international marketing for mba

1

Master of Business Administration

International MarketingPaper 488914

Class Details

CLASSES: Weekly 3-hour classes, 6 – 9pm

LECTURER:Name Mike HoffmeisterTitle Prof Dr Room:Phone:

OFFICE HRS:

488914 International Marketing

2

Objectives

Prescriptor• The nature and complexity of international marketing are examined.

An appreciation of factors to be considered when developing international marketing strategies and plans; the making of management decisions is developed.

Paper aim• To show the importance of international marketing for New Zealand

business• To examine the factors to take into account when developing

international marketing strategies and plansLearning outcome

• Identify and evaluate marketing opportunities for local business in a global market.

• Develop marketing strategies and plans for exporting to international markets

Organisation

Student learning time• A minimum of 75 hours, comprising 18 hours of class contact, 3 hours of

assessment and 54 hours of self-directed learning

Learning & Teaching Strategies• Lectures, Group seminars, Class discussion, Readings, Case studies, …

Assessment• Assignment• Weekly formative assessment involving questions and practice

assignments to assist development of understanding of and ability to apply concepts

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Weekly Programme (I)

Objective Topics Readings

WEEK 1: Introduction: Fundamentals of International Marketing

Discuss the challenges of global marketing

Importance of Export for NZ

Drivers towards globalisation

Management orientation

Meaning of culture

Text: Chapter 1-3 FundamentalsCase 1.1: Ikea´s Global Strategy

WEEK 2: Market Entry Options

Discuss impoact of entry barriers on the choice of an entry mode

Foreign Entry Research

Export, Licensing, Joint Ventures, Foreign Direct Investment

Text: Chapter 4-6Case 2.1: Daloon A/S

WEEK 3: Local Marketing

Discuss how to create and implement local marketing activities

Segmentation

Mature Markets

New Growth Markets

Emerging Markets

Text: Chapter 7-10Case 3.2: Levi Strauss Japan KK

Weekly Programme (II)


WEEK 4: Global Marketing (I) Brand and Product Strategies

Discuss the emergence of standardized global brand and product marketing strategies

Standardization

Brand Management

Product Strategy

Global Services

Text: Chapter 11-12Case: Disney in France; in Hill, International Business

WEEK 5: Global Marketing (II) Price, Distribution and Advertising Strategies

Discuss selected standardized global marketing mix instruments

Price Strategy

Distribution Strategy

Advertising Strategy

Text: Chapter 13-15Case 4.3: United Colors of Benetton

WEEK 6: Salesforce Management and Marketing Organisation

Discuss aspects of personal selling and marketing organisation · Managing a sales force

· International Human Resources Management

· Organizational Structure

Text: Chapter 16-17Case: Sales Force in Automotive Retailing

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Assignment for International Marketing

Please write a profile on one of the later mentioned companies with special regard to their international operations. Please consider the following:

• What are the company´s mission statements and objectives?• How has the company become international? Was it successful?• What is their international brand and product strategy?• What is the company´s philosophy concerning their employees and

leadership style in general and specifically for their sales force?

Textbook

Paper based on

Global MarketingForeign Entry

Local Marketing &Global Management

Johny K. JohanssonGeorgetown University, USA

3rd Edition, Boston et al, 2003

5

Master of Business AdministrationInternational Marketing

Paper 488914

Part 1Introduction

Weekly Programme



Discuss the challenges of global marketing

Importance of Export for NZ


Management orientation

Meaning of culture

Text: Chapter 1-3 FundamentalsCase 1.1: Ikea´s Global Strategy






6

The future is not ahead of us. It has already happened.

Unfortunately,it is unequally distributed

amongcompanies,

industries, and nations.

(Philip Kotler 2003, Marketing Management)

What is Marketing?

Marketing• … is a social and managerial process by which

individuals and groups obtain what they need and want through creating and exchanging products and value with others.(Philip Kotler 2004, Principles of Marketing, p 5)

• … is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals.(American Marketing Association)

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Nike: Superb Marketing

Nike• Company with a powerful brand and superb marketing skills

- It is not so much the shoe but where they take you:- Markts a way of life, a sports culture, a “Just Do It!” attitude- The culture and style is to be a rebel

• Gives customers more than just good athletic gear• Customers do not wear Nikes, they experience them

Target customers

Marketing Mix

A set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. It consits everything the firm can do to

influence the demand for its product.(Philip Kotler 2004, Principles of Marketing, p 56)

ProductVariety; Quality

Design; FeaturesBrand namePackagingServices

PromotionAdvertising

Personal sellingSales promotionPublic relations

PriceList priceDiscounts

AllowancesPayment period

Credit terms

PlaceChannelsCoverage

AssortmentsLocationsLogistics

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What is INTERNATIONAL Marketing?

International Marketing

• … is the process of planning and conducting transactions across national borders to create exchanges that satisfy the objectives of individuals and organisations.(Czinkota/ Ronkainen 2004, International Marketing, p 4)

Why International MarketingThe Example of New Zealand

9

Export/ Import by Country in NZ

Merchandise Exports• Total (07/2002-06/2003): $28,2 bill• Australia 20%• European Union 16%• USA 15%• Japan 12%

Merchandise Imports• Total (07/2002-06/2003): $32,2 bill• Australia 23% • European Union 19%• USA 13%• Japan 12%

Source: NZ Trade Statistics, June 2003

Export/ Import by Product in NZ

Merchandise Exports• Total (07/2002-06/2003): $28,2 bill• Diary products 20%• Meat 15%• Foresty 11%

Merchandise Imports• Total (07/2002-06/2003): $32,2 bill• Motor vehicles 16% • Mechanical machinery 13%• Mineral fuels 10%


10

41,5 40,860,3 75,9

97,6125,4

168,3198,1

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100

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Japan

United S

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Taiwan

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11

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200

400

600

800

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1200

Australi

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panKorea USA

China

Taiwan

Philippines

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Forestry Exports in NZ04/2001 – 03/2002

