Marketing on regional markets

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Marketing on regional markets

• October/November 2009

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What is Marketing?

• Marketing is an organizational function and a
  set of processes for creating, communicating, and
  delivering value to customers and for managing
  customer relationships in ways that benefit the
  organization and its stakeholders.
• AMA 2004

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2007 and on...

• Marketing is the activity, set of institutions,
  and processes for creating, communicating,
  delivering, and exchanging offerings that have
  value for customers, clients, partners, and
  society at large. (Approved October 2007, by AMA)

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Differences between Domestic and
International/Regional Marketing

• Culture
• Markets- widespread and fragmented
• Information
• Politics
• Governments
• Law
• Technology

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More Differences...

• Economies- varying levels of development
• Finance different systems and regulatory bodies
• Currency
• Business diverse rules and cultural influences
• Control increased difficulty controlling and
  coordinating across markets

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Dynamic Changes in World Markets and Politics...

• The rise of newly emerging markets
• Asia (China, India, ...)
• Ex-Eastern Europe and the former Soviet Union
• EU Expansion (new members)
• Regional economic integration
• EU, NAFTA and others
• Decreased trade barriers liberalization

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More Changes and Influences...

• The Globalization question (pros/cons)
• The WTO
• Technology the Internet and other
• Increased importance of Small and Medium-Sized
  Enterprises (SMEs) in international business
  born globals!

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Are all Firms Ready to Go International?

• The firms readiness for internationalization how
  experienced we are?
• Immature
• Adolescent
• Mature
• Industry Differences
• Local/Global
• Growing/Decreasing
• Constantly changing

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We Need Proper People!

• Business Skills marketing, management, finance,
  etc.
• Langauge skills
• Cultural Knowledge
• Adaptability to new situations, lifestyles and
  ideas
• Proper attitude

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We Need Proper Organizational Climate!

• Proactive/Reactive
• Risk taking
• People who like their firm being INTERNATIONAL
  and take that RISK and RESPONSIBILITY!

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MOTIVES OF INTERNATIONALIZATION

• Proactive Motives
• To seek profits
• Managerial initiative
• Technology competence/ unique product
• Foreign market opportunities/market information
• To achieve economies of scale
• Tax benefits
• Competitive pressures
• Small and saturated domestic market
• Overproduction/excess capacity

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Reactive motives

• Unexpected inquiries
• Extend sales of seasonal products
• Extend the product life cycle
• Proximity to international customers
  (psychological/cultural distance)
• Take an opportunity!

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Internationalization theories

• 1. TWO TRADITIONAL THEORIES
• Life-cycle Theory
• The Uppsala model STEP BY STEP OR INCREMENTAL
  THEORY
• 2. BORN GLOBALS!

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Product life-cycle theory

• Traditionally believed that firms began exporting
  when reaching the maturity stage of the product
  life-cycle
• Out-dated theory!

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Uppsala model

• Firms begin international activity in nearby
  markets and only gradually move into more distant
  markets
• Enter through successive stages
• Stage 1 No regular export activities sporadic
  exporting
• Stage 2 Export via independent representatives
• Stage 3 Establishment of a foreign sales
  subsidiary
• Stage 4 Foreign manufacturing
• Not valid for all industries! A bit
  old-fashioned BUT...

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Born globals!

• SMEs with fewer than 500 employees
• Rely on cutting edge technology in developing
  unique product or process innovations
• Usually managed by entrepreneurial visionaries
• - decision maker has a large influence over the
  type of internationalisation followed

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Factors of Born Globals Rising

• Growing importance of niche markets
• Advances in process/technology production
• Flexibility of SMEs/Born Globals
• Global Networks
• Advances in information technology
• Internet born globals

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• FIRST RULE OF INTERNATIONALIZATION
• BE COMPETITIVE!

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If you want to internationalize you need to be
competitive...

• What are your core competitive advantages?
• Will customers/buyers realize them?

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National level of competitiveness

• The Porter Diamond
• Factor conditions
• Demand conditions
• Related and supported industries
• Firm strategy, structure and rivalry
• Chance
• Government

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Industry level

• Competition analysis in an industry C analysis
  Porters approach
• Analyze
• Market competitors
• Suppliers
• Buyers
• Substitutes
• New entrants

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PORTERS MODEL
New entrants
Market competitors
Buyers
Suppliers
Substitutes
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Firm level

• Value Chain Analysis
• Competitive triangle
• Benchmarking
• RESOURCES!
• CORE COMPETENCES!

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If you want to internationalize you need to be
competitive...

• The Porter Diamond
• Factor conditions
• Demand conditions
• Related and supported industries
• Firm strategy, structure and rivalry
• Chance
• Government

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Industry level

• Competition analysis in an industry C analysis
  Porters approach
• Analyze
• Market competitors
• Suppliers
• Buyers
• Substitutes
• New entrants

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• Value Chain Analysis
• Competitive triangle
• Benchmarking
• RESOURCES!
• CORE COMPETENCES!

