Imm unit-03 (decision making in international marketing)

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By :

Prof. Amit Kumar

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International marketing has become a major concern for business schools to develop global strategies to lead and sustain in the much expanded and

competitive arena. Liberalization thus catalyzing market competition, poses challenge for the

managers in handling the rigors of expanding global marketplace.

Syllabus aims at providing contemporary knowledge & skills on issues of global

marketing management.

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Importance of this course

Global Marketing Management

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Course: Global Marketing Management

1. Framework of Global Marketing Management

2. Global Marketing Research

3. Decision Making in International Marketing

4. Foreign Market Entry & Export Marketing

5. Product Planning & Development

6. Global Pricing Strategies

7. Global Distribution System

8. Promoting Product Internationally

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Global Marketing Management

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Global Marketing Management Decision Making in International marketing

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Contents• Targeting Global ICT Markets by Country like INDIA• Hurdles in Reaching Global Market• Tools for Selecting the countries for doing business

Market Potential Index (MPI) Global Competitive Index (GCI) Foreign Direct Investment Confidence Index (FDICI) Global Political Risk Index (GPRI)

• Country Segmentation Country Segmentation on the Basis of Income Segmentation of Indian on Basis of Household Income Segmentation of Chinese Market on the Basis of Age Segmentation on the Basis of International Marketing

Opportunity and Attractiveness• Tools for International Market Analysis• Case Study: Identifying International Marketing

Opportunities in Medical services

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Learning OutcomesAfter reading this chapter you will understand:• The tools for selecting the countries for doing business

• How to take decisions with the help of indices such as Market Potential Index (MPI), Global Competitive Index (GCI), Foreign Direct Investment Confidence Index (FDICI) and Global Political Risk Index (GPRI)

• How to calculate MPI and its advantages• The importance of GCI and FDICI• Calculation of GPRI and the countries currently covered

under GPRI

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Identification of Niche Segment in International Markets

Targeting Global ICT Markets by a developing Country like INDIA

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Targeting Global ICT Markets by a developing Country like INDIA

The NASSCom has also forecasted that by 2008, ICT s/w and services exports will account for 35% of India’s total

exports. Employment in this industry grew from 160,000 in 1997 to an estimated 410,000 in 2000.

Today, some 40% of the Fortune 500 corporations are clients of the Indian s/w industry, while more than 25% of Indian

s/w firms meet the requirements set by ISO 9000.

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Hurdles in Reaching Global Market

A firm has to overcome several other hurdles to reach international markets.

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Geographical Distance

Economic Distance

Political Distance

Psychic Distance

Domestic Firm

TargetMarket

http://www.distancefromto.net/

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Tools for Selecting the Countries for doing Business

• Firms expanding internationally need to carry out research on business opportunities, evaluate different countries and select the potential locations for doing business.

• International marketing research has to be done scientifically with the help of tools available to resolve business problem.

• Various tools for measuring the economic, political and social risk of a country can be classified as:

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Tools for Selecting the Countries 1. Market Potential Index (MPI)

• The market potential database contains more than 2,200 items, grouped into 35 categories that provide information about goods, services, attitudes and activities collected from consumer surveys conducted by Mediamark Research Inc. Doublebase 2005.

• The various categories include:• Electronics (PC, DVD, Film, Cameras, Internet usage)• Financial Investments (banking services)• Health & beauty (health, fitness, personal care)• Restaurants (family, fast food)• Sports & leisure (sporting events, travelling, reading)• Retail (apparel, convenience store, automotive, home)• Pets & products (pet food, pet accessories)

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Tools for Selecting the Countries 1. Market Potential Index (MPI)

Construction of MPI• The indexing study is conducted by MSU-CIBER to help

companies compare the emerging markets with each other on several dimensions.

• Eight dimensions are chosen to represent the market potential of a country over a scale of 1 to 100. Each dimension is measured using various indicators & is weighted in determining their contribution to overall MPI.

• Market Potential data measures the likely demand for a product or service. This database projects the expected number of consumers and provides a MPI.

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Tools for Selecting the Countries 2. Global Competitive Index (GCI)

• Since 1979, the World Economic Forum’s annual Global Competitiveness Reports have examined the many factors enabling national economies to achieve sustained economic growth and long-term prosperity.

• The goal has been to provide benchmarking tools for business leaders and policymakers to identify obstacles to improve competitiveness.

