Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

21. Developing Innovative
    Marketing Plans

Text © The McGraw−Hill

Companies, 2002

630 Chapter 21

as operating policies. Where a close working relationship can be developed—per-

haps based on one firm’s technical and marketing know-how and the foreign

partner’s knowledge of the market and political connections—this approach can be

very attractive to both parties.

In some situations, a joint venture is the only type of involvement possible. For

example, IBM wanted to increase its 2 percent share of what business customers in

Brazil spent on data processing services. But a Brazilian law severely limited expan-

sion by foreign computer companies. To grow, IBM had to develop a joint venture

with a Brazilian firm. Because of Brazilian laws, IBM could own only a 30 percent

interest in the joint venture. But IBM decided it was better to have a 30 percent

share of a business—and be able to pursue new market opportunities—than to stand

by and watch competitors take the market.^12

A joint venture usually requires a big commitment from both parties—and they

both must agree on a joint plan. When the relationship doesn’t work out well, the

ensuing nightmare can make the manager wish that the venture had been planned

as a wholly owned operation. But the terms of the joint venture may block this for

years.^13

When a firm thinks a foreign market looks really promising, it may want to take

the final step. A wholly owned subsidiaryis a separate firm—owned by a parent

company. This gives the firm complete control of the marketing plan and opera-

tions, and also helps a foreign branch work more easily with the rest of the company.

If a firm has too much capacity in a country with low production costs, for exam-

ple, it can move some production there from other plants and then export to

countries with higher production costs.

As firms become more involved in international marketing, some begin to see

themselves as worldwide businesses that transcend national boundaries. These

multinational corporationshave a direct investment in several countries and run

their businesses depending on the choices available anywhere in the world.

Wholly owned
subsidiaries give
more control

Multinational
corporations evolve to
meet the challenge

Internet websites that specialize
by product-market and that
bring together producers,
intermediaries, and customers
are quickly creating new types of
international relationships and
opportunities.