
and risk-free financial returns. Said one Japanese manager,
“Our partner came in looking for a return. They got it. Now
they complain that they didn’t build a business. But that isn’t
what they set out to create.”
The most attractive partner in the short run is likely to be a
company that is already established and competent in the
business but with the need to master, say, some new
technological skills.
Another common cause of problems is “frictional loss” caused
by differences in management philosophy, expectations, and
approaches. All functions within the alliance may be affected,
and performance is likely to suffer as a consequence. Speaking
of his Japanese counterpart, a Western businessperson said,
“Our partner just wanted to go ahead and invest without

considering whether there would be a return or not.” The
Japanese partner stated that “The foreign partner took so long to
decide on obvious points that we were always too slow.” Such
differences often lead to frustration and time-consuming debates
that stifle decision making.
Last, the study found that short-term goals can result in the
foreign partner limiting the number of people allocated to the
joint venture. Those involved in the venture may perform only
2- or 3-year assignments. The result is “corporate amnesia”;
that is, little or no corporate memory is built up on how to
compete in Japan. The original goals of the venture will be lost
as each new group of managers takes their turn.
26
Cooperative Alliance in Japan:
Keiretsu
Inter-business alliance or enterprise groups in which business
families join together to fight for market share
Often cemented by bank ownership of large blocks of stock and
by cross-ownership of stock between a company and its buyers
and non-financial suppliers
Keiretsu executives can legally sit on each other’s boards, share
information, and coordinate prices
9-27
Japan’s keiretsu represent a special category of cooperative
strategy. A keiretsu is an inter-business alliance or enterprise
group that, in the words of one observer, “resembles a fighting
clan in which business families join together to vie for market
share.” Keiretsu exist in a broad spectrum of markets, including
the capital market, primary goods markets, and component parts

markets. Keiretsu relationships are often cemented by bank
ownership of large blocks of stock and by cross-ownership of
stock between a company and its buyers and nonfinancial
suppliers. Further, keiretsu executives can legally sit on each
other's boards, and share information, and coordinate prices in
closed-door meetings of "presidents' councils." Thus, keiretsu
are essentially cartels that have the government's blessing.
While not a market entry strategy per se, keiretsu played an
integral role in the international success of Japanese companies
as they sought new markets. Several large companies with
common ties to a bank are at the center of the Mitsui Group and
Mitsubishi Group. These two, together with the Sumitomo,
Fuyo, Sanwa, and DKB groups make up the "big six" keiretsu.
27
Horizontal Keiretsu
Big Six: Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa, DKB
Groups
Horizontal keiretsu: intragroup relationships involve shared
stock holdings and trading relations
Large, powerful with revenues in hundreds of billions
Can block foreign suppliers causing higher prices
Promotes corporate stability, risk sharing, long-term
employment
9-28
Keretsui
Vertical keretsui: Hierarchical alliances between manufacturers
and retailers
Matshusita sells its products through its chain of National

stores; 50-80% of products are Matshusita brands Panasonic,
Technics, and Quasar
Manufacturing keretsui: Vertical hierarchical alliances between
automakers suppliers, and component manufacturers
9-29
Cooperative Strategies in South Korea: Chaebol
Composed of dozens of companies, centered around a bank or
holding company, and dominated by a founding family
Samsung
LG
Hyundai
Daewoo
9-30
Like the Japanese keiretsu, chaebol are composed of dozens of
companies, centered around a central bank or holding company,
and dominated by a founding family. However, chaebol are a
more recent phenomenon; in the early 1960s, Korea’s military
dictator granted government subsidies and export credits to a
select group of companies. By the 1980s, Daewoo, Hyundai,
LG, and Samsung had become leading producers of low-cost
consumer electronics products. The chaebol were a driving
force behind South Korea’s economic miracle; GNP increased
from $1.9 billion in 1960 to $238 billion in 1990.

30
21st Century Cooperative Strategies: Targeting the Digital
Future
Alliances between companies in several industries that are
undergoing transformation and convergence
Computers
Communications
Consumer electronics
Entertainment
9-31
Increasing numbers of companies in all parts of the world are
entering into alliances that resemble keiretsu. In fact, the phrase
digital keiretsu is frequently used to describe alliances between
companies in several industries—computers, communications,
consumer electronics, and entertainment—that are undergoing
transformation and convergence. These processes are the result
of tremendous advances in the ability to transmit and
manipulate vast quantities of audio, video, and data and the
rapidly approaching era of a global electronic "superhighway"
composed of fiber optic cable and digital switching equipment.
31
21st Century Cooperative Strategies
Semantech: Consortium of 14 tech companies tasked with
saving the U.S. chip-making industry
Relationship enterprise: groupings of firms from different
industries and countries with common goals and act as one
entity
Next stage of evolution of the strategic alliance
Super-alliance

Virtual corporation
9-32
The “relationship enterprise” is said to be the next stage of
evolution of the strategic alliance. Groupings of firms in
different industries and countries, they will be held together by
common goals that encourage them to act almost as a single
firm. Within the next few decades, Boeing, British Airways,
Siemens, TNT, and Snecma might jointly build several new
airports in China. As part of the package, British Airways and
TNT would be granted preferential routes and landing slots, the
Chinese government would contract to buy all its aircraft from
Boeing/Snecma, and Siemens would provide air traffic control
systems for all 10 airports.
Another perspective on the future of cooperative strategies
envisions the emergence of the “virtual corporation.” As
described in a recent Business Week cover story, the virtual
corporation “will seem to be a single entity with vast
capabilities but will really be the result of numerous
collaborations assembled only when they’re needed.” On a
global level, the virtual corporation could combine the twin
competencies of cost effectiveness and responsiveness; thus, it
could pursue the “think globally, act locally” philosophy with
ease. This reflects the trend toward “mass customization.”
32
Market Expansion Strategies
Companies must decide to expand by:
Seeking new markets in existing countries
Seeking new country markets for already identified and served

market segments
9-33
The table illustrates the following strategies:
Strategy 1, country and market concentration, involves targeting
a limited number of customer segments in a few countries. This
is typically a starting point for most companies. It matches
company resources and market investment needs.
Strategy 2, country concentration and segment diversification, a
company serves many markets in a few countries. This strategy
was implemented by many European companies that remained in
Europe and sought growth by expanding into new markets.
Strategy 3, country diversification and market concentration, is
the classic global strategy whereby a company seeks out the
world market for a product.
Strategy 4, country and segment diversification, is the corporate
strategy of a global, multi-business company such as
Matsushita. Overall, Matsushita is multi-country in scope and
its various business units and groups serve multiple segments.
33
Importing, Exporting, and Sourcing
Chapter 8
Global Marketing

