International Strategic Marketing · Trier University MARKETING & RETAILING Prof. Dr. Prof. h.c. B. Swoboda 3 Objectives of the course You should learn and know the basic strategic

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda

1

International Strategic Marketing

Chair forMarketing and RetailingTrier UniversityProf. Dr. Prof. h.c. B. Swoboda

Univ.-Professor Dr. Prof. h.c. Bernhard Swoboda

Summer Term 2016


2

Which country, how to enter, globally standardized or locally adapted?

IM is not only multiplied domestic marketing!


3

Objectives of the course

You should learn and know the basic strategic decisions in International Marketing(i.e. from a country-specific and inter-country perspective) and selected challenges.

1. Overview of dynamic internationalization, the international strategies and the decisions within International Marketing (incl. complexity and determinants).

2. Core decisions of market entry: Market assessment/selection (+exit) and timing as well as market entry strategies/operation modes (+mode changes/switches).

3. Core decisions of market servicing: Standardization vs. adaptation as basic options in the design of the Marketing mix instruments (initial designs during the going international and chances during the being international).

4. Overview on implementation and international Value Added Management.


4

Marketing Mix decisions

Product Price Communication Distribution

Market engagement (Segmentation/selection and timing)

Basic decisions of market entry

Market entry strategy/operation mode

Introduction, trends and challenges

Economic/sectoral view Internationalization strategy Determinants

Value chain activities

Implementation and int. value chain managementStructures CultureSystems

What you should learn


No. Date Content Literature

1. 12.4.2016 A.I. Dynamic of InternationalizationA.II. Core Decisions in International MarketingA.III. Determinants of decision making

Literature (book # 7), additionally paper # 1 (obligatory) and paper # 2 (optional)2. 19.4.2016

3. 26.4.2016 B.I. Market segmentation/selection Literature (book # 7),additionally paper # 3 (obligatory)4. 03.5.2016 B.I. Market segmentation/selection

5. 10.5.2016 B.II. Country specific and across country timing

17.5.2016 Whitsuntide Literature (book # 7),additionally papers # 4 and 7 (optional), papers # 5 and 6 (obligatory)

11.1) 28.6.2016 B.III. Market entry strategies/operation modes



14.1) 12.7.2016 B.IV. Changes of operation modes

6. 24.5.2016 C.I. Marketing mix: Standardization vs. adaptation Literature (book # 7),additionally paper # 8 (optional), paper # 9 (obligatory)

7. 31.5.2016 C.II. Design of the Marketing mix instruments



10. 21.6.2016 D. Implementation and int. value chain management Paper # 10 (obligatory)

1) Lecture maybe held by Mr. Hirschmann; Blue presentations by the students.

Table of contents and organization


6

Literature

1. Bradley, Frank: International Marketing Strategy, 5th ed., (Prentice Hall) New York 2009.

2. Cateora, Philip R.; Gilly, Mary C.; Graham, John L.: International marketing, 17th ed., (McGraw-Hill Irwin) Boston 2016.

3. Cavusgil, S. Tamer; Knight, Gary; Riesenberger, John R.: International Business, 3rd ed., (Pearson) Boston 2013.

4. Hollensen, Sven: Global Marketing: A Decision-OrientedApproach, 6th ed., (Prentice Hall FIT) New York 2014.

5. Keegan, Warren J.; Green, Mark: Global Marketing, 8th ed.,(Pearson) Upper Saddle River 2014.

6. Kotabe, Masaaki; Helsen, Krsitiaan: Global Marketing Managemenet, 6th ed., (Wiley) Hoboken, NJ 2014.

7. Zentes, Joachim; Swoboda, Bernhard; Schramm-Klein, Hanna: Internationales Marketing, 3rd ed., (Vahlen) München 2013.

8. Zentes, Joachim; Swoboda, Bernhard (eds.): Fallstudien zumInternationalen Management, 4th ed., (Gabler) Wiesbaden 2011.

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTasks for presentations

Organizational matters Presentation: 45 minutes, about 25-30 charts (use PPT template from download

area on www.muh.uni-trier.de).

Each group prepares three questions for the discussion.

Max. five points on top of the exam for each presentation.

On the day of presentation: bring your charts digitally (on a USB drive) and printed (one copy for each participant).

Tasks

Each participant with his or her group prepares one presentation on paper no. 5.

Critically comment on the content of the paper. Differentiate between the theory/framework used and the empirical method.

Organize your presentation according to the structure of academic papers (see PPT template).

7


8

Exam structure and explanations

Exam structure

Open questions Question 1 20 points

Question 2

Question 3

Sum 60 points

20 points

20 points

Explanations

6 sub-questions with 5 points each,you must answer 4 sub-questions(mostly reproduction)

You must answer all sub-questions(50% reproduction, 50% application)

You must answer all sub-questions(mostly application)


9

Advices on the exam

Check for your exam's completeness.

Writer your student number on each page.

Do not write with a pencil or in red.

You may use a non-programmable calculator.

Pay attention to the readability of your writing.

Please clearly indicate to which questions you refer and differentiate your answers clearly on the respective sub-questions.

Note the wording of the task (Name, Define, Describe, Explain, Discuss).

Not only the quantity of your answer matters, rather the focus on systematics, clearness of formulation, and completeness of content are essential.

The recommended number of minutes equal to the maximum number of points per question.

Advices…

…in general

…on answering the questions

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents

I. Dynamic of internationalizationII. Core decisions in International Marketing

(Case: International expansion of the Top 4 retailers)III. Determinants of decision making

1. Introduction, trends and challenges

2. Core decisions of market entry

I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes

3. Core decisions on Marketing-Mix

I. Marketing mix: Standardization vs. adaptationII. Design of the Marketing mix instruments

4. Implementation and int. value chain management

A

B

C

D

10


Economic level –Worldwide development of …

0

5000

10000

15000

20000

25000

1970 1980 1990 2000 2010 2014

3172'376

4'261

7'941

18'969 23'725

2,62,72,82,8

3,03,13,53,6

8,08,5

12,3

0% 2% 4% 6% 8% 10% 12% 14%

RussiaUK

ItalyHong Kong

KoreaFrance

NetherlandsJapan

GermanyUSA

China

…international export trade volumes – bn. USD

…direct investment stocks – bn. USD

Source: UNCTAD 2015.

Source: UNCTAD 2015.

Leading export countries- Share of world foreign trade %

Source: WTO 2015.

0

5000

10000

15000

20000

25000

1980 1990 2000 2010 2014

6982'081

7'511

20'371 25'823

11


12

Basic forms of internationalization

Foreign trade Export is defined as the cross-frontier provision of commercial goods and

services to sell abroad (direct and indirect exports).

Analogical, import is defined as the cross-frontier buying of commercial goods and services from abroad.

Foreign Direct Investment (FDI) is defined as capital asset within a foreign country, which are used by the investor to: Gain direct influence on companies’ business operations (e.g., M&A, JV),

Set up a new company.


Source: Destatis 2016.

Relevance of German companies' foreign trade partners (2015, in bn. EUR)

480

BE41

CH49

PL52

AT58

IT58

CN71

NL79

UK89

FR103

USA114

1.196

Exports Imports

9.5

8.6

7.5

6.6

6.0

4.9

4.4

4.1

4.9

3.5

CZ

38UK

37AT

948

391

39

CH 43

44PL

IT 49

USA 59

FR 67

NL 88

CN 92 9.7

9.3

7.1

6.3

5.2

4.7

4.1

4.0

4.5

3.9

Total (exports + imports)

IT 107

UK 128

CN 163

NL 168

FR 170

USA 173

Others 874

BE 78

CH 92

AT 95

PL 97

Total 2.144

8.1

7.9

7.8

7.6

5.9

5.0

4.4

4.3

4.5

3.6

Others

Total

% %%

13


Relevance of Foreign Direct Investments of German companies

14

28%

3%

31%

12%

22%

4%

Europe

Africa

North America

South America

Asia

Oceania

Source: Destatis 2016.


Source: CIA The World Fact Book 2016. 15

Development of exports (in bn. USD)

Country 1993 1996 1999 2002 2005 2008 2011 2013 2015 est.USA 464.7 625.1 702.1 693.9 904.3 1'277.0 1'511.0 1'575.0 1'598.0Germany 380.1 524.1 542.9 613.1 970.7 1'498.0 1'408.0 1'493.0 1'292.0Japan 362.3 411.0 417.6 416.7 595.8 746.5 800.8 697.0 624.00France 206.2 288.6 300.2 331.8 459.2 601.9 578.4 578.6 509.1UK 181.6 262.1 268.2 279.6 377.9 466.3 495.4 813.2 442.0Italy 167.7 250.4 230.2 251.0 366.8 546.9 522.0 474.0 454.6Netherlands 139.1 197.4 200.3 244.3 401.3 531.7 576.9 567.9 488.3Canada 145.2 201.6 238.4 252.4 359.6 471.6 450.6 458.7 428.3Hong Kong 135.2 180.7 173.9 201.2 292.3 459.1 427.9 456.4 499.4Belgium (+ Lux.) 119.5 165.8 176.1 214.0 329.6 365.2 351.5 311.1 281.7China 90.9 151.2 195.1 325.6 762 1'435.0 1'898.0 2'210.0 2'270.0South Korea 82.2 129.7 144.7 162.5 284.7 433.5 556.5 557.3 535.50Singapore 74.0 125.0 114.7 125.2 229.6 342.7 409.2 410.3 384.6Taiwan 85.1 116.0 121.6 135.1 196.6 254.9 325.1 305.8 262.6Spain 62.9 102.0 110.0 119.1 186.1 285.9 330.6 458.0 277.3Sweden 49.9 85.0 84.8 81.1 129.9 185.9 204.2 181.5 151.1Russia 44.3 89.1 74.7 106.9 245.3 471.6 498.6 515.0 337.8Switzerland 58.7 76.2 80.2 87.9 127.6 241.3 308.3 229.2 270.6Malaysia 47.1 78.2 84.4 93.3 140.9 198.7 212.7 230.7 203.8Thailand 37.0 55.5 61.8 68.9 89.9 175.3 244.4 225.4 214.8Brazil 35.0 47.7 46.9 59.4 115.1 200 256.0 244.8 189.1India 19.8 30.5 36.3 44.5 76.23 175.7 299.4 313.2 287.6Total 2'934.0 4'114.8 4'322.8 4'803.6 7'450.1 10'989.4 12'665.5 13'315.1 12'002.2Other countries 804.0 1'171.9 1'275.7 1'651.4 2'670.9 5'291.0 5'470.4 7'594.3 4'667.8World 3'736.6 5'286.8 5'668.5 6'455.0 10'121.0 16'280.0 18'135.9 20'909.4 16'670.0

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTrade in the Triad

16Source: UNCTAD 2015. Source: UNCTAD 2015.

Japan

USA EU

276,1

418,2

73,4

70,9

Quelle: U.S. Census Bureau 2015; European Commission 2015.

2'345

8'008

862

2'847

7'407

991

USA EU Japan

Exports Imports

3'4795'178

6'448

10'495

15'174

18'689

826 1'227 1'5292'564

3'7455'017

1990 1995 2000 2005 2010 2014

Products Services

134,0 66,8

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaThe BRIC countries at a glance

Top3 export countries

China, USA, Argentina

Netherlands, China, Germany

USA, United Arab Emirates,Hong Kong

USA, Hong Kong, Japan

Most important export products

Iron, coffee, agricultural products

Crude oil, natural gas, timber, metals

Textiles, gemstones, chemicalproducts

Machinery, plastics, iron,steel

Source: Worldbank, CIA World Factbook 2014. 2003 2014 (*2013)

Per capita income (USD) GDP (bn. USD)

Exports (bn. USD) Imports (bn. USD)

17

670 591 7222.067

RU

1.860

BR

2.346

CN

10.360

1.942

IN

641

CN

7.594

1.498

IN

1.596

RU

12.736

4.102

BR

11.385

3.598

111 203 127

593270 595* 488

CN

2.343

INRUBR

88 131 139561335 472* 537

RUBR CN

1.960

IN


Industry level –Foreign trade (Germany)

Source: Statistisches Bundesamt 2015.

Vehicle Industry

Machinery Construction

Chemical Industry

Metal Industries

Electrical and Optical Engineering

Electrical Equipment

Other Transport Equipment

Food and Beverage

Rubber and Plastics

Textiles, Clothing und Leather

Coal and Lignite

Agriculture, Forestry and Fish

Oil and Gas

1818

Imports in m. EURExports in m. EUR

76.500

28.953

27.457

31.861

26.875

47.395

36.741

48.102

90.042

90.036

74.618

70.803

87.324

5.416

10.082

15.077

31.861

40.097

54.336

49.922

68.702

89.189

90.036

107.362

166.145

203.434

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaCompetitive advantages in industries

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Adaptationadvantages

Globalizationadvantages

low high

hig

hlo

w

Source: Bradley 2009.

aircraftindustry

constructionmachines

entertainmentelectronics

watches andjewellery

pharmaceuticalindustry

automobileindustry

armsindustry

telecommuni-cation

railway

post

banking

insurance

food processing

cement

tonnage steel


20

Industry differences in IM


21

General corporate strategies Product-Market strategies: Specialization/diversification, internationalization,

vertical integration

Entry strategies: Subsidiaries/acquisitions, ownership forms, timing

Business area strategies Competitive Strategies: Cost leadership, quality leadership, focused strategy

Business are development strategies: growth, consolidation, exit

Functional Strategies Marketing

HRM

Purchasing

…

Company level –International strategy levels


Company level –International strategies

Preasures for Local Responsiveness

highlow

high

low

Preasuresfor GlobalIntegration

Global Transnational

MultinationalHome marketoriented

highlow

high

low

Need forIntegration

Need for Responsiveness

Global

Transnational

Multi-nationalHome

marketoriented

Bartlet/Ghoshal (1989) Prahalad/Doz (1987)

1. Paper: Preferences and Performance of International Strategies in Retail Sectors: An Empirical Study, Long Range Planning, Swoboda/Elsner/Morschett (2014, obligatory).


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International strategies

Multinational companies try mainly to reach the goal of outstanding profits in a high number of “national markets“. Foreign units have a vary high autonomy, which allows them to adapt to local needs and pressures in each of the foreign country markets and to act as a autonomic and local company.

Global companies are characterized by a high integration of all business activities in a cohesive overall system (mostly standardized) of market servicing and (mostly a tight) management of foreign activities.

Transnational companies try to adapt locally by high/tight integration.

Preferred international strategy determines - International Marketing (market selection, timing, market entry strategy, marketing mix)

- International Management of the firm (configuration and coordination of value chain activities and the value chain)


24

low highAdvantages of

localization

Advantages ofglobalization

hig

hlo

w

Globalorientation

Multinationalorientation

Home countryorientation

Transnationalorientation

International strategies – Examples


25

International strategies – Paper No. 1

Abstract This study examines the international strategies of retailers that have been

internationalising aggressively.

By applying the I-R-framework, we hypothesise that retailers use all four strategies (international, global, multinational and transnational) but that their preferences for these strategies vary across retail sectors (food and non-food).

From the inter-sector-based and sector-specific perspectives, we also hypothesise that the strategies correspond to different levels of performance.

Research questions Do retail firms have a preferred international strategy for their store activities?

If so, which strategy is more successful?

By assuming strong differences, we further ask the following: are different strategies preferred, and are they differently successful in specific retail sectors?


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Self typing Capabilities/Resources (central/global, home/mother, dislocated, specialized FU)

Generation/dispersion of knowledge (central, home, dislocated, networks)

Competitive advantages (costs/global, capabilities at mother, local presence, networks)

Axes (5 point Likert-type scales) Integration: Focus on international economies of scale and

competitive position regional/global equal/global competition

Responsiveness: FU act autonomously, look at local competitive advantages and differences in culture/customer behavior is addressed with local offers.

International strategies – Measures (1)


27


Appendix 2 Measurement of internationalization strategy (1) Axis* Statement – pre-test according to Harzing, 2000

Integration Our company’s strategy is focused on achieving economies of scale by concentrating its important activities at a limited number of locations. (economies of scale) Our company’s competitive position is defined in world-wide terms. Different national markets are closely linked and interconnected. Competition takes place on a global basis. (global competition)

Responsiveness

Our company’s competitive strategy is to let each subsidiary compete on a domestic level as national product markets are judged too differently to make competition on a global level possible. (domestic competition)Our company not only recognizes national differences in taste and values, but actually tries to respond to these national differences by consciously adapting products and policies to the local market. (local responsiveness)

Statement – survey

Integration Our firm focuses internationally on achieving economies of scale by concentrating important activities in a small number of international locations.

Our competitive position has an identical regional/global orientation; competition is global.

Responsiveness

Our competitive strategy is multi-national, i.e. each foreign company deliberately acts alone/autonomously in order to generate domestic/ international competitive advantages.

Our firm considers the differences in buying behaviour/culture in different countries and reacts to them with customized services adapted on a broad basis to suit the markets concerned.

* The questionnaire did not contain this column. Each question was measured on a 5-point Likert scale from totally disagree to totally agree.


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Appendix 3. Measurement of international strategy (self-typing)

Strategy According to Leong/Tan (1993), Pla-Barber (2002)

We achieve competitive advantages in an international context by …

Global … achieving cost advantages with identical regionally/globally oriented and largely standardized activities.

International … making use of knowledge and skills of the parent company and implementing and adapting these skills internationally/worldwide.

Multinational … generating a strong local presence, with an intuitive feel and adapting to special features of the countries concerned.

Transnational … creating networked resources, i.e. foreign subsidiaries perform specialist tasks and operations between countries are networked.

Our strategic skills and resources are …

Global … centralized and oriented towards all markets (regional/global).

International … available at the parent company in the home market and are passed on to the foreign subsidiaries.

Multinational … are spread at international level, each foreign subsidiary acts independently.

Transnational … are spread internationally over specialized foreign subsidiaries that interact to a large extent with other foreign subsidiaries.

New knowledge is…

Global … generated, is tested centrally and is equally aimed at all regional/global markets.

International … mostly created in the home market and is passed on from there to all foreign subsidiaries.

Multinational … mostly created in the countries where there are foreign subsidiaries but is not transferred to other subsidiaries.

Transnational … generated in subsidiaries and in the parent company and is also exchanged via cross-links among the subsidiaries (not via the headquarters).

The respondents were asked which of the four statements per dimensions best represented their own strategies.


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Comparison of self typing and scales (Ward and correspondent analysis)

Empirical results (1)

Dimension 1

Dim

ensi

on

2

Legend:Self typingCluster analyse

home market oriented

home market oriented

= Global= Multinational= International

= Transnational

high

high

low

low

Local responsiveness

Glo

ba

l in

teg

rati

on


30

Performance in retail sectors (correspondent analysis)

Empirical results (2)

Food Non-food







3. Core decisions on Marketing mix



A

B

C

D

31


32

Development of international marketing

Kahler/Kramer (1977) Export and international business operations

Czinkota/ Planning and execution of (markt-) transactions across bordersRonkainen (1993)

Meffert (1998) Analysis, planning, execution, coordination, and control of market oriented business activities in more than one country.

Zentes/Swoboda/ Characteristics for International Marketing: On the one hand Schramm-Klein cross-border activities, on the other hand country specific (2013) and cross country thinking and acting.

1st stage: Export as most important form of Internationalization Hellhauer (1910); Sonndorfer (1910); Oberparleiter (1913)

2nd stage: Export marketing as sales policy in foreign countries Weinhold (1965); Fischer (1973); Smith (1977), Peter (1978)

3rd stage: International marketing as active exploitation and servicing of foreign countries Kulhavy (1981); Meffert (1982); Meissner (1987)


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From national to international marketing

1. Unique culture and language2. Market rather homogeneous3. Easy to find and rather reliable

information4. Easy use of market intuition5. Political factors have a lesser

importance6. Rather stable environment with

visible trends7. Weak influence of financial flows

(exchange rate)8. Internal organization simple and

cheap (time - travelling)

1. Diverse cultures and languages2. Markets are diverse/heterogeneous3. Very disparate information, uneasy to

find – synthesis is a heavy task requiring adequate personnel

4. Intuition is very difficult to use in a first stage

5. Political factors (norms, tariffs, taxes, investments) play a major role)

6. Very unprecise environment with invisible trends

7. Financial flows and change rates are very influential

8. Complex and costly organization (time – travelling)

National International


International strategy of the firm

General host and home country factors

Tradition IM decisions –Going international

FOREIGN OPERATIONMETHODS (HOW?)

SALES OBJECTS(WHAT/HOW?)

MARKETS(WHERE?)

Capacity /Implementation

Organizational Structure Finance Personnel

Source: According to Welch, Lawrence S.; Luostarinen, Reijo (1988), Internationalization: Evolution of a Concept, in: Journal of General Management, 14 (2), p. 34-55, p. 39 .

Ind

ust

ry a

nd

Co

mp

etit

ion

Co

mp

anies in

ternal facto

rs


35

Changing characteristics of internationalization

70er / 80er years 90er / 00er years

International situation Pioneers /Early Starter

International mmong others

International competition Low High

Relevance of international strategy

Low High

Transaction forms of internationalization

Exports, agents, sales subsidiaries

Alliances, acquisitions, own companies

Area orientation Neighbor countries, regions (e.g. Europe)

World

Primary international dimensions

Country /sales activities

Value chain dimensions / coordination

Dynamics of international processes

Low High


36

Evolution periods of internationalization

Source: Swoboda, B.: Internationalisierung als strategische Option des Großhandels, in: Zentes, J.; Swoboda, B.; Morschett, D. (ed.): B2B-Handel – Perspektiven im Groß- und Außenhandel, Frankfurt/Main 2002, pp. 147-175, p. 164.

Period of evolution Mother country Foreign markets

Period IIIa Presence “at the face”

Assort-ment

Presentation & service

Human Resource Management

Period IV Global integration

Finance, value systems, corporate identity etc.

Total local integration of allbusiness divisions on side

Period IIIb Autonomoussubsidiaries

Sourcing/Buying

Period I Import Sour-cing

Lo-gis-tic

Ass-ort-

ment

Mar-ke-ting

Pre-sent-

ation

Ser-vice

TraderPeriod II Export Sour-cing

Lo-gis-tic

Ass-ort-

ment

Mar-ke-ting

Pre-sent-

ation

Ser-vice


37

Markt engagement Marketing operations

Operation strategy

Dynamic and dependent decisions –Going and being international

Source: Zentes/Swoboda/Schramm-Klein 2013.

INTEGRATION/ COORDINATION

Organizational structure

Processes/systems

Corporate culture/HRM

Coun. A

Coun. CCoun. B Coun. D

Inter country

Country ECountryspecific

Market selec-tion/ entry

Market exit/clear up

Market entrystrategy

Enlargement/switch

Adaptation/change

Primaryarrangement

Business model and pre-decisions: Corporate strategies/principles, resources, preferred internationalization strategy, goals


38

Complexity of decision making in IM

Different views and situational contexts thinkable Going vs. being international

Country specific vs. across countries (interdependencies)

Industrial goods, consumer goods vs. service/retailing firms

A very high number of determinants of decision making and thus success External environment (host country and home country)

Macro: Economical, political-legal, socio-cultural, geographical, technological

Meso: Customer behavior and industry competition

Internal environment

Micro: Preferred international strategy, capabilities/ resources, international knowledge


39

International marketing vs. management

Int. value added management has two goals (levels of management) Design and management of value added processes

(i.S.v. configuration and coordination)

Design and management of the whole value added system(i.S.v. organizational structure, systems und culture)

Source: OC&C-Partner 2015, data for 2014.Source: Bloomberg 2016, data for 2015.


Case study –Growing but young internationalization

2. Paper: International Expansion of the Four World’s Largest Retail Companies, Swoboda/ Elsner, Fallstudien zum Int. Management (Gabler 2011, optional)


41

1 >

1 >

1

1

2

2

2

4

5

7

11

15

19

22

25

Safeway (USA)

*Schwarz Group (D)

Costco (USA)

Tengelmann (D)

Delhaize Le Lion (B)

Tesco (GB)

Metro/Makro-SVH (D/NL)

*Auchan (F)

Casino (F)

*Aldi (D)

Leclerc (F)

Carrefour, Promodes etc. (F)

Ahold (NL)

17

17

36

9

13

12

12

6

11

2

12

12

40

16

34

11

[1]

[1]

[1]

[2]

[2]

[2]

[1]

[2]

[1]

[1]

[3]

[7]

[10]

[2]

[5]

[4] 42

*ITM Intermarche (F)

Wal-Mart (USA)

Edeka (D)

Other (out of the biggest) retailers with foreign turnovers < 2 percent

Internationally most active grocery retailers 1992

Total salesin EUR bn

Share of sales inforeign countries (in %)[No. of]

Source: M+M Planet Retail 1993 (* estimated); own research.


13

15

19

29

27

28

33

45

32

61

56

55

59

61

Others under TOP 30 worldwide<1% 5. Kroger; 9. Walgreens;

13. CVS; 16. Edeka; 21. Wesfarmers; 29. Sainsbury;

<15% 11: Target; 17. AEON; 18. Woolworths, 22. Sears; 23. Leclerc

Intermarché (F)

Costco (USA)

Casino (F)

Seven&I (J)

Rewe (D)

Tesco (GB)

Tengelmann (D)

Aldi (D)

Wal-Mart (USA)

Schwarz Group (D)

Auchan (F)

Carrefour (F)

Metro Group (D)

Ahold (NL)

Delhaize Group (B)

Safeway (USA)

No. in World*

24.

7.

12.

1.

14.

3.

26.

88.

6.

10.

4.

2.

15.

37.

25.

27.

[2]

[9]

[13]

[27]

[16]

[13]

[11]

[15]

[20]

[17]

[12]

[33]

[33]

[11]

[10]

[7]

76

Total salesin EUR bn

Share of sales inforeign countries (in %)[No. of]

76

41

36

90

333

48

72

34

11

64

58

44

81

67

21

30

60

61

59

59

55

55

Internationally most active grocery retailers today

Source: Planet Retail.


Ukraine 28Germany 307

Morocco 8

Spain 37

Portugal 10

Hungary 13

Pakistan 5

Romania 32Russia 73Serbia 10

Metro – Active in 32 countries

Netherlands 45

Italy 117

Sweden 27

Austria 47Germany 415

France 32

Spain 72

Hungary 21

Belgium 15Germany 122

Slovakia 6

Turkey 38

Netherlands 17

Italy 49

Croatia 7

Poland 41

China 78

Belgium 15Austria 12Germany 107

Denmark 5

Czech Rep. 13Bulgaria 14

UK 30

France 93

Vietnam 19

Greece 9

Moldavia 3

Japan 9

Poland 71

Belgium 23

767 stores in 28 countries 965 stores

in 15 countries

Portugal 9

Greece 10

Switzerland 25

Russia 63

India 16

307 storesin Germany Turkey 39

Germany 53

others

Source: Company website, 10/2014.

Luxembourg 2

China 3

Kazakhstan 8

137 storesin 2 countries

Poland 54Romania 25Russia 16Turkey 12Ukraine 1

Turnover (bn. €)* 66.7Market Cap. (bn. €) 7.9Net Income (bn. €) 0.1

Egypt 2

43



.Europe

8,724 stores• France 4,779 • Italy 1125• Belgium 729• Poland 635• Greece 463• Spain 456• Portugal 353• Turkey 243• Romania 162• Bulgaria 1• Russia 1• Other 131

Africa/Middle East226 stores

• UAE 39• Jordan 11• Quatar 6• Tunisia 1• Eqypt 1• Morocco 23• Oman 5• Saudi Arabia 17• Iraq 2• Kuwait 1• Other 120

Latin America762 stores

• Argentina 521• Brazil 241• Chile 4• Columbia 73• Mexico 29

Key: Countries where Carrefour is re-presented only through its franchise,

license or joint venture partners

18.4% of net sales

8.5%of net sales

EUROPE(excl. France):25.6% of net

sales

FRANCE:47.5% of net

sales

Turnover (bn. €)* 74.9Market Cap. (bn. €) 20.9Net Income (bn. €) 1.3Carrefour – Active in 33 countries

Asia393 stores

• China 236• Indonesia 84• Taiwan 69• Thailand 40• South Korea 31• Malaysia 26• Japan 8• India 4• Other 84

(´06)

(´05)

(´10)

(‘12)

(‘12)

AFRICA/M.EAST

(´03)

(´05)(´12)

(´11)

(´09)

44


Apparel Stores (MEX) 109

Sam`s Club846 stores

• USA 640• Brazil 27• China 10• Mexico 158• Puerto Rico 11

Supercenters4,317 stores

• USA 3,348 • Argentina 32• Brazil 59• Canada 259• China 357• Mexico 243• Puerto Rico 12• Guatemala 7


Neighborhood Markets

389 stores• USA 381• China 2• Puerto Rico 6

Other Neigh-borhoodMarkets

295 stores

• Todo Dia (BR) 179

• Superama (MEX) 92

• Amigos (PR) 24

Discount Stores624 stores

• USA 489• Canada 132• Puerto Rico 3

Other Supercenters• ASDA Wal*Mart (UK) 32

OtherDiscount Stores

2113 stores

•Bodegas (MEX) 439•Bodega Expres

•ASDA (UK) 515

Other Hyper-, Super- and Minimarkets611 stores

• Super/Hiper Ma. (BR) 101• Big, Mercadorama,

Maxxi, Nacional (BR) 208• Changomas/-Express/

Mi Changomas (ARG) 67• Trust-Mart (China) 28• ASDA Living (UK) 33• Despensa (GTM) 174 Lider Hyper (Chile) 76

Lider Express/ Acuenta (Chile) 156Ekono (Chile) 126

Japan435 stores

•Seiyu Super. 256•Seiyu Hyper. 106•Seiyu GM 1• Wakana 63• Livin 9

1159•Restaurants (Chile) 17

Wal-Mart – Often acquisition strategy

45








I. Standardization vs. adaptationII. Design of the Marketing mix instruments


A

B

C

D

46


47

General conditions

- entry barriers- numbers, disposition, size of competitors

- competition intensity- competitors‘ offering- …

- numbers, disposition, size of suppliers

- quality / suppliers’ offering

- level of concentration- …

- demand behavior- structural disposition ofneeds

- disposition / sizeof market segments

- distribution conditions- power of demanders- …

Industry structure /competition

Sourcing markets Markets

Industry/ competition framework

- structure of resources (tangible/intangible)- internationalization strategy- objectives- competitive strategy - characteristics of product line/range of services

- …

Company specific factors

International Marketing

General antecedences within Int. marketing/management – An overview


- market size/ -potential- cost structure- interest rate develop.- exchange rate develop..- purchasing power- business climate- …

- tariffs- integration agreement- legal framework- political stability- …

- language- religion- values / norms- …

- climate- topography- infrastructure- …

- information/communication technology

- technical development- IT-systems- …

Economic factors Political-legal factors Socio-cultural factors Nature Technological factors


Examples of antecedences, e.g. international branding

Host Country specificGeneral Individual

Home Country specific

Internal factors

Developing vs. developed country

Behavior (e.g. aware-ness, associations)

Cultural and political distance

Cultural and political distance

Culture Perceived Brand Globalness

Country-of-Origin International experien-ce and knowledge

Competition and competitors position

Consumer Ethnocentrism

Country Image Objectives and strategy

Attractiveness (market size and growth)

Involvement Competitive position Structure and processes

Legal restrictions … … Firms culture (int., en-trepreneurial orient.)

Country/political risk Resources

Trade barriers Size, age, performance

… …

Slide 48


49

Levitt (1983) – Worldwide homogenization of consumer needs

Standardization of IM for consumer products is predicated on: an international equalization of relative income levels increasing personal consumption and ownership patterns of consumer durables increased and better communications worldwide travel patterns of consumers spread of MNCs

Global companies can reduce their unit costs which allows them to price penetrate markets and force non-global competitors out

Global Media Consumption But then …


50

Example 1 – Income differences in the world (GNI per capita, 2015)

Source: Worldbank 2016.


51

Income as a potential driver of convergence of markets

Per capita income is an important determinant of consumer buying behavior. less than US$ 10,000, much of the income is spent on food and other necessities,

and very little disposable income remains As a country reaches US$ 20,000, the disposable portion of income increases dra-

matically, results in increased convergent pressures on consumer buying behavior.

Typical cross border segments are younger, richer and more urban than the rest of the population

Source: Keegan/Green.

Thailand average income: approx.

400 US$ per month

But then …


52

Example 2 –Diverse influences of legal systems

More general economic freedom in general

labour law

tariffs

subsidies for FDI (or locals), government attitude towards foreign companies

reliability of the justice system, type of justice system (e.g. jury law in USA with high fines)

More Marketing-Mix related protection of intellectual property rights

advertising laws and promotions laws

price regulation (e.g. books in many markets), taxes

sector regulation, e.g. opening hours in retailing, regulation of certain products as medicals, cigarettes

regulation concerning product features

Source: Adapted from Hill 2008.

Market selection

Market entry strategy

Marketing-Mix


53

Example 3 –Socio-demographics

Different Socio-Demographics across Europe Different income levels Different share of old/young inhabitants Different share of single households (old/young) Different age of marriage Different no. of children in household Different share of double income households Different level of urbanization ... Percentage of People 65+


54

Example 3 –The aging of the population as trend


55

Example 4 –Culture and international marketing

Source: Kotabe/Helsen 2008.

Culture is the collective programming of the mind which distinguishes the members of one human group from another. The ways are learned in which a society understands, decides and communicates (Hofstede 1996).

Culture is a key pillar of international marketing success, e.g. Product policy: certain products are more culture-bound than other products

(food/beverages and clothing vs. high-tech).

Promotion Policy: major influence on a firm’s communication strategy because of local cultural taboos, norms, different decoding of colors etc.


56

Culture – Hofstede’s approach

Cultural dimensions (50 countries, more than 100,000 IBM respondents)

Power distance: extent to which people see power distributed unequally- high PD: hierarchy and inequality is natural and beneficial (CEE)- low PD: minimizing social, class inequalities, reducing hierarchical structures (DE)

Uncertainty avoidance: people feel threatened by uncertain situations- high UA: stability, rules, not tolerating irregular ideas and behavior (CEE) (DE)

- low UA: willing to risk, flexible, relaxed, encourage initiative

Individualism/ collectivism: people’s relation to the larger social groups- Individualistic: independence, privacy, individual decision making (DE) - Collectivist: group interests over personal ones (CEE)

Masculinity/ femininity: the degree to which masculine (achievement/ assertiveness) and feminine (nurturance/ social support) traits prevail- Highly masculine: earnings, ambition, recognition, leadership (DE)

- Highly feminine: quality of life, relationships to people (CEE)

Source: Hofstede, Geert (1996): Differences and Danger, Higher Education in Europe, 21(1).


57

Bottom left quadrant:German-speaking countries plus Finland, Hungary, Israel, mental programs: - low PD little social inequality- high UA need for a structure

Bottom right quadrant:Latin Europe, Americas, Asian, Muslim countries, South East European countries plus Russia: - high PD - high UA

Note: Top left quadrant: Anglo-Saxon, Scandinavian countries low PD, low UA

Relative positions of the answers –Power Distance/ Uncertainty Avoidance


58

Bottom right quadrant:German-speaking countries plus Anglo-Saxon countries and some others:individualistic/ masculine

Top left quadrant: Slovenia, Croatia, Serbia, Russia:collectivistic/ feminine, (Russia more individualistic)

Relative positions – Individualism/Collectivism and Masculinity/ Femininity


Formula

59

Kogut & Singh index (1988; JIBS)

CDj stands for the distance between a host country j and the home country (e.g. US) on the ith dimension

IUS is the score of the US on the same dimension as for Iij

Vi is the variance of the dimensions score

Example: Portugal as Home country and US as Host country Home country

PDI = 38UAV = 53IND = 80MAS = 14

Host countryPDI = 63UAV = 104IND = 27MAS = 31

DifferencesPDI = 25UAV = 51IND = 53MAS = 17

CD = [25²/503,2+51²/605,5+53²/620,8+ +17²/324,1]/4 = 2,73

/4

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaCross-national distances (I)

FinancialDistance

EconomicDistance

Definition Measurement

Differences in economic development andmacroeconmic characertistics

Income (GDP/capita) Inflation Exports Imports

Differences in financial sector development Private credit Stock market capitalization Listed companies

PoliticalDistance

Differences in political stability, democracy, and trade block memebership

Policy-making uncertainty Democratic character Size of the state WTO member Regional trade agreement

AdministrativeDistance

Colonizer-colonized link Common language Common religion Legal system

Differences in colonial ties, language, religion, and legal system

Source: Berry, H., M.F. Guillén and N. Zhou (2010), An instituional approach to cross-national distance, Journal of International Business Studies, 41 (9), 1460 – 1480. 60

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaCross-national distances (II)

DemographicDistance

Cultural Distance

Definition Measurement

Differences in attitudes toward authority, trust, individuality, and importance of work andfamily

Power distance Uncertainty avoidance Individualism Masculinity

Differences in demographic characteristics Life expectancy Birth rate Population under 14 Population above 65

ConnectednessDistance

Differences in tourism and internet use Number of Internet user Int. tourism expenditure Int. tourism receipts

GrographicDistance

Great circle distance between geographiccenter of countries

Great circle distance

KnowledgeDistance

Differences in patents and scientific production Number of patents Number of scientific articles

Source: Berry, H., M.F. Guillén and N. Zhou (2010), An instituional approach to cross-national distance, Journal of International Business Studies, 41 (9), 1460 – 1480. 61










A

B

C

D

62


63

Decisions on market entry (engagement)

Country specific view ("going international") Market entry on the base of

Market assessment and selection, Projects in foreign countries and follow-the-customer strategy

Country specific timing-decision

Across-country view ("being international") Market expansion on the basis of

Country comparisons/portfolios, market exist or re-nationalization Bridge head strategy and interdependencies between markets

Across-country timing-decision

Two types of studies are common Explaining which country markets were entered by firms (descriptive) Models explaining rational ways of entry/categorization of markets (normative)


64

Example – Nestlé’s segmentation of the Americas

Source: Nestlé.

Turnover (bn. CHF) 91.6Op. Income (bn. CHF) 14.0Employees 339,000Number of countries 170


65

Two basic forms of market segmentation

International segmentation:Market selection in the narrow sense

Intra-national segmentation:country-specific groups

Identical cross-national customer segments

Country A Country B Country C

Integral segmentation:

International vs. integral market segmentataion


66Source: Zentes/ Swoboda/ Schramm-Klein 2013.

