Analysis of risk in international marketing
David Kilburn
Bournemouth University
EUNCET – Spain
March 21/04
INTRODUCTION TO
INTERNATIONAL MARKETING
WHAT IS MARKETING?
Marketing Involves:
• Focusing on the needs and wants of
customers
• Identifying the best method of satisfying
those needs and wants
• Orienting the company towards the process
of providing that satisfaction
• Meeting organisational objectives
WHAT IS INTERNATIONAL
MARKETING?
Different Levels of International Marketing
• Export marketing
• International marketing
• Global marketing management
ENVIRONMENTAL INFLUENCES ON
INTERNATIONAL MARKETING
Socio/Cultural
Language
Religion
Aesthetics
Values and attributes
Social organisation
Material culture
Economic
Developed economies
Emerging economies
Less developed economies
Currency movements
Legal
Local domestic laws
International law
Home domestic law
Environmental
Influences on
International
Marketing
Political
Operational restrictions
Discriminatory restrictions
Physical actions
Technological
Satellite Communications
ISDN
Internet
WWW
The Electronic
Superhighway
SOCIAL / CULTURAL INFLUENCES

Coca-Cola:


2 Litre bottles too big for Spanish fridges
Pronunciation in China – Kooke Koula


Johnson’s Floor Wax:

Made Japanese floors slippery


‘A thirsty mouthful of candle wax’
The Japanese do not wear shoes indoors
McDonald’s:

The white face of ‘Ronald McDonald’

A white face is seen as a death mask in Japan
REGIONAL BREAKDOWN OF GLOBAL
POPULATION
0
0.5
1.0
1.5
2.0
2.5
Other Asia
Africa
India
China
Latin America
Europe
North America
1995
Source: United Nations (1998)
2050
THE LEGAL ENVIRONMENT

3 dimensions in the legal environment:

local domestic law:


international law:


different in every country
issues include piracy, treaties, patents etc
domestic laws in the home country:

export controls, plus duty to abide by national
laws in all activities
WORKING TIME REQUIRED TO BUY A BIG MAC
Minutes 1997
0
Caracas
Moscow
Manila
Shanghai
Mexico City
Bogota
Warsaw
Bangkok
Sao Paolo
Johannesburg
Singapore
Paris
Kuala Lumpur
London
Frankfurt
New York
Tokyo
20
40
60
80
100
20
Source: Economist: Jan 1998
ECONOMIC ENVIRONMENT

Developed triad Economies


Emerging Economies




account for 80% of world trade
huge and growing consumer demand
government directed economic reforms
‘dual economy’
Less Developed Countries (LDCs)



low GDP, limited manufacturing base
infrastructure weaknesses
heavy reliance on one product/one trading partner
POLITICAL ENVIRONMENT

‘A risk due to a sudden
or gradual change in a
local political
environment that is
disadvantageous or
counter productive to
foreign firms and
markets’

Government actions which
may constitute potential
risk for the firm:



Operational restrictions eg.
exchange controls or
employment policies
Discriminatory restrictions
eg. special taxes and tariffs
Physical actions eg
nationalisation, riots and war
TECHNOLOGICAL CONSIDERATIONS



Increased ease and speed of communication
High rate of technological change
Global access to the World Wide Web


Projected 765 million users by end 2005
Importance of English language for web users
THE CHALLENGES OF THE INTERNATIONAL
MARKETING ENVIRONMENT #1

Culture


Markets


Widespread and sometimes fragmented
Data


Often diverse and multicultural
Difficult to obtain and sometimes expensive
Politics

Regimes vary in stability, political risk becomes an
important variable
THE CHALLENGES OF THE INTERNATIONAL
MARKETING ENVIRONMENT #2

Governments


Competition


Can be a strong influence in regulating importers
and foreign business ventures
Multinationals can distort competitive structure of
markets
Economies

Varying levels of development
THE CHALLENGES OF THE INTERNATIONAL
MARKETING ENVIRONMENT #3

Finance


Currency


Varying and unstable, strong likelihood of
transaction risk
Business


Many differing finance systems and regulatory
bodies
Diverse rules, culturally influenced
Control

Difficult to control and co-ordinate across markets
INTERNATIONAL MARKETING
STRATEGIES
Success and Failure

Failure arises from:









inability to find right market niche
unwilling to adapt products
products not perceived as sufficiently unique
vacillating commitment
assigning the wrong people
picking the wrong partners
inability to manage local stakeholders
mutual distrust/lack of respect between HQ &
management
inability to leverage ideas to all countries
THE INTERNATIONAL
MARKETING STRATEGY PROCESS
Understand the environmental influences
on a firm’s international markets
:
Analysis
Segment international markets, identify &
analyse opportunities
Feedback &
reassess
continually
Develop appropriate international marketing
strategies, planning & processes
Strategy
Development
Decide marketing entry strategies
Build added value through effective
marketing mix strategies
Implementation
THE INTERNATIONAL TRADING
ENVIRONMENT
REGIONAL COMPOSITION OF WORLD
GDP & POPULATION
Proportion of
World GDP
(PPP terms, %)
25
Western
Europe
North
America
20
Asia
Developing
15
Japan
10
Latin America
5
Middle East & North Africa
Eastern Europe & FSU
Other
Sub-Saharan Africa
Proportion of World Population
0
0
10
Source: EIU National Westminster Bank 1998
20
30
40
50
60
PERCENTAGE OF THE TOTAL OF WORLD
EXPORTS IN MERCHANDISE (2000)
Country
Source: WTO.org/english/res.e/statis_e/stat_toc_e.htm
Percentage %
United States
12.6
Germany
9.6
Japan
7.5
France
5.3
Britain
4.8
Italy
4.1
Canada
4.2
Netherlands
3.6
Hong Kong
3.1
China
3.5
FORECASTS IN % CHANGES IN CONSUMER
PRICES AND REAL GDP/GNP 1999-2003
Country
Australia
Belgium
Brazil
Canada
China
France
Germany
Hong Kong
India
Ireland
Italy
Japan
Malaysia
Mexico
% inflation
rate
2.7
2.4
6.0
2.4
6.8
2.3
2.3
5.8
9.0
2.8
2.7
1.8
3.9
12.2
% growth
rate
2.9
2.2
4.2
2.6
7.6
2.2
2.2
4.4
5.5
5.5
2.2
2.2
5.4
5.1
Country
Netherlands
Singapore
South Korea
Spain
Taiwan
Thailand
UK
US
Adv economies
EU
Eastern Europe
FSU
Asia Developing
Latin America
Source: Marketing Intelligence Department, Nat West Bank (1998)
% inflation
rate
2.4
2.6
4.7
2.7
3.5
5.8
2.5
2.5
2.4
2.5
11.8
10.6
7.1
9.5
% growth
rate
2.5
6.1
4.9
2.6
5.8
4.4
2.5
2.6
2.5
2.3
4.4
4.3
6.2
4.6
BALANCE OF PAYMENTS CURRENT
ACCOUNTS
Australia
-17.0
Brazil
-33.8
China
+29.3
Germany
Japan
Country
Mexico
Malaysia
+120.6
-15.9
-4.8
Netherlands
+19.9
Saudi Arabia
-12.8
Singapore
+17.6
UK
USA
Source: World Bank: World
Development Indicators 2000
13.4
EU
-0.3
-220.5
+78.2
REGIONAL TRADING AREAS OF THE
WORLD 1998
APEC
NAFTA
Canada
Australia
Mexico
Mexico
Brunei
New Zealand
United States
Canada
P.N.G.
Chile
Philippines
China
Singapore
Hong Kong
South Korea
Indonesia
Taiwan
Japan
Thailand
Malaysia
United States
EU
FTAA
An agreement to
create a free-trade
area among 34
countries in North
and South America
Austria
Belgium
Britain
Denmark
Finland
France
Mercosur
Argentina
Brazil
Paraguay
Uruguay
Germany
ASEAN
Greece
Brunei
Ireland
Indonesia
Italy
Malaysia
Netherlands
Philippines
Portugal
Singapore
Spain
Thailand
Sweden
Vietnam
MAJOR CHANGES IN THE SINGLE
EUROPEAN MARKET






Removal of tariff
barriers
Removal of technical
barriers
Public procurement
Free movement of
labour and workers’
rights
Opening up of
professions
Financial services





Transport, haulage and
coastal carriage
Capital movements
Company law
Fiscal barriers
The environment
FOUR TESTS FOR A SUCCESSFUL
TRADING BLOC




Similar per capita income
Geographical proximity
Compatible trading regimes
Political commitment
CONVERGENCE CRITERIA

PRICE STABILITY

EXCHANGE RATE STABILITY

LONG TERM INTEREST RATES

GOVERNMENT DEFICIT

PUBLIC DEBT
SINGLE CURRRENCY
STRATEGIC IMPLICATIONS

NON UNIFORMITY OF PRICING

PRICE TRANSPARENCY

GREY MARKETING

EURO SOURCING

FEWER TRANSACTION CHARGES

NEW PRICING POINTS
SOCIAL AND CULTURAL
CONSIDERATIONS
CULTURE DEFINED
The sum total of learned beliefs, values and
customs that serve to direct customer
behaviour in a particular country market
COMPONENTS OF CULTURE #1
Beliefs:
A large number of mental and verbal
processes which reflect our knowledge
and assessment of products and services
COMPONENTS OF CULTURE #2
Values:
The indicators consumers use to serve as
guides for what is appropriate behaviour,
they tend to be relatively enduring and
stable over time and widely accepted by
members of a particular market
CULTURAL VALUES AND THEIR
RELEVANCE TO CONSUMER BEHAVIOUR
Source: Schiffman, L.G. & Kanuk, L. L. (2000)
Value
Features
Achievement & success
Success flows from hard work Justification for acquisition of goods
Efficiency & practicality
Admiration of things that
solve problems
People can improve
themselves
Stimulates purchase of well functioning
products
Ready acceptance of ‘new’/‘improved’
products
Material comfort
The ‘good life’
Individualism
Being oneself
Fosters acceptance of convenience/
luxury products
Stimulates acceptance of customised or
unique products
External conformity
Uniformity of observable
behaviour
Stimulates interest in products used by
others
Youthfulness
State of mind that stresses
being young at heart
Stimulates acceptance of products that
promote youthfulness
Progress
Relevance to behaviour
COMPONENTS OF CULTURE #3
Customs:
Overt modes of behaviour that constitute culturally
approved or acceptable ways of behaving in specific
situations. Customs are evident at major events in
ones life eg birth, marriage, death and at key events
in the year e.g. Christmas, Easter, Ramadan, etc.
CULTURAL INFLUENCES ON BUYER
BEHAVIOUR
Adapted from: Jeannet and Hennesey (1998)
A CULTURAL FRAMEWORK
Religion
Values &
Attitudes
Language
Aesthetics
Cultures
Social
Organisations
Law & Politics
Adapted from Terpstra & Sarathy (1999)
Education
Technology &
Material Culture
OFFICIAL LANGUAGES AND SPOKEN
LANGUAGES
SOURCE: Guardian (1992)
THE MAIN SILENT LANGUAGES IN
OVERSEAS BUSINESS #1
Silent Language
Implications For Marketing & Business
Time
- Appointment scheduling
- The importance of being ‘on time’
-The importance of deadlines
Space
- Sizes of offices
-Conversational differences between people
Things
- The relevance of material possessions
- The interest in the latest technology
Source: Hall & Hall (1987)
THE MAIN SILENT LANGUAGES IN
OVERSEAS BUSINESS #2
Silent Language
Implications For Marketing & Business
Friendship
- The significance of trusted friends as
social insurance in times of stress and
emergency
Agreements
- Rules of negotiations based on laws,
moral practices or informal customs
Assumptions to Be Questioned by
International Marketing Managers
1. That Maslow’s Hierarchy of Needs is consistent across cultures
2. That the buying process in all countries is an individualistic activity
3. That social institutions and local conventions are similar across
cultures
4. The consumer buying process is consistent across cultures
- consumer involvement
- perceived risk
- cognitive style
5. Self reference criterion
MODEL OF CONSUMER BEHAVIOUR IN
INTERNATIONAL MARKETS
Cultural
Identity
Attitudes
Motives
Consumer
Experience
Family
Consumer
Lifestyles
Values
Reference
Learning
Groups
Social Status
Problem Recognition
Information Search
- Opportunity cost of time
in seeking information
- Delay costs
- Psychological costs
Evaluation of Alternatives
- Evoked set
Purchase
- Degree of involvement
Post Purchase Evaluation
- Actual product against expectations
Values
Attitudes
Beliefs
Cultural
Identity
INTERNATIONAL MARKETING RESEARCH
AND OPPORTUNITY ANALYSIS
3 AREAS OF INTERNATIONAL
MARKET ANALYSIS