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Market

Competition

Technology

Government

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Market Drivers

Common customer needs• When customers in different countries have same/

simular needs in a product or service category- Nike, McDonalds

Global customers• Customers that need the same product or service in

several countries• Therefore, firms follow customers abroad

- Hotel industry - German Bosch follows Volkswagen

Global channels• Existence of global distribution and logistic firms

- Federal Express

Tranferable marketing• Using the the same name packing, advertising, brand

names and other marketing mix elements in various countries

- Nike: Basket-ball star Michael Jordon

Competitive Drivers

Active• If competitors go to foreign markets• Incentive for firms to follow• Trying to match a competitor´s move• Example

- Swedish Ericsson and Finnish Nokia both went into the USA market in the late 1990

- Toyota´s Lexus, Honda´s Acura and Nissan´s Infinity were introduced in the USA at the same time

Passive• Presence of foreign competitors in a firm´s domestic market increases

the need for the firm to venture abroad or to counterattack in foreign country

• Example- Benetton´s success in the USA has led The Gap and The Limited, two US

competitors, to go abroad

13

Cost Drivers

Economies• … of Scale

- Spreading activities across multiple product lines of businesses Unit cost

• … of Scope- reduction by increased production

• Example- Volkswagen: over 20 factories in foreign countries

Sourcing advantages• Supply from a low-wage country

- global sourcing

Technology Drivers

Internet• Global information and

communication• Business transactions• E-commerce• On-line marketing• Examples

- Microsoft- Amazon- Ryan Air

14

Government Drivers

Favorable trade policies• BMW goes to the US

Acceptance of foreign investments• China

Compatible technical standards• ISO 9000

Risks of international activities

Misunderstanding customers preferences and foreign business culturesLack of international management knowhowUnstable governmentsForeign exchange problemsForeign-government entry requirementsand bureaucracyTariffs and other trade barriersCorruptionTechnological piratingHigh cost of product and communicationadaptionShifting borders

Kotler 2003: Marketing Management, p 385 and Kotler 1999, Marketing Management an Asian Perspective, p 410

15

Limits to global marketing

Limits• Negative industry drivers• Lack of resources• Localized mix requirements• Antiglobalization trends

Leads to LOCALIZED

Global Marketing

Localized Global Marketing

Definition• Globalise …

- the product strategy by marketing the same o product lines, o product designs and o brand names

every where but• Localize …

- distribution and marketing communication

A firms global marketing strategy has to be flexibly implementedand take into account of the different degrees to which the activites need local adaptions and personnel

New code word in marketing strategy

16

International management orientation

International management orientation

Need to classify international companies not only byquantitative figures but also by qualitative features (eg values, international orientation)

EPRG• Ethnocentric

• Polycentric

• Regiocentric

• Geocentric

*Heenan/ Perlmutter 1979, S. 17ff

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Management Orientation: EPRG-Model*

Ethnocentric orientation• Home market attitude

- „This works at home; therefore, it must work in your country“

• Export company- Each market is simular- Focus on home market - Sourcing, production and marketing

from home market perspective- Management decisions done locally- Manager for oversears are sent from

home markets

*Heenan/ Perlmutter 1979, S. 17ff; Kreutzer 1989, S. 12ff.; Hünerberg 1994, S. 114; Becker 1990, S. 270ff.

domestic

foreign

foreign


Polycentric orientation• Host market orientation

- „We want to be a good local company“

• Multi-national company- Each host market is different- Foreign market adaptions- Management decisions done in guest

market- Akquisition of manager for guest

market in that country


domestic

foreign

foreign

18


Geocentric orientation• World orientation

• Global company- Worldwide complex company

structure- International management- Standardised, global objectives and

strategies- Recruitment of managers worldwide


domestic

foreign

foreign


Regiocentric orientation • Based on polycentric orientation

- Considers increasing regionalisationof economies ie Europe

- Base: not countries but country groups

- Each country group is different while each country within a group is simular


domestic

f f

f f

f f

f f

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Country Specific Advantages (CSAs)

Factors that determine competitive advantages of a country• Factor Conditions

- The nation’s position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry

• Demand Conditions- The nature of the home demand for the industry’s product or service

• Related and Supporting Industries- The presence or absence in the nation of supplier industries and related

industries that are internationally competitive

• Firm Strategy, Structure, and Rivalry- The conditions in the nation governing how companies are created,

organized, and managed, and the nature of domestic rivalry

Firm-Specific Advantages (FSAs)

Firm-specific advantages• Patent• Trademark• brand name • Control of raw materials required for the manufacturing of the product

Knowledge-Based FSAs• Knowledge is recognized as one of the key resources of the firm• Resource-Based Strategy

- Defines the firm not in terms of the products or services it markets, or in terms of the needs it seeks to satisfy, but in terms of what it is capable of

• Marketing FSAs- It is important to recognize that the source of a firm-specific advantage can

depend on specific market know-how

20

Culture

Defined as • the underlying value framework that

guides an individual’s behavior

Reflected in an individual’s perceptions

• of observed events, in personal interactions, and in the selection of appropriate responses in social situations

Manifests itself • in learned behavior as individuals grow

up and gradually come to understand what their culture demands of them

The modern conception of culture • focuses directly on observable behavior;• consequently, culture creates a repertoire

of behavioral skills

Cultures Across Countries

High Context Cultures

• The meaning of individual behavior and speech changes

• Nonverbal messages

• When words are spoken: “reading between the lines”

• Found in most of the European countries, some of Latin American countries, and in Japan and many of the newly industrializing Asian countries

Low Context Cultures

• Intentions are expressed verbally

• A person’s meaning should be explicit: not taken for granted

• Propositions have to be justified and opinions defended openly

• Found in the USA, Russia, Australia and New Zealand

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Five different “Silent Languages”

Space• Relates to matters such as the distance between two people conversing

Material Possessions• Usually describes a person’s station in life

Friendship Patterns• Reflective of a person’s cultural upbringing

Agreements Across Cultures• Interpreted differently across cultures

Time• Studies have documented the cultural problems with time perceptions

Geert Hofstede Cultural DimensionsSo

urce

: ww

w.it

im.o

rg/g

eert

-hof

sted

e

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Hofstede’s Cultural Dimensions

