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Module ILP304

International
Marketing

International Learning
Partnership Programme

Student Guide
Module ILP304
International Marketing
(January 2008; Edition 1)

University of Gloucestershire Business School 2007


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University of Gloucestershire Business School.
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International Marketing

Table of Contents
Introduction 1

Topic one: Course overview and review of marketing


fundamentals 13

Topic two: International marketing and the international


trading environment 31

Topic three: Social and cultural considerations 39

Topic four: Assessing market attractiveness 55

Topic five: International marketing research 65

Topic six: International niche marketing strategies and


global strategies 77

Topic seven: Market entry strategies 93

Topic eight: International product and service


management 105

Topic nine: Case study activity 119

Topic ten: International distribution and logistics 123

Topic eleven: Pricing for international markets… 135

Topic twelve: International communications 145

Topic thirteen: Implementation through enabling


technologies 159

Topic fourteen: Workshop activity 169


International Marketing

Introduction

Aims
Welcome to International Marketing.

This module aims to extend the application of marketing to the


international arena and to build upon previously studied modules. It
will enable you to analyse and evaluate the characteristics of
international markets and understand how to develop appropriate
marketing decisions and strategies in a potentially complex and multi-
cultural situation.

The module is structured mainly around the course textbook and it is


expected that after the first session you should have read the
specified readings in advance of the weekly lecture/ tutorial sessions.

This Study Guide has been written and prepared to provide you with
most of the information and materials you will require for your studies
on this module. The guide also contains the basis of the tutorials and
the essential and recommended reading.

It has been broken down into weekly sessions, which give you an
introduction to the lecture topic with copies of most of the Powerpoints
that may be used. These Powerpoints relate to the textbook, tutorial
sessions and assessment case. Your module tutor may choose to
add or delete some Powerpoints to suit his or her approach.

Attendance: The Key to Success


In our experience students who do not attend, either fail or achieve far
below their capabilities, whilst those that attend and work hard, excel.
If you have to miss a session for good reasons, please inform the
tutor in advance, so you can get advice on what you need to do to
minimise the effect of your absence. And, if you want good results
you also will have to invest in many hours of independent study.

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Module ILP304 International Marketing

Module Learning Outcomes


The module will extend your knowledge of marketing so that you can apply
these principles to an international situation. Therefore the module starts with
approaches to analysing the international environment before utilising this
knowledge in the development of international marketing decisions, strategies
and organisation.

Key areas covered are:-

• Introduction to internationalisation.
• Analysing the international marketing environment
• International consumer behaviour
• International marketing research
• The assessment of market attractiveness
• Market selection and entry methods
• The international marketing mix
- International product and services management
- International distribution management and logistics
- International pricing decisions
- International marketing communications
• International marketing planning and strategy

Enabling technology and management systems for international


marketing
By the end of this module, you should be able to:
i) Knowledge and understanding.

a) Discuss the complexity of the international environment and how it impacts


upon the full range of marketing decisions.
b) Know where to find sources of information on international markets and
critically evaluate the validity of such data.
c) Appreciate that consumers from different cultures respond differently to
marketing stimuli.
d) Know how to evaluate and select potential international markets including
the adoption of specific methods of market entry.
e) Critically analyse the key issues involved in making international marketing
decisions and how these may vary from domestic market practice.
f) Make appropriate decisions for international marketing strategy and its
implementation.

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Module ILP304 International Marketing

ii) Skills
a) Independent learning and working: weekly reading on each topic
area, use of on-line student resources to supplement class
contact time, preparation for module assessment.
b) Problem solving: use of mini case studies and tutorial tasks to
apply the theoretical content of the module to realistic situations.
c) Information and communications technology usage: some
tutorial tasks will require students to develop skills in sourcing
and utilising information from a range of sources.

General intellectual skills

The module will develop the students’ skills in critically evaluating


information on international markets and applying marketing principles
to decisions made across multiple markets. Discussion, feedback
and lecture content will all be part of developing such skills.

Teaching and Learning Approach


The weekly format for ILP304 is a Lecture and Tutorial session.

Rather than just attend the weekly lectures and read the textbook we
want you to do some ‘real world’ international marketing. Thus the
weekly tutorial exercises have been designed to bring to life the key
themes of the lectures, and of course, to help prepare you for the final
examination.

By the end of the module, you will have a better understanding as to


how all the international marketing topics fit together. You also will
gain experience (the ‘good’ and the ‘bad’) of working in groups whilst
you address various International Marketing issues.

To help you prepare for the final examination, we will hold a


‘Formative Assessment' as Topic 8, which covers Topics 1 to 7
inclusive. The Topic 9 tutorial session will be devoted to the
Formative Assessment feedback.

Please note that a high proportion of ILP304 is student-directed


study. Whilst you have three hours a week of formal contact time,
you also will need to devote approximately another two hours a week
to reading the textbook and prepare for the tutorials.

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Module ILP304 International Marketing

Resources
Essential Text:

Doole, Isobel and Lowe, Robin (2004) International Marketing


Strategy, 4th ed., London: Thomson Learning. ISBN1-84480-025-3.

Supplementary Reading

Other suggested supporting textbooks for this module are:

Bradley F. (2005) International Marketing Strategy, 5th Edition, Prentice


Hall.

Chee H. and Harris R. (1998) Global Marketing Strategy, Pitman.

Czinkota M. and Ronkainen I. (2007) International Marketing,8th Edition,


Thomson.

Douglas S. and Craig S. (1995) Global Marketing Strategy, McGraw-Hill.

Kotabe M. and Kristiaan H. (2004) Global Marketing Management, 3rd


Edition, Wiley.

Lasserre P. (2003) Global Strategic Management, Palgrave Macmillan.

Lee K. and Carter S. (2005) Global Marketing Management, Oxford Press.

Muhlbacher H., Dahringer L. and Leihs H. (2006) International Marketing,


3rd Edition, Thompson Learning

Onkvisit S. and Shaw J. (2004) International Marketing: Analysis and


Strategy, 4th Edition, Routledge.

Other Resources
It is unlikely that you will have to do any further reading outside of the
compulsory textbook and the materials provided. You should however,
keep yourself abreast of what is going on in the marketplace by reading
marketing journals, periodicals (e.g. The Economist magazine) and of
course, good quality newspapers.

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Module ILP304 International Marketing

The University’s Virtual Learning Environment (VLE) site


The University’s VLE site contains the salient information contained in
this Study Guide, plus a notice board for ILP304 announcements.

To Log on to the University’s VLE site:


1. Go to http://moodle.glos.ac.uk
2. Enter your username and password. Username = your student
number, preceded by lower case ‘s’ (e.g. s012345). If for some
reason you cannot get access to the University’s VLE site,
contact your College administrator.

The University’s VLE site is available only to students officially


registered.

Textbook Website

Please take a look at the Doole and Lowe (2004) textbook website. It
contains lots of great stuff--including multiple-choice tests per chapter.
Go to: www.thomsonlearning.co.uk. Then: “Doole and Lowe (2004)”.

Chapter Tests (Multiple-choice)


We urge you to take these 'optional' multiple-choice tests to ensure
you have a good grasp of the key ideas per chapter.

Once you have taken a test, write down your test scores in Appendix
A of this Study Guide. Then jot down the areas you know well, and
those areas you need to review for the final examination.

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Module ILP304 International Marketing

Assessment
FORMATIVE ASSESSMENT
During the course of the module your tutor will issue you with pieces of
formative assessment. This work does not count towards your final
grade, but it will be marked by your tutor and returned to you with
feedback. The purpose of this work is to support and prepare you for
the final examination. It will give you the chance to demonstrate how
well you have understood the module content and practise applying it
to particular scenarios. The feedback you receive from your tutor
should highlight the strengths and weaknesses of the work and where
you need to improve. This should enable you to perform to a higher
standard in the final examination.

Final Examination (100%)


Module code ILP304

Module title International Marketing

Module tutor As assigned

Tutor with responsibility for this As above.


Assessment
(Your first point of contact)
Assessment & Weightings Closed-book 3-hour Final Exam
(100% of final grade).

Important
To pass this module, students must have an overall grade of forty
(40) percent.

The final examination is available only to students officially


registered in ILP304. The ILP304 examination is a three (3) hour
Closed-book exam worth 100% of your final grade. It covers the
entire ILP304 module. No books or notes will be permitted.
All exam questions pertain to a ‘real-world case’. The exam case will
be distributed to you in the Topic 11 class. It also will be available on
the ILP304 the University’s VLE site from that date.
More details about the final examination will be discussed in Topic
12’s Module Summary lecture and posted on the ILP304 University’s
VLE site. Please refer to the Exam Grading Scheme on the next
page to ascertain what is required for each grade band.

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Module ILP304 International Marketing

Examination Marking Scheme

The marking schemes for the formative and summative examinations


will be the generic marking grid for case study assessments. You
should familiarise yourself with these marking criteria. Tutorial
exercises will aid the development of the skills necessary to meet
these criteria, and provide examples of how they may be
demonstrated in relation to case study material. The formative
assessment will also provide an opportunity to see how these criteria
apply to the grading of student answers.

