International Marketing – Lectures

Why is international marketing important?
Creates opportunities for:
1. COUNTRIES
– economic advantage – growth of consumption, higher spending on economy, expansion of economy
– economic multiplier – creates jobs, builds on existing capabilities.
2. FIRMS
– opportunities for expansion, growth of profitability and revenues
– larger market access, economies of scale
– take advantage of differing wants and needs with increased economies of scope
3. PEOPLE
– creates jobs, builds on existing jobs, increasing incomes, purchasing power
– improves levels of poverty, quality of living, self worth
4. TRADE RELATIONS
– development of relationships between international firms and governments through bilateral and multilateral agreements
– creates political, economic relationships, breaks down trade barriers
5. CULTURAL EXCHANGE
– increased transfer of sport, tourism, customs
– spreading of ‘who we are’
Steps in international market process – How does international marketing work?
1. Identify target market through market research
2. Can it be made to work
– is it safe to do business > war zones, debt crisis
3. Is it profitable
– most beneficial export model to be used
4. Negotiate to make it happen
– employ staff with the skills, experience and expertise needed for success
5. Manage, monitor and adapt
– consistently review and analyse situation to identify adaptation required to suit the constantly changing environment
Analysing challenges for international firms – market planning
MARKET SCHEMATIC MODEL – draw
1. EXTERNAL ENVIRONMENT
– how areas of PESTEL are different overseas, implications for business and its operations, adaptation?
2. POSSIBLE CUSTOMERS/TARGET CUSTOMERS
– how to segment international market, different to domestic
– are all international markets segmented the same?
– consumers from different markets use products differently and have diff wants and needs, thus marketing strategies need to be adapted.
3. MARKET PLACE
– differences in how business is conducted with customers, partners, suppliers, shareholders
– different business cultures and interactions – habits, customs, traits. e.g. gaunxi
– implications for business operations
4. COMPETITORS
– how do competitors compete in market, what is the basis of competitive advantage, what does this mean for the business’ competitive advantage
5. MARKETING PROCESSES
– What do all these changes mean for the marketing plan: getting information, evaluating information, making decisions
6. OUTCOMES
– What do all these changes mean for the outcomes and success of the marketing plan: profitability growth, quality customers, repeat customers
What is international strategic planning?
International strategic planning is the process of considering long-term growth options and the firm viewing international market/s development as a key aspect of this.
International strategic planning process
DRAW
International Planning Critera
1. Why export? – proactive/reactive
2. Which country/market? – most profitable, highest opportunity, found through market research
3. How to enter market? – models
4. How to distribute to consumers? – consider strategies used to satisfy their needs and wants
Typical stages a firm’s goes through to reach internationalisation
1. Partially interested firm – enquiries, research
2. Exploring firm – test marketing
3. Experimental exporter – trials
4. Experienced small exporter
5. Experienced large exporter
>>consider born global firms
Considerations of international strategic planning
1. Most attractive markets – research
2. Which business model is most beneficial – risk/market access/cost
3. What is the basis of competitive advantage in the market
4. Profit expectations
5. How can the business build long-term growth capabilities
Major types of international marketing
Proactive – Actively taking initiative to expand.
Reactive – Responding to market conditions
Internal – Expanding through internal capabilities
External – Expanding through external opportunities
Main strategy considerations when exporting
1. Local to global needs
2. Alliances to independence
3. Regional trade agreements
4. Business cultures
International planning tools – New markets evaluation
1. COUNTRY ANALYSIS
– GE/McKinsey Matrix – assessing viability of country markets by mapping them on a grid depending on 2 factors of business strengths and market attractiveness. Identifies which markets should be invested in and which should be divested.
2. MARKET ANALYSIS
– Porter’s 5 Forces Analysis – evaluates competitive situations of industry in the market by analysing 5 factors:
– availability of substitutes, bargaining power of suppliers, bargaining power of customers, threat of new entrants and rivalry amongst competitors
3. MARKET ENTRY
– 12 business models – diff levels of risk/market access/cost
4. MARKET STRUCTURE AND POSITION IN MARKET
– key issues in strategic groups – structure of industry, size and position of competitors in groups, potential to move to another group
5. PROFITABLE TARGET CUSTOMERS
– segmentation of international markets, different segmentation for different countries, segment depending on buyer characteristics, buyer behaviour, developed/developing, economic structures, ease of doing business, regulation requirements
6. PRODUCT/SERVICE NEEDS AND WANTS
– product adaptation in different markets to suit different wants and needs, integral to success, customisation
7. STRATEGY EVALUATION
– how will business compete, what is competitive advantage, can it be made sustainable, how do competitors compete, their influence on business
8. SUPPLY CHAIN EVALUATION
– identify economic structures of supply chain, identify any international outsourcing options, create risk profile of each link in value chain
9. RISK MANAGEMENT EVALUATION
– Risk management process – establish context, identify, analyse, evaluate, treat.
