INTERNATIONAL PRODUCT LIFE CYCLE

 Introduction & Growth Stages

MNC manufactures product in developed countries: export to developing

countries.

 Early Maturity

MNC moves production to developing country,begins importing to home country.

 Late Maturity

Developing country competitor exports product to MNC Home country:competes

with MNC in imports.

 Decline

Developing country targets remain viable target markets for MNC.

MNC home country market is diminishing.

 PRODUCT INTRODUCTION STAGE

 Products are developed and marketed in developed countries

 THE GROWTH STAGE

 Increasing competition and rapid product adoption

 Marketed primarily in developed countries

 Product is exported to developing countries

 THE MATURITY STAGE

Product is adopted by most target consumers

 Sales are leveling off

 Profits decline due to intense competition

 Manufacturing operations move to developing countries to take

advantage of cheap labor

 New competitors: firms from developing countries

  THE DECLINE STAGE

Products are rapidly losing ground to new technologies and product alternatives

 Decrease in sales and profits

 Product lifecycle is extended through sales to consumers in developing

countries

 1. Introduction
 A new product is introduced onto the Marketplace, few people know about it, and its
success is rarely guaranteed. Much time and money is invested in promoting this product,
and there is either no profit or even a net loss during this period.
 2. Growth
 The product starts to grow in popularity, sales increase as advertising starts working and
others start to imitate your product. Profits increase, and your product steadily becomes a
success.
 3. Maturity
 Your product becomes an established part of the Market, but sales start to increase slowly
as competition and pricing factors take place. At this stage advertising costs are at their
highest, whilst profits may start to drop. The market for your product could reach
saturation point.
 4. Decline
 Sales start to fall, as your product loses its appeal. Profits drop as production is often cut,
competition in the marketplace gets stiffer as advertising is cut and plans are made to
shelve the product in the future.
 5. Innovation
 Innovators take your product and may incorporate it into a new product. This has
happened to the humble FM radio and Camera which you find as a basic feature on most
hand phones. The decline of the original product has just lead onto the use of it on a very
new product.
 The product Life Cycle may not end it changes, especially in this century of fast moving
technology. Traditionally products faded away into the memories of their users, but have
often become part of a new product, that faces the same decline in the future.
 METHODS OF ENTERING

 Trading overseas
 There are a number ways an organisation can start to sell their products in international
markets.
 1. Direct export.
 The organisation produces their product in their home market and then sells them to
customers overseas.
 2. Indirect export
 The organisations sells their product to a third party who then sells it on within the
foreign market.
 3.Licensing
 Another less risky market entry method is licensing. Here the Licensor will grant an
organisation in the foreign market a license to produce the product, use the brand name
etc in return that they will receive a royalty payment.
 4.Franchising
 Franchising is another form of licensing. Here the organisation puts together a package of
the ‘successful’ ingredients that made them a success in their home market and then
franchise this package to oversea investors. The Franchise holder may help out by
providing training and marketing the services or product. McDonalds is a popular
example of a Franchising option for expanding in international markets.
 5.Contracting
 Another of form on market entry in an overseas market which involves the exchange of
ideas is contracting. The manufacturer of the product will contract out the production of
the product to another organisation to produce the product on their behalf. Clearly
contracting out saves the organisation exporting to the foreign market.
 6.Manufacturing abroad
 The ultimate decision to sell abroad is the decision to establish a manufacturing plant in
the host country. The government of the host country may give the organisation some
form of tax advantage because they wish to attract inward investment to help create
employment for their economy.
 7.Joint Venture
 To share the risk of market entry into a foreign market, two organisations may come
together to form a company to operate in the host country. The two companies may share
knowledge and expertise to assist them in the development of company, of course profits
will have to be shared out also.
 Deciding on the International Entry Mode

 Indirect Exporting

 Company uses home country intermediaries, who in turn sell

product overseas

 Lowest risk, lowest control

 Companies can use cooperative exporting, also known as

piggybacking and mother-henning

- Involves using the distribution system of exporters with

established systems for selling abroad who agree to
handle the export function of a non-competing company
on a contractual basis

 Direct Exporting

 Own in-house exporting department handles the exporting

function

 LICENSING

 Licensor offers know-how, shares technology, and shares

brand name with licensee

 Licensee pays royalties

 Lower-risk entry mode; limits exposure to economic, financial,

and political instability

 Permits the company access to markets that may be closed or

that may have high entry barriers

DISADVANTAGE: Can produce competitor in the licensee

 FRANCHISING

 Franchisor gives franchisee right to use brand name,

trademarks and business know-how

• Less risk, higher level of control

 • Very rapid market penetration

DISADVANTAGE: Can create future competitors who understand the

operations of the franchise

 JOINT VENTURE

 Preferred entry mode of governments of developing countries

- Help develop local expertise

- If production is exported, helps with country’s balance

of trade

 Foreign company and local company establish a jointly-owned

new company

 Parties share capital, equity, labor

 70% of all joint ventures break up within 3.5 years

DISADVANTAGE: Joint-venture partners can turn into viable

competitors; and 70% of all joint ventures break up
within 3.5 years.

