International Marketing (2014)Apunte Inglés
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International Business and Economics
What Is International/Global Marketing?
It involves the performance of marketing functions across national boundaries to satisfy need
and desires of people with products and services. The physical shipment of the goods or
services is not essential (exchanges can be made thanks to numerous channels such as:
information technologies, etc.). It comprises the transfer of Management Systems, Strategies
and Communication between countries.
It includes Exports Multi-domestic market operations Global Integrated Marketing A multi-domestic strategy is a strategy by which companies try to achieve maximum local responsiveness by customizing both their product offering and marketing strategy to match different national conditions How Does International Marketing Differ From Domestic Marketing? Operations occur in a multi-country context. It’s important to take into account the different Environments in terms of: Economy Finance Politics Law Culture Society But also account for Differences in Competition and Different Marketing Infrastructures in terms of Media Distribution Logistics So, there is a real need to adjust any policy and strategy to these differences.
That’s the main reason why yet there exist integrating forces of technology and change such as: Political and Economic Initiatives Growth of International Communication (Satellite, TV, Fax, Internet) Increased Travel, Interaction and Migration Organizational Links Across Markets (Retailers, Manufacturers, Etc.) But still, there’s a need to co-ordinate and integrate operations across markets.
1 Carla Martínez International Business and Economics nd 2 Trimester How Does International Marketing Strategy Evolve Over Time? We can observe 3 main phases: International marketing strategy over time Phase 1: Initial Entry Key decisions are made regarding Phase 2: Local market expansion Typical firms in entry phase: Country Mode of Entry Phase 3: Global rationalization Small to mediumsized firms Large firms from emerging countries Competitive adv Strategic imperatives Narrow market scope or Niche markets Achieve focus Cost leadership Remain cost competitive Timing and Sequencing 1. Initial entry: choose countries where you want to sell your product. At least firms should have one store in each country or city.
The choice of the market is made, assuming there will be demand in these new countries, that you are successful in home market and that the decision of how international do you want to become is already made.
It’s important to take decisions regarding the mode of entry, the timing (first mover, follower...) and the sequencing (where to provide the product, what cities…) and elaborate a marketing plan.
Some countries become international only because of a brand image matter. Saying they’re successful in foreign markets makes the brand more valuable for consumers. Maybe these foreign markets act only as a part of the strategy because they don’t represent a high volume of sales.
2. Local (regional) Market expansion: expand within those new markets, now in different new cities.
E.g: Inditex did it through the opening of new owned stores, Mango through franchising.
3. Global rationalization: The Company has many stores and realizes there are many inefficient operations. Maybe they have ended up with too many stores, factories, warehouses, etc. They need to reorganize all sections in a more efficient and rational way.
2 Carla Martínez International Business and Economics nd 2 Trimester 2. Leveraging: Economies of scale Going international is not just selling more but become a stronger brand (and competitor) Companies can take advantage of economies of scale to do so in terms of: R&D: taking advantage of different labor conditions that may create a competitive advantage. Eg: in India, engineers, scientist, etc. have lower salaries than in other countries.
Advertising: the media agencies providing you the media space offer better prices as you advertise more.
Production: the need to increase production capacity becomes impossible (and inefficient) if the company sets a small production plant in each country.
Brand image: Becoming international sometimes acts more as a strategy for branding.
This generates a Halo Effect where consumers are willing to pay higher price for a foreign good because the premium gives additional value to the product.
Experience: companies can gain experience and take advantage of it as it is being built.
This knowledge (learning effect) can also be applied at processes at home.
Ideas: going abroad allows companies to generate new ideas and perspectives, to get in touch with other ways of thinking.
3. Evaluating countries But the first thing to do before becoming international is make sure there is a potential market (demand) there.
HOW? Online tests for market research, agencies such as ICEX or ACCIO10 (COPCA) which have access to many databases and offices worldwide.
When assessing the country’s business environment special attention should be paid to: Political and Financial Risk Internal political stability State ownership & regulation Host government attitudes to foreign investment Import-export restrictions (tariffs/quotas, etc) Restrictions on foreign ownership Economic Growth/Financial factors GNP per capita, GNP size, PPP Growth of GNP, Gini Coefficient Rate of inflation Capital flow restrictions Foreign exchange fluctuations External debt Sociocultural Factors Ethnic diversity Religion Age structure and composition Rate of population growth Technological Change Education levels, literacy Production and consumption technology Scientific/technological skills 3 Carla Martínez International Business and Economics nd 2 Trimester Political situations may be translated into some risks for companies such as: Loss of assets by: Expropriation (the government compensates the company but it has no longer access to the market, Confiscation (there exists no compensation in this nationalization process) and Domestication (long negotiation process with the government) Operational interference: some governments take actions and could require you to accept a representative who enters the company and takes decisions regarding many aspects, for instance, price.
