DECISION FRAMEWORK

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DECISION FRAMEWORK
Developed Markets
Emerging Markets

Developing Markets
Key Decisions Product Design, Choosing an Entry
Mode, Targeting, Building Brand
Equity
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Decision Criteria for Country Selection

• Market Size and Growth
• Risk (Political Economic Internal External)
• Government Regulations
• Competitive Environment
• Local Infrastructure
• Country Classification
• Platform gathering intelligence and establish a
  network (Singapore, Hong Kong)
• Emerging Market Vietnam, Kazakhstan
• Growth Markets The Czech Republic, China,
  Brazil
• Maturing Markets Japan, Germany

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The Triad Framework

• Japan GDP-4.22, Population 127M
• Australia GDP 666B,Population 20M
• New Zealand GDP 106B, Population 4M

EU Total Population 460M GDP - 12.86

• NAFTA
• US
• Canada
• Mexico
• Total Population 425M
• GDP - 17.1 trillion

• Elements from
• China GDP 10T, Population 1.3B
• India GDP 4.0T, Population 1.1B

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The Trouble with India

• India has under invested in infrastructure for 60
  years and are 10 to 12 years behind
• Crumbling roads, jammed airports, and power
  blackouts could hobble growth
• With no transit in Bangalore, Indian technology
  firms Infosys technologies ltd. Spends 5 million
  a year on buses minivans, and taxis to transport
  its 18,000 employees to and from Electronics
  City.
• Growth is running at 9 plus this year

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• Real estate prices have shot through the roof
  with some prices doubling in the past year
• Highways, modern bridges, world class airports
  ,reliable, and clean water desperately fall short
  in supply
• Economic losses from congestion and poor roads
  alone are as high as 6 billion a year
• Intel recently chose Vietnam as opposed to India
  because of the lack of reliable power and water
  in India
• This is why Indias exports are less than 1
  where Chinas is 7.

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• If the infrastructure development gets delayed
  ,the economic development, job creation, and
  foreign investment get delayed as well
• GDP growth would run 2 points higher if the
  country had decent roads, railways, and power
• The problems are even contributing to overheating
  in the economy
• India today is where China was a decade ago
• Fortunately after decades of under investment and
  political inertia, Indias political leadership
  has awakened to the magnitude of the
  infrastructure crisis

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• Example The first phase of a new subway in New
  Delhi was completed in 2005
• On the whole there are so many infrastructure
  challenges, but also there are a lot of
  opportunities to assist meeting those challenges
• This is why so many multinational companies are
  flocking to India ranging from tourist class
  hotel rooms to telecom
• While the laws of supply and demand would
  indicate that Indias infrastructure gap can be
  filled, that logic ignores the corrosive effect
  of the countrys politics

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• None of the solutions to Indias infrastructure
  challenges are simple, but business leaders some
  enlightened government officials, and even
  ordinary citizens are chipping in to help make
  things better
• Unless the nation shakes off its legacy of
  bureaucracy, politics, and corruption its ability
  to build adequate infrastructure will remain in
  doubt as will its economic destiny

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The Chinese Century

• Already a commercial giant, China is aiming to be
  the worlds next great power
• You may know all about the world coming to China
  about the hordes of foreign business people
  setting up factories and boutiques and show
  rooms, but you probably know less about how China
  is going out into the world
• Through its foreign investments and appetite for
  raw materials, the worlds most populous country
  has already transformed economies from Angola to
  Australia
• At present China is turning that commercial might
  into real political muscle, striding onto the
  global stage and acting like a nation that very
  much intends to become the worlds next great
  power.