1
Learning Objectives
Compare and contrast export selling and export marketing.
Identify the stages a company goes through, and the problems
it encounters, as it gains experience as an exporter.
Describe the various national policies that pertain to imports
and exports.
Explain the structure of the Harmonized Tariff System.
Describe the various organizations that participate in the export
process.
Identify home-country export organization considerations.
Identify market-country export organization considerations.
Discuss the various payment methods that are typically used in
trade financing.
Identify the factors that global marketers consider when making
sourcing decisions.
8-2
Export Selling vs. Export Marketing
Export selling involves selling the same product, at the same
price, with the same promotional tools in a different place
Export marketing tailors the marketing mix to international

customers
8-3
As organizations seek to move operations into other countries
they need to make the basic decision regarding their level of
involvement in the foreign markets. Two broad areas include
export selling and export marketing.
Export selling does not involve tailoring the product, the price,
or the promotional material to suit the requirements of global
markets. The only marketing mix element that differs is the
“place;” that is, the country where the product is sold. This
selling approach may work for some products or services; for
unique products with little or no international competition, such
an approach is possible. Similarly, companies new to exporting
may initially experience success with selling.
Export marketing targets the customer in the context of the total
market environment. The export marketer does not simply take
the domestic product “as is” and sell it to international
customers. To the export marketer, the product offered in the
home market represents a starting point. It is modified as
needed to meet the preferences of international target markets;
this is the approach the Chinese have adopted in the U.S.
furniture market. Similarly, the export marketer sets prices to
fit the marketing strategy and does not merely extend home
country pricing to the target market. Charges incurred in export
preparation, transportation, and financing must be taken into
account in determining prices. Finally, the export marketer also
adjusts strategies and plans for communications and distribution
to fit the market. In other words, effective communication about
product features or uses to buyers in export markets may require

creating brochures with different copy, photographs, or artwork.
As the vice president of sales and marketing of one
manufacturer noted, “We have to approach the international
market with marketing literature as opposed to sales literature.”
3
Requirements for Export Marketing
An understanding of the target market environment
The use of market research and identification of market
potential
Decisions concerning product design, pricing, distribution and
channels, advertising, and communications
8-4
After the research effort has zeroed in on potential markets,
there is no substitute for a personal visit to size up the market
firsthand and begin the development of an actual export
marketing program. A market visit should do several things.
First, it should confirm (or contradict) assumptions regarding
market potential. A second major purpose is to gather the
additional data necessary to reach the final go/no-go decision
regarding an export marketing program. Certain kinds of
information simply cannot be obtained from secondary sources.
For example, an export manager or international marketing
manager may have a list of potential distributors provided by
the U.S. Department of Commerce. He or she may have
corresponded with distributors on the list and formed some
tentative idea of whether they meet the company’s international
criteria. It is difficult, however, to negotiate a suitable
arrangement with international distributors without actually
meeting face to face to allow each side of the contract to
appraise the capabilities and character of the other party. A

third reason for a visit to the export market is to develop a
marketing plan in cooperation with the local agent or
distributor. Agreement should be reached on necessary product
modifications, pricing, advertising and promotion expenditures,
and a distribution plan. If the plan calls for investment,
agreement on the allocation of costs must also be reached.
One way to visit a potential market is through a trade show or a
state- or federally-sponsored trade mission. Each year hundreds
of trade fairs, usually organized around a product category or
industry, are held in major markets.
4
Organizational Export Activities
The firm is unwilling to export; it will not even fill an
unsolicited export order.
The firm fills unsolicited export orders but does not pursue
unsolicited orders. Such a firm is an export seller.
The firm explores the feasibility of exporting (this stage may
bypass Stage 2).
The firm exports to one or more markets on a trial basis.
8-5
Exporting is becoming increasingly important as companies in
all parts of the world step up their efforts to supply and service
markets outside their national boundaries. Research has shown
that exporting is essentially a developmental process that can be
divided into the following distinct stages.
5
Organizational Export Activities (Cont.)

The firm is an experienced exporter to one or more markets.
The firm pursues country- or region-focused marketing based on
certain criteria
The firm evaluates global market potential for the “best” target
markets.
8-6
The probability that a firm will advance from one stage to the
next depends on different factors. Moving from stage 2 to stage
3 depends on management’s attitude toward the attractiveness of
exporting and confidence in the firm’s ability to compete
internationally. However, commitment is the most important
aspect of a company’s international orientation. Before a firm
can reach stage 4, it must receive and respond to unsolicited
export orders. The quality and dynamism of management are
important factors that can lead to such orders. Success in stage
4 can lead a firm to stages 5 and 6. A company that reaches
stage 7 is a mature, geocentric enterprise that is relating global
resources to global opportunity. To reach this stage requires
management with vision and commitment.
6
Potential Export Problems
8-7
Top 10 Clothing Exporters
2011 ($ billions)

8-8
8
National Policies Governing
Exports and Imports
Most nations encourage exports and restrict imports
In 2014, the total was $2.8 trillion
European Union trade, domestic and foreign, is $3 trillion +
8-9
US based Zippo Manufacturing Co., was awarded the
President’s “E” Star Award for export expansion in 2012.
In 1997 total imports of goods and services by the United States
passed the $1 trillion mark for the first time; in 2014, the
combined figure was $2.8 trillion.
China’s pace-setting economic growth in the Asia-Pacific
region is reflected by trends in both exports and imports.
Exports from China have grown significantly; and they are
growing even now that China has joined the WTO. Historically,
China protected its own producers by imposing double-digit
import tariffs. These are being reduced as China complies with
WTO regulations.
For centuries, nations have combined two opposing policy
attitudes toward the movement of goods across national

boundaries. On the one hand, nations directly encourage
exports; the flow of imports, on the other hand, is generally
restricted.
9
Government Programs that
Support Exports
Governments concerned about trade deficits or economic
development should educate firms about possible gains from
exporting
Done at the national, regional & local levels
After WWII, Japan’s trade ministry developed export strategies
The China triangle (People’s Republic, Taiwan, & Hong Kong),
& the four tigers--Singapore, South Korea, Taiwan, & Hong
Kong) learned from Japan and built strong export-based
economies
8-10
Government Programs that
Support Exports
Tax incentives
Subsidies
Governmental assistance
Free trade zones
The Milan Furniture Fair held in April attracts 300,000 visitors
from 160 countries .
8-11

