International Marketing and Management

1. International Marketing and Management Lecture 4

2. Lecture themes Modes of Entry into International Markets Market Segmentation Channel and Place Decisions

3. Stages of the international market entry • Country identification • Preliminary screening • In-depth screening • Final selection • Direct experience

4. Stages of the international market entry

5. Modes of Entry • Low (shared) • High (full control) • Entering the international market a firm should make a careful study of the pros and cons of each entry mode

6. High (full control) mode of entry • Large firms which have ambitious objectives, and those which are willing to take risks, prefer to have greater control over their operations in international markets. They • acquire firms in international markets • start their own operations, both of which are high control modes. High control modes of entry also offer high returns.

7. Low (shared) mode of entry Firms which • do not take risk • cannot commit resources opt for a shared/low control mode. This can be in the form of exporting, contracts, joint ventures or strategic alliances. The returns are moderate in the low control mode.

8. The choice of the entry mode depends on: • Internal factors • External factors • Social ties of a firm

9. Choosing a mode of entry • Firms, which sell customized products, usually adopt a direct exporting strategy whereas firms that sell standardized products prefer to have intermediaries. In countries where the risk factor is high, firms adopt a low control entry mode and in economies where the risk factor is low, a high control entry mode is preferred.

10. How does an organization enter an overseas market? • A mode of entry into an international market is the channel which your organization employs to gain entry to a new international market.

11. Modes of Entry • the Internet, • Exporting, • Licensing, • International Agents, • International Distributors, • Strategic Alliances, • Joint Ventures, • Overseas Manufacture • International Sales Subsidiaries.

12. the Internet • The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations. The eMarketing space consists of new Internet companies that have emerged as the Internet has developed, as well as those pre-existing companies that now employ eMarketing approaches as part of their overall marketing plan.

13. Exporting • There are direct and indirect approaches to exporting to other nations. Direct exporting is straightforward. Essentially the organization makes a commitment to market overseas on its own behalf. This gives it greater control over its brand and operations overseas, over an above indirect exporting. On the other hand, if you were to employ a home country agency (i.e. an exporting company from your country - which handles exporting on your behalf) to get your product into an overseas market then you would be exporting indirectly.

14. Licensing • Licensing includes franchising, Turnkey contracts and contract manufacturing

15. Licensing • Licensing is where your own organization charges a fee and/or royalty for the use of its technology, brand and/or expertise.

16. Licensing • Franchising involves the organization (franchiser) providing branding, concepts, expertise, and infact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser. Examples include Dominos Pizza, Coffee Republic and McDonald's Restaurants.

17. Licensing • Turnkeycontractsare major strategies to buildlargeplants. Theyoftenincludetraininganddevelopmentofkeyemployees

18. International Agents International Distributors, • Agents are individuals or organizations that are contracted to your business, and market on your behalf in a particular country. • Distributors are similar to agents, with the main difference that distributors take ownership of the goods. Therefore they have an incentive to market products and to make a profit from them.

19. Strategic Alliances Strategic alliances is a term that describes a whole series of different relationships between companies that market internationally. • Shared manufacturing • Research and Development • Distribution alliances • Marketing agreements Essentially, Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate.

20. Joint Ventures • Joint Ventures tend to be equity-based i.e. a new company is set up with parties owning a proportion of the new business.

21. Reasons why companies set up Joint Ventures to assist them to enter a new international market: • Access to technology, core competences or management skills. For example, Honda's relationship with Rover in the 1980's. • To gain entry to a foreign market. For example, any business wishing to enter China needs to source local Chinese partners. • Access to distribution channels, manufacturing and R&D are most common forms of Joint Venture.

22. Market Segmentation • The process of dividing up a total market into subgroups with similar characteristics.www.crfonline.org/orc/glossary/m.html • Identifying groups of consumers whose purchasing behavior differs from others in important ways.enbv.narod.ru/text/Econom/ib/str/261.html

23. What is a Market? People

24. What is a Market? People who have • willingness to buy • purchasing power (money) • authority to buy

25. Types of Markets • Consumer Goods and Services • Industrial Goods and services

26. Consumer goods Convenience goods Shopping goods Consumer services Speciality services Convenience services Consumer goods and services

27. Industrial goods and services • Industrial goods are things used in the production of other products

28. Industrial goods and services Some products are both industrial and consumer goods – electricity, water, desktop PCs

29. Marketing Plan – factors involved • Consumer analysis • Environment analysis • Target market – decide on the segment • Competitors – what they are doing • Marketing plan – develop a unique one

30. Age Gender Geographic location Income Spending patterns Cultural background Demographics Marital status Education Language Mobility Market segmentation - characteristics

31. Global segmentation and positioning • In global marketing, market segmentation becomes especially important because of wide divergence in cross-border consumer needs and lifestyles.

32. International market segmentation - reasons Segments should be: • Identifiable • Sizable • Accessible • Stable • Responsive • Actionable

33. International market segmentation - process • Country screening • Global market research • Entry decisions • Positioning strategy • Resource allocation • Marketing mix policy (balance between standardization and customization)

34. International market segmentation - approaches International segmentation – procedures: The standard country segmentation procedure classifies prospect countries on • a single dimension (e.g. per capita GNP); • a set of multiple criteria from secondary data sources • socioeconomic • political • cultural

35. International market segmentation –scenarios • Universal or global segments • Regional segments • Unique (diverse) segments

36. International positioning strategies (local or global) - formulation • Identify the relevant set of competing products or brands • Determine current perceptions that consumers have about your product or brand • Develop possible positioning themes • Screen the positioning alternatives and select the most appealing one • Develop a marketing mix strategy • Monitor the effectiveness of your positioning strartegy

37. Global, foreign and local consumer culture positioning • Global consumer culture positioning (GCCP) – Brand as a symbol of a given consumer culture • Local consumer culture positioning (LCCP) – Brand as an intrinsic part of the local culture • Foreign consumer culture positioning (FCCP) – Brand mystique built around a specific foreign culture

38. International market segmentation • Companies that serve global markets, divide them into several clusters on the basis of similarities. And each such cluster is known as a segment. Segmentation helps marketers to serve the markets in a better way.

39. International market segmentation - targeting • After segmenting the markets, one or more segments are chosen for trade to be carried out. The process of choosing the most potential market segments is known as targeting.

40. International market segmentation - targeting The three basic criteria for targeting the markets: • the current size and growth rate of the market, • potential competition, • compatibility and feasibility.

41. International market segmentation - positioning • As the next step, firms should position their product in the global market. Product positioning is nothing but creating a favorable impression of the product against the competitor's products in the minds of customers.

42. International marketing product decisions • International marketing product decisions need to take 5 important characteristics into consideration. They are primary functional purpose, secondary purpose, durability and quality, method of operation, and maintenance. • Product design plays a key role in the success of global marketing. Product design decisions address questions, such as whether to design different products for different national markets or to design a single product for the global market.

43. Global products • Localisation of a product or service to fit local regulation and usage requirements e.g. local voltages and safety laws • Adaptation fits the product to buyer preferences e.g. Air-conditioning in USA • Standardised global products are not adapted to local preferences, but must still be localised. E.g Coca-Cola obey local hygiene laws

44. Product decisions • Product definition and classification. • International branding.

45. Factors contributing to success Factors contributing to the success of an organization at the global level: • innovation, • excellence in customer service • efficient operations Before entering a foreign country, a service organization needs to check if - it has sufficient resources to venture into the market, - the mode of entry is appropriate, - the demand in the market is adequate, - the management style is appropriate, - it has the right people to deal with suppliers and the local authorities.