Frameworks for international market segmentation and selection

Framework for integral market segmentation and selection

Characteristics Customers within mass market Dyadic customer relationships

Decision problem Selection of customer groups Selection of partners

Level of investigation Company Networks

Integration within strategic context

Segmentation as a basis for internationalization

Not specified

Type of information Customers across countries Key customer

Number of coutry markets Across countries Country specific

Framework for international market segmentation and selection

Characteristics Normative Descriptive

Decision problem Country selection Country selection

Level of investigation Company Company

Integration within strategic context

Not integrated Integrated within internationalization process

Type of information Country/market indicators Subjective perception

Number of coutry markets Across countries/ country specific Across countries/ country specific


67

Rumania (S)Algeria (S)Morocco (S)PR China (S) Hungary (S)Poland (S)

Russia (S)

Indonesia (P)Saudi Arabia (P/S)

Venezuela (P/S)Indonesia (S)Nigeria (S)

Iran (P/S) Malaysia (P/S)Columbia (P/S)Thailand (P/S)

Taiwan (P)Philippines (P/S)Philippines (P)

Japan (P)Australia (S)

Rodesia (P/S)

Mexico (P/S)Brasilia (P/S)

Pakistan (P/S)India (P/S)

South Korea (P/S)

Turkey (P/S)

USA (P/S) Canada (P/S)

P = private customer

S = real estatecustomer

B2B segments


68

Why segmentation?Heterogeneity of consumers


69

Heterogeneity of consumerswithin one country


70

But then…

Namibia

HipHop

USA

Germany

France

Benetton, Esprit …


71

Lifestyle groups in fashion business

Defining and selecting effective segmentation criteria Measurability of criteria, possibility to identify segments Behavioral relevance of criteria: often, easy-to-measure and easy-to-access

criteria (as language, income, geography) are low on behavioral relevance Accessibility of resulting segments (and potential to isolate the segments) Profitability and stability of segments


72

Integral market segmentation –Consumer typology

1. Risk perception and brand loyalty

2 3 4 5 6 7 8

week

Brandloyalty

high

2

3

1

UprootedSurfers

Traditionalists

Rulemakers

lowPerceived

risk high

2. Importance of the typologies

Total

Netherla.

Mexico

SaudiArabia

Turkey

USA

Traditionalists

32

Uprooted

25

Rule-makers

17

Surfers

26

48 17 17 18

39 36 19 6

38 14 15 33

29 35 16 20

19 23 17 41

Thailand 18 17 19 46

Source: Müller/Kornmeier 1995.


73Source: GfK.

Dreamers

Motivated to achieve happiness

Homebodies

Desire material security and status

Settled

Long for peace and harmony

DemandingSeek a balance between responsi-bility, duty and pleasure

OrganicsSeek for sustainability and self-actualization

Open-minded

Seek a balance between self-actualization, social responsibility and pleasure

Adventurers

Driven by passion

RealistsValue work and responsi-bililty

Need: PossessingMaterialism, price-consciousness

Need: BeingPost-materialism, quality orientation

Nee

d: L

ivin

g ou

t pa

ssio

nsH

edo

nis

m,

ple

asu

reN

eed: Peace and security

Pu

ritanism

, orien

tation

tow

ards secu

rity

Integral market segmentation –GfK Roper Consumer Styles (RCS)


74Source: GfK.

GfK Roper Consumer Styles (RCS) –Example "Realists RCS target group"

Consumption and valueorientation

Socio-demographic characteristics

Interests & activities

Spends significant time seeking out brands that meet their exacting demands

Career ambition and hard work for the sake of establishing themselves socially: ambition, power, duty, satisfying work, knowledge, curiosity, learning

Respect for nature and society: desire to be in harmony with the nature and to work for the betterment of society

Strive for status and material security

Married couples 40 years and older, some with older children, some already in retirement

Managers / experts

High level of education

Mid-level income

Participate in sports

Attend sporting events, watch sports

Nature / outdoors

Politics and government

Gardening

Foreign cultures

Spend time with partner

Science

Exercise and fitness

Environmental issues

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaOverview of selected lifestyle studies

Content Geograpfical coverage Types

RISC (Research Institute on Social Change) – study: Anticipating Change in Europe

Segmentation based on socio-cultural characteristics, i.e. values, habits, attitudes, changing attitudes

Annual survey since 2000: Europe, Germany, France, Italy, japan, Spain, GB, USA (ca. 3000 interviews) in 30 countries

Enthusiasts, Surfers, Daredevils, WannabesJuggles, Contenteds, Caretakers, Guardians, Connoisseurs, Pathfinders

CCA/Europanel with Roper Consumer Styles by GfK – www.gfk.com

Identification of cross –country “GfK-Roper Consumer Styles“ using peace/security vs. change and having vs. being

Survey within 38 countries:

Crafty World, Cosy Tech World, New WorldMagic World, Authentic World, Standing World, Secure World, Steady World

SRI Consulting with VALS (Values and Life Styles) – www.sric-bi.com

Basis: Values and needs according to Maslow and Riesman‘s Theory of social behavioral constants (VALS I) VALS II incluedes behavioral characteristics , from socio-demographic and psychological criteria, assets

VLAS I includes only 13 European countries; VALS II includes USA

Innovators, Thinkers, Achievers, Experiencers, Believers, Strivers, Makers, Survivors

Periodical studies: Research Institute on Social

Change (RISC) Gesellschaft für

Konsumforschung (GfK) Stanford Research Institute

(SRI) Burnett/Burnett Life Style

Research Centre de Communication

(CCA Europanel/Euro-Styles)

75


76

Contrasting views of integral segmentation

Conventional wisdom Assumes heterogeneity between

countries

Assumes homogeneity within a country

Focuses on macro level cultural differences

Relies on clustering of national markets

Less emphasis on within-country segments

Modern view Assumes emergence of segments

that transcend national boundaries

Recognizes existence of within-country differences

Emphasizes micro-level differences

Segments micro markets within and between countries

Source: Keegan/Green 2005.


7777

Unsolicited request for company’s products

Casual discovery of market potential

Third party referral; observation of competitors

Trade Fairs

Projects in foreign countries

Follow-the-customer

Expansion from neighbouring countries

Bridgehead strategy

I. Opportunisticidentification

II. Without initialmarket selection

Identification of foreign markets/countries

Evaluation of a single country

Selection of a country (e.g., elimination)

Comparison of countries (e.g., portfolios)

III. Systematic marketevaluation, to decide

Function of a model Number of selection steps Choice of selection criteria



7878Source: Zentes/Swoboda/Schramm-Klein 2013.

Follow-the-customer strategy

The Follow-the-customer strategy is defined as an activity pattern of international market engagement where a corporation follows its customer(s), ideally with its own subsidiaries, in order to be present in the host countries with its goods and services

(c.f. Gerlach/Brussig 2004, p. 133).

Driving forces of Follow-the-customer

strategy

Concentration on core competencies

Increased outsourcing: Parts of the value chain are outsourced to suppliers, service providers etc.

New dyadic-cooperative or network-like structures emerge

Increasing internationalization International configuration of

value chain activities, e.g., sales activities in industries which were only national (retailing) or construction of production sites abroad etc.



Follow-the-customer strategy –Decision-making parameters

Depends on decision of customer to enter a specific foreign market

Questions of whether and where to enter a foreign market are explicitly predetermined by the customer

Customer also influences the time of market entry, the operation mode and the service range offered

Supplier rather concerned with strategies, structures, and processes of its customers

Decision to employ strategy

Timing in the sense of fast reaction / adaptability is crucial Early strategic preparation of the internationalization process

enables the supplier to mitigate the need for fast response to the customer's market entry decision

Proactivity and implementation of long-sighted activities and measures is necessary

High importance of integration of suppliers in customer's strategies and processes

Timing



Follow-the-customer strategy –Determinants

Procurement Strategic input: differentiated, long-

range, fine-tuned services Volume and frequency of purchase Potential for standardization and

imitation Level of complexity

Internal factors Sourcing strategy (single sourcing) Scope of specific investments Organizational structure Conception of sourcing (key supplier

and key account management)

Propensities of involved corporations Strategic propensity Risk propensity

Inter-company and social factors Trust: long-term commitment, intense

information exchange, technical support, joint development of services

Ethical position

Industry characteristics Bargaining power of customers Bargaining power of suppliers Competitive intensity of foreign market Risk of new competitors Threat by substitution

Environmental factors Legal conditions Country risk Other macro economic factors, e.g.,

growth, inflation rate, exchange rate Societal and social systems, e.g.,

values, attitudes

Inte

rnal

Ext

ern

al



Follow-the-customer strategy –Advantages and disadvantages

Systematischer Überblick

Hohe Effizienz im Anfangs-stadium der strategischen

Analyse

Advantages Disadvantages+ –

For suppliers / service providers Guaranteed volume of orders for a certain

time period Known general conditions Lower investment risk Raising barriers to entry for potential

competitors Gain experience in foreign (growth) markets Competence development

For customers Transaction cost advantage at building

supply relations Coordination advantage with higher

potential for mutual adjustment, i.e., increased flexibility

General risk of international market engagement

Resource intensive internationalization process (construction of subsidiary network)

Challenge of organizing subsidiary network Investment risk from building subsidiaries Cost of foreign market cultivation Potentially missing experience with

respective foreign market Language and psychological / cultural

barriers


82

Systematic identification of international markets

Market selectionprocedures

One stage procedures Multiple stage procedures

Criteria-based elimination Scoring models Portfolios Value-based methods (estimated present

value of investment)

Country-specific evaluation Inter-country evaluation

Criteria-based elimination Portfolios


83

Selected one stage procedures

Source: Papadopoulos/Denis 1988, S. 40; Papadopoulos/Chen/Thomas 2002, S. 166ff.

Mar

ket

gro

up

ing

Macro segmentation

Bartels 1963; Liander u.a. 1967; Litvak/Banting 1968; Sethi 1971; Sethi/Curry 1973; Sheth/Lutz 1973; Ramond 1974; Doyle/Gidengil 1977

Microsegmentation

Hodgson/Uyterhoeven 1962; Wind/Douglas 1972; Douglas/Craig 2005; Papadopoulos 1983

Mar

ket

eval

uat

ion

Import demand potential

Multiple criteria (UNCTAD/GATT 1968; CFCE 1979) Econometric methods (Alexandrides 1973;

Alexandrides/Moschis 1977)

Total demand potential

Econometric methods (Moyer 1968; Armstrong 1970; Singh/Kumar 1971; Ferguson 1979; Lindberg 1982)

Multiple factor indices (Micro: Douglas/Craig/ Keegan 1982; Douglas/Craig 2005); (Macro: Conners 1960; Dickensheets 1963; Liander u.a. 1967; Beckerman 1966; Moyer 1968; Samli 1977; Helsen/Jedidi/DeSarbo 1993)


84

Multiple stage (I) –Function filtering one country out

Preliminary Screening Fine-grained Analysis

ChosenMarkets

1. Selection Stage 2. Selection Stage 3. Selection Stage

Markets, which are filtered out

after Fine-grained analysis

Markets, which are filtered out on

the basis of further criteria

Markets, which are filtered out due tolack of necessary

conditions(Must-Criteria)

Detailed Screening

All countries

Source: Schneider, Dieter . J. G.; Müller, Ralph U.: Datenbankgestützte Marktselektion, (Poeschel) Stuttgart 1988, p. 17.


85Source: Henzler, Herbert A.: Neue Strategie ersetzt den Zufall, in: m m, 1979, H. 4, p. 122-129, p. 122.

29

150Countries

16 Attractivecountries

Preliminary screening- Political situation- Legislative issues

72

Preliminary screening- Population size- GNP

22

Countries with low potential on:- Housing demand- Economic basis

11

Evaluated based on:- Potential- Market size per capita- Technical level- Rules and regulations- Resources availability

Multiple stage (II) –Function filtering one country out


86

Markets selected Markets rejected

Preliminary screeningof potential markets

Stage 2: Reduction in number of potential markets

Stage 1: Reduction innumber of potential markets

Step 3: Final reductionin number of potential markets

Markets rejected

Markets rejected

Markets rejected

Estimate industry salespotential in each market

Estimate company salespotential in each market

Aware of specificmarket opportunities

Markets tested

Multiple stage (III) –Function filtering one country out


87

Entry conditions

Different possibilities for market entry / foreign trade policy Investment incentives/ concessions for foreign business

Prospects of transformation

Speed of market economy reforms / abolition of government monopolies Degree of decentralization and deregulation / restriction of inflation

Evaluation criteria for market selection

Main Criteria Sub criteria (examples)

Market capacity/ potential

Population figures / gross national product / gross domestic product Individual household incomes and expenditures

Market growth Estimates for GDP development / income development Development of equipment in individual households

Market volume Sales volume per industry / budget Purchasing power and demand behavior

Degree ofprivatization

Conditions for participation of foreign business in privatization Possibilities of buying real estate

General legalframework

Conformity of economic legislation with the standards of the Western countries Degree of equality of foreign business to domestic business enterprises

Distribution Availability and efficiency of Marketing channels up to the ultimate buyers Logistic infrastructure and expenses

Intensity ofcompetition

Foreign competition / domestic competition Preconditions for fair competitive terms

Business risk Risk in the interpretation of the terms of a contract / buyer/purchaser risk Payment / credit / product / distribution / price / risk of inflation


88Source: Swoboda et al. 2009: Market Selection in Garment firms, JFM.

Factors of market selection on the purchase and sales side

low labour costs/wages

advantages of production costs

low product/material prices

low capital/investment costs

higher level of productivity

high (product) knowledge

quality of products/labour

present technology know-how

securing supply sources

sales market potential

anticipation of competition

saturation of home market

affinity to culture/mentality

physical market proximity

market knowledge

competitive environment

sharpen own profile

cost advantages

factor 1:cost advantages

factor 2:advantages of productivity/quality

factor 3:sales potential/attractiveness

factor 4:market proximity/distance

factor 5:firm-specific issues

,755

,879

,883

,857

,721

,829

,770

,893

,470

,695

,671

,572

,769

,891

,869

,562

,469

,398

,872

low labour costs/wages

advantages of production costs

low product/material prices

low capital/investment costs

higher level of productivity

high (product) knowledge

quality of products/labour

present technology know-how

securing supply sources

sales market potential

anticipation of competition

saturation of home market

affinity to culture/mentality

physical market proximity

market knowledge

competitive environment

sharpen own profile

cost advantages

factor 1:cost advantages

factor 2:advantages of productivity/quality

factor 3:sales potential/attractiveness

factor 4:market proximity/distance

factor 5:firm-specific issues

,755

,879

,883

,857

,721

,829

,770

,893

,470

,695

,671

,572

,769

,891

,869

,562

,469

,398

,872


Decisio

n fu

nctio

nM

AN

AG

EM

EN

T

Pre-decisionsfor an foreign expan-sion and a MS-model development

Product line/product strategy/

Iindustry

Internationalknowledge and

goals

Critical factors

Internationalmode of entry

Principles and strategies

(Order of)selection

steps

Modelfunction

Choice ofselectioncriteria

Constructionof MS models

Construction of country selection models

3. Paper: Towards a Conceptual Model of Country Market Selection,Swoboda et al., Int. Rev. of Retail, Distribution & Consumer Research (2007, optional)


90

Country-specific evaluationInter-country market selectionAll Countries (without METRO operating countries)

Preliminary evaluation

Knock-out criteria

Country scoring model

Primary ranking

Competition/Adjustment factors

Final country-ranking pipeline

New

country openings

Feasibility study process

1. Desk

research

2. Pre-

feasibility study

3. Full-

feasibility study

Candidate for step 2

Candidatefor step 3

Candidate for entrance

if positiveresult

if positiveresult

if positiveresult

Management-decision

Market selection at Metro C&C

Pre-decision: Emerging countries, first mover, organic growth, limited resources, three formats …

Source: Swoboda et al. 2007.


91

Portfolio-based selection with the function of country comparisons

Market barriersfor car imports

Market growthpotential

2001-2011

high

low

highlow

China

India

Vietnam

Philippines

Thailand

Indonesia

Taiwan

Singapore

Hong Kong Korea

Malaysia

Size of car markt 2001

Size of car markt 2011 (prognosis)

Source: Urban, M. (2000), S. 269-286.

Market barriers / risks

Marketattractiveness

Peripheral /casual

markets

Coremarkets

Abstinencemarkets

Speculativemarkets

high

low

low high


92

Approaches which accent the companies contexts


Relative competitive advantages (strength)

Mar

ket

attr

acti

vity

low high

high

low

mid

dle

middle

Finland

Sweden

Denmark

Ukraine

Norway

Competition intensityin host country

Str

ateg

ic r

elev

ance

of

the

ho

st c

ou

ntr

y

low high

high

low

Danger/correct

Maintaining/develop

DefendingAvoidance/

attack


93

Systematization of concepts for assessment of country risk

Debt ratio Debt-service ratio Net borrowing

requirements Import backing Euro money-Index

Country reports of the Federal Foreign TradeInformation Office

PRL AGEFI country

index

World Bank‘stwo-gap model

US EXIM Bankmodel

Statisticalratios

Econometricmodels

Qualitative(purely descriptive)

Quantitative

Objective(cardinal)

Subjective(interval led)

Investment climate (political/economical) BERI BI-Country Ratings

Firms/sector specificCountry risks FORELEND Euromoney-Index International Country

Risk Guide

Investment climate (political/economical) Ifo Economic Survey

International (ESI) Country Risk Service

Firms/sector specificcountry risks Institutional

Investor (II)-Index

One-dimensionalfactor score

models

Multidimensionalfactor score

models

Political (in)stability Coplin-O´Leary-System Political Systems Stability Index (PSSI) World Political Risk Forecast (WPRF)


94

Structure and weighting schema of the Operation Risk Index (BERI) – Example

Criteria (i = 1, 2, ..., 15) (ai) (gi) (ai · gi)

1. Political stability 2,3 3,0 6,902. Attitude towards foreign investments 2,1 1,5 3,15 3. Expropriation 1,8 1,5 2,704. Inflation 1,3 1,5 1,955. Balance of payments 1,1 1,5 1,656. Bureaucratic obstacles 1,6 1,0 1,607. Economic growth 2,0 2,5 5,008. Currency convertibility 1,6 2,5 4,009. Enforceability of contracts 1,7 1,5 2,5510. Labour costs / productivity 1,8 2,0 3,6011. Availability of local specialists 1,6 0,5 0,8012. News / transport 1,7 1,0 1,7013. Management and partners 1,8 1,0 1,8014. Availability of short-term credit 1,7 2,0 3,4015. Availability of long-term credit 1,8 2,0 3,60

*Forecast

max. 25 · 4 = 100 points 15 15 gi = 25 ai · gi = 44,4

i=1 i=1ai: Average occurence of characteristic; 0,0 ( = not acceptable) bis 4,0 ( = very positive) gi: Weighting

Country rating+70 points: Typical situation of an overal stable developed country55-70 points: Countries with moderate risk and certain complications with daily business40-55 Punkte: High risk and bad business climate for foreign corporationsless than 40 points: Not acceptable for foreign investments

Development of ORI

Year ORI2000 46

2001 37

2002 37

2003 38

2004 37

2005 42

2006 42

2007 43

2008 42

2009 37

2010 38

2011 41

2012 44

2013* 48

2015* 52


95Source: Benito/Welch 1997, p. 20

Market exits – Forms, reasons, and consequences/barriers

Within the context of market exits Benito (2005, p. 242) talks about divestments and understands this as adjustments, failures

and results of restructuring.

The reasons/determinants of market exits are the following: Changes in the attitudes or foreign commitment of the management (1)

Change in the organization, as strategy changes (e.g. product-market/ competitive strategy) (2), resource-based decisions (3), new management, which follows new ideas (4)

Changes in the external environment, for example in the macro environment (political-legal, economical, technological) (5), or in the meso environment (customer, competitor) (6)

Changes in performance, in the host country as well as in other markets (7)


96

Company Country / year ReasonsM&S (UK) US 2006;

F/E/B/NL/D/P/LUX 2001• resource-concentration in core countries• corporate restructuring program

Ahold (NL) BE/ES/ARG/BRA/CRI/ESA/GUA/HON 2005 THA 2004; CHI/IND/ MAL/PAR/ECU/PER

2003; CH/SIN 1999

• financial problems in home country• reorganization of resources (to Spain)• losses, no ROI-Perspective, concentration

Auchan (FR) ARG 2005; US 2003; MEX 2002; THA 2001 • no perspective • no critical mass

Intermarché (FR) DE 2005; IT 2002 • no partner for the future

Edeka (DE) CZ 2006; F 03; PL 2001 • Concent. on competences; Spar integrat.

Dohle (DE) PL 2002 • attractive selling opportunity

Dairy Farm (HK) AUS/NZ 2002; ES/UK/JA 1998 • concentration on key competences• weak reorganization and losses

Reitan (NOR) PL 2003; HUN 2002; CZ 1998 • competition/ weak perspective

Jer. Martins (P) BRA/UK 2002 • financial problems

Seiyu (JP) THA 2001 • losses and JV-partner quitted

Julius Meinl (AT) CZ/HUN 2005 • re-orientation of business

Carrefour (FR) SCO 2006; JA/MEX/ CZ/SK 2005; CHI 2004; HK 2000

• high competition, home market problems• hypermarkets with weak performance

Casino (FR) PL 2006 • Losses and weak perspective

Wal-Mart (US) DE/RSC 2006; HK 1996 • losses; problems with JV-partner

Source: Swoboda/Schwarz 2006.

Withdrawals – Examples in retailing


97

Commitment to international options

- Complete de-internationalization - - Partial de-internationalization -

Probabilityof full de-internationalization

Probability of partial de-internationalization

Commitment to international options

Noviceexporter

International firm

Global operator

Re-nationalization

Source: Benito/Welch 1997, p. 17f.










A

B

C

D

98


99

Country-specific timing strategies

Industry turnover

Timet0 t1 t2

Early

mover

Second

mover

Competitorsshake-out 1

Late

mover

Competitorsshake-out 2

Level of uncertainty

Market life cycle

Entry continuum Phases of market processingSource: Swoboda 2002.

Time

Market saturation100%

Cantle


100

Advantages and disadvantages

Early/Firstmover

Secondmover



Analyse


Establishment of market standards Longer pay-back period Market share-based cost advantages Development of business experience Strategic autonomy/ monopoly profits

Higher costs for market development Higher effort to convince customers Higher R&D costs Risk of technological leaps Uncertainty about future market

development

Participation in the market development of the pioneer

Risk reduction (waiting for the market development of the pioneer)

Entry compared to late moveroption - influence of standards

Less strategic autonomy as a pioneer Cost and experience disadvantages

compared to the pioneer Compared to the late movers higher

investment and higher risk

Cost reduction in R&D Following established standards Standardization potential

Disadvantages in image building Entry barriers Competitive problems in case of price

reduction by competitors

Latemover

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaExample – Tablets in Germany

May 28, 2010: Apple iPad (announced on January 27, 2010, by Steve Jobs at an Apple press conference)

October 11, 2010: Samsung Galaxy Tab

March 15, 2011: Apple iPad2

June 15, 2011: BlackBerry PlayBook

July 15, 2011: HP Touchpad

August 15 2011: Samsung Galaxy Tab 10.1

March 16, 2012: Apple the new iPad

101


102

First mover advantages

Source: Kalynaram/Gurumurthy 1998.


103

Selected timing effects

Source: Luo 1999, p. 193.

Return on equity

Turnovergrowth

Total turnover

Competitiveposition

Operative risk

Independent variable: Timing -0.43* -0.26* -0.34* -0.24* -0.28*

Controls:

Industry 0.27* 0.31* 0.27* 0.35* 0.20***

Firm size -0.08 0.05 -0.05 0.03 -0.20

Equity base 0.02 0.11 0.09 0.12 0.13

R&D 0.34* 0.41* 0.43* 0.47* -.017

Model F 21.6 15.04 20.76 20.66 7.12

p< 0.001 0.001 0.001 0.001 0.001

R² 0.55 0.46 0.53 0.53 0.36

Corr. R² 0.52 0.42 0.51 0.51 0.32

Significance level p<0.001*. <0.01**. <0.05***.


104

Turnover

Time

Country C

Country A

Country B

Turnover

Intro-ducti

on

Gro-wth

Matu-rity

Satur-ation

Degener-ation

Traditional product life cycle

Time

t2 t3t1

Inter-country timing


105

Inter country timing (product level or company level)

Country 1(France)

Country 2 (UK)

Country 3(Poland)

Homecountry

Country 1

Country 2

Country 3

Country 4

Homecountry

Time1-2 Years

Time

t1 t5t4t3t2

Sequential strategy(cascade, waterfall)

Simultaneous strategy(sprinkler, shower)


Advantages and disadvantages of the cascade and the sprinkler model

Cascademodel

Sprinklermodel



Analyse


Limited resource use Organizational learning process Limited risk Possibility to prolong the life cycle Possibility of stepwise adaptation to

heterogeneous country markets Indispensable when certain markets

have lead function for region

Danger of short attention spans to specific markets (too early end of marketing activity)

Danger of imitation Danger of competitive reaction Danger of unsatisfied consumer need

and negative image effects (iPhone)

Indispensable with short product / technology life cycles / long R&D times

Possibility to build up first mover advantages

Establishment of market entry barriers High volumes, EoS, experience effects Risk portfolio

High coordination efforts High resource use High risk of general failure

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaExample – Sony Company information

Company information (historical)

1946: Foundation of Tokio Tsuchin Kogyo

1958: Naming SONY

1960: Sony Europe, Sony CooperationUS

1968: Sony UK, 1970: Sony Germany

1972: First foreign production plant in San Diego, followed by Bridgend in 1972

1985: Acquisition of CBS Records, 1989 Columbia Tristar, 2001 Sony Ericsson Mobile, 2004 FeliCa Network

2013: More than 146,000 employees, 72 bn. USD annual sales, approx. 1,000 subsidiaries

Global innovation leader for more than four decades, early mover, strong brand, well-balanced regional sales: approx. 25% each in Japan, USA, Europe, others; five business units (BU)

Focus BU Games: 8% of all company sales (2013), growth sector, 2006: world market leader

107

1955 1968 1979 1982 1995 2004 2013


Example – Sony's worldwide product launch of PS3

Playstation 1 Playstation 2 Playstation 3 Playstation 4

1994 2000 2006 2013

2006 Business Unit Games

14% of all company sales

Profit: approx. 2 bn. USD (2005)

Worldwide market share <50%

PS3: Worldwide market launch in March 2006; high-priced premium product

No simultaneous product launch in triad markets

Production and delivery problems with blue- ray player

Launch in November 2006 in the US and Japan subject to a quota

Launch in Europe in March 2007 due to focus on US bulk business

Enormously high distribution cost


Example – Consequences of Sony's misplanning

Time (2006/07)

Indus-trysales

Nintendo-Wii

X-Box

Sony PS3

50 m. USD

20 m. USD

Wii with motion sensor 250 USD in Nov 2006

PS3 with blue ray 499 USD with time delay March 2007

Scheduled product launch of PS3

Stylized product lifecycle

Consequences for Business Unit GamesShort-term Time advantage for competitors with cheaper

products (up to €200); overnight loss of market share to Nintendo and Microsoft

High positioning in terms of quality and price (but price advantage only for first mover)

Customer wishes change within one year, possibly even target groups (customers > 20 years old)

Amplifier: Loss of win-win-situation with software producers (who sell more games with competitors' products) and of trade and distribution partners

Long-term Only little recovery of BU Games: loss of 590

m. USD (2009), no world market leader 1 year handling of old product instead of new R&D Amplifier: sales problems of strongest BU

Electronics (70% of total sales), financial crisis, tsunami

Status as of 2014 With PS4 ahead of Microsoft (Xbox One) and

Nintendo (Wii U and 3DS); Sony again market leader










A

B

C

D

110


111

Decisions on market entry strategy

Basic perspectives/tasks Initial choice of market entry strategy/operation mode

Alternative operation modes and selection criteria

(Success related) advantages of each operation mode

Mode combinations

Mode changes or switches

Different forms of mode switches

Different reasons for mode switches

Interdependencies: mode choice, market selection and preferred internationalization strategy

One of the major research topics in international business research



112

Value-added dominantlyin home country

Value-added dominantlyin host country

Without FDIin host country

Export (Direct or indirect)

e.g. licensing, franchising,

management contracting

With FDIin host country

Greenfield investment

Acquisition(Brownfield investment)

Cooperation Hierarchy

Classification of selected foreign market entry strategy/operation modes

Market entry strategy or operation modes are defined as contractual arran-gements/institutional background of market activities in foreign countries.

Jointventures

Wholly-ownedsubsidiaries


113

Basic types of exporting –Direct and indirect

Border

Company BuyerWholesaler /

export company

Company BuyerDirect

Indirect


Evaluation of direct and indirect exporting


Direct export Indirect exportExogeneous factors

Rapid market entry + +

Rapid multiplication of product successes – +

Specific upgrading of the marketing program – x

Good absorption of market potential – +

Endogeneous factors

Higher coordination costs over time – +

High control and possibilities to influence + –

Danger of losing competences concerningcompetitive advantages

– +

Decreased use of human resources – +

Strategic flexibility + ++ given; – not given; x no assertion possible


115

Exporting –Advantages and disadvantages

Source: Hill 2008.

Advantages

Avoids the substantial cost of establishing manufacturing operations in the host country

Easy way to sell a surplus, thus helps to achieve experience curve advantages at home

Easy way to tap international market potential

Low risk Remains flexibility Potentially country-of-origin

advantages

Disadvantages

There may be lower-cost locations for manufacturing abroad

Transport costs Tariff barriers Agents/distributors in a foreign

country may not act in exporter's best interest

Inter-nal

Exter-nal


116

Different distribution channel alterna-tives for the case of direct exporting

Border

Company BuyerDistributor

Company BuyerSales subsidiary

Company Buyer

Company Buyer

Sales representative(Domestic-based or resident)

Company BuyerAgent

1

2

3

4

5

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaIncoterms

117

Incoterms Definition Key points Arrangement of shipping

EXWEx works(named place)

Delivery takes place at the seller's premises or another named place (i.e., works, factory, or warehouse).

EXW represents minimal obligations for the seller, the buyer bears all the costs and risks involved in claiming the goods from the seller's premises.

Buyer arranges shipping

FOBFree on board(named portof shipment)

Delivery takes place when the goods pass the ship's rail at the named port of shipment, the port of origin in the seller's home country.

The buyer bears all the costs and risks of loss and damage upon delivery. The seller clears the goods for export.

Buyer arranges shipping

CIFCost,insurance, and freight (named portof destination)

Seller pays the cargo insurance and delivery of goods to the named port of destination. From the destination port, buyer is responsible for customs clearance and other costs and risks.

The seller pays for freight and insurance to transport the goods to the named port of destination. At that point, responsibility for the goods transfers from the seller to the buyer.

Seller arranges shipping and insurance

Source: Cavusgil/Knight/Riesenberger 2014.


118

Choice of an intermediary

The partner is financially well consolidated

The partner covers the whole geographic area, e.g., the country

The partner has a high level of expertise in the industry

The partner's staff have a high level of technical know-how

The partner's staff offer a high level of service support

The partner's staff have excellent relations with the industry

Manufacturer's seeking criteria ("wish" profile)

Partner's activity

Partner's type of customer Partner 1 Partner 2

strong weak strong weak strong weak

Manufacturer'sseeking criteria("wish" profile)

Manufacturer's evaluation of the competences of the two partners

Manufacturer would expect similarities in activities and types

of customers

Source: Hollensen 2007.


119

Some questions on exporting

What are the differences between direct and indirect exports?

Which role do exports play for small versus large companies, and for the companies' internationalization process? Non-exporters: Willingness to start exports (export ratio = 0%)

Reactive involvement: reactive exporters (export ratio = 1-9%)

Active involvement: growing number of markets abroad (export ratio = 10-39%)

Committed involvement: (highly) engaged firms (export ratio = 40-100%)

How are exports conducted and which challenges do they bear? Shipping documents, foreign trade assurance etc.

Direct customer access, sales-broker control, switch from indirect to direct export

Which possibilities do firms have to coordinate their exports?

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaSubsidiaries

120

Subsidiaries

Sales subsidiariesWholly owned

production subsidiaries (WOPS)

Sales facilities (usually combined with services) that serve the host country market and that are in the 100%-ownership of the company

Production facilities (usually combined with sales department) that serve the host country market and that are in 100% ownership of the company

Located and operated in the host country by the MNC, under the laws and regulations of the host country

Different legal forms and strategic roles are

common


Internal advantages and disadvantages of WOPS

121

Disadvantages



Analyse

Advantages

Low transportation cost

Potentially lower labor cost

Independent marketing & business strategies / full control over operation

High level of control over knowledge outflow (protection of unwanted know-how diffusion)

Easy integration into own organizational structures

High capital investment necessary

Acquisition of country-specific know-how is more difficult

Firms bear the full costs and risks of setting up overseas operations

High investment might reduce flexibility in international strategy

Source: Kotabe/Helsen 2008; Hollensen 2007.

+ –


External advantages and disadvantages of WOPS

122



Analyse


Full and own presence in the market

Uniform market appearance (brands, CI, etc.)

Enhanced market power over suppliers, competitors, etc.

Circumvention of market barriers (e.g. host country restrictions, non-tariff barriers)

Often subsidized by host country government

Local value added considered beneficial by host country officials; image as local company (job creation)

Need to develop a foreign market presence without the support of a third party

Company might have limited market knowledge

High risk (country risk, risk of expatriation…)



123Source: Bartlett/Goshal 1986.

Black holeImplementer

Strategic leaderContributor

low high

low

high

Strategic importanceof local environment

Com

pete

nce

oflo

cal o

rgan

izat

ion

Strategic roles of WOPS


124

Market shares and production location of Japanese manufacturers

Source: Blaser et al. 2009 (Case Study Group).

Local production

Exports


125

Some questions on subsidiaries

Which role do subsidiaries play during the internationalization process; especially for firms that start their internationalization with exports?

How are subsidiaries established, and which added value do they deliver? Greenfield vs. brownfield investments

Sales subsidiaries, production subsidiaries vs. autonomous subsidiaries

Which possibilities to coordinate subsidiaries abroad do you know? E.g., structural, technocratic/process oriented, cultural

Which strategic roles can subsidiaries play in connected and transnational companies?


Establishing WOPS – Assessment of greenfield investments and acquisitions

126

Greenfield investment Acquisition

Market access Delayed Directly

Market share Has to be captured Will be taken over

Capital expenditure Gradual increase High contribution in the beginning

Location Can be freely selected Already in place

Attitude of the host country government

Frequently financialsupport

Often a defensive position

Technology Latest methods can be implemented

Already in place

Integration Unproblematic Difficult

Number of firms and production capacity

To be increased Remains the same

Source: Zentes/Swoboda/Schramm-Klein 2013; Holtbrügge 2010.


Establishing WOPS via acquisitions –Advantages and disadvantages

127

Inter-nal

Exter-nal



Analyse

Advantages Disadvantages (why they fail)+ –

Economies of scale (from the beginning)

Often quick cash flow generation from the acquisition

High information and search costs ("lemons") (information asymmetry, acquiring firms often overpay the assets of the acquired company, synergy potentials often lesser than expected)

Opposition by host country government Necessity to integrate different systems,

cultures, people… (cost of integration) Potentially brain drain

Quick access to the local market Access to additional local resources

(brands, management expertise, market knowledge, government relations, distribution networks, suppliers, sites)

Buying into a market position / image Competitive intensity in host market is not

enhanced (lower risk of over-capacity)

Available and adequate take-over object necessary

High risk Opposition by local company


Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTypology of acquisitions

128

Horizontal acquisition

Vertical acquisition

Conglomerate acquisition

Sup-plier

Sup-plier

Sup-plier

Pro-ducer

Cus-tomer

Sup-plier

Pro-ducer

Cus-tomer

Same products / markets

Sup-plier

Pro-ducer

Cus-tomer

Customer-supplier-relationship

No specific relationship

Acquisitions over time, 1990–2011

Source: Herger/McCorriston, 2014.

Residual: where it is not clear whether a deal is driven by a horizontal or verticalmotive (or both).


Economic logic of an acquistion decision

129

Firmvalue before the acqui-sition

Value ofthe acquiredfirm

Buyingprice

Restruc-turingpoten-tial

Synergypoten-tial

Inte-grationcost

Firm valueafterthe acqui-sition

Pricepremium

Source: Hungenberg, H.: Strategisches Management in Unternehmen, Springer/Gabler, 2012, S. 524.


130

Example of a partial acquisition with partnership

Nestlé

• Strong gain in German pizza market forNestlé (Wagner holds 27%)

• Access to Nestlé distribution networkabroad for Wagner

• Some Wagner pizza sold under Nestlé-brands (e.g., Buitoni in Italy and CH)

• Access to financial capital for Wagner (20 Mio. EUR invested in production, 6.5 Mio. EUR invested in distribution center)

• 2005-2008: +20% sales, +200 employees, export rate of 30% (from formerly 13%)

49% in 2005, added 25% per 1.1.2010

Wagner Tiefkühlprodukte GmbH, Germany


Factors to consider in selecting foreign direct investment locations

131

Market factors Size and growth of national

market Size and growth of regional

market Proximity to key export markets

Human resource factors Cost, availability, and

productivity of skilled labor Involvement of labor unions Availability and quality of

managerial workforce

Profit retention factors Types and level of taxes Tax rates for profit

repatriation Complexity of tax system Rate of inflation

Economic factors Cost of land and facilities State of the local

economy Stability of currency Extent of free trade

Legal and regulatory factors Regulations on FDI and technology

transfer Nature of legal system and laws Intellectual property protection Extent of tariffs, other trade barriers

Infrastructural factors Availability and quality of local manufacturing Efficiency of physical distribution Cost, availability, and quality of utilities and

finance Quality of marketing and distribution

Political and governmental factors Political stability and corruption Openness to foreign investment Extent of bureaucracy and red tape

(excessive regulation or rigid conformity to formal rules that is considered redundant)



132

Some huge acquisitions

Some questions on mergers & acquisitions

When do firms choose acquisitions as market entry strategy?

How are market selection and acquisitions related?

Please explain the ideal process and the characteristics of a foreign acquisition process, so during the pre-merger and post-merger phase.

Buyer Goal Branch bn. EUR

Totalfina Elf Aquitane Oil 52.2

Rhône-Poulenc Hoechst Pharma 25.8

Carrefour Promodès Retailing 16.7

Vodafone Mannesmann Telecommunication 198.4

AOL Time Warner Medien / Internet 191.5

SmithKline Beecham Glaxo Wellcome Pharma 78.4

France Telecom Orange Telecommunication 48.4

AT&T Media One Telecom. / Media 46.3

Unilever Bestfoods Food industry 24.9


133

Joint ventures as international market entry strategy


Management,investment

and risk

(Equity) Joint ventures (JV) are partnerships between two or more economically and legally independent parties that involve the creation of a new company (or change in

ownership of an existing company) as a third entity in which the parties carry out economical activities (in our case: operations) together and in which they share

ownership and control (joint ownership).

Company 1 Company 2

Joint Venture

International JV: The 3 units must be located in at least two countries

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTypes of equity joint ventures

134

Characteristics

Number of cooperation partners

JV with one partnerJV with two or more partners

Area of cooperation JV for one value creation activityJV for two or more value creation activitiesCompany-wide, cross-functional JV

Location JV based in one partner's home countryJV based in a third country

Geographic scope of cooperation

Local JV for specific host countryJV for specific region / for world market

Type of cooperation Horizontal / Vertical / Concentric / Conglomerate JV

Equity investment Equal sharesUnequal shares

Time horizon Temporary JVJV without time limit



135

Cooperative options – Danone's activities in China

Joint Venture with Wahaha – Production and Product Know-how from Danone, Chinese Brand from Wahaha


Internal advantages and disadvantages of joint ventures

136

Disadvantages



Analyse

Advantages+ –

Low transportation costs, potentially lower labor cost, access to local inputs

Sharing the necessary investment (lowering capital needs and risk) and resources with partner

Complementary technology or management skills can lead to new opportunities

JV facilitate technology transfer compared to other entry modes

More control over the operations compared to other "lower" order entry modes

Long-term, intensive cooperation with joint objectives

Possibility to establish local government relationships

Knowledge dissemination Problematic in particular when JV is

terminated (who owns the resources that were established together?)