Individualism versus Collectivism• In a collective society the identity and worth of the individual is rooted in

the social system

High versus Low Power Distance• High power distance societies tend to be less egalitarian

Masculine versus Feminine• Captures the degree to which culture is dominated by assertive males

Uncertainty Avoidance• Rates nations based on the level

Confucianist Dynamics• Distinguishes the long-term orientation of Asian people; from the more

short-term outlook of Western people

Hofestede´s Classification of Triad Countries

LowHighLowHighContext

LowHighHighLowRisk Tolerance

HighLowHighHighMasculinity

HighLowLowHighPower Distance

High HighHighLowIndividualism

W. EuropeContinent

W. EuropeNorthern

Anglo-Saxon(Canada, US, UK)

Japan

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Four stages of business negotiation

Concessions and commitments are made throughout; a sequential approach to decision making

Concessions are made only towards the end of negotiations; holistic approach to decision making. Progress is difficult to measure for Americans

Concessions and Agreements

Most important step; minds are changed at the negotiation table and aggressive persuasive tactics are used

Persuasion is accomplished primarily behind the scenes. Vertical status relations dictate bargaining outcomes

Persuasion

Information is given briefly and directly. “Fair” fist offers are more typical

Most important step; high first offers with long explanations and in-depth clarifications

Task-Related Exchange of Information

Relatively shorter periods are typical

Considerable time and expense devoted to such efforts it the practice

Nontask Sounding

AmericansJapanese

Case 1.1 IKEA

DISCUSSION QUESTIONS

1. What are IKEA's firm-specific advantages? Country-specific advantages?

2. What are the cultural factors which make expansion abroad in retailing difficult? What has made it possible in IKEA's case?

3. Describe how IKEA'S expansion has re-energized mature markets around the world and changed the competitive situation.

4. What could be the cultural reasons for IKEA's problems with store managers and employees in North America?

5. How does the TV advertising campaign initiated by IKEA overcome the entry barrier of high advertising expenditures?

24

Weekly Programme




Discuss impoact of entry barriers on the choice of an entry mode



Text: Chapter 4-6Case 2.1: Daloon A/SCase 2.3: Illycaffee Company





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Paper 488914

Part 2Market Entry Options

Lecturer ProfileProf Dr Mike Hoffmeister

Academic

Since August 2003• Professor for International Business at the

University of Applied Sciences Braunschweig/ Wolfenbuettel, Campus Wolfsburg, Germany

Since 2000 MBA Lecturing Experience• KIMS Kassel International Management School,

Germany (Sales Management)

PhD at University of Kassel, Germany• subject: Multi-Franchising in Car Retailing

1986 – 1992 Business Studies• Studied Marketing and Distribution at the University

of Muenster, Germany• Internships at Banks and Advertising agencies in

New York, San Francisco, Hong Kong and South Africa

Business

1992 – 2003 Volkswagen AG • Head of Sales People Development and Training

for the Volkswagen Brand in Germany• Area Sales Manager for the Arabian Gulf States• Marketing Consultant for Brand Management and

Dealer Network Strategy• Trainee at dealership in the USA• Member of the Automotive Committee for Sales

People Development of the Automotive Industry in Germany

1983 – 1986 • 2.5 year apprenticeship at Volksbank Wolfsburg• Soldier in German Army

Contact• Tel +49-5361-831533, 831501• Mail: [email protected]• Robert-Koch-Platz 10-14, 38440 Wolfsburg,

Germany

2

Wolfsburg

Wolfsburg

Hamburg

Berlin

Amsterdam

PragueFrankfurt

Munic

Wolfsburg

3

German Unification

Weekly Programme



WEEK 2: Market Entry OptionsDiscuss impact of entry barriers on the choice of an entry mode



Text: Chapter 4-6Case 2.1: Daloon A/SCase 2.3: Illycaffee Co





4

Research topics

Entering new markets abroad requires information about

• Political environment

• Physical environment

• Sociocultural environment

• Economic environment

• Regulatory environment

Political risk factors

Level 1: General Instability• Revolution, external aggression

Level 2: Expropriation• Nationalisation, contract revocation

Level 3: Operations• Import restrictions, local content rules, taxes, export requirements

Level 4: Finance• Repatriation restrictions, exchange rates

5

Unclear legal systems

0 20 40 60 80 100

Singapore

USA

UK

Japan

Brasil

Thailand

Kenyo

Indonesia

Russia

China

Source: Economist, March 3, 2001, p. 100

Top

3se

lect

ed

Lack of transparency; unclear legal systems

Contracts in China

Germany• Official check of

credibility• Written Contract• End of negotiation process• Defines mutual rights and

commitments• Written = commitments

China• No tradition for written

contracts; courts have no power; judges are not independent and have to execute orders

• Rely on personal references • Shows mutual interest / relationship• Start of co-operation• Defines mutual purpose• No lasting regulation for future• A good and trustful co-operation

implies that under new circumstancesthe contract can be newly negotiatedand adopted

Personal relationships are more important than written contractsie Hongkong: in 1996, 1/3 of all sub-contracts of companies are based on verbal commitments

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Piracy/ Counterfeiting in China

Personal-care product companies such as Henkel and Procter and Gamble estimate that about 25% of the goods bearing their names in China are fake

Pfizer started selling Viagra in China in July 2000• By end of the year, 3 local producers introduced a cheaper version of

the pill

• Within the next 90 days another 30 companies followed

Source: Kotler, Marketing Management: An Asian Perspective

McDonald´s in China

First McDonald´s restaurant opened in Beijing downtown in 1992; 20 year lease contract

Became then the largest McDonald´s in the world within two years

In 1994 the Beijing city government abruptly informed McDonald´s that the location would be needed for commercial complex and that McDonald´s had to move

McDonald´s took the Beijing City Government to court but lost


7

Gillette Razor Blade in China

The Huaxing Razor Blade Factory was producing Gillette look-alike razor blades and sold them in the same packaging

Chinese authorities fined that company US$ 3,500 and told management to stop

Five months later, the company still produced those razor blades

Chinese authorities fined that company again (US$ 3,300)

Huaxing Razor Blade Factory argued it did not want to throw away already produced material