• For the past several years, the WEF has based its competitiveness analysis on the Global Competitiveness Index (GCI), a highly comprehensive index for measuring national competitiveness, which captures the micro and macroeconomic foundations of national competitiveness.

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Tools for Selecting the Countries 2. Global Competitive Index (GCI)

• Competitiveness is defined as the set of institutions, policies and factors that determine the level of productivity of a country.

• The level of productivity, in turn, sets the sustainable level of prosperity that can be earned by an economy.

• The diagram shows the 12 pillars of competitiveness.

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Tools for Selecting the Countries 3. FDI Confidence Index (FDICI)

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Tools for Selecting the Countries 4. Global Political Risk Index (GPRI)

• The GPRI measures stability-defined as the capacity to withstand internal and external shocks or crises-in 24 emerging countries.

• Each country’s score is based on 20 indicators in four equally weighted subcategories:

1. Government2. Society3. Security and4. Economy

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Eurasia Group, a political and economic risk analysis firm, has composed Global Political Risk Index

(GPRI).

The index is a composite measure of the state of a country’s government, security and economy. All indicators are scored on a scale of 0 to 100. The higher the number , the greater the political stability.

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Political Risk Assessment

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Ran

king

of c

ount

ries

on G

PRI b

y Eu

rasi

a

Countries 2010 2011Hungry 78 77S. Korea 76 75Poland 74 72Bulgaria 70 69Mexico 67 67China 66 61Brazil 66 64Argentina 66 66S. Africa 64 65Russia 63 61India 62 62------- -- --Iran 51 49Venezuela 50 52Nigeria 48 47Pakistan 45 50

Assesses political risk associated with doing business in foreign countries, firms should evolve suitable strategies to manage such risks.

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Country Segmentation on the Basis of Income

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Several international agencies including the Organization for Economic Cooperation and

Development (OECD) and United Nations classify countries by their economic status. But the best

known system of classification is the one recommended by the world bank in which ‘184

economics with the population of at least 30,000 are ranked by their levels of gross national income

(GNI) per capita’.

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Country Segmentation on the Basis of Income

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• Then these economics are then classified as low-income (LIC), lower-middle income (LMC), upper-middle income (UMC), high-income countries (HI).

• LIC countries are those having per capita GNI in 2000 of $735 or less; LMC between $736 and $2995; UMC between $2996 and $9265 and high-income countries with $9266 or more.

• Generally speaking, LIC, LMC, and UMC are developing countries and the rest are developed nations.

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Segmentation of Indian Market on Basis of Household Income

The generic model of the Indian market has been depictedon the five consuming classes, as defined by NCAER.

1. Rich (Benefit Maximizers)- Household with annual income above Rs 2,15,000, 4% in 2009-10

2. Consuming (Cost-benefit Optimizer)- Rs 45,000 to Rs 2,15,000, 38%

3. Climbers (Cash-constrained Benefit Seekers)- Rs 22,000 to Rs 45,000, 36%

4. Aspirants (New Entrants into Consumption)- Rs 16,000 to Rs 22,000, decline to 14%

5. Destitutes (Hand-to-Mouth Existence)- Less than Rs 16,000 are very poor people, decline to 8%

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Segmentation of Chinese Market on Basis of Age

Demographic classification of Chinese market on the basis ofage indicates three distinct segments:

1. Generation I ( Age 45 to 59)• Generation of the socialistic society, talented got university degree

and have become high-ranking government officials, some are retired2. Generation II (Age 30 to 44)

• Lost opportunity to get proper education, mainly working for state-owned enterprise

3. Generation III (Age 18 to 29)• Good educational background with opportunity to work for foreign-

affiliated firms, they are blessed with a good aspect of the market economy system that promises a brighter future for people who earned good money

For international marketers, G-III is most attractive segment.

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Segmentation on the Basis of International Marketing Opportunity

The stages of demands for products and services variessignificantly in countries. On the basis of opportunity, international markets can be classified as:

1. Existing Market2. Latent Market3. Incipient Market

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Existing Latent Incipient

Competitive

Improved

Breakthrough

Low

Low

HighHigh

Cost andRisk ofProductLaunch

Cost and Risk

Market Segment

Prod

uct T

ype

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Marketing opportunities may be classified in three distinctproduct types as follows:Competitive Product:• Is one which has no significant advantage over those

already an offer. It is a ‘me too’ market offering.Improved Product:• Although an improved product is not unique, it provides

some improvement over the presently available market offering.

