Page xix Guided tour Each chapter concludes with a Case Study, providing a range of material for seminars and private study by illustrating the real life applications and implications of the topics covered in the chapter. Part I The decision to internationalize 2. The chapter opened with the major motives for firms to internationalize.
So South Africa should concentrate on the production of oranges as its comparative advantage is greatest here.
Unfortunately the theory assumes that production costs remain relatively static. However, it is a well known fact that increased volumes result, usually, in lower costs. Indeed, the Boston Consulting Group observed this phenomenon, in the so called "experience curve" effect concept.
And it is not only "production" related but "all experience" related; including marketing. The Boston Consulting group observed that as an organisation gains experience in production and marketing the greater the reduction in costs.
The theory of comparative advantage also ignores product and programme differentiation. Consumers do not buy products based only on the lowest costs of production.
Image, quality, reliability of delivery and other tangible and non tangible factors come into play. Kenyans may well be prepared to pay extra for imported French or South African wines, as the locally produced paw paw wine may be much inferior.
The product trade cycle: The model describes the relationship between the product life cycle, trade and investment see figure 1. At the same time other countries, particularly less developed but not exclusively so, shift from being importers to exporters.
These stages are reflected in figure 1. The assumption behind this cycle is that new products are firstly launched in high income markets because a there is most potential and b the product can be tested best domestically near its source of production.
Thus new products generally emanate from high income countries and, over time, orders begin to be solicited from lower income countries and so a thriving export market develops. High income country entrepreneurs quickly realise that the markets to which they are selling often have lower production costs and so production is initiated abroad for the new products, so starts the second stage.
In the second stage of the cycle, foreign and high income country production begins to supply the same export market. As foreign producers begin to expand and gain more experience, their competition displaces the high income export production source.
At this point high income countries often decide to invest in foreign countries to protect their share. As foreign producers expand, their growing economies of scale make them a competitive source for third country markets where they compete with high income exporters.
The final phase of the cycle occurs when the foreign producer achieves such a scale and experience that it starts exporting to the original high income producer at a production cost lower than its original high income producer at a production cost lower than its original high income supplier.
High income producers, once enjoying a monopoly in their own market, now face competition at home.
The cycle continues as the production capability in the product extends from other advanced countries to less developed countries at home, then in international trade, and finally, in other advanced countries home markets.Foreign market entry modes or participation strategies differ in the degree of risk they present, the control and commitment of resources they require, and the return on investment they promise.
The following introductions were based on the statement of Hollensen. Moreover, according to Hollensen () most SMEs, including companies that become international market selection criteria and market entry modes of these firms. Section Five, however, summarises the key findings and as explained by the co-founder of STENDERS Ltd., in a way the company has indeed lived the “Latvian dream”.
Sales, exports and international marketing (SE21) Chapter 7 Export entry modes 1 Introduction Choice between using direct and indirect exporting organizational forms involves: 1.
cost of performing functions 2. transaction costs of organizing activities or contracting with others. Summary Global Marketing A market-responsive approach Svend Hollensen Second Edition ISBN PART 1 Chapter 1 THE DECISION WHETHER TO INTERNATIONALIZE.
Case Cold Storage Company Of Zimbabwe.
The Cold Storage Company (CSC) of Zimbabwe, evolved in , out of the Cold Storage Commission. The latter, for many years, had been the parastatal (or nationalised company) with the mandate to market meat in Zimbabwe.
This paper proposes that going global in groups can represent an expansion of market entry modes, and shows that financial and diplomatic support provided by Chinese Government has reinforced internationalization in groups, thereby minimizing some structural risks in host countries.