Lower control than in case of WOPS; might not be enough to realize experience curve or location economies

Managerial dependency between JV and one of the partners

Potential conflicts over strategies, resource allocation, transfer pricing, ownership of critical assets, repatriation or investment of profits, resources

Changes in the bargaining power of partners over time

Integration in international strategy of parent may be difficult

Source: Kotabe/Helsen 2008; Hollensen 2007; Bradley 2002.


External advantages and disadvantages of joint ventures

137

Disadvantages



Analyse

Advantages+ –

Increased speed of market entry Circumvention of market barriers (such

as host country restrictions, tariffs, non-tariff barriers)

Local value added considered beneficial by host country officials (image as local company (job creation))

Legal restrictions against other forms (less developed countries may restrict foreign ownership)

Higher rate of return compared to licensing (and other "lower" order entry modes)

Access to local market knowledge, market relations (including customers, suppliers), distribution network

Change in product-market mission may make JV a liability

Source: Kotabe/Helsen 2008; Hollensen 2007; Bradley 2002.


138

Some questions on alliances

When do firms choose alliances as entry strategy?

How are market selection and alliances related?

What are key challenges/success factors during different phases of international alliance evolution? First phase

Foundation phase

Management phase

Which role does foreign culture play during the alliance evolution?


139

Situational factors

Company characteristicsIndustry characteristicsEnvironment characteristics Decision-maker characteristics

Evolution phases of alliances

Building phase Managing phase

Basicdecisions

Searchfor

partners

Negotiationsconstitution

Management

Cooperationas possible

strategy?

Informationabout

partner

Goals andfigures

Structure,strategies

and culture

4. Paper: International SME Alliances: The Impact of Alliance Building and Configurational Fit on Success, Long Range Planning, Swoboda et al., Long Range Planning (2011, optional).


Guidelines for successful collaborative ventures (1/2)

140

Pursue common goals

Be cogizant of cultural differences

International collaborations require that both parties learn and appreciate each other's corporate and national cultures

Cultural incompatibility can cause anger, frustration, and inefficiency

The partners may otherwise never arrive at a common set of values and organizational routines, especially if they are from very distinct cultures

Give attention to planning and management

When partners have differing goals for the venture, or their goals change over time, they can find themselves operating at cross-purposes

E.g., Japanese firms tend to value market share over profitability, U.S. firms value profitability over market share

To overcome such challenges, partners need to regularly interact and communicate at different levels of the organization

Without agreement on questions of management, decision making, and control, each partner may seek to control all the venture's operations, which can strain the managerial, financial, and technological resources of both



Guidelines for successful collaborative ventures (2/2)

141

Adjust to shifting environmental circumstances

Safeguard core competencies

Collaborations take place between current or potential competitors that must walk a fine line between cooperation and competition

For example, Volkswagen and GE succeeded in China by partnering with the Chinese firm, Shanghai Automotive Industry Corporation (SAIC), and the Western firms transferred much technology and know-how to their Chinese partner

Having learned much from them, SAIC is now becoming a significant player in the global automobile industry and even a competitor to its earlier partners

When environmental conditions change, the rationale for a collaborative venture may weaken or disappear

An industry or economic downturn may shift priorities in one or both firms; cost overruns can make the venture untenable; new government policies or regulations can increase costs or eliminate anticipate benefits etc.

Flexibility is key for adjusting to changing conditions



142

Licensing

International licensing occurs when a firm provides (against payment), rights needed by another company to operate its business in a foreign market MAN B&W Diesel as licensor to Hyundai Heavy Industries

Licensing out vs. licensing in Active vs. passive licensing Licensor vs. licensee


A licensing agreement is an arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specified time period, and in

return, the licensor receives a payment from the licensee

Example: A licensor allows another company to manufacture a certain product that is based on a patent against some agreed royalty.


143

International licenses

400

350

300

250

200

150

100

50

0 10 20 30 40 50 60 70 80 90 100

Joop

Mövenpick

Boss

Camel

Aigner

MCM

Jil Sander

License salesin m. €

Share of license sales tototal sales in %

Source: Zentes/Swoboda/Morschett 2004.

Operationlicence

Trade namelicence

Productlicence

Distributionlicence

Types of licences

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTypes of license agreements

144

Operation license

Product license

Distribution license

Trade namelicenses

Grants a firm permission to produce another firm's product

Grants a firm permission to use another firm's proprietary names, characteristics, or logos

Grants a firm permission to distribute another firm's product or know-how

Grants a firm permission to use a production technology or parts of a larger system etc.



4,3

5,0

5,0

5,5

5,6

6,0

7,0

8,7

12,0

The CollegiateLicensing Company

Major LeagueBaseball

Sanrio

Nickelodeon &Viacomm

MarvelEntertainment

Warner Bros.Consumer Products

Mattel

Phillips-VanHeusen

ICONIX

Disney ConsumerProducts

28,6

Leading licensors ranked by licensing revenues (in bn. USD)

145

1

2

3

4

5

6

7

8

9

10

Toy and apparel licesing for Disney movies such as Hannah Montana and Mickey Mouse

Licensed merchandise for universities and collegiate sports teams

Licensor of iconic toy and game brands such as Barbie and UNO

Toy and apparel licensing from movies such as Batman and Harry Potter

Toy, game, and apparel licensing for comic characteristics such as Iron Man and X-Men

Toys and apparel tied to the Hello Kitty character



146

License contracts

Source: Hollensen 2007; Bradley 2002.

License packages contain elements such as: Patents, designs, trademarks, copyrights Product and process specifications Quality control procedures Manufacturing layout drawings and instruction manuals Commissioning to achieve a performance guarantee Technical and commercial training programmes Product literature and other sales support material

License transactions involve combinations of A down payment on release of the written part of the technology Progress payments leading up to commissioning one or more products to the

licensor‘s performance specification Minimum royalty – a guarantee that at least some annual income will be received by

the licensor Running royalty – normally expressed as a percentage of normal selling price or as

a fixed sum of money for units of output


147

International licensing – Examples

Country Edition fromLicencee or JV-Partner

AUTO OGGI (Italien) 1986 Arnoldo Mondadori Editore

AUTO EXPRESS (Großbritannien)

1988 Dennis Publishing Ltd.

AUTO WEEK (Niederlande) 1990 Uitgeverij Sparnestad B.V.

AUTO TIP (TschechischeRepublik)

1991 Automedia

AUTO SHOW (Türkei) 1992 Hürriyet Istanbul

AUTO NEA (Griechenland) 1993 Lambrakis Press

AUTO FOCO (Portugal) 2000 JV SVD

AUTO BILD SUOMI (Finnland)

2004Sanoma Magaz. FinlandCorp.

AUTO BILD THAILAND (Thailand)

2004Hubert Burda Media Thailand

AUTO BILD LITHUANIA (Litauen)

2005Veidas PeriodicalPublishing

AUTO BILD SRBIJA CRNA GORA (Serbia/Monten.)

2006 Politika Magazines

AUTO BILD DANMARK (Dänemark)

2006 Forlaget de Luxe A/S

Autobild (by Axel Springer) Tokyo Disneyland


Internal advantages and disadvantages of licensing out

148

Disadvantages



Analyse

Advantages+ –

Good opportunity for small companies with limited financial, managerial or marketing resources to expand into a new market

Low own investment / low commitment of own resources

Low transport costs

Potentially lower labour cost

Access to local inputs

Easy way to improve cash flow from existing technology/know-how/brand (better exploitation of past R&D investment; stretching product life cycle is possible in less developed countries)

Might not give tight control over manu-facturing, marketing, and strategy that may be required to maximize profits

Problems with integration of market into international strategy (change in market entry strategy not possible in the short term)

Low initial cost might be accompanied with less than optimal long-term income in foreign market

Licensing includes transaction cost (identifying partner, monitoring, enforcing: risk of opportunism as greatest risk)

Low own value added by own company

Source: Hollensen 2007; Bradley 2002; Hill 2008.


External advantages and disadvantages of licensing out

149

Disadvantages



Analyse

Advantages+ –

Good opportunity to enter smaller foreign markets, higher risk markets

Fast and cheap introduction of licensed product (based on existing manufacturing facilities of licensee)

Use of market know-how, customer relationships and distribution channels of licensee

Improved delivery and service levels in local markets

Circumvention of market barriers (such as host country restrictions, tariffs, non-tariff barriers)

Local value added considered beneficial by host country officials

Only passive interaction with the market

Low possibility to influence the market policy of licensee

Creates possible future competitors (licensee may become a future competitor)

Establishment of competitors by know-how-transfer (esp. on third markets)

Lack of commitment of foreign partner can endanger the market success

Lack of control over licensee operations in the foreign market (potentially negative image effects in host country and spill-over effects)

Source: Hollensen 2007; Bradley 2002; Hill 2008.

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaImpact of licensing on cash flow

150

Profits

Costs

Time

Cash flow for licensing in new product

technology

Cash flow for inhouse new product

development

Royalty costs

Research and market development costs

1

2

1

2

Technology adaptation andmarket development costs



151

Internationalhotel company A(HQ: country X)

Owner of hotel BLocation: country Y (or third country)

Hotel BMarket: country Y

Managementcontract

Ownership(often: portfolio

investment)

Manages

Management contracts

A management contract is an arrangement whereby one party hands over the actual operational control of a company to another company which performs the necessary

management functions in return for a fee.

Example: Hotels, airports, casinos


152Source: Fraport AG 2015.

Civil Aviation MinistryEgyptian holding company for

airports and air navigation

Cairo Airport Company Cairo International Airport

Fraport AG Germany

Ow

ners

hip

100

%

man

agem

ent

Ownership100 %

Structure of a management contract system in the airport industry


153

The Accor strategy –Trends by market segment

Current model

Owned/fixed leases

Owned/fixed leases

Owned/fixed leases

Owned/fixed leases/franchising

Variable leases/franchising

Management contracts/variable leases/

franchising

Management contracts/franchising

Preferred operating structure(in mature markets)

Management contracts

Source: Accor 2015.

Accor franchise


154

Franchising (I)

Source: European Franchise Federation 2007.

Franchising is A system of marketing goods and/or services and/or technology, Which is based upon a close and ongoing collaboration between legally and

financially separate and independent undertakings, the franchisor and its individual franchisees,

Whereby the franchisor grants its individual franchisee the right, and imposes the obligation, to conduct a business in accordance with the franchisor's concept.

Autonomousfranchisor

Autonomousfranchisee

Franchise package

Directives and control

Long-term contractual cooperation

Compensation


155

Business format franchising comprises of five essential elements A brand name (registered as a brand name and/or a trademark, etc.) which

serves as the umbrella sign for network, and a rallying sign for the consumer and public,

A licence to the use the brand, granted to the franchisee by the franchisor,

A business system - a business concept formatted into a duplicable value "package" founded on the franchisor's tested know-how and his continued assistance during the term of the agreement,

Payment by the franchisee of a financial consideration, either in a direct form, such as an entrance fee and/or continuing fee ("royalty"), and/or an indirect form such as a mark-up on supplied goods.

The investment in, and ownership of, the assets of the franchised business by the franchisee.

Different: Product and trade name franchising Similar to licensing


Franchising (II)


156

Business format “packages”

Trade marks / trade names / designs

Patents and copyrights

Business know-how / trade secrets

Geographic exclusivity

Store design

Market research

Location selection



157

Obligations in a franchise system

The franchisor shall Have operated a business concept with success, for a reasonable time and in at

least one pilot unit before starting its franchise network

Be the owner, or have legal rights to the use of its network's trade name, trade mark or other distinguishing identification

Provide the individual franchisee with initial training and continuing commercial and/or technical assistance during the entire life of the agreement.

Extract taken from the „Code of ethics“ What is a code of ethics and why is it necessary?



158

Franchising in Germany (2015)

Source: Deutscher Franchise-Verband 2016.


159

Franchising in Europe (2015)


0

200

400

600

800

1000

1200

1400

1600

1800

2000

Number of franchises


160

Top 10 global franchises (2016)

Source: Franchise direct 2016.

No. Name Business CoO Founded in Franchisesince

No. of countries

Total units

1 Mc Donald's Fast food USA 1955 1955 119 35,690

2 Subway Fast food USA 1965 1974 98 42,230

3 KFC Fast food USA 1939 1952 108 18,775

4 Burger King Fast food USA 1956 1956 76 13,260

5 Pizza Hut Fast food USA 1958 1959 92 14,970

6 7-Eleven Convenience store USA 1927 1964 15 51,000

7 Wyndham Hotel Group

Hotel USA 1990 1990 70 7,400

8 InterContinental Hotels and Resorts

Hotel UK 1946 1956 100 5,000

9 Hilton Hotels & Resorts

Hotel USA 1962 1965 78 560

10 Marriott International

Hotel USA 1967 1967 80 4,200

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaAccor case – Operation modes

161Source: Accor 2015.

Structure of the Accor network Accor contract types

Franchise

Management

You operate your hotel directly under one of our brands and you benefit from Accor's expertise (services)

You pay franchise fee to Accor (based on revenue)

We manage your hotel

We deploy our operating expertise to manage your hotel over the long term

You pay management fees to Accor (based on revenue and operational profit)

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaBrand portfolio


Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaPreferred operation modes

Franchising: You operate your hotel directly under one of our brands and you benefit from Accor expertise (Services).

Management: We manage your hotel directly and efficiently and your hotel benefitsfrom a full range of services.

Lease:We operate your hotel directly under one of our brands and in return pay you a variable rent.



Choosing the right brand for the franchise contract


Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaBenefits for the franchisee

Why choose a franchise contract with Accor for your hotel?

Because you would like to…

Benefit from the expertise of the 1st world hotel operator.

Attract and develop loyalty of new customers.

Take advantage of a famous strong brand and internationally known.

Join a powerful network.

Get the support of experts close to you and to your daily issues.

Optimize your project of investment increase your margins.

Attract talented employees and train your staff in operating excellence.



Design and technicaladvisory service

Design and technicalservice teams around the world

190 construction experts around the world

Personal support in organizing and developingconstruction and renovation projects

600 projects a year trackedsimultaneously an all continents

Support in supply withhotel equipment like lighting, furniture, bedding

Benefits for the franchisee –Architecture and design

166

Services offered by Accor's design & technical team

Source: Accor 2015.


Worldwide renowned brands Cooperations with leading airlines such

as Qantas and Air France, with banksand other service firms such as VISA

Improvement of brand image throughcommunication activities such assponsoring

Customer club "Le Club" with 14 millionmembers

Benefits for the franchisee –Marketing know-how

167

Benefits of "Le Club" 45% of members revisit Accor hotels vs.

16% for non-members year on year 5% acquisition cost vs. 16% for a non-

member booking x3 spending for a member vs. a non-

member on one year +40% spendings on-site per stay vs. a

non-memberSource: Accor 2015.


Benefits for the franchisee –Accor booking system

Accor has a multi-channel distribution strategy that fits the brands from Luxury to Budget incorporating all segments and distribution channels, both direct and indirect via partners and intermediaries

The backbone of the distribution is Accor’s fully owned CRS, called TARS (Travel Accor Reservations System), that operates worldwide

TARS has a fully integrated interface with: All major GDS systems (Galileo, Amadeus,

Sabre, Worldspan) Pegasus – connecting a multitude of online

travel agencies as well as Touroperators/Wholesalers to provide access to dynamic inventory

Direct connectivity with key Global Online Travel Agencies

Alternate connectivity solution for smaller Online Travel Agents

168

Accor distribution system TARS

"Accor’s aim is to remain the market leader in providing a strong global distribution platform to our hotels through continual development of our own channels and developing business with qualified third party websites."

Source: Accor 2015.


Benefits for the franchisee –Management support

Boost your revenue thanks to our high-performance booking tools and systems and our expertise in revenue management.

Ensure operational excellence every day with proven hotel operating procedures and standards that ensure you a high-quality, profitable hotel.

Design, build and renovate with technical experts in hotel design, construction, renovation, maintenance and installations, who are backed by more than 40 years of experience and can guarantee a high-quality project that meets your deadlines and budget.

Hire and retain the best people: As the world’s largest hotel employer, our goal is to hire, motivate, train and retain the most talented men and women in the market.



Internal advantages and disadvantages of franchising

170

Disadvantages



Analyse

Advantages+ –

For the franchisor

Revenues may not be adequate; depending on the franchisee(s)

Strong controlling system is needed

Absence of direct control over franchisee’s operations

Potential problem in performance standards

Firm avoids many costs and risks of opening up a foreign market

High motivation of franchisee (as compared to employed "store manager") due to independent entrepreneurship (franchisees’ profit directly tied to their efforts, low monitoring costs)

Mutual (bidirectional) know-how-transfer: local knowledge combined with support from headquarters; simultaneous usage of advantages of large system with small units

Source: adapted from Bradley 2005.

For the franchisee

Not fully independent in business decisions


External advantages and disadvantages of franchising

171

Disadvantages



Analyse

Advantages+ –

Rapid expansion possible (see Fressnapf, McDonald’s)

Capital infusion by franchisee (direct or via bank)

Local network of the franchisee (existing community goodwill, existing local market knowledge)

Value added dominantly in the host country

Source: adapted from Bradley 2005.

For the franchisor

Availability of franchisees or a master franchisee sometimes not given

(European) franchise law grants substantial freedom to the franchisee ("in participating restaurants only")

Only passive interaction with the market

Risk of lowering quality of brand name (franchisees' effects on brand name)

For the franchisee

Residual risks of local operations

Only limited expansion possible


172

Strategies of franchising

Franchiser

Franchisee Franchisee Franchisee

Franchisee

Franchisee

Franchisee

Franchise contract

Franchise contract

Franchiser


Masterfranchiser


Masterfranchise contract

Home country Foreign country

Franchiser


Joint venturesubsidiary


Corporation contract

Direct foreign fran-chising

Master fran-chising

Indirectfran-chising

Franchise contract

Franchise contract Franchise contract

Franchise contract


173

Choice of a market entry strategy

Export Licenses

WOPS /acquisition

Joint venture

Market attractivity

Marketbarriers(risks)

high

low

low high

Indirectexport

Direct export /licenses

Joint venture

WOPS /acquisitions

Market attractivity

Competitive strength

high

low

low high


When contemplating international expansion, firms often struggle to decide which entry strategy is best. Experienced managers consider… Objectives of the firm, such as desired profitability, market share, or positioning

The degree of control the firm desires over decisions, operations, and strategic assets

The specific financial, organizational, and technological resources and capabilities available to the firm (for example, capital, managers, technology)

The degree of risk that management can tolerate in each proposed foreign market

The characteristics of the product or service to be offered

Conditions in the target country, such as legal, cultural, and economic circum-stances, and the nature of business infrastructure, such as distribution and transportation systems

The nature and extent of competition from existing rivals and from firms that may enter the market later

The availability and capabilities of partners in the market

The long-term strategic importance of the market

174

Factors to consider when deciding on the right market entry strategy



175

Control

Flexibility

High

Low

Perceiveduncertainly

High

Low

Desiredrole inmanagerialdecisions

Franchising /Joint venture

Exporting FDI

0 % 100 %Capital investment


Strategy trade-off


176

Determinants of the choice between WOPS and JV

Host country factors Cultural distance Country risk (-) Legal restrictions (-) Market growth (-)

Income level (of host country) Industry concentration (in host country) Market size (-) Markt attractiveness Volatility of demand Trade barriers Competitive intensity Openness of host country to FDI

Home country factors Power distance index (+)

Uncertainty avoidance

Internal factors Int. product diversification (-) Specificity (general) Advertising intensity (+)

R&D intensity Capital intensity Sub size (absolute) Sub size (relative to MNC) Resource intensity (-) MNC sales MNC employees (+)

MNC assets Int. experience (country specific) (+)

Age of subsidiary Multinational experience Int. experience (general) Export intensity (+)

Diversification of MNCLegend (basis 600 studies, meta-analysis): Country Risk has a significant impact (negative) on the choice of WOPS, i.e. companies prefer JV. Determinants without “+/-“ have no significant impact on the choice.