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A GENERIC MARKING GRID FOR CASE STUDY ASSESSMENTS
Understanding of theory
Know Apply Evaluate & synthesise
Describe 1. Correct explanation of relevant 4. Able to illustrate the use of the relevant 7. Will show a critical appreciation of the relevant
model/theory, and reproduction of case theory/model, but with no depth in understanding of theory and its underpinning concepts, and even
material. the relationship between the model and the case. The identify combinations of theories. However, this
student will use a relevant framework, but simply student will simply refer case material into this
regurgitate/cut and paste case material into this framework with little evident understanding of this
framework without any evident understanding of this material. Conclusions and recommendations may be
material. (e.g. not able to put in own words) made, but the justification for these is wholly
theoretical, and they are not necessarily realistic or
appropriate within the case context.
Analyse 2. Show the ability to break down and 5. Show the ability to break down and order or classify 8. Selective approach to the application of theory in
Understanding of materials

order or classify the material. However, the material. In this case the conceptual framework given context, identifying weaknesses and
not able discriminate between key and underpinning this process will be clearly derived from limitations of own analysis. However, although the
peripheral factors or issues. theory. approach to the analysis is original and clearly
stems from a deep and critical understanding of
The student might produce a clear and For example, a student might produce a SWOT theory, the student will not show a similar level of
relevant breakdown of a variety of issues, analysis which correctly identifies and categories understanding of the case issues and may, for
ordered by their own classification, but the issues from the case, but shows no discrimination example, choose to analyse peripheral issues.
conceptual underpinning will stem from between key and peripheral issues, and fails to Hence, although the conclusions and
their own experience or common sense identify the relationship between the analysis and any recommendations will be well justified in theoretical
rather than relevant theory. conclusions or make recommendations. Conclusions terms, they will be incomplete, inappropriate to the
and recommendations will therefore lack justification. case context, or fail to offer justification for selecting
this approach in preference to alternatives.
Evaluate & 3. Make links between different elements 6. Able to make links between different elements of 9. Able to develop realistic and original solutions in
Synthesise of the case or show the ability to the case to develop insights, conclusions, or the context of the case, which are clearly
discriminate between key and peripheral recommendations that go beyond the information in underpinned by relevant theory.
issues. However, there will be no the case. The student will demonstrate that these
evidence that these stem from the arise from the application of theory. For example, a Able not only to identify shortcomings in theory or in
application of theory. Recommendations student might use porter’s five forces model to make a case information, but also bring other relevant
may be made, or conclusions drawn, but judgement about the overall attractiveness of the frameworks, information or assumptions in order to
there is no evidence that these stem from market or make recommendations on the fill these gaps.
theory. organisation’s strategy in relation to that market.
However, in arriving at solutions, a student will not Demonstrates a capacity for self evaluation by
have integrated different theories relating to different considering the criteria and assumptions on which
aspects of the case organisation’s current situation or their judgements have been made.
potential strategies.

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Application of the marking grid

The marking grid combines assessment across two generic criteria:

• The student’s cognitive processing of relevant theory


• The student’s cognitive processing of the case material

The extent to which a student demonstrates ability in terms of the respective


criteria is likely to be related (i.e. student who is highly skilled in processing
theoretical knowledge is likely to be equally skilled in processing case material).
Nevertheless, the two types of skill are independent - it is possible for a student
to excel in one whilst not clearly demonstrating ability in the other. Hence a
student’s grade will depend on the combination of both types of intellectual skill.

Each criterion is divided into three categories. These, and the means by which
they may be demonstrated in a student’s answer, are described below.

Use of theory

Knowledge: This is the lowest level skill, in which the student demonstrates the
ability to memorise and reproduce theoretical material. Such skills will be
demonstrated by drawing or describing theories, models or principles.
Application: Here the student is able to use the theory for a specific purpose; for
example to produce an argument in response to a question, classify objects for
analytical purposes, or generate options.
Evaluation: In this case, the student demonstrates the ability to critically appraise
theoretical material, and consciously make judgements about the value and
limitations of this theory. The student may demonstrate this skill by making and
justifying judgements relating to the value and limitations of particular theories.
Synthesis: Synthesis is defined as the ability to put disparate elements together
to form a coherent, novel whole. The ability to synthesise may be demonstrated
in two ways. The student may develop an original approach to answering the
question by using several theories or models in combination. The ability to
synthesise may also be demonstrated by the development of original insights,
conclusions or recommendations.

Use of case material

Description: Description is defined as the reproduction of case material, without


processing the information contained in the case in any way. This is
demonstrated by the reiteration of facts or issues that are explicitly identified in
the case.

Analysis: Analysis is the breaking down of material into its constituent parts, and
detecting how the various parts relate to one another and to an overall structure

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Module ILP304 International Marketing

or purpose. Unlike description, analysis requires the application of a conceptual


framework beyond that provided in the case study, which the student may use to
order and interpret the information in the case. Students may demonstrate this
ability by manipulating, transforming or interpreting the material in the case, and
providing evidence that the conceptual framework governing this process is not
drawn from the case itself.
Evaluation: Here the student will possess the ability to critically appraise
potential courses of action, qualify the importance of issues, or raise questions
about the material in the case. This may be demonstrated by making
judgements regarding the prioritisation of issues facing the case study
organisation or by consciously selecting a particular course of action in
preference to others, providing a clear justification of such choices. It may also
be demonstrated by the identification of the limitations of the information in the
case study.

Synthesis: This is reflected in the ability to make links between seemingly


disparate information in the case study to develop original insights into broad
issues or themes, or the ability to develop original conclusions and
recommendations. This may be demonstrated by making links between the
results of different analyses, or by identifying underlying issues in the case
study. It may also be demonstrated by drawing conclusions or making
recommendations that offer novel and realistic answers or solutions. It should
be stressed here that the existing of novel or realistic solutions is not sufficient
evidence of synthesis. The student must demonstrate how these have been
drawn from an analysis of the course material and/or from an application of
theory.

Grading

In addition to the criteria contained in the marking grid, a student must


demonstrate a basic grasp of relevant theory. They must also demonstrate that
they have understood the question, and made an attempt to address this
question. Answers which fail to meet this criterion will be awarded a mark of 0-
29.

The grid should be applied to each answer. The grade boundary within which a
particular answer falls is determined by placing the answer in a particular box as
follows:

Marginal Fail (30-39): Box 1 (very dark grey)


Third class (40-49): Boxes 2 & 4 (dark grey)
Lower Second (50 – 59): Boxes 3, 5 & 7 (light grey)
Upper second (60 – 69): Boxes 6 & 8 (very light grey)
First class: Box 9 (white)

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Module ILP304 International Marketing

Within each class boundary, the exact mark will be determined by the clarity and
consistency with which the answer demonstrates the relevant cognitive abilities.
This may involve, for example, a qualitative judgement on the part of the marker
regarding the depth or comprehensiveness of understanding, the rigour of
evaluation, or the originality of recommendations. This is a relative judgement,
made by comparing the different answers within a class boundary, so detailed
criteria are not given.

Students should familiarise themselves with the marking criteria. Tutorial


exercises will aid the development of these skills, and provide examples of how
they may be demonstrated in relation to case study material. The formative
assessment will also provide an opportunity to illustrate the application of these
criteria to the grading of student answers.

Personal Development Planning


Personal Development Planning (PDP) is an initiative to improve your capacity
to understand and take responsibility for what and how you are learning. It is
concerned with your academic, personal and professional development and
your ability to understand and manage your own learning and to articulate your
achievements and capabilities to other people including employers. It is
important for you to develop the skills of independent learning and the ability to
reflect on your progress, experiences and achievements, particularly in relation
to the following capabilities:

• The ability to manage one’s time and the development of a systematic


approach to planning and organising work schedules and accessing
information systems.
• The skills and conventions of academic writing and referencing.
• Confidence in developing critical and reasoned arguments.
• Effectiveness in using module readings and independent tasks to support
learning and completion of assessments.
• The ability to reflect on progress, using evidence, and to develop
personal action plans.

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Module ILP304 International Marketing

Scheme of Work
Come to class prepared! Read the textbook pre-reading(s) and the assigned
tutorial exercise!

Topic Topic Textbook Tutorial


No Chapter(s) Exercise
1 Course Overview; Review ---- Brainstorming
of Marketing Fundamentals Exercise: Bicycle
PART 1: Analysis
2 ‘International Marketing’ and 1 and 2 Debate:
the international trading “The Ethics of
environment Globalisation”
3 Social and cultural 3 Case study: HMV in
considerations Japan
4 Assessing Market 4 (101-112) Case study:
Attractiveness + OHTs) Assessing market
attractiveness
5 International marketing 4 (excluding Case study: Seagram
research 101-112)
PART 2: Strategy
Development
6 International niche 5 and 6 Case study: Starbucks
marketing strategies and
global strategies
7 Market entry strategies 7 Case Study:
Waterstone’s in
Taiwan or India?
8 International product and 8 Standardisation vs.
service management adaptation
9 Case study activity Tutor to provide case
study
PART 3: Implementation

10 International distribution and 10 Formative


logistics assessment feedback
11 Pricing for international 11 McDonald’s
markets international pricing
12 International 9 Culture and
communications communications
13 Implementation through 12 The future store
Enabling Technologies concept
14 Workshop activity Tutor to provide case
study

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Module Structure
The ILP304 Scheme of Work follows the three main issues which form the basis
of the international marketing management process:

1. The identification, analysis and evaluation of opportunities;


2. The establishment of a strategic perspective and development of an
international marketing strategy; and
3. The approach that is to be used in the implementation and operation of
the international strategy that is to be adopted.

