International Marketing Strategy: Analysis, Development and Implementation (Isobel Doole and Robin Lowe)

Part 1: Analysis1 An introduction to International Marketing

The strategic importance of international marketingo Two differences between international marketing and local marketing

There are different levels at which international marketing can be approached

The uncontrollable elements of the marketing environment are more complex and multidimensional given the multiplicity of markets that constitute the global marketplace

This means managers need new skills to add to the tools and techniques they have developed in local marketing

o Export marketing is when firm sells products overseaso International marketing is marketing within foreign countries (countries

perceived to be independent and profit centres in their own right. Hence also the term multi-domestic marketing)

o Global marketing is coordinating marketing in multiple markets (exploiting global marketing opportunities and marshalling resources around the globe) to achieve global competitive advantage

The international marketing environmento Vital not to confuse globalisation of brands with the homogenisation of

cultures. There are many global brands but even these have to manage cultural differences between and within national country boundaries

o There are a number of cultural paradoxes that exist (i.e. Asia experiencing westernisation of tastes)

o Legal environment in international marketing is more complex because there are three dimensions: local domestic law, international law, and domestic laws in home countries (i.e. export controls and duties of firm to act by its national laws in all activities, whether domestic or abroad)

o Exchange rates and currency movements (currency risk) is a vital part of international marketing

o Actions that governments may take which constitute potential political risk include operational restrictions (employment policies, exchange controls, investment restrictions), discriminatory restrictions, physical actions (confiscation without payment)

o Often stumble across the paradox that whilst in some countries there is a market of well educated and computer literate people, in others countries they have very little knowledge of computers

Differences between international and domestic marketingo Including culture, markets, data, politics, governments, economics, finance,

stakeholders, controlo 9 cross cultural management incompetencies

Inability to find the right market niches, unwillingness to adapt and update products to local needs , not having unique products that are viewed as sufficiently higher added value by customers in local markets, a vacillating commitment, assigning the wrong people, picking the wrong partners, inability to manage local stakeholders,

developing mutual distrust and lack of respect between HQ and affiliates at different levels of management, inability to leverage ideas developed in one country to other countries worldwide

The international planning processo For large global firms, challenge is how to structure the firm so that its

increasingly complex and diverse activities around the world can be planned and managed effectively, goals achieved, stakeholders satisfied

o International planning process must allow firm to answer 3 questions: where is the firm now, where does it want to go, how might it go there?

o Many fail to prepare contingency plans to cope with unexpected in international markets

o Many firms wait for problems to occur and react to it. Whilst it may be possible to survive in a uncomplicated domestic environment by reacting rapidly to new situations as they arise, it’s impossible to grow significantly in international markets as an overly reactive management style is wasteful of opportunities and resources.

o Plans developed must be flexible enough to deal with the uncertainties of the markets

o Evolutionary stages of planning Unplanned, budgeting (largely financial in nature), annual business

planning, strategic planning (5 years or more, benefit from avoiding short-term, highly reactive, contradictory, wasteful activity)

o Planning can be top down (to be successful needs senior managers to be closely in touch with all markets and for business to be uncomplicated in terms of products offered), bottom up (encourages local initiative and innovation but can be difficult to manage as sum the individual parts that make different demands on resources rarely add up to a feasible plan at the total level), and goals down, plans up (requires allowance of flexibility in the way the goals are achieved)

o Aspects of international marketing planning Stakeholder expectation Situation analysis (evaluation of the environment and individual

markets) Resources of capabilities (individual small business unit strengths and

weaknesses analysis, capability to deal with threats and opportunities)

Corporate aims and objectives (financial, market, area, brand and mix objectives)

Marketing strategies (growth strategies, standardisation vs. adaptation dilemma)

Implementation of the plan (individual SBU and marketing mix plans, regional/global integration)

Control and feedback (setting standards, measuring performance, correcting deviations)

o Conflicts between different stakeholders is inevitable due to different objectives

o Growth potential can only by exploited if the firm becomes a learning organisation in which the good practice learned by individual members of staff can be leveraged, transferred and built upon throughout its global activity (knowledge management)

o Plan must be strategic (fulfilling corporate objectives and coordinating individual strategic business unit plans), tactical (focusing upon individual SBU marketing activities in each country), and implementable (detailing the individual activities of each department within the SBU)

o Successful firms able to perceive changes in the international environment and develop strategies which enable them to respond accordingly

o Transfer of knowledge and sharing of success/failure learning are crucialo Firms need to have a culture of learningo Dynamic environment means constant monitoring and evaluation is vital

(close the loop)o Management foresight and organisational learning are basis of a sustainable

competitive advantage in global markets

2 The International Trading Environment

The reasons countries tradeo Ricardo’s theory of comparative advantage: Trade takes place because one

country is able to produce a product at a lower price than is possible elsewhere

Comparative advantage achieved through sustained period of investment, lower labour cost, proximity to raw materials, subsidies, building expertise in key areas

o International product life cycle theory: US firms manufacture for the home market and begin exporting, foreign production starts, foreign products become increasingly competitive in world markets, imports to the USA begin providing significant competition

Barriers to world tradeo Such as tariffs, quantitative restrictions, and law/regulation/policies

3 Social and Cultural Considerations in International Marketing

Culture is made up of beliefs, values, customs Hofseteded (2003) identifies layers within a national culture

o A national level according to one’s countryo A regional/ethinic/religious/linguistic affiliation levelo A gender level according to whether a person was a girl or boyo A generation level which separates grandparents, parents, childreno A social level associated with educaitonal opportunities, occupation,

profession 8 components of culture (Srarathy et al 2006)

o Educationo Social organisation (like role of women and caste systems, house ownership)o Technology and material culture (like local market’s ability to handle and deal

with modern technology)o Law and Politicso Aesthetics (perception of things such as beauty, good taste and design)o Values and attitudes (values consumers place on things like time,

achievement, work, wealth, risk taking)o Religiono Language (broken up in spoken language and silent language, which is

communication through body language, silences, and social distance) Cultural learning

o Enculturation is learning about their own culture by members of a society. Can be down formally through family and social institutions to which people belong, technically through education processes be it through schools or religious institutions, and informally through peers/advertising/marketing

o Acculturation is process of understanding another culture’s beliefs, values, and attitudes in order to gain empathy with that market

Culture and consumer behaviouro Three major processes through which culture influences consumer behaviour

(Jeannet and Hennessey 2004)

Culture is seen as being embedded in elements of society such as

religion, language, history and education. These elements send direct and indirect messages to consumers regarding the selection of goods and services

o Important assumptions which international marketers need to question when applying western theoretical principles to understanding international markets

That Maslow’s hierarchy of needs is consistent across cultures

The axiom that one need must be satisfied before the next appears is not true for every culture

Similar kinds of needs may be satisfied by different products and consumption types

That the buying process in all countries is an individualistic activity That social institutions and local conventions are similar across

cultures That the consumer buying process is consistent across cultures

(Follows Blackwell’s model) That the level of involvement and perceived risk (physical social,

financial) is the same Analysing cultures and the implications for consumer behaviour

o Blackwell et al (2006) identifies steps that should be undertaken when analysing consumer behaviour in international markets