5. Paper: Research on market entry modes, Journal of International Management,Morschett/Schramm-Klein/Swoboda (2010, obligatory).


Examples:Different determinants of mode choice

Choices betweenWOS (1) or JV (0)

Geographic distance

Cultural distance

Firms size

Legal constrains

Strongeconomic growth

High competition

-

(-)

+

-

-

(+)

6. Paper: How do past mode choices influence subsequent entry? A study on the boundary conditions of preferred entry modes of retail firms, International Business Review, Swoboda/Elsner/Olejnik (2015, obligatory).

Preferred entry mode

Choice of entry mode

- -

+ +

Politicaldistance

Culturaldistance

Internation-alization speed

International experience

+

Controls- Firm size- Market size- Industrial development- Firm dummy- Country dummy

External institutional environment

Internationalization knowledge










A

B

C

D

178


Internationalization is a dynamic process Traditional perspectives focus on increases of foreign involvement (increasing

foreign commitment towards international markets, e.g. Uppsala Model) Reductions of activities or divestment rarely analyzed But: mode changes as adaptations to the environment

Research gap Huge knowledge on mode choice and reasons for mode choice Limited knowledge on the dimensions of mode change, and also the reasons for

a change in mode Especially in the case of reductions/divestments Empirical results are rare and barely comparable

Overview

1797. Paper: Changes in foreign operation modes: Stimuli for increases versus reductions,

International Business Review, Swoboda/Olejnik/Morschett (2011, optional).


The internationalization process approach suggests that mode changes are to be expected given the dynamic nature of the internationalization process. But the process perspective does not explicitly consider reductionsof modes or non-incremental changes (Pauwels/Matthyssens 2004).

‘‘The economic–strategic literature on foreign operation methods has largely taken for granted that whenever a choice is made, it will be the most suitable one given the circumstances. Thus, the firm will consider a change of mode only if drastic changes occur.’’ (Pedersen et al. 2002, p. 326)

Empirical studies on reasons for mode shifts mostly analyze mode increases (12), rarely mode reduction (8), and hardly ever both (1) Increases: From joint venture to WOPS (e.g. Gomes-Casseres 1987;

Puck et al.), from distributors/intermediaries to direct export (e.g. Rosson 1987; Ellis 2005; Petersen et al. 2006), from export to sales subsidiary (e.g. Ford/Rosson 1990; Millington/Bayliss 1999; Pedersen et al. 2002), and from indirect export to other modes (e.g. Buckley et al. 1990)

Reductions: divestments (e.g. Benito 2005; Ellis 2005; Pedersen et al. 2006) Calof/Beamish (1995) evaluate mode increase and reduction simultaneously

Review of selected perspectives

180

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaInternationalization paths/pattern

(7) Twodimensional reduction

(6) Country reduction

Rarespecial case

(3) Reduction(divestment)

(1) Integration/consolidation/stagnation

(2) Increase/penetration (investment)

Rarespecial case

(4) Country expansion

(5) Twodimensionalexpansion

no change (0)

very strong(++)

Changes of strategies/modes

very strong(--)

no c

hang

e (0

)ve

ry s

tron

g(-

-)

Ch

ang

es o

f co

un

trie

s/re

gio

ns

very

str

ong

(++

)

181


Calof/Beamish (1995) examined 121 changes in in-depth interviews with 38 companies, and linked these to the reasons stated for the changes

We collected reasons (separately for mode increases and mode reductions) in terms of scaled items and in open-ended questions 265 German, Austrian and Swiss managers provided information on 320 mode

changes

Empirical design and sample

320 descriptions of mode changes(210 penetrations and 110 reductions)

182

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaStimuli

183

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaInternationalization patterns (I)

184

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaInternationalization patterns (II)

185

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaReasons for mode change (I)

186

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaReasons for mode change (II)

187

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaKey results and discussion

In general Relevance of incremental and “revolutionary” changes Selected self-reinforced constructs are insufficient as the only explanation for

internationalization processes

Comparison of the results to those of Calof/Beamish (1995) Comparable: internal environment is a dominant reason for mode increase

(but also important antecedent of mode reduction) Comparable: attitudes are strongly linked to mode increases Different: external environment significantly stimulates mode reduction Different: performance is not significantly more important for mode reduction

Further international adaptation (process) model Calof/Beamish differentiate between four process levels

Stimuli of internationalization change (e.g. opportunity, environ-mental/internal changes, performance, learning) connected with

The perception of modes and markets and both connected with Mediators (e.g. environment, resources, strategy) and Internationalization patterns (influenced by the mediators)

Extension: structural, organizational and cultural consequences 188










A

B

C

D

189


Simple viewpoint (I):Marketing mix

ProductPolicy

PricingPolicy

Communication Policy

Distribution Policy

190


Simple viewpoint (II): A continuum of the Marketing mix

The Marketing components perspective

(Full)Standar-dization

(Full)Localadaptation

Mixed strategy

(i.e.: some components standardized or adapted to some degree,others to a different degree)

191

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaExample: Voith Paper

Trade fairsABTCP (Brazil)

192

Trade fairsChina Paper (China)

Voith: founded 1867, 40,000 employees, 5,6 bn EUR turnover and presence in 50 countries

Division Voith Paper: 1,5 bn EUR turnover (48% Asia, 32% Europe, 20 % Americas)

Turnover (bn. EUR) 4.3Op. Income (bn. EUR) 0.2Employees 20,200Number of countries >60


193

Distribution-Mix

Price-M

ix

Co

mm

un

ication

-Mix

Product-Mix

Delivery terms

Dis-count

Credit

Prise

ServiceBrandAssort-ment

Quality

Channels Logistic

Public Relations

Adver-tising

Market

Personalselling

Distribution-Mix

Price-M

ix

Co

mm

un

ication

-Mix

Product-Mix

Delivery terms

Dis-count

Credit

Price

ServiceBrandAssort-ment

Quality

Channels Logistic

Sales promotion

Public Relations

Adver-tising

Market

Personalselling

(Full) Global standardization Local adaptation

Simple viewpoint (III):Marketing mix components

Salespromotion


194

Simple viewpoint (IV): Levels of standardization (consumer goods)

Componentslowhigh

1 2 3 4 5

Currentstandardization

Intended standardization

Source: Bolz.

Product

Communication

Price

Distribution

CoreproductspecificationBrand nameDesignPackagePositioningAdvertising messageAdvertising mediaSales promotionPublic RelationsSponsoringPriceConditions

Sales channelsLogistic

Customer servicePersonal selling


195

Simple viewpoint (V):Degree of adaptation as success factor

Standardization Adaptation

Goals: - Harmonization of market presence- Easier inter-country planning/ expansion - Use of synergies

Goals: Higher market share -

Profile in the competition -Higher communication effects -

Advantages: - Critical mass- Scale and learning effects

Advantages: Better address of customers needs -Ability to adopt to market changes -


Global Multinational


196

More complicated viewpoints (1):Questions for studying int. Market. mix

How do companies form their Marketing mix? During the first entry into a foreign market (“going international“)

Multiplication/replication of existing products/offers?

During the ongoing presence in foreign countries (“being international“)

How companies adapt, in the sense of “pressures or strategy to adapt“? Pressures to adapt: norms (e.g. legal) force the company to adapt Strategy to adapt: all decisions which goes beyond such norms

A lot of further antecedences: e.g. host country, home country, micro (e.g. sectors because food mostly have to adapt to local tastes)

What do companies adapt and what do they standardize? Which Marketing mix components are stronger adapted (core vs. peripheral) vs.

general positioning strategy?

What's about a format specific strategies vs. perceptions by consumers?

What's about processes (marketing vs. supply chain processes)?

8. Paper: International transfer and perception of retail formats: A comparison study in Germany and Romania, Swoboda/Berg/Dabija, International Marketing Review (2014, optional)


Introduction – Conceptualization and hypotheses development – Empirical study – Discussion

Practical and theoretical relevance

Retail context

Strong internationalization, esp. since two decades (Gielens & Dekimpe, 2007), start in developed, an then more distant countries (Alexander, Rhodes & Meyers, 2007)

Local business with adapted marketing and efficient processes (Dawson, 1994)

Retail format transfer strategy central to success (Goldman, 2001; Alexander, 2008)

Visible offers and internal processes are transferred unchanged or modified compared to the home country

Many studies on standardization/adaptation (review by Schmid & Kotulla, 2011)

In retailing dominant case study research (review by Swoboda, Zentes & Elsner, 2009)

Format transfer strategy types between adapted & standardized (simple addition of visible offer and internal process elements by Goldman, 2001)

In general research focus on marketing program elements neglecting important processes, especially supply chain processes (e.g., Bianchi & Ostale, 2006, Coe 2004).

1979. Paper: Transferring the Retail Format Successfully into Foreign Countries, Swoboda/Elsner,

Journal of International Marketing (2013, obligatory)

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaObjectives and contribution

1.Which process and marketing program elements are standardized or adapted, and how do the processes and offers interact?

2.Whether and how the degree of standardization of the marketing program elements and marketing and supply chain processes determines performance in a foreign country?

Contribution

We disaggregate the retail format transfer strategy by conceptualizing the determining role of process on marketing program elements and by investigating core and peripheral marketing and supply chain processes as well as marketing programs (calls of Goldman 2001)

We study the interaction among retail processes, marketing programs and performance in a country.

Introduction – Conceptualization and hypotheses development – Empirical study – Discussion 198

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaConceptual framework

Marketing program elements, standardization degrees (Baalbaki & Malhotra, 1995)

Core: Format type, store location, store layout

Peripheral: Assortment, price, sales promotion

Supply chain processes (Swoboda, Foscht & Cliquet, 2008; Bourlakis & Bourlakis, 2001)

Core: Purchasing and logistic systems, IRP and ERP systems

Peripheral: Purchasing processes, supply logistic, distribution logistic

Marketing processes (Griffith, Hu & Ryans, 2000; Walters, 1986)

Core: Procedure/planning of locations, store layout, trend analysis, CRM

Peripheral: Planning of categories, sales, sales promotion, service

– Theory – FFR: flexible format replication approach is used to determine the degree of

standardization of process and program elements and to draw advanced conclusions concerning the relationships between the more standardized core vs less standardized peripheral elements of a format (Jonsson and Foss 2011)

PMT: Profit maximization theory is used to determine how the standardization of processes and offers is associated with performance (Samiee and Roth 1992) 199



Coremarketing elements

Peripheralmarketing elements

H1a

H1b

Coresupply chain processes

Coremarketing processes

Peripheralmarketing processes

Peripheralsupply chain processes

Literature review and hypotheses development I

Corporate elements

FFR: core elements are replicated in an unchanged form because of various advntages and based on a systematic evaluation and market-based learning

Global retailer standardize all elements, multinational may standardize elements before entry or as a result of experience

Very few studies may supportthis assumption empirically

HYPOTHESIS 1The higher (a) the degree of standardization of the core marketing processes and (b) the degree of standardization of the core supply chain processes, the higher the standardization of the core marketing program elements.

200



Coremarketing elements

Peripheralmarketing elements

H2a

H2b

H3a

H3b

Coresupply chain processes

Coremarketing processes

Peripheralmarketing processes

Peripheralsupply chain processes

Literature review and hypotheses development II

Standardization of core processes drive standardization of peripheral marketing elements

FFR: Retailer use processes as a temple for international expansion (e.g. strict organizations like franchise systems)

Prior studies indicate such relationships but without empirical evidences, e.g. retailers like ZARA, IKEA

FFR: Positive relation between peripheral processes and marketing elements

HYPOTHESIS 2a/b (positive relationships)3a/b (positive relationships)

201



H5: All four processes performance (positive).

Financial performance

H4b

H4a

Marketing program elements

PMT: standardization/adaptation as trade-off between economies of scale & customer orientation/segmentation (Samiee & Roth, 1992)

Core: standardization of core format transfer strategy elements, thus core competencies of a retailer drives performance (Wigley & Chiang, 2009).

Peripheral: retailer benefits from adapta-tion (Dawson, 1994), missing adaptations lead to market failure (Bianchi, 2006)

H4: The higher (a) the degree of standardization of the core marketing program elements and (b) the higher the degree of adaptation of the peripheral marketing program elements, the higher the performance in a foreign country.

Coremarketing programs

Peripheralmarketing programs

Literature review and hypotheses development III

202


Sample Identification of 793 retail chains in German-speaking countries, 193 international

102 firms (122 mangers) agreed for an personal in-depth interviews at the headquarter (CEOs 48%; expansion managers 52%; response rate of 52.9%)

Respondents were asked to evaluate two countries: one psychic close and psychic distant (according to Evans & Mavondo, 2002)


Research methodology I

203

M SD Close country1 Distant country

Number of total sales in m. € 5,772 10,371 Western Europe 85.3% Eastern Europe 46.1%

Sales abroad in % 41.6 25.9 Eastern Europe 11.8% Asia 31.4%

Number of employees 25,508 56,268 Other 2.9% Americas 17.6%

Employees abroad in % 40.4 25.9 Other 4.9%

Number of operating countries 19.1 23.5 Entry modes

International experience in years 23.7 17.1 WOS 62.8% WOS 54.9%

Country experience in close countries in years 19.5 14.1 Franchising 16.7% Franchising 22.5%

Country experience in distant countries in years 10.9 5.2 M&A 13.7% M&A 11.8%

Retail sector 39.2% food Joint Venture 3.9% Joint Venture 5.9%

60.8% non-food Other 2.9% Other 4.9%

Notes: N=102; Country of origin: German = 80.4%, Austria = 11.8%, Switzerland = 7.8%. 1 Please choose two different countries to evaluate in which your company operates for at least five or more years: one psychically close country

(with similar legal, political, economic, business and cultural environment compared to your home country) and a psychically distant country. The country selection has been controlled according to Evans and Mavondo (2002) by using ten business and cultural dimensions; all mean value differences are significant at a p<.001 level (two-sided).



Research methodology II

Measurements Pretests: three experts and two top management seminars

Further development of past scales (Goldman, 2001, Swoboda, Foscht & Cliquet, 2008)

8 items for marketing processes, 8 items for supply chain processes, 6 items for marketing programs (two factors for each MPR, SCP, MP)

Degree of standardization/adaptation measured on 5-point semantic differentials

Performance measured according to Evans & Mavondo (2002, combining three financial performance indicators (sales, ROI, market share) and one strategic effectiveness indicator (satisfaction) in the last three years).

Controls: Retail sector, country experience (log), firms size (log), geographic scope (log), entry mode dummy

Method

Tests for reliability, validity, non-response, common method, single response bias

Hypotheses testing with PLS (estimation of rival models)

204



Measurement of MPR & SCP

205

M EFA(> .50)

ItTC(>.50)

KMO(X²)

(>.50)

Factor-

loading

PLS

Indicator

reliability

(>.30)

AVE

Composite

reliability(>.60)

Cronbach’s

alpha(> .60/.70)

MM1

diff3

EFA(> .50)

ItTC(>.50)

KMO(X²)

(>.50)

Factor-loading

PLSIndicator reliability

(>.30)

AVECompos

ite reliabilit

y(>.60)

Cronbach’s

alpha(>

.60/.70)Close countries Distant countries

Core marketing processes1

.768(316.93

)

.533 .817 .743

.767(262.95

)

.544 .826 .727

Procedures of market and trend analyses 3.77 .802 .490 .528 .379 3.51n

s .784 .521 .664 .440

Procedures of store location planning 3.94 .844 .634 .768 .590 3.65 * .823 .568 .794 .631

Procedures of store layout development 3.89 .745 .566 .770 593 3.84n

s .612 .539 .699 .489

Procedures and systems of CRM 3.81 .532 .529 .820 .672 3.70n

s .719 .545 .784 .614

Peripheral marketing processes

.646 .879 .822 .636 .875 .817

Processes of category composition 3.32 .661 .501 .779 .607 3.03 * .677 .513 .793 .629Processes of sales planning and monitoring 3.10 .862 .730 .861 .741 3.09 ns .845 .696 .828 .686

Processes of customer service 2.98 .887 .744 .845 .713 2.91 ns .880 .734 .822 .676Processes of promotion planning 2.96 .774 .614 .722 .521 2.69 * .799 .629 .743 .552

Core supply chain processes1

.804(532.40

)

.605 .859 .793

.

.791(539.64

)

.626 .868 .792Purchasing processes 4.03 .793 .531 .743 .553 3.93 ns .847 .565 .609 .371IRP systems 4.28 .950 .596 .802 .643 4.09 ns .945 .637 .865 .749Logistic processes 4.05 .751 .656 .816 .666 3.81 ns .707 .712 .825 .680ERP systems 4.29 .947 .732 .746 .557 4.11 ns .948 .755 .838 .702

Peripheral supply chain processes

.717 .910 .869

.

.673 .891 .838Short-term supply processes 3.79 .775 .656 .827 .685 3.42 * .707 .595 .777 .604Purchasing logistics 3.71 .902 .788 .884 .781 3.55 ns .905 .726 .851 .724Internal logistics processes 3.78 .818 .737 .850 .722 3.34 * .794 .720 .847 .717Distribution logistics for stores 3.35 .849 .720 .826 .682 3.04 * .814 .662 .804 .647



Measurement of MP and Performance

206

Core marketing elements1 .

.714(152.02

)

.686 .867 .771

.689(116.44

)

.581 .804 .679Store type 4.27 .890 .701 .872 .760 4.12 ns .862 .532 .663 .439Store location 3.77 .809 .535 .771 .595 3.48 † .857 .542 .753 .567

Store layout 3.81 .773 .558 .839 704 3.59n

s .561 .497 .858 .736

Peripheral marketing elements

.585 .808 .664 .594 .814 .696

Assortment 3.49 .833 .541 .848 .720 3.16 * .822 .545 .836 .700Sales Promotion 3.42 .779 .527 .740 .548 3.12 * .726 .535 .735 .540Price 3.07 .663 .482 .699 .488 2.75 † .717 .505 .736 .542

Performance2

.812(200.23

)

.792 .919 .873

.833(254.47

).816 .930 .893

Sales development 2.66 .903 .805 .887 .786 2.87n

s .891 .801 .842 .709

Return on investment 2.58 .850 .718 .849 .721 2.72n

s .889 .797 .927 .859

Market share 2.38 .865 .742 .932 .869 2.69 * .900 .813 .938 .881

Strategic effectiveness (satisfaction) 4 3.50 .764 .610 .384 .148 3.57n

s .865 .762 .450 .203

Notes: 1 How strongly does your company adapt or standardize the following [elements] in country […] in comparison to the home market? (Please estimate as follows: 1 totally adapted to 5 totally standardized.).2 How successful was your company in country […] on average over the past three years? (Please estimate as follows: 1 Declining/ constant, 2 Increase of up to 10%, 3 Increase of 11-20%, 4 Increase of 21-30%, 5 Increase of more than 30%). How satisfied are you with the overall development? (1 very unsatisfied to 5 very satisfied).

