Download International Marketing Management Part 4 Deciding

2015-03-25
International Marketing
Management
Part 4
Deciding Which Markets to Enter
Macro environmental analysis
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Preliminary screening
•
Sources:
-
desk research
-
personal knowledge&experience
Macro Environmental Analysis
•
•
•
SLEPT
PEST
PESTEL
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SLEPT Approach
•
Socioculural
•
Legal
•
Economic
•
Political
•
Technological factors
Deciding Which Markets to Enter
Micro Environmental Analysis
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Micro Environmental Analysis
•
Customers
•
Competitors
•
Potential demand
•
Distribution chains
•
Suppliers
What Influences the Buyer?
• Cultural factors
– values, attitudes, beliefs, ideas, artefacts and symbols
• Social factors
–
–
–
–
primary membership groups (family ..)
secondary member groups (union, cim ..)
aspirational groups (MBA…!)
dissociative groups (hell’s angels…??)
• Personal factors
– age, life cycle, occupation, lifestyle, personality ...
• Psychological factors
– motivation, perception, learning (& beliefs), attitude
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Source:Webster and Wind, 1972
The Buyer ‘DMU’
Initiator
first suggests buying product
or service
User
Influencer
whose comments affect
the decision
Help define spec, help in
evaluation of alternatives
Decider
Product requirements
and suppliers
Ultimately make all or part
of buying decision
Buyer
Formal authority to select
supplier - negotiate terms
Physically makes purchase
User
Initiate process / define specs
Consumes product or service
Source:Assael, 1987
Does Behaviour Change in
Relation to What is Purchased?
Degree of involvement
Significant difference
between brands
low
few
many
HABITUAL
VARIETY
(seeking)
high
DISSONANCE
(differing of views)
COMPLEX
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Source: Porter, 1985
Porter’s Industry Analysis:
The 5 Forces Model
POTENTIAL
ENTRANTS
Threat of
rivalry
Bargaining
power
SUPPLIERS
Bargaining
power
INDUSTRY
Competitive rivalry
BUYERS
Threat of
substitution
SUBSTITUTES
Bargaining Power of Suppliers
•
the strength of the supplier brand
•
the source of supply spans only a small number of
suppliers
•
switching supplier
•
substitute products of suppliers
•
forward integration
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Bargaining Power of Buyers
•
where few buyers control a large volume of the market
•
where there are a large number of smaller suppliers
fighting for a share of the market
•
the cost of switching supplier is low
•
the supplier’s product is a mass-market product and not
necessarily differentiated
•
strong customer power
•
threat of backward vertical integration
The Threat for Potential Entrants
•
economies of scale
•
access to new distribution channels
•
brand loyalty
•
capital investment
•
competitor retaliation
•
regulatory influence
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Threat of Substitutes
•
a new product or service equivalent
•
a new product replacing an existing product
•
consumer substitution
Key Factors Influencing
Competitive Rivalry
•
stage of product life cycle of competing product
•
use of specialized production techniques
•
liquidity of competitor
•
ability to achieve differentiation and brand loyalty
•
competitor intentions
•
the relative size of the competitor
•
barrier of exit from the industry
•
number of sellers & degree of products differentiation
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Industry’s Competitive Structure
One seller
Undifferentiated
product
Few sellers
Many sellers
Pure oligopoly
Pure
competitive
Pure
monopoly
Differentiated
product
Differentiated
oligopoly
Monopolistic
competitive
....How does it matter?
Roles in the Target Market
•
market leader
•
market challenger
•
market follower
•
market nicher
.... and main implications.....
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Designing International
Marketing Plan
Market Segmentation
&
Targeting
Marketing Plan
• S–T–P
• Marketing mix: product, place, price,
promotion
• Marketing budget
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Companies that operate on one or more foreign markets must
decide how to adapt their strategy to local conditions.
At one extreme are companies that use a standardized
marketing-mix (world-wide).
At the other extreme is adapted marketing-mix, where s
producers adjusts marketing-mix to each target market.
Determinants of standardization
•Legal regulations & world-wide standards
•Common customers needs & preferences
•Economies of scale in R&D, production & marketing
•Learning effects in production & marketing
•Characters of products (industrial vs. customer goods)
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Determinants of adaptation
•Better adjustment of company’s strategy to local preferences
•Better adjustment of company’s strategy to local competition
•Better adjustment of product usage conditions
•Character of product (customer vs. industrial goods)
•More coincide approach with marketing concept
Benefits from standardization
•Lower costs production & marketing costs
•Clear & common communication message world-wide
•Easier decision-making process
•Improve marketing program effectiveness
•Improve company’s competetive position world-wide
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Benefits from adaptation
•Better adjustment marketing-mix elements to local conditions
•Less formal decision-making procedures
•More elastic strategy and its implementation
•Local initiative & resources are used more efectively
•Each country (market) is important
Global Standardisation or
Adaptation?
