Foreign Operations Methods

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Revision as of 01:39, 9 July 2012

Introduction

An integrity of global supply chains across borders is accomplished with help of international operations understood also as modes of entry. An existing areas of international business evolve, or new areas emerge, the process tends to spill over into questions that pertain to the use of foreign operations modes[1] The class of managerial decisions concerning choosing and implementing international operations is often classified as strategy decisions or the global market entry strategies [2] [3]. However, supposing any strategic decision has to answer questions "What?", "Where?", and, sometimes, "When?" to sell, we propose to classify the entry mode decisions answering the questions "How?" as operative decisions whereas all decisions concerning marketing mix adjustments are named as tactic decisions.

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An entry mode is understood in terms of international marketing as an approach to international expansion a company chooses based on desired control and on the risk it can afford. Nevertheless, in terms of international logistics, the entry mode should be defined as a means to connect and match arms of a global supply chain belonging to different national marketing environments [4]. The main task of international logistics efforts is to overcome disruptions on the way of international supply chain generated by dissimilarities between different national marketing environments (Fig. 1.).


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Any product movement across borders is to be arranged as a sale-purchase transaction. This absolute rule is in power due to the fact of export/import customs formalities and government regulations presented as tariff and non-tariff barriers in international trading. Therefore, the first step of international logistics managers in any international (foreign) operations is to reveal and interpret the differences between national marketing environments of (as minimum) two countries ("home country" and "host country" on Fig. 1.). The second step consists of executing export/import customs clearance, home and host country export/import government regulations and contractual requirements.

Entry Mode Factors vs International Logistics Considerations

Entry Mode Factors Commentary
The size of the market While there is no easy rule, the method of entry is different for a market in which combined sales amount to €10,000,000 (U.S. $14,159,000 – MAY22, 2011 exchange rate) per year and a market that exhibits sales in billions of euros.
The growth of the market A stable market, growing at a moderate rate, will call for a different entry strategy than one in which there is a substantial potential for growth.
The potential market share of the exporter A market in which the exporter can become a major player will call for a different strategy than one in which the exporter has no chance to be much more than a niche player.
The type of product Products with technology and a need for after-sale service and parts will require a different entry strategy than a disposable consumer good.
The marketing strategy of the firm. Although self-evident, a firm whose strategy is to provide a top-of-the-line product will have a different entry strategy than a firm that has chosen to be the lowest cost provider.
The characteristics of the country considered The level of development, the infrastructure of the country, the business sophistication of potential trade partners, the overall climate under which business is conducted, the culture of the market, and the culture of customers should all be considered in the decision of an entry strategy.
The time horizon considered Products that have a short life cycle, or products that are likely to generate a lot of “me-too” competitors, demand a different entry strategy than products that are patent protected or are likely to have a long life cycle or engender a long line of complementary products.
The willingness of the firm (its relevant managers) to get involved. Firms that actively want to develop foreign markets should have a different entry strategy than firms that believe that their domestic market is their primary concern and consider foreign sales as “bothersome.”


Unified classification (methods-forms-subjects) of international operations (See LEGEND under the bottom-line)

Forms of International Operations: Methods of International Operations:
Direct Indirect:

Agency

Distributorship Consignment

Cooperative:

Piggybacking Consortium

Own or

Intracorporative

Countertrading Institutionally-Competitive*) E-commerce
TRADITIONAL METHODS - "PRODUCT" GROUP:
Importing 1, 2A, 5, 6 1, 2A, 4, 5, 6, 7
Importing 1, 2A, 5, 6 Commodity Exchange:

1B, 1C

Auction: 1B, 1C

Tender: 1A, 1B, 3

Exporting 1, 2A, 5, 6 1, 2A, 4, 5, 6, 7
Exporting 1, 2A, 5, 6 Commodity Exchange:

1B, 1C

Auction: 1B, 1C

Tender: 1A, 1B, 3

TRANSMUTATED METHODS - "KNOW-HOW" GROUP:
Stranding YES YES YES YES YES YES
Sinking YES YES YES YES YES YES
Collision YES YES YES YES YES YES
General Average YES YES YES YES YES YES
Jettison YES YES YES YES YES [5]
Loss Overboard YES YES YES YES [5]
Seawater Damage YES YES YES YES [5]
Lightening YES YES YES YES [5]
Condensation YES YES
Improper Stowage by Carrier YES YES
Theft YES YES
Pilferage YES YES
Leakage YES YES
Breakage YES YES
Damage While Loading/Unloading YES YES YES YES
Damage on land Before Loading YES YES YES YES YES YES

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References

  1. Welch, L.S., Benito, G.R.G., Petersen, B.: Foreign Operation Methods: Analysis, Strategy, and Dynamics: Edward Elgar, London, 2007 - p.8
  2. Gillespie, K, Jeannet, J-P., Hennessey, H.D. Global Marketing - Houghton Mifflin Company, Boston, New York, 2007 - Ch.9.
  3. Keegan, W.J., Green, M.C. Global Marketing - Pearson Education, Boston, etc., 2013 - Ch.9.
  4. Cherenkov, V.I. Global Marketing Environment: Essays on Conceptualization and Generalization -
  5. 5.0 5.1 5.2 5.3 Under an FPA policy, any partial loss incurred would not be covered unless it is due to a ship sinking, burning, becoming stranded, or being involved in a collision; a total loss would be covered
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