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ILP304 International Marketing – Topic 1

Module Overview
Learning Outcomes
It is essential that we start with an overview of Introduction to Marketing
‘fundamentals’ since these principles underpin the essence of 'International
Marketing'.

Pre-session activities
Buy the textbook and familiarise yourself with its topics!
Read the Introduction section of this Study Guide.

Overview of the session


As this is the first week, most students will not have purchased the Doole and
Lowe (2004) International Marketing textbook! Thus we will ease you into
international marketing by presenting an overview of the ILP304 module.

But we will pick up the pace in Week 2!

ILP304 assumes you are familiar with ‘Introduction to Marketing' fundamentals.


So, we will also provide you with an overview of ‘Level 1 Marketing.’ Naturally
we do not expect you to know everything! However if you do not have a good
grasp of these concepts covered in today’s lecture, please re-read your
‘Introduction to Marketing’ textbook.

Topic 1 Tutorial session


Get into groups of 3-4 students to 'brainstorm' ideas as to how “Peddle Power
Bikes” can 'go international’.

Post-topic activities
List a numbers of areas from this week’s ‘Introduction to Marketing'
fundamentals overview that you would like ‘clarified’ in next week’s class. Buy
the textbook and familiarise yourself with its topics! Re-read the Introduction
section of this Study Guide.

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Module ILP304 International Marketing

Topic One Tutorial

Peddle Power Bikes – Brainstorming Session


Peddle Power Bikes (PPB) is a fictitious company in your home (domestic)
country. PPB designs, manufactures, assembles and markets bicycles under
the brand name of PPB. All parts are manufactured by PPB.

PPB currently offers just teens and adults bikes, which are low quality and low
price.

PPB is thinking about 'going international’. Since they know you are studying
'International Marketing', they’ve asked for your initial ideas on what to do.

Required

In groups of 3-4 students, 'brainstorm' some ideas re:

1. What country should PPB initially use as their International marketing


'beachhead'?

2. What is your rationale for selecting this country? (i.e. what makes this
country ''attractive' to PPB?)

Now, for your chosen country:

3. Conduct a brief SLEPT analysis

4. Your best guess re 'consumer behaviour facts'

5. What are the 'possible Segments' for PPB? Which one(s) will be your
‘Target market(s)’? How will you 'Position' the PPB company and its
products?

6. Summary of your Marketing Mix recommendations (plus any customer


service issues).

7. Any ideas your have for business-to business ('B2B') opportunities?

8. Based on your answers above, what key market information will you need
to help ‘fine-tune’ your international marketing strategy?

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Module ILP304 International Marketing

___________________________________
ILP304 International Marketing ___________________________________
Module Overview ___________________________________
and
‘Introduction to Marketing’ Review
___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 1
© UGBS 1

___________________________________
Welcome to International Marketing ___________________________________
Topic 1 Agenda
___________________________________
™ ILP304 Module Overview
___________________________________
™ Review of ‘Introduction to Marketing’
fundamentals ___________________________________

™ Tutorial: “Pedal Power Bicycles” ___________________________________


___________________________________
© UGBS 2

___________________________________
Module Format ___________________________________
™ 14 Topics; 3-hours per topic session
¾ Lecture + Tutorial format ___________________________________
™ Tutorials reinforce the key themes of the Lectures. ___________________________________
¾ Be prepared as tutorials are student-led!

™ Topic 9 ‘Mock Examination’’ ___________________________________


¾ Helps prepare you for the final examination.
¾ Covers Topics 1 to 8 inclusive. ___________________________________
¾ Topic 10 tutorial session devoted to Mock Exam
feedback.
___________________________________
© UGBS 3

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First edition January 2008
Module ILP304 International Marketing

___________________________________
ILP304 – Reading Materials ___________________________________
Core Text
™ Doole, Isobel and Lowe, Robin (2004). ___________________________________
International Marketing Strategy, Fourth Edition.
London: Thomson Learning. ISBN1-84480-025-3. ___________________________________
™ You also are required to ‘read around the topics.’ ___________________________________
¾ Topic Lectures (and OHTs) are to designed to augment the
core text, not summarise it!
¾ Academic journals, books, newspapers, periodicals, etc. ___________________________________
___________________________________
© UGBS 4

___________________________________
ILP304 – Other Resoruces ___________________________________
FREE Study Guide !
™ All salient information for the course. ___________________________________
¾ Bring to class!

ILP304 WebCT site


___________________________________
™ All Study Guide details and ILP304 announcements.
___________________________________
Textbook Website
™ Contains lots of neat stuff--including Multiple-Choice ___________________________________
Tests per chapter.
¾ Take these ‘optional' multiple-choice tests to ensure you
have a good grasp of the key ideas per chapter. ___________________________________
© UGBS 5

___________________________________
Assessment--Final Examination (100%) ___________________________________
™ 3-hour, closed-book exam
¾ Based on a real-world case. ___________________________________
¾ Covers the entire ILP304 module.

™ Exam details discussed in Topic 12’s Summary lecture ___________________________________


and posted on the ILP304 WebCT site.

To get a good grade… ___________________________________


™ JUSTIFY your assumptions and recommendations, citing:
¾ Marketing theory, models and concepts ___________________________________
¾ Relevant examples, et cetera.

™ IF you attend the Lectures, contribute to the tutorials, and study ___________________________________
for the ‘Mock Exam’ (Topic 9), you should do well on the Exam.
© UGBS 6

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First edition January 2008
Module ILP304 International Marketing

___________________________________
ILP304 Scheme of Work ___________________________________
Follows three main aims which form the basis of the
international marketing management process: ___________________________________
1. Identification, analysis, and evaluation of international
marketing opportunities.
___________________________________
2. Establishment of a strategic perspective and ___________________________________
development of an international marketing strategy.
___________________________________
3. Implementation and operation approach for the
adopted international strategy.
___________________________________
© UGBS 7

___________________________________
The International Marketing Syllabus ___________________________________
Topics

Understand the environmental influences on firm’s international markets 1 and 2


___________________________________
The “International Marketing Audit” 3-5
___________________________________
Develop appropriate international marketing
6
Strategies for small and medium sized firms and global players
___________________________________
Decide marketing entry strategies and determine product portfolio 7 and 8
___________________________________
Build added value through: distribution, pricing, communication, 10 - 13
and enabling technologies
___________________________________
Mock Examination, Topic 9
© UGBS 8

___________________________________
Introduction to Marketing Review ___________________________________
™ ILP304 builds upon the fundamentals of previous
Marketing modules. ___________________________________
™ Thus we assume you have a good level of ___________________________________
understanding of ‘Introduction to Marketing’.
___________________________________
™ If you do not have a good grasp of the
concepts that follow, re-read your ‘Introduction ___________________________________
to Marketing’ textbook.
___________________________________
© UGBS 9

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Module ILP304 International Marketing

___________________________________
Introduction to Marketing: “A Typical Syllabus” ___________________________________
Promotion Product Price Place ___________________________________
___________________________________
Focus on
Market satisfying customers’ Marketing
Environment needs ‘profitably’ Planning ___________________________________
___________________________________
Buyer Segmentation,
Behaviour Market Targeting and ___________________________________
Research Positioning
© UGBS 10

___________________________________
What is ‘Marketing’? ___________________________________
Definition of Marketing
“The management process responsible for ___________________________________
identifying, anticipating and satisfying customer
requirements profitably.” (Chartered Institute of Marketing)
___________________________________
A company achieves its organizational goals by:
™ Determining the needs and wants of the consumer;
___________________________________
™ Delivering the desired satisfaction more effectively and
efficiently than its competitors; ___________________________________
™ Viewing ‘profit’ as the reward for satisfying customers'
needs & wants. ___________________________________
© UGBS 11

___________________________________
Aim of Marketing ___________________________________
™ Deliver a Unique Selling Proposition (or ‘bundle of
benefits’) that is perceived as superior by the firm’s ___________________________________
target customers -- vis-à-vis competitive offerings.
___________________________________
1. Promote to our target customers that our ‘Brand’ …
2. is the right Product …
___________________________________
3. available at the right Place …
4. at the right Price.
___________________________________
5. And develop Sustainable Competitive Advantages
(SCAs). ___________________________________
© UGBS 12

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Module ILP304 International Marketing

___________________________________
Customer Satisfaction Model
Customer
Defection ___________________________________
Perceived
Quality +
Customer
Complaints
___________________________________
& Price
+ _ ___________________________________
Overall
Perceived + Complaints
Customer
+ Value Satisfaction
Resolution
___________________________________
+
+ +

Customer Customer
___________________________________
+
Expectations Loyalty
___________________________________
Brand Equity
Source: Fornell et al. (1991) 11

___________________________________
Superior Product & Service “Value”
___________________________________
___________________________________

PRODUCT/ SERVICE BEHAVIOURAL
• Ongoing Revenue
VALUE INTENTIONS
• Increased Spending
• Price Premium
___________________________________
Remain
Superior Favourable • Referred Customers

