Transcript International Marketing

INTERNATIONAL MARKETING
Topic 4: International Niche Marketing for SMEs
Theories of Internationalisation
LEARNING OUTCOMES
After completing this topic, you should be able to:
 Explain the barriers to internationalisation
that SMEs face, and suggest methods to
overcome
 Analyse the various internationalisation
options available to the SME
 Apply strategic management models to SMEs
in international markets
 Discuss the critical success factors for the
international SME
SMES & INTERNATIONALISATION
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Definition of SME is dependent on nature of
business
SMEs becoming more important
Internationalisation now more accessible to
smaller firms
KEY MOTIVATORS TO INTERNATIONAL
MARKETING (KATSIKEAS, 1996)
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Reactive stimuli (see last weeks lecture)
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Proactive stimuli
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Managerial elements
(PERCEIVED) BARRIERS (ALBAUM ET AL, 2005)
Controllable
 Lack of knowledge
 Lack of information
 Control of activities
 Physical
arrangements
 Service support
 Perceived risk?
Uncontrollable
 DEPICTS factors
 Red tape
 Financing
 Lack of assistance
&/or incentives
OVERCOMING THE BARRIERS
Look to existing customers
 Make a commitment
 Seek advice
 Use trade shows
 Pick markets carefully
 Manage growth
 Use letters of credit
 Be patient
 Choose partners carefully
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(BARRETT, ‘95)
INTERNATIONALISATION FACTORS
SME generic strategy
Segmentation, targeting
and positioning
Growth options
Competitive advantage
SME internationalisation
strategy
Customer
base
Industry structure
and competition
Supply chain
SME generic
strategy
Market
factors
Motivations
and barriers
Country and
market entry
selection
Company
factors
Stage of
internationalisation
Ambition, capabilities
and attitudes to risk
SME INTERNATIONALISATION OPTIONS
Exporting
 Niche marketing of domestically delivered services
 International niche marketing
 Direct marketing and ebusiness
 Piggybacking – on Multi-national Enterprise
(MNE)
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TYPES OF EXPORTER (LOWE & DOOLE, 1997)
MOTIVATIONS TO EXPORT (DOOLE AND
LOWE 2004)
Government support programmes
 Attractive profits
 Growth opportunities
 Economies of scale
 Unique product offering
 Export orientated management team
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BARRIERS TO EXPORTING
Red Tape
 Slow payment from buyers
 Lack of competitive products
 Danger of payment defaults
 Lack of experience and skill
 Language barriers
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DOMESTICALLY DELIVERED SERVICES
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Leisure & tourism, health care, education
Need USP that justifies extra travel costs
incurred
INTERNATIONAL NICHE MARKETING
Different from exporting
 Occurs when a firm becomes strong in a
narrow specialised market of one or two
segments across a number if country markets.
 These segments need to be too small to attract
larger interests (Brown and McDonald 1994)
 To be successful the product must be
distinctive, highly differentiated and
recognisable.
 McDonalds and Coca Cola
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EXPORTING & INTERNATIONAL NICHE
MARKETING: DIFFERENCES
Marketing strategy
 Segmentation
 Management focus
 Market information
 Pricing
 Distribution
 Relationships
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SUSTAINING AND DEVELOPING THE NICHE
Understand customers
 Deliver on service
 Innovate
 Seek out cost efficiencies
 Profits before market share
 Evaluate entry strategies & marketing mix for
each new country
 Maintain focus
 Provide high levels of service
 Be content to remain small
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PORTER’S GENERIC STRATEGIES
Competitive advantage
Low cost
Differentiation
Broad
Cost
Leadership
Differentiation
Cost Focus
Differentiatio
n
focus
Scope
Narrow
Cost Leadership
 Efficiency - producing high volumes of
standardized goods
 Economies of Scale and experience curve effects.
 Low cost product to large customer base.
 Strategy = constant cost reductions throughout
the business
 Distribution = strategy
 Promotional = low cost product features.
 For success you need large market share
advantage and or preferential access to raw
materials, components, labour etc
Examples: Aldi and Ryanair,
Differentiation Strategy
 Unique offering.
 Must provide unique value to custome
 Inelastic demand
 High loyalty
 Premium pricing strategy.
 Success requires: innovation, creativity,
research, distributio, ability to communicate
the differentation, high skills level (marketing,
service staff etc)
Focus/Niche Strategy
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Select few target markets.
Targeting and tailoring to one or two narrow market
segments allows the firm to better satisfy the needs and
wants of that target market.
Suitable for relatively small firms and in instances
larger firms.
Internationally allows you to select markets less
attractive to competition
Maybe company cannot afford other two strategies
Niches can dissapear
CRITICISMS OF THE GENETIC
STRATEGIES
They lack specificity and flexibility.
 Apply generic strategies is possibly ineffective in
the long run
 "caught in the middle“ given that there is a
middle ground between the strategies. Being
stuck in the middle looses your competitive
advantage.
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ANSOFF’S GROWTH MATRIX
Products
Old
New
Old
Penetration
Product
development
Market
development
Diversification
Markets
New
HBR (1957) 'Strategies for Diversification'.
 Concerned with strategic options for growth
objectives
 Helps select product and market growth
strategy.
 Grow depends on whether it markets new or
existing products in new or existing markets.
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Market Penetration
Market/selling existing products to existing
customers: promotion, repositioning, pricing etc.
 Product is not altered
 Not seeking new customers.
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Four objectives
 Maintain or increase the market share of current
products
 Secure dominance of growth markets
 Restructure a mature market by driving out
competitors
 Increase usage by existing customers
Market Development
 Market/sell existing product range in a new
market.
 Product remains the same
 New target market
 Strategies:
 New geographical markets (export)
 New product dimensions or packaging
 Different pricing policies to attract or create
new market segments
 New distribution
Product Development
 New product to be marketed to existing
customers.
 Innovate new product offerings to replace
existing ones.
 Marketed to existing customers
 Car Markets
Diversification
 Market completely new products to new
customers.
 Two types of diversification:
Related diversification staying in familiar markets –
food industry. Kellogg’s/Nestle cereal bars
 Unrelated diversification - no market experience.
Caterpillar and clothing
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INTERNATIONAL E-MARKETING
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x
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Internet overcomes geographic barriers
Size of firm is no longer a barrier
Facilitates faster internationalisation
Information access
Lack of know-how
Need for multi lingual options
Still large numbers not got access
MCKINSEY 7S FRAMEWORK
Strategy
Structure
Systems
Skills
Shared
values
Style
Staff
The 7-S framework is a Value Based
Management (VBM) model
 Company orientated – how to operate
 How to holistically and effectively organise a
company.
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1. Shared Value
 The interconnecting center
 Organization world view, mantra, beliefs and
attitudes – Bennetton, Google
2. Strategy
 The plans for resource allocation to achieve
objectives. Environment, competition, customers.
3.
Structure
 Interorganisational functionality. Centralized,
functional divisions (top-down); decentralized (the
trend in larger organizations); matrix, network,
holding, etc.
4. System
 Procedures, processes ect hiring, finance, promotion
etc
5. Staff
6. Style
 Cultural style
 Management Styles
7. Skill
 Company capabilities –Core competencies of the firm
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Useful for Interrelationship of strategy formulation
and implementation.
Helps managers to link a strategy to a variety of
activities and so improve strategic implementation.
It’s an effective assessment of the viability or
plausibility of a strategy
Convention is get the strategy right first and the right
org structure will fall into place.
This is a limiting perspective
To assess a new strategy you have to assess
organisational capabilities
The 7’s allow this possibility. When the 7’s are in sync
the company is organises and ready to implement a
new strategy
CRITICAL SUCCESS FACTORS (D
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OOLE,
2000)
Organisational culture that fosters learning &
innovation
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Effective relationship building
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Clear focus & positioning strategy
ALTERNATIVE INTERNATIONAL
DEVELOPMENT FOR SME’S
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Useful to segment firms based on their level of
internationalisation:
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The passive exporter – focus domestic, new to exporting,
reaction to unsolicited orders, poor research
The reactive exporter – seeks exports markets as secondary to
domestic, doesn’t invest in attracting foreign orders but
follows up on existing ones, has basic knowledge
The experimental exporter – beginning to commit, structuring
organisation accordingly, relationship building, making
adaptations for foreign markets
The proactive exporter – entering and developing new
markets, regular research, promotional mix adaptations,
exports accounting for up to 50%
Established exporter – integral to business, generates
majority of business, substantial investments. Networks and
relationships
Internationalisation of SME’s
Factors giving rise to the Born
Globals
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Increasing Role of Niche markets
Advances in Technology (production)
Flexibility of SME’s
Global Networks
Advances in information technology
(speed)
SUMMARY
Many factors drive the SME to internationalise
 Many of the barriers to internationalisation are
perceived rather than actual
 There is a range of internationalisation options
open to the SME
 Maintaining a strategic focus & fostering an
appropriate organisational culture will assist
the SME in international markets
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