3 Two-sided test of significance between close and distant countries: *p<.05, †p < .10, ns=not significant. 4 Excluded.

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaDiscriminant validity

207

Squared latent variable correlation

AVE 1 2 3 4 5 6 7 8 9 10 11 12

VIF 1.473 1.581 1.035 1.847 1.357 1.037 1.060 1.400 1.213 1.284 1.345 1.072

AVE .533 .646 .605 .717 .686 .585 .792 1.000 1.000 1.000 1.000 1.000

1 Core marketing processes .544 - .315 .315 .357 .294 .200 .001 .107 .000 .016 .038 .032

2 Peripheral marketing processes .636 .184 - .374 .518 .189 .413 .000 .171 .000 .070 .082 .040

3 Core supply chain processes .626 .264 .241 - .567 .174 .334 .001 .091 .000 .016 .008 .009

4 Peripheral supply chain processes .673 .225 .452 .530 - .394 .425 .011 .154 .000 .020 .059 .097

5 Core marketing elements .581 .173 .099 .114 .199 - .175 .029 .132 .000 .038 .018 .048

6 Peripheral marketing elements 594 .186 .262 .293 .277 .175 - .006 .147 .035 .025 .016 .009

7 Performance .816 .025 .002 .020 .022 .064 .002 - .005 .012 .003 .049 .041

8 Retail sector 1.000 .021 .158 .022 .117 .042 .058 .001 - .000 .114 .134 .014

9 Country experience (log) 1.000 .023 .000 .012 .000 .018 .056 .000 .000 - .059 .113 .000

10 Firm size (log) 1.000 .000 .073 .001 .008 .004 .009 .001 .114 .000 - .008 .016

11 Geographical scope (log) 1.000 .002 .054 .002 .024 .011 .002 .003 .134 .000 .008 - .000

12 Entry mode dummy1 1.000 .001 .021 .005 .002 .000 .000 .019 .002 .000 .049 .000 -

Notes: Close countries above (distant countries below) the diagonal; Discriminant validity: Squared correlation < AVE; 1 M&A vs. others.



-

Close countries

Model 1a Model 2a Model 3a Model 4a

Beta t-value Beta t-value Beta t-value Beta t-value

Core processes and core marketing elements (1)

H1a: Core marketing processes 1 .426 8.040*** .451 7.311***

H1b: Core supply chain processes 1 .194 3.385*** .166 2.663**

Processes and peripheral marketing elements (2)

H2a: Core marketing processes 2 -.013 0.386ns -.004 0.123ns

H2b: Core supply chain processes 2 .161 2.762** .147 2.639**

H3a: Peripheral marketing processes 2 .363 6.131*** .343 5.653***

H3b: Peripheral supply chain processes 2 .269 4.425*** .297 4.793***

Marketing elements and performance (3)

H4a: Core marketing program elements 3 .199 4.200*** .244 4.207***

H4b: Peripheral marketing program elements 3 -.201 3.355*** -.202 2.371*

Processes and performance (3)

H5a: Core marketing processes 3 .206 2.295* -.212 2.574*

H5b: Peripheral marketing processes 3 .175 1.875† -.005 0.070ns

H5c: Core supply chain processes 3 .164 2.744** -.021 0.496ns

H5d: Peripheral supply chain processes 3 .133 1.739† .126 1.371ns

Controls

Retail sector -.012 0.402ns -.002 0.079ns -.007 0.222ns -.001 0.040ns

Country experience (log) .007 0.238ns .041 1.254ns -.042 0.950ns -.066 1.437ns

Firm size (log) .062 1.610ns .063 1.634ns .076 1.627ns .078 1.583ns

Geographical scope (log) .219 4.984*** .140 3.163** .229 4.074*** .244 3.624***

Entry mode dummy -.211 4.681*** -.180 4.487*** -.191 3.377*** -.183 3.870***

R² Performance 9.5% 15.0% 13.8% 16.6%

Core marketing program elements 31.2% 31.4%

Peripheral marketing program elements 50.3% 49.8%

† p <. 10. * p < .05. ** p < .01.*** p < .001.ns Not significant.Note: Standardized beta coefficient are illustrated.

Results

---

Similar results for distant countries

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTest for mediation

Close countries Distant CountriesIndirect effect Sobel test Bootstrap analysis1 Sobel test Bootstrap analysis1 F-value M lower upper c2 F-value M lower upper c2

CMP-CMI-Performance

3.436*** 0.109 0.020 0.234 -0.010ns 3.693*** 0.072 0.004 0.173 0.076ns

CSCP-CMI-Performance

2.386* 0.080 0.004 0.197 -0.114ns 2.270* 0.062 0.002 0.169 0.078ns

CMP-PMI-Performance

0.068ns -0.029 -0.131 0.052 0.029ns -1.695† -0.019 -0.143 0.079 0.166ns

PMP-PMI-Performance

-1.935† -0.058 -0.195 0.085 0.067ns -1.690† 0.003 -0.129 0.122 0.031ns

CSCP-PMI-Performance

-1.708† -0.041 -0.182 0.102 0.009ns -1.719† -0.055 -0.215 0.093 0.196ns

PSCP-PMI-Performance

-1.874† -0.111 -0.263 0.036 0.184† -0.695ns -0.048 -0.198 0.088 0.183ns

† p <. 10. * p < .05. ** p < .01. *** p < .001. ns Not significant. Notes: 1 Bootstrap samples = 5,000; 95% confidence interval; 2 Direct effect of independent variable on performance; CMP=Core marketing processes; CSCP=Core supply chain processes; PMP=Peripheral marketing processes; PSCP= Peripheral supply chain processes; CMI=Core marketing program elements; PMI= Peripheral marketing program elements; MV=Mean Values.




Findings Marketing elements drives performance directly, internal processes indirectly

Successful retail format transfer strategy has to be considered more differentiated (in contrast to Goldman, 2001)

Core marketing instruments have to be standardized (represent main factors in the retail format)

Peripheral marketing instruments have to be adapted (represent peripheral factors in the retail format)

Results are consistent in psychic close and psychic distant markets

Implications Contribution to the young field of retail internationalisation by focusing on

Combining the effects of visible offers and internal processes as well as

corporate- and product-related elements (Srivastava, Hervani & Fahey, 1999)

Theoretical and managerial implications

210

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTake-aways

How do retail firms successfully transfer their format strategy into foreign markets?

1. Which retail processes and instruments are rather transferred unchanged or modified and how does the standardization of corporate- and product-related processes and instruments correspond?Very different, but quite strong.

2. Is performance rather determined by the standardization or adaptation of different retail marketing elements and (Marketing supply chain) processes?Standardization of strategic elements and adaptation of product-related marketing program elements drive performance.

Format transfer strategy is not the addition of different processes and marketing elements, because these elements drive performance differently.



Limitatons and directions for future research

Data basis Sample is restricted to retailers from German-speaking countries.

Only managers from the headquarters have been interviewed.

Methodological and conceptual approach

Adapted measurements to the context of the retail industry.

Investigations of the mediating role of the standardization of marketing instruments could be assumed.

Standardizations of marketing instruments and processes could differ regarding retail sector.

Results could be biased by the employed entry mode so that further research should control for these effects











A

B

C

D

213


214

Product

Source: Kotler et al. 2005; Hollensen 2007.

Core product/benefit

(Actual) Furtherproduct attributes

Support services(“augmented product”)

Functional features, perceived value, technology

Delivery, installation, guarantees, after-sales service,

spare parts

Brand, quality, design, packaging, price, size, etc.

Levels of a product

A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need (including physical

objects, services, persons, places, organizations and ideas).

Levels of product standardization

(2) Branding

(1) Core

product

Packaging

Size

Support

Positioning

Services


215

Following topics on product policy

Core product Principles

Product policy as a process

Product ranges

Positioning and branding Product positioning/image (country,

corporate, product)

Corporate branding (guest speech winter term)

Product branding


216

Dependency on culture Ranking Sector

1.2.3.4.5.6.7.

computer hardwareairline companiesphotographic equipmentheavy machinerymachine toolsconsumer electronicscomputer software

8.9.

10.11.12.13.

durable household goodshardwarewine and spiritssoft drinkstobacco goodsstationery

14. cosmetics

15.16.17.18.19.20.21.

beerhousehold cleaning productstoiletry articlespublishing productsfood productsconfectionarytextiles

Principles –Standardization in product categories

Cu

ltu

re-f

ree

hig

h-t

ech

hig

h-t

ou

ch

hig

h-i

nte

rest


Cu

ltu

re-b

ou

nd

Lo

w s

tan

diz

atio

np

ote

nti

al


217

Principles –Strategic options

Standardization cost advantages cost advantages in logistics

(potential to centralize stocks) global similar image less disappointed customers (when

exposed to product in different countries)

standardized product policy as „prerequisite“ for standardization of other marketing mix elements

Adaptation differences in legal requirements differences in consumer demand

cultural reasons income-related reasons

… Mixed strategy

slight adaptation to elements that are not costly to adapt

modular strategy, e.g. platform approach

adaptation of range, not single products


218

Principles – Antecedences of the level of standardization

Host country

Regulative institutions (e.g. legal situation)

Normative institutions (e.g. culture, consumer needs, usage situation etc.)

Size of the market (e.g. ROI of an adaptation largely depends on market size)

Competitive situation, saturation of market, sophistication of demand

Host and home country relations

Homogeneity/heterogeneity (e.g. purchasing power, customer needs etc.)

Belonging to a group of similar markets (homogeneous within, but different from home country)

Internal factors

Culture-boundedness of products

Economies of scale in production

production strategy in general (concentration vs. decentralization)

Intention to separate markets, e.g. to avoid arbitrage, existence of international media overspill, travelling, arbitrage intermediaries, etc.


219

Standardizedcore product

Built-In-Flexibility

ModularDesign

Adaptedcore product

Principles –Continuum core product options


220

Principles – Adapting product offerings to local markets (McDonald's)

Source: Kotabe/Helsen 2008.

Cairo and Bangkok

Turnover (bn. USD) 27.1Op. Income (bn. USD) 7.9Employees 420,000Number of countries >100


221

Core and peripherial elements

Peripheral marketingelements

Supply chain processes

Marketing processes

Success acrossnations

Success inhost country

Source: Swoboda/Elsner 2013.

Core marketingelements

Chicken Maharaja MacMcRice

McKebab Le petit McBaguette


Influencing factors on the degree of standardization

Host country Regulative institutions (e.g., legal situation)

Normative institutions (e.g., culture, consumers, usage situation, etc.)

Market size (e.g., ROI of an adaption mainly depends on market size)

Competitive situation, market saturation

Relations between host and home country Homogeneity / heterogeneity (e.g., purchasing power, consumer needs, etc.)

Affiliation to a group of similar markets (intra homogenous, but different from home country)

Internal factors Extent to which products are culture-bound

Economies of scale in production and production strategy (e.g., decentralization)

Intention to seperate markets

Intention to separate markets, for example to avoid arbitrage effects, because of media overspill, or arbitrage intermediaries

222


223

Precursor packaging

Separate packaging

Bulk packaging

Transport packaging

Competition

Brand/product

Legislativerestrictions

TechnologyEcological

rules

Geographic environment

Customer

Principles –Packaging/determinants



224

Not yeton market Present on market

Not offeredto marketany more

Development

A A

Variation

A B

Differentiation

ABA

Unification

CBA

Elimination

A A

Product policy as a process –Known decisions


225

Product policy as a process –Possible decisions

Startingpoint

• Existing product range in home country

1. Step

• Which products are generally viable for the foreignmarket?

2. Step

• Can I use them in a standardised way or would itbe better to modify/adapt to local conditions? (cost/benefit)

3. Step

• Would it be beneficial to develop new productsspecifically for this country? (cost/benefit)

4. Step

• Should I introduce the „foreign“ products in thehome country and third countries as well?

Remark: Third countries must be considered as well.

Home Country Foreign Market


226

Product policy as a process – Product lifecycle (influences rest of the M-mix!)


227

Product policy as a process –Potential shapes of product lifecycles

Sales

Time

Country C

Country A

Country B


228

Product policy as a process –Heineken brand building by country

Hong KongJapan

ItalyNetherlands

Brazil ArgentinaGermany

USA

Stage of development

Building

Enrichment

Confirmation

Restoration

Market evolution



229

Product policy as a process –Volkswagen's range in two countries

Volkswagen India Volkswagen Brazil

Turnover (bn. USD) 245.0Op. Income (bn. USD) 13.4Employees 420,000Number of countries 153


Product: A process – Henkel´s decen-tral growth

Turnover (bn. €)* 16.5Op. Income (bn. €) 1.7Employees 50,00075 countries with subsidiaries

Detergent

Cleaning agents

Dish liquid


231

Product ranges –Instead of single-product companies

Breadth and depth of range Number of product lines (group, category), i.e., a group of connected products

with certain similarities

Depth of range, no. of products/product variants per product line

Nestlé in CEE: Portfolio of international and local brands

Source: Nestlé 2008.


232

Nestle’s Branding Tree

Sources: http://www.nestle.com; http://brand/index.asp.

10 Worldwide “Corporate” Brands

45 Worldwide Strategic BrandsResponsibility of general management at strategic business unit level

140 Regional Strategic BrandsResponsibility of strategic business unit and regional management

7,500 Local BrandsResponsibility of local markets

Nestle Carnation Buitoni

Kit Kat Polo Cerelac Baci

Macintosh Vittel Contadina Stouffer’s

Texicana Brigadeiro Rocky Soils

Examples

Herta Alpo Findus

Mighty Dog Smarties After Eight Coffee-Mate

Maggi Perrier L’Oreal


233

Positioning and branding –Competitive strategy and positioning

Competitive strategy: Activities a company undertakes to gain a sustainable competitive advantage in a particular industry.

Decision on the competitive advantage which the firm is attempting to achieve, i.e. what advantage should be used to elevate the company from its competitors

Traditional example is Porter’s cost leadership and differentiation

Related: Concept of positioning

More marketing oriented

Positioning is the deliberate, proactive, iterative process of defining, measuring, modifying and monitoring consumer perceptions of a marketable object.

Strategic positioning involves providing unique value: it involves selecting and then bringing to bear an integrated set of tools and communication techniques that identify and explain the product offer to the customer


234

Positioning and branding: Different positions of standardized brands

high

low

high

low

PriceAdidas

H

AdidasD

AdidasF

Prestige/quality

GoldstarSamsung

Sonyhigh

low

high

low

PriceSony

GoldstarSamsung

Prestige/quality

Western EU Middle-/Eastern EU



235

Positioning and branding –Image dimensions in foreign countries

(3) Productimage

(2) Corporate image

(1) Country image("Made in ...")

Determinants of perception Brain information Communication

But also Cultural differencesMarket position Competitive situation…….


Global Brand Tracking- Determination of corporate brandvalue from cutomers viewpoint

- Linkage to employer branding

Ad-hoc surveys

User/Reader surveys- different media- different users

Audience survey Bayer culture

Focus groups

BayKomm visitor survey

Bayer Employee Survey

Sustainability Survey

Triple-i Survey

Core

Projects for Corporate Branding

Extended

Projects in cooperation with other units

Unit-wide

Projects for Corporate Communications

Quelle: Bayer AG.

Monitoring of local perceptions

Turnover (bn. €)* 42.3Op. Income (bn. €) 4.5Employees 120,000Number of countries 150


237

Positioning and branding – Advantage from Country-of-Origin image


238

Positioning and branding –Made-in-Image of countries

Product image

2 3 4

GB I F CH DUSA J

2

D

4

I F GB USA JCH

3

Corporate image

Source: GfK 2016.

Anholt-GfK Nation Brands Index (2015)"What people think of the people, the products, the governments, the culture, the education, the tourist attractions and the lifestyle of other countries."

Overall ranking 2015, Top10 of 50 nations

1. United States2. Germany3. United Kingdom4. France5. Canada6. Japan7. Italy8. Switzerland9. Australia10. Sweden


statement is true

Fashion industry1 2 3 4

D

J

CH F

GB

IUSA

1 2 3 4

DJCH FGB I USAAutomobile industry

1 2 3 4

DJ CHF

GB

I USAChemical industry

Jewel/watch industry

1 2 3 4

DJCHF GB

I

USAMachinery industry

1 2 3 4

D J CHFGB

I

USA

1 2 3 4

DJ CHF

GB

I

USAPharmaceutical industry

1 2 4

DJ CHF

GB

I USAFinancial industry

statement is not true

Basis: 3.419 respondents

"Companies of the following sector do have an international accepted excellent reputation."

Positioning and branding –Made-in-Image within sectors

Source: GfK.


240

Positioning and branding –International product evaluation

24

32

32

44

43

73

19

16

21

63

49

58

52

40

60

43

39

79„State of the Art”

Highly reliable

High product quality

Excellent reputation

Excellent design

Mainly for commercial companies

4

23

3

13

6

2

3

31

15

8

2

2

6

54

15

11

5

4

0 10 20 30 40 50 60

USA Japan Germany

Source: GfK.

Japanese products

Italian products„State of the Art”

Highly reliable

High product quality

Excellent reputation

Excellent design

Mainly for commercial companies


241

Product level – Standardization of product and/or of brand name

Product

Brand

Standard.(“extension”)

Adaptation

AdaptationStandardization

e.g., Casio digital cameras,

Apple iPod,Sony Vaio notebooks,

Montblanc fountain pens

e.g.,Autobild, Vogue

e.g., Axe/Lynx deodorants,Lusso/Langnese/Streets

icecreams,Fressnapf/Maxi Zoo,

Snuggle/Kuschelweichfabric softeners

Often food products,e.g., Nestlé waters,Dr. Oetker/ Cameo



242

Product brand elements

ElementsSlogans

Brand

names URLs

Logos

SymbolsCharacters

Source: Kotler/Keller 2009.

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaOptions in choosing brand names

243

Pronunciation(Phonetics)

Meaning(Semantics)

Structure/length(Morphology)

AdoptionUnchanged adoption ofthe original brand name

TransliterationReproduction of theoriginal pronunciation

TranslationLiteral translation of theoriginal brand name

CreationCreation of a completelynew brand name

= unchanged = changed

Standardization

Differentiation


244

Global branding …


245

… vs. local (adapted) brands


246

… and mixed strategies


247

Motives for global branding

Possibility to achieve a consistent image across the world

also necessary requirement for global advertising campaigns

A global brand has much more visibility than a local brand.

The fact of being global adds to the image of a brand

Cost for creating / strengthening the brand can be spread over large sales volumes

Global brands reach the highest brand equity even though the value of a global brand (brand equity) usually varies a great deal

from country to country

brand equity / brand image can also serve as bases for brand extension (via image transfer to new product categories, see Swiss Army example)

Global brands are also able to leverage the country association for the product (country of origin)


248

Barriers to global branding

Product offer in host country does not fit to the brand image

Adaptation of advertising message to each market (and of product recipes, etc.) is easier under different brand names

Price differentiation is easier with different brand names

Quality differentiation is easier with different brand names

Local brand names might be easier to understand

Country of origin effect may be only/mainly strong in the home country

Brand name is not adequate for internationalization

In case of acquisition of local brand high brand equity of acquired brand


249

Decision fields Price level and structure (strategic and operative)

Price level setting and upper/lower limit country specific/across countries

Number and wideness of offers (price gap) und price coordination

mixed calculation (strategic and dynamic)

Determinants Economic (macro-)determinants

Economic development, level of purchasing power and cost situation

Legal conditions, political risks and influence of the government

Inflation- and currency exchange rates

Market determinants

Customer structure, consumption habits, arbitrage disposition

Competitive structure and -intensity

International price policy


250

Different price levels in different countries (2015)

Source: OECD 2016.

– Purchasing Power of EUR 100 in Different Countries (in EUR) –

020406080

100120140160180200


251

The Big Mac index 2016 (prices in USD)

Source: The Economist 2016.

