Download MARKETING OF A HIGH TECH FIRM

HT Entrepreneurship
May 6-7, 2008
Tuija Mainela
D.Sc., Professor of International Marketing
Department of Marketing
University of Oulu
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Objectives and contents
Aim of the lectures
 To create understanding of marketing and internationalization of HT firms
 Describing typical features of HT marketing and internationalization
 What kinds of issues make HT marketing especially challenging?
 What kinds of customer strategies HT firms can utilize?
 How HT firms create customer relationships in international markets?
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Lecture I:
Typical Characteristics of HT Businesses and
Specificities of HT Marketing
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Key marketing tasks
 to attract, establish contact with and keep customers
 to perform business activities that direct the flow of goods and services from
producer to consumer or user
 to know and understand the customer so well that the product or service fits
her/him and seems like selling itself
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Exercise 1
 Form teams of 2-3 persons
 Discuss the features of HT business that create
specific challenges to their marketing (10 min)
 Develop a list of 5 most important features (5 min)
 Characteristics of their business environment
 Characteristics of their products or services
 Characteristics of their customers
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Characteristics of high tech businesses
High turbulence of business environment
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difficulty of forecasting
uncertainty and risks
rapid changes
obsolete technology -> going out of business
decision making based on weak signals from the markets
Short product/service life cycles
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new/better/more effective applications
high development costs
adoption times should be short
dependence on the latest technologies self-evident
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Fast growth
 demand sometimes growing faster than supply
 possible quick returns attract followers and copiers
Threat of too heavy product focus and technocracy
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product developers rule also marketing
newest and most sophisticated technology seen always as the best solution
product development without customer contact
market analysis ignored
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Born globals
 niche type of markets
 real competition takes place in global markets
Mergers and acquisitions
 small producers of special applications and services
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extremely important to a few big multinationals
securing critical supplies
sharing product development costs and expertise
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Characteristics of high tech markets
Technological
uncertainty
Market
uncertainty
HT
marketing
Competitive
volatility
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Technological uncertainty
 New technologies risky investments
 Can they be commercialized?
 Will the new product function as promised?
 Will the new technology make our present technology obsolete?
 Technological development takes often more time than expected
 Several bugs may be found when the product is already in the market
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Market uncertainty
 New technologies difficult for the buyers to evaluate and
appreciate
 What needs might be met by the new technology?
 How large is the potential market?
 How will needs change and how fast will the innovation
spread?
 Will the market adopt industry standards?
Competitive volatility
 Who will be our competitors?
 What products will we compete with?
 What will be the tactics for competition?
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Role of marketing with respect to market features
Technological uncertainty
 Speeding up the product launching (note! Bugs and beta versions)
 Securing service for customers
 User experience analysis (beta versions)
Market uncertainty
 Recognizing the market uncertainty customers face
 Reducing fear of bad choice and reducing uncertainty
 Market education
Competitive volatility
 Following the development also outside the industry
 Being aware of the alternative ways to satisfy the customer needs
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Types of innovations and their marketing
Marketing strategy
Success of a new product
Type of innovation
-Incremental
-Radical
Contingency theory of HT Marketing
= Marketing tools matching the innovation type -> Odds of success increase
Match between customer and supplier perceptions -> Make marketing clearer
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
 Incremental
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Extension of existing
Characteristics well defined
Low-cost production
Response to specific market
need
 ”Demand-side” market
 Customer pull
 Radical
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New technology + new market
R&D invention
Superior performance over ”old”
Specific market need of
secondary concern
 ”Supply side” market
 Technology push
Note! Radical and incremental innovations are the extremes and most
innovations are situated somewhere in between
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Marketing of different types of innovations
 Incremental
 Objectives in terms of
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 market share
 product positioning
 targeted segments
Competition
 Breath down our necks
 Cause short window of
opportunity
Emphasize differentiation
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Speed to market critical