FINANCIAL
___________________________________
BEHAVIOUR CONSEQUENCES

-£ ___________________________________
Inferior Unfavourable • Decreased Spending
Defect • Lost Customers
• Costs to Attract ___________________________________
New Customers

Source: adapted from Zeithaml et al. (1996: 34) 14

___________________________________
Marketing Research Process
___________________________________
Define the problem
and research objectives Market Intelligence
is a core element of the
___________________________________
‘Market-Orientation’
Develop research plan ___________________________________
for collecting information Organisation-wide:
• Generation of data ___________________________________
Collect the data • Dissemination of data
Secondary Primary • Inter-functional ___________________________________
coordinated response to
Analyse the data that market intelligence
___________________________________
Present the findings
Source: Palmer (2004: 132)
© UGBS 19

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Module ILP304 International Marketing

___________________________________
Buyer Behaviour ___________________________________
Consumer Behaviour Factors Customer Involvement
¾ Cultural; Social; Personal;
Psychological
¾ High or Low ___________________________________
Decision Making Unit
Buyer Decision-- Process
¾ Need Recognition; Information
¾ Users, Influencers, Buyers,
Deciders, Gatekeepers
___________________________________
Search; Alternatives Evaluation;
Purchase; Post-purchase
Behaviour.
New Product Adoption Curve
¾ Innovators; Early Adopters; Early
___________________________________
Buying Decision -- Typology Majority; Late Majority; Laggards
¾ Complex; Dissonance-Reducing;
Habitual; Variety-Seeking. Non-Consumer Marketing
___________________________________
¾ Business-to-Business; Non-profit
Problem-Solving Level
¾ Extended; Limited; Impulse
Organisations/ Institutions. ___________________________________
© UGBS 16

___________________________________
Market Segmentation Questions

What’s the
___________________________________
competition doing?
1. Who are the ___________________________________
customers?
What are their
need & wants? ___________________________________
2. What product/ service offerings
will meet/ exceed the
___________________________________
target segments’ needs?
___________________________________
3. What strategies & processes
are required to effectively develop
and implement superior
___________________________________
product/ service solutions?
Source: Baker (2000: 183)
16

___________________________________
Segmentation, Targeting & Positioning
___________________________________
Segmentation Positioning
Geographic Area: Country, Region
Density
Product: Better ways to perform
existing functions (new features); ___________________________________
new functions; bundle/ unbundle;
Demographics: Age; Gender; design & style; ‘performance’.
Income; Family life cycle; Family
size; Occupation; Education; Ethnic Services: Information & reassurance;
___________________________________
origins; Nationality; Religion
convenience; installation & repair;
training; speed; delivery; choice;
Psychographics: Social class;
Lifestyle; Personality & experiential
financing; contextual ___________________________________
benefits
Personnel: Employee professionalism
Behavioural: Benefits sought; Usage
rate; User status; Purchase
(friendly, polite, helpful, empathy,
knowledgeable,)
___________________________________
occasion; Loyalty status; Lifetime
Value. Image: Brand & company ‘personality’
(name, logo, symbols, public
relations, social causes/
___________________________________
Resources & Competencies: Find a
market for what you’re great at. sponsorship)
© UGBS 18

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

___________________________________
The ‘Marketing Mix’ Elements ___________________________________
™ Product – Fits the task target customers ‘want’ it for.
¾ It should work and be what the consumers expect to get.

™ Place – Product available wherever and whenever target


___________________________________
customers find ‘easiest’.

™ Price – Product perceived as ‘good value for money’. ___________________________________


¾ Lowest price does not necessarily mean ‘best value’.
» But price is generally perceived as a ‘quality’ (or ‘prestige’) cue
___________________________________
™ Promotion -- Communication between seller and potential buyer
(or others in the channel) to influence attitudes and behaviour.

™ 3 Service P’s – People, Physical Environment, Processes.


___________________________________
NOTE:
Marketing mix elements are totally interdependent.
___________________________________
¾ If one element is changed, then others may need to change.
© UGBS 19

___________________________________
What is a ‘Product’? ___________________________________
Company’s perspective
™ “Anything that is offered to a market for ___________________________________
attention, acquisition, use or consumption, and
includes physical objects, services, persons,
places, organisations and ideas or mixes of ___________________________________
these entities.” (Kotler et al. 1999: 561)
___________________________________
Customer’s perceptive
™ A complex bundle of ‘ready-to-hand tools’ to satisfy
my specific end needs, wants, and desires.
___________________________________
™ Customers may evaluate a product’s individual
attributes and benefits, but they buy the Total Offer.
___________________________________
20

The Total Product Offer


___________________________________
___________________________________
?

Augmented Installation
Potential
Everything potentially
___________________________________
Value-added features Freephone Selection
feasible to attract
& benefits to the Packaging and hold customers.
target market
Brand The Ideal. ___________________________________
Name Styling/
Core Design After-
Delivery
Core
Benefit sale
service ___________________________________
Basic problem-solving Quality Actual
benefits; utility of the Features
physical product
Credit
Customer's minimal
product attributes
___________________________________
or service ?
Warranty
? and use conditions
___________________________________
What is the brand’s Unique Selling Proposition (USP) ?
12
Source: Adapted from Kotler et al. (1999: 562)

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Module ILP304 International Marketing

___________________________________
The Product Life-Cycle ___________________________________
___________________________________
Sales
“Brand ___________________________________
Revitalisation”

___________________________________
___________________________________
Time ___________________________________
Development Introduction Growth Maturity Decline
Source: Adapted from Kotler et al. (2001:518)
22

___________________________________
New Product Adoption Curve ___________________________________
___________________________________
___________________________________
Sales

___________________________________
13.5% 34% 34%
Early Early Majority 16%
Adopters
Late Majority
Laggards ___________________________________
2.5%
X
___________________________________
Innovators Time of Adoption
Source: Adapted from Perreault et al. (2000: 250) 23

___________________________________
‘Price’ ___________________________________
Factors Affecting Price Decisions
___________________________________

External factors
___________________________________
Internal factors
• Market demand
• Marketing objectives
(Price Skimming; Price
• Price elasticity
• Competition
___________________________________
Penetration, etc.) Pricing
decisions • Other environmental
• Marketing-mix strategy
• Costs factors (economy, ___________________________________
resellers, government)
• Company considerations
___________________________________
Pricing Strategies: Cost-based; Competitor-based; Value-based; Product Mix

© UGBS 24

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

___________________________________
‘Place’ (Routes to Market)
___________________________________
Designing channels
___________________________________
Analyse
customer
needs
___________________________________
Match channel
and Brand
objectives
___________________________________
Identify channel
alternatives
___________________________________
Evaluate
Marketing channels can influence
alternatives ___________________________________
customer’s perception of the brand !
© UGBS 25

Branding & Marketing Communications


___________________________________
SITUATION ANALYSIS ___________________________________
OBJECTIVES and POSITIONING
___________________________________
STRATEGIES & TACTICS
Advertising
{
{
___________________________________
Sales Promotion
{ ‘Pros & Cons’
Public Relations
Sales Force { ___________________________________
Packaging; Direct Marketing; Internet {
___________________________________
BUDGET

MPLEMENTATION ___________________________________
Source: Rothschild (1992) EVALUATION 30

___________________________________
‘MarComms Planning’ ___________________________________
MarComms Objectives Product/ Market type:
™ Inform; Persuade; Remind ™ Consumer or Industrial ___________________________________
™ Push Vs. Pull strategy ™ Product life cycle
™ Problem-solving level
Communication Channels ___________________________________
™ Personal; Non-personal Media types based on:
™ Target audience media
™ Standardize or adapt?
habits ___________________________________
Budgeting Methods ™ Nature of product
™ Affordable; % Sales; Parity;
Objective-task
™ Message type; ’Cost’ ___________________________________
Evaluation
Buyer’s Readiness state ™ Sales & profits; AIDA model;
Competitive reactions
___________________________________
™ AIDA model (Awareness;
Interest, Desire Action)
© UGBS 27

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

___________________________________
___________________________________
Strategic Marketing Planning ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
© UGBS 28

___________________________________
Strategic Market Planning ___________________________________
‘Strategy’
___________________________________
“A set of operating guidelines which co-ordinates
the various activities of an organisation over time,
with the intention of achieving a pre-determined
___________________________________
outcome.”
___________________________________
‘Planning’

“The process of defining how and when future


___________________________________
actions must happen to achieve a pre-determined
outcome.” ___________________________________
© UGBS 29

___________________________________
The Marketing Planning Process
___________________________________
Situation
Situation analysis Where are we now? ___________________________________
analysis

Objectives Where do we want to be?


___________________________________

How will we get there?


