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International Marketing Theory Review Uli Breunig Caglar Cintuglu Deniz Yarar 23.1.2007 Jobber, Chapter 22 1 Agenda Going International? How to Enter which Markets Marketing Strategy Structures of Organization 23.1.2007 • Deciding: – whether to go International – which Markets to enter – how to enter • Developing International Marketing Strategy • Organizing for International Operations Jobber, Chapter 22 2 Seven triggers for International expansion: Going International? How to Enter which Markets Marketing Strategy Structures of Organization 23.1.2007 • • • • • • • Saturated domestic markets Small domestic markets Low-growth domestic markets Customer drivers Competitive forces Cost factors Portfolio balance Jobber, Chapter 22 3 Seven triggers for International expansion: Going International? Saturated Small Low-growth Cust. drivers Comp. forces Cost factors Portfolio 23.1.2007 • • • • • • • Saturated domestic markets Small domestic markets Low-growth domestic markets Customer drivers Competitive forces Cost factors Portfolio balance Jobber, Chapter 22 4 Saturated domestic markets Small domestic markets Going International? Saturated • Few opportunities to expand in current domestic (saturated) market Small Low-growth Cust. drivers Comp. forces Cost factors • Serving small national markets is not sufficient to compete against other global competitors Portfolio 23.1.2007 Jobber, Chapter 22 5 Low-growth domestic markets Customer drivers Going International? Saturated • Recession at home -> new opportunities overseas Small Low-growth Cust. drivers Comp. forces Cost factors • Suppliers with international presence expected • Customers expanding abroad Portfolio 23.1.2007 Jobber, Chapter 22 6 Competitive forces Going International? Saturated Small Low-growth Cust. drivers Comp. forces • Companies feel obliged to follow others going abroad • Attacking an overseas competitor, that entered domestic market, in his own home market Cost factors Portfolio 23.1.2007 Jobber, Chapter 22 7 Cost factors Portfolio balance Going International? Saturated Small • Low-cost areas (labour: Taiwan, Korea…) • Gaining economies of scale Low-growth Cust. drivers Comp. forces Cost factors Portfolio 23.1.2007 • Different growth rates in different areas provide portfolio balance Jobber, Chapter 22 8 Deciding which markets to enter Going International? • Macroenvironmental issues How to Enter which Markets – Economic influences – Socio-cultural influences – Political-legal influences Marketing Strategy • Microenvironmental issues Structures of Organization 23.1.2007 – Market attractiveness – Company Capability Profile Jobber, Chapter 22 9 Deciding which markets to enter How to Enter which Markets Macroenvironment Economic Socio-cultural Political-legal Microenvironment Attractiveness • Macroenvironmental issues – Economic influences – Socio-cultural influences – Political-legal influences • Microenvironmental issues – Market attractiveness – Company Capability Profile Capability profile 23.1.2007 Jobber, Chapter 22 10 Macroenvironmental issues: Economic influences How to Enter which Markets Macroenvironment Economic Socio-cultural Political-legal Microenvironment • Country‘s size • Per capita income • Stage of economic development • Infrastructure • Exchange rate stability Attractiveness Capability profile 23.1.2007 Jobber, Chapter 22 11 Macroenvironmental issues: Socio-cultural influences How to Enter which Markets Macroenvironment Economic Socio-cultural Political-legal • Psychic distance • Cultural differences – Attitudes – Social Perspectives – Language Microenvironment Attractiveness Capability profile 23.1.2007 Jobber, Chapter 22 12 Macroenvironmental issues: Political-legal influences How to Enter which Markets Macroenvironment Economic Socio-cultural Political-legal Microenvironment • Attitude of foreign governments to – Imports – Foreign direct investment • Political stability • Trade barriers Attractiveness Capability profile 23.1.2007 Jobber, Chapter 22 13 Microenvironmental issues: Market attractiveness How to Enter which Markets Macroenvironment Economic Socio-cultural Political-legal Microenvironment Attractiveness • Size & growth rate • Competition • Costs of serving the market – (distribution and control) • Profit potential • Market access (informal ties between existing suppliers) Capability profile 23.1.2007 Jobber, Chapter 22 14 Microenvironmental issues: Company capability profile How to Enter which Markets Macroenvironment Economic Socio-cultural Political-legal Microenvironment Attractiveness Capability profile 23.1.2007 • Skills – Necessary skills to market abroad? – Compensation of shortfalls? • Resources – Financial resources for maybe higher market servicing costs? – Human resources (local)? Jobber, Chapter 22 15 Microenvironmental issues: Company capability profile How to Enter which Markets Macroenvironment Economic Socio-cultural Political-legal Microenvironment Attractiveness • Product adaptation – Product modifications: • Local preferences/regulations • Motivation/capability for redesign? • Competitive advantage – Ability to create a competitive advantage? Study foreign market! Capability profile 23.1.2007 Jobber, Chapter 22 16 Deciding how to enter a market Going International? How to Enter which Markets Marketing Strategy • Exporting – Indirect – Direct • Licensing • Joint Ventures • Direct investment Structures of Organization 23.1.2007 Jobber, Chapter 22 17 Deciding how to enter a market How to Enter which Markets Exporting Indirect Direct Licensing Joint Ventures • Exporting – Indirect – Direct • Licensing • Joint Ventures • Direct investment Direct investment 23.1.2007 Jobber, Chapter 22 18 Indirect exporting How to Enter which Markets Exporting Indirect Direct Licensing Joint Ventures Direct investment 23.1.2007 • Domestic-based export merchants – who take title to the products & sell abroad • Domestic-based export agents – who sell on behalf