Instability to transfer funds: some governments may choose to limit any possibility of cash flows Regarding Economic features of a country it may be useful to compare indicators but always taking into account that: GDP per capita doesn’t account for inequalities so, Gini index (the lower the more equality) should be observed instead.
Cost of living doesn’t account for inequalities either so Purchasing Power Parity should be studied instead.
Increases in inflation rates make decline the Purchasing power very fast, so it’s another important indicator.
This macro environment study should be complemented by another one regarding the country’s product market features: Product Market Data Product usage o Sales Volume, Imports o Ownership o Growth Rate Use of Complimentary or Substitute Products o Sales/Ownership of Complimentary Products o Sales of Substitute Products Competition o Number of Firms/Size o Market Share o Growth Rate of Competing Firms Market Infrastructure Transportation Infrastructure Distribution Network Mass Media, TV, Radio, Print Related to Porter’s 5 Market and consumer/user analysis includes the study of the market segment (size, features..) 4 Carla Martínez International Business and Economics nd 2 Trimester There are 5 product levels Augmented Product the offer of more elements attributes or services, which add value for customers and attracts them (if they didn’t expect it). Eg: when you buy sth and they give you a cookie Potential Product thinking on the future potential of your product Potential Product Expected Product Are not necessary or vital products but the absence of them may influence consumers not to purchase the product. Eg:a mini-bar in a hotel Augmented Product Expected product Generic Product includes all the benefits apart from basic needs which add value to the product. E.g: you need a house with a sofa, a tv, etc.
Generic Product Core Product Directly benefits consumers.
Sometimes consumers perceive the benefits of the product in a different way, this allows firms to target different segments depending on the perceptions of the market.
Core product It’s important to select countries in a context of long-run growth strategy taking into account the Macro and Microeconomic analysis presented before but also the degree of market integration.
4. Assessing International market opportunity: International Market Research IMR: The systematic collection and analysis of information that provides support for strategic market decisions on a global scale Is done to find out consumer’s wants and needs so firms can make and sell this product or service In-house or agency (local) Ways of conducting research Agency in home market, overseas or global agency A combination of in-house and outside Market research provides understanding of consumers and markets (support for decision making) o Makes possible to assess market potential 5 Carla Martínez International Business and Economics nd 2 Trimester o Makes possible the segmentation of the market and therefore: Position and Marketing Mix Firms also have to make decisions regarding product features (the standardization/adaptation dilemma) If the product is good enough and people in foreign markets give value to its current features → Standardization If heritage is not enough and markets are attracted to more adapted products, related to local market features → Adaptation Steps in the international marketing research process Steps in the research process 1. Identifying the information requirement i.
What information is needed and Why? 2. Problem Definition (overcoming the SRC) i.
Self-reference criterion occurs when a person’s values and beliefs intrude on the assessment of a foreign culture ii.
Awareness of SRCs i. Enhances management’s willingness to conduct market research ii. Ensures that research design has minimal home-country bias iii. Increases management’s receptiveness to findings 3. Choose a Unit of Analysis i.
Can be: Global, a region, a country, a province, a state, a city… 6 Carla Martínez International Business and Economics nd 2 Trimester 4. Examine data availability and data sources i.
External data sources can be: Supranational (Eurostat, WTO, IMF), National governments (US Government NTDB, DTI’s Trade Partners UK, Embassies), Financial institutions, Chambers of Commerce, trade associations, Libraries and universities, Electronic databases, Internet sites (BBC News, Trade Partners UK, Institute of Export, EIU, marketresearch.com), Market research firms (MINTEL, MarketResearch) and Personal sources 5. Assess value of primary research i.
What is the information worth vs. what it will cost to collect? What will it cost if the data are not collected? (consequences of not doing research) What will the company gain with this information? (what’s the value added to the company by the information) 6. Research Design—Data Collection i.
Develop multiple customized indicators specific to the industry, product market, or business model ii.
Do not assess a market in isolation iii.
Observation of purchasing patterns/behavior (facts) are more important than reports of purchase intention or price sensitivity (words) Qualitative (An exploration of what people do or say) •Observation •Depth interviews •Focus groups Quantitative (Structured questions where the response options have been predetermined) •Survey research •Consumer panels •Experiments •Observation 7 Carla Martínez International Business and Economics nd 2 Trimester 7. Analyzing Data i.
Clean the data (outliers) ii.