Strategy & ___________________________________
Tactics

Monitoring and ___________________________________


How will we know if we are on track? control

___________________________________
© UGBS 30

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

___________________________________
Strategic Market Planning

External Analysis * Internal Analysis *


___________________________________
Vision,
• Customers Mission • Performance:
• Competitors
• Markets
- market; financial;
processes; culture
___________________________________
• SLEPT factors ** ‘What if?’ • Strategic options
Scenarios • Portfolio analysis
___________________________________
Opportunities and Strengths and
Threats Weaknesses
Evaluation
___________________________________
and Choice
Key Success Factors Distinctive Capabilities
of Strategy
(What you need to do well to compete) (Your ‘SCAs’)
___________________________________
** Social; Legal; Economic;
* Also called ‘‘Marketing Audit’
___________________________________
Political; Technological Strategy Execution
or ‘Situation Analysis’
The Brand Plan
Source: Flynn (1999) 6

___________________________________
Porter’s Industry/ Market Forces
___________________________________
New Competitive Entrants
___________________________________
Threat
___________________________________
Bargaining Industry/Market

Suppliers
Power Competitors
Customers
___________________________________
Intensity of Bargaining
Rivalry Power ___________________________________
Threat
___________________________________
Substitute Products
Source: Porter (1980)
32

Strategic Options: ___________________________________


Boston Consulting Group (BCG) Matrix
___________________________________
RELATIVE MARKET SHARE
High Low ___________________________________

High
PROBLEM ___________________________________
STAR CHILD
(Question Mark)
___________________________________
MARKET
GROWTH ___________________________________
CASH DOG
Low COW (Re-launch or Exit)
___________________________________
Relates to PLC, Ansoff Matrix, and even at the Country/ Region level. 33

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© University of Gloucestershire Business School
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Module ILP304 International Marketing

___________________________________
Generic Strategy Types
___________________________________
Source of
Competitive Advantage ___________________________________
Cost Differentiation
___________________________________
Cost / Price
Differentiation
Broad Leadership ___________________________________
Competitive
Scope ___________________________________
Narrow
Focus ___________________________________
Source: Porter (1980) 34

Strategic Options:
___________________________________
Ansoff’s Product/ Market Matrix ___________________________________
4 Main Ways to Increase Sales are:

Present Products New Products


___________________________________
I. Market Penetration II. Product development
• Add product features, ___________________________________
• Increase/ maintain market share product refinement
Present • Increase/ maintain product usage • Expand product line
Markets - Frequency used
- Quantity used
• Develop a new generation
product
___________________________________
- New applications for current users • Develop totally new products
• Brand/ company image • Brand/ company image
___________________________________
III. Market development * IV. Diversification involving
new products & new markets *
New
Markets
• Expand geographically
• Target new segments • Related & Unrelated
___________________________________
• Brand/ company image • Brand/ company image

35
* Via ‘International / Global Marketing

___________________________________
Today’s Tutorial Exercise ___________________________________
“Pedal Power Bicycles”

™ In groups of 3-4 students, 'brainstorm' some ideas as to how


___________________________________
Pedal Power Bicycles can go “international”

Tutorial Session Aims


___________________________________
™ Get acquainted with your class mates.
™ Understand how Marketing ‘fundamentals’ can be applied to
___________________________________
the international & global marketplace…
™ AND how International marketing differs from domestic ___________________________________
marketing!
™ Appreciate the complexities of international marketing -- even
for a simple, everyday product like a bicycle. ___________________________________
© UGBS 36

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© University of Gloucestershire Business School
First edition January 2008
Part 1: ANALYSIS
(Topics 2, 3, 4 & 5)
Topics 2-5 concentrate on helping the student generate a greater understanding
of the concepts of the international marketing process and the international
environment within which companies operate.

Knowledge and an understanding of the markets in which companies operate


are important for all business activities. In international markets, because of
geographical distances and the complexities of operating in a number of
disparate markets where risk and uncertainty are high, the need for knowledge
and understanding becomes of paramount importance.

Therefore the development of analytical skills is a critical pre-requisite to the


international marketing manager's ability to make effective decisions. In order to
develop such skills the manager needs a sound knowledge of the marketing
environment in which they operate and a systematic research methodology.

Key Learning Objectives

Topic 2
Identify the steps in the international marketing process and the complexities of
the international marketing environment. Understand the changing nature of the
international trading environment.
Topic 3
Understand the differences in social/cultural conventions that affect buyer
behaviour and marketing approaches in international markets.
Topic 4
Evaluate the attractiveness of a foreign market using explicit evaluation criteria.
Explain the difference between the assessment of country attractiveness and
that of market segment attractiveness.
Topic 5
Develop the skills to carry out an international marketing research project and be
able to identify sources of information and methods of information analysis. Use
appropriate conceptual frameworks to develop a trans-national segmentation
methodology on which to base a global marketing strategy.

29
© University of Gloucestershire Business School
First edition January 2008
ILP304 International Marketing – Topic 2

‘International Marketing’ and the


International Trading Environment
Two topics are covered in this session: an overview of International Marketing;
and the International Trading Environment. Given time constraints, only the key
issues of each will be covered in the Lecture. Thus it is imperative that you read
and understand the textbook chapters.

Pre-session activities
Read Chapters 1 and 2 of the Doole and Lowe (2004) textbook.

1. ‘International Marketing’
Learning Outcomes
On completion of session the student should be able to:
• Explain the impact of macro-environmental factors on international markets.
• Discuss the differences between export marketing, international and global
marketing.
• Understand the criteria required to evaluate a company’s international
marketing strategy.

Overview
We examine how international marketing differs from domestic marketing and
why it is such an important area of study for any manager in marketing today.
Various aspects of the international marketing environment are explored. The
international marketing process is examined and the major themes to be
pursued in later sessions reviewed.
We discuss the growing strategic importance of international marketing and
examine the reasons why companies become involved in international markets.
The environments that international companies face are typically characterised
by uncertainty and change, factors which, taken together, increase the element
of risk. The global context of international marketing is evaluated by examining
the ‘SLEPT’ dimensions of the social/cultural, legal economic, political, and

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

technical environs, which impact on firms marketing goods and services


internationally.

2. The international trading environment


Learning Outcomes
On completion of this session, the student should be able to:
• Discuss the effects and implications of the factors impacting on world trade.
• Explain the key trends in the major regional trading blocs around the globe.
• Understand the role of the major world institutions that foster the
development of multilateral free trade across the world.

Overview
International marketing takes place within the framework of the international
trading environment. We examine the development of international trade in
recent years. The growth and changing pattern of international trade is analysed
and the institutions that aim to influence international trade are discussed. The
changing nature of world trade structures and the implications these changes
have on trading regions around the globe are also examined.
International trade has been the major stimulus for world economic growth.
International trade in merchandise totalled US $5.5 trillion in 1998. East Asia,
North America and the European Union account for approximately 80 per cent of
world trade and 85 per cent of world direct investment.
A major trend that is examined in the session is the development of regional
trade groupings around the world. The European Single Market, the formation of
The North American Free Trade Area (NAFTA) and the Association of South
East Asian Nations (ASEAN) all indicate a world wide growth towards
regionalism.
To foster international trade several world organisations have been developed.
The World Trade Organisation (WTO replacing GATT), The World Bank (IBRD)
and the International Monetary Fund (IMF) are examples of some of the most
important ones.
The rationale for world trade is based largely upon the 'Theory of Comparative
Advantage', developed mainly by the classical economist David Ricardo. At its
simplest level, the theory suggests that trade between countries takes place
because one country is able to produce a product at a lower price (at
comparable quality) than is possible elsewhere.
In a rapidly changing world, managers need to not only develop well-focused
and clear strategies but also have the flexibility to deal with ambiguity, high-risk
situations and a constantly changing marketplace. New markets are emerging
where risk and uncertainty are high and where there is little reliable information.
These have social and cultural implications (Topic 3), how marketing information

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

is obtained and used (Topic 4) and how to develop strategies to achieve


competitive advantage (To[ics 5 and 6). Whilst countries have many reasons for
wishing to trade with each other, it is also true to say that all too frequently an
importing nation will take steps to inhibit the flow of goods and services into their
countries, thus over the years numerous non-tariff barriers have been developed
by countries wanting to protect indigenous industries.

Topic 2 Tutorial session


Student Debate: The “Ethics of Globalisation”

Get into groups of 3-4 students. Half of the ILP304 students will take the “For
Globalisation” position; the other half, “Against Globalisation”. Groups will make
presentations on their position, including their rationale. .

Post-topic activities
Take the multiple-choice tests to ensure you have a good grasp of this week's
key ideas. Then write your test scores in Appendix A; and jot down the areas
you know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

___________________________________
___________________________________
___________________________________
International Marketing
and the ___________________________________
International Trading Environment
___________________________________
___________________________________
___________________________________
ILP304
Topic 2
1

___________________________________
Learning Outcomes
___________________________________
™ Discuss the differences between export marketing, international and
global marketing.
___________________________________
™ Explain and use ‘SLEPT’ factors to assess international markets.

™ Understand the criteria required to evaluate a company’s ___________________________________


international marketing strategy.

