These companies adapt their Web sites to provide country specific content and services to their best potential international markets, ideally in the local language. The number of Internet users is rising quickly as access costs decline, local language content increases and infrastructure improves upscale retailer and cataloger. The sharper image they get on the web get more than 25% of its online business from overseas customers.
The Internet has become an effective means of everything from gaining free exporting information and guidelines to conducting market research and offering customers several time zones away a secure process for ordering and paying for products. Going abroad on the internet does pose special challenges. The global marketer may run up against governmental or cultural restrictions. In Germany, a vendor cannot accept payment via credit card until two weeks after an order has been sent. German law prevents companies from using certain marketing techniques like unconditional lifetime guarantees. On a wider scale, the issue of who pays sales taxes and duties on global e-commerce is murkier still.
Foreign investors may join with local investors to create a joint ventures company in which they share ownership and control.
Coca-Cola and Nestle joined forces to develop the international market for â€œready-to-drinkâ€ tea and coffee, which currently they sell in significant amounts in Japan.
Procter & Gamble formed a joint venture with its Italian archrival Fater to cover babiesâ€™ bottoms in the United kingdom and Italy.
Whirlpool took a 53% stake in the Dutch electronics group Philipâ€™s white goods business to leapfrog into the European market.
A joint venture may be necessary or desirable for economic or political reasons the foreign firm might lack the financial, physical, or managerial resources to undertake the venture alone; or the foreign government might require joint ownership as a condition for entry.
Even corporate giants need joint ventures to crack the toughest markets. When it wanted to enter Chinaâ€™s ice cream, market Unilever joined forces with Sum-star, a state owned Chinese investment company. The ventureâ€™s general manager says Sum-starâ€™s help with the formidable Chinese bureaucracy was crucial in getting a high tech ice cream plant up and running in just 12 months.
Joint ownership has certain drawbacks. The partners might disagree over investment, marketing, or other policies. One partner might want to reinvest earnings for growth, and the other partner might want to declare more dividends. Joint ownership can also prevent a multinational company from carrying out specific manufacturing and marketing policies on a world wide basis.
The ultimate form of foreign involvement is direct ownership of foreign based assembly or manufacturing facilities. The foreign company can buy part or full interest in a local company or build its own facilities. General Motors has invested billions of dollars in auto manufacturers around the world, such as Shangai GM. Fiat Auto Holdings, Isuzu, Daewoo, Suzuki, Saab, Fuji Heavy Industries, Jinbei GM Automobile Co., and AvtoVAZ.
If the market appears large enough, foreign production facilities offer distinct advantages. First, the firm secures cost economies in the form of cheaper labor or raw materials, foreign-government investment incentives and freight savings. Second, the firm strengthens its image in the host country because it creates jobs. Third, the firm develops a deeper relationship with government, customers, local suppliers, and distributors, enabling it to adapt its products better to the local environment. Fourth, the firm retains full control over its investment and therefore can develop manufacturing and marketing policies that serve its long term international objectives. Fifth, the firm assures itself access to the market in case the host country starts insisting that locally purchased goods have domestic content.
The main disadvantage of direct investments is that the firm exposes a large investment to risks such as blocked or devalued currencies, worsening markets, or expropriation. The firm will find it expensive to reduce or close down its operation, because the host country might require substantial severance pay to the employees.