Coca Cola in India

1977 the Indian government decreed that the secret formula for the cola and 60% of the equity of its Indian subsidiary must be transferred to local nationals

• Reasons: Indian government wanted to control manufacturing and to stop the outflow of foreign exchange

Coca-Cola deceided to withdraw from India rather than jeopardize their firm-specific advantages, giving the secret formula to domestic imitators1990’s: Liberalisation in India

• Less-restrictive investment conditions

Coca-Cola returned to India in 1993

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Israel boycott listwww.inminds.co.uk/boycott-faq.html


9


Quoted/Source www.inminds.co.uk/boycott-faq.html• “McDonalds is a "major corporate partner" of the Jewish United Fund. In its own

words, the Jewish United Fund "works to maintain American military, economic and diplomatic support for Israel; monitors and, when necessary, responds to media coverage of Israel." Also, McDonalds chairman and CEO Jack M. Greenberg is a honorary director of the American-Israel Chamber of Commerce and Industry”.

• “McDonalds has 80 resturants in israel, providing employment to 3000 israelis.”• “McDonalds has just announced it is closing down its operation in the middle east

due to loss of revenue as a direct result of the boycott (Oct 2002), and is replacing Greenberg as its chairman and CEO (Dec 2002). Since the launch of the boycott campaign, two of Jordan's six McDonald's franchises have closed due to lack of business. In Egypt, McDonald's decided to change its brand name to Manfoods this past March, in an attempt to dodge the boycott. It had no effect and Egyptian police forces were ordered to guard the entrances to McDonald's restaurants, after stone throwing incidents took place. A total of 175 restaurants will be closed at a loss of $350 million.”

Product reliability in the USAThe McDonald's Hot Coffee Case

A woman spilled hot coffee on herself while driving. She had purchased the coffee at the drive-through window of a McDonald's Restaurant. She sued McDonald's for compensation for her injuries (about $11,000) and was awarded nearly $3 million in compensatory and punitive damages by a New Mexico jury.

• Stella Liebeck, 79, purchased the coffee and while driving her car, placed the coffee cup between her legs and tried to remove the lid. The cup spilled and coffee ran into her lap. Wearing a sweatsuit and sitting in a bucket seat, she received second- and third-degree burns across her buttocks, thighs, and labia.

• After the spill, Liebeck spent seven days in the hospital and three weeks recuperating at home with her daughter in attendance. This was followed by skin grafts. During this period, she lost 20 pounds—to 83 pounds—almost 20% of her body weight.

• Liebeck wrote to McDonald’s and asked them to turn down the coffee temperature, which was set at 170 degrees. She also asked for her out-of-pocket medical expenses of about $2,000 plus the lost wages of her daughter. McDonald’s offered $800. She sued, asking for no less than $100,000 in compensatory damages, including pain and suffering, and triple punitive damages. Just before trial, she offered to settle for $300,000, but McDonald’s rejected the offer.

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Impact of Media in the USAAudi and the 60 Minutes Show

When 60 Minutes did the "expose" on Audi 5000 sedan's "sudden acceleration" problems that supposedly caused accidents. This caused sales of Audi to slip until they redesigned the model and called it a different name.

Foreign market entry barriers

Barriers• Primarly, to protect domestic

business agianst foreign competitors

Cost• inefficiency creates higher prices

for consumers• Gatekeepers hold the key to the

market and have a chance to profit from a monopolistic position

Tariff barriers• Customs• Tax • Quotas for imports

Nontariff barriers• Slow customs procedures• Special product tests for imports• Bureaucratic inertia in processing

import licenses

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Impact of Barriers

By lobbying home or host governments When the imported product has a certain level of “local content”or when imports involve production for reexportEstablishing manufacturing in a member country in the regional group; the firm can then export to the market country in the region at lower tariff rates from the transplant operation inside the regionGovernment Regulations: company may need a native partner who can carry out negotiations with government authorities and local regulatorsdifficulty to get members of the distribution channels to carry the firm’s product


Globalisation• research firms expand abroad and beome multi-national as well• Such as

- AC Nielsen in the USA- Taylor Nelson Sofres in the UK- GfK in Germany

• The internet aggregators: cheaper, better, faster- Profound.com- AllNetResearch.com

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AC Nielsen in the USA

ACNielsen is the world's leading marketing information company. 21,000 employees worldwide Offering services in more than 100 countriesACNielsen provides market research, information, analysis and insights to the consumer products and service industries.

Macrosegmentation

Grouping countries on the basis of common characteristics deemd to be important for marketing purposesExamples

• Trade blocs- EU, NAFTA, ASEAN, …

• Geographical regions- Southeast Asia, Oceania,

Middle East, Western Europe, …

• Customer behavior- Lifestyle segmentation

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Lifestyle Segmentation of the EU Consumer

A study covering France, Germany, Italy and the UK identified eight groups:

• Upper conservative Traditional mainstream Traditional working class Modern mainstream Trendsetter Avantgarde Socially concerned Underprivileged

Another broader-based European study produced sixteen so-called Euro-styles:

• Citizens Moralists Ultra-conservatives Underprivileged Intellectuels Pioneers Puritans Tolerants Suburbanites Yuppies Prudents Dandies Rockers Romantics Prudents Vigilantes

The RISC Organization in Geneva offers a continuous measurement of trends. Their research has produced six Euro-types:

• Traditionalists Homebodies Pleasurists Strivers Trendsetters Rationalists

www.languages.dk/marketing/lifestyle_segmentation_of_europe.htm

Foreign Market Entry Modes

Amount of commitment, risk, control and profit potential

Exporting Licensing StrategicAlliance

ForeignDirect

Investment

14

Foreign Market Entry ModesExporting

Indirect Exporting• Export management companies work with independent

agents which operate for the firm in overseas markets, going to fairs, and contacting distributors

• Pro- firm avoids the overhead costs and administrative burden

involved in managing their own export affairs- Less risk- Economies of scale effects (location economies) at home/

learning curve- High transport cost

• Con- skills and know-how developed through experiences

abroad are accumulated outside the firm, not in it

Direct Exporting• Pro

- The firm is able to more directly influence the marketing effort in the foreign market