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• China seems ready to challenge and possibly even
  undermine some of Washingtons other foreign
  policy goals
• China is still a poor country whose leaders face
  so many problems
• China is an environmental dystrophic, its cities
  air foul beyond imagination and its clean water
  is scarce
• The most immediate priority for Chinas
  leadership is less how to project itself
  internationally than how to maintain stability in
  a society that is going through the sort of
  social and economic change that, in the past, has
  led to chaos and violence

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• Chinas objective is to ensure a steady supply of
  natural resources, so that its economy can
  sustain the growth that officials hope will keep
  a lid on unrest at home
• This is the reason why china has reached out to
  resource rich democracies like Australia and
  Brazil as much as it has to such international
  pariahs as Sudan and Burma
• Assuming a bigger global presence has forced
  Beijing to learn the art of international
  diplomacy
• Within its own neighborhood there are signs that
  Chinas behavior is changing in more constructive
  ways

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• Today Chinas relations with its neighbors are
  viewed as positive at the expense of the US.
• There are some China watchers who fear a point to
  two factors modernization of Chinas defense
  forces and the risk of war over Taiwan
• Chinas military spending has increased nearly
  300 in the past decade
• After 200 years Chinas prospects are now better
  than ever and the opportunities of its people
  improve each year
• As China gets richer its population will press
  for a more democratic freedoms and its ruling
  elite mindful of the need for change will grant
  them

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Three Dimensional The markets of Japan, Korea,
and China

• Asia is one of the worlds most dynamic regions,
  and offers multiple opportunities for business
  and investors
• Asian consumers have different tastes,
  preferences, and moderated by different income
  levels.
• A tendency has occurred to group these countries
  together but should not be done because they are
  so different
• GDP and purchasing power
• o Japan 4.80 trillion, 4 trillion
• o China - 1.84, 7 trillion
• o Korea - .72 trillion, 1 trillion
• Japan Korea and China differ in their brand
  orientations, attitudes toward domestic and
  foreign products, quality and price perceptions,
  and product feature preference

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• Brand Orientation
• Japan
• Most brand conscious and status conscious
• Love high end luxury goods
• Country represents 20 of Guccis world
• Prefer brands that contribute to their senses of
  identity and self expression
• Highly group oriented consumers
• Korea
• Sophisticated tastes
• Show immense passion for new experiences and
  favor premium and expensive imported products
• Great interest in generational fads and select
  products that follow their generations judgments
  and preferences
• China
• Prefer luxury goods
• Brand and status conscious
• Consider luxury goods to be personal
  achievements, bringing higher social status
• Purchasing behaviors are regional

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• Domestic VS. Foreign
• Japan
• Consumers extremely demanding and have different
  perceptions of product made in other countries
  they are generally accepting of quality foreign
  products.
• Dominated by well established companies such as
  Canon, Sony, and Toyota
• Korea
• Consumers hold negative attitudes toward foreign
  businesses the majority believes that these
  businesses transfer local wealth to other
  countries and crowd out small establishments
• Consumers very product and demonstrate a
  complicated love hate relationship with foreign
  brands
• Korea campaigns require significant re-branding
  use of localized brands to influence local
  perceptions
• Country is increasingly comfortable with the
  presence of foreign companies
• China
• Attitudes toward foreign products differ
  depending on consumers age groups
• Believe imported products under foreign brands
  names are more dependable
• Foreign companies such as Nike Nokia Sony have
  replaced well known brands
• Countrys consumers are inspired by design and
  function they prefer domestic brands because of
  their food value for the money

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• Quality and Price
• Japan
• Consumers are the worlds strictest when it comes
  to demand for product quality and they clearly
  articulate their needs desires about a product or
  package operation
• Foreign companies dont fully understand and meet
  consumers needs expectations struggle with their
  investments
• To cater to them manufacturers have adopted a
  total quality approach
• Korea
• Consumption has been sluggish since the financial
  crisis of 1997-1999
• Younger generation is at the forefront of a new
  and emerging patter and holds opposing
  expectations of preferences for low priced and
  high priced goods
• China
• Price sensitive and try to safeguard their income
  for investment
• Market is lucrative with growing demand foreign
  brands

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• Technology Features
• Japan
• o Consumers prefer high tech gadgets
• o Consumer are willing to pay for better cooler
  features and technological sophistication
• o Because of small living quarter, manufacturers
  have become experts at minimizing and creating
  multifunction devices
• Korea
• o Most wired country in the world is a leader in
  internet usage and high the industries such as
  mobile phones, liquid crystals, and
  semiconductors
• o Cyberspace reaches more than ¼ of the
  population
• China
• o Imperative for companies o understand the major
  difference in consumer behavior between
  generations
• o Young consumers are passionate about the latest
  developments
• o 40s and 50s consumers are price conscious,
  brand loyal, and less sensitive to technology