™ Discuss the effects and implications of the factors impacting on


world trade.
___________________________________
™ Explain key trends in the major regional trading blocs around the
globe.
___________________________________
™ Understand the role of the major world institutions that foster the
development of multilateral free trade across the world.
___________________________________
2

___________________________________
The International Marketing Syllabus
Topics ___________________________________
Understand the environmental influences on firm’s international markets 1 and 2
___________________________________
The “International Marketing Audit” 3-5

___________________________________
Develop appropriate international marketing
6
Strategies for small and medium sized firms and global players
___________________________________
Decide marketing entry strategies and determine product portfolio 7 and 8
___________________________________
Build added value through: distribution, pricing, communication, 10 - 13
and enabling technologies
___________________________________
Mock Examination, Topic 9
3

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

___________________________________
Reasons for Going ‘International’
___________________________________
™ Saturated home market re incremental sales and profits
™ Fall in domestic sales ___________________________________
™ Life cycle extension
™ Excess capacity ___________________________________
™ Production economies of scale
™

™
Research & Development amortisation
Countering trade cycles
___________________________________
™ Less competition abroad
™ Pre-emptive strike on competitors going international
___________________________________
™ Retaliation to foreign competitors to your home market
___________________________________
4

___________________________________
What is International Marketing?
___________________________________
™ Different Levels of International Marketing ___________________________________
¾ Export marketing
¾ International marketing ___________________________________
¾ Global marketing
___________________________________
___________________________________
___________________________________
5

___________________________________
Stages in International Development
___________________________________
™ Nationally based
___________________________________
™ Local countries based

™ Export based
___________________________________
™ Internationally based ___________________________________
™ Multi-nationally based ___________________________________
™ Globally based
___________________________________
6

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

___________________________________
Scale of Operations
___________________________________
™ National Market ™ Sell in one country
___________________________________
™ International Markets ™ Sell in a few countries

™ Multinational Markets ™ Sell in many countries ___________________________________


™ Global Market ™ Sell in most countries ___________________________________
___________________________________
___________________________________
7

___________________________________
‘EPRG’ Framework
___________________________________
™ Ethnocentrism
¾ Domestic markets take precedence of overseas markets.
¾ Overseas markets will be exploited to the extent that they are ___________________________________
similar to domestic ones.

™ Polycentrism (Opposite of ethnocentrism).


¾ Domestic market viewed as unique, perceive real differences
___________________________________
between domestic and international markets.

™ Regiocentrism ___________________________________
¾ Sees regions as unique and attempts to achieve an integrated
approach within them.

™ Geocentrism (Combination of ethnocentric and polycentric)


___________________________________
¾ Global view that is accepting of similarities and differences and
seeks to develop appropriate strategies. ___________________________________
Source: Perlmutter (1969, cf. Lee and Carter 2005, p. 549)
8

Environmental Influences on ___________________________________


International Marketing
___________________________________
Socio/Cultural Legal Political
Language
Religion
Local domestic laws
International law
Operational restrictions
Discriminatory restrictions
___________________________________
Aesthetics Home domestic law Physical actions
Values and attributes
Social organisation
___________________________________
Material culture
Technological
Satellite Communications
___________________________________
Environmental ISDN
Economic Influences on Internet ___________________________________
Developed economies International WWW
Emerging economies Marketing The Electronic
Less developed economies Superhighway ___________________________________
Currency movements

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

1. Analysing Cultural Suitability ___________________________________


for a Product or Service
___________________________________
Determine the needs of potential foreign market:
™ what needs do customers perceive? ___________________________________
™ how are needs satisfied now?
™ do people recognise their needs?
___________________________________
Determine behaviour patterns:
™ role played by family or DMU members ___________________________________
™ what quantity? Quality? Brand names?
™ how and when is product /service purchased?
___________________________________
What broad cultural values are relevant:
™ morality, religion, work, family
™ do they clash with the product or service? ___________________________________
10

___________________________________
2. The Legal Environment
___________________________________
™ 3 dimensions in the legal environment:
¾ local domestic law:
___________________________________
„ different in every country
___________________________________
¾ international law:
„ issues include piracy, treaties, patents etc ___________________________________
¾ domestic laws in the home country: ___________________________________
„ export controls, plus duty to abide by national laws in all activities.
___________________________________
11

___________________________________
3. The Economic Environment
___________________________________
™ Developed triad Economies
¾ account for 80% of world trade ___________________________________
Emerging Economies
™
¾ huge and growing consumer demand
___________________________________
¾ government directed economic reforms
¾ ‘dual economy’ ___________________________________
™ Less Developed Countries (LDCs) ___________________________________
¾ low GDP, limited manufacturing base
¾ infrastructure weaknesses
¾ heavy reliance on one product/one trading partner ___________________________________
12

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© University of Gloucestershire Business School
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Module ILP304 International Marketing

___________________________________
4. The Political Environment
___________________________________
“A risk due to a sudden or gradual change in a local
political environment that is disadvantageous or counter-
productive to foreign firms and markets”. ___________________________________
™ Government actions which may constitute potential risk ___________________________________
for the firm:
¾ Operational restrictions
„ E.g. exchange controls or employment policies
___________________________________
¾ Discriminatory restrictions
„ E.g. special taxes and tariffs ___________________________________
¾ Physical actions
„ E.g. nationalisation, riots and war.
___________________________________
13

___________________________________
5. Technological Considerations
___________________________________
™ Increased ease and speed of communication
___________________________________
™ High rate of technological change
___________________________________
™ Global access to the World Wide Web
¾ Projected 765 million users by end 2005
___________________________________
™ Importance of English language for web users
___________________________________
___________________________________
14

International Marketing Strategies: ___________________________________


Success and Failure
___________________________________
Failure arises from:
™ inability to find right market niche
___________________________________
™ unwilling to adapt products
™ products not perceived as sufficiently unique ___________________________________
™ vacillating commitment
™ assigning the wrong people
™ picking the wrong partners
___________________________________
™ inability to manage local stakeholders
™ mutual distrust/lack of respect between HQ & ___________________________________
management
™ inability to leverage ideas to all countries
___________________________________
15

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© University of Gloucestershire Business School
First edition January 2008
ILP304 International Marketing – Topic 3

Social and Cultural


Considerations
Learning Outcomes
At the end of the session the student should be able to:

• Discuss and evaluate social and cultural factors impacting on an


international marketing strategy.
• Understand the cross-cultural complexities of buying behaviour in different
international markets.
• Assess the impact of social and cultural factors on the international
marketing process.
• Carry out a cross-cultural analysis of specified international markets.

Pre-session activities
Read Chapter 3 of the Doole and Lowe (2004) textbook.
(See also tutorial session)

Overview of the session


Social and cultural issues are often cited as being the biggest barrier to
successful international marketing strategies. Often the force a company has to
deal with may not necessarily be another competitor but the cultural traditions of
the country. As such, an appreciation of the social and cultural factors that may
impinge on a marketing strategy is fundamental to the development of an
appropriate marketing strategy. Thus an appreciation of the factors discussed in
this session will lay a useful foundation when studying later sessions, particularly
Part Three, which focuses on the implementation issues in international
marketing.
For a company to operate in its domestic market there are considerable
difficulties in understanding and in forecasting within its own cultural frame of
reference. In international markets where knowledge demands are greater an
intuitive and comprehensive understanding, of the relevant social and cultural
challenges are exceedingly difficult to obtain. Yet in examining market failure, it

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

is often a lack of understanding in these very factors that has led to failure by
firms to compete in international markets.
Therefore the development of the ability to empathise with different cultures is a
key challenge emanating from this session.

TOPIC 3 TUTORIAL: The importance of culture


Before the class:

i Read the case study “The HMV Group PLC in Japan”

ii Re-read Chapter 3 of Doole & Lowe, and make notes on the


characteristics of the English, Canadian (North American) and Japanese
cultures. Look in particular at the section on cross-cultural analysis
(pages 80 – 85). In terms of culture, how similar are the three different
markets? What implications does your answer to this question have for
HMV’s decision to remain in Japan?

iii Now read the case study `Growing old, but not growing up’ below. How
do the cultural trends in this case fit with the characteristics of Japanese
culture that you identified from Doole & Lowe?

iv Assuming that HMV decides to remain in the Japanese music market, jot
down some ideas for positioning the brand to appeal to a particular target
market.

During Class

The class will begin with a discussion on issues of analysing `national culture,’ so
be ready to put forward your ideas from activities i – iii above. The bulk of the
class will be spent working in groups on developing ideas for a brand positioning
for HMV. Your group will present:

Choice of target market


Brand positioning and value proposition
Outline marketing mix strategies

After the class

During this session, we focussed on the analysis of culture and sub-culture as a


basis for developing a marketing strategy and associated tactics. Spend half an
hour reflecting on the different types of cultural influences on marketing strategy.
Try to develop a summary list of cultural factors that an organisation could use to
ensure that such issues were comprehensively addressed in a marketing plan for
an overseas market.

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

Post-topic activities
Take the multiple-choice test to ensure you have a good grasp of this week's key
ideas. Then write your test scores in Appendix A; and jot down the areas you
know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.

41
© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

CASE STUDY: THE HMV GROUP PLC IN JAPAN

The HMV Group plc

To the British public, the HMV brand stands for music retailing. It is arguably the
strongest brand in this market in the UK, having been named best music retailer
by the prestigious Music Week awards for the last eight years. Behind the music
store brand, however there is an international retail group with over 730 outlets
spread across eight countries, which, during its nine-year history has built a
strong position in the music, DVD and video gaming markets worldwide (See
figure 1). Music is the Group’s largest product category, accounting for 37% of
Group sales for the year to April 2006, closely followed by DVD, which was 32%
of Group sales. Although the HMV Group operates in 8 countries worldwide, its
principal markets are in the UK, Japan, and Canada (see figures 2 and 3). The
Group’s sales in the Book market are largely limited to the UK, where the
company operates under the Waterstone’s brand. These contributed 24% of
Group sales in the same period. All of its operations, both in the UK and
internationally, are wholly owned.