ForeignDirect

Investment

Hom

e market

Export market

Export Company

Agent

Agent

indirect direct

Foreign Market Entry ModesLicensing

The licensor licenses a foreign company to use a

• manufacturing process• Trademark• Patent• trade secret or other item of value

for a fee

Variations• Manufacturing contract• Management contract• Franchising

pro• The need for market research is

reduced • The licensee may support the

product strongly in the new marketCon

• Lack of tight control over manufacturing and marketing

• Less economies of scale/ learning curve effects in home country

• Less profit (taken by licensee)• Limits the ability to move

budgets/profits across countries in order to support competitive attacs on others

• Loss of technology know how


ForeignDirect

Investment

15

Foreign Market Entry ModesLicensing: Franchising

Franchising• More complete form of licensing• Franchiser offers a franchisee a

complete brand concept and operating system

• Longer-term commitment• Franchiser often assists the

franchisee to run the business

pro• Marketing concept is

defined in detail • Quicker international

expansion possible• The local franchisee raises

the necessary capital and manages the franchise

con• Careful and continuous

quality control is necessary


ForeignDirect

Investment

Franchising

Foreign Market Entry ModesStrategic Alliance

Strategic Alliances• Partnership• Formal or informal arrangement

between two or more companies; sometimes competitors, across borders

• Exchange or share value activities- R&D- Manufacturing- Marketing- Distribution

Distribution Alliances• Also called “piggybacking”, “consortium

marketing”• STAR Alliance

- United Airlines, Lufthansa, Air Canada, SAS, Thai Airways, China Air, and Varig Brazilian Airlines

Advantages• Improved capacity load• Wider product line• Inexpensive access to a market• Quick access to a market• Assets are complimentary• Each partner can concentrate on what

they do best

Disadvantages• Time arrangement can limit growth for

the partners• Can hinder learning more about the

market, creating obstacles to further inroads

Exporting LicensingStrategicAlliance

ForeignDirect

Investment

16

Foreign Market Entry ModesStrategic Alliance: Joint Venture

Joint Venture• Foreign investors join with local investors to

create a joint venture• Common business objectives• Share ownership and control• Involve capital investments• Creation of new corporate unit• Partners

- High net-worth families- Relatively small companies in the same

business- Large companies- Government or government-linked companies

Pro• Benefits from local partners knowledge

of host countries • Sharing development costs and risk

Con• Knowhow transfer to partner• Difficult to manage (common goals,

visions) especially when various cultures are involved

• Limited economies of scale• Limited ability to coordinate

international strategy against competitors

Exporting LicensingStrategicAlliance

ForeignDirect

Investment

Joint Venture

Foreign Market Entry ModesForeign Direct Investment

Direct ownership of foreign-based assembly or manufacturing facilities

Pro• Cost economies in form of cheaper labor or raw

materials• Foreign government incentives• Better image in host market because it creates jobs• Deeper relationship with government, customers,

local suppliers and distributors• Full control over the investment (manufacturing and

marketing)• Reduces risk of know how transfer to competitors (ie

Joint Venture)

Cons• Large investment• Blocked or devalued currencies• Expensive to exit (reduce or close operations


ForeignDirect

Investment

17

Internationalisation stages

Stage 1: Indirect exporting, licensing

Stage 2: direct export, via independent distributor

Stage 3: establishing foreign sales subsidiary

Stage 4: local assembly

Stage 5: foreign production

Export Expansion Strategy

Waterfall Strategy• The firm gradually moves into overseas

markets- Advantages of this strategy are that expansion

can take place in an orderly manner and it is relatively less demanding in terms of resource requirements

- Disadvantage of this strategy it may be too slow in fast-moving market

Sprinkler Strategy• The firm tries to enter several country markets

simultaneously or within a limited period of time- Advantages of this strategy are that it is a much

quicker way to market penetration across the globe and it generates first-mover advantages

- Disadvantage of this strategy is the amount of managerial, financial, and other resources required

Waterfall Strategyhome

host

host

host

Sprinkler Strategy

home

hosthosthost

18

Case 2.1 Daloon A/S

DISCUSSION QUESTIONS:• What are the firm-specific advantages of

Daloon over its competitors? The country-specific advantages? Any disadvantages?

• Why was the German market so difficult for Daloon to enter? What was required to make entry successful?

• How well did Daloon adapt its marketing organization to the requirements in the German market? How did Daloon try to create a strong relationship with and loyalty among its customers?

• How did Daloon gain McDonald's Germany as a customer? How is Daloon leveraging this foothold into becoming a supplier for McDonald's in other European countries?

Case 2.3 Illycaffee Company

DISCUSSION QUESTIONS:1. What created the problems

with the existing distribution strategy in the German market? Was the distribution alliance with Hag ill-advised?

2. To what extent do you think the pan-European strategy shift well-founded? For example, one question is whether the espresso market is global or multi-domestic.

3. What would be your recommendation to Mr. Illy?

19

Weekly Programme






Segmentation

Mature Markets

New Growth Markets

Emerging Markets





Assignment for International Marketing

Please write a profile on one of the mentioned companies with special regard to their international operations. Please consider the following:

• What are the company´s mission statements and objectives?• How has the company become international? Was it successful?• What is their international brand and product strategy?• What is the company´s philosophy concerning their employees and

leadership style in general and specifically for their sales force?

• BASF, Aldi, Carrefours, Walmart, K-Mart, Ikea, GAP, Toys R Us, McDonalds, Starbuck´s Coffee Shop, 7-Eleven, Subway, Walt Disney World, Ritz Carlton Hotel, Emirate Airlines, Lufthansa, Marriott, UPS, Siemens, Caterpillar, Xerox, BASF, Coca Cola, Unilever, Universial Studios, Harley Davidson, Dell Computers, McKinsey, Boston Consulting, Becks Bier, Fosters Beer

1


Paper 488914

Part 3Local Marketing

Weekly Programme






Segmentation

Mature Markets

New Growth Markets

Emerging Markets





2

The beer market

Can Beer be an international, global

product?