Governments commonly use four activities to support export
activities of national firms. First, tax incentives treat earnings
from export activities preferentially either by applying a lower
rate to earnings from these activities or by refunding taxes
already paid on income associated with exporting. The tax
benefits offered by export-conscious governments include
varying degrees of tax exemption or tax deferral on export
income, accelerated depreciation of export-related assets, and
generous tax treatment of overseas market development
activities.
Governments also support export performance by providing
outright subsidies, which are direct or indirect financial
contributions that benefit producers. Subsidies can severely
distort trade patterns when less competitive but subsidized
producers displace competitive producers in world markets.
The third support area is governmental assistance to exporters.
Companies can avail themselves of a great deal of government
information concerning the location of markets and credit risks.
Assistance may also be oriented toward export promotion.
In an effort to facilitate exports, countries are designating
certain areas as free trade zones (FTZ) or special economic
zones (SEZ). These are geographic entities that offer
manufacturers simplified customs procedures, operational
flexibility, and a general environment of relaxed regulations.
11
Governmental Actions to Discourage Imports and Block Market
Access
Tariffs: 3 Rs—rules, rate schedules, & regulations
Import controls
Nontariff barriers (hidden)
Quotas
Discriminatory procurement policies

Restrictive customs procedures
Arbitrary monetary policies
Restrictive administrative & technical regulations
8-12
Measures such as tariffs, import controls, and a host of nontariff
barriers are designed to limit the inward flow of goods. Tariffs
can be thought of as the “three R’s” of global business: rules,
rate schedules (duties), and regulations of individual countries.
A nontariff trade barrier (NTB) is any measure other than a
tariff that is a deterrent or obstacle to the sale of products in a
foreign market. NTBs are also known as hidden trade barriers.
A quota is a government-imposed limit or restriction on the
number of units or the total value of a particular product or
product category that can be imported. Quotas are designed to
protect domestic producers. In 2005, for example, textile
producers in Italy and other European countries were granted
quotas on 10 categories of textile imports from China. The
quotas, which ran through the end of 2007, were designed to
give European producers an opportunity to prepare for increased
competition. Discriminatory procurement policies can take the
form of government rules and administrative regulations that
give local vendors priority. The Buy American Act of 1993 says
federal agencies must buy American products unless a domestic
product is not available, the cost is unreasonable, or it would
not be in the public’s interest.
Customs procedures are considered restrictive if they are
administered in a way that makes compliance difficult and
expensive.

Discriminatory exchange rate policies distort trade in much the
same way as selective import duties and export subsidies. As
noted earlier, some Western policymakers have argued that
China is pursuing policies that ensure an artificially weak
currency which results in Chinese goods having a competitive
price edge in world markets. Restrictive administrative and
technical regulations can also create barriers to trade. These
may take the form of antidumping regulations, product size
regulations, and safety and health regulations. U.S. safety and
pollution regulations in the auto industry have forced some auto
makers to withdraw certain models and are generally expensive
with which to comply.
12
Examples of Trade Barriers
8-13
13
Harmonized Tariff System
Developed by the World Customs Organization
Effective January 1989
Adopted by most trading nations
Importers & Exporters have to determine the classification
number for any product moved across borders
Import & export numbers are the same on Schedule B
Meant to simplify tariff procedures but problems still arise
8-14

In spite of the progress made in simplifying tariff procedures,
administering a tariff is an enormous burden. People who work
with imports and exports must familiarize themselves with the
different classifications and use them accurately. Even a tariff
schedule of several thousand items cannot clearly describe
every product traded globally. Plus, the introduction of new
products and new materials used in manufacturing processes
creates new problems. Often, determining the duty rate on a
particular article requires assessing how the item is used or
determining its main component material. Two or more
alternative classifications may have to be considered. A
product’s classification can make a substantial difference in the
duty applied. For example, is a Chinese-made X-Men action
figure a doll or a toy? For many years, dolls were subject to a
12 percent duty when imported into the United States; the rate
was 6.8 percent for toys. Moreover, action figures that represent
nonhuman creatures such as monsters or robots were
categorized as toys and thus qualified for lower duties than
human figures that the Customs Service classified as dolls.
Duties on both categories have been eliminated; however, the
Toy Biz subsidiary of Marvel Enterprises spent nearly 6 years
on an action in the U.S. Court of International Trade to prove
that its X-Men action figures do not represent humans. Although
the move appalled many fans of the mutant superheroes, Toy
Biz hoped to be reimbursed for overpayment of past duties made
when the U.S. Customs Service had classified imports of
Wolverine and his fellow figures as dolls.
14
Tariff Systems
Single-column tariff
Simplest type of tariff
Schedule of duties in which rate applies to imports from all

countries on the same basis
Two-column tariff
General duties plus special duties apply
Normal Trade Relations (NTR) means that countries in the WTO
apply the Column 1 rates most favorable or lowest rates to all
nations (with exceptions). Column 2 rates are for non-WTO
countries
8-15
Tariff systems provide either a single rate of duty for each item
applicable to all countries or two or more rates, applicable to
different countries or groups of countries. Tariffs are usually
grouped into two classifications. The single-column tariff is the
simplest type of tariff; a schedule of duties in which the rate
applies to imports from all countries on the same basis. Under
the two-column tariff (Table 8-4), column 1 includes “general”
duties plus “special” duties indicating reduced rates determined
by tariff negotiations with other countries.
15
Sample Rates of Duty for U.S. Imports
8-16
Under the two-column tariff, column 1 includes “general” duties
plus “special” duties indicating reduced rates determined by
tariff negotiations with other countries. Rates agreed upon by
“convention” are extended to all countries that qualify for