Easier to standarize
More difficult to standarize
1.
Target markets
1.
Services for the customers
2.
Positioning
2.
Distribution
3.
Physical product attributes (features)
3.
Price
4.
Brand name
4.
Advertising media
5.
Packaging
5.
Sales promotion
6.
Guarantee (warrantee)
6.
Sales approach
7.
After sales service
7.
Salespeople training
8.
Advertising theme
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Market Segmentation
The act of dividing the market into specific groups of consumers who
share common needs and who might require separate marketing mixes.
In international marketing:
The same target segment
on different markets
Group of markets
and then target segments
Different target segment,
Different markets
Product the same
Speciffic target segment
on each foreign market
The same target segment on different
markets
Examples:
•
•
•
•
Individual clients with high incomes
Hobby products
International companies
High-tech companies
Segments & markets with high level of globalization!
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The same target segment on different
markets
High end
Market
segments
Low end
A
B
C
D
countries
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Different target segment,
Different markets - the same product
Major goal – cost reductions due to product
standardization
•
•
•
•
Needs:
adapted targeting,
positioning,
price,
promotion & place
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Different target segment,
Different markets - the same Product
High end
Market
segments
Low end
A
countries
B
C
D
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Group of markets
and then target segments
Entire process consists of two parts:
– Countries groups identification
– Targeting based on segmentation procedure
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Group of markets
and then target segments
High end
Market
segments
Low end
Group A
countries
Group B
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Speciffic target segment
on each foreign market
• Segmentation - separately for each market
• Marketing mix - adapted to local requirements
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Speciffic target segment
on each foreign market
High end
Market
segments
Low end
A
B
C
D
countries
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Designing International
Marketing Plan
International Positioning and
Branding
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Positioning
• positioning is how the product is perceived and evaluated
by the target audience relative to competitor products
• companies must differentiate products or services
• positioning must promise the benefit the customer will
receive
• should be believable
Positioning
To standarize
To adapt
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International positioning
Purchase motivation
Consumption pattern
Market position
Market similiarity
Level of industry
globalization
Positioning – level
of standardization
Country of origin
image
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Steps in Positioning
• identify differentiating factors in product or services in
relation to competitors
• select the most important differences
• communicate the position to the target market
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Positioning Strategies
… Overall Focus Options
• attribute
• customer benefit
• price and quality
• use / application
• product user
• product class (disassociation)
• competitor
Developing a Successful
Positioning Strategy
• How many ideas to promote?
- one
- two
- more...?
• What to choose?
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Major Positioning Errors
• underpositioning - brand does not have a clear identity in
the eyes of the customer
• overpositioning - buyers may have too narrow image of a
brand
• confused positioning - too many claims might be made for
a brand
• doubtful positioning - positioning may not be credible in
the eyes of buyer
International Brand Decisions
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Single market – single brand
Advantages:
Disadvantages:
• Marketing efficiency
• Assumes market homogenity
• Permits more focused
marketing
• Limitted shelf space
• Eliminates brand confusion
• Good product with good
reputation (halo effect)
Single market – multiple brands
Advantages:
Disadvantages:
• Market segmented for
varying needs
• Higher marketing cost
• Creates competitive spirit
• Avoids negative
connotation of existing
brand
• Higher inventory cost
• Loss of economies of scale
• Gains more retail shelf
space
• Does not harm existing
brand’s image
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Multiple markets – local brand
Advantages:
Disadvantages:
• Meaningful names
• Higher marketing cost
• Local identification
• Higher inventory cost
• Avoidance of taxation on
international brand
• Loss of economies of scale
• Allows variations of
quantity and quality across
markets
• Diffused image
Multiple markets – global brand
Advantages:
Disadvantages:
•
Maximum marketing efficiency
• Assumes market homogenity
•
Reduction of advertising costs
•
Elimination of brand confusion
•
Good for culture-free product
•
Good for prestigious product
•
Easy identification/recognition
for international travellers
•
Uniform worldwide image
•Problems with black and grey
markets
• Possibility of negative
connotation
•Requires quality and quantity
consistency
•Legal complications
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Designing International
Marketing Plan
Product Decisions
Product decisions
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International Product Strategies
Straight product
Extension
(product transfer)
Product adaptation
Product invention
Backward
Forward
global
Straight product extension
• Standard product (the same as on domestic market)
without any changes in it’s attributes beside really
necessary
• Limited number of geograpgical markets
• Similiariry of foreign markets
• Low costs
• Low level of commitment to new markets
• Typical startegy of standardization
• Hidden champion or hit&run strategy
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Product adaptation
• Some features of product are changed according to foreign
customers preferences, legal requirements, etc.