Johanson, Page 225

The beer market

Corona• Became most popular imported beer in the US in 1999• Mexicans regard Corona as a relatively low-class beer• Targets two niche markets

- Mexicans living in the US- Young American beer drinkers, many of whom vacationed on Mexican

beaches• Export all over the world

Heineken• Available in 170 countries• Most international beer in the world

Germany• Over 3.500 beer brands

Johanson, Page 225

3

Local Microsegmentation

Segmentation Criteria• Economic

- the most basic local segmentation criterion is still economic development

• Demographic- the age and family structure in different countries

play an important role in determining global segments

• Culture- people care about their identify even though a lot

has been said in the media about the emergence of global segments of people

• Benefits- the most clearcut segmentation criteria are those

which focus on the benefits sought• Lifestyle

- consumers start developing their own lifestyle with buying behavior involving more than simple necessities

Segmentation and Positioning

Local market segment

Positioning

Universalthe same

across countries

UniformThe same

accross countries

AdaptedDiffers from

country to country

VolvoPampers

Levi´sHonda

NikeYoung boys and aspiring athletics

IkeaMobile phones

UniqueDiffers from

country to country

4

Local Marketing in Mature Markets

Local marketing in • mature markets• new growth markets• emerging markets

Mature markets• Show slow growth apart from some high-technology markets. The

customers in these mature markets are pampered by strong domestic and global companies who compete intensely for customer satisfaction

New growth markets• Show greater purchasing power and more demanding consumers than

emerging markets. Possess a rapidly developing marketing infrastructure

Emerging markets• Characterized by low levels of product penetration, weakly established

marketing infrastructure, relatively unsophisticated consumers with weak purchasing power, and weak domestic competitors

Three Local Marketing Environments

5

Value StatusAffordablePricing

adaptedAdvancedBasicProduct design

wideLimitedLowProduct range

Compete for shareParticipation in growth

Market developmentStrategic focus

In store promotionStrong WeakDistribution

Low MediumHighPolitical risk

Saturated StrongEmbryonicConsumer markets

Strong StrongWeakForeign competition

Strong Getting strongerWeakDomestic competition

Low MediumHighBarriers

Mature New growthEmerging

Three Local Marketing Environments

Local Marketing in Mature Markets


Mature markets• Show slow growth apart from

some high-technology markets. The customers in these mature markets are pampered by strong domestic and global companies who compete intensely for customer satisfaction

6

Ultra-Heat-Treated Milk

Ultra-Heat-Treated Milk requires no refrigeration

US• Large refrigerators, therefore buy milk by gallon or half-gallon• Prefere cold and fresh milk (= healthy)• Assume technologically sophisticated food must be artificial• Not well accepted

EU• Little room in their refrigerators and pantries prefere small cartons• More accepted

Mature Markets

Competition • In many mature markets intense competition has produced a

management focus on customer satisfaction• There exists a need to make sure that existing customers will stay loyal

Two factors make customers satisfied in mature markets- Product quality including functional performance factors

• Emotional factors or a matter of pleasing the customer

Segmentation• customers are increasingly particular with well-developed preferences• The fragmentation of mature markets presents an opportunity that there

will often be a part of the market that has yet to find the kind of product desired

7

Marketing Mix in Mature Markets

Product Policies• Many Third World countries tend toward selling a low-cost “me-too” product in a mature market

- A “me-too” product is basically a copy of another product, often with simpler features and at a lower price• The global marketer introducing a new kind of product to a local market has the advantage of little

or no competition

Pricing• In mature markets it is common to think of pricing in terms of selecting a target position and then

using temporary deals and offers to attract customers in the short term

Distribution• In mature markets, the distribution system is usually well developed• One distribution strategy is “piggybacking”

- An existing network controlled by another company, often a potential competitor, in which the product is distributed through contracting with the competitor to move products on a fee or commission basis

Promotion• In many mature markets where market share is the criterion of success s

- Sales promotions are used to break the habitual choice of the loyal customer

Pan-European MarketingEurope becoming a very large single marketApproaching 400 million consumers Single currency (EURO €)15 members

• Belgium, Germany, France, Italy, Luxembourg, Netherlands. Denmark, Ireland, United Kingdom, Greece, Spain, Portugal, Austria, Finland, Sweden

New members in May 2004• Cyprus, the Czech Republic,

Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, and Slovenia

• Negotiation process- Bulgaria, Romania , Turkey.

8

Pan-European Marketing

Competition• The integration forced large European corporations to start

coordinating previously independent national operations• For smaller European companies and even the many large firms,

the threat from these foreign entrants has been met by the creations of larger and stronger companies

• At the corporate level, there seems to be only one strategic response possible for European firms: Get bigger and go pan-European

Product Positioning• There are very few products today that can maintain different

images in different countries of Europe• In pan-European marketing, product positioning is the same across

countries

Pan-European Marketing-Mix

Product Policies• The marketing mixes of the European marketers have moved toward uniformity as the

pan-European strategies are implemented• Most packaged goods in Europe feature packaging in at least four languages: English,

French, German, and Spanish

Pricing• Pan-European pricing is a particularly complicated issue • As the single euro currency is introduced and companies have to set a common euro

price throughout the region• Price differentials on the same product and brand in different countries are being

minimized to avoid inducing customers to buy in a neighboring country

Distribution• Retail and wholesale distribution is gradually being transformed from locally based

smaller units to large integrated organizations resembling those common in North America

Promotion• There is increasing use of pan-European TV advertising, taking advantage of the

satellites beamed across previously closed borders

9

Regional Trade Agreements• The 1994 NAFTA agreement has created increased

exchange between- Canada- the U.S.- Mexico

Background• Ethnic Diversity

- A fundamental cultural factor is the region’s ethnic diversity

• Religion- In North America, church and state are

separated by law• Decentralization

- In North American, firms are spread all over the world and even into small towns

Marketing in North America

Marketing in North America

Competition• The U.S. is one of the most competitive markets in

the world

Market Segmentation• For segmentation purposes cultural identity can

serve as a useful criterion

Product Positioning• When positioning in the U.S., premium is placed on

direct and straightforward explanations• The Canadian approach treats differences in

cultural norms with more sensitivity and more soft sell

10

Marketing-Mix in North America

Product Policies• Market size, affluence, and diversity have meant that the

North American market offers a dizzying array of choices of product and services

Pricing• The attractiveness of the North American market has

made it a very competitive arena for many domestic and foreign producers

Distribution• The great size of the North American continent and the

wide spread of its people seems to be the main cause for a very efficient distribution system in the U.S.