What is international market research?
International market research is the process of gathering, analysing and evaluating information in order to decide which international markets are most attractive and then how to implement business strategies to be profitable in that market.
Involved in every aspect of – management, planning, strategy, tactics, implementation.
International market research decisions – Information required
1. WHICH COUNTRY?
– Determine which market is most attractive
>Big market/Small country or Small country/Big market
>Consumption levels: base on per capita not total
– Determine whether to leave or expand
>conduct cost/benefit analysis
2. WHICH MARKET?
– PESTEL analysis: identify opportunities and threats, which has most supportive external environment
3. POTENTIAL TARGET CUSTOMERS
– Segmentation analysis, Analyse most attractive segments, Target strategies towards that segment
4. MARKET PLACE
– how do customers buy products – online, store, both
– what structures are needed for purchase – systems, payment, store, website
– what interface is required – people skills, systems, support
– logistical issues – transport, delivery, timeliness
5. COMPETITORS
– how do competitors compete
– options of competitive advantage
– implementation options in market
6. YOUR BUSINESS
– issues of product, pricing, promotion and distribution
– key roles, responsibilities, skills, management
– financial evaluation criteria
The stages of the international market research process
1. PROBLEM IDENTIFICATION
– need to establish – who will approve research, what is the objective, how to obtain info, what to do with info
2. RESEARCH DESIGN
– framework needed for design – what data is required, what info does data needed to produce
– critical issues in research resign:
(1) construct equivalence – respondent and researcher view questions and concepts differently
(2) measurement and gradation equiv – different units of measurement, perceptions of measurement
(3) sample equiv – different external environments influence on repsondents answers
(4) translation equiv – differences in verbal and non-verbal communication affects results.
3. COLLECTION OF DATA
– primary data – collected by business, first hand.
> very time consuming, costly, bias, equivalence issues
> reliable, relevant, focused on business strategy
– secondary data – previously collected externally
>age, accuracy, reliability, relevance, bias of data
> quick, easy and relatively cheap to obtain
– quantitative – hard, factual data, not subjective
>most common method – questionairre
– qualitative – soft, subjective data based on opinions and perceptions. needs to be translated into quantitative data to be used practically
>most common methods – focus groups, surveys, delphi studies, observations
4. ANALYSIS AND INTERPRETATION
– sort, code, enter, analyse data – identify trends
– determine implications for business: management, tactics, strategy, planning, implementation
5. DISSEMINATION OF RESULTS
– who will receive report
– implications for business and marketing plan
International research techniques
1. internet based research – cookies, click rates, visitor numbers, ad responses, surveys, chat rooms, polls
2. scanner data
3. social media analysis
4. omnibus surveys
5. direct engagement research techniques – sending employees to live and work in overseas country to gather first-hand, real-time information
What is the political environment?
The political environment defines what a country is and how business and society are organised.
What is the importance of the political environment?
The political environment determines how a business will be set up and run within a country, influences ease of doing business, sets explicit and implicit rules and regulations unique to each country.
>can often facilitate or block international trade
Methods of researching political structures
JAIN’S 4 METHODS:
1. GRAND TOUR – send executive team to country to gain first-hand knowledge of the context
2. OLD HAND – employ country expert to give advice
3. DELPHI METHOD – pay a group of experts to access information and share information
4. QUANTITATIVE METHOD – Send a research team to country with a specific market research brief, primary research.
What are government regulations?
Government regulations are the rules which a government employs in order to control imports and exports between the country and the rest of the world.
What is the economic environment?
The economic environment is the systems and structures which the government uses to manage a country’s finances and economic development.