Scanning international markets to
identify and segment markets
Building marketing information systems
to monitor environmental trends
Carrying out primary marketing for
input into the development of
marketing strategies
PRODUCT/MARKET COMBINATIONS AND THE
SCOPE FOR COMPETITIVE ADVANTAGE ON
MARKET ENTRY
Source: Gilligan and Hird (1985)
Type
of
Market
Existing
Product
Competitive
Improved
Breakthrough
Superior product
offers high competitive
Advantage and eases
market entry
Breakthrough product
offers self evident
superiority and
competitive
Advantage is high
Low
Latent
Incipient
Existing brands for
developing needs; no
direct competition. Need
to find and educate
consumers. Risk and
cost of failure may be
Advanced profile offers high
greater benefits to the
market; no direct
competition
Low
Cost & Risk
of launching
the Product
Breakthrough product offers significant
advantages but markets need to be identified.
Few competitors, but high consumer resistance
Cost & Risk of Opening Up Market
High
High
THE FOUR RISK MATRIX
BUSINESS PORTFOLIO MATRIX
Source: Harrell G D and Kiefer R O (1993) Multinational
market portfolios in global strategy development,
International Marketing Review, Vol 1- No 1
Country Attractiveness
High
High
Company’s
Compatibility
Medium
With Each
Country
Low
Medium
Low
WHY NEW APPROACH NEEDED

MACRO
vs
MICRO

TRADE BARRIERS DOWN

GLOBAL NICHES

GREY MARKETS

NET ETC.
TRANSNATIONAL SEGMENTATION &
METHODS
Demographic: sex, age, income level,
social class and educational achievement
Psychographic: lifestyle factors - activities,
interests and opinions
Behavioural: patterns of consumption,
loyalty to product category and brand
BEHAVIOURAL SEGMENTATION

NEEDS

BENEFITS

OCCASION

USAGE
HIERARCHICAL COUNTRY
CUSTOMER SEGMENTATION #1
Stages of Segmentation
• Identify the countries that have the infrastructure to
support the product and which are easily
accessible to the company
• Select from these, countries that meet certain
qualifying criteria
• Develop micro-segments within these countries
e.g. examine information search behaviour or
product characteristics required
Source: Kale & Sudarsen (1987)
HIERARCHICAL COUNTRY
CUSTOMER SEGMENTATION #2
Stages of Segmentation
• Look for similarities across segments to identify
characteristics of demand of each segment. They
can then be rated in terms of potential response
• Cluster analysis is used to identify meaningful
cross-national segments which it is thought would
evoke a similar response to a marketing mix
strategy
Source: Kale & Sudarsen (1987)
2ND AREA OF INTERNATIONAL
MARKET ANALYSIS
Building marketing information
systems to monitor environmental
trend
12C FRAMEWORK
Culture/consumer
Behaviour
Country
Channels
Concentration
Choices
Commitment
12c
Currency
Communication
Consumption
Contractual
Obligations
Capacity
to Pay
Caveats
Social
Cultural
Legal
Factors
Economic
Factors
Political
Factors
Technological
Factors
Competition
Trading
Practices
Tariff
Barriers
Financial
Source: Majaro (1992)
Pricing
Mix
Distribution
Mix
Promotion
Mix
Product
Mix
Market
Entry
MARKET PROFILE ANALYSIS
SOURCES OF INFORMATION








Business libraries
University libraries
International chambers of
commerce
International Market
Intelligence Centre (DTI)
Business Links
Embassies
Banks
Trade associations





Export councils
Overseas distributors
Overseas sales subsidiaries
Foreign brokerage houses
Foreign trade organisations
such as JETRO

