Page 325 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes Many other multinational marketers in industries, such as automobile, photographic equipment,
electronics, computer parts, apparel, multinational retail chain business and others, use contract
manufacturing.

14.2.3 Joint Venture

Forming a joint venture is a more important and popular approach for carrying on international
marketing. A joint venture is a partnership between a domestic company and a foreign business
house, or it can be between two countries. Joint venture partner minimises risks associated with
political, economic, and cultural aspects.

A joint venture can be an attractive option to an international marketer when the company can
take advantage of specialised skills of local partner, avail the facility of local partner’s distribution
set up, wholly owned subsidiary is not permitted, and the international marketer gains access to
protected markets.

Example: A huge multinational like General Motors formed a joint venture with Jinberi
Automobiles of China to manufacture light commercial trucks. Many brands of companies from
other countries are manufactured and marketed in China at prices that would not be possible if
these brands were imported.

The newest form of joint ventures in partnership is called strategic alliance in which two or more
firms join hands to create competitive advantage on worldwide basis. In industries such as
autos, airlines, insurance, and computers etc., strategic alliances are fairly common to meet the
ever increasing competition. According to Harvey Arbelaez and Rafik Cuplan, Strategic
International Alliance (SIA) is a way to provide support for weaknesses and increase competitive
strengths. Strategic alliances at international level attract partners to take advantage of
opportunities to enter and expand into new markets, gain access to new technology, cost
efficiencies in manufacturing and marketing, access to marketing channels, and suppliers.

Example: Jeffery Ball, Todd Zaun, and Norihiko Shirouzu report that Daimler Chrysler,
Mitsubishi, and Hyundai have entered into a joint venture to develop a “small-car engine” to be
used in one million cars of these auto companies. An engine is one of the most expensive car
component and since margins on small cars are very thin, this type of strategic alliance provide
savings for all the companies and allows them to compete on other features.

14.2.4 Direct Ownership

This level of involvement in international marketing entails owning a foreign subsidiary or
division.

Did u know? This is the highest level of commitment to international marketing by
multinational companies, such as Procter & Gamble, Nestle, Sony, Canon, Nikon, LG,
Samsung, Toyota, Pfizer, GlaxoSmithKline, and IBM etc.

The company is the sole owner and does not compromise on any aspect of the business, including
manufacturing or marketing programmes and enjoys greater control and flexibility. The parent
company is often based in one country and carries manufacturing, management, and marketing
operations in different countries. The subsidiaries may be autonomous and allowed to operate
independently of the parent company to adjust according to local environmental conditions,
usually operating under local management.

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