Determine relevant motivations in the culture Determine characteristic behaviour patterns Determine what broad cultural values are relevant to this product Determine characteristic forms of decision making Evaluate promotion methods appropriate to the culture Determine appropriate institutions (retailers and intermediaries) for

this product in the minds of consumerso Self reference criterion

Characterises our unconscious reference to our own cultural values when examining other cultures

Usunier and Lee (2005) adopts 4 step approach to eliminate it Define problem or goal in terms of home country cultural

traits, habits and norms Define problem or goal in terms of foreign country cultural

traits, habits and norms Isolate the SRC influence in the problem and examine it

carefully to see how it complicates the problem Redefine the problem without the SRC influence and solve for

the foreign market situation Process of enculturation to gain empathy with a foreign country

market requires cultural empathy (become the buyer in that other culture) and neutrality (identify differences that exist without making value judgements about better or worse cultures)

Cross cultural analysiso The high/low context approach (Hall)

One culture will be different from another if it understands and communicates in different ways. Languages are therefore seen as the most important components of culture

Low context cultures rely on spoken and written language for meaning. Senders of messages encode their messages expecting that the receivers will accurately decode the words used to gain a good understanding of the intended message

High context cultures use and interpret more of the elements surrounding the message to develop their understanding of the message. Social importance, knowledge of the person and the social setting add extra info and will be perceived by the message receivers

The greater the contextual difference between those trying to communicate, the greater the difficulty firms will have in achieving accurate communications

Usunier et al (2005)’s contextual continuum

o Hofstede’s cultural dimensions (2003) Individualism

Describes the ties between individuals in society Power distance

Involves the way societies deal with human inequality People possess unequal physical and intellectual capacities

which some societies allow to grow into inequalities in power and wealth. However some other societies de-emphasise such inequalities

Uncertainty avoidance Reflects how a society deals with uncertainty about the future Weak UA means cultures socialise members to accept and

handle uncertainty Strong UA fosters the need to try to beat the future, resulting

in greater nervousness, aggressiveness and emotional stress Masculinity

Deals with the degree of masculinity Masculine values stress making money and the pursuit of

visible achievements Feminine societies exhibit values associated with traditionally

feminine roles such as endurance and an emphasis on people rather than money

Confucian dynamism

Assess cultures on the degree they are universalistic or particularistic

Particularistic evolve where unique circumstances and relationship are more importance considerations in determining what is right and good rather than abstract rules

Universalistic cultures believe that what is true and good can be determined and defined and can be applied everywhere

Major characteristics of Confucianism is strong bias towards obedience, importance of rank and hierarchies and the need for smooth social relations

o 4 verbal communication typologies used for cross cultural analysis (Gudykunst et al2005)

Direct vs. indirect: Degree of explicitness of the verbal message of a culture

Elaborate vs. succinct: Quantity of talk that people feel comfortable with in a particular culture

Personal vs. contextual: Contextual focuses on role of speak and role of relationships. This type of communication reflect high power distance, collectivism and high context cultures

Instrumental vs. affective: defines the orientation of the speaker. Affective style means speaker is process oriented, i.e. there is concern that neither the speaker nor the receiver will be put in an uncomfortable position. Speaker also listens to and closely observes the receive in order to interpret how the message is being taken

o Hofstede’s cultural dimensions vs. rate of product adoption (Singh 2006) Cultures characterised by a small power distance, weak uncertainty

avoidance and masculinity are more likely to be innovative and accept new product ideas than cultures where there was large power distance, strong uncertainty avoidance and more feminine traits

Social and cultural influences in B2B marketingo Types of buying process (straight rebuy, modified rebuy, new task) will be

influenced by cultural factorso 4 stages of the negotiation process that is influenced by culture

Non-task discussion (establishing rapport between members of the negotiation teams like going to Karaoke)

Task related exchange of info Persuasion Concession and agreement

o Ways to minimise cultural impact in negotiations in order to build effective trans-cultural relationships

Adaptation, interpreters (cultural blocks: it may not be possible to translate meaning exactly for all elements in an interpretation), avoid negative stereotyping, intercultural preparation

Ethical issues in cross-cultural marketingo Bribery and corruption, piracy, counterfeiting,

4 International marketing research and opportunity analysis

The research process (Malhotra et al 1997)o Defining the problem, developing the approach to be taken, designing the

research, carrying out the field work, analysing the data, preparing the report and presentation

Research into internal market issues can incorporate 3 major roleso Cross cultural research: conducting research projects across nation or culture

groupso Foreign research: research conducted in a country other than the home

countryo Multi-country research: research conducted in all or important countries

where a firm is represented Scanning international markets

o Markets are scanned primarily to identify countries that warrant further research and analysis

o Will look for countries that fit the 3 criterions: accessibility (scan things such as tariffs and other barriers like regulations), profitability, market size

o 3 types of market opportunities Existing markets: Customers’ needs are already serviced by existing

suppliers Latent markets: recognized potential customers but no company has

yet offered a product to fulfil the latent demand Incipient markets: Markets do not exist at present but conditions and

trends can be identified that indicate the future emergence of needs that will be unfulfilled

o Level and nature of competition that a firm will encounter can be analysed by relating 3 types of demand to 3 types of product

Key techniques for identifying level of market developmento Demand pattern analysis: by comparing pattern of demand in the country

under study with the pattern of demand in an established market when the product was first introduced, a broad estimate of an incipient market can be achieved

o Multiple factor indices: assumes that demand for a product correlates to demand for other products. By measuring demand for the correlated product, estimates of potential demand can be made

o Analogy estimation: Used where there is a lack of market data in a particular country. Analogies are made with existing markets, comparing and contrasting certain ratios to test for market potential

Cross section approach is where product market size for one country is related to some appropriate gross economic indicators to establish a ratio. Then apply ratio to country of analysis

Time series approach assumes country under analysis will follow the same pattern of consumption as a more advanced economy, just with a time lag

o Regression analysis: useful in enhancing the likely accuracy and eventual confidence placed on cross sectional studies

o Macro survey technique: Based on notion that as a community grows and develops, more specialised institutions come into being. Thus one can construct a scale of successively more differentiated institutions against which any particular country can be evaluated to assess its level of development and hence market potential

o Risk evaluation Need to take into account in opportunity analysis One is the four-risk matrix

Another is BERI: provide country risk forecasts for countries in the world and updated 3 times a year

Goodnow and Hansz temperature gradient: rates country’s environmental factors on a temperature gradient, with scale defined as being hot to moderate to cold

International marketing segmentationo Segmentation by geographical criteria

Business portfolio matrix (Harrell and Keifer 1993)

Plots markets on country attractiveness against company’s compatibility with each country

Ford Tractor says factors for market attractiveness should be market size, market growth rate, government regulations, and economic and political stability. Compatibility defined took into account factors like market share, market representation, contribution margin, and market support

Infrastructure/,marketing institution matrix (Sheth and Arma 2005) Categorize markets by country’s infrastructure (roads,

telecommunication, legislative bodies, open and free justice systems) and marketing institutional development (availability of media efficiency, distribution channels)

Drawback with country based approach is that countries do not buy products, consumers do

o Trans-national segmentation Segmentation bases included value systems, demographic,

psychographic, behavioural criteria EuroMosaic

Pan-European segmentation system allowing classification of consumers across the EU on basis of types of neighbourhood in which they live (suburbs or rural)

o Hierarchical country-consumer segmentation (Hassan and Stephen 2005) Takes into account country factors but also incorporates individual

behaviourist characteristics 1. Identify those countries that have the infrastructure to support the

product and are accessible to the company 2. Screen those countries to arrive at a shorter list of countries with

the characteristics that make the market attractive 3. Develop mini-segments within these countries based on factors like

information search behaviour and product characteristics required. Outcome would be series of min-segments within qualified countries

4. Look for similarities across segments. Factor analysis of the behavioural patterns of these segments enables understanding of the characteristics of the demand of each segment as regards marketing mix issues. Each mini segment would be rated on several strategic factors in terms of potential response

Cluster analysis used to identify meaningful cross-national segments, each of which would evoke similar response to any marketing mix strategy

The international marketing information systemo Company needs a systematic method for evaluating the markets identified,

and this is the role of the marketing information systemo 12C environmental analysis shows you the major inputs into the system

o The information input into the MIS is used to draw up a market profile analysis

Problems in secondary datao Availability and accessibility of quality secondary info, distortion of data in

nations due to political reasons by governments, classification of various types of data in various countries is problematic when carrying out any

comparative analysis across markets because measures are usually defined differently, outdated data

International market primary research process (Malhotra et al 2006)o Problem definition and research objectives: Comparability of

phenomenon/behaviour, isolating the self reference criteriono Developing an innovative approach

Networking (Use of contact networks to build info is vital because of the sometimes prohibitive costs of varying out detailed market research studies overseas)

Multi-country studies Consortium (essentially a group of firms come together to research a

particular market area in which they have common interest)o Organising the research study: Centralised vs. Decentralised, in-house vs.

Agency) In house or agency depends on ease of briefing the agency,

supervising and coordinating the project, probability of language problems arising, requirements of specialist market knowledge, standard of competence required and budget available

o Research design: Redefine research problem, reliability and validity of secondary data, appropriate use of qualitative research, questionnaire design, sampling design

o Field work: Interviewee and interviewer bias Different cultures will produce a varied response to interviews or

questionnaires (like Italians have a propensity to over claim likelihood to buy whereas German results much close to reality)

Different social classes of customers could have differing responses to marketing research techniques (i.e. give responses that they feel interviewers may want to hear)

o Analysis and evaluation: Data preparation, cross country comparabilityo Report preparation and presentation: Interpretation and presentation

Comparative evaluation of survey method for use in international marketing research (Malhotra et al 1997)

International market research, whilst expensive, is no means a one-off activity, and requires continuous research

Part 2: Strategy Development5 International niche marketing strategies for SMEs

Categories of SME internationalisationo Exploring is concerned with selling domestically developed and produced

goods abroado International niche marketing is concerned with marketing a differentiated

product or service overseas, usually to a single customer segment, using the full range of market entry and marketing mix options available

o Domestically delivered or developed niche services can be marketed or delivered internationally to potential visitors

o Direct marketing including E-commerce allows firms to market products globally from a domestic location

o Participation in their international supply chain of an MNE can lead to SME’s piggybacking on the MNE’s international developments. Like establishing facility close to where MNE’s new locations rare established in other countries

Motivations for exporting (Balabanis et al 2004)o Motivation caused by reactive stimuli

Adverse domestic market conditions, opportunity to reduce inventories, availability of production capacity, favourable currency movements, opportunity to increase number of country markets and reduce market related risk, unsolicited orders from overseas customers

o Motivation caused by proactive stimuli Attractive profit and growth opportunities, ability to easily modify

products for export markets, public policy programmes for export promotion, foreign country regulations, possession of unique products, economies resulting from additional orders, presence of an export-minded manager, opportunity to better utilise management talent and skills, management beliefs about the value of exporting

Barriers to internationalisationo Red tape, trade barriers, transportation difficulties, lack of trained personnel,

lack of export incentives, lack of coordinated assistance, unfavourable conditions overseas, slow payment by buyers, lack of competitive products, payout defaults, language barriers, limited info from which to locate and analyse foreign markets

International niche marketingo Difference between exporting and international niche marketing

Direct marketing and electronic commerceo Cutting out other distribution channel members such as importers, agents,

distributors, wholesalers and retailers, by using a variety of communications media, including post, telephone, television and networked computers in the form of the internet

o Disadvantages: cultural insensitivity and language mistakes in the communications, multilingual websites and material add costs

o Internet benefits to SMEs: Creating new opportunities, diminishing barriers to entry, making cost savings from online communications, providing online support for inter-firm collaboration, establishment of company websites fro marketing and sales promotion, transmission of any type of data rapidly

The nature of international developmento Internationalisation process differs depending on whether the company first

serves the domestic market and later develops into foreign markets (adaptive exporter) or is expressly established from its inception to enter foreign markets (born global)

o Internationalisation process manifests itself by the development of business relationship in other countries

Through establishment of relationships in country networks that are new to the firm (international extension)

Through development of relationships in those networks (penetration)

Through connecting networks in different countries (international integration)

o Multilateral aspects of the internationalisation process (Johnnson and Vahine 1992)

o Market expansion or concentration Choice between expanding into many markets (gaining a superficial

presence and accepting a low overall market share) or concentrating their marketing activities in a small number of markets in which a significant market share can be built

Katsikeas and Leonidou (1996) say market concentrators are smaller firms because of their greater interest in export profitability and lesser concern with export sales objectives.

Expanders are larger firms who are concerned with export sales objectives, do more export marketing research, and have greater overall market share expectations. Place less emphasis on profitability

o SME patterns of development tend to be the result of a network approach where the selection of the market is not merely made on the relative attractiveness of the markets and their match with the company capability, but rather on the reduction of the risk of entering unknown markets by working with individuals or companies they know

o Trends that have given rise to the emergence of born global firms Increasing role of niche markets, especially i the developed world To compete with large, powerful MNEs smaller firms must specialise Recent advances in process technology mean low scale batch

production can be economical and new technologies mean that SMEs can compete with MNEs to produce sophisticated products

Communications and technologies allow SMEs to manage across borders and information is more readily available to everyone

Quicker response time, flexibility and adaptability to foreign tastes and specific customer requirements give these firms an immediate competitive edge

SMEs can gain access to funding and support, benefit form joint research programmes and technology transfer and employing cross border educated managers more easily than ever before

Increasingly international business is facilitated through partnership with foreign businesses, allowing new specialist firms to participate in global network more easily than before

International strategic marketing management in SMEso Mckinsey’s 7S framework

First 3 elements (strategy, structure, systems) are considered to be the hardware of successful management and as such can be implemented across international markets without the need for significant adaptation

The other four (management style, staff, skills, and shared values) are software, and are affected by cultural differences

o Generic marketing strategies for SME internationalisation STP marketing Competitive strategies of Porter (1990): Cost leadership, focus,

differentiation Ansoff (1957)’s 4 growth strategies according to product/market

old/new: product penetration, market development, product development, diversification

Factors affecting SME internationalisation

o Organisation structure Can organise firm by geography, product, or function Variables which might influence the decision (Srathy et al 2006): size

of business, number of markets in which it operates, level and nature of involvement in the markets, company objectives, company international experience, nature of products, width and diversity of the product range, nature of the marketing task

Grimes et al (2007) identifies different stages of internationalisation on 2 dimensions: international prospects and capability

o Passive exporter Lack any international focus, perceives export markets as having a

high hassle factor, new to the export business, often reacting to unsolicited order, do not carry out research or invest in export promotion campaign, little direct contact with foreign companies

o Reactive exporter Sees export markets as secondary to the domestic markets but puts

effort into dealing with key export accounts, once done business with a foreign customer will follow up for repeat orders, promote their export capacity and be starting to visit overseas clients, only basic knowledge of their markets

o Experimental exporter Develop a commitment to exporting, starting to structure the firm

around international activities, regular contact with key accounts, develop alliances with export partners to build better products by using info from their successful markets, prepared to make product adaptations to suit overseas customer needs, appointed dedicated export staff

o Proactive exporter Focused on key export markets, devotes substantial time and

resource to entering and developing new markets, regular market assessments, promotional materials adapted to different foreign places, regularly visit key accounts to maintain health relationships

o Committed exporter Exporting is integral to the business and sees domestic market as just

another market, majority of turnover is generated through international trade, frequently visiting customers

o Movement from one stage if another is not gradual because heavy investment is required to progress

Three key areas that SME international marketers need to focus on to ensure successo Developing the characteristics of a learning organisation, developing effective

relationships, having a clear international competitive focus

6 Global strategies

Drivers of globalisationo Market access, market opportunities, industry standards, global sourcing,

products and services, technology, customer requirements, competition, cooperation, distribution, communication, company’s strategy/business programme/processes

o Benefits of global sourcing: cheaper labour rates, better or more uniform quality, access to the best technology/innovation/ideas, access to local markets, economies of scale advantages, lower taxes and duties, potentially lower logistic costs, more consistent supply

The international competitive posture matrix (Gogel and Larreche 1989)

o Identifies 4 types of businesses along 2 dimensions of product range and geographic coverage. Different strategies for different categories

Global strategyo Global marketing can be defined as focusing of an organisation’s resources on

the selection and exploitation of global marketing opportunities consistent with and supportive of its short term strategic objectives and goals

o Categorise firm’s strategic development as multi-domestic (completely different strategy for every single market), global (marketing activity is standardized in all countries), or regional (standardization across regions)

o Transnational approach is one in which firm has a standardized identity and corporate values throughout the firm but delivers its strategic objectives through composite strategies which contain elements of mufti-domestic, regional and global strategies

o Standardization and adaptation

Elements of marketing management should be seen as being at different points of a continuum of standardisation.

From adaptation to standardization are: pricing, distribution, sales force, sales promotion, product, image, objective, strategy

o Globally standardised strategy Buzzell (1968) argues benefits of product standardization: Economies

of scale, faster accumulation of learning through experience that aids efficiency and effectiveness, reduced costs of design modification

Meffet and Bolz (1993) describe globalisation push and pull factors which are driving marking standardisation (programme and process standardisation)

Pull factors is globalisation of markets (homogenisation of demand, global market segments, globally active customers)

Push factor is globalisation of industries (R&D expenses, reduce pay back cycles, experience curve effects) and globalisation of competitors (market interdependence, global competitors, cross subsidisation)

o Multi-domestic strategies Arguments for using this to achieve an effective worldwide strategy:

industry standards remain diverse, customers continue to demand locally differentiated products, being an insider remains critically important, global organisations are difficult to manage, management myopia (self reference criterion makes it difficult for managers to take other than a narrow, national view of international marketing)

o Regional strategy To be successful must decide what makes the region distinctive and in

what ways the marketing strategy for one region should be differentiated from the others

In practice differences within the region are still huge, even if regional trading blocs are formed (EU)

o Transnational strategies Transnational companies aim to build 3 strategic capabilities: global

scale efficiency and competitiveness, national level responsiveness and flexibility, cross-market capacity to leverage learning on a worldwide basis

International marketing management for global firmso Challenges facing firms who want to build a truly global presence

Responding to the changing basis of competitive advantage, increasing global appeal by building the global brand, creating a global presence by achieving global reach, managing diverse and complex activities across a range of often similar but often disparate markets and cultures

o 3 routes to brand consolidation once acquisition/merger has occurred (Smith 1998)

Phasing out brands over time, when the strategy is to retain loyal customers who will buy as long as the brand is available

~Quickly changing some of the branding, which works well if the firm has control over distribution, advertising, promotion

Co-branding to manage the transition, which is the most common approach

o Risks associated with specific merging country market involvement Financial loss associated with inappropriate investment Damage to firm’s reputation through association with the country, its

government and intermediaries Litigation arising from offering an unacceptable product to the

country or involvement in unethical behaviour Prompting international competitor attack in home territory Making inappropriate arrangements with partners, distributors,

agents, governments which in the long run does no good Organisation structure for transnational firms

o Strategic business units and the 3 management levels

Level 1 Operational (marketing , production, R&D, personnel) Set and achieve the budgets, manage the functions, carry out

marketing campaigns, manage advertising agents and distributors

Level 2: management level Set the SBU objectives and allocate resources, control the SBU

programme, organise the opportunity analysis and research, control international marketing planning

Level 3: strategic level Identify the stakeholder requirements, define the corporate

aims and objectives, evaluate global opportunities, organise the business structure, control the corporate performance

Feedback needs to flow between all three levelso 3 basic structure in international organisations (Majaro 1991)

Macropyramid Strong nerve centre or headquarters, highly centralised,

foreign SBU operate at the management or operational levels of the organisation

Marketing plans produced centrally, major decision regarding marketing mix taken centrally and so can be slow and unresponsive to local needs, marketing is standardized as much as possible, world markets for their products are regarded as largely the same, local creativity inhibited, communication problems occur as a result of difficulty in interpreting instructions from the centre, lack of local autonomy is a disincentive to good managers

Umbrella Fully decentralised planning and control, full independence at

all levels of management to the foreign subsidiaries, centre sets only broad corporate objectives and will provide advice and support, each SBU develop a plan for their area of responsibility

SBU can adopt appropriate marketing mix strategy for the local marketing, local marketing plans, respond to local environmental developments, different strategies in regards to R^D/personnel/fiancé followed in each area, little chance of a global strategy, considerable duplication as different SBUs work on similar strategies and tactics

Interglomerate Centre does not develop strategies for the individual SBUs

which are likely to be international businesses in their own right, because of the diversity of firm’s activities the centre take no significant, active management role, and is concerned purely with financial planning and control