(Japanese Export Trade and
Research Organisation)
3RD AREA OF INTERNATIONAL
MARKET ANALYSIS
Carrying out primary marketing for
input into the development of
marketing strategies
ORGANISING THE RESEARCH
STUDY #1

Questions the International Marketing
Manager should address:


Should the research be carried out by
foreign local subsidiaries or should all
marketing research be centralised at
headquarters?
Should the fieldwork be carried out in
house or by an agency?
ORGANISING THE RESEARCH
STUDY #2

Options when choosing an agency:






Local agency in the market under investigation
Domestic agency with offices overseas
Domestic agency with overseas associate
companies
Domestic agency which subcontracts fieldwork to
an agency in the market under investigation
Domestic agency with competent foreign staff
Global agency with offices around the world
MULTI-COUNTRY STUDIES






The project is discussed at length
with the client
The fieldwork agencies in each
country are selected
The questionnaire is designed
centrally
It is translated locally and the
translation is checked centrally
It is piloted locally
It is finalised centrally
Hibbert (1993)






The interviewers are briefed locally
by an executive of the central
company
The fieldwork is carried out locally
The coding and editing plan is
provided for the local agencies
The edited and coded
questionnaires are returned to head
office
A coding and editing check is
carried out centrally
Computing and analysis are carried
out centrally
EVALUATION OF SURVEY METHODS
+ = advantage
- = disadvantage
Malhotra et al (1997)
INTERNATIONAL MARKETING PLANNING
AND ORGANISATION
THE BENEFITS OF PLANNING

Planning encourages:












proactivity in new and old markets
a systematic process of analysis
clear statement of objectives and policies
more focused thinking
quick and decisive reaction to environmental changes
co-ordination of strategies
familiar product or service ‘offers’ in each market
company-wide performance and quality standards
increased managerial ownership and loyalty
reduced internal company conflict
standardised information transfer systems
integrated short-term action and control
INTERNATIONAL PLANNING PROBLEMS
Headquarters

Management







Unclear allocation of
responsibilities &
authority
Lack of multinational
orientation
Unrealistic expectations
Lack of awareness of
foreign markets
Unclear guidelines
Insensitivity to local
decisions
Insufficient provision of
useful information

Processes






Lack of standardised bases for
evaluation
Poor IT systems & support
Poor feedback & control systems
Excessive bureaucratic control
procedures
Excessive marketing & financial
constraints
Insufficient participation of
subsidiaries in process
INTERNATIONAL PLANNING PROBLEMS
Overseas Subsidiary

Management








Resistance to planning
Lack of qualified personnel
Inadequate abilities
Misinterpretation of
information
Misunderstanding
requirements & objectives
Resentment of HQ
involvement
Lack of strategic thinking
Lack of marketing expertise

Processes







Lack of control by HQ
Incomplete or outdated internal
& market information
Poorly developed procedures
Too little communication with
HQ
Inaccurate data returns
Insufficient use of multi-national
marketing expertise
Excessive financial & marketing
constraints
THE CONCEPTUAL FRAMEWORK OF A
FIRM
Strategic
level
Management level
Operational level
Production
Marketing
Personnel
R&D
FUNCTIONS OF DIFFERENT MANAGEMENT LEVELS
Strategic
• Identify the stakeholder requirements
• Define the corporate aims and objectives
• Evaluate global opportunities
• Organise the business structure
• Control the corporate performance
Management
• Set the SBU objectives and allocate resources
• Control the SBU programme
• Organise opportunity analysis and research
• Control international marketing planning
Feedback
Implementation
• Set and achieve the budgets
• Manage the functions (marketing, production,
R&D, logistics)
• Carry out marketing campaigns, manage
advertising agents and distributors
ASPECTS OF THE INTERNATIONAL
MARKETING PLAN
Stakeholder Expectations
Shareholders, customers, host government, employees
in each country, pressure groups
Situation Analysis
Evaluation of the environment & individual markets
Resource & Capabilities
Individual SBU strengths & weaknesses analysis
Capability to deal with threats and opportunities
Corporate Aims & Objectives
Financial, market, area, brand & mix objectives
Marketing Strategies
Growth strategies
Standardisation & adaptation
Implementation of the Plan
Individual SBU & marketing mix plans
Regional, global or multidomestic integration
Control & Feedback
Setting standards, measuring performance, correcting deviations
SOME TYPICAL STAKEHOLDERS OF
MULTINATIONAL ENTERPRISES
Shareholders
Expatriate staff
Individual politicians and
civil servants
Suppliers
Distributors &
retailers
Customers
Local competitors
Home country
government
The Firm
Host country
government
Local workers and
their organisations
Pressure groups
Competitor MNEs
INTERNATIONAL NICHE MARKETING
STRATEGIES FOR SMEs
STRATEGIES FOR SME
INTERNATIONALISATION





Exporting
International niche marketing
Domestically delivered or developed niche
services
Direct marketing including electronic commerce
Participation in the international supply chain
KEY MOTIVATORS TO INTERNATIONAL
MARKETING
Source: Katsikeas (1996)


Reactive stimuli:






adverse domestic market
conditions
opportunity to reduce
inventories
availability of production
capacity
favourable currency
movements
opportunity to increase the
number of country markets
and reduce market related
risk
unsolicited orders from
overseas customers
Proactive stimuli:







attractive profit and growth
opportunities
ability to easily modify products for
export markets
public policy programmes for export
promotion
foreign country regulations
possession of unique products
economies resulting from additional
orders
Managerial elements:



presence of export minded manager
opportunity to better utilise
management talent and skills
management believes about the
value of exporting
BARRIERS TO INTERNATIONALISATION











