Global Markets: Ethics and Strategy

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Global Markets: Ethics and Strategy

(Global Markets: Ethics and Strategy)

Assignment.

  1. Explain how the flow of transactions and the flow of the physical product relate to foreign market entry mode.
  2. Are companies in less developed countries ethically justified in producing and selling generic copies of patented drugs without obtaining the permission (and paying) the patent holders? Explain your answer
  3. What is market segmentation, and why is it more complex for foreign markets than it is for domestic markets? What is the best way for segmenting export markets? Explain.

Answers.

 

1. Flow of Transactions and Physical Product in Foreign Market Entry Mode

The relationship between the flow of transactions and the flow of the physical product is crucial in determining a company’s foreign market entry mode.

  • Flow of Transactions involves financial exchanges, contracts, and the movement of funds across borders. This flow is influenced by the entry mode, whether it is direct exporting, licensing, franchising, joint ventures, or wholly-owned subsidiaries.
  • Flow of the Physical Product pertains to the logistics and distribution of goods to foreign markets. Entry modes such as exporting rely on efficient logistics, whereas local production (via joint ventures or subsidiaries) reduces the complexity of physical product flow.

The chosen entry mode affects how these flows are managed. For instance:

  • Exporting focuses on minimal transaction and logistics control.
  • Licensing or Franchising relies on local partners to manage the product’s physical and transactional aspects.
  • Direct Investment ensures maximum control over both flows but comes with higher costs and risks.

2. Ethical Justification for Generic Drug Production in Less Developed Countries

Producing and selling generic copies of patented drugs without permission raises ethical dilemmas related to:

  • Access to Essential Medicines: In less developed countries, life-saving drugs are often inaccessible due to high costs. Producing generics can address public health crises and uphold the ethical principle of beneficence.
  • Intellectual Property Rights: Patent holders argue that unauthorized production undermines innovation and economic sustainability. However, this must be balanced with the urgency of saving lives in underprivileged populations.

Ethically, such production can be justified under certain circumstances, particularly during health emergencies, as outlined by the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, which allows compulsory licensing.

3. Market Segmentation in Foreign vs. Domestic Markets

  • Definition: Market segmentation is the process of dividing a market into distinct groups based on shared characteristics such as demographics, psychographics, or geographic factors.
  • Complexity in Foreign Markets:
    • Cultural Diversity: Foreign markets encompass diverse languages, cultural norms, and consumer behaviors.
    • Economic Disparities: Income levels and purchasing power vary significantly across and within countries.
    • Legal and Regulatory Differences: Laws and trade regulations can influence segmentation strategies.
  • Best Way to Segment Export Markets:
    • Macro-Segmentation: Divide markets based on economic factors (e.g., GDP, infrastructure) and regional proximity.
    • Micro-Segmentation: Further segment based on local consumer preferences, lifestyles, and purchasing behavior.

 

 
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