of the exporter but do not take title Jobber, Chapter 22 19 Indirect exporting How to Enter which Markets Exporting Indirect Direct Licensing Joint Ventures • Piggy-backing – Exporter uses other producer‘s overseas distribution facilities • Co-operative organizations – Act on behalf of a number of producers, partly controlled by them Direct investment 23.1.2007 Jobber, Chapter 22 20 Direct exporting How to Enter which Markets Exporting Indirect Direct Licensing Joint Ventures Direct investment 23.1.2007 • Foreign-based agents or distributors • Domestic-based sales representatives • Overseas sales/marketing office or subsidiary • The internet Jobber, Chapter 22 21 Licensing How to Enter which Markets Exporting Indirect Direct Licensing Joint Ventures Direct investment 23.1.2007 • Licensing – Foreign Licensor provides a local licensee with access to technology • Franchising – Product & trade name franchising – Business format franchising Jobber, Chapter 22 22 Joint Ventures How to Enter which Markets Exporting Indirect Direct Licensing Joint Ventures • Contractual joint-venture – No new enterprise, share cost, investment, risk and profit • Equity joint-venture – New company, foreign & local investors Direct investment 23.1.2007 Jobber, Chapter 22 23 Joint Ventures How to Enter which Markets Exporting Indirect Direct Licensing Joint Ventures • Joint Ventures are often the only way to enter a market: – Government restrictions to market entry – Foreign companies lack the resources to set up production facilities alone Direct investment 23.1.2007 Jobber, Chapter 22 24 Direct investment How to Enter which Markets Exporting Indirect Direct Licensing Joint Ventures Direct investment 23.1.2007 • Acquisition of foreign producer • Buying-out joint-venture partner • Building new facilities Expensive and risky but quick way of entering new market Jobber, Chapter 22 25 Selecting an entry mode Control, Resources, Risk How to Enter which Markets Exporting Factor Risk of losing Proprietary information Resources Control Direct investment Direct investment Exporting (own staff) Joint Venture Exporting (own staff) Joint Venture Licensing Indirect High Direct Licensing Medium Level Joint Ventures Licensing Joint Venture Direct investmentExporting (own staff) Licensing Low Exporting (middlemen) Exporting (middlemen) Exporting (middlemen) Direct investment 23.1.2007 Jobber, Chapter 22 26 Developing international marketing strategy Going International? How to Enter which Markets Marketing Strategy Structures of Organization 23.1.2007 • Standardization or adaption • International marketing mix decisions – Product – Promotion – Price – Place Jobber, Chapter 22 27 Developing international marketing strategy Marketing Strategy Standard/adopt Int. Marketing mix Product Promotion Price Place 23.1.2007 • Standardization or adaption • International marketing mix decisions – Product – Promotion – Price – Place Jobber, Chapter 22 28 Standardization or adaptation Marketing Strategy Standard/adopt Int. Marketing mix Product Promotion Price • Few totally standardized mixes – Coca-Cola differs sweetness & carbonization – McDonald‘s: meat in hamburgers, menu with(out) salad Place 23.1.2007 Jobber, Chapter 22 29 International marketing mix Product Marketing Strategy Standard/adopt Int. Marketing mix Product Promotion Price • Global market to justify huge R&D costs – Pharmaceutical industry • Authentic national heritage: – Scotch whisky, Belgian chocolate, French wine Place 23.1.2007 Jobber, Chapter 22 30 International marketing mix Promotion Marketing Strategy Standard/adopt Int. Marketing mix Product Promotion Price Place 23.1.2007 • Standardized advertising for consistent image identity also for international travellers • Adaptations: – Language, local taboos, different use of goods, local culture Jobber, Chapter 22 31 International marketing mix Price Marketing Strategy Standard/adopt Int. Marketing mix Product Promotion Price Place 23.1.2007 • • • • • • Local competition Customers Transfer pricing Taxes, tariffs, exchange rates Counter trade Parallel importing Jobber, Chapter 22 32 International marketing mix Place Marketing Strategy Standard/adopt Int. Marketing mix Product Promotion Price • Distribution channels In Spain yoghurt was sold through pharmacies Germany, UK etc. sell some pharmaceuticals in grocery outlets Place 23.1.2007 Jobber, Chapter 22 33 Organizing for international operations Going International? How to Enter which Markets • Organization • Centralization vs. decentralization Marketing Strategy Structures of Organization 23.1.2007 Jobber, Chapter 22 34 Organizing for international operations Structures of Organization Organization Centralization • Organization • Centralization vs. decentralization Decentralization 23.1.2007 Jobber, Chapter 22 35 Organization Structures of Organization Organization Centralization Decentralization • International – Overseas operations are appendages to a central domestic operation • Global – Overseas operations viewed as „delivery pipelines“ to a unified global market 23.1.2007 Jobber, Chapter 22 36 Organization Structures of Organization Organization Centralization Decentralization • Multinational – Regard for overseas operations as portfolio of independent businesses – Rather decentralized • Transnational – Coordination & cooperation in an environment of shared decision-making 23.1.2007 Jobber, Chapter 22 37 Centralization Structures of Organization Organization Centralization Decentralization 23.1.2007 • Global integration of international operations • Reaps economies of scale • Provides integrated marketing profile Jobber, Chapter 22 38 Decentralization Structures of Organization Organization Centralization Decentralization 23.1.2007 • Delegation of international operations to individual countries or regions • „Regional responsiveness“ • Maximizes customization of products to regional preferences Jobber, Chapter 22 39 Thank you for your attention 23.1.2007 Jobber, Chapter 22 40