Page 177 - DMGT547_INTERNATIONAL_MARKETING

International Marketing

Notes delay for delivery and the higher transportation cost. However, innovation and new
transportation technologies are cutting both time and dollar costs. To facilitate global delivery,
transportation companies such as CSX Corporation are forming alliances and becoming an
important part of industry value systems. Manufacturers can take advantage of intermodal
services that allow containers to be transferred between rail, boat, air and truck carriers.

Did u know? Today, transportation expenses for U.S. exports and imports represent
approximately 5 per cent of total costs. In Europe, the advent of the single market means
fewer border controls, which greatly speeds up delivery times and lower costs.
10.1 International Logistics

Having sketched in the broad picture of international marketing, we are ready to analyze the
approaches of management to international logistic planning. In supplying world markets,
companies try to work out systems that will be competitively practical and permit lowest cost
operation so that profit is maximized. This is one of the key components of the global unification
strategy upon which the overall effectiveness of a multinational firm depends. Looking at the
operations of U.S. companies, we find that logistic systems are commonly composed of four
main components.
Export of finished products from the United States. Virtually all companies start their logistic
planning with a strong preference for exporting from the United States. Manufacture abroad
always involves some risks, along with the complications of managing operations from a
distance. Furthermore, exports from the United States add to the volume of output of domestic
plants, making them more efficient.
Manufacture in a foreign country for sale in that country. Under this heading fall two types of
situations. First are the plants in less developed countries. Companies selling goods in these
countries are repeatedly confronted with the choice of manufacturing on a protected basis
within the country or being excluded by restrictions designed to protect those who are willing
to manufacture. Sometimes companies have decided to take the second choice rather than make
sizable investments of money and manpower in small markets. But because of the long run
potential in the developing countries, most companies are reluctant to be frozen out of them.

Foreign plants producing for local and export markets. This type of operation may be expected
to increase with the reduction of trade restrictions under international agreements and especially
with the development of common markets. A major disadvantage of foreign manufacture has
been the high cost of producing on a small scale for one-country markets.
As barriers to trade are lowered, therefore, companies have shifted toward logistic systems
based on small number of fairly large plants located at strategic spots around the world.
Export of components from the United States and third countries. Although many finished
products cannot be exported from the United States, it is generally possible to export some parts
or supplies for use in foreign plants, especially those manufacturing complex products like
drugs, automobiles, and electronic equipment.
Self Assessment

State whether the following statements are true or false:
1. The costs involved in manufacturing plants in foreign country catering to the local needs
only are generally low making it easy for exporters to export.

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