Types of world trade structures
1. PREFERENTIAL TRADE AGREEMENTS
– deals between countries to facilitate trade
2. FREE TRADE AGREEMENTS
– facilitates trade in particular industries/types of products
3. CUSTOMS UNIONS
– evolution of FTA
– harmonises systems, makes trade easier
4. ECONOMIC UNIONS
– further evolution of FTA
– harmonises labour, tax, monetary systems
Tools used to evaluate international economic environment
1. DEMOGRAPHY
– population sizes, characteristics, age structures, sex
2. GEOGRAPHY
– location – proximity to international competitors, ease of trade routes, logistical issues, market access
– size of country – consumption rates, economies of scale
– climate and agriculture
– natural features
3. RESOURCES
– people – skills, experience, expertise, education, labour
– natural – minerals, gold, oil, crops, rainfall, water, gas
4. BALANCE OF PAYMENTS
– analyses trade patterns, compares imports/export levels
5. DEBT
– how much government owes, effects economy, budget, purchasing power of consumers, consumption
6. INFRASTRUCTURE QUALITY
– quality of communication, transport, logistics, banking systems, financial services, technical support
7. FOREIGN EXCHANGE POLICY
– management of currency fluctuations: free float, pegging, managed pegging, hedging financial instruments
8. RISK EVALUATION
– analyse PESTEL influences, opportunities and threats
– conduct risk management matrix – 4 steps – identify, analyse, evaluate, treat
What is the legal environment?
The legal environment is the rules within which individuals and businesses undertake all public activities.
Impact of law on international business operations
Law impacts in 4 key areas:
1. Human resources – employment law, NIKE
2. Environment – pollution, air, water
3. IP protection – copyrights, trademarks, patents, licences, WIPO
JURISDICTION – which law applies to agreement during disputes. Depends on if companies have entered:
1. Formal contract – not common, law set out
2. Exchange of letters – more common, agreement relies on handshake and trust, dispute is dealt with by mediation
CONTRACTS DISPUTE RESOLUTION – mediation, arbitration, litigation
TAX – tax avoidance is legal, tax evasion is illegal
What is culture?
Culture defines what is considered acceptable behaviour in a specific community.
Why is culture important to international business?
– It defines how business is conducted.
– It influences wants, needs and buying behaviour.
– Having cultural knowledge allows for the development of more comprehensive business and marketing plans.
Key elements/structures of culture
1. Language / communication
2. Symbols
3. Religion
4. Habits, customs and traits
5. Opinions, beliefs and perceptions
6. Self and space
7. Time awareness
8. Dress and appearance
9. Food and eating habits
10. Rewards and recognition
11. Learning processes
12. Relationships
Non-verbal communications
Culture causes differences in countries’ perceptions of:
1. Time
– monochronic – doing one thing at a time, orderly
– polychronic – multitasking
2. Space
– differences in spatial awareness, influenced by population density. > China and Japan
3. Symbols
– numbers, colours, emlems, national flag
4. Agreements
– formal written contracts vs. informal contracts which rely on a handshake, exchange of letters, trust
5. Things
– different customs surrounding things in business. >business cards in China
6. Etiquette
– things considered acceptable in one country is rude in another
Tools to evaluate culture
1. MASLOW’S HIERARCHY OF NEEDS
– different cultures perceive values and achievements differently. the west strive for self actualisation, whilst Asia strives for status
2. SELF REFERENCE CRITERION
– analyses culture by comparing how business is conducted domestically with how it is done overseas. then solve for the differences
3. CULTURE LEVELS
– high context – society based on strict set of rules, formal business relationships > japan, saudi arabia
– low context – minimal rules in business, informal relationships, verbal contracts based on a handshake > US, Australia
– middle context – some rules, middle ground > France, Germany
4. HOFSTEDE’S CULTURAL PARADIGM
– analyses culture by classifying the country with 6 cultural dimensions:
> individualism vs. collectivisim
> masculinity vs. femininity
> restraint vs. indulgence
> time orientation: long vs. short
> power distance
> uncertainty avoidance
What is the international social environment?
The systems and structures which define how individuals, families, communities, firms and societies work and live. It is governed by a set of formal and informal rules which influence consumer behaviour and consumption.
Stages of international negotiations
1. research
2. initial contact
3. informal meetings – first face to face contact
4. strategy
5. detailed negotiations
6. agreement/documentation
7. implementation
What is the international technological environment?
The set of buildings blocks which allow businesses to be set up and run within a country. Mainly focused on infrastructure and banking systems.