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Recommendations

• Marketers need to tailor country specific
  strategies to target consumers in Korea, Japan,
  and China
• The existence of strategically equivalent
  segments suggests a geocentric approach to global
  markets
• Similarities allow for standardized strategies
  across national boundaries
• Companies not only preserve consumer orientation,
  but also reduce the number of marketing mixes
  they have to offer

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A Model For Selecting Foreign Markets

• 1. Macro Level Research
• (General Market Potential)

3. Micro Level Research (Specific Factors
Affecting the Product)
Existing and potential competition Ease of
entry Reliability of information Sales
Projections Cost of Entry Probably product
acceptance Profit potential Feel
Economic statistics The political
environment Social structure Geographic features
Preliminary Opportunities
Rejected Countries
2. General Market Relating to the Product
Probable Opportunities
Growth trends for similar products Cultural
acceptance of such products Availability of
market data Market size State of
development Taxes and duties
4. Target Markets
Corporate factors affecting implementation
Country Priority Listings
Possible Opportunities
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Opportunity Matrix
L M H
Market Opportunity
H M
L
Business Political Risk Measured Over Time
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Market Stage
Infancy Developing Mature

1. Customers
2. Product Introduction
3. Distribution
4. Price
5. Competitive Strategies

(Types of after markets.)
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Criteria Used in Choosing Entry Strategies
External Criteria
Internal Criteria
Time orientation Need for control Degree of
internationalization Urgency of going
international Ability to handle international
risk
Market risk factor Competition in the
market Political conditions Market
conditions Future market potential Availability
of desired distribution outlets Availability of
venture capital Availability of know-how
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Entry Decisions Strategic Parameters
Input Process Output
A strategic plan including
Motivation(s) for entry ? Decision rules
for ? Mode of entry site(s) selection
(risks control, legal issues)
Inventory of own Operational and
resources implementation programs
Inventory of competitors resources Market
intelligence IP protection
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International Market Entry Funnel Approach
Regional Focus Mode of Entry Regional Focus
Trading companies Exporting Licensing Manufactu
ring Joint Ventures Strategic
Alliances Management Contracts
Using an entry into one National marketing as a
stepping stone for launching market Penetration
into other markets
Identification of A Lead Country (Function
of the Firm Size)

• The Triad
• Japan
• North America
• Europe

• Emerging Markets
• Latin America
• Venezuela
• Argentina
• Brazil
• Columbia
• Chile

Pacific Basin China India
Middle East Or various clustering
schemes e.g. seekers vs. Climbers

• Less Developing Regions

A popular clustering approach consists of
criteria such as development level (urbanization,
life expectancy, infant mortality, literacy
rte, per capita GDP), Economic Performance (GPD,
inflation, investment foreign trade and debt,
etc., and Political and Economic Liberalization.
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The Spectrum of International Business Involvement
Inactive Exporting
Licensing
Joint Venture
Strategic Alliance
Franchising
Proactive Exporting
Turnkey Contract
Management Contract
Direct Investment
Less involved
More involved
Contractual Relations/Arrangements
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HENKEL CASE

• Theoretical Strategic Cosiderations

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FRAMEWORK OF GLOBAL STRATEGY FORCES
Position and Resources of Business and
Parent Company
Benefits/Costs of Global Strategy

• Appropriate Setting for Global Levers
• Major Market Presentation
• Product Standardization
• Activity Concentration
• Uniform Marketing
• Integrated Competitive Moves

• Industry Globalization
• Drivers
• Major Market
• Cost Factors
• Environmental Factors
• Competitive Factors

Organizations Ability To Implement a
Global Strategy
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The EPRG Framework (Companies Philosophies on
International Involvement) Ethnocentric
Orientation Firms are guided by a domestic
market extension concept. (Disney in the
past) Polycentric Orientation Firms are
guides by a multi-domestic market
concept. (Some of the car companies) Regioce
ntric Orientation Firms view world regions as
distinct markets. (Pepsi Co.,
Otis) Geocentric Orientation The world is
perceived to be a potential market regardless
of geographic location or nationality. (McDo
nalds, IBM)
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Thank You