International Marketing

International Marketing Theory Review Uli Breunig Caglar Cintuglu Deniz Yarar Jobber, Chapter 22

Agenda • Deciding: • whether to go International • which Markets to enter • how to enter • Developing International Marketing Strategy • Organizing for International Operations Jobber, Chapter 22

Seven triggers forInternational expansion: • Saturated domestic markets • Small domestic markets • Low-growth domestic markets • Customer drivers • Competitive forces • Cost factors • Portfolio balance Jobber, Chapter 22

Saturated domestic marketsSmall domestic markets • Few opportunities to expand in current domestic (saturated) market • Serving small national markets is not sufficient to compete against other global competitors Jobber, Chapter 22

Low-growth domestic marketsCustomer drivers • Recession at home -> new opportunities overseas • Suppliers with international presence expected • Customers expanding abroad Jobber, Chapter 22

Competitive forces • Companies feel obliged to follow others going abroad • Attacking an overseas competitor, that entered domestic market, in his own home market Jobber, Chapter 22

Cost factorsPortfolio balance • Low-cost areas (labour: Taiwan, Korea…) • Gaining economies of scale • Different growth rates in different areas provide portfolio balance Jobber, Chapter 22

Deciding which markets to enter • Macroenvironmental issues • Economic influences • Socio-cultural influences • Political-legal influences • Microenvironmental issues • Market attractiveness • Company Capability Profile Jobber, Chapter 22

Macroenvironmental issues:Economic influences • Country‘s size • Per capita income • Stage of economic development • Infrastructure • Exchange rate stability Jobber, Chapter 22

Macroenvironmental issues:Socio-cultural influences • Psychic distance • Cultural differences • Attitudes • Social Perspectives • Language Jobber, Chapter 22

Macroenvironmental issues:Political-legal influences • Attitude of foreign governments to • Imports • Foreign direct investment • Political stability • Trade barriers Jobber, Chapter 22

Microenvironmental issues:Market attractiveness • Size & growth rate • Competition • Costs of serving the market • (distribution and control) • Profit potential • Market access (informal ties between existing suppliers) Jobber, Chapter 22

Microenvironmental issues:Company capability profile • Skills • Necessary skills to market abroad? • Compensation of shortfalls? • Resources • Financial resources for maybe higher market servicing costs? • Human resources (local)? Jobber, Chapter 22

Microenvironmental issues:Company capability profile • Product adaptation • Product modifications: • Local preferences/regulations • Motivation/capability for redesign? • Competitive advantage • Ability to create a competitive advantage? Study foreign market! Jobber, Chapter 22

Deciding how to enter a market • Exporting • Indirect • Direct • Licensing • Joint Ventures • Direct investment Jobber, Chapter 22

Indirect exporting • Domestic-based export merchants • who take title to the products & sell abroad • Domestic-based export agents • who sell on behalf of the exporter but do not take title Jobber, Chapter 22

Indirect exporting • Piggy-backing • Exporter uses other producer‘s overseas distribution facilities • Co-operative organizations • Act on behalf of a number of producers, partly controlled by them Jobber, Chapter 22

Direct exporting • Foreign-based agents or distributors • Domestic-based sales representatives • Overseas sales/marketing office or subsidiary • The internet Jobber, Chapter 22

Licensing • Licensing • Foreign Licensor provides a local licensee with access to technology • Franchising • Product & trade name franchising • Business format franchising Jobber, Chapter 22

Joint Ventures • Contractual joint-venture • No new enterprise, share cost, investment, risk and profit • Equity joint-venture • New company, foreign & local investors Jobber, Chapter 22

Joint Ventures • Joint Ventures are often the only way to enter a market: • Government restrictions to market entry • Foreign companies lack the resources to set up production facilities alone Jobber, Chapter 22

Direct investment • Acquisition of foreign producer • Buying-out joint-venture partner • Building new facilities Expensive and risky but quick way of entering new market Jobber, Chapter 22

Selecting an entry modeControl, Resources, Risk Factor Risk of losing Proprietary information Resources Control Direct investment Direct investment Exporting (own staff) High Licensing Joint Venture Joint Venture Exporting (own staff) Joint Venture Licensing Level Medium Exporting (own staff) Exporting (middlemen) Direct investment Licensing Exporting (middlemen) Exporting (middlemen) Low Jobber, Chapter 22

Developing international marketing strategy • Standardization or adaption • International marketing mix decisions • Product • Promotion • Price • Place Jobber, Chapter 22

Standardization or adaptation • Few totally standardized mixes • Coca-Cola differs sweetness & carbonization • McDonald‘s: meat in hamburgers, menu with(out) salad Jobber, Chapter 22

International marketing mixProduct • Global market to justify huge R&D costs • Pharmaceutical industry • Authentic national heritage: • Scotch whisky, Belgian chocolate, French wine Jobber, Chapter 22

International marketing mixPromotion • Standardized advertising for consistent image identity also for international travellers • Adaptations: • Language, local taboos, different use of goods, local culture Jobber, Chapter 22

International marketing mixPrice • Local competition • Customers • Transfer pricing • Taxes, tariffs, exchange rates • Counter trade • Parallel importing Jobber, Chapter 22

International marketing mixPlace • Distribution channels In Spain yoghurt was sold through pharmacies Germany, UK etc. sell some pharmaceuticals in grocery outlets Jobber, Chapter 22

Organizing for international operations • Organization • Centralization vs. decentralization Jobber, Chapter 22

Organization • International • Overseas operations are appendages to a central domestic operation • Global • Overseas operations viewed as „delivery pipelines“ to a unified global market Jobber, Chapter 22

Organization • Multinational • Regard for overseas operations as portfolio of independent businesses • Rather decentralized • Transnational • Coordination & cooperation in an environment of shared decision-making Jobber, Chapter 22

Centralization • Global integration of international operations • Reaps economies of scale • Provides integrated marketing profile Jobber, Chapter 22

Decentralization • Delegation of international operations to individual countries or regions • „Regional responsiveness“ • Maximizes customization of products to regional preferences Jobber, Chapter 22

Thank you for your attention Jobber, Chapter 22

International Marketing