Breakthrough Product• It represents significant differentiation with innovation and

therefore has considerable competitive advantage.

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Segmentation on the Basis of International Market Attractiveness

The overall Attractiveness of the market depends on marketsize and growth, risk, government regulations, competitiveintensity, physical infrastructure etc.

1. Platform Country (Singapore & Hong Kong)2. Emerging Markets (Vietnam & Philippines)3. Growth Markets (China, India, Indonesia, Malaysia)4. Maturing Markets (Taiwan, Korea)5. Established Markets (Japan)

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Tools for International Market Analysis

International marketing planning and strategy developmentcalls for use of market analysis tools to adopt differentiatedstrategies for different segments. Two of the widely used tools for analyzing international markets are:

1. BCG Matrix2. Market Attractiveness/ Company Strength Matrix

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Growth-Share (BCG) Matrix

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Such a matrix can be prepared either for a country’s exportsor a firm’s export so as to facilitate segmentation of the

products under four broad categories.

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Growth-Share (BCG) Matrix

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1. High-Growth High-Share Products (Stars)• Such markets offer high growth potential but require lot of

resources to maintain the share in high-growth markets.• 42% of India’s exports fall under this categories. Gems &

Jewellery, Drugs & Pharmaceuticals, Readymade Garments2. Low-Growth High-Share Products (Cash Cows)

• Products bring high profits but a slow market growth rate• Marine products, leather and oil meals, 26% of India’s exports

3. High-Growth Low-Share Products (Question Marks)• Products are under high-risk, also called ‘Problem Children’• Petroleum products, tea, cosmetics, glassware, 9% exports

4. Low-Growth Low-Share Products (Dogs)• India’s export in this category include handicrafts, carpets,

coffee, basmati, cashew etc.

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Major Export Markets & Competitors

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Products Major Export Market Major CompetitorsRice (Basmati) UAE, UK and USA Pakistan

Wheat UAE, Netherlands, Turkey Canada, USA, Australia

Spices West Europe, East Asia Thailand, Indonesia, Brazil, China, Nepal

Oil Meal Singapore, Japan USA, Brazil

Sugar Indonesia, Pakistan, Sri Lanka, Russia, USA

Cuba, Brazil, Thailand

Fruits Middle East, UK, France, USA

Chile, South Africa, Philippines

Vegetables USA, Russia, UK, Germany, UAE

China, Turkey, Thailand

Meat Malaysia, UAE, Mauritius, Saudi Arabia

China, Korea, Thailand

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Market Attractiveness/ Company Strength Matrix

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Market Attractiveness:• Market Size, Market Growth, Customer’s Buying Power• Average Trade Margins, Seasonality and Fluctuations in

Market• Marketing barriers, Competitive Structure• Government Regulations & Infrastructure• Economic & Political stability

Competitive Strength of a Firm:• Its Market Share, Familiarity & Knowledge about the Country• Price & product Fit to the Market, Demands, Image• Product Quality & Technology Position• Financial Resources• Access to the Distribution Channels & Quality

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Business Unit StrengthHigh Medium Low

Mar

ket A

ttrac

tiven

ess

GE / McKinsey Matrix

High

Medium

Low

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Invest/Grow

Invest/Grow

Invest/Grow

SelectiveStrategies

SelectiveStrategies

SelectiveStrategies

Harvest/Divest/

Combine

Harvest/Divest/

Combine

Harvest/Divest/

Combine

Business Unit StrengthHigh Medium Low

Mar

ket A

ttrac

tiven

ess

GE / McKinsey Matrix

P P

P

S

S

S T

T

T

High

Medium

Low

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Ford for its tractors used the country attractiveness / company strength matrix and

placed India in the extreme right top of the matrix wherein the country attractiveness was very high but the competitive strength of the

company was low.

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Case Study

Identifying International Marketing opportunities in Medical Services

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Case Study: Questions for AnalysisIdentifying International Marketing opportunities in Medical Services

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1. Medical travel is the most visible face of increasing global trade in healthcare services. WTO expects three different modes. What are those?

2. Estimate the market size of the top 10 healthcare services.

3. Identify the areas in which India has a strategic edge in healthcare services.

4. Prepare a checklist of issues that need to be addressed to make India a global hub for healthcare services.

Documents

Imm unit-03 (decision making in international marketing)