Market learning through
customer surveys
Importance acknowledged
inside the firm
Key customers known,
possibly the idea creators
 Radical
 Objectives broadly in terms of
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 solving unsolved problems
 beginning a new platform
Competitors not known
Will the technology work is the
critical question
Close allies and partners used to
validate the concept
Big need to convince various
stakeholders also inside the firm
Application areas and early
potential users unclear and
unfamiliar
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Customer types
Diffusion of innovations
Innovators
Technology
enthusiasts
•Just for
technology
(Rogers 1983; Moore 1991)
Early
adopters
Early
majority
Visionaries
Pragmatists
•Competitive
advantage
•Proven
applications
•productivity
enhancement
Late majority
Laggards
Conservatives
Skeptics
•Risk averse and •If all the other alternatives of
technology shy action are certainly worrse
•Just to stay
even
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
time
Example: possible customer segments in HT-markets
Advertising
agency
M-advertiser
M-ad
Interaction,
Purchases
Professional
service
relationship
M-advertising
service
M-ad
provider
system
M-ad
Consumers
Focus of this study
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Different types of customers for new mobile services
Resources &
knowhow
Motivated Pioneers
Profit Hungry
Willingness
to invest
Technical NonExperts
Idea Supporters
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Different types of customers for new mobile services
Resources &
knowhow
Profit Hungry
• Don’t yet see the opportunities
• Don’t want to experiment
• Have resources but don’t want to
use them without proofs
Technical Non-Experts
• Inexperienced electronic
advertisers
• Little time and other resources
for testing -> impatient
• Taking care of basic business
the most important
Motivated Pioneers
• Can imagine the possibilities
• Want first-hand experience
• Expect a lot from technology and
user experience
• Have both marketing and
technological resources
Idea Supporters
Willingness
to invest
• Don’t really have resources
• No view of the possibilities
• Positive attitude towards
experimenting
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Exercise 2. Marketing to different customer types
Resources &
knowhow
Motivated Pioneers
Profit Hungry
Willingness
to experiment
Technical NonExperts
Idea Supporters
What kind of a product/service package would you offer?
What do these customers value in new HT products/services?
What kind of marketing arguments could be effective?
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Lecture II:
Internationalization of High-Tech Firms
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Challenge: Distance between business partners
DISTANCE
GEOGRAPHIC
PHYSICAL
TIME
-time zones
-conception of time
-from contact to
delivery
Influence on:
Transfer of products
Transfer of knowledge
PSYCHIC
CULTURAL
-national
-language
-norms, values
-political env.
-economic env.
TECHNOLOGICAL
-product and process tech
TRUST-BASED
-firm-level
a) competence
b) contractual
c) goodwill
SOCIAL
-individual level
-knowledge on
each other
-experience
Influence on:
Communication
Team work
Understanding needs of the other
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Challence: Information needs in internationalization
 3 types of knowledge:
 Institutional knowledge
 Foreign institutions and their activities
 Laws and regulations
 Business knowledge
 Knowledge on customers
 Knowledge on the needs of the customers
 Knowledge on the decision making processes of the customers
 Internationalization knowledge
 Knowledge on internal resources (e.g. adoption capability)
 Knowledge on external resources
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Basic assumptions in traditional internationalization
 Market uncertainty
 Difficult to evaluate current and future market development
 Lack of market-specific knowledge
 Market commitment
 Market uncertainty leads to minimum commitment of resources
 Increase in commitment leads to decrease in uncertainty
 Knowledge
 Central regulator of market commitments
 Lack of knowledge creates uncertainty
 Leads to gradual, experience-based internationalization
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Basic assumptions in traditional internationalization
 Operation strategy
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no regular exports
exports via an agent
sales unit
manufacturing subsidiary
 Market strategy
 company starts from a foreign market to which the psychic distance is
considered to be low
 Factors explaining internationalization:
 Experience (”learning by doing”), psychic distance
 Development of internal knowledge and experience and other resources
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Critics of process models from the HT-viewpoint
 Deterministic, no room for strategic choice and decision
making
 Fits only to small firms
 Leapfrogging in the development processes
 Phenomenon of ”born globals”
 Early, significant internationalization of activities of the firm
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Internationalization of born globals
 From inception seek to derive significant competitive advantages
from use of resources and sale of outputs in multiple countries
 Traditional stepwise approaches in internationalization not followed
 Why not?
 highly competitive and turbulent environment
 short life-cycles of the products & rapid speed of innovation
 small domestic markets (niche-markets)
 following growth opportunities
 being close to particular customers
 R&D cooperation to exploit the technological know-how
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Exercise 1: What kind of factors favour born globals?