Finance driven, marketing function will not be represented at the strategic level, corporate and marketing strategies are the sole responsibility of the SBU

Controlo 3 essential elements in the control process: Setting standards, measuring

performance against standards, correcting deviations from the plano Consistency across firm’s global operations can be increased and general

improvements made through the techniques: Benchmarking against other SBUs within the firm, other firms within

the business sector and the best in class in a particular activity Identifying good practice wherever in the world it occurs Encourage performance improvement through self assessment, peer

review, appraisals by senior managers Staff and the problems of international management

o Relationship between headquarter and local subsidiary staff is a major source of problem in planning of international marketing

o International planning problems (Brandt et al 1980, Weichmann and Pringle 1979)

o As firms grows, need a company-wide planning culture, with the following objectives:

Planning becomes part of the continuous process of management rather than an annual event

Strategic thinking becomes the responsibility of every manager rather than being restricted to a separate strategic planning department

Planning process becomes standardized, with a format that allows contributors from all parts of the company

Plan becomes the working document, updated periodically for all aspects of the firm, so allowing regular performance evaluation

Planning process is itself regularly reviewed and refined through the use of new tools and techniques in order to improve relevance and effectiveness

What makes a good international manager (Wills and Barham 1994)o Be able to cope with cognitive complexity and be able to understand issues

from a variety of complicated perspectiveso Have cultural empathy, a sense of humility and the power of active listeningo Have emotional energy and be capable of adding depth and quality to

interactions through their emotional self-awareness, emotional resilience, ability to accept risk

o Demonstrate psychological maturity by having the curiosity to learn 4 organisational culture types

o Competitive or market culture characterised by an emphasis on competitive advantage and market superiority

o Entrepreneurial or adhocracy culture which emphasises innovation and risk taking

o Bureaucratic or hierarchy culture where regulations and formal structures are important

o Consensual or clan culture which emphasises loyalty, tradition, and internal maintenance

7 Market entry strategies Criteria to consider when choosing market entry method

o Company objectives and expectations relating to the size and value of anticipated business, size and financial resources of the firm, existing foreign market involvement, skill/abilities/attitudes of the company management towards international marketing, nature and power of competition, nature of the product itself, nature of existing and anticipated trade barriers, timing of the move in relation to the market and competitive situation

Market entry methods ranked in decreasing level of involvemento Wholly owned subsidiary, company acquisition, assembly operations, joint

venture, strategic alliance, licensing, contract manufacture, direct marketing, franchising, distributors and agents, sales force, trading companies, export management companies, piggyback operations, domestic purchasing

Risk and control in market entryo 4 categories of market entry methods: indirect and direct market entry,

cooperation, direct investment. Each of varying risks and control issues

Indirect exportingo Domestic purchasing

Foreign firms come to the firm’s country, buy product and sells them abroad

o Export management companies or export houses Specialist firms set up to act as the export department for a range of

companies May specialise by geographical area or product or consumer type,

which may not coincide with supplier objectives. Selection of market entry may be in the best interest of the export house, not the supplier

May be tempted to concentrate upon products with immediate sales potential rather than looking long term, firm’s products may not be enough attention, and may be carrying competitive products

o Piggybacking An established international distribution network of one

manufacturer might be used to carry the products of a second

manufacturer. Carrier is either paid by commission to act as agent or buys the products outright and acts as distributor

Advantages for carrier are a wider product range, potential economies of scale by increasing revenue without adding additional costs

Problems include getting locked into an arrangement that’s unsatisfactory, and incompatibility on marketing mix issues like branding

o Trading companies Essential role is to quickly find a buyer for the products that have

been taken in exchange Direct exporting

o Factors for successful exporting (Katsikeas et al 2000) Commitment of the firm’s management, emphasize importance of

augmenting and maintaining skills, good marketing information and communication system, sufficient product capacity and capability, product superiority and competitive pricing, effective market research to reduce psychic distance, effective national export policy to support expansion

o Components of the export marketing mix Product, price, promotion, distribution, services (market research,

training and sales servicing), finance and administration (budgets, order processing, insurance, credit control, technical (specifications, testing and product quality)

o Agents Contracted to act on behalf of exporters to obtain orders on a

commission basis Selection criteria might include: financial strength, contacts with

potential customers, nature and extent of their responsibilities to the organisation, premises, equipment and resources

To achieve good relationship, need to allocate time and resource to finding someone suitable, ensure both parties understand expectations, ensure agent is motivated to improve performance, provide adequate support, ensure sufficient advice and info transfer in both directions

o Distributors Buys product, organise selling and distribution, and so take the

market risk on unsold products as well as profitso Other direct exporting methods include management contracts (growing

importance of services, business skills and management expertise as saleable commodities in international trade), franchising, direct marketing

Foreign manufacturing strategies without FDIo Contract manufacture

Ask local person to produce product on their behalf under contract Disadvantage is loss of control or quality

o Licensing

Example is license the use of brands, characters and themes to other countries (like Disney), generating additional revenue with low levels of investment

Can avoid barriers to entry and financial and management commitments are low

To minimize problems of licensing (Sarathy et al 2006), develop clear policy and plan, allocate responsibility to senior manager, select licensees carefully, draft agreement carefully, supply the critical ingredients, obtain equity in the licensee, limit product and territorial coverage, retain patent/trademarks/copyrights, be involved in the licensee’s business

Foreign manufacturing strategies with FDIo Benefits for setting up overseas manufacturing and service operations

Product (perishable goods), services (local intellectual property and cultural sensitivity), transporting and warehousing (reduce logistic costs), avoid tariff barriers/quotas, government regulations (if don’t product locally can’t enter), market (local production viewed favourably by customers), government favour them more by showing they’re contributing to the economy, information (prompt market feedback), international culture, delivery (less costs), cheap labour costs

o Reasons for local operations include to gain new business, to defend existing business, to move with an established customer, to save costs, to avoid government restrictions

o Assembly: make products over thereo Wholly owned subsidiary: more than just producing productso Company acquisitions and mergers

Gives immediate access to a trained labour force, existing customer and supplier contacts, recognized brands, an established distribution network, and an immediate source of revenue

Disadvantages: might take over de-motivated labour force, a poor image and reputation, and out of date products and processes, and might not make money in the end

Cooperative strategieso Joint ventures

Based on the premise that the two can contribute complementary expertise or resources which will create a unique competitive advantage

Reasons for setting up include national regulations restricting foreign ownership, complementary assets and capabilities, combine R&D and production

Differences in aims and objectives can cause problems, so can the potential of creating a new competitor

o Strategic alliances Include technology swaps, R&D exchanges, distribution relationships,

marketing relationship, manufacturer-supplier relationships, cross-licensing

Motivations: Insufficient resources, pace of innovation and market diffusion, high R&D costs, concentration of firms in mature industries, government cooperation, self-protection, market access

o Reciprocal share holdings Take equity stake in another firm, enabling it to influence the strategy

of that firm, and can create a basis upon which to share expertise between the firms or establish a platform that might lead a more formal relationship such as merger, and can generate immediate return on investment

