INTERNATIONAL MARKETING 6e Chapter 15 Global Market Expansion Copyright 2001 by Harcourt, Inc.. All rights reserved. Requests for permissions to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt, Inc, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777
Copyright © 2001 by Harcourt, Inc.. All rights reserved. Requests for permissions to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt, Inc., 6277 Sea Harbor Drive, Orlando, Florida 32887-6777. INTERNATIONAL MARKETING 6e Global Market Expansion Chapter 15
Foreign Investments Objectives of foreign investments: Firms invest to enter markets Or to assure themselves of sources of supply Copyright 2001 by Harcourt, Inc. All rights reserved 15-2
Copyright © 2001 by Harcourt, Inc. All rights reserved. 15-2 Foreign Investments Objectives of foreign investments: Firms invest to enter markets Or to assure themselves of sources of supply
Foreign Investments a Foreign direct investment An equity investment to create or expand a permanent interest in a foreign enterprise Two phases of foreign investment Portfolio investment The purchase of stocks and bonds internationally Manufacturing Major foreign investors More than 45,000 multinational corporations with 280,000 affiliates globally. The terms "foreign"and domestic may no longer apply. Copyright 2001 by Harcourt, Inc. All rights reserved 15-3
Copyright © 2001 by Harcourt, Inc. All rights reserved. 15-3 Foreign Investments Foreign direct investment • An equity investment to create or expand a permanent interest in a foreign enterprise. Two phases of foreign investment • Portfolio investment – The purchase of stocks and bonds internationally. • Manufacturing Major foreign investors • More than 45,000 multinational corporations with 280,000 affiliates globally. • The terms “foreign” and “domestic” may no longer apply
Reasons for Foreign Direct Investment Marketing factors Growth and profit motivations Circumventing government-erected barriers to trade Access to low-cost resources and supply Local customers preference for domestic goods and services Attempts to obtain low-cost resources and ensure their supply Copyright 2001 by Harcourt, Inc. All rights reserved 15-4
Copyright © 2001 by Harcourt, Inc. All rights reserved. 15-4 Reasons for Foreign Direct Investment Marketing factors • Growth and profit motivations • Circumventing government-erected barriers to trade • Access to low-cost resources and supply • Local customers preference for domestic goods and services • Attempts to obtain low-cost resources and ensure their supply
Categories of International Firms Resource seekers are searching for natural and human resources Identify Us international firms that can be categorized as resource seekers Which Us firms can be considered as human resources seekers Market seekers are searching for better opportunitie to enter or expand within markets Efficiency seekers are attempting to obtain the most economic sources of production Copyright 2001 by Harcourt, Inc. All rights reserved 15-5
Copyright © 2001 by Harcourt, Inc. All rights reserved. 15-5 Categories of International Firms Resource seekers • are searching for natural and human resources – Identify US international firms that can be categorized as resource seekers – Which US firms can be considered as human resources seekers ? Market seekers • are searching for better opportunities to enter or expand within markets. Efficiency seekers • are attempting to obtain the most economic sources of production
Reasons for Foreign Direct Investment Derived demand results when businesses move abroad and encourage their suppliers to follow them, creating chain or pattern of direct investment in a market Copyright 2001 by Harcourt, Inc. All rights reserved 15-6
Copyright © 2001 by Harcourt, Inc. All rights reserved. 15-6 Reasons for Foreign Direct Investment Derived demand • results when businesses move abroad and encourage their suppliers to follow them, creating chain or pattern of direct investment in a market
Reasons for Foreign Direct Investment n Government incentives Fiscal incentives tax holidays, allowances, credits and rebates Financial incentives special funding for land or buildings, loans and guarantees, wage subsidies Nonfinancial incentives guaranteed purchases, protective tariffs, import quotas, local content requirements, infrastructure Copyright 2001 by Harcourt, Inc. All rights reserved
Copyright © 2001 by Harcourt, Inc. All rights reserved. 15-7 Reasons for Foreign Direct Investment Government incentives • Fiscal incentives – tax holidays, allowances, credits and rebates • Financial incentives – special funding for land or buildings, loans and guarantees, wage subsidies • Nonfinancial incentives – guaranteed purchases, protective tariffs, import quotas, local content requirements, infrastructure
Foreign Direct investors Positive perspectives Bring in capital, economic activity, and employment Transfer technology and managerial skills Competition, market choice, and competitiveness are enhanced Copyright 2001 by Harcourt, Inc. All rights reserved 15-8
Copyright © 2001 by Harcourt, Inc. All rights reserved. 15-8 Foreign Direct Investors Positive perspectives • Bring in capital, economic activity, and employment • Transfer technology and managerial skills • Competition, market choice, and competitiveness are enhanced
Foreign Direct investors Negative perspectives Drain resources from host countries Starve smaller capital markets Discourage local technology development Bring in outmoded technology Create new competition for local firms Copyright 2001 by Harcourt, Inc. All rights reserved 15-9
Copyright © 2001 by Harcourt, Inc. All rights reserved. 15-9 Foreign Direct Investors Negative perspectives • Drain resources from host countries • Starve smaller capital markets • Discourage local technology development • Bring in outmoded technology • Create new competition for local firms
Types of Ownership Ownership patterns may be based on past experiences with similar ownership models Fu‖ ownership Fu∥ contro,fu∥ assumption of all risks May be desirable, but is not necessary for success internationally. 口 Joint ventures Shared control shared investment risks Reasons for joint ventures governmental pressure to join with local partners mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers Copyright 2001 by Harcourt, Inc. All rights reserved
Copyright © 2001 by Harcourt, Inc. All rights reserved. 15-10 Types of Ownership Ownership patterns may be based on past experiences with similar ownership models. Full ownership • Full control, full assumption of all risks • May be desirable, but is not necessary for success internationally. Joint ventures • Shared control, shared investment risks • Reasons for joint ventures: – governmental pressure to join with local partners – mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers
