Download Market - TU Freiberg

International Marketing
Dipl.-Wirtsch.-Ing. Kati Kasper-Brauer
Marketing Department
Freiberg University of Technology
MBA Programm – International Business in Developing and Emerging Markets
Summer Term 2015
Introduction
Chair of Marketing and International Trade
Univ.-Prof. Dr. Margit Enke
Research assistants:
▪ Jennifer Glinka, M.Sc.
▪ Nicole Ritter, Dipl.-Kffr.
▪ Kati Kasper-Brauer,
Dipl.-Wirtsch.-Ing.
▪ Nicole Schütz, M.A.
(f. l. t. r.)
2
Introduction
Contact Details
Prof. Dr. habil. Margit Enke
Lessingstraße 45
Room: 1302B
Phone: +49 (0) 3731 39-2543
E-Mail: [email protected]
Make an appointment please.
Dipl.-Wirtsch.-Ing Kati Kasper-Brauer
Lessingstraße 45
Room: 1007
Phone: +49 (0) 3731 39-3552
E-Mail: [email protected]
Make an appointment please.
3
Introduction
Overview of the Lectures
Integrative Lehrformen
(Exkursionen, Fallstudien,
Marketing live mit dem Prof.)
Bachelormodule
Mastermodule
Applied Marketing Science
International
Marketing (IBDEM)
International
Marketing
Seminar Marketing
Marketing (IMRE)
Marketing Intelligence
Brand Management
Marketingmanagement Instrumente
Proseminar Marketing
Projektstudium
Marketing
Marketingmanagement - Grundlagen
4
Introduction
Scope
Lectures
+ Lecture notes and cited literature
+ Case studies
+ In-Lecture Repetition
+ Guest lectures by marketing experts
_______________________________
= Exam (written test - 90 minutes)
5
Introduction
Sessions, Exam, and Handout
Handout
You can download the lecture notes on our website. The file will be available
by next Monday.
http://tu-freiberg.de/fakult6/marketing/downloads
Password: SS_2015
6
Introduction
Download Instruction for Lecture Notes
Download Instruction for Lecture Notes
SS_2015
7
Case Studies
Why Case Studies
• learn to develop solutions for complex problems
• transfer knowledge from the course and gain new knowledge during
case study work
• practice soft skills, especially:
• self-organisation
• intercultural teamwork
• presentation skills
• discussion skills
8
Case Studies
Case study 1: Internationalisation of Anheuser-Busch
• In 2002 August Busch III, Chairman and President of
Anheuser Busch Group, was reflecting on the future of its
brewery operations
• Reputation as the world´s largest brewer is mainly
created by the companie´s dominance in the USA
• Anheuser-Busch is losing out in the international market
to lower volume players such as Heineken, Carlsberg and
Guiness
• One of the important Asian markets of Carlsberg Asia, the
largest brewer in Asia, is Malaysia.
• Busch decides to enter the Malaysian market.
9
Case Studies
Case study 1: Internationalisation of Anheuser-Busch
Tasks
1. Analyze the macro environment of Malaysia.
2. Analyze the micro environment of Malaysia.
3. Develop a segmentation and positioning strategy for Anheuser-Busch.
4. Develop a market entry strategy for Anheuser-Busch.
5. Develop the marketing mix for the first year in Malaysia.
10
Case Studies
Case study 2: Marketing Strategy for Low-Income Consumers
• Unilever´s Home Care Division in Brazil has already
a market share of 81 % in the detergent powder category.
• Nevertheless, 48 million predominantly low-income consumers in Brazil´s
Northeast are a segment that Unilever does not reach with its current
brands Omo, Minerva, and Campeiro.
• Unilever Brazil discusses how the segment can be reached and developed
for Unilever´s detergent powder.
• Critics at Unilever highlight the threat of cannibalization for existing brands.
• Should Unilever change its current marketing and branding strategy in the
detergent powder category?
11
Case Studies
Case study 2: Marketing Strategy for Low-Income Consumers
Tasks
1. Analyze the economic and sociocultural environment of the low-income
segment Brazil northeast. Show differences to the southeast where the
brand Omo is very strong.
2. Analyze the market for detergent powder in the northeast of Brazil and
derive a solution for the threat of cannibalization.
3. Develop a brand strategy for the low-income segment.
4. Develop the marketing mix for the segment. Discuss different solutions
for product packages, prices, promotion, and distribution.
12
Case Studies
Case study 3: International Expansion in India
• Since the end of 2006, the French group Sarbec Cosmetics
had been trying to establish its brands on the Indian
cosmetics market, which had just begun to show enormous
potential. In the beginning, the company decided to build on
its network in the region and worked mainly through Sarbec’s
Dubai agent, who had business connections in India.
• Soon enough, it became clear that this strategy could not be
sustained and all activities in the country were temporary
suspended.
• Can Sarbec find a niche among the big multinationals and
numerous local producers that have started to raid the
market?
• What will be the company´s critical success factors in India?
13
Case Studies
Case study 3: International Expansion in India
Tasks
1. Analyze the macro environment of India.
2. Analyze the micro environment for Sarbec Cosmetics in India.
3. Which products and brands of Sarbec Cosmetics have a chance in
India?
4. Develop a segmentation and positioning strategy for Sarbec Cosmetics
in India.
5. Develop a successful market entry strategy for Sarbec Cosmetics in
India.
14
Case Studies
Further procedure
Please find all case studies on the website!
One of each team (maximal 6 students per team) should send me an email
with your chosen case study and the names and e-mail addresses of all
team members by the end of the week!
Please use our ppt-layout for your presentation which is available for
download on our website!
Please send me your completed ppt-presentation by Friday, June 19th!
The presentations are scheduled for the end of June. Please prepare a
presentation of approx. 20 minutes (No additional written case solution
necessary).
Please contact me via email or in the lectures if you have any questions!
15
Introduction
Structure
1
Marketing Basics
2
The Decision Whether to Internationalize
3
Deciding Which Markets to Enter
4
Market Entry Strategies
5
Global Marketing Strategies
6
International Marketing Mix
7
Implementing and Coordinating the International Marketing
16
Structure
1
Marketing Basics
1.1 Markets as Focal Points of Marketing
1.2 Development and Scope of the Marketing Concept
1.3 The Strategic Triangle
1.4 International Marketing
2
The Decision Whether to Internationalize
3
Deciding Which Markets to Enter
4
Market Entry Strategies
5
Global Marketing Strategies
6
International Marketing Mix
7
Implementing and Coordinating the International Marketing
17
1 Marketing Basics
Learning Objectives
In this chapter you will become familiar with:
 the characteristics of markets, different types of markets, and how
markets can be differentiated from one another
 the historical development of marketing
 the various perspectives of marketing
18
1.1
Markets as Focal Points of Marketing
19
1.1 Markets as Focal Points of Marketing
Markets
Marketing is derived from “market” and “to market”
(1)
markets define the framework for marketing practiced by companies
(2)
within the course of their marketing activities, companies strive to actively
exert a controlled influence on the behavior of customers and
competitors
Market
A market is any place where supply meets demand, thus leading
to the formation of prices. Supply and demand can meet at a physical
or at a virtual location.
Homburg et al. (2013), p. 2ff.
20
1.1 Markets as Focal Points of Marketing
Markets
Stakeholders which influence market activities
(1)
buyers
(2)
companies
(3)
sales partners
(4)
public institutions
(5)
lobbyists
See Homburg et al. (2013), p. 2ff.
21
1.1 Markets as Focal Points of Marketing
Markets
Different types of markets – a classification by types of goods
(1)
markets for consumer goods
(2)
markets for business - to - business goods
(3)
markets for services
See Homburg et al. (2013), p. 4ff.
22
1.2
Development and Scope of the Marketing Concept
23
Market-oriented
management
History of the Marketing Concept
Relationship
marketing
1.2 Development and Scope of the Marketing Concept
Marketing
Implementation
Marketing
Implementation
Marketing Mix
Marketing Mix
Marketing Mix
Product
Decisions
Product
Decisions
Product
Decisions
Pricing
Decisions
Pricing
Decisions
Pricing
Decisions
Advertising
Communication
Decisions
Communication
Decisions
Communication
Decisions
Sales
Sales
Sales
Decisions
Sales
Decisions
Sales
Decisions
1900 - 1920
1920 - 1950
1950 - 1980
1980 - 1990
Starting 1990
Homburg et al. (2013), p. 6.
24
1.2 Development and Scope of the Marketing Concept
Definition of Marketing
Approaches of defining marketing
(1)
activity-oriented definitions
marketing is a bundle of market-driven activities
(2)
relationship-oriented definitions
marketing aims at establishing, maintaining, and strengthening
relationships with customers
(3)
management-oriented definitions
marketing focuses on managing a company from a market perspective
Deriving an integrative definition of marketing
See Homburg et al. (2013), p. 7.
25
1.2 Development and Scope of the Marketing Concept
Definition of Marketing
Integrative definition of marketing
Marketing has a company-external and a company-internal facet.
• Regarding the company-external aspects, marketing comprises the
conception and implementation of the market-related activities that are
practiced by a company and geared towards buyers or potential buyers of
its products.
• Regarding the company-internal aspects, marketing refers to creating the
necessary prerequisites and conditions within the company in order to
facilitate the effective and efficient implementation of the market-related
activities.
• Both facets of marketing aim at designing and structuring customer
relationships so that company objectives can be achieved.
See Homburg et al. (2013), p. 7f.
26
1.3
The Strategic Triangle
27
1.3 The Strategic Triangle
The Strategic Triangle as Conceptual Basis
Global environmental factors
(= Macro environment)
Market
(= Micro environment)
Buyers in
market
Competitors
Company
situation
Homburg et al. (2013), p. 38.
28
1.3 The Strategic Triangle
The Strategic Triangle as Conceptual Basis
Elements of the Strategic Triangle
(1)
Customers of a Company
(2)
Competitors of a Company
(3)
The Company itself
Company
Customers
See Homburg et al. (2013), p. 38f.
Competitors
29
1.4
International Marketing
30
1.4 International Marketing
International Marketing what it is…
Definition of International Marketing
International marketing refers to design and realization activities on the part of
a company, directed at its customers and potential customers located in more
than one country.
international
marketing
global
multinational
international
domestic
marketing
national
local
See Homburg et al. (2013), p. 406; Keegan/Green (2013), p. 30.
31
1.4 International Marketing
International Marketing what it is…
Characteristics of International Marketing
Higher level
of coordination
requirements
Higher need of
information
Higher level of
uncertainty
International Marketing
Higher level of
complexity
32
2
The Decision Whether to Internationalize
33
Structure
1
Marketing Basics
2
The Decision Whether to Internationalize
2.1 Barriers/Risks to Internationalize
2.2 Motives to Internationalize
2.3 Internationalization Theories
3
Deciding Which Markets to Enter
4
Market Entry Strategies
5
Global Marketing Strategies
6
International Marketing Mix
7
Implementing and Coordinating the International Marketing
34
2 The Decision Whether to Internationalize
Learning Objectives
In this chapter you will become familiar with:
 pros and cons of internationalization
 overview about theories to explain internationalization processes of
companies
 EPRG-Framework
35
2.1
Barriers/Risks to Internationalize
36
2.1 Barriers/Risks to Internationalize
Barriers of Internationalization
Critical (internal) factors hindering internationalization initiation
• Insufficient finances
• Insufficient knowledge
• Lack of foreign market connections
• Lack of internationalization commitment
• Lack of productive capacity to dedicate to foreign markets
• Lack of foreign channels of distribution
• Management emphasis on developing domestic markets
Higher level of uncertainty
See Hollensen (2014), p. 61.
37
2.1 Barriers/Risks to Internationalize
Risks to Internationalize
General market risks
• Market distance
• Existing competition in target markets
• Differences in product usage, language, and culture
• Differences in product specification
• Complexity of shipping services to overseas buyers
Commercial risks
• Exchange rate fluctuations
• Delays or damage in the distribution process
• Failure of int. customers to pay due to contract dispute, bankruptcy, or fraud
See Hollensen (2014), p. 64.
38
2.1 Barriers/Risks to Internationalize
Risks to Internationalize
Political risks
• Foreign government restrictions
• National export policy
• Complexity of trade documentation
• Civil strife, revolution, or wars
See Hollensen (2014), p. 64.
39
2.2
Motives to Internationalize
40
2.2 Motives to Internationalize
Motives to Internationalize
Reduction of threat
• Domestic market too small
• Stabilization of sales by supplying several markets with different economic
life cycles
• Compensation for market shares lost to competitors in the domestic market
• Counteract potential loss in domestic markets
• Maintenance of established market positions in international markets by
means of intensified commitment
• Following competitors abroad in order to balance the competitive situation
• Overproduction/excess capacity
See Homburg et al. (2013), p. 428f; Hollensen (2014), p. 104ff.
41
2.2 Motives to Internationalize
Motives to Internationalize
Realization of opportunities
Sales opportunities
• Leverage of new sales sources
• Following important customers abroad
• Participation in the growth of international markets
• Achievement of growth targets that could not be achieved in the
domestic market
Sales-rated opportunities
• Reduction of costs as a result of economies of scale arising from higher
sales volume
• Utilization of lower market development costs in international markets
Price opportunities
• Leverage of higher willingness to pay on the part of international customers
See Homburg et al. (2013), p. 428f.
42
2.3
Internationalization Theories
43
2.3 Internationalization Theories
Overview about Internationalization Theories
Basic theories
• The Uppsala School Approach
• The internationalization/transaction cost approach
• The network approach
• The ERPG-Framework
See Homburg et al. (2013), p. 420ff.; Hollensen (2014), p. 72ff.
44
2.3 Internationalization Theories
The Uppsala School Approach
Basic framework
• Companies tend to intensify their commitment towards foreign markets as
their experience grows.
• Four successive stages of entering an international market
• Internationalization starts in fairly nearby markets
Market
(Country)
Stages
No regular
export
Independent
representatives
Market A
Foreign sales
subsidiary
Foreign
production and
sales subsidiary
Increasing market commitment
Market B
Market C
…
Market n
See Hollensen (2014), p. 75ff.
Increasing
geographic
diversification
45
2.3 Internationalization Theories
The Uppsala School Approach
Criticism
• Does not account interdependencies of different country markets.
• Is not valid for service industries.
• Trends to leapfrog stages.
• Is not valid in situations of highly internationalized firms and industries.
• Globalization trends decrease psychic distance to a new country.
• Today’s market uncertainty is reduced by market research and
consulting firms.
• Number of people with experience in doing business abroad has increased.
See Hollensen (2014), p. 75f.
46
2.3 Internationalization Theories
The Transaction Cost Analysis Model
Model foundation
• A firm will tend to expand until the cost of organizing an extra transaction
within the firm (control costs) will become equal to the cost of carrying out
the same transaction by means of an exchange on the open market.
• Transaction costs are a result of friction between buyer and seller.
Seller
(Producer)
Friction
Buyer
(Export
Intermediary)
Endcustomer
Transaction cost
1. Ex ante cost:
•
Search cost
•
Contracting cost
2. Ex post cost:
•
Monitoring costs
•
Enforcement costs
See Hollensen (2014), p. 77f.
47
2.3 Internationalization Theories
The Transaction Cost Analysis Model
Internationalization models based on TCA
• If transaction costs through externalization (e.g. importer or agent) are higher
than the control costs through an internal hierarchical system, then the firm
should seek internationalization of activities, i.e. implementing the global
marketing strategy in wholly owned subsidiaries.
Seller
(Producer)
Seller
(Producer)
See Hollensen (2014), p. 78ff.
Transaction costs higher
than internal control costs
Transaction costs lower
than internal control costs
Internal firm
(foreign
subsidiary)
Endcustomer
Buyer
(Export
Intermediary)
Endcustomer
48
2.3 Internationalization Theories
The Transaction Cost Analysis Model
Criticism
• Narrow assumption of human nature
• Excluding internal transaction costs
• Is not valid for small and medium-sized enterprises (SME)
• Importance of production cost is understated
See Hollensen (2014), p. 79f.
49
2.3 Internationalization Theories
The Network Model
Basic concept
• Focus on relationship of business actors
• Actors are linked to each other through exchange relationships.
• Needs and capabilities are mediated through interaction.
• Network structure is more flexible in fast changing environments.
• The individual firm is dependent on resources controlled by other firms.
• Companies get access to external resources through their network position.
• To enter a network requires that other actors are motivated to engage in
interaction and make adaptations in their ways of performing business.
See Hollensen (2014), p. 80f.
50
2.3 Internationalization Theories
The Network Model
Applying the network model for international marketing
• Networks in a country may well extend far beyond country borders.
• Internationalizing firms are initially engaged in a domestic network.
Governmental
organization
Governmental
organization
Production
subsidiary
Head office
Country C
Bank
Sales subsidiary
Agent
Bank
See Hollensen (2014), p. 82f.
Country B
Supplier subsidiary
Supplier head office
Country D
Home country
• The relationships in the domestic network are bridges to networks of other
countries .
Customer
Customer
51
2.3 Internationalization Theories
The Network Model
EPRG-Framework
The form and substance of a company’s response to global
market opportunities depend greatly on management’s
assumptions or beliefs – both conscious and unconscious
– about the nature of the world.
• Ethnocentric orientation: assumption that home country is superior to the rest
of the world.
• Polycentric orientation: assumption that each country in which a company
does business is unique.
• Regiocentric orientation: a region becomes the relevant geographic unit;
management’s goal is to develop an integrated regional strategy.
• Geocentric orientation: views the entire world as a potential market and
strives to develop integrated global strategies.
See Keegan/Green (2013), p. 40ff.; Hollensen (2014), p. 19f.
52
2.3 Internationalization Theories
Ethnocentric Orientation
Characteristics
Product planning
• Product Development for home country customers
Marketing mix decisions
• Made at headquarters
1960s-1970s
Type of marketing
Country Choice
Export
Timing and Sequencing
of Entry
See Kotabe/Helsen (2011), p. 14ff; Homburg et al. (2013), p. 421.
53
2.3 Internationalization Theories
Polycentric Orientation
Characteristics
Product planning
• Local product development based on local needs
Marketing mix decisions
• Made in each country
Type of marketing
Modify
Marketing Strategy
Country 1
Country 2
Develop and Acquire
New National Brands
Country 3
Share Advertising,
Promotional, and
Distribution Costs
See Kotabe/Helsen (2011), p. 14ff; Homburg et al. (2013), p. 421.
Country 4
54
2.3 Internationalization Theories
Regiocentric Orientation
Characteristics
Product planning
• Standardized within regions, but not across regions
Marketing mix decisions
• Made regionally
Type of marketing
Modify
Marketing Strategy
Region 1
Country 1
Country 2
Develop and Acquire
New National Brands
Country 3
Share Advertising,
Promotional, and
Distribution Costs
See Kotabe/Helsen (2011), p. 14ff;
Homburg et al. (2013), p. 421.
Country 4
Region 2
55
2.3 Internationalization Theories
Geocentric Orientation
Characteristics
Product planning
• Global products with local variations
Marketing mix decisions
• Made jointly with mutual consultation
Type of marketing
Coordinate Marketing
Mix across countries
and regions
Integrate sourcing
and production
with marketing
Allocate resources to
achieve portfolio balance
and growth
See Kotabe/Helsen (2011), p. 14ff; Homburg et al. (2013), p. 421.
56
3
Deciding Which Markets to Enter
57
Structure
1
2
3
4
5
6
7
Marketing Basics
The Decision Whether to Internationalize
Deciding Which Markets to Enter
3.1 The International Market Selection Process
3.2 Macro Environment
3.2.1
The Political and Legal Environment
3.2.2
The Economic Environment
3.2.3
The Technological Environment
3.2.4
The Sociocultural Environment
3.2.5
The (Corporate) Social Responsibility Orientation
3.3 Micro Environment
3.3.1
Analysis of National Competitiveness
3.3.2
Competitive Analysis in an Industry
3.3.3
Value Chain Analysis
3.4 Market Research and Information Systems
Market Entry Strategies
Global Marketing Strategies
International Marketing Mix
Implementing and Coordinating the Intern. Marketing
58
3 Deciding Which Markets to Enter
Learning Objectives
In this chapter you will become familiar with:
 the international market-screening model
 issues of the political environment like quotas or local content
 economic aspects to consider when choosing target markets
 technological and sociocultural differences of countries
 diverse attention to corporate social responsibility aspects in different
countries
59
3.1
The International Market Selection Process
60
3.1 The International Market Selection Process
Relevance of Identifying the Right Markets
Why is it important to identify the ‘right market’ to enter?
• Influences likelihood of success
• Influences nature of marketing programs
• Affects firm’s ability to coordinate foreign operations
See Hollensen (2014), p. 261f.
61
3.1 The International Market Selection Process
Selecting Process of SME
Factors influencing the market selection process of SME
• Short psychic distance
 low uncertainty about foreign markets and low perceived difficulty of
acquiring information about them.
• Short cultural distance
 low perceived differences between the home and destination culture
• Short geographic distance
See Hollensen (2014), p. 262f.
62
3.1 The International Market Selection Process
Internationalization of GEO
since 1976
www.gujmedia.de
63
3.1 The International Market Selection Process
International Market-Screening Model
Macro environment
Micro environment
The firm
• Degree of internationalization
Step 1: Selection of segmentation criteria
and overseas experiences
• Size/amount of resources
• Type of industry/nature of the
business
• Internationalization goals
• Existing networks of relationship
Step 2: Development of segments
Step 3: Screening of segments
Step 4: Microsegmentation
Market entry
See Hollensen (2014), p. 263.
64
3.2
Macro Environment
65
3.2 Macro Environment
The Strategic Triangle as Conceptual Basis
Political & Legal
Environment
CSROrientation
Economic
Environment
Market
(= Micro environment)
Buyers in
market
Competitors
Company
situation
Sociocultural
Environment
Homburg et al. (2013), p. 38.
Technological
Environment
66
3.2.1
The Political and Legal Environment
67
3.2.1 The Political and Legal Environment
Barriers in the Political/Legal Environment
Aspects of the political/legal environment
• Home country
• Host country environment
• General international environment
Hollensen (2014), p. 204f.
68
3.2.1 The Political and Legal Environment
The Home Country Environment
Governmental support
• Promotional activities sponsored by governmental organizations
• Financial activities
• Information services
• Export-facilitating activities
• Promotion by private organizations
• State trading
See Hollensen (2014), p. 205ff.
69
3.2.1 The Political and Legal Environment
The Home Country Environment
Kinds of information typically available
• Economic, social, political data on individual countries
• Summary and detailed information on aggregate global market transactions
• Individual reports of foreign firms
• Specific export opportunities
• Lists of potential overseas buyers, distributors, and agents for various
products in different countries
• Information on relevant government regulations
• Foreign credit information
See Hollensen (2014), p. 205ff.
70
3.2.1 The Political and Legal Environment
The Host Country Environment
Political risks
• Ownership risks
• Operating risks
• Transfer risks
See Hollensen (2014), p. 207.
71
3.2.1 The Political and Legal Environment
The Host Country Environment
Effects of political risk
• Import restrictions
• Local content laws
• Exchange controls
• Market controls
• Price controls
• Tax controls
• Labor restrictions
• Change of government party
• Nationalization
• Domestication
See Hollensen (2014), p. 207f.
72
3.2.1 The Political and Legal Environment
Categories of Trade Barriers
Tariff barriers
• Specific
• Ad valorem
• Discriminatory
Non-tariff barriers
• Quotas
• Embargoes
• Administrative delays
• Local content requirements
Why do countries levy tariffs?
See Hollensen (2014), p. 209f.
73
3.2.1 The Political and Legal Environment
Political Risk Analysis
Step 1: Issues of relevance to the firm
• Determine critical economic/business issues relevant to the firm
• Assess the relative importance of these issues
Step 2: Potential political events
• Determine the relevant political events
• Determine their probability of occurring
• Determine the cause and effect relationships
• Determine the government’s ability and willingness to respond
Step 3: Probable impacts and responses
• Determine the initial impact of probable scenarios
• Determine possible responses to initial impacts
• Determine initial and ultimate political risk
Hollensen (2014), p. 212.
74
3.2.1 The Political and Legal Environment
The Host Country Environment
Important factors to determine the political risk
• Change in government policy
• Stability of government
• Quality of host government’s economic management
• Host country’s attitude towards foreign investment
• Host country’s relationship with the rest of the world
• Host country’s relationship with the parent company’s home government
• Attitude towards the assignment of foreign personnel
• Closeness between government and people
• Fairness and honesty of administrative procedures
See Hollensen (2014), p. 228.
75
3.2.1 The Political and Legal Environment
Legal Environment
Legal systems
• Common Law
• Code Law
• Theocracy
Implementation of laws
• Litigious societies
• Unimportant role of laws
See Hollensen (2014), p. 204ff.
76
3.2.1 The Political and Legal Environment
Legal Issues Facing the Company
15,600-26,000 $
Nov. 1. 2008
Kotabe/Helsen (2011), p. 168f.
77
3.2.1 The Political and Legal Environment
Intellectual Property Protection
Differences in property rights
• Patent (first-to-file vs. first-to-invent, period of time)
• Copyright (period of time)
• Trademark (first-to-use vs. first-to-file)
vs.
50 years
95 years
• Trade Secret
See Kotabe/Helsen (2011), p. 176f.; Seyoum (1996), p. 56.
78
3.2.1 The Political and Legal Environment
Influencing Politics and Laws
Relationship building
• Build relationships with government
• Build relationships with customers
• Build relationships with employees
• Build relationships with local community
See Hollensen (2014), p. 212f; Czinkota/Ronkainen (2013), p. 86ff.
79
3.2.2
The Economic Environment
80
3.2.2 The Economic Environment
Market Characteristics - Population
Relevant characteristics
• Population growth rates
• Age distribution
• Life expectancy
• Size of a household
• Urbanization
See Czinkota/Ronkainen (2013), p. 95ff.
81
3.2.2 The Economic Environment
Market Characteristics - Population
Population Reference Bureau (2012)
82
3.2.2 The Economic Environment
Income
Indicators
• Per capita GDP
• Income distribution
• Purchasing power parities (PPP)
Income classification for International Marketing
• Very low family incomes
• Very low, very high family incomes
• Low, medium, high family incomes
• Mostly medium family incomes
See Czinkota/Ronkainen (2013), p. 97f.
83
3.2.2 The Economic Environment
The Global Economy/Economic Strength
See Czinkota/Ronkainen (2013), p. 93.
.
84
3.2.2 The Economic Environment
Purchasing Power Parities (PPP)
Criticisms of using per capita income figures
• Uneven income distribution
• Purchasing power not reflected
• Lack of comparability
Purchasing Power Parities
PPPs show how many units of
currency are needed in one country
to buy the amount of goods and
services that one unit of currency
will buy in another country.
See Czinkota/Ronkainen (2013), p. 98ff.
85
3.2.2 The Economic Environment
Consumption Patterns
Consumer spending by categories (Engel’s Law)
• Spending on food decreases with increasing family income
• Percentage spend on housing and household operations is roughly constant
See Czinkota/Ronkainen (2013), p. 99ff.
86
3.2.2 The Economic Environment
Regional Economic Integration
Forms of economic integration in regional markets
Czinkota/Ronkainen (2013), p. 107.
87
3.2.2 The Economic Environment
Emerging Markets
Definition: An emerging market is a country making an effort to change and
improve its economy with the goal of raising its performance to that of the
world’s more advanced nations.
See Czinkota/Ronkainen (2013), p. 116; GlobalEdge (2014)
88
3.2.3
Technological Environment
89
3.2.3 Technological Environment
Infrastructure
Relevant characteristics
• Electric power supply
• Road system
• Transportation system
• Communication systems
• Usage of electronic devices
See Czinkota/Ronkainen (2013), p. 200f.
90
3.2.3 Technological Environment
Internet Usage
http://de.statista.com (2015)
91
3.2.4
Socio-cultural Environment
92
3.2.4 Sociocultural Environment
Culture
Definition
“Culture is the collective programming of the mind which distinguishes the
members of one human group from another.” –Geert HofstedeIt is the learned way in which a society understands, decides and
communicates.
• Culture is learned
• Culture is interrelated
• Culture is shared
Hollensen (2014), p. 234.
93
3.2.4 Sociocultural Environment
Models to Describe Cultures
Hofstede’s 4 + 1 culture dimensions
Power
Distance
Individualism
Masculinity
Uncertainty
Avoidance
Long-Term
Orientation
Trompenaars’ additional culture dimensions
Emotionality
Quality of Relationship
Attitudes Towards the
Personal Environment
Hall’s additional culture dimensions
high-context vs. low-context cultures
See Hollensen (2014), p. 245f; Homburg et al. (2013), p. 409ff.
94
3.2.4 Sociocultural Environment
Hofstede’s 4+1 Culture Dimensions
Power distance
Power distance refers to the
degree of inequality among
people that is viewed as being
equitable. With a high power
distance, the weaker members of
a society expect or accept a
relatively unequal distribution of
power. Societies with low power
distance are characterized by a
certain degree of egalitarianism.
See Homburg et al. (2013), p. 409ff.; www.geert-hofstede.com (2013)
Country
Power Distance
Brazil
69
China
80
Germany
35
Hong Kong
68
India
77
Japan
54
Netherlands
38
Pakistan
55
United States
40
95
3.2.4 Sociocultural Environment
Hofstede’s 4+1 Culture Dimensions
Individualism
Individualism describes the
degree to which people refer to
act as individuals rather than
group members (“me” vs. “we”
societies). In an individualistic
society, the focus is on people’s
own interests; there is little need
for loyalty to a group. In
collectivistic societies, the
interests of the group take center
stage.
See Homburg et al. (2013), p. 409ff; www.geert-hofstede.com (2013).
Country
Individualism
Brazil
38
China
20
Germany
67
Hong Kong
25
India
48
Japan
46
Netherlands
80
Pakistan
14
United States
91
96
3.2.4 Sociocultural Environment
Hofstede’s 4+1 Culture Dimensions
Masculinity
If a country culture demonstrates
a high degree of masculinity,
individuals tend to be more
assertive and display competitive
behavior; with low masculinity,
values such as modesty and
care-taking predominate.
See Homburg et al. (2013), p. 409ff.; www.geert-hofstede.com (2013).
Country
Masculinity
Brazil
49
China
66
Germany
66
Hong Kong
57
India
56
Japan
95
Netherlands
14
Pakistan
50
United States
62
97
3.2.4 Sociocultural Environment
Hofstede’s 4+1 Culture Dimensions
Uncertainty avoidance
Uncertainty avoidance is defined
as the extent to which people in a
culture prefer structured
situations, with clear rules, over
unstructured ones. With a high
uncertainty avoidance, members
of a society feel threatened by
uncertain or unfamiliar situations;
cultures with a low level of
uncertainty avoidance show a
greater willingness on the part of
individuals to take risks.
See Homburg et al. (2013), p. 409ff.; www.geert-hofstede.com (2013).
Country
Uncertainty Avoidance
Brazil
76
China
30
Germany
65
Hong Kong
29
India
40
Japan
92
Netherlands
53
Pakistan
70
United States
46
98
3.2.4 Sociocultural Environment
Hofstede’s 4+1 Culture Dimensions
Long-term orientation
With long-term orientation,
members of the culture are very
forward-looking, and value
perseverance and economical
behavior (e.g. thriftiness). If a
culture is characterized by shortterm orientation, its members
prioritize values connected to the
past and present, such as respect
for tradition.
See Homburg et al. (2013), p. 409ff.; www.geert-hofstede.com (2013).
Country
Long-Term Orientation
Brazil
65
China
118
Germany
31
Hong Kong
96
India
61
Japan
80
Netherlands
44
Pakistan
0
United States
29
99
3.2.4 Sociocultural Environment
Hofstede’s 4+1 Culture Dimensions
Strengths
• Large scale sample (116,000)
• Dimensions tap into deep cultural values and make significant comparisons
between national cultures possible
• Highly relevant dimensions for international managers
Weaknesses
• Cultural homogeneity of nations (assumption)
• Population of a single industry and a single multinational company (IBM)
• Overlapping discrimination problems between certain dimensions
• Definition of cultures may be different from country to country
See Hollensen (2014), p. 247.
100
3.2.4 Sociocultural Environment
Trompenaars’ Additional Dimensions
Emotionality (affective vs. neutral cultures)
• Are feelings and emotions displayed openly or kept concealed?
• Do people rather use affective or rational aspects to make judgments?
Quality of relationship (specific vs. diffuse cultures)
• Are different living situations strictly separated from another?
Attitudes towards the personal environment (self determined vs.
heteronomous cultures)
• Can individuals dominate the environment (including nature)?
• Do people respond to change with open minds or skepticism?
• Do individuals focus on themselves or others?
Homburg et al. (2013), p. 413.
101
3.2.4 Sociocultural Environment
High- and Low-Context Cultures
Characteristica
Low-context (e.g.
Communication
Explicit, direct
Implicit, indirect
Sense of self and space
Informal handshakes
Formal hugs, bows, and handshakes
Dress and appearance
Varies widely, dress for success
Indication of position in society,
religious rule
Food and eating habits
Eating is a necessity, fast food
Eating is social event
Time consciousness
Linear, exact, promptness is valued,
time = money
Elastic, relative, time = relationships
Family and friends
Nuclear family, self-oriented,
value youth
Extended family, other oriented,
loyalty
Values and norms
Independence, confrontation of conflict
Group conformity, harmony
Beliefs and attitudes
Egalitarian, challenge authority,
gender equity
Hierarchical, respect for authority,
gender roles
Mental process and learning
Linear, logical, sequential, problem
solving
Lateral, holistic, accepting
life’s difficulties
Business/work habits
Deal oriented, rewards based on
achievement
Relationship oriented, rewards based
on seniority
Hollensen (2014), p. 238.
)
High-context (e.g.
)
102
3.2.4 Sociocultural Environment
Hall’s Context Dimension of Culture
Low-context cultures
• Rely on spoken and written
languages for meaning
• Senders of messages encode their
messages, expecting that receivers
will accurately decode the words
used to gain a good understanding of
the intended message.
High-context cultures
• Use and interpret more of the elements surrounding the message to develop
their understanding of the message.
• The social importance + the knowledge of the person + the social setting add
extra information.
See Homburg et al. (2013), p. 413f; Hollensen (2014), p. 237f.; Usunier (2013).
103
3.2.4 Sociocultural Environment
Onion Ring Model of Culture
Symbols
Heroes
Rituals
Values
Trompenaars (1993).
104
3.2.4 Sociocultural Environment
The Iceberg Model of Culture
Iceberg
Hollensen (2014), p. 235.
105
3.2.4 Sociocultural Environment
Elements of Culture
Elements
• Language
• Manners and customs
• Technology and material culture
• Social institutions
• Education
• Values and attitudes
• Aesthetics
• Religion
See Hollensen (2014), p. 237ff.
106
3.2.4 Sociocultural Environment
Language
Verbal language
• syntax
• semantics
alphabetic
language systems
logographic
language systems
i.e. English, German
i.e. Chinese, Japanese
• phonology
• morphology
characters
symbols, intonation
pronunciation
interpretation of
symbolic meaning
d-o-g
d-r-a-g-o-n
dog
(guo)
See Hollensen (2014), p. 239ff.
dragon
(long)
107
3.2.4 Sociocultural Environment
Language
Mercedes Benz
“ben chi“
“run fast“
BMW
“bao ma“
“race-horse“
Coca Cola
“ke kou ke la” “tasty and happy“
“Sheng Lu”
“Ye Ge ”
Enke/Geigenmüller (2014).
108
3.2.4 Sociocultural Environment
Language
Mistranslation
Fiat Uno
Toyota MR2
Chevrolet Nova
Japanese hotel notice to guests:
“You are invited to take advantage of the chambermaid.”
Bangkok dry cleaner to potential customers
“Drop you trousers here for best results.”
A Roman laundry innocently suggests:
“Ladies, leave your clothes here and spend the afternoon having a good time.”
See Hollensen (2014), p. 240f.
109
3.2.4 Sociocultural Environment
Manners and Customs
Relevance of manners and customs
• Negotiation
• Product usage and positioning
• Gifts
When and what to
give as gifts
When
China
Japan
Mexico
India
Chinese New Year
Oseibo (Jan, 1st.)
Christmas/New Year
Hindu Diwali festival
Recommend
Modes gifts like
books, ties, pens
Scotch, brandy, round
fruits
Desk clocks, fine
pens, gold lighters
Sweets, nuts, and
fruits, candleholders
To be avoided
Clocks, Taiwanese
products
Gifts that come in sets Sterling silver items,
of 4 or 9
food baskets
See Hollensen (2014), p. 242.; Czinkota/Ronkainen (2013), p. 71ff.
Leather objects,
snake images
110
3.2.4 Sociocultural Environment
Influences of Religions
See Czinkota/Ronkainen (2013), p. 68.
111
3.2.4 Sociocultural Environment
Religions of the World
See Czinkota/Ronkainen (2013), p. 69.
112
3.2.4 Sociocultural Environment
Aesthetic Differences
Relevant characteristics
• Symbolism of colors, forms, and music
• taste
See Czinkota/Ronkainen (2013), p. 241.
113
3.2.4 Sociocultural Environment
Aesthetics
Aesthetic differences - taste
malty
sweet
alcoholic
dry
persistent taste
fruity
furry
hoppy
bitter
burning
watery
metallic
114
3.2.4 Sociocultural Environment
Aesthetics - Example
115
3.2.4 Sociocultural Environment
Values and Attitudes
116
3.2.5
The (Corporate) Social Responsibility Orientation
117
3.2.5 The (Corporate) Social Responsibility Orientation
Social Responsibility
Hollensen (2014), p. 123ff.
118
3.2.5 The (Corporate) Social Responsibility Orientation
Social Responsibility
Considering your own values, how important is environmental protection for you?
Very important
Eurobarometer (2014), p. 12.
Quite important
Quite unimportant
Unimportant
I do not know
119
3.2.5 The (Corporate) Social Responsibility Orientation
Social Responsibility
Which measures shall have priority to protect the environment?
Save energy at home
Try to use as often as possible public transportation
Reduce waste by higher packages or boycott of
certain warped goods
Buy environment-friendly products
Buy local products
Buy cars with low energy consumption and
pollution
Consider environmental aspects of greater
investments (voyages, cars, houses)
75%
43%
Separation of garbage and recyclables
23%
64%
23%
60
44%
14%
12%
42
9%
40 %
37%
7%
6%
24%
10%
Willingness to pay higher taxes
EUROBAROMETER Spezial 295 (2008).
120
3.2.5 The (Corporate) Social Responsibility Orientation
Case Nestlé Kit Kat
23%
23%
14%
12%
9%
7%
6%
Hollensen (2014), p. 123ff.
121
3.2.5 The (Corporate) Social Responsibility Orientation
Corporate Social Responsibility
Definition
Corporate social responsibility encompasses not only what companies do with
their profits, but also how they make them.
It goes beyond philanthropy and compliance and addresses how companies
manage their economic, social, and environmental impacts, as well as their
relationships in all key spheres of influence: the workplace, the marketplace,
the supply chain, the community, and the public policy realm.
www.hks.havard.edu (2013).
122
3.3
Micro Environment
123
3.2.4 Micro Environment
Development of a Firm’s Int. Competitiveness
Hollensen (2014), p. 105.
124
3.3.1 Analysis of National Competitiveness
125
3.3.1 Analysis of National Competitiveness
Analysis of National Competitiveness (Porter’s Diamond)
Chance
Firm strategy,
structure,
and rivalry
Factor
conditions
Demand
conditions
Related and
supporting
industries
See Hollensen (2014), p. 104ff.
Government
126
3.3.1 Analysis of National Competitiveness
Analysis of National Competitiveness (Porter’s Diamond)
See Hollensen (2014), p. 104ff.
127
3.3.1 Analysis of National Competitiveness
Analysis of National Competitiveness (Porter’s Diamond)
Factor conditions
Demand conditions
• Climate
• Nature of home demand
• Physical infrastructure
• Size of home demand
• Natural resources
• Economies of scale
• Educational system
• Transportation costs
• Human resources
• Buyer sophistication
• Technological infrastructure
• Capital
See Hollensen (2014), p. 104ff.
128
3.3.2
Competitive Analysis in an Industry
129
3.3.2 Competitive Analysis in an Industry
Porter’s Five Forces Model
New entrants
Industry level
Market
competitors
Suppliers
Market level
Buyers
Intensity
of rivalry
Substitutes
See Hollensen (2014), p. 109ff.
130
3.3.2 Competitive Analysis in an Industry
Porter’s Five Forces Model
Market competitors
• Concentration of industry
• Rate of market growth
• Structure of costs
• Degree of differentiation
• Switching costs
• Exit barriers
See Hollensen (2014), p. 110.
131
3.3.2 Competitive Analysis in an Industry
Porter’s Five Forces Model
Bargaining power of suppliers
• Supply is dominated by a few companies
• Products are unique
• High switching costs
• Forward integration is possible
• Backward integration is unlikely
• Market is not an important customer to supplier group
See Hollensen (2014), p. 110f.
132
3.3.2 Competitive Analysis in an Industry
Porter’s Five Forces Model
Bargaining power of buyers
• Buyers are concentrated and/or purchase in large volumes
• Backward integration is likely
• Products are standardized
• Many suppliers exist
• Buyers earn low profits
• Industry product is unimportant to quality of buyer’s products, but price is
important
See Hollensen (2014), p. 111.
133
3.3.2 Competitive Analysis in an Industry
Porter’s Five Forces Model
Substitutes
• Buyer’s willingness to substitute
• Relative price and performance of substitutes
• Costs of switching
New entrants
• Economies of scale
• Product differentiation and brand identity
• Capital requirements in production
• Switching costs
• Access to distribution channels
See Hollensen (2014), p. 111f.
134
3.3.3
Value Chain Analysis
135
3.3.3 Value Chain Analysis
The Roots of Performance and Competitive Advantage
Performance
Tangible
Assets
Competitive advantage
Core competences
Competences
Resources
See Hollensen (2014), p. 119.
Intangible
Assets
136
3.3.3 Value Chain Analysis
Benchmarking
See Hollensen (2014), p. 120f.
137
3.4
Market Research and Information Systems
138
3.4.1
Market Research
139
3.4.1 Market Research
Tasks of Int. Marketing Research by Decision Phase
Phase 1:
Deciding whether to
internationalize
Phase 2:
Deciding which markets
to enter
Assessment of
•
Global market opportunities
•
Competitiveness of firms
•
Global demand vs. domestic demand
Assessment of
•
Local competition
•
Political risks/trade barriers
•
Psychic distance
Phase 3:
Deciding how to enter
foreign markets
Phase 4:
Designing the international
marketing program
Phase 5:
Implementing/ controlling the
international marketing
program
See Hollensen (2014), p. 175f.
Assessment of
•
Behavior of local competition and potential intermediaries
•
Transport costs
•
Government requirements
Assessment of
•
Buyer behavior
•
Competitive practice
• Available distribution channels
•
Media and promotional channels
Assessment of
•
Negotiation styles by culture
•
Sales by product line, etc.
•
Contribution margin
•
Marketing expenses per market
140
3.4.1 Market Research
Categorization of Data for Assessment of Market Potential
Hollensen (2014), p. 176.
141
3.4.1 Market Research
Secondary Research
Advantages
Disadvantages
• Less expensive
• Non-availability of data
• Less time consuming
• Reliability of data
• Low level of commitment
• Data classification
• No constraints by overseas customs
• Comparability of data
• Speed
• Data privacy concerns
How to judge the reliability of data sources???
See Hollensen (2014), p. 177ff.
142
3.4.1 Market Research
Comparing Qualitative and Quantitative Research
Characteristic
Quantitative
Qualitative
Objective
To quantify data and generalize the
results to the population of interest
To gain an initial understanding of
underlying reasons and motives
Type of research
Descriptive and/or causal
Exploratory
Flexibility
Low due to standardized, structured
questionnaires
High due to use of two-way
communication
Sample size
Large
Small
Choice of respondents
Representative sample of
population
Persons with considerable
knowledge of problem
Information per respondent
Low
High
Data analysis
Statistical summary
Subjective; interpretative
Ability to replicate
High
Low
Interviewer requirements
No special skills
Special skills required
Time consumption
High during design phase; low
during analysis phase
Low during design phase; high
during analysis phase
Hollensen (2014), p. 182.
143
3.4.1 Market Research
Research Design Considerations
What is the research problem? What are the objectives?
What research approach should be used?
What is the best contact method?
What are the details of the sampling plan?
What is the contact medium?
How should the data be analyzed?
See Hollensen (2014), p. 184.
144
3.4.1 Market Research
Research Design Considerations
One (sub)culture
Several ethnics
One nation
One-cultural-research
Cross-culturalresearch
Several nations
Cross-nationalresearch
Cross-nationalresearch
See Berndt/Altobelli/Sander (2010), p. 47.
145
3.4.1 Market Research
Problems of Cross-National-Research
Difficulties of international market research
• Suitable data collection methods
• Cross-national equivalence of measuring instruments:
Question equivalence
See Hollensen (2014), p. 183ff.
146
3.4.1 Market Research
Problems of Cross-National-Research
Difficulties of international market research
• Response equivalence:
• Social acceptability of answers
• Communication patterns
vs.
• Tendency to extreme values
• Tendency to mean values
• Tendency to “yes”
&
• General usage of language
See Hollensen (2014), p. 183ff.
147
3.4.2
International Marketing Information System
148
3.4.2 International Marketing Information System
International Marketing Information System
An international marketing information system is an interacting
organization of people, systems, and processes devised to create a
regular, continuous and orderly flow of information essential to the
marketer’s problem-solving and decision-making activities.
Hollensen (2014), p. 197.
149
4
Market Entry Strategies
150
Structure
1
2
3
4
5
6
7
Marketing Basics
The Decision Whether to Internationalize
Deciding Which Markets to Enter
Market Entry Strategies
4.1 Segmentation, Targeting, and Positioning
4.2 Entry Modes
4.2.1 Export Modes
4.2.2 Intermediate Modes
4.2.3 Hierarchical Modes
4.3 Timing Decisions
Global Marketing Strategies
International Marketing Mix
Implementing and Coordinating the Intern. Marketing
151
Learning Objectives
In this chapter you will become familiar with:
 Explore how international marketing screens potential markets
 Distinguish between preliminary and ‘fine-grained‘ screening
 Realize the importance of segmentation in the formulation of the
global marketing strategy
 Choose among alternative market expansion strategies
152
4.1
Segmentation, Targeting, and Positioning
153
3.1 The International Market Selection Process
International Market-Screening Model
Macro environment
Micro environment
The firm
• Degree of Internationalization
Step 1: Selection of segmentation criteria
and overseas experience
• Size/amount of resources
• Type of industry/nature of the
business
• Internationalization goals
• Existing networks of relationship
Step 2: Development of segments
Step 3: Screening of segments
Step 4: Microsegmentation
Market entry
See Hollensen (2014), p. 263.
154
4.1 Segmentation, Targeting, and Positioning
Business Environment Risk (BERI) Index
Criteria included in the overall BERI Index
• Political stability
• Monetary inflation
• Economic growth
• Balance of payments
• Currency convertibility
• Enforceability of contracts
• Labor cost/productivity
• Bureaucratic delays
• Short-term credit
• Communications
• Long-term loans/venture capital
• Local management
• Attitudes
• Professional services
• Nationalization
See Hollensen (2014), p. 268.
155
4.1 Segmentation, Targeting, and Positioning
The Market Attractiveness/Competitive Strength Matrix
• A countries: primary
markets offering the best
opportunities for long-term
strategic development
• B countries: secondary
markets where
opportunities are there but
risk is high
• C countries: tertiary
markets with high risk
Hollensen (2014), p. 269.
156
4.1 Segmentation, Targeting, and Positioning
The Market Attractiveness/Competitive Strength Matrix
Dimensions of market/country attractiveness
• Market size
• Market growth
• Buying power of customers
• Market seasons
• Average industry margin
• Competitive conditions
• Market prohibitive conditions
• Government regulations
• Infrastructure
• Economic and political stability
• Psychic distance
See Hollensen (2014), p. 270.
157
4.1 Segmentation, Targeting, and Positioning
The Market Attractiveness/Competitive Strength Matrix
Dimensions of competitive strength
• Market share
• Marketing ability and capacity
• Products to fit market demands
• Price
• Contribution margin
• Image
• Technology position
• Product quality
• Market support
• Quality of distributors
• Financial resources
• Access to distribution channels
See Hollensen (2014), p. 270.
158
4.1 Segmentation, Targeting, and Positioning
Development of Sub-Segments/Micro-Segments
Criteria to develop segments
• Demographics
• Lifestyles/Psychographics
• Consumer motivations
• Buyer behavior
Hollensen (2014), p. 272f.
159
4.1 Segmentation, Targeting, and Positioning
Example International Market Segmentation Process
Hollensen (2014), p. 274.
160
4.1 Segmentation, Targeting, and Positioning
International Positioning
Positioning is the process of developing strategies for ‘filling a slot’ in the
mind of target customers.
General positioning strategies
• Attributes or benefit
• Quality and price
• Use or user
• Competition
See Keegan/Green (2013), p. 237ff.
161
4.1 Segmentation, Targeting, and Positioning
International Positioning
“Global consumer culture positioning (GCCP) is defined as a strategy that
identifies the brand as a symbol of a particular global culture or segment.”
“Foreign consumer culture positioning (FCCP) is defined as a strategy that
associates the brand’s users, use occasions, or production origins with a
foreign country or culture.”
“Local consumer culture positioning (LCCP) is defined as a strategy that
associates the brand with local cultural meanings, reflects the local culture’s
norms, portrays the brand as consumed by local people.”
Keegan/Green (2013), p. 240ff.
162
4.2
Entry Modes
163
4.2 Entry Modes
Types of Entry Modes
risk
financial commitment
Hierarchical
Intermediate
Export
flexibility
control
See Hollensen (2014), p. 317.
164
4.2 Entry Modes
Model for Entry Mode Decision
Factors affecting the foreign market entry mode decision
Hollensen (2014), p. 322.
165
4.2.1 Export Modes
166
4.2 Entry Modes
Success of Export Modes
Partner mindshare
• Measurement of the strength of a relationship in terms of:
• Trust
• Commitment
• Cooperation
• High influence on sales performance
See Hollensen (2014), p. 335.
167
4.2 Entry Modes
Indirect Export Modes
Indirect export modes
• Sale is like a domestic sale.
• Most appropriate for firms with limited international expansion objectives
• Appropriate for firms using international sales as a means of disposing of
surplus production
See Hollensen (2014), p. 336ff.
168
4.2.1 Export Modes
Indirect Export Modes
Indirect entry modes
• Export buying agent
• Broker
• Export management company
• Trading company
• Piggyback
See Hollensen (2014), p. 338ff.
169
4.2.1 Export Modes
Export Management Company
Export management company
• Specialist companies that act as the export department
• EMCs spread selling, administrative, and transport costs because of
economies involved making large shipments of goods from a number of
companies
• EMCs offer far wider exposure for client products at a lower cost
Disadvantages export management company
• EMC specialization may not correspond to supplier objectives
• EMCs are paid by commission and may focus on opportunities that enhance
returns quickly
• EMCs may represent too many clients to provide outstanding service to any
single one
• EMCs may carry competing products
See Hollensen (2014), p. 338ff.
170
4.2.1 Export Modes
Piggyback Considerations
Disadvantages for the carrier
• Quality control concerns
• Continuity of supply issues
Disadvantages for the rider
• Loss of control over marketing of products
• Potential lack of commitment from carrier
• Carrier may wish to acquire rider
See Hollensen (2014), p. 340f.
171
4.2.1 Export Modes
Piggyback Considerations
Advantages for the carrier
• Enables use of excess export capacity
• May fill gap in product line
• Broadens product range without development and manufacturing costs
Advantages for the rider
• No need for distribution system
• Opportunity to learn from carrier
See Hollensen (2014), p. 340.
172
4.2.1 Export Modes
Direct Export Modes
Direct export modes
• Sells directly to a buyer or to an importer in a foreign market
• Export through foreign-based agents
• Export through foreign-based distributors
How to find an intermediary?
See Hollensen (2014), p. 340f.
173
4.2.1 Export Modes
Matchmaking Between Manufacturer’s Potential Partners
Hollensen (2014), p. 343.
174
4.2.1 Export Modes
Cooperative Export Modes
Functions of export marketing groups
•
•
•
•
•
•
•
•
Exporting in the name of the association
Consolidating freight, negotiating rates, and chartering ships
Performing market research
Appointing selling agents abroad
Obtaining credit information and collecting debts
Setting prices for export
Allowing uniform contracts and terms of sale
Allowing cooperative bids and sales negotiation
See Hollensen (2014), p. 349.
175
4.2.1 Export Modes
Advantages and Disadvantages of Export Modes
Export Mode
Advantages
Disadvantages
Indirect exporting
• Limited commitment and investment
• High degree of market diversification
possible
• Minimal risk
• No export experience required
• No control of marketing mix elements
other than product
• Costs of domestic companies reduces
profit to the producer
• Lack of contact to the market
Direct exporting
• Access to local market and contact
with potential customers
• Shorter distribution chain
• Market knowledge acquired
• More control over marketing mix
• Local selling support and services
available
• Little control of market price
• Some investments in sales organizations
(contact from home base with distributors
or agents)
• Cultural differences, providing
communication problems and information
filtering
Export marketing
groups (EMG)
• Shared costs and risks of
internationalization
• Provide complete product line or
system sales to the customer
• Risk of unbalanced relationships
• Participating firms are reluctant to
give up their complete independence
Hollensen (2014), p. 350.
176
4.2.2 Intermediate Entry Modes
177
4.2.2 Intermediate Entry Modes
Intermediate Modes
Contract manufacturing
Licensing
Franchising
Strategic alliances/joint ventures
Factors encouraging foreign market production
• Desirability of being close to foreign customers
• Foreign production costs are low
• Transportation costs may render heavy products non-competitive
• Tariffs can prevent entry of an exporter’s products
• Government preference for national suppliers
See Hollensen (2014), p. 356ff.
178
4.2.2 Intermediate Entry Modes
Contract Manufacturing
Contract manufacturing is the term used to refer to manufacturing which is
outsourced to an external partner, one that specializes in production and
production technology.
• Quality and specification requirements are important
• Offers substantial flexibility
• Typical problems with contract manufacturing:
• Delivery
• Product warranties
• Fulfilling additional orders
See Hollensen (2014), p. 356ff.
179
4.2.2 Intermediate Entry Modes
Licensing
Licensing is the transfer of usage rights for the intellectual property of the
licensor to the licensee for a lump sum fee or for royalties.
Typical rights given in a license agreement
• Patent covering a product or process
• Manufacturing know-how not subject to a patent
• Technical advice and assistance
• Marketing advice and assistance
• Use of a trade mark/trade name
See Homburg et al. (2013), p. 431; Hollensen (2014), p. 358ff.
180
4.2.2 Intermediate Entry Modes
Intermediate Modes
Motives for licensing out
• Licensor firm will remain technologically superior in its product development
• Licensor is too small to have financial, managerial or marketing expertise for
overseas investment
• Product is at end of product life cycle in advanced countries but stretching
product life cycle is possible in less developed countries
• Opportunity for profit on key components
• Government regulations may restrict foreign direct investment
• Constraints may be imposed on imports
See Hollensen (2014), p. 359.
181
4.2.2 Intermediate Entry Modes
Intermediate Modes
Licensing in
Hollensen (2014), p. 360.
182
4.2.2 Intermediate Entry Modes
Franchising
Franchising refers to the exchange of rights between a franchisor and
franchisee, such as the right to use a total business concept including use of
trade marks, against some agreed royalty.
Franchising is a marketing-oriented method of selling a business service,
often to small independent investors who have working capital but little or no
prior business experience.
Major types of franchising
• Product and trade name franchising
• Business format ‘package’ franchising
See Hollensen (2014), p. 361f.
183
4.2.2 Intermediate Entry Modes
Franchising
Business format ‘packages’
• Trade marks/trade names/designs
• Patents and copyrights
• Business know-how/trade secrets
• Geographic exclusivity
• Store design
• Market research
• Location selection
Key success factors in the franchisor-franchisee relationship
• Integrity of business system
• Capacity for renewal of business system
See Hollensen (2014), p. 361ff.
184
4.2.2 Intermediate Entry Modes
Intermediate Modes
Joint ventures are partnerships between two or more parties. It involves two
‘parents’ creating the ‘child’. The ‘child’ is the joint venture acting in the market.
Reasons for using joint ventures
• Complementary technology or management skills can lead to new
opportunities.
• Firms with partners in host countries can increase speed of market entry.
• Less developed countries may restrict foreign ownership.
• Costs of global operations in R&D and production can be shared.
See Hollensen (2014), p. 366.
185
4.2.2 Intermediate Entry Modes
Intermediate Modes
Joint venture types
• Upstream-based collaboration (Y coalition)
• Downstream-based collaboration (Y coalition)
• Upstream/downstream-based collaboration (X coalition)
See Hollensen (2014), p. 357ff.
186
4.2.2 Intermediate Entry Modes
Intermediate Modes
Stages in joint venture formation
1: Joint venture objectives
2: Cost/benefit analysis
3: Partner selection
4: Business plan development
5: Joint venture agreement
6: Contract writing
See Hollensen (2014), p. 368f.
7: Performance evaluation
187
4.2.2 Intermediate Entry Modes
Intermediate Modes
Principal objectives for forming a joint venture
• Entering new markets
• Reducing manufacturing costs
• Developing and diffusing technology
Factors to consider during the cost/benefit analysis
• Financial commitment
• Synergy
• Management commitment
• Risk reduction
• Control
• Long-run market penetration
See Hollensen (2014), p. 368f.
188
4.2.2 Intermediate Entry Modes
Intermediate Modes
Stages for partner selection
• Establishing a desired partner profile
• Identifying joint venture candidates
• Screening and evaluating possible joint venture partners
• Initial contact/discussion
• Choice of partner
Relevant issues of the business plan
• Ownership split
• Management
• Production
• Marketing
See Hollensen (2014), p. 369ff.
189
4.2.2 Intermediate Entry Modes
Intermediate Modes
Joint-venture agreement
• Is determined by the relative bargaining power of
both prospective partners.
Contract writing
• ‘Marriage’ conditions
• ‘Divorce’ conditions
• Future of the child after ‘divorce’
Performance evaluation
• Should be measured in a long-term orientation
• Not only conventional output measures
• Joint ventures need considerable time to be measured by cash flow,
market share, etc.
See Hollensen (2014), p. 371f.
190
4.2.2 Intermediate Entry Modes
Intermediate Modes
Sources of potential conflicts
• Changes in bargain power
• Diverging goals
• Double management
• Repatriation of profits
• Mixing cultures
• Shared equity
• Developing trust
• Providing an exit strategy
See Hollensen (2014), p. 372ff.
191
4.2.2 Intermediate Entry Modes
Intermediate Modes
Strategic alliances are partnerships between two or more parties. The formal
difference between a joint venture and a strategic alliance is that a strategic
alliance is typically a non-equity cooperation.
Parent
firm
A
Parent
firm
B
Parent
firm
A
Parent
firm
B
Joint venture C
See Hollensen (2014), p. 366.
192
4.2.2 Intermediate Entry Modes
Advantages and Disadvantages of Contract Manufacturing
Export Mode
Advantages
Disadvantages
Contract
manufacturing
•
•
•
•
•
•
•
•
•
•
Permits low-risk market entry.
No local investment
Retention of control over R&D,
marketing, and sales/after-sales
service.
Avoids currency risks and financing
problems.
A locally made image assists in sales
to governments.
Entry to market otherwise protected by
tariffs, barriers.
Possible cost advantages if local costs
are lower.
Avoids intra-corporate transfer-pricing
problems that can arise with a
subsidiary.
Hollensen (2014), p. 376.
•
•
•
•
Transfer of production know-how is difficult.
Contract manufacturing is only possible when a
satisfactory and reliable manufacturer can be
found.
Extensive technical training will often need to be
given to the local manufacturer’s staff.
As a result, at the end of the contract, the
subcontractor could become a formidable
competitor.
Control over manufacturing quality is difficult to
achieve.
Possible supply limitation if the production is
taking place in developing countries.
193
4.2.2 Intermediate Entry Modes
Advantages and Disadvantages of Licensing
Export Mode
Advantages
Disadvantages
Licensing
•
•
•
•
•
•
•
•
•
•
Increases the income on products.
Permits entry into markets that are
otherwise closed on account of high rates
of duty, import quotas, etc.
Viable option where manufacturer is near
the customer’s base.
Requires little capital investment.
The licensor is not exposed to the danger
of nationalization or expropriation of assets.
Because of the limited capital requirements,
new products can be rapidly exploited.
Licensor can take immediate advantage of
the licensee’s local marketing and
distribution organization and of existing
customer contacts.
Protects patents, especially in countries
that give weak protection for products not
produced locally.
Local manufacture may also be an
advantage in securing government
contracts.
•
•
•
•
•
•
•
Licensor is ceding certain sales territories to
the licensee. If they fail to live up their
expectations, renegotiations may be expensive
When the licensing agreement expires, the
licensor may find a competitor in the former
licensee.
The licensee may prove less competent than
expected at marketing activities. Costs may
grow faster than income.
The licensee may not fully exploit the market
and leave it open to entry of competitors.
Licensee fees are normally a small percentage
of the turnover and lower than the profits of a
company’s own manufacturing operation.
Lack of control over licensee operations.
Quality control of the product is difficult.
Negotiations with the licensee, and sometimes
with the government, are costly.
Hollensen (2014), p. 376.
194
4.2.2 Intermediate Entry Modes
Advantages and Disadvantages of Franchising
Export Mode
Advantages
Disadvantages
Franchising
•
•
•
•
•
•
•
Greater degree of control
compared to licensing.
Low-risk, low-cost entry mode (the
franchisees are the ones investing
in the necessary equipment and
know-how)
Using highly motivated business
contacts with money, local market
knowledge, and experience.
Ability to develop new and distant
international markets, relatively
quickly and on a larger scale than
otherwise possible
Generating economies of scale in
marketing to international
customers
Precursor to possible future direct
investments in foreign market.
•
•
•
•
•
•
The search for competent franchisees can
be
expensive and time consuming.
Lack of full control over franchisees operations,
resulting in problems with cooperation,
communications, quality control, etc.
Costs of creating and marketing a unique package of
products and services recognized internationally
Costs of protecting goodwill and brand name.
Problems with local legislation, including transfer of
money, payments of franchise fees and governmentimposed restrictions on franchise agreements.
Opening up internal business knowledge may create
potential future competitor
Risk to the company’s international profile and
reputation if some franchisee underperforms (‘free
riding’ on valuable brand names).
Hollensen (2014), p. 377.
195
4.2.2 Intermediate Entry Modes
Advantages and Disadvantages of Joint Ventures
Export Mode
Advantages
Disadvantages
Joint
Ventures
•
•
•
•
•
•
•
•
•
•
Access to expertise and
contacts in local markets.
Reduced market and political
risk.
Shared knowledge and
resources: compared to wholly
owned subsidiary, less capital
and fewer management
resources are required.
Economies of scale by pooling
skills and resources.
Overcome host government
restrictions.
May avoid local tariffs and nontariff barriers.
Shared risk of failure.
Less costly than acquisitions.
Possibly better relations with
national governments through
having a local partner.
•
•
•
•
•
•
•
•
•
Objectives of the respective partners may be
incompatible, resulting in conflict.
Contributions to joint venture can become
disproportionate.
Loss of control over foreign operations. Large
investments of financial, technical or managerial
resources favor greater control than possible in a joint
venture.
Completion might overburden a company’s staff.
Partners may become locked into long-term investments
from which it is difficult to withdraw.
Transfer pricing problems as goods pass between
partners.
The importance of joint ventures might change over time.
Cultural differences may result in possible differences in
management culture
Loss of flexibility and confidentiality
Problems of management structures
Hollensen (2014), p. 377.
196
4.2.3 Hierarchical Entry Modes
197
4.2.3 Hierarchical Entry Modes
Hierarchical Modes
Hierarchical modes are entry modes, where the firm completely owns and
controls the foreign entry mode.
The degree of control that head office can exert on the subsidiary will depend
on how many and which value chain functions can be transferred to the
market.
Domestic-based representatives
Resident sales representatives/
foreign sales subsidiary
Sales and production subsidiary
Region centers
See Hollensen (2014), p. 386.
198
4.2.3 Hierarchical Entry Modes
Domestic-Based Sales Representatives
Domestic-based sales representatives reside in the home country of the
manufacturer and travel abroad to perform the sales function.
Domestic-based vs. resident sales representatives
• Order making or order taking
• Nature of the product
See Hollensen (2014), p. 387f.
199
4.2.3 Hierarchical Entry Modes
Resident Sales Representatives
Resident sales representatives: The sales function is transferred to the
foreign market.
Foreign branch is an extension and a legal part of the firm (often called sales
office). Taxation of profits takes place in the manufacturer’s country.
Foreign subsidiary is a local company owned and operated by a foreign
company under the laws and taxation of the host country.
See Hollensen (2014), p. 387f
200
4.2.3 Hierarchical Entry Modes
Sales and Production Subsidiary
Sales and production subsidiary: The production and the sales function are
transferred to the foreign market.
Reasons for establishing local production facilities
• To defend existing business
• To gain new business
• To save costs
• To avoid government restrictions
See Hollensen (2014), p. 389f.
201
4.2.3 Hierarchical Entry Modes
Region Centers
Region centers are regional headquarters or appointment of a ‘lead country’,
which will usually play the role of a coordinator and stimulator with reference
to a single homogeneous group.
Coordinating role of region centers
• Country and business strategies are mutually coherent.
• One subsidiary does not harm another.
• Synergies are identified and exploited.
Stimulator role of region centers
• Translation of global products into local country strategies
• The development of local subsidiaries
See Hollensen (2014), p. 391f.
202
4.2.3 Hierarchical Entry Modes
Region Centers
Hollensen (2007), p. 362f.
203
4.2.3 Hierarchical Entry Modes
Advantages and Disadvantages of Hierarchical Modes
Export Mode
Advantages
Disadvantages
Domestic-based
sales reprentative
•
Better control of sales activities
compared to independent
intermediaries.
Close contact with large customers in
foreign markets close to the home
country.
•
•
High travel expenses.
Too expensive in foreign markets, far
away from home country.
Full control of operation.
Eliminates the possibility that a national
partner gets a ‘fee ride’.
Market access.
Acquire market knowledge directly
(sales subsidiary).
Reduce transport costs (production
subsidiary).
Access to raw materials and labor
(production subsidiary).
•
High initial capital investment
required.
Loss of flexibility.
High risk (market, political, and
economic).
Taxation problems.
•
Foreign sales
branch/sales and
production
subsidiary
•
•
•
•
•
•
Hollensen (2014), p. 399.
•
•
•
204
4.2.3 Hierarchical Entry Modes
Advantages and Disadvantages of Hierarchical Modes
Export Mode
Advantages
Disadvantages
Region centers
•
•
•
•
•
Achieving potential synergies on a
regional/global scale.
Regional/global scale efficiency
Leverage learning on a cross-national
basis. Resources and people are
flexible and can be put into operating
units around the world.
Hollensen (2014), p. 398.
•
•
Increasing bureaucracy.
Limited national-level responsiveness
and flexibility.
A national manager can feel to have no
influence.
Missing communication between head
office and region centers.
205
4.3 Timing Decisions
206
4.3 Timing Decisions
Timing of International Market Entry
Waterfall strategy
Market
Entry
Country A
Country B
Country C
Country D
Country E
Time
A=lead country
See Homburg et al. (2013), p. 432.
B,C,D,E…=lag countries
207
4.3 Timing Decisions
Waterfall Strategy
Advantages
• Successive development and expansion of financial and human resources
(including personnel with marketing skills) facilitated by learning effects
• Temporal diversification of risks
• Marketing can be adjusted with respect to a later entry into other markets
• Potential extension of product life cycle
Disadvantage
• Risk of market entry by competitors
Situational factors favoring the waterfall strategy
• Necessity for reference markets (e.g. USA for South America)
• Longer product cycles
• Lower competitive intensity in international markets
See Homburg et al. (2013), p. 433.
208
4.3 Timing Decisions
Timing of International Market Entry
Sprinkler strategy
Market
Entry
Country A
Country B
Country C
Country D
Country E
Time
See Homburg et al. (2013), p. 432.
209
4.3 Timing Decisions
Sprinkler Strategy
Advantages
• Establishment of market entry barriers to thwart followers
• Regional/geographical diversification of risks
Disadvantages
• Increased short-term financial and human resource requirements
• Major losses if strategy fails
Situational factors favoring the sprinkler strategy
• Short product and technology life cycles
• Long R&D times
See Homburg et al. (2013), p. 433.
210
5
Global Marketing Strategies
211
Structure
1
2
3
4
5
6
7
Marketing Basics
The Decision Whether to Internationalize
Deciding Which Markets to Enter
Market Entry Strategies
Global Marketing Strategies
International Marketing Mix
Implementing and Coordinating the Intern. Marketing
212
Learning Objectives
In this chapter you will become familiar with:
-
The process of global marketing strategy formulation
-
Competitive strategies
-
Challenges of global marketing implementation
213
5 Global Marketing Strategies
Global Marketing Evolution
Czinkota/Ronkainen (2013), p. 208.
214
5 Global Marketing Strategies
Global Strategy
“A global strategy is to array the competitive advantages arising from
location, world-scale economies, or global brand distribution, namely, by
building a global presence, defending domestic dominance, and overcoming
country-by-country fragmentation.”
Kotabe/Helsen (2011), p. 254.
215
5 Global Marketing Strategies
Global Strategy Formulation
Czinkota/Ronkainen (2013), p. 214.
216
5 Global Marketing Strategies
Understanding and Adjusting the Core Strategy
Core strategy
• Begins with a clear definition of the business for which the
strategy is to be developed.
• The strategic business unit (SBU) represents groups
organized around product market similarities based on:
• Needs or wants to be met,
• End user customers to be targeted,
• Products or services used to meet needs of specific customers.
• Requires the participation of executives from different
functions.
See Czinkota/Ronkainen (2013), p. 214f.
217
5 Global Marketing Strategies
Understanding and Adjusting the Core Strategy
Market and competitive analysis
• Helps to balance risks, resource requirements, competitive
economies of scale, and profitability to gain stronger long-term
positions.
• Helps to understand the structure of the global industry and
identify the forces that drive competition and determine
profitability.
Internal analysis
• Examines the readiness and capability of the firm to
undertake strategic moves with its current resources.
See Czinkota/Ronkainen (2013), p. 215f.
218
5 Global Marketing Strategies
Understanding and Adjusting the Core Strategy
Formulating a global marketing strategy (I)
• Choice of competitive strategy
See Czinkota/Ronkainen (2013), p. 216f.
219
5 Global Marketing Strategies
Understanding and Adjusting the Core Strategy
Formulating a global marketing strategy (II)
• Country market choice
• Segments
See Czinkota/Ronkainen (2013), p. 217ff.
220
5 Global Marketing Strategies
Understanding and Adjusting the Core Strategy
Marketing related decisions will have to be made in four areas:
• The degree of standardization in the product offering.
• Marketing approach - Uniformity is sought in elements that are
strategic in nature, while taking care to localize necessary tactical
elements; this approach is called glocalization.
• Location and extent of value-adding activities.
• Competitive moves - Cross-subsidization may be the competitive
advantage needed for the long term.
See Czinkota/Ronkainen (2013), p. 222f.
221
5 Global Marketing Strategies
Understanding and Adjusting the Core Strategy
See Czinkota/Ronkainen (2013), p. 222f.
222
5 Global Marketing Strategies
Understanding and Adjusting the Core Strategy
Challenges of global marketing implementation
• Insufficient research and the tendency to over-standardize.
• Inflexibility in planning and implementation.
• Local resistance in the form of not-invented-here syndrome (NIH), which
occurs when country organizations are not part of the planning process,
or if adoption is forced on them by headquarters
How to avoid the NIH syndrome
• Encourage local managers to develop ideas for regional or global use.
• Maintain a product portfolio that includes local as well as regional and
global brands.
• Allow local managers control over their marketing budgets so that they
can respond to local customer needs and counter global competition.
See Czinkota/Ronkainen (2013), p. 224f.
223
5 Global Marketing Strategies
Localizing Global Marketing
• Globalization enhances the flow of information, leading to idea
exchange and strengthening of organizational values.
• Encourage personnel interchange to gain experience abroad.
• Coordinate and leverage resources of the corporation.
• Permit local managers to develop their own programs within specified
parameters and subject to approval.
• Minimize the influence of the NIH syndrome by using motivational
policies.
See Czinkota/Ronkainen (2013), p. 225f.
224
5 Global Marketing Strategies
Localizing Global Marketing
Organization structures
• Establish global or regional product managers and their support
groups at headquarters.
• The matrix structure is considered more effective in today’s global
marketplace.
• Execute global account management programs to build relationships
with important customers and allow development of internal systems
and interaction.
See Czinkota/Ronkainen (2013), p. 226f.
225
5 Global Marketing Strategies
Localizing Global Marketing
Corporate culture
• Affects and is affected by the manner in which a company holds
its operations together and makes them a single entity, and commits
to the global market place.
• The management development system has to be transparent; nonnational executives should have an equal chance for the fast track to
top management.
• Implement compensation and mobility policies to avail the best talent
regardless of job location.
See Czinkota/Ronkainen (2013), p. 227f.
226
6
International Marketing Mix
227
Structure
1
2
3
4
5
6
7
Marketing Basics
The Decision Whether to Internationalize
Deciding Which Markets to Enter
Market Entry Strategies
Global Marketing Strategies
International Marketing Mix
6.1 Product Decisions
6.2 Pricing Decisions
6.3 Sales Decisions
6.4 Communication Decisions
Implementing and Coordinating the Intern. Marketing
228
Learning Objectives
In this chapter you will become familiar with:
-
The standardization and adaptation possibilities of products
-
Pricing decisions for international products
-
Characteristics of sales decisions like the design and structure of
sales systems
-
Barriers to standardizing communication internationally
229
6 International Marketing Mix
Standardization versus Adaptation
Hollensen (2014), p. 455.
230
6 International Marketing Mix
Standardization versus Adaptation
Hollensen (2014), p. 456.
231
6 International Marketing Mix
Standardization versus Adaptation
Factors favouring standardization
Factors favouring adaptation
•
•
•
•
•
•
•
•
•
•
•
•
Economies of scale in R&D,
production and marketing
Global competition
Convergence of tastes and consumer
needs
Centralized management of
international operations
Easier communication, planning and
control
Stock cost reduction
Standardized concept is used by
competitors
See Hollensen (2014), p. 458; Czinkota/Ronkainen (2013), p. 358f.
•
Government and regulatory influences
Legal issues
Local competition
Differing consumer behavior patterns
Fragmented and decentralized
management with independent
country subsidiaries
Adapted concepts are used by
competitors
232
6 International Marketing Mix
Standardization versus Adaptation
Hollensen (2014), p. 457.
233
6.1
Product Decisions
234
6.1 Product Decisions
Main Product Decision
Basic alternatives for approaching international markets are:
• Sell the product as it is internationally.
• Modify the product for different countries or regions.
• Design new products for foreign markets.
• Incorporate all differences into one flexible product design and introduce it
globally.
See Czinkota/Ronkainen (2013), p. 380f.
235
6.1 Product Decisions
Cultural and Psychological Factors Affecting Product Adaptation
Consumption patterns
Patterns of purchase
• Is the product or service purchased by relatively the same consumer
income group from one country to another?
• Do the same family members motivate the purchase in all target countries?
• Do the same family members dictate brand choice in all target markets?
• Do most consumers expect a product to have the same appearance?
• Is the purchase rate the same regardless of the country?
• Are most of the purchases made at the same kind of retail outlet?
• Do consumers spend the same amount of time making the purchase?
Czinkota/Ronkainen (2013), p. 363.
236
6.1 Product Decisions
Cultural and Psychological Factors Affecting Product Adaptation
Consumption patterns
Patterns of usage
• Do most consumers use the product or service for the same purpose or
purposes?
• Is the product or service used in different amounts from one target area or
country to another?
• Is the method of preparation the same in all target countries?
• Is the product or service used along with other products or services?
Czinkota/Ronkainen (2013), p. 363.
237
6.1 Product Decisions
Cultural and Psychological Factors Affecting Product Adaptation
Psychological characteristics
Attitudes toward the product or service
• Are the basic psychological, social, and economic factors motivating the
purchase and use of the product the same for all target countries?
• Are the advantages and disadvantages of the product or service in the
minds of consumer basically the same from one country to another?
• Does the symbolic content of the product or service differ from one country
to another?
• Is the psychic cost of purchasing or using the product or service the same
for all countries?
• Does the appeal of the product or service for a cosmopolitan market differ
from one market to another?
Czinkota/Ronkainen (2013), p. 363.
238
6.1 Product Decisions
Cultural and Psychological Factors Affecting Product Adaptation
Psychological characteristics
Attitudes toward the brand
• Is the brand name equally known and accepted in all target countries?
• Are customer attitudes toward the package basically the same?
• Are customer attitudes toward pricing basically the same?
• Is brand loyalty throughout target countries for the product or service under
consideration?
Cultural criteria
• Does society restrict the purchase and/or use of the product or service to a
particular group?
• Is there a stigma attached to the product or service?
• Does the usage of the product or service interfere with tradition in one
or more of the target markets?
Czinkota/Ronkainen (2013), p. 363.
239
6.1 Product Decisions
Elements of a Product
See Kotabe/Helsen (2011), p. 332ff.
240
6.1 Product Decisions
Standardization vs. Adaptation of Core Product
Subject to standardization
• Physical product features such as product functions and quality attributes
Degree of standardization
• Uniform
• Similar
• Country specific
See Homburg et al. (2013), p. 436f.
241
6.1 Product Decisions
Standardization vs. Adaptation of Brand Name
Subject to standardization
• Brand name
• Brand logo
Standardization of brand names
• Translation
• Transliteration
• Transparency
• Transculture
See Homburg et al. (2013), p. 436f.; Czinkota/Ronkainen (2013), p. 366f.
242
6.1 Product Decisions
Standardization vs. Adaptation of Brand Positioning
Brand positioning refers to consumers’ perception of a brand as compared
with that of competitors’ brands, that is, the mental image that a brand, or the
company as a whole, evokes.
Degree of brand positioning standardization is the compatibility between
the definition of the target segments and the brand promises to these
segments.
See Homburg et al. (2013), p. 437; Czinkota/Ronkainen (2013), p. 364f.
243
6.1 Product Decisions
Standardization vs. Adaptation of Brand Positioning
7,500 Local Brands
Responsibility of local markets
140 Regional Strategic Brands
Responsibility of strategic business unit
and regional management
Examples
•Texicana
•Brigadeiro
•Rocky
•Soils
•Mackintosh
•Vittel
•Contadina
•Stouffer’s
•Herta
•Alpo
•Findus
45 Worldwide Strategic Brands
Responsibility of general management at
strategic business unit level
•Kit Kat
•Polo
•Cerelac
•Baci
10 Worldwide Corporate Brands
•Nestle
•Maggi
•Carnation •Perrier
•Buitoni
•L’Oreal
See Kotabe/Helsen (2011), p. 370.
•Mighty Dog
•Smarties
•After Eight
•Coffee-Mate
244
6.1 Product Decisions
Standardization vs. Adaptation of Brand Name
Packaging serves three major functions
• Protection
• Promotion
• User convenience
Barriers to standardization
• Cultural differences
• Legal issues
• Different ecological values
• Climate
• Different usage of packaging
See Homburg et al. (2013), p. 437; Czinkota/Ronkainen (2013), p. 367f.
245
6.2
Pricing Decisions
246
6.2 Pricing Decisions
Pricing
Relevance of pricing decisions
• The only element in the marketing mix that generates revenue.
• Serves as a means of attracting and communicating an offer to a potential
buyer.
• A competitive tool for dealing with rivals and substitutes.
• Used to position the product or service in the market.
• Pricing problems are technically identical in the domestic and international
market, but vary according to the degree of foreign involvement.
See Czinkota/Ronkainen (2013), p. 459f.
247
6.2 Pricing Decisions
Pricing Strategies
Alternative strategies for first-time pricing
• Skimming - achieve the highest possible
contribution in a short initial time period, and
then gradually lower the price as more
segments are targeted and more products
are available.
• Penetration pricing – offer products at a low
price to generate volume sales and achieve
high market share, to compensate for lower
per unit return.
Price
p
Time t
Price
p
• Market pricing – Determined based on
competitive prices; production and marketing
is adjusted to the price.
Time t
See Czinkota/Ronkainen (2013), p. 460f.
248
6.2 Pricing Decisions
Stages in Setting of Prices for Foreign Markets
Czinkota/Ronkainen (2013), p. 462.
249
6.2 Pricing Decisions
Structural Factors of Standardized vs. Differentiated Pricing
Price differentiation
Price standardization
Differences in:
• Average industry prices
• Internationalization of
competition
• Price segments
• Methods and importance
of special offers
• Importance of own
brands
• Strength of local
competitors
• Retailer Power
• Terms and conditions
consumer prices,
retail prices,
price positioning,
terms and conditions,
product line pricing,
special offers
• Homogenization of
competitive structures
• International activities
of large retail
organizations
• Low cost of obtaining
information
• Increased danger of
cross-border arbitrage
• Consumer preferences
• Price interest and
awareness
Hollensen (2014), p. 529f.
250
6.2 Pricing Decisions
Preparedness for
internationalization
A Taxonomy of International Pricing Practices
High
3 Multilocal
price setter
4 Global
price leader
1 Local
price follower
2 Global
price follower
Multilocal markets
Global markets
Low
Industry globalism
Hollensen (2014), p. 530.
251
6.2 Pricing Decisions
Incoterms
Incoterms
The internationally accepted standard definitions for terms of sale set by the
International Chamber of Commerce (ICC) since 1936.
They are grouped into four categories:
• E-terms - Seller delivers the goods to the buyer only at the former’s own
premises.
• F-terms - Seller delivers the goods to a carrier appointed by the buyer.
• C-terms - Seller contracts for carriage without assuming the risk of loss or
damage to the goods.
• D-terms - Seller bears all costs and risks to deliver goods to the destination
determined by the buyer.
See Hollensen (2014), p. 537f.
252
6.2 Pricing Decisions
Incoterms
EXW: Ex-works
Czinkota/Ronkainen (2013), p. 466.
FCA:
Free carrier
FAS:
Free alongside ship
FOB:
Free on board
CFR:
Cost and freight
CIF:
Cost, insurance,
and freight
CPT:
Carriage paid to
CIP:
carriage and
insurance paid to
DDP:
Delivered duty paid
DDU:
Delivered duty
unpaid
253
6.2 Pricing Decisions
Different Terms of Payment
Factors affecting terms of payment
• Practice in the industry
• Terms offered by competitors
• Relative strength of the buyer and the seller
Czinkota/Ronkainen (2013), p. 469ff.; Hollensen (2014), S. 539.
254
6.3
Sales Decisions
255
6.3 Sales Decisions
International Sales Decisions
Main areas of international sales decisions
• Design and structure of the sales system
• Sales logistics
• Structure and organization of the relationships to sales partners and key
accounts
• Design of sales activities
See Homburg et al. (2013), p. 443.
256
6.3 Sales Decisions
Design and Structure of the Sales System
Sales channels
• Channels can vary from direct (producer-to-consumer types) to elaborate
(multilevel channels employing many types of intermediaries).
• Channel configurations for the same product will vary within industries, even
within the same firm, because national markets quite often have unique
features.
• Channel structures are designed to manage multidirectional connections for:
• Physical movement of goods and services.
• Transactional title flows.
• Information communications flows.
See Czinkota/Ronkainen (2013), p. 498f.
257
6.3 Sales Decisions
International Sales Decisions
Examples of different sales channels
See Hollensen (2014), p. 553f.
258
6.3 Sales Decisions
Design and Structure of the Sales System
Determinants of channel structure
External
• Customer characteristics
• Distribution culture
• Competition
• Legal regulations/local business practices
See Czinkota/Ronkainen (2013), p. 499ff.; Hollensen (2014), p. 552f.
259
6.3 Sales Decisions
Design and Structure of the Sales System
Determinants of channel structure
Internal
• Company objectives
• Product characteristics
• Capital
• Cost
• Coverage
• Control
• Continuity
• Communication
See Czinkota/Ronkainen (2013), p. 499ff.; Hollensen (2014), p. 555.
260
6.3 Sales Decisions
Design and Structure of the Sales System
Problem gray market channels
Gray market channels refer to the legal export/import transaction involving
genuine into a country by intermediaries other than the authorized distributors.
Strategies against gray market channels
• Seek legal redress
• Change the marketing mix
• product strategy
• pricing strategy
• warranty strategy
See Kotabe/Helsen (2011), p. 563ff; Hollensen (2014), p. 575f.
261
6.3 Sales Decisions
Sales Logistics
Factors affecting transportation mode decision
• Cost of different transport alternatives
• Distance to the location
• Nature of the product
• Frequency of the shipment
• Value of the shipment
• Availability of transport
See Hollensen (2014), p. 565; Homburg et al. (2013), p. 444.
262
6.3 Sales Decisions
Relationship to Sales Partners
Guidelines for anticipating and correcting problems with international
distributors
• Select distributors – do not let them select you
• Look for distributors capable of developing markets
• Treat the local distributors as long-term partners
• Support market entry by committing money, managers, and proven
marketing ideas
• Maintain control over marketing strategy
• Make sure distributors provide you with detailed market and financial
performance data
• Build links among national distributors at the earliest opportunity
See Hollensen (2014), p. 557f.
263
6.3 Sales Decisions
Relationship to Sales Partners
Czinkota/Ronkainen (2013), p. 505.
264
6.3 Sales Decisions
Designing the Sales Activities
Specific characteristics related to international sales negotiations
• Verbal communication is required in order to convey needs and preferences.
• Negotiation strategies that are geared towards influencing the behavior and
attitudes tend not to be very successful.
• Risk of misunderstandings and misinterpretations can arise during the verbal
and non- verbal exchange of information between the negotiating parties.
See Czinkota/Ronkainen (2013), p. 444ff.
265
6.3 Sales Decisions
Designing the Sales Activities
US
customer
British
customers
French
customers
Recommended behavior
Problematic behavior
•
•
•
•
Punctuality
Create a friendly atmosphere
Give feedback to positive anecdotes
Include local attorneys in negotiations/
convert negotiation results into contractual
stipulations
•
•
•
•
•
•
Search for pragmatic solutions
Strive for fairness
Wear conservative clothing
Be prepared for subtle humor
Recognize and detect discrete/
only implicitly expressed criticism
•
•
•
•
Communicate French
Elegance, eloquence, and enthusiasm are
important components of communication.
Introduce the topic by way of intellectual/
abstract/philosophical aspects
Accept delays on the part of discussion
partners.
•
•
•
•
•
•
•
•
Homburg et al. (2013), p. 446.
•
•
•
Religion, sexuality, race as topics of
conversation
Overly abstract concepts instead of specific,
concrete examples
Emphasis on academic titles
Overly direct communication
Expectation of open disagreement
Misinterpretation of ‘understatement’
Discussion of political matters during business
lunch/dinners
Too much emphasis on detail
Inadequate consideration of hierarchies
Premature discussion on details
Reducing the conservation down to facts
Being put off by mental leaps/erratic
conversation patterns of the French discussion
partner.
266
6.3 Sales Decisions
Designing the Sales Activities
Russian
customer
Recommended behavior
Problematic behavior
•
•
Be well informed about your counterpart
Be serious, polite, and patient in
negotiations
Clarify everything; Russians dislike
uncertainty
Build personal relationships
Keep the favors that you are promising:
they are serious obligations
•
•
•
Compromising too early, as a sign of weakness
Overestimating a contract
delivery guarantees often do not mean a lot
Make sure the negotiating partner has the
authority to close the deal.
Always be polite
Be patient; the same business takes six
times
Build a good personal relationship and
make counter-invitations
Document all results in detail; verbal
agreements do not last long
•
•
Making the other side lose face
Being too direct; a ‘no’ is a no-no
•
•
•
Chinese
customers
•
•
•
•
•
Homburg et al. (2013), p. 446.
267
6.4
Communication Decisions
268
6.4 Communication Decisions
Elements of the International Communication Process
Hollensen (2014), p. 587.
269
6.4 Communication Decisions
Standardization vs. Adaptation of Communication
Merits of standardization
• Economies of scale
• Consistent image
• Global consumer segments
• Creative talent
• Cross-fertilization
See Kotabe/Helsen (2011), p. 435ff.
270
6.4 Communication Decisions
Standardization vs. Adaptation of Communication
Barriers to standardization
• Cultural differences
• Advertising regulations
• Market maturity
• Not-Invented-Here (NIH) Syndrome
• Technological infrastructure
See Kotabe/Helsen (2011), p. 437f.
271
6.4 Communication Decisions
Standardization vs. Adaptation of Communication
Advertising regulations
• Advertising of “vice products” and pharmaceuticals
• Comparative advertising
• Content of advertising messages
• Advertising targeting children
Channel regulations
• Product placement
• Ratio TV ad to content
• Other laws, e.g. Billboard ban of Sao Paulo
See Kotabe/Helsen (2011), p. 445ff.
272
6.4 Communication Decisions
Standardization vs. Adaptation of Communication
Types of standardization
• Laissez faire
• Export advertising
• Prototype standardization
• Regional approach
• Pattern standardization
See Kotabe/Helsen (2011), p. 438ff.
273
6.4 Communication Decisions
Standardization vs. Adaptation of Communication
Adaption of advertising styles
• Appeal
• Communication style
• Basic advertising form
• Execution
De Mooji (2010) p. 169ff.
274
6.4 Communication Decisions
Standardization vs. Adaptation of Communication
Connection between cultural dimensions and advertising form
De Mooji (2010) p. 169ff.
275
7
Implementing and Coordinating the Intern. Marketing
276
Structure
1
2
3
4
5
6
7
Marketing Basics
The Decision Whether to Internationalize
Deciding Which Markets to Enter
Market Entry Strategies
Global Marketing Strategies
International Marketing Mix
Implementing and Coordinating the Intern. Marketing
7.1 Organization of Global Marketing Activities
7.2 Global Account Management
7.3 Controlling the Global Marketing Program
7.4 Global Marketing Budget
277
Learning Objectives
In this chapter you will become familiar with:
 How firms build their organizational structure internationally and what
roles headquarters can play
 Global Account Management
 The most important measures for marketing performance
 How a global marketing budget is established
278
7.1
Organization of Global Marketing Activities
279
7.1 Organization of Global Marketing Activities
Structural Evolution of International Operations
Hollensen (2014), p. 685.
280
7.1 Organization of Global Marketing Activities
Example of the Geographical Structure
CEO/Board
Corporate
staff
Europe
North
America
Latin
America
Asia/Pacific
Country
subsidiaries
Country
subsidiaries
Country
subsidiaries
Country
subsidiaries
Production
Marketing
Finance
Hollensen (2014), p. 688.
Production
Marketing
Finance
Production
Marketing
Finance
Production
Marketing
Finance
281
Schedule
Date
Content
May, 28th
Lecture
June, 2nd
Lecture
June, 4th
Guest lecture „International Market Reserch“
June, 9th
Guest lecture „Brand Management“
…
…
June, 19th
Hand in your case studies
June, 25th
Case study presentations
…
July, 2nd
Exemplary test, Q&A (Questions before June 30th)
282
7.2
Global Account Management
283
7.2 Global Account Management
Global Account Management
Global account management is a relationship-oriented marketing
management approach focusing on dealing with the needs of an important
global customer (=account) with a global organization (foreign subsidiaries all
over the world).
Steps for implementing GAM
Identifying the selling firm’s global accounts
Analyzing the global accounts
Selecting suitable strategies
Developing operational capabilities
See Hollensen (2014), p. 691.
284
7.2 Global Account Management
Global Account Management
Criteria for determining strategically important customers
• Sales volume
• Age of the relationship
• Selling firm’s share of customers’ purchase
• Profitability of the customer to seller
• Use of strategic resources and extent of executive/management commitment
Steps for implementing GAM
• Basic characteristics of a global account
• Relationship history
• Level and development of commitment
• Goal congruence of parties
• Switching costs
See Czinkota/Ronkainen (2013), p. 459f.
285
7.2 Global Account Management
Global Account Management
Criteria for determining strategically important customers
• Product/service development and performance
• Organizational structure
• Individuals (human resources)
• Information exchange
• Company and individual level benefits
See Hollensen (2014), p. 692f.
286
7.2 Global Account Management
Global Account Management
Advantages of global account management
• Provides better fulfillment of customers’ global need for having only one
supplier
• Create barriers for competitors
• Increase sales of existing products and services through a closer
relationship with the key customer
• Facilitate the introduction of new products
• Coordinates marketing activities across borders
• May increase profit potential
• Reduces marginal costs of creating adapted programs for every new market
• Provides access to new customers through customer’s global network
See Hollensen (2014), p. 697.
287
7.2 Global Account Management
Global Account Management
Disadvantages of global account management
• Supplier will feel pressure to improve global consistency
• Pressure to ‘standardize’ pricing on a global basis
• Pressure to ‘standardize’ all terms of trade, not just price
• Supplier’s loss of GA due to major competitors using GAM strategy
• Multiple decision makers due to matrix structure
See Hollensen (2014), p. 697f.
288
7.3
Controlling the Global Marketing Program
289
7.3 Controlling the Global Marketing Program
Controlling the Global Marketing Program
Decide objectives, strategies,
plans for implementation
Alter standards
Alter objectives
Establish marketing
performance standards
Locate responsibility
Reward, promote,
advise, punish
Evaluate
Take corrective/
supportive action
See Hollensen (2014), p. 704.
290
7.3 Controlling the Global Marketing Program
Alter standards
Alter objectives
Controlling the Global Marketing Program
See Hollensen (2014), p. 704.
Reward, promote,
advise, punish
291
7.3 Controlling the Global Marketing Program
Measures of Marketing Performance
Product
• Sales by market segments
• New product introductions each year
• Sales relative to potential
• Sales growth rates
• Market share
• Contribution margin
• Product defects
• Warranty expense
• Percentage of total profits
• Return on investment
Hollensen (2014), p. 705.
292
7.3 Controlling the Global Marketing Program
Measures of Marketing Performance
Pricing
• Response time to price changes of competitors
• Price relative to competitor
• Price changes relative to sales volume
• Discount structure relative to sales volume
• Bid strategy relative to new contacts
• Margin structure relative to marketing expenses
• Margin relative to channel member performance
Hollensen (2014), p. 705.
293
7.3 Controlling the Global Marketing Program
Measures of Marketing Performance
Distribution
• Sales, expenses, and contribution margin by channel type
• Percentage of stores carrying the product
• Sales relative to market potential by channel, intermediary type, and specific
intermediaries
• Percentage of on-time delivery
• Expense-to-sales ratio by channel, etc.
• Order cycle performance by channel, etc.
• Logistics costs by logistics activity by channel
Hollensen (2014), p. 705.
294
7.3 Controlling the Global Marketing Program
Measures of Marketing Performance
Communication
• Advertising effectiveness by type of media (e.g. awareness levels)
• Actual audience/target audience ratio
• Cost per contact
• Number of calls, enquires, and information requests by type of media
• Sales per sales call
• Sales per territory relative to potential
• Selling expenses to sales ratio
• New accounts per time period
• Lost accounts per period
Hollensen (2014), p. 705.
295
7.4
Global Marketing Budget
296
7.4 Global Marketing Budget
Marketing Budget and Its Underlying Determinants
Hollensen (2014), p. 710.
297
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USA.
De Mooji, M. (2010), Global Marketing and Advertising: Understanding Cultural Paradoxes,
Third Edition, USA.
Dicken, P. (2014), Global Shift: Mapping the Changing Contours of the World Economy,
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(2014),
Market
Potential
Index
(MPI)
for
Emerging
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Hollensen, S. (2014), Global Marketing, A decision-oriented approach, Sixth Edition, Pearson
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Keegan, W. J./ Green, M. C. (2013), Global Marketing, Seventh Edition, Pearson Prentice
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List of References
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(2012),
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Trompenaars, F. (1993), Riding The Waves Of Culture, Understanding Cultural Diversity in
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Usunier, J.-C./ Lee, J. A. (2013), Marketing across cultures, 6th Edition, Prentice Hall,
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