International Marketing

1
International Marketing

• Tim Beal
• Lecture 7
• 8 September 2006

2
TODAY

• Where were at
• Housekeeping
• Strategy, Entry ad Distribution

3
Where were at

• Been looking at aspects of the international
  marketing environment
• Dont forget that diagram
• Economic, political, social, technological and
  cultural aspects
• Also
• Services and specifically education
• Research project
• Country studies Japan, India

4
From environment to operations

• Now look at some of the issues companies face
  when marketing internationally
• Schedule

5
Housekeeping

• Wine assignment
• Marks over weekend/ early next week
• Next Friday prize draw for bottle of wine
• No Iranian ambassadors dilemma
• Money instead of wine
• Preferences?

6
GLOBAL STRATEGY academic readings

• Craig and Douglas (1996)
• Responding to the challenge of global markets
  Change, complexity, competition and conscience
• Yip. Loewe and Yoshino (1988)
• How to take your company to the global market
• Copies here and on coursepage
• Good overview papers complement textbook - but
  bit dated
• Need to ask if still valid
• Always look at date

7
Craig and Douglas (I)

• Four challenges
• Change
• Complexity
• Competition
• NIEs, China, India, Brazil.
• See also Asian Titans
• Conscience
• Social responsibilities
• Consumer movements

8
Craig and Douglas (II)

• Three phases
• 1 International market entry
• 2 local market expansion
• 3 global rationalisation
• Challenges vary with phase of international
  involvement
• How cope with challenges?

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3 key management tools

• Information systems technology
• Internet, Intranets, Extranets..
• Administrative structures
• Multi-domestic, regional, global..
• Resource deployment
• Resources allocated to countries, products..

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Yip, Loewe and Yoshino

• Two tasks
• Five dimensions
• Four factors
• US, European and Japanese MNCs approached
  globalisation in different ways

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Different approaches

• US -parochial
• latecomers to internationalisation because of
  huge domestic market
• Europeans
• colonial heritage
• EU is multinational (eg Holland)
• Japanese
• Focused on US
• undifferentiated global strategy

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Is globalisation necessary?

• US companies can probably survive by staying with
  domestic market
• niche market
• Other MNCs need to be global
• Globalisation is difficult
• Starting point is corporate culture

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Two tasks

• Formulating global strategy
• Implementing global strategy

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Five dimensions

• Playing big in major markets
• Standardising the core product
• adding-value in few countries
• uniform position and mix
• integrating strategy

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Cut coat to cloth

• Paper is addressed to large MNCs
• NZ companies need to adapt strategies
• strategies must reflect resources

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Dimension1 Playing big in major markets

• Major markets
• size
• technology level
• leading in taste
• large volumegtgteconomies of scale
• amortise RD, investment, etc
• coherent portfolio
• differences in Product Life Cycle?
• Is this still valid?

17
Example Market selection - screening

• far more countries/markets than most companies
  can service
• Even largest companies may screen out some
  countries
• most companies concentrate on few markets

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International market selection methods

• Market grouping
• group counties by indicators
• Market estimation
• Using quantitative methods to forecast demand for
  particular product in given market
• Portfolio analysis
• matrix of market attractiveness against
  company/competitor positions

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Process

• Funnelling
• start with many, move to few
• Trade off between richness of data and cost
• Much data of uncertain reliability
• Simple and robust may be best
• Use of subjective evaluations
• people in the field

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3 stages 1 2

• 1 An evaluation of the set of possible countries
  against general criteria to determine a set of
  attractive markets.
• 2 A further evaluation of this set of attractive
  markets against specific product-related criteria
  to determine a sub-set of markets.

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Stage 3

• 3 An in-depth investigation of this sub-set of
  markets to enable forecast demand to be estimated
  and provide the basis for development of
  strategies to address achieving the forecast
• gtgtback to Yip, Loewe and Yoshino

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Dimension 2 Standardising the core product

• tension between advantages of standardisation and
  demands of local market
• return to next week

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Dimension 3 adding-value in few countries

• RD in country A
• manufacturing in B,C,D
• test marketing in E
• eg Hong Kong for China
• See Don Park interview
• regional centres for core marketing programmes
• selling and customer service in individual
  countries

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Dimension 4 Uniform position and mix

• Uniformity cuts costs
• fewer brands lends focus
• customer mobility and telecommunications making
  global brands more appropriate

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Dimension 5 Integrating across countries

• Competitive strategy based on global awareness
• where are competitors strong? Weak?
• US companies made mistake in 50s and 60s of not
  tackling Japanese market

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2 tasks, 5 dimensionsgtgtfour drivers, four factors
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Industry drivers of globalisation

• Drive to globalisation varies with industry
• some are more suitable than others
• Driver 1 Market factors
• is there a global market?
• Will the Chinese buy baked beans?

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Baked beans?