Too much red tape
Trade barriers
Transportation difficulties
Lack of trained personnel
Lack of export incentives
Lack of coordinated assistance
Unfavourable conditions overseas
Slow payments by buyers
Lack of competitive products
Payment defaults
Language barriers
SUSTAINING AND DEVELOPING THE NICHE

The firm must:









have good information about the segment needs
have a clear understanding of the important segmentation criteria
understand the value of the product niche to the targeted segment
provide high levels of service
carry out small scale innovations
seek cost efficiency in the supply chain
maintain a separate focus (eg by being content to remain relatively
small)
concentrate on profit rather than market share
evaluate and apply appropriate market entry and marketing mix
strategies to build market share in each country they wish to
become involved in
THE DIFFERENCE BETWEEN EXPORTING &
INTERNATIONAL NICHE MARKETING
Exporting
International Marketing
Marketing strategy
Selling production capacity
Meeting customer needs
Financial objective
To amortise overheads
To add value
Segmentation
Usually by country and
customer characteristics
By identifying common
international customer benefit
Pricing
Cost based
Market or customer based
Management focus
Efficiency in operations
Meeting market requirements
Distribution
Using existing agents
or distributors
Managing the supply chain
Market information
Relying on agent or
distributor feedback
Analysing the market situation
and customer needs
Customer
relationship
Working through
intermediary
Building multiple level
relationships
FACTORS AFFECTING SME
INTERNATIONALISATION
Generic
Strategy
Segmentation, Targeting, Positioning
Industry
Competitive
Structure
Market
Factors
Customer
Segment
SME
Internationalisation
Strategy
Motivations
Barriers
Support Network
Country
Selection
Stage of
Internationalisation
Company
Factors
Owner’s ambition,
capabilities and
attitude to risk
LEVELS OF INTERNATIONALISATION
CHARACTERISTICS OF SUCCESSFUL
INTERNATIONAL BUSINESS-TO-BUSINESS
MARKETERS

Successful international business-to-business marketers have:










a clear competitive focus in international markets place and a specific directional policy as to
where the top management intended taking the firm.
high levels of repeat business and operate tight financial controls in export markets.
the tenacity and the resilience to face challenges and drive through change.
a perception that risk indicates a problem to be solved, not an insurmountable barrier; and
View themselves as international niche marketers, not necessarily as good exporters
Fully invest in ensuring they have a thorough knowledge of the international markets in which
they operate.
Are able to exploit distinctive product advantages in international markets.
Are strongly committed to supplying quality products and services to all their customers
wherever they were in the world.
Build close relationships throughout the supply chain and invest in maintaining regular
communications with their overseas partners.
Have a well defined communications strategy and invested in good quality promotional
materials.
MULTILATERAL ASPECTS OF THE
INTERNATIONALISATION PROCESS
Johannson and Vahline (1992)
GEOGRAPHIC DEVELOPMENT OF SMEs
Birth
High tech firms,
born globals,
direct marketing,
eCommerce
Global
Domestic
Home market
is trading bloc
Piggybacking on OEM
internationalisation
Regional
Contracts through
family, friends,
business &
supply chains
Concentration
Expansion
Network
Supply
Chain
MNE OUTSOURCING

Reasons for outsourcing







reducing capital requirements of
business
Managing difficulty of developing
quickly
improving flexibility
firms reluctant to take risks in noncore areas
economies of scale of suppliers
expertise of business support service
providers
downsizing may leave management
resources stretched and unfocused

Disadvantages


loss of know-how
costs of managing
outsourced supplies
OUTSOURCING FOR SMES

Advantages



opportunities for learning
from OEM (Original
Equipment Manufacturer)
security of reliable and
predictable ordering
able to focus on
production and technical
issues

Disadvantages




need for dependence on
one/two major customers
internationalisation
driven by demands of
OEM
continual pressure to
improve product and
operations
weakening external
marketing
GLOBALISATION
MEANING OF ‘GLOBALISATION’







Market access
Market opportunities
Industry standards
Sourcing
Products & services
Technology
Customer requirements





Competition
Co-operation
Distribution
Communication
The company’s
strategy, business
programmes &
processes
TOP15 TRANSNATIONAL COMPANIES
BY FOREIGN ASSETS
SOURCE: ‘At a location near you’ (1997) The Economist
TRANSNATIONAL COMPANIES
SOURCE: UNCTAD (1997)
BENEFITS OF GLOBAL SOURCING








Cheaper labour rates
Better or more uniform quality
Better access to the best technology,
innovation and ideas
Access to local markets
Economies of scale advantages
Lower taxes and duties
Potentially lower logistics costs
More consistent supply
THE INTERNATIONAL
COMPETITIVE POSTURE MATRIX
Barons
Kings
Commoners
Crusaders
Product
Strength
Geographic Coverage
Source: Gogel, R and Larreche, JC (1989)
ALTERNATIVE WORLD WIDE STRATEGIES
Multi-Domestic
Regional
Global
Individual
Country
Strategy
Region is One
Market
One Global
Segment
Transnational
Strategy
Standardised Identity & Values
With Composite Strategies
CONTINUUM OF STANDARDISATION
Pricing
Distribution
Sales Force
Sales Promotion
Product
Image
Objectives
Strategy
Differentiation
Standardisation
GLOBALISATION PUSH & PULL FACTORS
‘Globalisation Pull’
Globalisation of Markets
Homogenisation of demand
Global market segments
Globally active customers
Source: Meffet and Bolz
(1993) in Hallibuton and
Hunerberg (eds) European
Marketing Readings and
Cases Addison Wesley
1993
Marketing Standardisation
Programme standardisation
Process standardisation
Globalisation of Industries
R&D expenses
Reduced pay back cycles
Experience curve effects
Globalisation of Competitors
Market interdependence
Global competitors
Cross subsidisation
‘Globalisation Push’
FORCES DRIVING
A MULTI-DOMESTIC APPROACH