Promotion• North American communications media are similar to

media elsewhere, but the use of advertising and commercials is greater in North America

Increased Credit Use in the USA

Source: www. Economy.com

• More and more consumers are fueling their affluent lifestyles with credit that is easily available, and accepted, as a normal way of life in the United States.

11

Local Marketing in Growth Markets


New growth markets• Show greater purchasing power

and more demanding consumers than emerging markets. Possess a rapidly developing marketing infrastructure

Growth Markets

Two Kinds of Markets• Markets that are relatively rich in natural raw materials• Markets that have turned toward Western-style capitalism more recently, with the

help of foreign direct investment

The Role of Trade Blocs• Membership in trade blocs plays a very important role for two reasons

- It makes the country more attractive to foreign investors- It creates an trading region with an enlarged market potential

Market Segmentation• New growth markets are in the growth phase of the PLC• Market segmentation in these countries differs from that in the developing

countries primarily in the degree to which a core middle class is developed

Product Positioning• In new growth markets it is easy to observe the attention given to well-known

brand names

12

Marketing-Mix in Growth Markets

Marketing Tactics• Product

- Basic localization to make sure the product functions well is necessary in these markets, and customers can be as demanding as elsewhere

• Pricing- Pricing is important but can largely reflect the same considerations as in the

advanced markets—demand, costs, competitive conditions• Distribution

- Distribution is very important and warrants larger margins and more support services than elsewhere

• Promotion- Promotional support, tie-ins with local representatives, and an open mind in

regard to trusting locals will be more justified in the future

Megatrends in Asia

From Government driven to market-driven economies

From villages to supercities

From agricultural society to information age

From labor-intensive to high-technology instustries

From west to east, as Asia becomes the center of the world

Source: John Naisbitt, Megatrends Asia, 1995)

13

Population in New Asian Growth Markets(year 2000, in millions)

1260

1003

211127

47 22

282

82

0

200

400

600

800

1000

1200

1400

ChinaIndia

Indonesia

Japan

South Korea

Taiwan USA

German

y

GDP in New Asian Growth Markets(year 2000, US$bill)

1100474 153

4800

457 310

9870

1900

0

2000

4000

6000

8000

10000

ChinaIndia

Indonesia

Japan

South Korea

Taiwan USA

German

y

14

Marketing in the New Asian Growth Markets

Market Environment• Several of these countries are ethnically homogeneous while others are populated by

several racial groups

Regional Trade Agreements• The Association of South East Asian Nations (ASEAN) was created in 1967• APEC (Asia-Pacific Economic Cooperation) is a large association that spans both sides

of the Pacific • In 1992, ASEAN countries met to formalize a far-reaching trade agreement forming the

ASEAN Free Trade Area (AFTA)

Market Segmentation• The economic upswing in the Asian high-growth markets has led to the emergence of a

significant middle class in Thailand known as the “have somes”• However justified from an economic perspective, avoiding the rural areas where people

tend to be less well off can create some political problems

Product Positioning• The Asian markets’ desire for global identification has made many multinationals with

more mundane products use global standardization in their positioning strategies

Marketing-Mix in the New Asian Growth Markets

Product• Policies: The emphasis on these markets as followers of global mature markets

makes standardized product policies natural• Design: The Asian consumer is generally more eager to achieve “a harmonious

whole” than Western individuals• New Products: The buyers in Asian markets are basically eager to get access to

the products they see available in mature foreign markets

Pricing• In Asia as elsewhere, the global marketer faces a choice between a high

skimming price strategy and a lower penetration price strategy

Distribution• Many observers agree that the most visible sign of economic growth in the Asian

markets is the dynamism of the urban retail sector

Promotion• By and large the promotional strategies employed by multinationals in Asian

markets have been only minimally adapted from elsewhere

15

Local Marketing in Emerging Markets

Local marketing in • mature market• new growth markets• emerging markets

Emerging markets• Characterized by low levels of

product penetration, weakly established marketing infrastructure, relatively unsophisticated consumers with weak purchasing power, and weak domestic competitors

Local Marketing in Emerging Markets

The macroenvironment in the typical developing market is characterized by uncertainty

Consumer needs tend to be basic and easy to identify

Market Segmentation• In these markets, income level represents the basic segmentation

criterion- Effective income measures are defined in terms of access to convertible

currency

16

Marketing-Mix in Emerging Markets

Product Positioning• product policy a key issue• Customer needs tend to be basic and domestic alternatives weak

Pricing• The balance between affordability and upper-end positioning• The lack of purchasing power means that the marketer often must find

ways of offering a simpler product

Distribution• Unless effective ways of distributing the product can be found or

created, market entries might be thwarted and economic growth of the developing countries will not take off

Promotion• Promotion in developing markets is initially limited because of lack of

broadcast media

Marketing in China

China has a population of 1.2 billion people which is the largest in the world

• With its underlying strength in natural resources and able and disciplined worker the Chinese economy has so far been relatively untouched by the Asian Crisis

• Despite the size and potential of the Chinese market its fast-growing purchasing power is still low

• Market Segmentation- Geographic region- Urban/rural split in the typical emerging market pattern

• Product Positioning- The China market is open for global brands and

standardized campaigns

17

Entry Barriers in China

Import License Controls• The Ministry of Foreign Trade and Economic

Cooperation (MOFTEC)

Protective Tariffs• With the entry into the WTO, the government

has promised to continue tariff reductions to meet the level of the other WTO members

Foreign Exchange Control• Foreign exchange is controlled by the State

Administration of Foreign Exchange Control

Foreign Trading Companies• With ongoing reform, and WTO entry, the

government-controlled trading companies have lost their monopoly

Marketing in China

Product Policies• Chinese consumer buy foreign products

because of no availability of similar products and the superior quality of foreign products