• Interview with Donald Park, Marketing Manager -
  Asia Pacific Export, Heinz Wattie's Ltd
• January 2006
• My questions in italics
• Don on baked beans

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Driver 2

• Driver 2 Economic factors
• light, high value, non-perishable products more
  suitable

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Environmental and competitive factors

• Driver 3 Environmental factors
• is the technological, legal, political
  environment conducive?
• Driver 4 Competitive factors
• Are the competitors in global markets?
• Presence shows market demand
• absence shows potential advantage being first

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Four organisational factors

• Not merely industry but company must be
  considered
• is it appropriate for globalisation?
• relates to SWOT analysis
• Four internal factors
• structure
• process
• people
• culture

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Factor 1 Organisational structure

• Centralisation of global authority
• Telecommunications and transport revolutions
  fostering centralisation
• in past local autonomy was inevitable
• Domestic/international split
• common amongst US firms
• But many small hi-tech firms are born global

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Factor 2 Management processes (I)

• Cross-country coordination gtregionalisation
• Regionalisation
• regional managers
• Regional HQs (eg Taiwans APROC Singapore, Hong
  Kong)
• John Rutherford on HK as regional HQ

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Global planning

• Often strategic plans developed on
  country-by-country basis
• IT fostering integrated strategy

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Management processes (II)

• Budgeting
• should be globalised to reveal cost and profit
  differences
• Performance review and compensation
• should recognise difficulties of foreign markets
• international meetings
• bringing people together to exchange information
  and experience
• building intra-company relationships

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Factor 3 People (I)

• Use foreign nationals
• Traditional discrimination against foreigners is
  dysfunctional
• nationality-neutral meritocracy
• widens for pool of talent for company to draw on
• demonstrates commitment to globalisation
• develops individual talents

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People (II)

• Japanese tended to have dual system
• Meetings between Japanese expatriates and local
  managers in English
• Japanese only meetings
• Require multicountry experience
• Too often going abroad seen as demotion or dead
  end
• especially true of US companies

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People (III)

• Travel frequently
• especially top management
• State global intentions
• reiterate the commitment

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Factor 4 Corporate Culture (I)

• Invisible but very important
• Global versus national identity
• strongly national-oriented firm will find acting
  globally difficult
• Commitment to employment
• reluctance to shift manufacturing abroad
• Contentious issue in NZ
• Good or bad?
• Japanese invested in robotisation to keep
  producing at home

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Corporate Culture (II)

• Interdependence versus local autonomy
• autonomy hinders globalisation

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Congruency of internal factors

• Internal factors
• organisational structure
• management processes
• people
• culture
• Must be congruent with globalisation if company
  is to have successful global strategy

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MARKET ENTRY AND DISTRIBUTION

• Perhaps most crucial operational decision
• Prices can be adjusted
• advertising campaigns re-jigged
• products adapted
• constant process of change anyway
• Distribution like marriage
• divorce can be messy and expensive
• right partner can make all the difference

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Market entry

• level of involvement
• continuum from -
• indirect exporting
• wholly owned subsidiary

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Indirect and Direct exporting

• Indirect
• export management companies, piggybacking,
  trading companies
• Direct
• Agents, Franchising, Licensing, Joint Venture,
  Wholly owned subsidiary

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cost and control

• more control higher the cost
• does this increase risk?
• Yes, because more at stake
• No, because you have more control
• less at mercy of other companies (eg agents)

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Company and environment

• decisions about market entry depend on
• Company
• objectives
• resources
• experience
• commitment
• market environment

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Importance of experience

• Get experience in other international markets
  before going to India become streetwise first.
  (Beal and Lindsay Business opportunities in
  India

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Market environment

• competition
• actual or potential
• complexity and physiological distance
• how difficult is it?
• Size and profitability

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types of involvement

• Indirect exporting
• responding to importers
• export management companies
• eg R C Macdonald Ltd, Victoria St
• As a major NZ Export/Import company we can
  handle any kind of enquiry

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Piggybacking

• company uses another companys existing network
• eg Wilkinson Sword on Colgate Palmolive
• conflicts of interest
• unlikely to be permanent

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Trading companies

• Japanese sogo shosha most famous
• NZ - Marubeni, Mitsubishi
• long history
• Dutch East India CompanygtgtIndonesia
• English East India Companygt India, opium wars
  with China

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Advantages of trading companies

• Resources and experience
• large sogo shosha have global information systems
• may give entry into home market
• especially Japanese
• gtgtjoint venture
• eg Mitsubishi and KFC

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Direct exporting

• requires commitment and resources
• traditionally supported by governments
• subsidies
• export credit
• market intelligence

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government support and free trade

• increasing constraints on government assistance
• market intelligence, domestic support
• hard business networks
• Joint action groups
• Protecting domestic producers
• dumping
• eg US and kiwifruit
• Negotiating/promoting market entry
• eg Helen Clark in China, Japan, Korea, India
• Paul Vaughan on Prime Ministers and matchmaking

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types of direct exporting

• Agents
• Franchising
• Licensing
• Joint venture
• wholly owned subsidiary

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Agents and distributors

• trade-off between
• cost and commitment
• control
• manufacturer may have
• sole agents
• multiple agents
• Agents seldom monogamous
• conflict of interests
• See DVD Doing Business in India- Education

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Finding agent

• difficult
• recommendations (eg NZTE)
• poaching
• advertising
• Web increasingly important
• lots of websites are marriage brokers

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Agent gtgtdistributor

• distributors share risk, provide working capital
• Distributors role is important one
• partnership - similar to subsidiary but without
  that degree of control

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Distributors role

• Distributors usually seek exclusive rights for a
  specific sales territory and generally represent
  the manufacturer in all aspects of sales and
  servicing in that area
• Exclusive rights .parallel importing
• long-term commitment
• more likely when quality control and after sales
  service major part of product

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Relationships

• Relationships with distribution channels members
  is crucial
• Hennig and Vaughan on relationships

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Today
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Strategy

• Craig and Douglas
• Four challenges
• Three phases
• Three management tools
• Yip, Loewe, Yoshino
• two tasks
• five dimensions
• Four drivers
• four factors

63
Entry and distribution

• types indirect to direct exports
• reasons for selection
• Importance of relationships, long-term commitment
  and perspective

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Next week

• Pat English on China
• Tim Beal on Global Product Development and
  Branding