Process the data using statistical techniques (ANOVA, correlation analysis, regression, …) iii.
Elaborate perceptual maps 8. Presenting the Findings i.
Report must clearly address problem defined at the beginning of the study ii.
Include a memo or executive summary of the key findings along with main report Challenges in international marketing research General problems regarding secondary data Availability of Data Reliability of Data Comparability of Data Questions to be asked •entire country, regions? •optimistic, understated? •quality in developing markets •categories, currencies, frequency, base years, sampling unit •Who, how and why collected the data? •Is data internally consistent and logical? •What are the sources or market factors? Challenges regarding primary data Decisions to make • In-house or outsourced • Infrastructure • Who • Nuclear vs. extended family • Method suitability • Mail, phone, personal interviews, internet? • Sample adequacy • Interviewer choice Cultural challenges • Language • Translation • Cultural norms IT for global marketing Information Technology refers to an organization’s processes for creating, storing, exchanging, using, and managing information 8 Carla Martínez International Business and Economics nd 2 Trimester Provides managers and other decision makers with a continuous flow of information about company operations Tools Is a private network contained within a firm. It may consist of many interlinked local area networks and also use leased lines in the wide area network.
The main purpose is to share company information and resources among employees.
Can also be used to facilitate working in groups and for teleconferences.
Intranet Electronic Data Interchange (EDI) Efficient Consumer Response System (ECR) Electronic point of sale System for replenishing merchandise based on actual consumer demand, initiating the manufacture and shipment of goods based on consumer purchase activity reduces the cycle time from purchase to replenishment reduces the cost of warehousing excess inventory assists retailers, wholesalers, and manufacturers in determining the optimum product mix predicts the impact of a product promotion on retail demand and production requirements.
Is an electronic communication system that provides standards for exchanging data via any electronic means.
By adhering to the same standard, two different companies, even in two different countries, can electronically exchange documents Self-contained, computerized equipment that performs all tasks of a store checkout counter. It allows payments by bank or credit cards, verifies transactions, provides sales reports, coordinates inventory data, and performs several other services normally provided by employees.
Intranet EDI ECR •Allows companies like Amazon.com and Dell to operate as real time enterprises •Allows business units to: •Submit orders • Issue invoices • Conduct business electronically •Transaction formats are universal •Allows computers from different companies to speak the same language •A joint initiative by members of a supply chain to work toward improving and optimizing aspects of the supply chain to benefit customers •This is in addition to EDI •An effort for retailers and vendors to work closely on stock replenishment •Utilizes electronic point of sale 9 Carla Martínez International Business and Economics nd 2 Trimester Customer Relationship Management It is a new business model whose philosophy values two-way communication between the company and the customer because every point of contact with a consumer represents an opportunity to collect data It can make employees more productive and enhance corporate profitability Privacy Issues on CRM EU’s Directive on Data Collection, 1998 ensures regulations of all 27 members The U.S./EU Safe Harbor agreement, 2000 protects individuals’ rights among nations o Establishes principles for privacy protection for companies that transfer data to the U.S. from Europe like: Purposes of the information collected and used and an ‘opt out’ option to prevent disclosure of personal information o Can only transfer information to third parties that are in compliance with Safe Harbor and Individuals must have access to information Data Warehouses Is a database used for reporting and analysis. Integrating data from one or more disparate sources creates a central repository of data. Store current and historical data and are used for creating trending reports for senior management reporting such as annual and quarterly comparisons.
Help fine-tune product assortments for multiple locations Enhance the ability of management to respond to changing business conditions Organizational IT Necessities An efficient, effective system that will scan and digest published sources and technical journals → Translating, digesting, abstracting, an electronic input of information into a market intelligence system o Expanding information coverage to other regions of the world Global Marketing Research project-specific, systematic gathering of data in the search scanning mode on a global basis Challenge is to recognize and respond to national differences that influence the way information is obtained 10 Carla Martínez International Business and Economics nd 2 Trimester Sampling A sample is a selected subset of a population that is representative of the entire population.
There can be Probability and non-probability samples.
Enhancing Comparability of Data Emic analysis o Ethnographic in nature and studies culture from within. Therefore uses culture’s own meanings and values Etic analysis o Done from the outside. Detached perspective that is used in multi-country studies which enhances comparability but minimizes precision Special Considerations for Surveys Benefits Issues 11 Carla Martínez International Business and Economics nd 2 Trimester 5. Entry Methods Phase 1: Initial entry - Alternative entry methods We have several operation methods: Exports: being indirect through agents, cooperative sharing resources with some partners or exporting directly its own sales (outsourcing) Contractual: cooperative exports where companies get together and help each other.