Need to select partners that want to contribute: complementary products/services, knowledge and expertise, capability in R&D, capacity in manufacturing and logistics, power in distribution channels, money and management time

Problems can arise due to differences in objectives and strategies, approach to repatriation of profits and investment, culture, expectations

8 International product and service management Kotler (2002) says 3 aspects of the product offer are the core product benefit,

product attributes (colour, size), and the marketing support services (delivery, after sales service)

Main issue for firm that’s about to go international is to assess the suitability of the existing products for international markets

To what extent should the total product offer be adapted for international marketso Decision usually based on cost-benefit analysis of what they believe the

implications of adaptation and standardization might be for revenue, profitability, market share

o Only if needs and tastes identified in the target market segment are significantly different and substantial additional business generated, can the extra cost involved in making and delivering adapted products be justified

o Reasons for standardization Rapid recovery of investment, easier organisation and control of

product management, possibility to reduce costs through economies of scale, experience effect through operations such as production/advertising/distribution

Standardization encouraged by globalization trends: markets becoming more homogeneous, more identifiable transnational consumer segments, increase in the number of firms moving towards globalization, forcing standardization throughout industry sectors

o Standardization disadvantages Market opportunities lost when can’t match local requirements, de-

motivated local managers who can’t innovate, easier to competitors to copy at ever lower prices

o Reasons for adaptation Cultural factors, usage factors (same products used in different ways

in different markets due to culture, geography, climate, terrain), legal standards

Other factors influencing product and service decisions are product accessibility and ethical issues (consumers view of what is acceptable will vary considerably depending on country), green environmental issues (importance placed on the environment differs amongst countries), shortening product life cycles, effect of different market entry methods, changes in marketing management

Product policyo Which products to include in the range to be marketed internationally

depends on: Firm objectives, experience/philosophies/attitudes of the firm, characteristics of the market, requirements and expectations of consumers, characteristics of the products themselves, ease of distributing and selling, environmental constraints, level of risk firm is willing to take

o Product strategies Mesdag (1985) says 3 choices:

SWYG (sell what you have got): dump spare capacity, ignore market demand

SWAB (Sell what people actually buy): differentiated approach GLOB: sell the same thing globally disregarding national

frontiers Keegan (1989)’s 5 product strategies

One product, one message worldwide Product extension, promotion adaptation (product the same) Product adaptation, promotion extension (promotion

campaign has achieved international appeal, so keep the same)

Dual adaptation (change product and promotion for each market)

Product invention (products specifically developed to meet the needs of the individual markets, usually done by advanced nations who supply products to under developed countries)

Managing products across borderso International product life cycle

Products in international markets can have consecutive lies in different countries. E.g. whilst domestic market is in decline and has

launched for a long time, market B sales may be on the rise and has launched for a medium time period

Firms must decide how to allocate scarce resources between product and market development.

o Product portfolio analysis Include BCG growth-share matrix, GE/McKinsey Screen, Arthur D.Little

Business Profile Matrix Comparing strength of a portfolio across a variety of markets is

difficult as the analytical base constantly change For BCG matrix, can adapt so base on one product range or one brand

with circles in the matrices representing country sales instead of different product sales

For BCG matrix, the 2 dimensions are market growth and relative market share (Starts, Question marks, cash cows, dogs)

o Introduction and elimination activities Depends on firm objectives, profitability, degree of overlap in terms of

positioning, stage in the life cycle, manufacturing capacity available, likely receptiveness of market to the new product, competitive structure of the market

Harder decision to take in the international perspective because since a product might be a cash cow in one market and a dog in another. Hence decisions need to be made even more carefully

Image, branding, positioningo Country of origins effects

Where buyer’s knowledge about product is limited, country of origin perceptions influences buying decisions. These are based on national stereotypes

o International brandings Brands can add value to firm by providing befits: price premium, high

volumes, lower costs, better utilisation of assetso Brand categories (Doyle 2000)

Attribute brands (functional appeal), aspirational brands (buy because of who else buys it), experience brands (shared philosophy between customer and brand on shared associations and emotions, but not necessarily on claims of superiority)

Brand value equation says that brand value is benefits (tangible and intangible) received by customers divided by costs to customer of brand purchases (total cost of ownership)

Challenge for international banding is to what extent the benefits from branded products and services vary between countries, cultures, individuals

o Different branding strategies include umbrella brands (all brands under corporate name), product brands (Dove), line brands (L’Oreal in its line of hair products), range brands (Heinz brand across categories in frozen food and sauces), endorsing brands (weaker association between company and brand, like Nestle and Kitkat), source brands (double branded, like Ford Mondeo)

NPD

o NPD process: Idea generation, initial screening, business analysis, development, market testing, commercialisation and launch

o Requirements for NPD success (Griffin 2003): uncover unmet needs and problems, develop a product with competitive advantage, shepherd the products through the firm

o Reasons for international NPD failure: barriers to entry, local competitor subsidies, cultural insensitivity, poor planning, poor timing, lack of USP, product deficiencies, misguided enthusiasm of top management

R&D strategieso Must take decision on the location of their own internal R&D facilities, extent

to which they contract out certain parts of the R&D effort, whether acquiring a firm can provide new technology or new product, licensing technology to another company, funding joint ventures or strategic alliances with companies to enable complementary technology

o Arguments for and against centralisation of R&D

Part 3: Implementation9 International Communications

Roles of marketing communications

o Need to consider 3 dimensions: external, internal, and interactive/relationship marketing

o For external marketing need to communicate with different stakeholders at different dimensions

Fundamental challenges for international marketing communicationso Purpose is to ensure that the intended messages are conveyed accurately

between the sender and the receiver, and that the impact of unintentional messages are kept to a minimum

o Reasons for international marketing communications failure: Inconsistency in the messages conveyed to customers by staff at

different levels and from different countries and cultures, different styles of presentation of image from different departments and countries leave customers confused, lack of coordinated of communication tools, failure to appreciate differences in the fields of perception of the sender and receiver

o Important to appreciate the subtlety of language and tone in communications

Standardization versus adaptationo Drivers of standardisation

Efficiency: cost saving due to economies of scale, experience effect, replicating successful marketing communication programmes and processes in different countries

Provide added value to consumers: customers believe that they gain additional benefit and value from a consistent and widely recognized brand image that reflect their own self image

o Drivers of adaptation approach Cultural differences

International marketing communications strategyo Wilson and Gilligan (2003) says promotion objectives can be categorised into

2 Sales-related: increasing market share, identifying new potential

customers, obtaining responses, reducing impact of competitors Brand/product related: increasing value of brand and product,

establish position or reposition brand, increase awareness levels, change consumer’s perceptions of brand/product/firm

o Generic strategies available are push and pullo Once push/pull decided, dimensions of the promotion implementation

strategy are defined: message to be communicated, target audience, media utilized, how to measure impact