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• ENVIRONMENTAL SCANNING
• macro environment analysis for marketers

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PEST/SLEPT ANALYSIS

• Political Environment
• very complex due to the interaction of the
  domestic, foreign, and international political
  environments regulations, agreements,
  governmental activities, export facilities,
  information infrastructure, risks such as
  ownerships, trade barriers...
• Economic Environment
• a major determinant of market potential and
  opportunities exchange rates, PPP, trade zones,
  custom unions, FDI climates, GDP p.c., ...
• country risk assesment! BERI index

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Sociocultural environment

• What is culture?
• collective programming of the mind which
  distinguishes the memebers of one human group
  from another... Includes system of values and
  values are among the building bloks of
  culture... (Hofstede, 1980)

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Visible and invisible parts of culture

• The visible behaviour (body language, cothing,
  lifestyle...)
• Values and social morals (family values, sex
  roles, friendship patterens...)
• Basic culture assumptions (national identity,
  ethnic culture, religion,...)

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High and low-context cultures

• Low context rely on spoken and written language
  for meaning senders of the messeges encode their
  messages, expecting that the recievers will
  accurately decode the words used to gain a good
  understanding of the intendend message
• High context use and interpret more of the
  elements surrounding the message to develop tehir
  understanding of the message

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Elements of culture

• Language (verbal/non-verbal)
• Manners and customs
• Technology and material culture
• Social institutions
• Education
• Values and attitudes
• Aesthetics
• Religion

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Legal environment

• Law code law, common law, islamic law...
• Standards, regulations
• Interesting law areas for marketers
• Intelectual and property rights
• Consumer protection
• Dumping/antidumping
• Standardization of the products/services
• Tarrifs and duties
• Tax laws
• Labeling
• FDI...

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Information and technological environment

• Infrastructure
• Information technology
• Telcommunication technology
• Dynamics and changes!

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Ecological environment

• Costly advantage!
• Kioto agreement world rules for ecology?

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ALWAYS COMBINE...

• C analysis (competitors)
• Buyers, suppliers (five forces)
• PEST analysis
• Market potential analysis
• Sales potential
• INTEGRATION/COMBINATION OF ALL!

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• MARKET SELECTION WHICH MARKET SHOULD WE ENTER
  OR NOT?

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Deciding about markets, regions...

• Segmentation
• The international market as a country or group of
  countries
• -Often the preferred approach
• The international market as a group of similar
  customers from several countries

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Market screening model

• Step 1 and 2 Defining criteria
• measurabiltiy, accesibility, profitability,
  actionability
• General characteristics (geographic location,
  language, political factors, demography, economy,
  industrial structure, technology, social
  organization, religion, education, ...)
• Step 3 Screening markets/countries
• Market atractiveness/size
• Competitive strength
• Step 4 Develop subsegments in each qualified
  country and across country (geographic,
  demographic, lifestyles, buyer behavior)

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International marketing research and information
system

• Information system provides managers and other
  decision makers with a continuous flow of
  information. Scanning modes
• Surveillance browsing through newspapers,
  magazines, TV and if a story has a special
  relevance, the marketer tracks its development
  through monitoring.
• Search seeking out specific information.
• Marketing research Gathering, analysing and
  presenting information related to well defined
  problem. Linked to decision making within the
  firm.

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Marketing research
Macro environmental factors economy,
technology, legal, political, social
environment, competition
Micro environmental factors family, peer
groups, opinion leaders
Consumers
4 Ps

• Marketing
• Managers

Customers behaviour, satisfaction, loyalty

• Market segmentation
• Target market selection
• Marketing programmes
• Performance and control

• Marketing research support
• The nature and scope of target markets
• The forces that shape the marketing system
• Evaluate marketing mix variables
• Evaluate success and failures of marketing
  decisions

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Marketing research

• Secondary research conducted from the home base.
  Consists of secondary data gathering, which is
  defined as information that has already been
  collected for other purposes and is thus readily
  available.
• Internal data sources and external data sources
• Advantages and disadvantages
• Primary research aims at collecting primary
  data, which is defined as information collected
  first-hand, generated by original research that
  are tailor-made to answer specific research
  questions.
• Advantages and disadvantages
• Qualitative vs. quantitative research

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Primary research

• Quantitative research involve getting data from
  a large representative group of respondents. The
  objective is to quantify data and generalize the
  results from the sample to the population of
  interests. Typically these techniques apply some
  form of statistical analysis.
• Qualitative research involves getting data from
  persons that are knowledgeable about the problem.
  The objectives is to get initial and qualitative
  understandings of the underlying reasons and
  motives. Example focus groups, personal
  interviews

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Primary research process
Identifying the research problem
Developing a research plan
Collecting data
Analysing data
Presenting the research findings
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Primary research process

• Identifying the research problem What
  information do I need? Why do I need this
  information?
• Developing a research plan

Research approaches
Observation
Surveys
Experiments
Personal interviews Focus groups Surveys
quantitative research
qualitative research
Source Hollensen, 2001
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Primary research process

• Developing a research plan

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Primary research process

• Collecting data establish parameters, develop
  instructions, check that data are gathered
  correctly, efficiently and at reasonable cost.
• Analysing data need creativity and scepticism!
• Presenting the research findings

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Key factors in international marketing research

• Size
• Comparability of data
• Reliability
• Validity internal and external
• Smaller markets

Importance of marketing research in
international marketing!
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Designing the marketing programme

• What to sell abroad?
• all products/services, selected
  product/services, specially designed, new
  products, differentiated products?
• To whom? Segmentation and positioning.