Industry standards remain diverse
Customers continue to demand locally
Being an insider remains critically important
Global organisations are difficult to manage
Management myopia
TRANSNATIONAL STRATEGIES #1

Transnational companies aim to build
three strategic capabilities:



Global scale efficiency and competitiveness
National level responsiveness and flexibility
Cross market capacity to leverage learning
on a world wide basis
TRANSNATIONAL STRATEGIES #2

Challenges for firms wishing to build global presence:






Achieving truly global reach
Building global appeal and responding to the changing
basis of competitive advantage
Managing the firm’s marketing strategy in less
developed countries
Building the global brand
Customising the standardised product and
service offer to individual customer tastes
sometimes called ‘global one-to-one marketing’
For service firms, globalising presents additional
and specific implementation challenges
DEMAND FOR CUSTOMISED SOLUTIONS







customers cannot be classified into simple, stable
segments
the customer in not monodimensional
desires guide consumption
functional and technological attributes of products or
services are balanced by its aesthetics and cultural
attributes
quality is now more subjective
a wide permanent variety of products is required
the quest for authenticity orientates consumption
Source: Halliburton (1994)
GLOBAL ONE TO-ONE MARKETING
Source: Halliburton (1994)
UNSEEN DANGERS IN FOREIGN
INVESTMENT
SOURCE: Report by Export Today (1997)
DRIVING FORCES OF RETAIL
INTERNATIONALISATION
SOURCE: McGoldrich and Davies (1995)
MARKET ENTRY STRATEGIES
MARKET ENTRY METHODS & THE LEVELS OF
INVOLVEMENT IN INTERNATIONAL MARKETS
Levels
of
involvement
Wholly-owned subsidiary
Company acquisition
Assembly operations
Joint venture
Strategic alliance
Licensing
Contract manufacture
Direct marketing
Franchising
Distributors and agents
Sales force
Trading companies
Export management companies
Piggyback operations
Domestic purchasing
SUCCESSFUL MARKET ENTRY #1

Criteria for Selecting Appropriate Market
Entry Method





The company objectives and expectations relating
to the size and value of anticipated business
The size and financial resources of the company
Existing foreign market involvement
The skills, abilities and attitudes of the company
management towards international marketing
The nature and power of the competition with the
market
SUCCESSFUL MARKET ENTRY #2

Criteria for Selecting Appropriate Market
Entry Method



The nature of existing and anticipated tariff and
non-tariff barriers
The nature of the product itself, particularly any
areas of competitive advantage, such as
trademark or patent protection
The timing of the move in relation to the market
and competitive situation
RISK & CONTROL IN MARKET ENTRY
Control
Co-operation
Strategies
Joint ventures
Strategic alliances
Manufacturing
Own subsidiary
Acquisition
Assembly
Direct Exporting
Distributors
Agents
Direct marketing
Franchising
Management contracts
Indirect Exporting
Piggybacking
Trading companies
Export management companies
Domestic purchasing
Risk
INDIRECT EXPORTING #1

Domestic Purchasing





Foreign organisation purchases the product for export to
another country
Gives access to and limited knowledge of the international
market
Little control over choice of markets entered
For longer term, need a more proactive approach
Export Management Companies (EMCs)



Specialist companies act as the export department for a
range of companies
Help SMEs to initiate/develop/maintain international sales
Deal with documentation, government regulation
INDIRECT EXPORTING #2

Trading Houses



Their extensive operations and controls enable
operation in more difficult trading areas
Manage countertrade activities
Piggy Backing



An established international distribution network
of one manufacturer used to carry products of a
second
Particularly good for firms from developing
countries
Often poorly considered terms and conditions
THE COMPONENTS OF THE EXPORT
MARKETING MIX
Pricing:
Policy, strategies, discount
structures & trading terms
Product:
Selection, development
& sourcing
Promotion:
Corporate promotions & local
selling, trade shows & literature
EXPORT
MARKETING
MIX
Technical:
Specifications, testing &
product quality
Distribution:
Services:
Sales force management,
agents, distributors & logistics
Market research, training &
sales servicing
Finance & Administration:
Budgets, order processing, insurance & credit
control
INITIATION AND DEVELOPMENT OF EXPORT
PRODUCT POTFOLIOS
IMPORTANT FACTORS FOR
SUCCESSFUL EXPORTING






commitment of the firm’s management
exporting approach reliant on strong skills base
good marketing and information communication
system
production capacity & capability, product
superiority, competitive pricing
effective market research
effective national export policy
Source: Katsikeas et al (1996)
AGENTS #1

Selection Criteria for Finding a Suitable
Agent




Financial strength of the agent
Their contacts with potential customers
The nature and extent of their
responsibilities to other organisations
Their premises, equipment and resources
(including sales representatives)
AGENTS # 2

Achieving Satisfactory Manufacturer-agent
Relationship





Allocate time and resources to find a suitable
agent
Ensure that both understand what each expects of
the other
Ensure that the agent is motivated to improve
performance
Provide adequate support on a continuing basis
Ensure that there is sufficient advice and
information transfer in both directions
REASONS FOR SETTING UP OVERSEAS
MANUFACTURE