Key factors/elements of technology
1. R&D – innovation and diffusion of innovation
2. manufacturing and production base
3. health
4. education
5. population density – access to labour
6. consumerism
7. communication systems
8. environment, pollution, conservation, geo-climate
9. logistics and transportation – road, rail, air, sea
10. security and banking systems
11. infrastructure
Process/ Stages of international market selection
1. REASON FOR EXPORTING
– proactive – taking initiative, making deliberate decision to expand operations
– reactive – expanding due to response to external environment
2. MARKET NEEDS
– do the market needs require the business to create an entirely new product, an adapted product, or keep the product the same
3. STRATEGY
– will the business target country that is:
>big market, small player >small market, big player
4. PSYCHIC DISTANCE
– differences in way in which customers behave. the distance which is acceptable depends on how important easy access to the market is.
5. HOME GOVERNMENT TRADE AGREEMENTS
– bilateral or multilateral agreements with export country which allows for easier trade
6. HOME GOVERNMENT ASSISTANCE
– export grants – expert advice, market research grants
7. OVERSEAS GOVERNMENT ASSISTANCE
– encouraging investment in foreign country by providing incentives to export such as lower tax/tariff rates
8. PROFITABILITY
– how profits will be measured > sales or units
9. OVERSEAS BUSINESS MODEL
– which of 12 will be used >risk, cost, market access
10. TRADE MISSION
– government sponsored visits to meet with foreign trade minister to promote trade
11. NETWORKS
– if one member of network sets up trade route, all of network benefits
12. BORN GLOBAL
– digital firms
Steps for international product development
1. market research – external environment, target customer analysis, competitor evaluation, industry analysis, country analysis
2. evaluation of competitive advantage in market
3. preparation of international marketing plan
4. launch of plan
5. adapt the plan as needed
International product development considerations
1. form
2. features
3. conformance – with local regulations
4. durability
5. reliability
6. repairability
7. quality
8. design / style
New product introduction strategies
1. STANDARDISATION
– selling same product domestically and internationally
– cheaper and easier
– risk not meeting needs and wants of consumers
– economies of scale
– economic of R&D
2. CUSTOMISATION
– adapting product for international market
– product will suit specific needs of new customers
– more expensive, more complex
– potential loss of economies of scale
– better adapted to: >market conditions, customer preferences, government regulations, economic conditions, climate, cultural factors
3. WATERFALL APPROACH
– introducing product to developed markets first, then to less developed markets, then to developing markets
4. SHOWER APPROACH
– marketing in all types of markets from outset
Types / Classifications of international service exports
1. business services
2. logistics services
3. customer services
4. support services
>high influence of employees on success and quality of services
International service marketing challenges
1. INTANGIBILITY
– cannot be seen, touched, smelt or heard, makes it difficult to judge quality prior to purchasing
2. INSEPARABILITY
– production and consumption are performed simultaneously
3. VARIABILITY
– chance of inconsistency of service delivery with different employees performing the service in differing situations
4. PERISHABILITY
– cannot be stored for resale or later use
International service delivery options
1. location free professional services
2. location bound services
3. standardised packages
4. customised packages
Categories of international service exports
business services, communication, distribution, construction, engineering, health, education, tourism, recreation and leisure, transport, financial, environmental
Services marketing P’s
1. service
2. price
3. promotion
4. distribution
5. people
6. physical facilities
7. positioning
8. processes
9. profit
International distribution strategies
1. EXPORT MERCHANTS
– hiring a firm to distribute products from firm to international consumers
2. DIRECT EXPORTING
– transporting the goods directly from domestic manufacturing facility to international end consumers
3. DISTRIBUTION VIA AGENTS / 4. DISTRIBUTORS
-an external firm facilitates distribution to consumers
-agents acts on behalf of firm, do not own goods
-distributors purchase title and control of goods
5. FRANCHISING
-purchasing the export of intellectual property >brand, image, systems, processes, resources, market coverage
6. LICENSING
-purchasing right to use intellectual property, then pay firm for use through royalties
7. CONTRACT MANUFACTURING
-outsourcing production process to external overseas firm >cheaper, more efficient >legal issues, quality, control
8. ASSEMBLY IN OVERSEAS MARKET
-government incentives for foreign firms to set up assembly function overseas, transport advantages
9. JOINT VENTURES 10. STRATEGIC ALLIANCES
– JV: partnering between companies in same industry
– SA: companies in complementary industries
>control, reliance, quality, dispute issues, terms and conditions, conflict
11. ACQUISITION
– purchasing an existing facility overseas >thorough research needed, can be expensive
12. GREENFIELDS
– setting up operations overseas >expensive, legal issues, complex, culture. >transport efficiency
How to decide which international distribution channel to use
Must consider both internal and external factors
1. LENGTH – levels available in network
2. WIDTH – market coverage
3. DENSITY – market coverage concentration
4. ALIGNMENT – integration/efficiency of network
>costs involved
>control commitment
>policy of firm
>nature or product
>market environment/risk
Elements of logistics / Logistical issues
1. TRANSPORT
-delivery time, costs, control, quality, reliability, regulation
2. TRANSPORT MODE
-road, rail, air sea >different costs, time, quality
3. INVENTORY
– major cost of internationalisation
-having inventory on hand to accommodate for changes in international demand is highly complex
-considerations: demand levels, seasonality, costs, location, systems, methods of management, inventory cycle times
4. STORAGE
-consider: location, physical facility, control systems, security, local regulations, quality
5. PACKAGING
-external: packaging of product for transport
-internal: packaging of product for end user
>transport mode, durability of product, local requirements of packaging, customs requirements, environment, promotional appeal, quality of materials
6. MANAGEMENT
-skills, experience and expertise of managers in dealing with logistical issues
>inventory control management, reviewing costs and methods consistently, qualifications, consistently searching for cheaper, better quality materials, methods, systems
What is international pricing?