Integration of communicationso Davidson (2002) says firm communities in 8 ways: actions, behaviours (how

things are done), face to face by management, signals, product and services, intended communications (ads), WOM and word of web, comment by other organisations (pressure groups or competitors and media)

o Shimp (2006) says integrated marketing communications focuses on 5 features: start with customer, use any form of relevant contact, achieve synergy through consistency across the communication elements, build relationships, affect behaviour

o Integration with the global strategy could mean business unit integration and marketing mix integration

o Marketing programmes influencing communications

o Actual mix of communication tools depends on market area and industry sector, whether it’s B2C/B2B/B2G, target audience, participants in the purchasing process, country/culture/communications infrastructure, resources available to the firm

Marketing communication toolso Personal selling and WOM,o Exhibitions and trade fairso Trade missions (organised visits to a country by a group of senior business

managers from a number of firms, often subsidised by national or local government

o Advertising (TV+ Press) Use of agencies and consultancies due to reasons pertaining to

financial, specialist knowledge, creative input, external perspectiveo Sales promotiono Direct marketingo Corporate Identity and lobbyingo Sponsorship and celebrity endorsement, product placemento PRo Online communications (ads, websites, email, viral marketing, mobile)

Developing profitable, long term marketing relationshipso Objectives of relationship marketing: maintain and build existing customers,

use existing relationships to obtain referral to new business, cross sell, reduce costs of servicing customers and costly ways of chasing new business

o Starting point is to build an IT system that will integrate the activities, such as CRM

10 Management of international distribution and logistics Selecting foreign country market intermediaries

o Indirect or direct channels Integrated (direct) channels of distribution where you use your own

sales force or distribution channels is beneficial when a firm’s marketing strategy requires a high level of service before or after the sale

Indirect channels require less investments in terms of both money and management time

Intermediaries may include export distributors, export agents, cooperative organisations (carry on exporting activities on behalf of several producers and are partly under their administrative control)

Company owned sales force include travelling export sales representatives, domestic-based export department, foreign based sales brand or subsidiary

o 11C considerations to consider in channel selection (Czinkota and Ronkainen 2006)

Consumer characteristics, culture, competition, company objectives, characteristics of the market, cost, capital required, coverage needed, control issues, continuity provided, communication effectiveness

Building relationships in foreign market channelso Motivating intermediaries

Intermediaries pick and choose products they will promote, hence they need to be motivated in order to emphasize the firm

3 basic elements (Rosenbloom 2002): finding out the needs and problems of marketing intermediaries, offering support that is consistent with their needs and problems, building continuing relationships

Support to intermediary include: adequacy of the profit margins available, guarantee of exclusive territories, adequacy and availability of advertising assistance, offer of needed financial assistance

Carrot and stick philosophy of motivating distributors in the US and Europe fails in the Middle East

Need to keep in regular contact with intermediaries to build rapporto Controlling intermediaries

Written plans with clearly expressed performance objectives, regular report programme and periodic personal meetings

Evaluation of performance and control against agreed plans has to be interpreted against the changing environment (economic downturn)

o Channel updating Need to adapt and update channel strategy periodically

o Developing a company-owned international sales force Benefits are control, closer manufacturer-customer relationship,

potential help in identifying and exploiting new international marketing opportunities

Disadvantages are resource commitment, higher exist costs, exposure to unexpected changes

Trends in retailing in international marketso Retail differences between developing and developed countries

o 4 stages of retailing around the world (McGoldrick 2002) Traditional retailing: Typically found in Asia, Latin America and Japan.

Concentration of operators is weak, segmentation is non-existent and level of integration of new technology is low. These are often small-scale family retailing businesses employing few people and with a low turnover

Intermediary retailing: Retailing in Italy, Spain, and Eastern Europe is in the process of transformation, being both modern and traditional. Most businesses are independent with a turnover lower than the European average but there is tendency towards concentration

Structured retailing: Retailing in the north of Europe tends to be fairly structured, reflecting the level of economic development. Have enterprises larger in size have a higher level of concentration and a greater level of productivity per employee. Have sophisticated technologies facilitating more elaborate competitive strategies

Advanced retailing: US/Germany/UK are examples, in which retailing is the most advanced in terms of concentration, segmentation, capitalisation and integration.

Characterized by 5 dimensions: interactive customer marketing, mass customisation, data mining, category management, effective consumer response (EDI systems for efficient inventory replenishment and ensuring a continuous just in time delivery of supplies)

o Globalisation of retailing Contributing push factors: saturation of home market, economic

recession, declining population, strict planning policies on store development, high operating costs, shareholder pressure to maintain profit growth, too much competition

Contributing pull factors: underdevelopment of some markets with weak competition, strong economic growth or rising standards of living, high population growth, relaxed regulatory framework,

favourable operating costs, geographic spread of trading risks, opportunity to innovate under new market conditions

o Marketing implications for development of international distribution strategies

Developments in retailing include power shifts in supply chains towards retailers, intense concentrated competition with significant buyer power across country markets, rapidly advancing technology facilitating global sourcing and global E-transactions, unrelenting performance measures demanded of suppliers by retailers, smart consumers expecting high levels of customer service

o Internet retailing Market characteristics which favour development of internet-based

distribution: inefficiencies in traditional distribution channels, market fragmentation, minimum scale barriers, commodity type products, short life cycle products

Management of the physical distribution of goodso 3 areas that add extra costs in international distributions: Increased distance,

new variables to consider (new modes of transport, new documentation, packaging), greater market complexity

o For firms to achieve a logistically effective system of distribution, need to clearly define areas of responsibility across foreign country markets, have a highly developed planning system, have an up to date and comprehensive information support system, develop expertise in distribution management, have a centralised planning body to coordinate activities and exercise overall control

o Transportation methods include ocean, inland, waterway, air, road, rail Brand (2005) says factors influencing which one to choose depends on

terms of export contract, commodity specification, freight and overall transit time

o Export processing zones (EPZ) Concerns the duty-free and tax-free manufacture or processing of

products for export purposes within a customs-controlled environment

Components imported into the zone duty free and tax free to be processed into the finished product, or stored for onward distribution and then re-exported without any liability of import duties or other taxes

Advantages for firms using EPZs: no customs duties and import permits, can use foreign currency to settle transactions, can be used for assembly of products and reduce transportation costs, give firm flexibility and help avoid the unwanted bureaucracy of customs and excise

o Brand (2005) says 3 areas of uncertainty in international trade contracts: uncertainty about which legal system will be used to adjudicate the contract, difficulties resulting from inadequate and unreliable info, differences in the interpretation of different trade terms

11 Pricing for international markets Stages for pricing strategy development

o Analyse factors influencing international pricing, confirming what impact the corporate strategies should have on pricing policy, evaluating the various strategic pricing options and selecting the most appropriate approach, implementing the strategy through the use of a variety of tactics and procedures to set prices at SBU level, managing prices and financing international transactions