6.445.235.21

4.934.414.41

4.324.34.294.254.254.22

4.144.024

3.913.86

3.763.763.74

0 1 2 3 4 5 6 7

SwitzerlandSwedenNorway

USAFrance

FinlandDenmark

ItalyIsrael

IrelandBelgium

UKCanada

Costa RicaEU

New ZealandGermany

SpainAustria

Uruguay


252

Determinants of prices

Country B

Company(e.g. costs)

Customers Competitors

Government

Country A

Company(e.g. costs)

Competitors Customers

Government

Inter-mediaries

Inter-mediaries


Price escalation (case of goodsexported from the parent company)

Country of origin Country A Country C

Cost ex works

Margin Parent Company

Freight

100,00

100,00

1,00

-----------

Cost ex works


Freight and Insurance

Subsidiary, buying price C.I.F.

Margin of subsidiary

(25% of selling price)

100,00

60,00

10,00

----------

170,00

96,66

----------

Cost ex works


Freight and Insurance

Agent, buying price C.I.F.

Agent margin


100,00

60,00

15,00

-----------

175,00

116,66-----------

Wholesale buying price

Wholesale margin


201,00

50,25

-----------


Wholesale margin


226,66

56,66

----------


Wholesale margin


291,66

72,91

Retail buying price

Retail margin


251,25

107,67

-----------

Retail buying price

Retail margin


283,32

121,42

----------

Retail buying price

Retail margin


364,57

156,24

-----------

Retail price before tax

V.A.T. (19%)

358,92

68,19

-----------


V.A.T. (22%)

404,74

89,04

----------


V.A.T. (19%)

520,81

130,20

-----------

Retail price incl. tax 427,11 Retail price incl. tax 493,78 Retail price incl. tax 651,01

Index 100 115 152


254

Price differentiation (I)

A firm can maximize profits by using price discrimination (charging consumers in different countries different prices for the same product)

For price discrimination to work the firm must be able to keep national markets separate and different price elasticities of demand must exist in different countries Price elasticity of demand is a measure of the responsiveness of demand for a

product to changes in price

Demand is elastic when a small change in price produces a large change in demand

Demand is inelastic when a large change in price produces only a small change in demand

Source: Hill 2008.


255

The elasticity of demand is determined by a number of factors including Income level, income distribution

Consumer preferences (attitudes, culture…)

Competitive conditions

In general, price elasticities tend to be greater in countries with lower income levels and greater numbers of competitors

The ability to separate markets is determined by arbitrage costs for transactions between the markets Distance (cross-border shopping)

Logistics costs (value/weight ratio)

Information overlap (transparency!?)

Tariffs

Currency (transparency issue, risk issue)

Influence of regional integration agreements (EU)

Price differentiation (II)

Source: Hill 2008.


256

But be aware: Target specific segments!

Boutiques in Bangkok


257Source: European Commission - Car Price Report 2011.

Country Belgium Germany France Italy Nether-lands

Portugal Spain Austria

sales/

Luxury tax21% 19% 19,6% 20% 19% 17% 16% 20%

Alfa Romeo 159 23.719 22.436 23.179 21.833 21.261 21.318 22.005 21.611

Audi A4 25.843 27.756 25.719 26.408 26.091 24.831 27.020 26.906

BMW 320d 27.419 28.824 28.336 28.958 28.411 28.234 28.553 28.686

Citroen C4 21.157 21.840 22.241 20.000 19.181 19.574 19.253 21.769

Fiat Punto Evo 13.801 13.739 13.237 13.582 13.441 14.300 12.873 13.590

Ford Focus 16.612 15.714 15.468 14.976 15.533 15.519 14.867 16.321

Mercedes C220 29.077 30.575 28.098 28.893 29.474 28.832 28.588 29.719

Opel Corsa 11.306 10.882 11.396 9.442 9.798 10.617 10.298 11.405

Peugeot 308 16.504 16.025 17.266 15.513 17.077 15.559 16.331 16.630

Renault Mégane 18.409 17.941 19.974 17.176 19.259 18.387 18.117 18.675

VW Polo 10.039 10.315 9.933 10.096 9.766 9.045 9.916 10.228

Highest price Lowest price

National price differences for cars

– Examples (end prices, excl. all taxes in Euro) –


258

Grey markets

Production Country A- Price pA = 8

Country B- Price pB = 6

Country C- Price pC = 10

Costs per product c = 2

Transport costs per product:between A and B: 0,50between A and C: 1,00between B and C: 1,50

Source: Simon/Wiese, 1992, p. 250.

Lateral,

grey import


Price

Country markets

CountryA

CountryB

LeadCountry

CountryD

CountryE

Costs of arbitrage

Source: Backhaus/Voeth 2010, p. 182.

Price corridors and the lead country concept


260

Price differentiation (III)

Additional influence on price differentiation E.g. retailer power

Important: manufacturers do NOT set consumer prices

International customers (with attempt for global pricing?)

“Low” arbitrage costs between country markets combined with low willingness / ability to pay in a specific market thus may result in The necessity to demand a price that is so high that sales are very low

The risk of ruining the price level in other markets

The market exit (for that product) in the low-price market

Price differentiation can be accompanied by other marketing mix instrument differentiation Different branding (reduced transparency; see private label manufacturing by

consumer goods companies)

Product adaptation (see VW in the USA)

Source: Hill 2008.


261

Regulatory influences (I)

The use of either price discrimination or strategic pricing may be limited by national or international regulations Example (international) antidumping regulations

Dumping occurs whenever a firm sells a product for a price that is less than the cost of producing it

Antidumping rules set a floor under export prices and limit firms’ ability to pursue strategic pricing

Competition policy Most industrialized nations have regulations designed to promote competition

and restrict monopoly practices Antitrust law (in particular in EU) strictly enforced

Taxes Influence final sales price VAT, but also additional taxes, e.g. on alcohol, coffee, cigarettes, petrol, luxury

goods, …

Source: Hill 2008.


262

Regulations on pricing policy Not allowed to sell below purchasing price (to protect small retailers)

Not allowed for a manufacturer to give binding orders to retailers on what the consumer price should be

Controlled distribution as one potential solution

In some industries, it is allowed (books)

Not allowed for a manufacturer (or only under very strong regulatory rules) to limit the re-sales of a retailer to another one (cross-border) (VW case)

Regulated prices for pharmaceuticals

Regulatory influences (II)


263

Timing to support price differentiation

Country A

Country B

time

Country A

Country B

time

- Sequential market introduction -- Simultaneous market introduction -

delay

priceprice

Price Difference Price Difference

t1 t2t1 t2


264

Selected issues in strategic international pricing

Issue of international price positioning Equal positioning in different markets attempted? (standardized relative price

level, not absolute prices)

Internationalization of competition

Multi-point pricing Refers to the fact that a firm’s pricing strategy in one market may have an impact

on a rival’s pricing strategy in another market

Aggressive pricing in one market may elicit a competitive response from a rival in another critical market

For managers, it is important to centrally monitor pricing decisions around the world

Source: Hill 2008.


265

Communication policy

Communication policy Refers to the analysis, planning, implementation and evaluation of activities

concerning the communication as marketing instrument

Instruments include: advertising, personal selling, direct marketing, public relations, sales promotions

Particular problem: different background (e.g. culture) of sender and receiver of message / heterogeneous backgrounds of different receivers


266

Global brands and int. product introduction as widest options for stand. communication

Germany

France

UK

Finland


International communication –Decision fields on standardization


Co

mm

un

icat

ion

go

als

Co

mm

un

icat

ion

str

ateg

y

Co

mm

un

icat

ion

in

stru

men

ts

Salespromotion

Publicrelations

Corporateidentity

Public communication

Advertising

Conception of media types

Selection ofmedia vehicles

Advertising tonality

Pictures

Colors

Music

Text

Advertising message


268

Cathay Pacific with a standardized advertising



269

Courvoisier with a localized approach



270

International communication determinants

Decision fields

Determinants Communication goals or country specific goals (product life cycle)

Law

Advertising, products etc.

Availability of media

Form, technique, broadcasting/store opening times etc.

Target groups and segment structure

Segment specific buying behavior

Roles of man and woman

Cultural differences


271

Legal influence – Outdoor advertising in several countries

Sao Paulo bans billboard advertising (2007)


272

International media selection

Availability of media infrastructure, which differs from country to country

Usage of media by consumers

Legislative restrictions on certain media: tobacco advertising on TV, etc. Example product placement in „bourne ultimatum“ (Jason Bourne drives

Volkswagen GT, Audi, and is hunted by a VW Touareg)


273

Media selection/strategy

Selection criteria reach

frequency

gross rating points (GRP) (frequency x reach)

cost per thousand (reach or GRP)

contact situation (outdoor/indoor, alone/social setting, high/low involvement, passive/active…)

modality (pictures (static/dynamic, sound, …))

Standardization of selected media vs. standardization of selection method (process standardization)

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaNet advertising expenses by media

274

29%

13%

26%

28%

19%

34%

39%

47%

17%

16%

29%

13%

10%

15%

40%

23%

19%

5%

17%

13%

16%

20%

4%

9%

11%

16%

25%

18%

12%

21%

23%

29%

7%

8%

7%

15%

14%

4%

11%

7%

14%

11%

9%

7%

8%

8%

4%

3%

4%

7%

11%

5%

7%

9%

3%

15%

4%

7%

13%

7%

4%

6%

100%

UK 30% 4%

Sweden 22% 3%

Spain 41% 9%

Russia 51% 5%

Poland 42% 9%

Netherlands 22% 6%

4%

Australia 33% 8%

Japan 43% 3%

Italy 53% 5%

Ireland 24% 9% 2%

India 42% 4%

Germany 23% 4%

France 32% 7%

China 43% 7% 2%

Canada 33% 13%

Brazil 67%

TV Newspapers Internet Radio Magazines Outdoor advertising

Source: Ofcom 2011.


275

Culture specific meaning of colors

Source: www.farbenundleben.de.

Black White Red Green Blue Yellow

Brasil Death, secret

Freedom, pureness

Warmth, hate, passion

Aspiration, freedom, illness

Silence, cold

Sun, luck, happiness, envy

China Power, money

Death, saidness

Happiness, luck, wealth

Silence, hope, fresh

Diligence Patience, wisdom

Pakistan Saidness Elegance, sorrow

Danger, ladies colour

Energy, luck, long life

Virginity, shortcoming

Germany Death Pureness, virtue

Love, danger

Hope, envy Male, fealty, cold

Recreance, caution

Blue and white are often used to for toilettries: Nivea

Red as one color to express dynamic and power: Persil, Fairy


276

Benefits of internationally standardized advertising

Reduction of planning and development costs

Establishment of uniform product and company image in all markets in particular important with international customers (see Cathay Pacific)

in particular important with cross-national segments

in particular important with international media overlap

Simpler coordination and control

Better use of good ideas and creative talents very good campaigns possible in countries with low subsidiary resources


277

Advantages of locally adapted advertising messages (I)

Language Barriers are stronger than you might expect consumers do not understand foreign languages well

translation (in the case of standardized advertising) often has mistakes/misinterpretations/changed meanings

Standardization might be possible, but not as effective messages, celebrities, etc. have a higher appeal in one market than in another

Standardization might cause problems with cultural differences if product / use of product is culture-bound (e.g. food, see Courvoisier)

if advertising topic is culture-bound (e.g. hygiene products)

when advertising design is culture-bound (e.g. use of colors, background music)

when advertising content is culture-bound (e.g. women, nakedness)


278

Advantages of locally adapted advertising messages (II)

Product might be in different stages of product lifecycle in different countries different advertising message necessary

Differences in media landscape (which might also influence advertising campaign)

Not-invented-here-syndrome by local subsidiary

Legal differences might restrict certain types of advertising/certain advertising messages in certain countries (advertising regulations) “vice” products such as alcohol, cigarettes, …

children in advertising…

comparative advertising

legal or “self-restrictions” by local advertising associations


International comparison of advertising styles

279

Germany

Finland

50

50

100

0

0 100PDI- PDI+

UA

I-U

AI+

Dire

ct &

Exp

licit

Ind

irect

& I

mp

licit

IDV

IDV

COL

IDV/COLFrance

Structure

NetherlandsSwedenDenmark

Humour

USA

UK

Personal

Metaphors

Entertainment

Drama

JapanSpain

ItalyBrazil

Songs play with

words

Singapore

China

India

Hong Kong

Symbolism

Source: de Mooij 2010; PDI: Power distance; IDV: Individualism; UAI: Uncertainty avoidance; COL: Collectivism










A

B

C

D

280


281

International marketing vs. management

Int. value added management has two goals (levels of management) Design and management of value added processes

(i.S.v. configuration and coordination)

Design and management of the whole value added system(i.S.v. organizational structure, systems und culture)

Source: OC&C-Partner 2015, data for 2014.Source: Bloomberg 2016, data for 2015.


282

Example –Cross border value chain activities

S 1

P 1

S 2

P 2

P 3

S 3

LI 3

R&D 3

CU 1 CU 2

CU 3

LI 2R&D 1

Legend:CU = Country unitP = ProductionS = SalesLI = Local inventoryR&D = Research & development


283

Organization

Human Resource Management

Controlling und Information management

Finance / Taxes etc.

Supply-Chain-Processes

Purchasing Logistic Operations

Support processes

Managementprocesses

(i.n.S.)

Keyprocesses

A modifed model of the value chain

Market oriented processes

R & D Marketing


Configuration of value added processes – Options and determinants

Geographicdispersion

Geographicconcentration

Economies of scale Learning curve effects Easier coordination of related activities

Risk reduction Knowledge and know-how growth Reduction of logistic costs Image as local corporation National / local adaptation (e.g., culture) Government influence (e.g., tariffs)

Location of sites as decision option

Number of sites as decision option

Comparative cost advantage (e.g., labor costs, subsidies), qualification advan-tages, legal landscape/governmental incentives, cultural proximity, attractivity Country market evaluation and selection


Labor costs in the manufacturing industry

285

– EURO/working hour, (blue- and white-collar workers) –

6.1214.02

22.6823.34

24.4125.93

27.3927.61

30.9130.95

34.4134.45

35.3736.3936.77

41.2942.1942.65

48.9556.46

0 10 20 30 40 50 60

RussiaGriece

EspaniaJapan

UKUSA

CanadaItaly

IrelandLuxemburg

AustriaNetherlands

FinlandFrance

GermanyDenmarkSwedenBelgium

SwitzerlandNorway

Source: Institut der deutschen Wirtschaft, Köln 2015.


Coordination of value added processes –Options and determinants

286

low high

The differentiation of a system into elements is advanced (e.g., strong divi-sion of labor)

High complexity and intensity of the relations between the elements exists (extent of mutual dependency)

Large physical, temporal, objective and human distance exist The problems to be resolved are extensive, variable, or unstructured The dysfunctional behavior of elements seriously threatens the system's

target achievment

Need for coordination especially high if …


287

Purchasing countries in fashion

•Greece

•Hong Kong

•Israel

•Malta

•Portugal

•Spain

•Turkey

•Bulgaria

•Czech Republic

•Estonia

•Hungary

•Morocco

•Poland

•Rumania

•Slovakia

•Thailand

•Bangladesh

•Cambodia

•China

•India

•Indonesia

•Moldavia

•Philippines

•Sri Lanka

•Ukraine

•Uzbekistan

•Vietnam

•Germany

•France

•Ireland

•Italy

•GB

•Czech Republic

•France

•Germany

•Poland

•Rumania

•Slovakia

•Turkey

119 81 49 34 59

Average CostIndex

Turnover (bn. EUR) 7.0Op. Income (bn. EUR) ca. 0.2Employees 36,300Number of countries 22

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaExample: Endress+Hauser

288

Swiss-based instrumentation and process automation company (producing instrumentsmeasuring level, volume or mass flow, den-sity, pressure, temperature, water quality (also for use in dangerous environments/extreme conditions).

7 industries are strategically focused, 40 Key Accounts, 45 foreign sales subsidiaries

7 production subsidiaries: USA, Canada, Australia, China, India, Korea, Indonesia etc.

Biggest step in the development of a local market

Final assembly units able to produce 80% of sold products

95% of production technology and philosophy identical to home country

Local business with local people, no local R&D but product modification/adaptation

Turnover (bn. EUR) 2.0Op. Income (bn. EUR) 0.3Employees 12,500Number of countries 46

India China Indonesia


289

Purchasing of Dell notebooks

Turnover (bn. USD) 57.0Op. Income (bn. USD) ca. 2.7Employees 108,300Number of countries >100


290

Internationalization mountain

Source: Swoboda 2002 and 2006.

Value chain activities

Adaptation/configurationA F I E ...USA CHINA

Integration/coordination

Marketing& Sales

Operations/processes

(Organization)

Procurement

Logistics


291

Dynamic internationalization

timet1 t2 t3

D D F I USA D F I USA J

Integration

Configuration

Value Chain

Integration

Configuration

Value Chain

Integration

Configuration

Value Chain

Source: Swoboda 2001.


292

Coordination of the value added system

Primary org. structure (e.g. integrated structure)

Secondary org. structure (e.g. int. project teams ) Centralization/ formalization (value chain activities)

Culture transfer strategy/ visitor traffic Management transfer/ appointments

Leadership (flexibility, responsibility sharing, benchmarks)

Organization Processes

Coordination

Cultural

HRM

Structural Systemic

Planning system (significance, participation)

Reporting system, IT/ communications systems Centralization/ formalization (plans/ control)

Source: Swoboda/Anderer 2008.

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaStructural coordination

Primary organization Unspecific structures

Export division

International division

Holding structure (for subsidiaries, management holding)

Integrated structures

Secondary organization Quality circles, workshops, cross-country work groups/committees etc.

Information networks

Centralization, formalization, and specialization Primary vs. secondary value chain activities

Focus on primary organization

293


Unspecific structures, export division, and international division

Unspecific structures Avoidance of costly adaptation of the organizational structure / reallocation of

resources

Short decision-making paths because of direct reporting to management

Possibility of quick adaptation to changing market conditions

High priority of the foreign business activities

Impairment of the regular business activities because of additional tasks for management

Poor decisions made based on little knowledge of the domestic management

Missing institutionalized processes, procedures and decision making rules

Export division

Transition to an international division if… Foreign sales reach critical amount or dominate domestic sales

Foreign sales generated with only a few products of the total product range

The international activities are not widely dispersed

294


Advantages and disadvantages of an international division

295

Disadvantages



Analyse

Advantages+ –

Multiple task fulfillment

Conflict between national and international management (allocation of resources, setting of transfer prices) and insufficient knowledge transfer

Development of a unified business culture is hampered

Central departments may be determined by needs of dominating national business activities

Lack of overview with increasing intensity of the foreign business activities

Clear lines of responsibility and counterweight to domestic business

Decisions can be made autonomously

Pooling of know-how and experiences (development of a competence center)

Quick adaptation to requirements of the different foreign markets

Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaIntegrated structures (1/2)

296

I II III IV

I II III IV

Procure-ment

I

Manu-facturing

II

Sales

III

Adminis-tration

IV

Country A

...Coun-try C

HQ

Executive board

Management

AG

AG

Integrated functional structure (functional structure with worldwide responsibility)

Integrated business unit / product structure (= worldwide business unit / product organization)

Integrated regional structure (= worldwide regional structure)

Matrix structure

Tensor structure

Country B

Management


297

Regions

Corporate Functions

Seg

men

ts

approx. 200 profit centers

35 companies in total

Europe / Middle East & Africa Americas Asia / Pacific

Core Networking

IP Routing

IP Transport

Access Segment

Wireless

Fixed Access

Licensing

Managed Services

IP Platforms

Transversal Functions

HR

Marketing

Financial&Legal

Sales

Strategy

Operations

Integrated structures (2/2)

Documents

International Strategic Marketing · Trier University MARKETING & RETAILING Prof. Dr. Prof. h.c. B. Swoboda 3 Objectives of the course You should learn and know the basic strategic