Pricing• Most Chinese customers are price-oriented

out of habit and are not willing to pay more for alleged superior quality

Distribution• Most distribution channels are controlled by

the government• Guanxi: Mutual good feeling and trust

Promotion • Strictly controlled by the government

18

Westernization of Chinese Consumers

Christmas shopping is becoming more important than Spring festival

Department stores use x-mas decoration like Santa Clauses, trees with lights, bells etc

Trend across all generations and social classes

Importance of Guanxi (good relations or connections)

“Guanxi seems to be the lifeblood of the Chinese business community, extending into politics and society. Without

guanxi one simply cannot get anything done … with guanxi anything seems possible”

(Davis/Leung/Wong, Benefits of Guanxi, in: IMM, 1989)

To overcome distrust among partners, Chinese develop family-like links, more extensively than almost any other nationFamily is a system of contacts rather than purely an emotional unit as in the WestIndividuals make decisions on the basis of family ties or social connections rather than objective issuesLong-term not short-term phenomenonRequirements for Guanxi

• Each party is fully committed to each other

• Honor your obligationsSource: Tang/Reisch; Erfolg in China-Geschäft

19

Cultural Differences

Present yourself Highlight yourself Be part of a groupSelf confident Enjoy respectBe dynamic and pushy Be helpful, co-operative

Discussion behaviour Offensive, direct Defensive, indirect, discreetInquisitive, active Hesitant, reactiveEngaged, emotional Relaxed, patientCollegial Respectful, distanced

Conflict management Confront conflicts IgnoreBe more specific GeneraliseDramatisize Relaxed attitideReject, deny Pull back;

no direct feedback Source: Tang/Reisch; Erfolg in China-Geschäft

The Automotive Industry in China

20

China … land of extremes

China … land of extremes

21

The automotive boom will bring problems

People living in metropolitan areas = 480 Mill (=EU + USA)

Only 1% of city residents own a car, though 32% intend to by one in the next 5 years

As a consequence• Pollution

• Traffic jams

• Cities get bigger and cars will be necessary to travel

Light Vehicle Sales in China So

urce

: J.D

. Pow

er &

Ass

ocia

tes;

in: w

ww

.aw

know

lege

.com

; Jun

e 20

03

0

1

2

3

4

5

6

1990 1992 1994 1996 1998 2000 2002 2003(est)

Mio Units

Over 1 mill passenger carsin 2002 and over 3 mill in 2008

2008(est)

2019(plan)

30Goal for 2019:Worldwide largest

car market

22

Key figures of the Chinese car market

Around 100 automotive manufacturers• Most produce less than 100.000 units pa

40 to 50 new models introduced in 2003 by foreign joint ventures

Intense price competition• Price declined by about 8% in 2003, following 7-8% in 2002

90% of car purchases are done by cash• China´s local consumer financing companies have yet to provide

sufficient and sophisticated lending services• Chance: new consumer groups can afford a car

Source: J.D. Power & Associates; in: www.awknowlege.com; June 2003

Taxi companies are key customers

Sales dominated by company (esp Taxi) and government customers; sales to private customers increase strongly

• Meanwhile over 50% private sales

23

Impact of World Trade Organisation

Opens the market and increases competition

Classical Management functions become more important• Marketing• Human Resources Management• Accounting

Local Production vs. Import• Less market entry barriers

Wholly Foreign Owned Enterprises versus Joint Ventures

Automotive impact• Less import tariffs from 80-100% to 25% by 2006• No import quotas by 2005

- Licensing law: a limited number of license plates are released every month, which must be bid on at monthly auctions (ie October 2002 3,200 plates for an average price of US$ 3,500)

• Independent sales without Chinese Partners• Foreign financial institutes are allowed to offer automotive financeSource: M. Taube, Universität Duisburg-Essen

Volkswagen´s investment into China

1984 Joint Venture Shanghai Volkswagen Automotive Ltd

• Sales 2002: 300.000 units• Employees 2000: 11.000 pers

1991 Joint Venture First Automotive Works Volkswagen Ltd

• Sales 2002: 210.000 units• Employees 2000: 7.000 pers

1978 first meetings of Volkswagen in ChinaToyota and General Motors were first choice partner of China; however, both decided not to invest at that stage

24

Challenges of co-operative internationalisation strategies in China

Market

Lack of efficient legal frameworkClosed market

• High tariffs• Import quotas• Chinese majority joint ventures • Increasing local-content

Management

Different business styles and valuesCorruptionBureaucracy Language problemsDifferent learning structuresDifficult to find skilled staff

Source: Mercado Solutions Asia Ltd. 2000; Bennett 1998, p. 190; Posth/ Bergmann 1995

Joint Ventures from a non-Chinese car manufacturer’s view

Pros• Market entry into

protected market• Lower tariffs• Contact to local

authorities

Cons• Long starting process• Difficult to manage and lead• Lack of skilled personnel• Must buy parts locally• Knowledge transfer• Difficult to control sales and service

network• Image of locally produced product• Danger of know-how transfer not only

from foreign joint-venture to chinese partner but also to other foreign investors

- FAW: Volkswagen, Toyota, Mazda- SAIC: Volkswagen, GM, Isuzu

25

Case 3.2 Levi Strauss Japan K.K.Selling Jeans in Japan

DISCUSSION QUESTIONS:1. What are the key success factors (KSFs) in the

Japanese marketplace?

2. To what extent do the Levi Strauss' FSAs and CSAs match the KSF's. How has Levi's been able to leverage its country-of-origin to become a leading brand? Can other American jeans do the same?

3. How would you explain the apparent success of LSJ's advertising campaign stressing American values in Japan?

4. List the pros and cons of the different distribution alterna-tives facing LSJ. Which one do you think has the best chance of succeeding?

5. Would you retain the premium positioning of Levi's in Japan? Why/Why not?

Weekly Programme






Discuss the emergence of standardized global brand and product marketing strategies

Standardization

Brand Management

Product Strategy

Global Services

ext: Chapter 11-12

ase: Disney in France; in Hill, International Business



international marketing for mba

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