The do events, visit potential distributors and if they perceive a lot of risk they make a contract to share this risk and costs. They can also address the administration and ask for funds. There are several examples such as licensing or franchising, contract manufacturing agreements or joint ventures (strategic A form of foreign direct investment alliances).
where a parent company starts a new Wholly-owned subsidiaries: by an acquisition or a venture in a foreign country by greenfield investment constructing new operational facilities from the ground up.
We should evaluate modes of operation regarding: Financial resources requirement Implications can be long-lasting and lock firm in Managerial resources requirement Control Over Operations Ability to reallocate resources Contact With End Market Commitment to other organizations Profitability Flexibility Is really important to fit with long-run international expansion strategy 12 Carla Martínez International Business and Economics nd 2 Trimester Exporting Analysis (no control) Contractual Agreements analysis (more control) Wholly-owned subsidiaries analysis 13 Carla Martínez International Business and Economics nd 2 Trimester Phase 1: Initial entry – Timing and sequencing of market entry So the companies should take decisions regarding market entry strategy in terms of: Speed Incremental Simultaneous Geographic targeting Concentration Diversification High risk in similar markets The fact that you fail in one market does If you fail in one of them you not necessarily mean that you may fail in all of them probably will fail in all of them 14 Carla Martínez International Business and Economics nd 2 Trimester Competitive position Pro-active Follower PRE-EMPTION: Enter markets before competition to capture first entrant advantage (high-risk, but may pay off) CONFRONTATION: Enter a key competitor’s market(s) to challenge and contain its position.
BUILD-UP: Enter neutral markets to accumulate experience and build market share.
Need to be fast and learn from “first entrants” Is really important to adopt a dynamic, strategic approach 6. Establishing initial entry objectives: Developing competitive advantage Base THE CORPORATE MISSION STATEMENT 1st 2nd ESTABLISHING STRATEGIC GOALS AND OBJECTIVES DEFINING COMPETITIVE ADVANTAGE CHOICE OF COUNTRY(IES) AND ENTRY STRATEGY Establishing strategic goals and objectives The degree of involvement in international market depends on: Company Resources Role of Management Attitudes The overall level of risk may depend on: Macro-Economic Risk Competitive Risks Policy Risk Industry Structure 15 Carla Martínez International Business and Economics nd 2 Trimester Defining the sources of competitive advantage At home are broad-based but narrow at foreign, cannot use the same name COST-BASED COMPETITION LEVERAGES: Operating Efficiencies Cost Advantages VULNERABILITIES: Change in Costs Currency Swings Competition DIFFERENTIATION-BASED COMPETITION VULNERABILITIES: Changes in LEVERAGES: Customer Strong Brand Tastes Image Competing Quality Products and Innovation Services BROAD-BASED ADVANTAGES: Targets Large Market Economies of Scale and Scope Meets Competition FOCUSED LIMITATIONS Spreads Resources Less Focused ADVANTAGES: Targeted Effort Clearly Defined Image LIMITATIONS: Limited Market Coverage Risk Not Diversified Skills and capabilities which are the basis of the long-run sustainable competitive advantage: R&D Production Logistics Marketing Capacity to adapt to Adapt to Market Dynamics and Strategy 16 Carla Martínez International Business and Economics nd 2 Trimester So, in summary, is really important to establish objectives to guide allocation of resources and effort to international markets, always taking into account the role of risk.
The competitive advantage of a company can be based on resources, skills and capabilities.
It’s important for firms to initially, try to leverage domestic advantage in international markets.
Even within europe, similar countries with different 7. International positioning and product positioning because of differences in market size International positioning options and targeted market Same positioning Different positioning Domestic market Broad-Based Market Extension Adaptation scope Focused segment Segment Extension Adaptation/Reposition At home is broad-based but in foreign is narrow (one specific segment) Same segment in different They change their countries Different in all countries market scope so they have to change their positioning strategy Product strategy: Barriers to standardization When trying to introduce standardized products in new market segments or new markets some problems may arise: Product Standards and Regulation (eg: some products in China or Cuba) Measurement and Calibration Systems (eg: differences between yards and meters) Usage and Climatic Conditions (eg: difference between Norway and Spain) Language and Literacy (eg: different between developed and non-developed countries) Design and Taste Differences (eg: differences between Asian and European tastes) Standardized products may find difficulties getting into a market or being successful so there’s often a need to adapt products to local standards and develop local line extensions to tap local tastes.
