Major International Motivations of Small and Medium-Sized Firms

Major International Motivations of Small and Medium-Sized Firms:

Proactive Motivations

n       Profit advantage

n       Unique Products

n       Technological advantage

n       Exclusive information

n       Managerial urge

n       Tax benefit

n       Economies of scale

Reactive Motivations

n       Competitive pressures

n       Overproduction

n       Declining domestic sales

n       Excess capacity

n       Saturated domestic markets

n       Proximity to customers and ports

Change Agents in the International Process:

Firm Internal

n       Enlightened management

n       New management

n       Significant Internal event

Firm External

n       Demand

n       Other firms

n       Distributors

n       Banks

n       Chambers of commerce

n       Export agents

n       Governmental activities

Key Managerial Characteristics Affecting Export Involvement:

n       Education

n       International exposure

n       Expertise

n       International orientation

n       Commitment

Export Intermediaries

n       Specialize in bringing firms or their products and services to the global market.

n       Cover the international marketing knowledge and performance gaps of firms.

n       Provide contacts with buyers abroad, call on customers, and handle delivery of goods.

n       Examples of facilitating intermediaries

n       Export Management Companies

n       Trading Companies

Export Management Companies

n       Domestic firms that specialize in performing international marketing services as commission representatives or distributors.

n       Two primary forms of operation

n       Take title to goods and operate internationally.

n       Perform service as agents.

Trading Companies

n       The sogoshosha of Japan

n        Sumitomo, Mitsubishi, Mitsui

n       Reasons for the success of the sogoshosha

n        Development of information systems to identify market opportunities.

n        Economies of scale in the vast transaction volume to obtain preferential treatment.

n        Large internal global markets creating opportunities for barter trade.

n        Access to vast quantities of capital on a global scale.


n       The licensor permits the licensee to use its intellectual property (an intangible) in exchange for a royalty payment.

n       Advantages of licensing

n       No capital investment, knowledge, or marketing strength.

n       Huge profit potential, recovered costs.

n       Minimal risk of government intervention.

n       A stage in internationalization.

n       Preempt market entry before competition.

n       Increasing intellectual property rights protection.

Principle  Issues in Negotiating Licensing Agreements:

n        Scope of the rights conveyed (product and/or patent rights)

n        Compensation (Transfer costs, R&D costs, and opportunity costs)

n        Licensee compliance (export control regulations, confidentiality of the intellectual property and technology, record keeping and provisions for licensor audits)

n        Dispute resolution (Under the Rules of Conciliation and Arbitration of the International Chamber of Commerce)

n        The term and termination of the agreement

n      Trademark Licensing: Companies who trade on their names and characters.  For example, the name and logos of designers, sports teams, movie stars appear on clothing, games, toys, beverages, etc.

Reasons for Global Franchising

n Market potential

n Financial gain

n Saturated domestic markets

Major forms of franchising

n       Manufacturer-retailer systems

n       Manufacturer-wholesaler systems

n       Service firm-retailer systems


Franchising Concerns

n       Companies need to know what their special capabilities are.

n       The need for standardization.

n       Protection of the total business system.

n       Government intervention.

n       Selection and training.