A very bad year

The year of 2006 started well for HMV, as the Group hit the headlines with its
£68.2m acquisition of UK book retailer Ottakars, giving it sufficient dominance in
the UK book retail market to attract intense scrutiny from the Competition
Commission. In March, Group managers rejected a bid by private equity firm
Permira of 210p per share, claiming that this undervalued the business. As
autumn approached, however, HMV bosses may have had cause to regret their
self-confidence. In September, Alan Giles, the man who had steered the group
since its birth in 1998, was replaced by Simon Fox, formerly boss of electrical
retailer Comet. The 2006/7 interim report in October recorded losses of £36.4
million for the first half of the year, compared to a £200,000 profit for the
previous one. The new chief executive’s first review was far from optimistic
about future profits and dividends, blaming `difficult market conditions’ for a poor
set of trading results. By the end of the year, some commentators were
suggesting that the Group would do better to dispose its `overseas ventures’ and
the Waterstone’s brand and return to its core business of UK music, DVD and
games retailing. Meanwhile, the share price slid to 141p in January 2007. With
a serious decline in its traditional UK markets, the HMV is looking to its more
successful Asian operations to offset the Group’s losses at home. Early results
from 2007, however, suggest that the HMV is struggling in Japan as well.

The Japanese Music & DVD/Video markets

The Japanese music retail market cannot be described as buoyant – total sales
have declined steadily over the last nine years, falling 7% in the first half of 2005
alone (Serafin 2005). The global trend towards downloading has impacted here
too, though it really only got underway in 2005, with the launch of iTunes’

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Module ILP304 International Marketing

Japanese site. The attention of web operators is not so much on the $10.3
million/year market for PC downloads, but the $107 million/year market for
downloads to mobile phones (McClure 2006). According to HMV, DVD/video
sales are also `slow’ here (HMV 2006) though Datamonitor (2006c) has market
growth at an annual rate of nearly 10% over the last five years, and set to
continue at 8.6% until 2010. Although Japanese consumers have been slower
than their European or American counterparts to adopt DVD technology, DVD
sales now make up over 80% of total revenues for the Asia Pacific region as a
whole (Datamonitor 2006c).

Cultural trends present a similar picture of change. Foreign products have


traditionally performed well, particularly luxury brands from Europe (Kotabi &
JIang 2006). Recent years have seen an increasing tendency in young
consumers towards products and services that allow them to relax and entertain
themselves in an attempt to offset the stress of modern life (Xtreme Information
2005). The demand for entertainment experiences is best represented by the
success of Shidax’s Karaoke and restaurant complex in Shibuya. Opened in
2005, the complex has a theme park feel, and is supplemented with a range of
shops offering pampering and entertainment products (Xtreme Information
2005).

HMV in Japan

Since the takeover of Tower Records by Nikko Principal Investments Japan,


HMV is the only foreign operator in the Japanese market. The most recent
figures put the number of outlets at 65, giving a total of 447,000 square feet.
According to President Paul Dezelsky, the company competes by tailoring the
offer to the local population, keeping an extensive catalogue of domestic
releases as well as international titles (Serafin 2005). The basic retailing
formula, however, remains unchanged. In terms of store layout, approach to
physical distribution, pricing, promotional activity and service levels, HMV Japan
adopts the same approach as the rest of the group, with one exception. Digital
sales figure more prominently than in other markets, with sales from hmv.co.jp
contributing 25% of total sales (HMV 2006). In 2006, the company launched a
mobile commerce site, to tap into this lucrative market.

After five years steady growth, however, there are signs that the HMV is
beginning to struggle in Japan. Figures for the latter half of 2006 showed a
decline in turnover on last year in comparable stores, and profits were similarly
disappointing. In March 2007, Fox announced a strategic review of the Group’s
Japanese interests, prompting rumours of a sell-off. Dezelsky remains optimistic
that HMV Japan might be retained, but independent observers suggest that the
Group might do well to sell the division while its recent success is still fresh in
the minds of potential buyers (McClure 2006). The bigger question is whether to
sell rather than when. On the one hand, the move could be a panic reaction to
one set of disappointing results, and the disposal of a relatively successful arm
of the business to temporarily shore up their ailing UK operations. On the other,

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Module ILP304 International Marketing

it could be a shrewd anticipation of a permanent decline in the Group’s


Japanese fortunes, which would generate the funds needed to deal with their
problems at home. Only one thing is clear – the decision will not be an easy
one.

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Module ILP304 International Marketing

Figure 1: HMV Group’s Strategic Business Units (As at April 2007)

HMV Group
CEO Simon Fox

HMV UK & HMV Asia HMV Canada Waterstones


Ireland President: Paul President: MD: Gerry
Acting MD: Dezelsky Humphrey Johnson
Simon Fox Kadaner

Figure 2: HMV International stores by country (As at 2004)


(Source Mintel 2005)

Country Number of stores


Belgium 1
Netherlands 1
Ireland 11
Japan 45
Australia 34
Hong Kong 4
Singapore 2
Canada 99
USA 1
Total 198

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Figure 3: Turnover and profit trends for strategic business units

Sales (£Million) 2006 2005 2004 2003

HMV
UK & Ireland 937.2 986 930.2 867.4
Asia Pacific 275.5 278.2 280.9 277
Canada 194.5 158.3 153.6 157
Total HMV 1407.2 1422.5 1364.7 1301.4

Waterstones 418.7 440 428.9 406.2


Total Group 1825.9 1862.5 1793.6 1707.6

Profit (£ Million) 2006 2005 2004 2003

HMV
UK & Ireland 60.6 93 95.6 88.6
Asia Pacific 8.6 6.6 7.6 9.3
Canada 12.5 7.4 2.4 -3.5

Total HMV 81.7 107 105.6 94.4


Waterstones 20.9 25.2 26 24
Total Group 102.6 132.2 131.6 118.4

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© University of Gloucestershire Business School
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Module ILP304 International Marketing

GROWING OLD, BUT NOT GROWING UP: DEMOGRAPHIC AND CULTURAL


CHANGE IN JAPAN

Much of the developed world is familiar with the issues associated with an aging
population. Falling birth rates, coupled with ever increasing life-expectancy have
left many developed countries with worries about national pension funds and a
burgeoning `grey-market.’ In Japan, however, the extent of such changes
threatens a crisis.

Japan’s population peaked at 130 million in 2005, when it passed Italy to


become the country with the highest proportion of over-65s, and the lowest of
under 15s. The seriousness of the situation became apparent in spring 2006,
when official figures showed that the population had begun to decline. This is not
merely a demographic blip – the average number of children borne by a
Japanese woman has fallen for the five year in a row, and pessimistic forecasts
estimate the population will have fallen to fewer than 50 million by the end of the
century if this trend continues (Dejevsky 2006).

With changing demographics comes a change in culture. Japan still clings


strongly to traditional family values, with parents providing a stable home, and
saving avidly so that they can pass as much as possible on to their children, who
in return would care for them in their old age. According to Tetsuro Sugiura,
chief economist at the Mizuho research institute in Tokyo, this “unspoken family
contract… is nothing like as firm as it was.” (Dejevsky 2006: 20). Not only will
there be fewer children to care for those currently approaching retirement, but
those few seem less inclined to shoulder the burden of caring for their aging
relatives. In return, parents are becoming less reluctant to spend their children’s
potential inheritance.

This has created a huge demand for high quality, high priced, luxury products,
particularly from Europe. According to HSBC, in 2006 a quarter of all the world’s
luxury products were purchased by the Japanese (Market: Asia Pacific 2007).
Entertainment and leisure services are also in demand, with an emphasis on
pampering and play. Toy manufacturers have been quick to cash in, by creating
toys aimed at adults rather than children. Kondo Kagaku Co, the leading
manufacturer of radio control technology is producing $1000+ robots based on a
1970s TV series. These `toys’ sell primarily to middle aged men who want to re-
live childhood fantasies of piloting a super-robot (Economist 2006), and have
even led to the creation of a televised Japanese/Korean tournament in which
pilots bring their robots to compete against and fight one another. The female
market has not been forgotten. Middle aged women, whose children have
recently left home, are rushing to buy `Primo Puel’ – a virtual child which repays
love and attention by exhibiting higher `happiness levels’ (Economist 2006). It’s
not just high price, high-tech products that are doing well; sales of nostalgia

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products such as `masked raider belts,’ and low tech products such as baseball
game `Yakyuu Ban’ have also rocketed (Economist 2006).

As parents inexorably colonise the traditional consumer territory of teenagers


and even children, it’s hard not to feel sorry for the beleaguered youth of Japan.
According to many commentators, the country’s dwindling population of
youngsters are responding by becoming increasingly alienated from the adult
one (Kirby 2006, Economist 2006), by seeking to subvert established youth
cultures, and by asserting their individualism over the traditional Japanese
values of collectivism and social obligation (Xtreme Research 2005). Nowhere
is this more apparent than in the recent movement to subvert the ubiquitous
culture of `Kawaii’ or cuteness, by adding darker undertones of violence or
pornography into traditional Kawaii imagery (Lee 2006). Youth music, too, is
taking on a harder edge with the increasing popularity of Hip Hop, produced
either by American artists such as Pharrell Williams, or home-grown acts such
as Nigo, both of whom have popular fashion labels. In fashion, the trend among
teenagers, both male and female, is for dressing in very young clothes, to create
the impression of a child trapped in an adult’s body (Kirby 2006).