• Adaptation may concern to every product attribute, eg packaging,
brand, quality level, etc. But except core product and basic feature.
• A large number of geographical areas
• Highly differentiated forein markets
• High level of commitment to new markets
• Typical strategy of adaptation
• Hidden champions or cooperation strategy
Product invention
• New product for new market but the same product category and form
-
backward – the old (former)product, PLC!!!
-
forward – new version of the product which is not offered on domestic market (B2B markets,
when SME wants to enter market)
• large new market
• large number of geographical areas
• Highly differentiated forein markets
• High level of commitment to new markets
• Typical strategy of adaptation
• Typical entering strategy – investment modes
• Hidden champion or cooperation strategy
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Designing International
Marketing Plan
Promotional Decisions
Promotion
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Communication at Work
• Differentiates
– between competitors, substitutes and alternatives.
• Reminds
– and re-enforces past transactions. Makes future dealings
desirable.
• Informs
– makes potential customers / users aware of offer. Essential to
diffuse information.
• Persuades
– influences the decision making process. Makes the exchange
desirable.
Communication at Work
• Attention
•Attention
• Interest
•Interest
• Desire
•Desire
• Action
•Conviction
•Action
•Satisfaction
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Possible Communications Objectives
• clarification of customer
needs
•increasing trial purchase
• increasing brand awareness
•increasing word-of-mouth
recommendation
•increasing repeat purchase
• increasing product knowledge
•improving financial position
• improving brand image
•increasing co-operation from the
trade
• improving company image
• increasing brand preference
•enhancing the reputation with key
stakeholder
• stimulating search behaviour
•building up management ego...
The ‘Promotional’ Toolbox - a Bag of
Marbles
?
Personal
selling
Advertising
Field
marketing
Sponsorship
Word of
mouth
Commerce
Internal
marketing
Packaging
Sales
promotion
Consumer Audience
Channel Audience
Stakeholder Audience
Corporate
identity
Point of
Purchase
Website
Direct
marketing
Public
relations
Exhibitions
Perception
Branding
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The Principal Characteristics of
Communications Tools
Advert.
Sales
promotion
PR
Personal
selling
Direct
marketing
Ability to deliver
personal messages
Low
Low
Low
High
High
Scope for reaching
large audiences
High
Medium
Medium
Low
Medium
Degree of interaction
Low
Low
Low
High
High
Perceived credibility
by target audiences
Low
Medium
High
Medium
Medium
Communications
The Principal Characteristics of
Communications Tools
Advert.
Sales
promotion
PR
Personal
selling
Direct
marketing
Absolute costs
High
Medium
Low
High
Medium
Cost per contact
Low
Medium
Low
High
High
Wastage levels
High
Medium
High
Low
Low
Level of investment
High
Medium
Low
High
Medium
Costs
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The Principal Characteristics of
Communications Tools
Advert.
Sales
promotion
PR
Personal
selling
Direct
marketing
Medium
High
Low
Medium
High
Management’s ability Medium
to adjust the
deployment of the
tool ws circumstances
change
High
Low
Medium
High
Control
Scope for targeting
specific audiences
Designing International
Marketing Plan
Distribution and Price Decisions
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An institutional arrangement necessary for the entry
of a company’s products into a new foreign market is
known as an entry mode.