 CONSORTIA

 Involve three or more companies

 Monopoly effect

 Allowed

- where expensive R&D is involved

- in underserved markets

- in markets where the government and/or the

marketplace can control its activity

 WHOLLY OWNED SUBSIDIARIES

 Can be developed by the company – greenfielding – or can be

purchased (acquisition or merger)

 Involve long-term market commitment

 High cost
  High control of operations

 Greatest level of risk

 BRANCH OFFICES

 Entities are part of the international company, rather than a

new company (as in the case of the subsidiary)

 Involves substantial investment

- sales office

- showroom

 Engages in a full spectrum of marketing activity

 High level of control

 IMPORTANT ENTERING STRATEGIES

 Licensing And Franchising

 No Capital Required Avoiding Government Market

Testing

 Avoid Competition Return on Obsolete product Tested Success

 Exporting

 Low Volume High Cost Of Production Poor Infrastructure

 Government Regulation No Permanent Interest

 Contract Manufacturing

 Low Commitment Give Freedom To Quit Any Time

 Immediate Return Government Support

 Management Contract

 Sale of products Commercializing Know How

 Difficulty in adaptation

 Turnkey Projects
  Third Country Location

 M&A

 Strategic Alliance

 Fully Owned Manufacturing

 Trade Barriers To get complete control Avoiding Potential

Competitors

 Assembly Operations Import Duty Structure Government

Support

 Less Risk

 Joint Ventures

 Dealing With GovernmentPublic SupportManaging Cultural Bridge

 Sharing Risk

 Counter Trade

Types

Barter

Buy back

Compensation Deal

Counter Purchase

Reasons

 Central Planning

 Forex Problem

 Obsolete Products

 Market Testing
Domestic marketing is the marketing practices within a marketer's home country. Foreign
marketing is the domestic operations within a foreign country (i.e., marketing methods used
outside the home market). Comparative marketing analytically compares two or more countries'
marketing systems to identify similarities and differences.

International marketing studies the "how" and "why" a product succeeds or fails abroad and how
marketing efforts affect the outcome. It provides a micro view of the market at the company
level.

Multinational, global, and world marketing are all the same thing. Multinational marketing treats
all countries as the world market without designating a particular country as domestic or foreign.
As such, a company engaging in multinational marketing is a corporate citizen of the world,
whereas international marketing implies the presence of a home base. However, the subtle
difference between international marketing and multinational marketing is probably insignificant
in terms of strategic implications.

Advantages to consider:

• Enhance your domestic competitiveness

• Increase sales and profits
• Gain your global market share
• Reduce dependence on existing markets
• Exploit international trade technology
• Extend sales potential of existing products
• Stabilize seasonal market fluctuations
• Enhance potential for expansion of your business
• Sell excess production capacity
• Maintain cost competitiveness in your domestic market

Disadvantages to keep in mind:

• You may need to wait for long-term gains

• Hire staff to launch international trading
• Modify your product or packaging
• Develop new promotional material
• Incur added administrative costs
• Dedicate personnel for traveling
• Wait long for payments
• Apply for additional financing
• Deal with special licenses and regulations

Difference
1. Outsourcing is a general term for a business function done by non-employees while offshoring
is also, and in most cases, outsourcing but the function is done outside the country or area of the
client.
2. Outsourcing is an option often selected by big companies to get rid of particular routine work
which could be performed by third parties for money. Offshoring is often opted because the
overhead for business process costs less in other places.
3. Outsourcing is usually done to preserve human resources to focus their energies on the
companiesí core competencies. Offshoring is basically the same but more concentration on cost-
cutting.
4. Outsourcing can be done in the same locality therefore it doesnít damage local labor market.
While in offshoring, since labor is done outside of the country, it may pose some detrimental
effects on the local labor market.
5. Outsourcing in local premises poses no real communication drawbacks while offshoring can
have significant communication and language barriers.

Process of negotiation

This is a unique combination framework that puts together the best of many other approaches to
negotiation. It is particularly suited to more complex, higher-value and slower negotiations.

1. Prepare: Know what you want. Understand them.

2. Open: Put your case. Hear theirs.
3. Argue: Support your case. Expose theirs.
4. Explore: Seek understanding and possibility.
5. Signal: Indicate your readiness to work together.
6. Package: Assemble potential trades.
7. Close: Reach final agreement.
8. Sustain: Make sure what is agreed happens.

There are deliberately a larger number of stages in this process as it is designed to break down
important activities during negotiation, particularly towards the end. It is an easy trap to try to
jump to the end with a solution that is inadequate and unacceptable.

Note also that in practice, you may find variations on these, for example there may be loops back
to previous stages, stages overlapping, stages running parallel and even out of order.

The bottom line is to use what works. This process is intended to help you negotiate, but do not
use it blindly. It is not magic and is not a substitute for thinking. If something does not seem to
be working, try to figure out why and either fix the problem or try something else. Although
there are commonalities across negotiations, each one is different and the greatest skill is to be
able to read the situation in the moment and adapt as appropriate.

The process comprises of five core steps:

1. Prepare: This phase involves composition of a negotiation team. The negotiation team
should consist of representatives of both the parties with adequate knowledge and skills
for negotiation. In this phase both the employer’s representatives and the union examine
their own situation in order to develop the issues that they believe will be most important.
The first thing to be done is to determine whether there is actually any reason to negotiate
at all. A correct understanding of the main issues to be covered and intimate knowledge
of operations, working conditions, production norms and other relevant conditions is
required.
2. Discuss: Here, the parties decide the ground rules that will guide the negotiations. A
process well begun is half done and this is no less true in case of collective bargaining.
An environment of mutual trust and understanding is also created so that the collective
bargaining agreement would be reached.
3. Propose: This phase involves the initial opening statements and the possible options that
exist to resolve them. In a word, this phase could be described as ‘brainstorming’. The
exchange of messages takes place and opinion of both the parties is sought.
4. Bargain: negotiations are easy if a problem solving attitude is adopted. This stage
comprises the time when ‘what ifs’ and ‘supposals’ are set forth and the drafting of
agreements take place.
5. Settlement: Once the parties are through with the bargaining process, a consensual
agreement is reached upon wherein both the parties agree to a common decision
regarding the problem or the issue. This stage is described as consisting of effective joint
implementation of the agreement through shared visions, strategic planning and
negotiated change.