normal trade relations (NTR; formerly most-favored nation or
MFN) status within the framework of the WTO. Under the
WTO, nations agree to apply their most favorable tariff or
lowest tariff rate to all nations—subject to some exceptions—
that are signatories to the WTO. Column 2 shows rates for
countries that do not enjoy NTR status.
16
Preferential Tariff
Reduced tariff rate applied to imports from certain countries
GATT prohibits the use, with three exceptions:
Historical preference arrangements already existed
Preference is part of formal economic integration treaty
Industrial countries are permitted to grant preferential market
access to LDCs
8-17
A preferential tariff is a reduced tariff rate applied to imports
from certain countries. GATT prohibits the use of preferential
tariffs, with three major exceptions. First are historical
preference arrangements such as the British Commonwealth
preferences and similar arrangements that existed before GATT.
Second, preference schemes that are part of a formal economic
integration treaty, such as free trade areas or common markets,
are excluded. Third, industrial countries are permitted to grant
preferential market access to companies based in less-developed
countries.
The United States is now a signatory to the GATT customs
valuation code. U.S. customs value law was amended in 1980 to

conform to the GATT valuation standards. Under the code, the
primary basis of customs valuation is “transaction value.” As
the name implies, transaction value is defined as the actual
individual transaction price paid by the buyer to the seller of
the goods being valued. In instances where the buyer and seller
are related parties (e.g., when Honda’s U.S. manufacturing
subsidiaries purchase parts from Japan), customs authorities
have the right to scrutinize the transfer price to make sure it is a
fair reflection of market value. In the late 1980s, the U.S.
Treasury Department began a major investigation into the
transfer prices charged by the Japanese automakers to their U.S.
subsidiaries. It charged that the Japanese paid virtually no U.S.
income taxes because of their “losses” on the millions of cars
they import into the United States each year.
17
Customs Duties
Ad valorem duty
Expressed as percentage of value of goods
Specific duty
Expressed as specific amount of currency per unit of weight,
volume, length, or other unit of measurement
Compound or mixed duties
Apply
8-18
Duties on individual products or services are listed in the
schedule of rates in the previous slides. As defined by one
expert on global trade, duties are “taxes that punish individuals
for making choices of which their governments disapprove.”
Before World War II, specific duties were widely used and the

tariffs of many countries, particularly those in Europe and Latin
America, were extremely complex. During the past half century,
the trend has been toward the conversion to ad valorem duties;
that is, duties expressed as a certain percentage of the value of
the goods.
Customs duties are divided into two categories. They may be
calculated either as a percentage of the value of the goods (ad
valorem duty), as a specific amount per unit (specific duty), or
as a combination of both of these methods.
18
Other Duties and Import Charges
Anti-dumping Duties
Dumping is the sale of merchandise in export markets at unfair
prices
Special import charges equal to the dumping margin
Countervailing Duties offset subsidies of the exporting country
Variable Import Levies apply to agriculture
Temporary Surcharges protect local industries and are used to
adjust balance of payment deficits
8-19
Antidumping duties are almost invariably applied to products
that are also manufactured or grown in the importing country. In
the United States, antidumping duties are assessed after the
commerce department finds a foreign company guilty of
dumping and the International Trade Commission rules that the
dumped products injured American companies. Countervailing
duties (CVDs) are additional duties levied to offset subsidies

granted in the exporting country.
Variable import levies apply to certain categories of imported
agricultural products. If prices of imported products would
undercut those of domestic products, the effect of these levies
would be to raise the price of imported products to the domestic
price level. In 2001, the ITC and commerce department imposed
both countervailing and antidumping duties on Canadian lumber
producers. The CVDs were intended to offset subsidies to
Canadian sawmills in the form of low fees for cutting trees in
forests owned by the Canadian government. The antidumping
duties on imports of softwood lumber, flooring, and siding were
in response to complaints by American producers that the
Canadians were exporting lumber at prices below their
production cost.
Temporary surcharges have been introduced from time to time
by certain countries, such as the United Kingdom and the
United States, to provide additional protection for local industry
and, in particular, in response to balance-of-payments deficits.
19
Key Export Participants
Foreign purchasing agents
Export brokers
Export merchants
Export management companies
Manufacturer’s export agent
Export commission representative
Cooperative exporter
Freight forwarders

8-20
Anyone with responsibilities for exporting should be familiar
with some of the people and organizations who can assist with
various tasks. Some of these, including purchasing agents,
export brokers, and export merchants, have no assignment of
responsibility from the client. Others, including export
management companies, manufacturers’ export representatives,
export distributors, and freight forwarders, are assigned
responsibilities by the exporter.
Foreign purchasing agents are variously referred to as buyer for
export, export commission house, or export confirming house.
They operate on behalf of, and are compensated by, an overseas
customer known as a principal. They generally seek out a
manufacturer whose price and quality match the specifications
of their principal. Foreign purchasing agents often represent
governments, utilities, railroads, and other large users of
materials. Foreign purchasing agents do not offer the
manufacturer or exporter stable volume except when long-term
supply contracts are agreed upon.
An export broker receives a fee for bringing together the seller
and the overseas buyer. The fee is usually paid by the seller, but
sometimes the buyer pays it.
Export merchants are sometimes referred to as jobbers. These
are marketing intermediaries that identify market opportunities
in one country or region and make purchases in other countries
to fill these needs. An export merchant typically buys
unbranded products directly from the producer or manufacturer.
The export merchant then brands the goods and perf
export management company (EMC) is an independent
marketing intermediary that acts as the export department for
two or more manufacturers (principals) whose product lines do
not compete with each other. The EMC usually operates in the

name of its principals for export markets, but it may operate in
its own name. It may act as an independent distributor,
purchasing and reselling goods at an established price or profit
margin. Alternatively, it may act as a commissioned
representative, taking no title and bearing no financial risks in
the sale. It performs all other marketing activities, including
distribution.
A manufacturer’s export agent (MEA) Much like an EMC, the
MEA can act as an export distributor or as an export
commission representative. However, the MEA does not
perform the functions of an export department, and the scope of
market activities is usually limited to a few countries.
An export commission representative assumes no financial risk.
The manufacturer assigns some or all foreign markets to the
commission representative. The manufacturer carries all
accounts, although the representative often provides credit
checks and arranges financing.
A cooperative exporter, sometimes called a mother hen, a
piggyback exporter, or an export vendor, is an export
organization of a manufacturing company retained by other
independent manufacturers to sell their products in foreign
markets. Cooperative exporters usually operate as export
distributors for other manufacturers, but in special cases they
operate as export commission representatives. They are
regarded as a form of export management company.
Freight forwarders are licensed specialists in traffic operations,
customs clearance, and shipping tariffs and schedules; simply
put, they can be thought of as travel agents for freight.
20
Organizing for Exporting in the Manufacturer’s Country

