International Retailing MKT501C2

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International Retailing (MKT501C2)

• Week 11 International Retail Marketing

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Lecture Aim

• to provide students with an understanding of the
  complexities of conducting marketing in the
  international retail environment

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Learning Outcomes

• By the end of the lecture, and having studied the
  recommended reading, students should be able to
• demonstrate an understanding of the impact of
  internationalisation on the management of the
  marketing mix elements
• demonstrate an awareness of the dimensions of
  international retail marketing activity, in terms
  of market research, segmentation, targeting,
  positioning etc.

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Globalisation

• The world is getting smaller by the day. Pretty
  soon, if the giant shopkeepers have their way,
  every high street from Tokyo to Torquay will look
  the same, give or take the occasional tea
  shop. Sunday Times, 25 April 1999

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Global Retailing Definition

• Tordjman (1989) defines a global retailer as
• 'essentially targeting the same group of
  customers in each country whose offer varies
  little across national boundaries with strong
  central control dependent on excellent
  information systems'.

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Global Strategy

• Global segmentation
• Standardisation of the marketing mix
• Vertical integration
• Centralised management
• High-performance information systems
• Significant economies of scale

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Benefits of Global Standardisation

• Substantial economies of scale in production and
  marketing can be achieved through supplying
  global markets
• Reduced inventory costs
• Sourcing from cheapest or multiple locations

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Multinational Strategy

• Multi-market approach to organisational structure
• Decentralised management
• Small economies of scale
• Know-how transfer

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Regional Strategy

• Companies being pressurised to become more
  regionally focused - response to growth of
  regional trading blocs
• Trade barriers exist for those companies located
  outside the trading bloc
• Compromise between global and multinational/multi-
  domestic strategies

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Transnational Strategy

• Flexible approach required for firms with many
  products and services
• These firms are characterised by
• global scale efficiency
• national level responsibilities and flexibility
• cross market capacity to leverage learning on a
  worldwide basis
• Contains elements of global, multi-domestic and
  regional organisational structure

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Global Trends

• The shift from labour to capital-intensive
  industries
• Labour has become a much less significant element
  of cost, so companies locating nearer their
  markets to obtain greater economies of scale.
• The accelerated technology life-cycle
• Technological advantage is increasingly hard to
  gain or sustain. Companies are having to
  introduce new products or services simultaneously
  in all the world markets.
• Some global convergence of consumer tastes

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Global Markets

• Culture may be a determinant factor only up to a
  certain level. When price differences between
  alternatives become too large, then cultural
  values diminish in importance and other factors
  take over
• Low-price products like McDonalds, Kentucky Fried
  Chicken, Benetton etc. can base their concepts on
  good-value products and a worldwide interest to
  spend as little as possible on necessities to
  have as much as possible to spend on other things
• Luxury products are typically also truly
  international, based on the worldwide interest to
  get the best on the market irrespective of origin

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Global Markets

• Types of Market Convergence (Ref H. Ehrnreich,
  The Globalisation Paradox, Financial Times,
  22/12/00)
• Aspirational convergence
• a growing number of consumers around the globe
  are united in following the American dream and
  the pursuit of personal freedom and material
  success
• Lifestyle driver convergence
• e.g. the growth of the concept of convenience
  brought about by a more hectic pace of life
• Connoisseur convergence
• consumption of a wider range of new products,
  flavours and receipes, complementing existing
  diets

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Global Markets

• Market Convergence
• Market convergence offers international synergies
  in aspirational brand building or opportunities
  to achieve efficiencies in basic production and
  to introduce certain products into new markets.
• However, they do not necessarily offer
  fundamental synergies in selling and marketing
  the same product, when it comes to specific
  packaging, flavours and recipes.

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Global Markets

• Contradictory forces - the process of
  globalisation and homogenisation accompanied by
  growing regionalism and specialisation
• Various issues driving this process
• The momentum for devolution - political
  developments
• The fear of cultural colonisation - EU and
  cultural identities
• The cult of the individual - the Internet has the
  power to create an interconnected world yet
  enforces more individual consumer demand

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Arguments Against Global Standardisation

• A lack of evidence of homogenisation
• Growth of intra - country segmentation
• Developments in factory automation allowing
  flexible, lower cost, lower volume, high variety
  operations
• Legal requirements (e.g. trademarks, product
  standards)
• Climatic considerations
• Government regulations (taxes, store laws etc.)

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Strategic Forces

• Internal Forces
• How important is control of the international
  operations for the company?
• e.g. if the local affiliate has a strong position
  within the company, then it is much more likely
  that decision-making is decentralised
• What are the managerial perceptions of
  international markets?
• e.g. if managers feel that cultural differences
  are important more decentralised planning may be
  found

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International Retail Marketing

• Market research
• Segmentation
• Targeting
• Positioning

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International Retail Marketing

• The marketing mix
• image
• product range
• format
• price
• location
• distribution
• promotion

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Global Marketing Strategy

• Global marketing does not necessarily mean
  providing the same product in all countries, but
  offering local adaptations around a standardised
  core
• The big issue today is not whether to go global
  but how to tailor the global marketing concept to
  fit each business (Quelch and Hoff, 1986)

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Marketing Mix Standardisation

• Advertising - arguments for and against
  standardisation
• Product - products tend to be standardised
• Prices - seldom standardised worldwide, but price
  positionings are
• Corporate image/brand - may or may not be
  standardised, depending on company strategy
• The term 'co-ordination' may be more appropriate
  than the more popular phrase of standardisation

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Corporate Image

• Corporate Personality
• personal contact
• impersonal contact
• experience with the products or services
• experience with the way of doing business
• behaviour of personnel
• structure
• historical success

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Corporate Image

• Visual Identity
• name
• logo
• home colours
• advertising
• look of shops
• labels/design
• uniforms
• signage
• printed material

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Global Marketing Strategies

• Standardise the core product, e.g. Laura Ashley,
  Sock Shop, Body Shop
• Adopt a uniform market positioning and marketing
  mix, e.g. Ikea
• Integrate competitive strategy across markets.
  Strategies may be based on price leadership, e.g.
  Aldi or quality, e.g. Marks and Spencer

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Global Marketing Strategies

• Ikea - One Furniture Store Fits All
• Anders Dahlvig, Chief Executive, sees no need to
  tailor Ikea stores to local markets
• Whether we are in China, Russia, Manhattan or
  London, people buy the same things. We have the
  same range everywhere - we dont adapt to local
  markets. If we were to adapt we would just
  become another retailer in that region or city.
  The whole idea is to be unique - uniquely
  Scandanavian and uniquely Ikea.
• Ref Financial Times, 8/2/01

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Multinational Marketing Strategy

• Operators define their formula globally and adapt
  the key aspects of their strategy to local
  circumstances
• The basic concept remains the same but
  adjustments are needed in order to meet the
  specific expectations of each market
• e.g., CA's product policy was traditionally
  determined on a country-by-country basis,
  although each store had to comply with national
  recommendations
• e.g. hypermarkets - decentralised purchasing
  applies right down to store level

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Transnational Marketing Strategy

• Global structuring of part of the product/service
  offer, whilst at the same time fine tuning other
  parts of the same offering
• e.g. Kentucky Fried Chicken's entry into Japan -
  3 specific changes were required
• product was wrong shape and size
• locations had to be moved into crowded city
  eating areas and away from independent sites
• contracts for supply of appropriate quality
  chickens had to be negotiated locally

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Summary

• A number of strategic approaches to international
  retail expansion.
• The strategic approach will have major
  implications for marketing activities in foreign
  markets.
• The ideal is to standardise as much as possible
  without overlooking the requirements of the local
  market.