Nature of product e.g. perishable
Costs of transporting and warehousing
Barriers to trade e.g. tariffs and quotas
Government regulations e.g. local investment
Local manufacture viewed favourable by market
Contributions to local economy
Market information feedback
International culture in firm
Faster response and just-in-time delivery
Lower labour cost
LICENSING # 1

Techniques to Minimise the Potential
Problems of Licensing




Develop a clear policy and plan
Allocate licensing responsibility to a senior
manager
Select licences carefully
Draft the agreement carefully to include duration,
royalties, trade secrets, quality control and
performance measures
LICENSING # 2

Techniques to Minimise the Potential
Problems of Licensing





Supply the critical ingredients
Obtain equity in the licensee
Limit the product and territorial coverage
Retain patents, trademarks, copyrights
Be an important part of the licences
business
FOREIGN MANUFACTURING STRATEGIES
WITH DIRECT INVESTMENT

Reasons for investment in local operations





To gain new business: local production
demonstrates strong commitment
To defend existing business
To move with an established customer
To save costs: e.g. labour, raw materials and
transport
To avoid government restrictions
WHO PROVIDES WHAT IN EAST-WEST
PARTNERSHIPS
SOURCE: Florescu and Scibor-Rylski (1993)
DRIVING FORCES FOR THE FORMATION &
OPERATION OF STRATEGIC ALLIANCES







Insufficient resources
Pace of innovation and market diffusion
High research and development costs
Concentration of firms in mature industries
Government co-operation
Self protection
Market access
INTERNATIONAL PRODUCT MANAGEMENT
THE 3 ELEMENTS OF THE PRODUCT OR
SERVICE
Standardisation
Adaptation
The core product benefit or service
Image BENEFITS Perceived
Value
Performance
Adaptation
Quality
Features
Brand name
ATTRIBUTES
Packaging
Design
Size & colour variants
After-sales service
Guarantees
MARKETING
SUPPORT
SERVICES
Delivery
Installation
EVALUATING THE PRODUCT






For what purpose has the product been developed and
how would it be used in that country?
What distinctive properties does it have?
What benefits is the consumer expected to gain?
How is it positioned and what image do consumers
perceive it to have?
Which consumer segments are expected to buy it, on
what occasions and for what purpose?
How does it fit into the total market?
REASONS FOR ADAPTATION
OF THE PRODUCT





Long term aims, objectives and strategies
One-year marketing objectives and individual
SBU strategies
Country-by-country forecasts and targets
Country-by country marketing plans for all
activities
Plan for regional and global integration
Determining the Product
Range









Overall growth/profit objectives
Experience, philosophies and attitude of the company
to international development
Characteristics of the market
Requirements, expectations and attitudes of the
consumers in the market
The products and services themselves
Ease of distribution
Support required from other elements of the marketing
mix
Environmental constraints
Level of risk that the company is prepared to take
THE INTERNATIONAL
PRODUCT LIFE CYCLE
Sales
Market D Domestic
Market
Market C
Market B
Market A
Time
THE PORTFOLIO APPROACH TO STRATEGIC
ANALYSIS
High
G
Ne
J
Sp
S
Market
Growth
Stars
Question Marks
US
I
Fr
Low Cash Cows
High
Key:
Dogs
Relative Market Share
Low
Ne - Netherlands G - Germany S - Sweden US - United States F - France I - Italy Sp - Spain J - Japan
THE BRAND VALUE EQUATION
Tangible & Intangible Benefits
BRAND
=
VALUE
Benefits Received by Customers
Costs to the Customer of Brand Purchase
Total Cost of Ownership
WORLD’S MOST VALUABLE BRANDS
(2000)
BRAND VALUATION

The most basic criteria for brand evaluation
include:


title to the brand has to be clear and separately
disposable from the rest of the business
the value has to be substantial and long term,
based on separately identifiable earnings that
have to be in excess of those achieved by
unbranded products
INTERNATIONAL BRANDING MODEL
NEW PRODUCT CATEGORIES
NEW PRODUCT DEVELOPMENT PROCESS






Idea generation
Initial screening
Business analysis
Development
Market testing
Commercialisation and launch
RESEARCH & DEVELOPMENT
STRATEGIES

International companies must take decisions on:





Location of their own internal R&D facilities
Extent to which they contract out certain parts of their
R&D programme
Whether or not they might acquire a company which can
provide either the required new technology or a new
product
Licensing the technology and process from another
company
Funding joint ventures or strategic alliances with
companies that have complementary technology
THE ARGUMENTS FOR & AGAINST
CENTRALISATION OF R&D
ARGUMENTS FOR CENTRALISATION
ARGUMENTS AGAINST CENTRALISATION
• economies of scale
• pressure from subsidiaries
• easier and faster communication
• pressure from governments
• better co-ordination
• benefits of public relations
• greater control over outflow of
• use of a wider range of skills and abilities
information with implications for secrecy
• financial savings
• greater synergy
• benefits from comparative advantage
• avoiding duplication
• greater sensitivity to local tastes
• overcoming problems of ownership
• better monitoring of local competitive activity
• closeness to possible acquisitions
• access to new technology wherever located
FAILURE OF NEW PRODUCT
DEVELOPMENT