It is a compromise between business’ strategic objectives and the demand of international consumers at varying price levels.
Why is international pricing important?
It is the only component of the international marketing mix which produces revenue, all others produce costs. Thus it is important for profitability.
How is international pricing evaluated?
1. PRICING OBJECTIVES
-Profit orientation: >target return, profit maximisation
-Sales orientation: >sales targets, market share
-Market orientation: >competitive capabilities, non-price (focused on service/quality).
2. CONSIDERATIONS OF PRICING STRATEGIES
-firm
-customers
-competition
-distribution channels
-environment
International pricing strategies
1. PRICE SKIMMING
-setting price as high as possible at first, then lowering it later to gain market access
2. PRICE PENETRATION
-setting price as low as possible to gain large market access
3. MARKET HOLDING
-aim to maintain hold of market by pricing at what market can bear
4. COST PLUS PRICING
-setting price at a percentage markup from cost
WHEN RELATIONSHIP BETWEEN PRICE/QUALITY:
1. PREMIUM PRICING
-setting prices higher than competitors to leverage superior quality
2. ECONOMY PRICING
-a no frills price, small margins, leverages economies of scale
Major challenges in managing international price
1. PRICE ESCALATION
-caused by: inflation, exchange rate fluctuation, taxes, tariffs, transportation costs
2. PRICE DUMPING
-setting price of imported goods at lower than what they would be sold for in origin country or at lower than production cost
-different laws/penalties in different countries
3. TRANSFER PRICING
-a process which enables international firms to transfer products/components between countries to avoid tax, but claims this is tax evasion.
-influences where firms choose to make profits/losses
4. INTERNATIONAL PRICING TERMS OF SALE
-incoterms determine where price is set
>EXW: at factory. FAS/FOB: at delivery port
5. INTERNATIONAL PRICING TERMS OF PAYMENT
-different methods have different levels of risk, cost and advantages to the buyer and the seller
>best for buyer – open account
>best for seller – cash in advance
How does promotion in international markets work?
International promotion involves developing a communications program which reaches consumers and target market in a way which relates to them and in a form which they can access.
COMMUNICATIONS THEORY:
1. Sender/Source
2. Encoding – before message is sent, it must be made suitable to the medium used for communication
3. Medium/Channel – must be suitable to context, product, receiver situation and preferences
4. Decoding – continually evaluate if communication objectives are being achieved, if it is effective. 2 forms: >forced (focus groups, interviews) >natural exposure
5. Receiver – range of people: >consumers, target market, public, government, media, employees, supplier, partner
***Inference/Noise – Sources of noise can occur during communications which interfere with how message is received. >business environment, competitors, regulation, social media, public relations
Major influences on international promotion
1. culture – how it is interpreted
2. technology – infrastructure used to receive it
3. government regulations – rules
4. local preferences – nationalism
5. education – which mediums to use
6. economic development – effects choice of method
Major promotion tools
tv, radio, newspaper, flyers, trade shows, public relations, press, door to door promotion, product placement, social media, web advertising, billboards, outdoor, sponsorships
The international promotion process
8 steps in promotion process:
1. Target market identification
2. Campaign objectives – what will it achieve
3. Promotional tools required – which will be used
4. Campaign strategy
5. Budget required – is it affordable, viable
6. Campaign theme – look and feel
7. Measurement of results – it is effective
8. Management structures needed – experience/expertise