9-65
Deciding How to Enter the Market
ENTRY MODES
EXPORT
MODES
INTERMEDIATE
MODES
INVESTMENT
MODES
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Deciding How to Enter the Market
– classification of entry modes
Export modes – 100% externalizing
low control, low risk, low profitability, high flexibility
Intermediate modes
shared control & risk, moderate profitabilty, split ownership
Investment modes – 100 % internalizing
high control, high risk, full ownership, low flexibility
Factors affecting foreign market entry mode
decision
Internal factors
Desired mode
characteristics
Entry mode
decision
External factors
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Internal factors affecting market entry mode
decision
Product
Product
complexity
Product
differentiation
advantage
International
experience
Entry mode
decision
Firm
size
Desired mode characteristics affecting market
entry mode decision
Risk
averse
Control
Entry mode
decision
Flexibility
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External factors affecting market entry mode
decision
Entry mode
decision
Sociocultural
distance
Number of
export
intermediaries
Country risk/
demand
uncertainty
Market size/
growth
Direct/
indirect
trade barriers
Intensity of
competition
Deciding How to Enter the Market
Export modes
1.Indirect export
2.Direct export
Intermediate entry
modes
3.Cooperative export
1.Contract manufacturing
2.Licensing
3.Franchising
4.Joint venture (strategic alliances)
Investment modes
5.Management contracting
1.Domestic-based representatives
2. Foreign sales subsidiary (foreign sales branch)
3.Sales & production subsidiary – acquisition
4. Sales & production subsidiary – greenfield
Source: Hollensen, 1998, pp. 217-281
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Advantages of Export Modes
Indirect exporting:
Direct exporting:
Limited commitment and investment
required
Access to local market experience and contacts
to potential customers
High degree of market diversifiction is
possible
Shorter distribution chain
Market knowledge acquired
Minimal risk (market or political)
More control over marketing-mix
No export experience required
Local selling support and services available
Export marketing groups:
Shared costs and risks of internalization
Provide a complete product line or system sales to customers
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Disadvantages of Export Modes
Indirect exporting:
Direct exporting:
No control over marketing mix elements
other than product
Limited control over market price because
of tarrifs and lack of distribution control
Additional domestic member in the
distribution chain may add costs, leaving
smaller profit to the producer
Lack of contact with the market (no
market knowledge acquired)
Limited product experience (based on
commercial selling)
Some investement in sales organization
required (contact from home base with
distributors or agents)
Cultural differences, providing
communication problems and information
filtering (transaction costs occur)
Possible trade restictions
Export marketing groups:
Risk of unbalanced relationships (different objectives)
Participating firms are reluctant to give up their complete independence
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What to look for in an intermediary
• Size of firm
• Physical facilities
• Willingness to carry
inventories
• Knowledge/use of
promotion
• Reputation with supplier,
customers, and banks
•
•
•
•
Sales performance record
Cost of operations
Overall experience
Knowledge of English or
other relevant languages
• Knowledge of business
methods in manufacturer’s
country
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Investment Modes - Advantages
•Company can secure cost economies in the form of cheaper
labor or raw materials, foreign-government incentives, freight
savings, and so on.
•Better image in the host country because company creates
jobs.
•Positive aspects of megamarketing practices.
•Deeper relationship with local customers, distributors, and
suppliers enabling better adopt marketing-offer.
•Company retains full control over investment, production &
marketing operations.
•Better access to the market.
Investment Modes - Disadvantages
•Higher risks (political, legal, financial, marketing, and so on)
•Higher responsibilities.
•Bigger requirements for capital, skilled managers,
salespeople.
•Lack of expertise, know-how and experience
•Threats of potential competition
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Distribution
Channel Levels
•
short vs. long channel (from one to three or more levels)
•
key factors:
- average order size
- geographic concentration of customers
- seasonality of sales
- geographical distance from producer to market
- perishability of the product
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Number of intermediaries
Three strategies:
•
intensive distribution - as many available outlets as
possible hold this product; products for which consumers
require a great deal of location convenience
•
selective distribution - more than a few but less than all of
the intermediaries
•
exclusive distribution - severely limiting the number of
intermediaries; even only one outlet in a certain geographic
area supplies a product
Intensive distribution
Key characteristic include:
•
•
•
•
•
•
•
maximum number of outlets covered to maximize
availability
target outlets in as many geographical regions as
possible
consumer convenience products
high number of purchasers
high purchase frequency
impulsive purchase
low price
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Selective distribution
Key characteristic include:
•
•
•
•
•
•
•
medium level of customers - but likely to be significant
less intensive distribution f outlets
retailers may require specialist knowledge
shopping based products
purchase is occasional
purchase is more likely to be planned
medium price
Exclusive distribution
Key characteristic include:
•
•
•
•
•
•
•
relatively few customers
limited retail outlet
close retailer/customer relationship
speciality products
infrequent purchase
high involvement and planned purchase
high price
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Price
Global Pricing Contract Benefits
For customers:
• Lower prices worldwide coupled with higher level od
service
• Standarization of products and services offered across
markets
• Efficiences in all processes, including NPD,
manufacturing, customer service
• Faster diffusion of innovations globally
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Global Pricing Contract Benefits
For suppliers:
• Easily gain access to new markets and grow the business
• Consolidate operations and achieve economies of scale
• Collaborate with customers and develop strong
relationships (difficult to brake into for potential
competitors)
Global Pricing Contract
Disadvantages
For customers:
• Supplier might not have capabiliteies to provide consistent
quality nad performance across markets
• Suppliers might use customer’s overdependence to extract
higher prices
• Costs of monitoring global contracts might outstrip the
benefits
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Global Pricing Contract
Disadvantages
For suppliers:
• Local managers resist change
• Conflict in existing channels of distribution in the new
market
• Might lose the ability to serve other attractive customers
46