Tariff and non-tariff barriers
Local competitor subsidiaries
Cultural insensitivity
Poor planning
Lack of unique selling proposition
Product deficiencies
Misguided enthusiasm of top management
INTERNATIONAL COMMUNICATIONS AND
INTERNET MARKETING
EXTERNAL, INTERNAL AND INTERACTIVE
MARKETING
THE DIMENSIONS OF EXTERNAL
MARKETING COMMUNICATIONS
EXTERNAL
STAKEHOLDERS
Using
Communications
To Build
Relationships
Communication with
existing and potential
customers regularly &
systematically to build
close relationships,
supported by database
management & IT
Communicating
The Product,
Service
Differentiation
Communication of a
distinctive brand image,
the unique positioning
of the product and the
reasons to buy, supported
by advertising, personal
selling and sales promotion
Communicating
The
Corporate
Identity
Communication to all
stakeholders of a clear
and distinctive corporate
identity for the firm
supported by sponsorship
& public relations
FAILURE IN INTERNATIONAL MARKETING
COMMUNICATIONS #1

Internal Factors:
 Inconsistency
of messages conveyed to
customers
 Different styles of presentation of
corporate identity, brand and product
image
 Lack of co-ordination of messages eg
press releases, advertising campaigns
 Differences in fields of perception of
sender and receiver
FAILURE IN INTERNATIONAL MARKETING
COMMUNICATIONS #2

The Effects of External Factors:
 Counterfeiting
 Parallel
importing
 Competitors, governments or pressure
groups
PROMOTIONAL OBJECTIVES #1

Sales Related:



Increasing market share at the expense of
local/international competitors
identifying new potential customers or
obtaining a specific number of responses
to a promotional campaign
Reducing the impact of competitors in the
market
Source: Wilson R & Gilligan C (1997)
PROMOTIONAL OBJECTIVES #2

Brand/Product Communications Related:




Increasing the value of the corporate brand and
the product image
Helping to establish the position or re-position the
product or brand
Increasing awareness levels especially in new
country markets
Changing consumers’ perceptions or products,
brands or the firm
Source: Wilson R & Gilligan C (1997)
PUSH AND PULL STRATEGIES
INTERNAL & EXTERNAL INTERNATIONAL
COMMUNICATION PROGRAMME #1

Internally Focused Programmes








Corporate identity
Internal marketing communications
Salesforce, dealer and distributor training and
development
Retailer merchandising
First contact customer service
After sales service
Quality management
Brand management
INTERNAL & EXTERNAL INTERNATIONAL
COMMUNICATION PROGRAMME #2

Externally Focused Programmes
(Marketing Mix)

Product attributes

Distribution channel

Price

Product/service promotion

People

Customer service process

Physical evidence for the service delivery
MARKETING COMMUNICATION TOOLS #1




Personal selling and word of mouth
Exhibitions and trade fairs
Trade missions
Advertising



TV advertising
Press advertising
Use of agencies and consultancies




Financial
Specialist knowledge
Creative input
External perspective
TOP 15 ADVERTISING SPENDERS OUTSIDE
THE USA
MARKETING COMMUNICATION TOOLS #2




Sales promotions
Direct Marketing
Cyberspace advertising
Communicating with a wider range of
stakeholders



Corporate identity
Sponsorship
Public Relations
FUTURE MARKETING CHALLENGES
FACING THE USE OF INTERNET




Customers in some countries place a higher
emphasis on using verbal interactions
Brand values dependent on image,
reputation, word of mouth etc
eCommerce favours global players
Design of web site critical in winning
customers from domestic company
THE DIMENSIONS OF TRANSACTION AND
RELATIONSHIP MARKETING

Transaction







Purchaser-marketer
interaction
Features-benefits offer
Discrete interactions
Competitive
Winning new
customers
Top down directives
Quality, value and
service

Relationship







Team based,
integrated interactions
Value added
Continuous
interactions
Co-operation
Retaining customers
Horizontal interactions
Customer satisfaction
BRAND VALUE BASED ON CUSTOMER
SERVICE
Promotion
The
standard
Product brand Price
mix
Customer
service
Customer
satisfaction
(with luck)
Distribution
Brand
perception (the reality)
(the promise)
BRAND VALUE BASED ON CUSTOMER
SATISFACTION
Price
Distribution
Customer
satisfaction
Customer
Service
The
flexible
mix
Promotion
Product
Brand
perception
(no compromise)
TRADITIONAL RELATIONSHIP
PARTNERSHIP LINKAGES
FOCUSING ON THE SIX MARKETS
MANAGING CURRENCY
FLUCTUATIONS #3
When
the domestic currency is strong:
Compete
on non-price factors (quality, delivery,
service)
Improve productivity and reduce costs
Prioritise strong currency countries for exports
Use counter-trade for weak currency countries
Reduce profit margins and use marginal costs for
pricing
MANAGING CURRENCY
FLUCTUATIONS #4
When
the domestic currency is strong:
Keep
the foreign earned income in the local
country
Maximise expenditures in local country currency
Buy services abroad in local currencies
Borrow money for expansion in local markets
Invoice foreign customers in their own currency
COUNTER-TRADE #1

Forms:






Barter
Compensation trading
Counter-purchase
Offset
Switch deals
Buyback
COUNTER-TRADE #2

Advantages of Counter-trade






New markets
Sell off surplus or poor quality products
Disguise dumping
Strengthens inter-government ties
Entry to high risk areas
Circumvent government restrictions
COUNTER-TRADE #3

Disadvantages of Counter-trade





Lack of flexibility
Exchange products difficult to sell
No price guide
Difficult profit evaluation
May create new competition
THE EXPORT ORDER PROCESS
Initial Enquiry
Pro-Forma Invoice
2
C
O
M
P
A
N
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6
7
8
9
C
O
N
F
I
R
M
I
N
G
B
A
N
K
1
5
Confirmed Order
3
Letter of Credit
4
Shipping Goods
Shipment of Documents
Commercial Invoice &
Documents in Letter of Credit
Payment
I
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