Chapter 10

1. Chapter 10 Building the Knowledge Base

2. Learning Objectives • To gain an understanding of the need for research. • To explore the differences between domestic and international research. • To learn where to find and how to use sources of secondary information. • To gain insight into the gathering of primary data. • To examine the need for international management information systems.

3. International and Domestic Research • The tools and techniques of international research are the same as those of domestic research. • The difference is in the environment to which the tools are applied.

4. International and Domestic Research (cont.) The four primary reasons for the differences between international and domestic research are: New Parameters New Environmental Factors An Increase in the Number of Factors Involved A Broader Definition of Competition

5. New Parameters • In crossing international borders, a firm encounters parameters not found in domestic business. • Examples include: • Duties • Foreign currencies and changes in their value • Different modes of transportation • International documentation • Differing modes of operating internationally

6. New Environmental Factors • Many of the domestic assumptions on which the firm and its activities were founded may not hold true internationally. • Management needs to: • Learn the culture of the host country • Understand its political systems and level of stability • Comprehend the existing differences in societal structures and language • Understand pertinent legal issues

7. The Number of Factors Involved • When a firm enters a new international market, the number of changing dimensions increases. • Coordination of the interaction among the dimensions is crucial to the international success of the firm for two reasons: • In order to exercise some central control over international operations, a firm must be able to compare results and activities across countries. • The firm must be able to learn from its international operations and must find new ways to apply the new lessons learned to different markets.

8. Broader Definition of Competition • The international market exposes the firm to much greater variety of competition than that found in the home market. • Firms must: • Determine the breadth of the competition, • Track competitive activities, • Evaluate their actual and potential impact on company operations on an ongoing basis.

9. Lack of International Research • International research is often less rigorous, less formal, and less quantitative than domestic research. • The four reasons why managers are reluctant to engage in international research are: • Their lack of sensitivity to differences in culture, consumer tastes, and market demands. • Limited appreciation for different environments abroad. • Lack of familiarity with national and international data sources. • Firms build international business activities gradually, frequently based on unsolicited orders.

10. The Importance of International Research • Firms must learn where the opportunities are, what customers want, why they want it, and how they satisfy their needs and wants. • Research allows management to identify and develop international strategies. • Firms must identify, evaluate, and compare potential foreign business opportunities and the subsequent target market selection. • Research is necessary for the development of a business plan.

11. Determining Research Objectives • As a starting point, research objectives must be determined for a firm. • These objectives will depend on the views of management, the corporate mission of the firm, the firm’s level of internationalization, and its competitive situation.

12. Going International-Exporting • A frequent objective of international research is that of foreign market opportunity analysis. The aim is to utilize a broad-brush approach. • Steps to this approach include: • A cursory analysis of general variables of a country. • A preliminary evaluation of each individual country. • Selection of appropriate markets for in-depth evaluation. • Finally, a competitive assessmentmust be made.

13. Process of Researching Foreign Market Potentials Stage One Preliminary Screening for Attractive Country Markets Key Question to be answered: Which foreign markets warrant detailed information? Stage Two Assessment of Industry Market Potential Key Question to be answered: What is the aggregate demand in each of the selected markets? Stage Three Company Sales and Promotion Analysis Key Question to be answered: How attractive is the potential demand for our products and services?

14. Going International-Importing • When importing, the major focus shifts from supplying to sourcing. • Management must identify markets that produce suppliers or materials desired. • The importer needs to know: • The reliability of a foreign supplier, • The consistency of its product or service quality, • The length of delivery time, • Government rules and restrictions of the exporting country

15. Secondary Data • Secondary data is information that already has been collected by some other organization. • This data should be evaluated regarding the quality of the source, how recent the data is, and the relevance to the task at hand. • Because secondary data were originally collected to serve another purpose, they can often only be used as proxy information. • Precautions should be taken due to increasing sensitivity to data privacy. Firms must inform their customers of privacy policies.

16. Sources of Secondary Data Other Firms Directories Governments International Institutions Service Organizations Trade Associations

17. Conducting Primary Research • Primary data are obtained by a firm to fill specific information needs. • The researcher must decide whether research is to be conducted in the consumer or the industrial product area.

18. Determining the Research Technique • Selection of the research technique depends on a variety of factors: • The objectivity of the data sought must be determined. Unstructured data will require more open-ended questions and more time than structured data. • Whether the data should be collected in the real world or in a controlled environment. • Whether to collect historical facts or information about future developments.

19. Research Techniques Interviews FocusGroups Observation Use of Web Technology Surveys

20. The International Information System • An information system is the systematic and continuous gathering, analysis, and reporting of data for decision-making purposes. • To be useful, the information system must be: • Relevant • Timely • Flexible • Accurate • Exhaustive • Consistent • Convenient

21. Export Complaint Systems • An export complaint system allows customers to contact the original supplier of a product in order to inquire about products, make suggestions, or to present complaints. • A firm must be able to aggregate and analyze complaints and to make use of them internally. • Increasingly, the Internet enables customers to provide feedback on their experiences with a firm.

22. The Mechanisms of Export Complaint Systems Environmental Scanning Delphi Studies Scenario Building

23. Environmental Scanning • Environmental scanning activities provide continuous information on: • Political, social, and economic affairs internationally • Changes of attitudes of public institutions and private citizens • Possible upcoming alterations • Two significant methods of environmental scanning are obtaining factual input and content analysis.

24. Delphi Studies • Delphi studies are a means for aggregating the judgements of a number of experts who cannot come together physically. • The Delphi technique is particularly valuable because it uses mail, fax, or electronic communication to bridge large distances and therefore makes experts accessible at a reasonable cost.

25. Scenario Building • Scenario building involves the identification of crucial variables and the degree of variation. • The possibility of joint occurrences must be recognized. • For scenarios to be useful, managers must analyze and respond to them by formulating contingency plans. • Through the anticipation of possible problems, managers hone their response capability and in turn shorten response times to actual problems.