Exports can be handled
As a part-time activity performed by domestic employees
Through an export partner
Through an export department
Through an export department within an international division
For multi-divisional companies; each possibility exists for each
division
8-21
Home-country issues involve deciding whether to assign export
responsibility inside the company or to work with an external
organization specializing in a product or geographic area. Most
companies handle export operations within their own in-house
export organization. Depending on the company’s size,
responsibilities may be incorporated into an employee’s
domestic job description. Alternatively, these responsibilities
may be handled as part of a separate division or organizational
structure.
21
Organizing for Exporting
in the Market Country
Direct market representation
Advantages: control and communications
Representation by independent intermediaries
Advantages: best for situations with small sales volume
8-22

In addition to deciding whether to rely on in-house or external
export specialists in the home country, a company must also
make arrangements to distribute the product in the target market
country. Direct market representation does not mean selling
directly to the end user but selling to wholesalers or retailers.
Every exporting organization faces one basic decision: To what
extent do we rely on direct market representation as opposed to
representation by independent intermediaries?
22
Trade Financing and
Methods of Payment
Documentary credits (letter of credit)
Documentary collections (bill of exchange)
Cash in advance
Sales on open account
Sales on consignment basis
8-23
The appropriate method of payment for a given international
sale is a basic credit decision. A number of factors must be
considered, including currency availability in the buyer’s
country, creditworthiness of the buyer, and the seller’s
relationship to the buyer. Finance managers at companies that
have never exported often express concern regarding payment.
Many CFOs with international experience know that there are
generally fewer collections problems on international sales than
on domestic sales, provided the proper financial instruments are

used. The reason is simple: A letter of credit can be used to
guarantee payment for a product. The export sale begins when
the exporter/seller and the importer/buyer agree to do business.
The agreement is formalized when the terms of the deal are set
down in a pro forma invoice contract, fax, or some other
document. Among other things, the pro forma invoice spells out
how much, and by what means, the exporter-seller wants to be
paid.
23
Documentary Credit-Letter of Credit
8-24
This is a two slide diagram of the documentary credit process.
A letter of credit (L/C) is essentially a document stating that a
bank has substituted its creditworthiness for that of the
importer-buyer. Next to cash in advance, an L/C offers the
exporter the best assurance of being paid. That assurance arises
from the fact that the payment obligation under an L/C lies with
the buyer’s bank and not with the buyer. The importer-buyer’s
bank is the “issuing” bank; the importer-buyer is, in essence,
asking the issuing bank to extend credit. The importer-buyer is
considered the applicant. The issuing bank may require that the
importer-buyer deposit funds in the bank or use some other
method to secure a line of credit. After agreeing to extend the
credit, the issuing bank requests that the exporter-seller’s bank
advise and/or confirm the L/C. (A bank “confirms” an L/C by
adding its name to the document.) The seller’s bank becomes
the “advising” and/or “confirming” bank. Whether it is advised
or confirmed, the L/C represents a guarantee that ensures
payment contingent on the exporter-seller (the beneficiary in

the transaction) complying with the terms set forth in the L/C.
The actual payment process is set in motion when the exporter-
seller physically ships the goods and submits the necessary
documents as specified in the L/C. These could include a
transportation bill of lading (which may represent title to the
product), a commercial invoice, a packing list, a certificate of
origin, or insurance certificates. For most of the world, a
commercial invoice and bill of lading represent the minimum
documentation required for customs clearance. If the pro forma
invoice specifies a confirmed L/C as the method of payment, the
exporter-seller receives payment at the time the correct shipping
documents are presented to the confirming bank.
The confirming bank, in turn, requests payment from the issuing
bank. In the case of an irrevocable L/C, the exporter-seller
receives payment only after the advising bank negotiates the
documents and requests payment from the issuing bank in
accordance with terms set forth in the L/C. Once the shipper
sends the documents to the advising bank, the advising bank
negotiates those documents and is referred to as the negotiating
bank. Specifically, it takes each shipping document and closely
compares it to the L/C. If there are no discrepancies, the
negotiating or confirming bank transfers the money to the
exporter-seller’s account.
The fee for an irrevocable L/C—for example, “1/8 of 1 percent
of the value of the credit, with an $80 minimum”—is lower than
that for a confirmed L/C. The higher bank fees associated with
confirmation can drive up the final cost of the sale; fees are also
higher when the transaction involves a country with a high level
of risk. Good communication between the exporter-seller and
the advising or confirming bank regarding fees is important; the
selling price indicated on the pro forma invoice should reflect
these and other costs associated with exporting.
24
Documentary Credit (Con’t)