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PRODUCT/SERVICE IN INTERNATIONAL MARKETS

• 4Ps 3Ps 2Ps people, process, physical
  evidence, power, provision of services
• SERVICES intangability, perishability,
  heterogeneity, inseparability
• Standardized, supported by equipment, personal

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Some alternatives...

• SWYG/SWAB/GLOB
• one product, one message worldwide
• product extension, promotion adaptation
• product adaptation, promotion extension
• dual adaptation
• product invention
• STANDARDIZATION/ADAPTATION- crucial question!

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Managing products across borders

• the product life cycle
• product portfolio analysis
• image (national, product, company)
• branding (corporate, family, range, individual)
  consistent, standardized, similar across borders
• national, regional, global brands
• trademarks
• positioning
• new product development process (CAD, CAM, FMS)
• RD location(centrtalized, decentralized)
• technology transfer

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Different usage of products in different markets

• Segment and target market differences
• hwo, how, when, where it is used, buyer
  preferences
• Size
• Packaging
• Differing price sensitivities
• Preferred method and outlet of purchase...

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COO AND MADE IN...

• Country-of-origin effect
• Made in influence
• Brand influence (corporate/product/service)

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COO
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INTERNATIONAL PRICING STRATEGY

• standardization(ethnocentric pricing)
• adaptation(polycentric pricing)
• invention (geocentric pricing)
• OBJECTIVES
• rate of return
• market stabilization
• demand led pricing
• competition led pricing
• pricing to reflect product differentiation
• market skimming
• market penetration
• early cash recovery

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Why prices differ across markets?

• Level of competition
• Taxes
• Government regulation tariffs, duties,
  non-tariff barriers
• Margins
• Exporting costs
• Different costs labour, transport...
• Different exchange rates

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SETTING A PRICE

• COST-ORIENTED (return, early cash)
• MARKET-ORIENTED (stabilize position, skim the
  profitable business, penetrate the market)
• COMPETITION-ORIENTED (maintain,improve position,
  meet and follow competition, reflect differences,
  prevent entrants)
• PROBLEMSin multinational pricing (coordination
  of prices, transfer pricing to create barriers,
  avoid domestic or foreign taxes, to manage the
  level of involvement in markets) in managing
  foreign currency and econoic conditions
  (dumping) to obtain suitable payment in LDCs
  administrative problems of cross-border transfer
  of goods
• GREY MARKETING/PARALLEL IMPORTS

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• CURRENCY ISSUES/fluctuations
• MODES OF PAYMENTS
• COUNTER-TRADES barter, compensation,
  counter-purchase, offset, switch, buyback

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INTERNATIONAL LOGISTICS AND DISTRIBUTION STRATEGY

• international logistics and distribution strategy
  as a source of competitive advantage
• C components cost, character, continuity,
  contol, coverage
• Total distribution cost approach
• DTWIOPS/transport, warehouse, inventory,
  order processing, packaging, lost sales/

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International distribution

• WHAT TO CONSIDER
• Customer characteristics
• B2B/B2C
• Product itsself
• Location/geographic conditions/infrastructure
• Competition
• Legal regulations
• Local business practices

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Channel structure

• Market coverage
• Intensive Distribution
• Selective Distribution
• Exclusive Distribution
• Channel length
• Control/Cost
• Degree of integration
• Vertical
• Horizontal

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INTERNATIONAL COMMUNICATION STRATEGY

• intercultural aspects of advertising, personal
  selling, public relations, sales promotion,
  direct marketing
• B2B specifics trade fairs, auctions, sales
  confererences
• diverse tools and techniques in different
  countries in communication mix
• Standardization/adaptation key issue
• THINK GLOBAL, ACT LOCAL?

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• MOST IMPORTANT INT/REG MARKETING ISSUE
• STANDARDIZATION VS. ADAPTATION

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Standardization/adaptation of marketing
programes...

• Why standardization?
• Economy of scale and scope
• Wider positioning
• Global brands
• Why adaptation?
• Market differences
• Price discrimination and differentiation
• Clear and focused positioning

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Jains model of S/A
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A.SHOHAM version of the Jains model
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• WHICH REGION WILL YOU ENTER?
• WHY AND HOW?
• DO YOU HAVE ENOUGH DATA ABOUT MARKETS AND
  UNDERSTANDING OF CUSTOMERS?
• ...