More formally, there exist some market development alternatives to standardization such as: Modify Product Product Line Extension Develop New Products A product line extension is a new product that is slightly different to a company’s existing range. An example would be a new pack size of an existing food product line, such as children’s breakfast cereals. In retailing, an example is the opening of a new branch of a franchised store, or a convenience-store version of a supermarket chain.
The product could be modified in terms of a new design: Backward Invention (introducing a product made with an old technology) Plan National Adaptations (Modular Production) Design for Regional/Global Markets (most common) 17 Carla Martínez International Business and Economics nd 2 Trimester 8. International pricing The main issues in establishing an international price policy are the use of price as a competitive tool and the settlement of standardized vs. differentiated prices.
The main barriers to price standardization are: Shipping and Transportation Costs, Tariffs Income Levels, Price Sensitivity Prices of Competing and Substitute Products Trade Margins, Taxes, Price Regulation Foreign Exchange Risk: Changes in value of one Currency vs another Rates of Inflation„ Transfer pricing Bartering arises. It is a simple Lack of Foreign Exchange concept: two individuals negotiate to determine the relative value of Gray Markets their goods and services and offer them to one another in an even exchange. It is the oldest form of commerce, dating to before hard currency even existed, and the current recession is revitalizing the concept of bartering Hedging occurs when companies make an investment to reduce the risk of adverse price movements in an asset.
Normally it consists on taking an offsetting position in a related security, such as a futures contract DEEPLY: GRAY MARKET (Mercado negro) Branded or trade-marked product sold through unauthorized distribution channels triggered by price differentials between countries Positive Consequences Negative consequences Takes advantage of price-sensitive Damage to Trademark/Quality Image customers Legal Liabilities (Warranties, etc) Strained Channel/Distributor Relations Disruption of Global Marketing Strategy Strategies to counteract grey markets Price Cutting Differentiate Product Model, Warranties, etc.
Cutoff/Control Supply Promote Gray Market Product Limitations In some cases companies may adopt a cost-based pricing. It’s basically a pricing method in which a fixed sum or a percentage of the total cost is added (as income or profit) to the cost of the product to arrive at its selling price.
It reaches the target price by taking a certain amount of the total cost and then just adding it to the production cost of the product to get to the selling price Some of the costs it considers are: Manufacturing costs (such as production, freight and packaging, handling and processing costs) 18 Carla Martínez International Business and Economics nd 2 Trimester Duties (import and custom duties) Margins (from the importer and the distributor) This way we can observe a price escalation.
There exist also some non-cost factors to consider in international pricing Demand Competition Distribution Price Sensitivity Prices of Competing and Availability of Certain Substitute Products Outlets/Discounters, etc.
Modes of Payment Regulation of Quality and Prestige Competitor Reaction Retail/Wholesale Associations Margins and Prices 9. International Channels of distribution As any other strategic element on international policy, channels of distribution also face some barriers to standardization: Customer Shopping Patterns and Preferences Competitor Control of Outlets„ Structure of Distribution (Traditional vs. Advanced)„ Regulation of Distribution Barriers to standardization arise from differences in distribution from country to country which can be summarized into: DOMINANCE OF ORGANIZED/MASS DISTRIBUTION LOCUS OF POWER TECHNOLOGICAL SOPHISTICATION Role of Open Air Markets, Extent of Computerized Inventory Itinerant Retailers Disintermediation and Ordering Systems Importance of Small Retailers as Channel Use of Scanner Independents Captains Systems/Smart Cards Catalogue and In-Home Shopping Internet Sites Countries differ significantly in the evolution of its retail sector in terms of: Multiplicity of formats Competitive intensity Retail productivity Internationalization Adoption of technology Size of retail enterprise Proportion of demand with organized retailers Shopping online isn’t as popular in Europe as in the U.S. and Japan.
Browsing for books is popular everywhere, but Europeans are more interested in travel deals.
19 Carla Martínez International Business and Economics nd 2 Trimester We could distinguish 4 main steps in evolution of distribution channels within a country: Traditional Structured •China, Greece, India, Mexico, Argentina •Belgium, Japan, France, Denmark Emergent Advanced •Brazil, Italy, Portugal, Taiwan, Spain •Germany, UK, Canada, US Global Retail Assortment strategies range from: International expansion retail strategies Centralized Management Systems/Operating Skills Decentralized Product Assortment/Mix Standardized Adapted Local Marketing/ Global Retailing Global Systems (IKEA) (WalMart) Global Marketing/ Multinational Local Systems Retailing (Carrefour) (C&A) Differences among countries have some implications such as: Need to adapt channel tactics to differences in distributon patterns Growth of crossborder retailing and E-tailing Technology advances impact balance of channel power Internet sites as alternative channel 20 ...