8-25
Methods of Payment
Documentary Collections (Sight or Time Drafts) use a bill of
exchange(draft) which is a negotiable instrument that easily
transfers from one party to another
A Bill of Exchange is a written order from one party (the
drawer)directs one party (the drawee) to pay a third party (the
payee)
Different from a L/C in that the bank has no risk
The exporter-seller bears all the risk
Fees are lower than L/C so used in low value transactions
8-26
After an exporter and an importer have established a good
working relationship and the finance manager’s level of
confidence increases, it may be possible to move to a
documentary collection or an open-account method of payment.
A documentary collection is a method of payment that uses a
bill of exchange, also known as a draft.
With a documentary draft, the exporter-seller delivers
documents such as the bill of lading, the commercial invoice, a
certificate of origin, and an insurance certificate to a bank in
the exporter-seller’s country. The shipper or bank prepares a
collection letter (draft) and sends it via courier to a
correspondent bank in the importer-buyer’s country. The draft is
presented to the importer-buyer; payment takes place in
accordance with the terms specified in the draft. In the case of a
sight draft (also known as documents against payment or D/P),
the importer-buyer is required in principle to make payment

when presented with both the draft and the shipping documents
even though the buyer may not have taken possession of the
goods yet. Time drafts can take two forms. As the names imply,
an arrival draft specifies that payment is due when the importer-
buyer receives the goods; a date draft requires payment on a
particular date, irrespective of whether the importer-buyer has
the goods in hand.
26
Methods of Payment
Cash in Advance
Credit risks abroad are high
Exchange restrictions in destination country may delay return of
funds for a long time
Any other reason the seller will not extend terms
Not used if competitive pressures or substitute products exist
Sales on Open Account
Payment is after delivery
Used for intracorporate or subsidiary sales, exchange controls
are minimal, or with longstanding customers
Can create a legal problem in collection without a tangible
obligation
8-27
Customs Trade Partnership
Against Terrorism
The U.S. Customs and Border Patrol inspects cargo
C-TPAT aims to have businesses certify their security and that
of their partners
They get inspection priority

8-28
As noted on the Customs and Border Protection Web site, “C-
TPAT recognizes that U.S. Customs and Border Protection
(CBP) can provide the highest level of cargo security only
through close cooperation with the ultimate owners of the
international supply chain such as importers, carriers,
consolidators, licensed customs brokers, and manufacturers.
Through this initiative, CBP is asking businesses to ensure the
integrity of their security practices and communicate and verify
the security guidelines of their business partners within the
supply chain.”
28
Duty Drawback
Refunds of duties paid on imports that are processed or
incorporated into other goods AND re-exported
Reduce the price of imported production inputs
Used in the U.S. to encourage exports
After NAFTA, U.S. reduced drawbacks on exports to Canada
and Mexico
China had to reduce drawbacks in order to join the WTO
8-29
29
Sourcing
The Sourcing Decision

Does the company buy or make its products?
Where?
Global outsourcing or offshoring refers to moving work to
another country
Call Centers were first nonmanufacturing moved
8-30
Call Center in Bangalore, India
30
Factors that Affect Sourcing
Management vision
Factor costs and conditions
Customer needs
Logistics
Country infrastructure
Political risk
Exchange rate, availability, and convertibility of local money
8-31
Factor costs are land, labor, and capital costs. Basic
manufacturing direct labor costs today range from less than $1
per hour in an emerging country to $6 to $12 per hour in a
developed country. In certain U.S. industries, direct labor costs
in manufacturing exceed $20 per hour without benefits. German
hourly compensation costs for production workers in

manufacturing are 160 percent of those in the U.S. while those
in Mexico are only 15 percent of those in the U.S. Labor costs
in nonmanufacturing jobs also vary. A software engineer in
India may receive an annual salary of $12,000; an American
with the same educational credentials might earn $80,000.
Customer needs: Although outsourcing can help reduce costs,
sometimes customers are seeking something besides the lowest
possible price. Dell recently rerouted some of its call center
jobs back to the United States after complaints from key
business customers that Indian tech support workers were
offering scripted responses and having difficulty answering
complex problems. In such instances, the need to keep
customers satisfied justifies the higher cost of home-country
support operations.
Logistics: To facilitate global delivery, transportation
companies such as CSX Corporation are forming alliances and
becoming an important part of industry value systems.
Manufacturers can take advantage of intermodal services that
allow containers to be transferred between rail, boat, air, and
truck carriers. In Europe, Latin America, and elsewhere, the
trend toward regional economic integration means fewer border
controls, which greatly speeds up delivery times and lowers
costs.
Infrastructure includes power, transportation and roads,
communications, service and component suppliers, a labor pool,
civil order, and effective governance.
Protectionist laws may cause political risk. Japanese auto
makers established production facilities in the U.S. partly out of
concern for market access. U.S. produced vehicles are not
subject to tariffs or quotas.
Change in commodities price and currency fluctuation: If the
dollar, the yen, or the mark becomes seriously overvalued, a

company with production capacity in other locations can
achieve competitive advantage by shifting production among
different sites.
31
Other Export/Import Issues
Management Vision
Some CEOs want to keep manufacturing at home (Swatch)
Some CEOs focus on high-value-added products rather than
manufacturing sites (Canon keeps 60% in Japan)
Factor Costs & Conditions
The cost of land, labor & capital costs
Labor in emerging markets less than $1 hr.,
But $6-$12 in developed countries
Sometimes the cost of land, materials, & capital offset each
other
8-32
Management Vision Some chief executives are determined to
retain some or all manufacturing in their home country. The late
Nicolas Hayek was one such executive. When he was head of
the Swatch Group, Hayek presided over the spectacular
revitalization of the Swiss watch industry. The Swatch Group’s
portfolio of brands includes Blancpain, Omega, Breguet, Rado,
and, of course, the inexpensive Swatch brand itself. Hayek
demonstrated that the fantasy and imagination of childhood and
youth could be translated into breakthroughs that allow mass-
market products to be manufactured in high-wage countries side
by side with handcrafted luxury products.
Costs and Conditions Factor costs are land, labor, and capital
costs (remember Economics 101!). Labor includes the cost of
workers at every level: manufacturing and production,
professional and technical, and management. Direct labor costs