 Form teams of 2-3 persons
 Discuss the features of HT business that favour fast
internationalization (10 min)
 Develop a list of 5 most important features (5 min)
 Characteristics of entrepreneurs
 Characteristics of production processes
 Characteristics of business environment
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Internal drivers of Born Globals
 Technically oriented, market oriented people
 Entrepreneurial drive (search for opportunities, organizing,
networking capability, ability to handle risks, innovativeness)
 International experience and enthusiasm for internationalization
of the managers
 Basis in a significant product- or process innovation
 Products with remarkable added value
 Internationally recognized leadership in certain product
category (specialization)
 More resources than the average SMEs have
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
External drivers of Born Globals
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Success in foreign market entry more dependent on the relationships with
current markets than on the chosen market and its cultural characteristics
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Existing relationships
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initial trigger to foreign market and entry mode selection
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e.g. a distributor taking contact
Relying on trusted persons with e.g. common history
offer contacts to customers
help to develop partners and positions
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provide access to local market knowledge
provide initial credibility
provide access to distribution channels
may restrict the firms growth initiatives
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Major network partners have a great influence
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Important to follow the “right” partner
Great dependence
Good in the beginning
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To compensate the limited marketing experience and infrastructure
Following the performance of the partners
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Unsatisfactory relationships terminated or replaced
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Not sufficiently committed or qualified
Serving own interests through marketing policies
Establishing own sales/service offices
Developing new products for diversified markets
Acquiring equity ownership in the partner
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To increase management control and market performance
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Activities kept on oneself
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Core competence of software development
Activities given to/shared with the partners
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Market research
Customer education and service
Market intelligence
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Product modifications
Technical service
Pricing
New market entry decisions
Along time firms develop in-house marketing and sales expertise
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To preserve independence
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
 To High Tech firms the network-based activities are almost
unavoidable
 To realize innovations
 To get information and knowledge
 To share costs and risks
 Possible problems
 Lack of coordination of cooperation
 R&D cooperation takes time and results are to be seen slowly
 What information to share and what to keep on oneself
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Networks and information for internationalization
 Network relationships
 company-specific i.e. difficult to copy
 same information not available to everyone
 relationships influence
 availability of information: what is going on in the market?
 timing of information: when does the information reach the
firm?
 spread of information: e.g. reference customers/ partners
take care that the company is on view in positive way in
the right place
 central position in the network is relevant
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Networks as a basis for born globals
Phase I
Dimension
II
III
IV
Type of
network
local networks
communication
networks
resource
networks
business
networks
Development
driver
innovative milieu
social relationships
acting as if
norms and
structures
INV
characteristic
technological
breakthrough
past international
experience networks
international
bridge building
INV network
coalition
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Influence of social network
on acquisition of knowledge for internationalization
 Social networks
 May initiate unplanned internationalization
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Tell about opportunities in foreign markets e.g. upcoming purchases
Provide information to evaluate possible business partners
Introduce you to a potential customer
Informally market your products
 May be the basis for initial market and operation mode selection
 Personal trust
 Common background
 e.g. Finnish HT-firm starting international business in Thailand
because of a previous colleague working there
 When you hire a person you may hire his/her relationships also
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Influence of social network
on acquisition of knowledge for internationalization
Information about
international
business
opportunities
Social
Network
Information about
potential
international
business partners
Initiation of Internationalisation
- establishing a business relationship with an
international partner
Introduction to
potential
international
partners
• Publicity
• Contacts
• Legitimacy
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]
Feedback
 What do you consider as the most important/
interesting issue that you learned today or yesterday?
 How did he different exercises influence your
learning?
Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu
Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]