Factors affecting international pricing decisionso Company and product factors

Corporate and marketing objective, firm and product positioning, product range/life cycle/substitutes, product differentiation, product USP, cost structures, manufacturing, marketing, product development, available resources, inventory, shipping costs, location of firm facility, specific export costs like documentation processing, whether will be able to take advantage of learning curve and economies of scale

o Market factors Consumer’s perceptions, expectations and ability to pay, need for

product and promotional adaptation, market servicing, extra packaging requirements, market structure, distribution channels, discounting pressures, market growth, demand elasticity, need for credit, competition objectives, strategies and strength

o Environmental factors Government influences and constraints, currency fluctuations,

business cycle stage, level of inflation, use of non-money payment and leasing

o 5 characteristics of the product are important in pricing: frequency of purchase, degree of necessity, unit price, degree of comparability, degree of fashion or status

Approaches to international pricing strategieso Standardisation (ethnocentric) pricing: based on setting a price for the

product as it leaves the factory, irrespective of final destination. Each customer pays expected to pay transport and import duties themselves, leading to considerable difference in the price to the final customer

o Adaptation (polycentric) pricing: Each local subsidiary to set a price which is considered to be the most appropriate for local conditions, with no attempt to coordinate prices from country to country. Weaknesses is lack of control, bad image, and grey markets

o Invention (geocentric) pricing: whilst the need to take account of local factors is recognized, particularly in the short term, firm still expects local pricing strategies to be integrated into a company-wide long term strategy (like short term do price promotion but long term be consistent globally)

Common pricing objectiveso Rate of return (cost oriented firms set prices to achieve a specific level of

ROI), market stabilisation (choose not to provoke retaliation from leader), demand led pricing, competition led pricing, pricing to reflect product

differentiation, market skimming (first high price than lower gradually), market penetration, early cash recovery (increase sales and generate cash rapidly through special offers, discounts for prompt payment and rigorous credit control), prevent new entry (establish low price to indicate to competitors the prospect of low returns and price wars)

o Setting a price can be based on the cost, market, or competition oriented approaches

Process for determining export priceso Determine export market potential, estimate price range and target price,

calculate sales potential at target price, evaluate tariff and non-tariff barriers, select suitable pricing strategy in line with firm objectives, consider likely competitor response, select pricing tactics, set distributor and end-user prices, monitor performance and take necessary corrective actions

Problems of pricing and financing international transactions as below:o Problems in multinational pricing

Firms find difficulties in coordinating and controlling prices across their activities sufficiently to enable them to achieve effective financial performance and their desired price positioning

3 types of grey markets (legal activity of buying at one place and selling at another, taking the price difference as profit) (Assmus and Weisse 1995)

Parallel importing: product priced lower in home market where it is produced than the export market

Re-importing: produce priced cheap in export market than in home market where it is produced

Lateral importing: price difference between export markets Price coordination strategies

Economic measures (raising price by which it transfers to the low-priced country), centralisation in price setting, formalisation in pricing decision process, information coordination (essential asset is common shared business values across the subsidiaries that are backed by compatible incentive systems)

Framework for selecting a coordination method (Assmus and Weisse 1995)

Transfer pricing in international markets Concerned with the pricing of goods sold within a corporate

family 3 types: transfer at production cost, transfer at arm’s length

(charged the same as any buyer outside the firm), transfer at cost plus (profits split between the production and international divisions)

Transfer pricing can be used by firms to act as a barrier to entry (oil firm charge high cost for crude oil, keeping profits at crude oil level, making petrol distribution seem unprofitable to potential market entrants), avoid domestic tax liabilities, avoid foreign tax (make operations with low tax rates with the most profits), and to marshal resources around the world

o Problems in managing foreign currency and fluctuating exchange rates Problem arise because of the need to buy and sell products in

different currencies Sarathy et al (2006) says 3 types of risk: Transactional (exporter

quotes in a foreign currency, which then appreciates, diminishing ROI), competitive risk (Yen appreciate, making Japan exporters uncompetitive), market portfolio risk (firm with a narrow market portfolio hit more because only operate in one area)

Firm should develop different tactics depending on whether domestic currency is strong (compete on non-price factors, use countertrade for weak currency countries, keep foreign earned income in local country, buy services abroad in local currencies, borrow money in expansion in local markets, invoice foreign customers in their own currency) or weak (compete on price, source and make in the domestic country, obtain payment in cash, minimise overseas borrowing, invoice in domestic currency)

o Problems of obtaining suitable payment in high-risk markets Obtaining payment promptly and in a suitable currency from the less

developed countries can cause expense and additional difficulties Can seek financial support to reduce risk of non-payment through

government sponsored finance, commercial banks, cooperation agreements, and forfeiting (transfer risk to a forfeiting house, who will pay you instantly minus the discount for them taking on the risk)

Countertrade Covers various forms of trading arrangement where part or all

of the payment for goods is in the form of other goods or

services, and price setting and financing are dealt with together in one transaction

Includes barter, compensation trading, counter purchase, offset, switch deals, cooperation agreements

Advantages: Surplus and poor quality products can be sold through whereas they could not for cash, government can strengthen political ties, can be used as a method of going into high risk areas, can circumvent government restrictions on import/export

Disadvantages: lack of flexibility, poor quality products, products taken in exchange does not fit firm objectives or is difficult to sell, negotiations are difficult due to no guide market prices, difficult to evaluate in terms of profitability

Leasing is used as an alternative to outright purchase in countries where there is a shortage of capital available to purchase high-price capital and industrial goods

o Administrative problems of cross border transfer of goods Like bureaucracy and delays Major stages at which export prices might be quoted: Ex (point of

origin), FOB (free on board), FAS (Free alongside), FAS (vessel), C. and F. (cost and freight), CIF (cost, insurance freight), DDP (direct to destination point)

Export order process

12 International marketing implementation through enabling technologies Vicious circle of technology and competitive advantage

International E-markets and e-marketingo B2C includes e-commerceo B2B includes industry specific hubs (automobile, aerospace), function specific

hubs (ad, HR), e-procurement with the supply chaino C2C include online auctiono C2C include stuff where consumers joining together to reduce prices they pay

through bulk buying, such as Groupon Impact of E-business on international marketing

o Disintermediation and re-intermediationo Social networking

International marketing solution integrationo Knowledge managemento Supply chain managemento Value chain integrationo Virtual enterprise networks (SME with complementary expertise that form

themselves into virtual enterprise networks to bid for and carry out projects and routine business)

o CRMo Mass customisation

Impact on international marketing strategyo Impact of technology on analysiso Impact of technology on international strategy developmento Internet-based market entryo Impact of technology on strategy implementation and control

Product and service management Pricing Channel management Communications Control, evaluation and learning

Challenges faced by international e-business marketing businesseso Customers from low context countries embrace the internet in different ways

to those in high context cultures because they emphasize implicit interactionso Need for an integrated communications approach involving virtual and

physical media

o Consumers expect high quality of performance, which can be tarnished by low-cost, poorly performing website and slow or inaccurate order fulfilment

o Effectiveness of website such as ease of navigation, shipping details, sensitivity to language and culture

o Marketing skills ensuring success in e-business are different from traditional skills

o Development of intelligent agents that search for specific pieces of information on markets and potential suppliers means that marketers cannot base their appeal to customers on traditional marketing mix factors