in basic manufacturing today range from less than $1 per hour
in the typical emerging country to $6 to $12 per hour in the
typical developed country. In certain industries in the United
States, direct labor costs in manufacturing exceed $20 per hour
without benefits. German hourly compensation costs for
production workers in manufacturing are 160 percent of those in
the United States, whereas those in Mexico are a fraction of
those in the United States.
Volkswagen’s business environment includes a significant wage
differential between Mexico . and Germany, the strength of the
euro, and growing worldwide demand for compact and
subcompact vehicles. Taken together, these factors dictate a
Mexican manufacturing facility that builds models destined for
the United States, China, Europe, and other key markets.
Assembly-line wages for Mexican workers start at about $40 per
day; by contrast, German auto workers average $60 per hour in
pay and benefits. Volkswagen has invested $1 billion to design
and produce the next-generation Jetta at a sprawling plant in
Mexico City.
The other factors of production are land, materials, and capital.
The costs of these factors depend on their availability and
relative abundance. Often, the differences in factor costs will
offset each other so that, on balance, companies have a level
field in the competitive arena. For example, some countries
have abundant land, and Japan has abundant capital. These
advantages partially offset each other. When this is the case, the
critical factor is management, professional, and worker team
effectiveness.
The application of advanced computer controls and other new
manufacturing technologies has reduced the proportion of labor
relative to capital for many businesses. In formulating a
sourcing strategy, company managers and executives should
also recognize the declining importance of direct manufacturing
labor as a percentage of total product cost. It is certainly true
that, for many companies in high-wage countries, the
availability of cheap labor is a prime consideration when

choosing manufacturing locations; this is why China has
become “the world’s workplace.” However, it is also true that
direct labor cost may be a relatively small percentage of the
total production cost. As a result, it may not be worthwhile to
incur the costs and risks of establishing a manufacturing
activity in a distant location.
32
Customer Needs
Needs can trump low cost; Dell moved call centers back to U.S.
when customers complained about problems with Indian tech
support
Logistics
Improved transportation systems & intermodal services cut time
& lower costs
Country Infrastructure
Power, transportation, roads, communications, service &
component suppliers, a labor pool, civil order, effective
government
8-33
Logistics In general, the greater the distance between the
product source and the target market, the greater the time delay
for delivery and the higher the transportation cost. However,
innovation and new transportation technologies are cutting both
time and dollar costs. To facilitate global delivery,
transportation companies such as CSX Corporation are forming
alliances and becoming an important part of industry value
systems. Manufacturers can take advantage of intermodal
services that allow containers to be transferred among rail, boat,
air, and truck carriers. In Europe, Latin America, and

elsewhere, the trend toward regional economic integration
means fewer border controls, which greatly speeds up delivery
times and lowers costs.
Country Infrastructure
In order to present an attractive setting for a manufacturing
operation, it is important that a country’s infrastructure be
sufficiently developed to support manufacturing and
distribution. Infrastructure requirements will vary by company
and by industry, but minimally, they will include power,
transportation and roads, communications, service and
component suppliers, a labor pool, civil order, and effective
governance. In addition, companies must have reliable access to
foreign exchange for the purchase of necessary material and
components from abroad. Additional requirements include a
physically secure setting where work can be done and from
which products can be shipped.
A country may have cheap labor, but does it have the necessary
supporting services or infrastructure to support a high volume
of business activities? Many countries offer these conditions,
including Hong Kong, Taiwan, and Singapore. In scores of other
low-wage countries, however, the infrastructure is woefully
underdeveloped. In China, a key infrastructure weakness is the
“cold chain,” a food industry term for temperature-controlled
trucks and warehouses. According to one estimate, an
investment of $100 billion will be required to modernize
China’s cold chain.
33
Political Factors
Political risk is higher in less developed countries in Africa,
South America or Asia than in the Triad
Protectionism at the state and federal level
Senate passed an amendment that would prohibit certain

agencies from hiring companies that used offshore call centers
Foreign Exchange Rates
Companies try to use global sourcing to limit risk of volatile
exchange rates or price levels of commodities
8-34
political risk is a deterrent to investment in local sourcing.
Conversely, the lower the level of political risk, the less likely
it is that an investor will avoid a country or market. The
difficulty of assessing political risk is inversely proportional to
a country’s stage of economic development: All other things
being equal, the less developed a country, the more difficult it
is to predict political risk. The political risk of the Triad
countries, for example, is quite limited as compared to that of a
less-developed country in Africa, Latin America, or Asia. The
recent rapid changes in Central and Eastern Europe and the
dissolution of the Soviet Union have clearly demonstrated the
risks and opportunities resulting from political upheavals.
Other political factors may weigh on the sourcing decision. For
example, with protectionist sentiment on the rise, the U.S.
Senate passed an amendment that would prohibit the U.S.
Treasury and Department of Transportation from accepting bids
from private companies that use offshore workers. In a highly
publicized move, the state of New Jersey changed a call center
contract that had shifted jobs offshore. About one dozen jobs
were brought back to the state—at a cost of about $900,000.
In deciding where to source a product or locate a manufacturing
activity, managers must take into account foreign exchange rate
trends in various parts of the world. Exchange rates are so
volatile today that many companies pursue global sourcing
strategies as a way of limiting exchange-related risk. At any

point in time, what has been an attractive location for
production may become much less attractive due to exchange
rate fluctuation. The dramatic shifts in price levels of
commodities and currencies are a major characteristic of the
world economy today. Such volatility argues for a sourcing
strategy that provides alternative country options for supplying
markets. Thus, if the dollar, the yen, or the mark becomes
seriously overvalued, a company with production capacity in
other locations can achieve competitive advantage by shifting
production among different sites.
34
Global Marketing Information Systems and Market Research
Chapter 6
Global Marketing
1
Learning Objectives
Discuss the roles of IT, MIS, and big data in a global
company’s decision-making processes.
Describe the various sources of market information, including
direct perception.
Identify the individual steps in the traditional market research
process and explain some of the ways global marketers adapt

them.
Compare the way a multinational firm organizes the marketing
research effort with the way a global or transnational firm
approaches the organizing issue.
Explain how information’s role as a strategic asset affects the
structure of global corporations.
6-2
Information Technology, Management Information System &
Big Data
IT: An organization’s processes for creating, storing,
exchanging, using, and managing information.
MIS: A means for gathering, analyzing and reporting
relevant data to provide managers and other decision makers
with a continuous flow of information about markets,
customers, competitors and company operations.
Big Data: Extremely large data sets that can be subjected
to computational analysis to reveal patterns and trends.
6-3
Big data and big data analytics have long been the province of
astronomers, meteorologists, and other members of the
scientific community. It is only recently that big data collection
and analysis been used in business situations. In particular, the
exploding popularity of Facebook and other social media
platforms has resulted in a wealth of big data. However, much
of that data may be redundant or irrelevant, for a simple reason:
The cost of data collection has dropped so dramatically that a

company can amass data irrespective of a particular question,
problem, or purpose that its marketers might have.
3
Business Intelligence Network
A component of MIS
Major Objective:
To enable interactive access to data, enable manipulation of
these data, and to provide managers and analysts with the
ability to conduct appropriate analysis. By analyzing historical
and current data, situations, and performances, decision makers
get valuable insights upon which they can base more informed
and better decisions.
6-4
Many companies with global operations have made significant
investments in IT infrastructure in recent years. Such
investment is typically directed at upgrading a company’s
legacy computer hardware and software. Microsoft, SAP,
Oracle, and IBM are some of the beneficiaries of this trend. All
are global enterprises, and many of their customers are global as
well. Vendors of complex software systems can find it difficult
to achieve 100 percent customer satisfaction.
4
IT Infrastructure
Intranet: A private network that allows insiders or outsiders to
share information securely and without paper
RTE: Real Time Enterprises are companies like Google,
Amazon, FedEx that leverage big data
EDI: Electronic Data Interchange systems allow computer
systems to speak the same language

6-5
system allows a company’s business units to submit orders,
issue invoices, and conduct business electronically with other
company units as well as with outside companies. One of the
key features of EDI is that its transaction formats are universal.
This enables computer systems at different companies to speak
the same language. Walmart is legendary for its sophisticated
EDI system; for years, vendors had received orders from the
retailer on personal computers using dial-up modems connected
to third-party transmission networks. In 2002, Walmart
informed vendors that it was switching to an Internet-based EDI
system. The switch has saved both time and money; the modem-
based system was susceptible to transmission interruptions, and
the cost was between $0.10 and $0.20 per thousand characters
transmitted. Any vendor that now wishes to do business with
Walmart must purchase and install the necessary computer
software.
5
IT Infrastructure
ECR: Efficient Consumer Response is a joint initiative of
supply chain members to optimize the supply chain to benefit
customers.
EPOS: Electronic Point of Sale data read on checkout scanners
help firms identify sales patterns & geographical consumer
preferences.
6-6

IT Infrastructure
CRM: Customer Relationship Management is a philosophy that
values two-way communication between the company & the
customer.
Touchpoints are any point of contact between the two.
360-degree view of the customer
SFA: Sales Force Automation software automates routine sales
& marketing functions
Data warehouses
6-7
Every point of contact (“touchpoint” in CRM-speak) that a
company has with a consumer or business customer—via a Web
site, a warranty card or sweepstakes entry, a payment on a
credit card account, or an inquiry to a call center—is an
opportunity to collect data. Likewise, every time a Spotify user
clicks “play,” a data point is generated. CRM tools allow
companies to determine which customers are most valuable and
to react in a timely manner with customized product and service
offerings that closely match customer needs. If implemented
correctly, CRM can make employees more productive and
enhance corporate profitability; it also benefits customers by
providing value-added products and services.
7
Sources of Market Information
Personal Sources
As much as 2/3rd of corporate information
Executives based abroad, company subsidiaries and affiliates
Travel builds contacts and rapport
75% from face-to-face conversations
6-8

Direct Sensory Perception
Seeing, feeling, hearing, smelling, or tasting firsthand to find
out what is going on in a country
“I believe it is part of any good marketer’s job to be in
touch with their audience and their product. There’s no
substitute for face-to-face, eye-to-eye, hand-to-hand.”
Cindy Spodek-Dickey
Microsoft Executive
6-9
Some information is easily available from other sources, but
sensory experience of it is needed for it to sink in. Often, the
background information or context one gets from observing a
situation can help fill in the big picture. For example,
Walmart’s first stores in China stocked a number of products—
extension ladders and giant bottles of soy sauce, for example—
that were inappropriate for local customers. Joe Hatfield,
Walmart’s top executive for Asia, began roaming the streets of
Shenzhen in search of ideas. His observations paid off; when
Walmart’s giant store in Dalian opened in April 2000, a million
shoppers passed through its doors in the first week.They
snapped up products ranging from lunch boxes to pizza topped
with corn and pineapple.
9
Formal Marketing Research
6-10

Formal Marketing Research, (cont.)
6-11
11
Step 1: Information Requirement
6-12
Step 2: Problem Definition
Be aware! The Self-Reference Criterion is at work when a
person’s home-country values and beliefs influence the
assessment of another country.
Mattel execs thought Japanese girls would like Barbie just like
American girls. They didn’t.
Disney’s detailed code about personal appearance was an insult
to French culture, individualism, and privacy when Disneyland
Paris opened.
6-13
Step 3: Choose a Unit of Analysis

Single country
Region
Global
City, state, or province
6-14
Step 4: Examine Data Availability
U.S. Government Resources
National Trade Data Base (Dept. of Commerce)
Bureau of Economic Analysis
Census Bureau
Eurostat
Canadian Trade Commissioner Service
Statistical Yearbook of the United Nations
CIA World Factbook
MarketResearch.com
6-15
Secondary Data
Data from sources that already exist - they have not been
gathered for the specific research project
Minimal effort and cost
Possible problems
accuracy
Availability
timeliness
comparability of data
6-16

Step 5: Assess Value of Research
If secondary data are not available, managers may conduct
further studies
Assess the cost of research vs. what the information is worth
Would the company enter the market without spending big
money on research?
Small markets may merit only modest research expense
6-17
When data are not available through published statistics or
studies, management may wish to conduct further study of the
individual country market, region, or global segment. However,
collecting information costs money. Thus, the marketing
research plan should also spell out what this information is
worth to the company in dollars (or euros, or yen, etc.)
compared with what it would cost to collect it. What will the
company gain by collecting these data? What would be the cost
of not getting the data that could be converted into useful
information? Research requires an investment of both money
and managerial time, and it is necessary to perform a cost-
benefit analysis before proceeding further. In some instances, a
company will pursue the same course of action no matter what
the research reveals. Even when more information is needed to
ensure a high-quality decision, a realistic cost estimate of a
formal study may reveal that the cost to perform research is
simply too high.
The small markets around the world pose a special problem for
the researcher. The relatively low profit potential in smaller
markets justifies only modest expenditures for marketing
research. Therefore, the global researcher must devise

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