Japan has been described as a neurotic nation, which, following historical


tragedies such as the Hiroshima bomb, the economic crash of the 1990s, and
the Kobe earthquake, refuses to grow up (Kirby 2006, Lee 2005). Others argue
that cultural changes are driven, not by history, but by demographic and
economic changes (Dejevsky 2006). Whatever the cause of the changes, those
wishing to market consumer brands in Japan cannot rely on existing stereotypes
of Japanese culture.

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Module ILP304 International Marketing

___________________________________
SOCIAL AND CULTURAL
CONSIDERATIONS ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 3
1

___________________________________
Learning Outcomes ___________________________________
™ Discuss and evaluate social and cultural factors
impacting on an international marketing strategy.
___________________________________
™ Understand the cross-cultural complexities of buying ___________________________________
behaviour in different international markets.
___________________________________
™ Assess the impact of social and cultural factors on the
international marketing process.
___________________________________
™ Carry out a cross-cultural analysis of specified
international markets. ___________________________________
2

___________________________________
Culture Defined ___________________________________
™ The sum total of learned beliefs, values and ___________________________________
customs that serve to direct customer
behaviour in a particular country market. ___________________________________
Doole & Lowe (2004:66) ___________________________________
___________________________________
___________________________________
3

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Module ILP304 International Marketing

___________________________________
Differences in Ethical Values ___________________________________
Economic relations Bribery
™ ™
___________________________________
™ Employee relations ™ Nepotism
___________________________________
™ Organisational issues ™ Hierarchy & status
___________________________________
___________________________________
___________________________________
4

___________________________________
A Cultural Framework ___________________________________
Religion
___________________________________
Values &
Language
Attitudes
___________________________________
Aesthetics Cultures Education ___________________________________
Law & Politics Social ___________________________________
Organisations
Technology &
Material Culture
___________________________________
Adapted from Terpstra & Sarathy (2000)
5

___________________________________
Some Cultural Universals
___________________________________
™ age athletics ™ hygiene ___________________________________
™ cleanliness ™ joking
™ courtship ™ kinship ___________________________________
™ dancing ™ language
™ division of labour ™ law ___________________________________
™ education ™ luck concepts
™ ethics ™ marriage ___________________________________
™ etiquette ™ mourning
™ Family ™ music ___________________________________
™ housing ™ religion
6

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Module ILP304 International Marketing

___________________________________
Cultural Influences On Buyer Behaviour ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
Adapted from: Jeannet and Hennesey (2002)

___________________________________
Eliminating
Self–reference Criteria (SRC) ___________________________________
™ Define in terms of home country cultural traits, habits
and norms.
___________________________________
™ Define in terms of foreign cultural traits, habits and ___________________________________
norms.
___________________________________
™ Isolate and analyse SRC influences and see how if
effects the problem. ___________________________________
™ Redefine the problem without the SRC influence.
___________________________________
8

___________________________________
Assumptions to be Questioned by
International Marketing Managers ___________________________________
™ Maslow’s Hierarchy of Needs is consistent across
cultures.
___________________________________
™ The buying process in all countries is an individualistic ___________________________________
activity.

™ Social institutions and local conventions are similar across


___________________________________
cultures.

™ The consumer buying process is consistent across cultures


___________________________________
¾ consumer involvement
¾ perceived risk ___________________________________
¾ cognitive style.

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Module ILP304 International Marketing

___________________________________
Culture and Communication ___________________________________
Low context cultures ___________________________________
™ Rely on words used to convey the intended meaning.

High context cultures


___________________________________
™ Depend on the context as much as the words
themselves. ___________________________________
Relational orientation analysis (Tromponaars 1993) ___________________________________
™ Expressing emotion is legitimate (affective)
™ Emotions should not be revealed (neutral)
___________________________________
10

___________________________________
Contextual Continuum of Differing
Cultures ___________________________________
High Japanese ___________________________________
Arabs
Latin Americans
Italians/Spanish
___________________________________
Context French
English
North Americans
___________________________________
Scandinavians

Low
Germans
Swiss
___________________________________
Explicit Messages Implicit
___________________________________
Source: Usiner (2000))
11

___________________________________
Hofstede’s Criteria (2001) ___________________________________
™ Individualism
¾ Affects the way people live together ___________________________________
™ Power distance
¾ Dealing with human inequality ___________________________________
™ Uncertainty avoidance
¾ Managing future uncertainty
___________________________________
™ Masculinity
¾ Male / female stereotyping
___________________________________
™ Confucian dynamism ___________________________________
¾ Universalistic or particularistic

12

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© University of Gloucestershire Business School
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Module ILP304 International Marketing

___________________________________
Power Distance/Individualism
Dimensions Across Cultures ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
Source: Hofstede (2001)
13

___________________________________
Interrelationship Between Context and
Product Diffusion ___________________________________

High Context/Fast Diffusion High Context/Slow Diffusion


___________________________________
South East Asia India ___________________________________
Japan Asia
___________________________________
Low Context/Fast Diffusion Low Context/Slow Diffusion

Scandinavia UK
___________________________________
USA, Canada Eastern Europe
Source: Willis, Samli and Jacobs (1991)
___________________________________
14

___________________________________
Analysing Cultural Suitability
for a Product or Service ___________________________________
Determine the needs of potential foreign market:
™ what needs do customers perceive? ___________________________________
™ how are needs satisfied now?
™ do people recognise their needs? ___________________________________
Determine behaviour patterns:
™ role played by family or DMU members ___________________________________
™ what quantity? Quality? Brand names?
™ how and when is product /service purchased?
___________________________________
What broad cultural values are relevant:
™ morality, religion, work, family
™ do they clash with the product or service? ___________________________________
15

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Module ILP304 International Marketing

___________________________________
CULTURAL SUITABILITY cont'd...
___________________________________
Determine the forms of decision making:
™ is purchase impulsive or complex? ___________________________________
™ what information sources are relied upon?
™ what criteria are used to assess alternatives?
___________________________________
Determine relevant promotions:
™ what laws affect advertising & sales promotion?
™ what sales techniques are accepted?
___________________________________
™ what language, spelling is relevant?
™ what words, themes, colours etc. are taboo? ___________________________________
™ what media exists? What are the media habits of the target market?

Determine appropriate outlets: ___________________________________


™ where is the product or service purchased?
™ what is the distribution chain?

16

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© University of Gloucestershire Business School
First edition January 2008
ILP304 International Marketing – Topic 4

Assessing Market
Attractiveness
Learning Outcomes
At the end of this session the student should be able to:
• Understand the concepts and techniques to identify and evaluate
opportunities internationally.
• Apply Lasserre’s framework for assessing country/market attractiveness.
• Apply segmentation techniques to international markets.
• Appreciate the relevance of generic strategic marketing models to
assessing international market attractiveness.

Pre-session activities
Re-read pages 101-112 of the Doole and Lowe (2004) textbook
Tutorial session pre-reading (see below)

Overview of the session


In this session, we look at the task of making a comprehensive and objective
assessment of an overseas market. You will have noticed that the core text
covers this subject rather briefly in the same chapter as that on marketing
research, under the heading of `opportunity analysis’. We have decided to
include a session specifically on the assessment of marketing attractiveness for
a number of reasons. The challenges of researching new markets go beyond
those of international marketing research. Although organisations need to be
aware of the difficulties in securing reliable, valid and comparable data, they
must also address the crucial question of what information is needed – how
should an organisation make a decision on whether to enter a new overseas
market?

It is on this question that the session concentrates. The lecture and tutorial
exercise explore the range of variables that impact on market attractiveness,
using Lassere’s (2003) framework as a focus. Whilst this is an excellent
framework for assessing market attractiveness at the country level, marketers
will often need to analyse specific segments, as well as the country as a whole.

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Module ILP304 International Marketing

In deciding whether to enter the Indian market, for example, the mobile
telecommunications company Maxis Communications Berhad concentrated its
initial analysis on the relative small number of regions that contained the affluent
middle class, ignoring the vast majority of the population, who lacked the
personal income and access to the technological infrastructure to constitute a
viable market opportunity. Hence this session will also consider approaches to
the segmentation of international markets, identifying and evaluating
homogenous groups of customers that may existing across national or cultural
boundaries.

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Module ILP304 International Marketing

TOPIC 4 TUTORIAL: Assessing market attractiveness

Before the class:

i The main theme of this week’s topic is the assessment of international


market opportunities. The core text gives you little help with this, since it
concentrates on the types of information and the means by which it may be
collected, rather than the decisions that this information is supposed to support.
Nevertheless, it is good to start by understanding the types of information that
are available to support the assessment of international market attractiveness,
so begin by reading Chapter 4 of Doole & Lowe, making a note of the types of
information that are used, and the problems associated with getting this
information. Be prepared to share your list with the rest of the class.

ii Now download and read the following articles:

• Francis (2003) “India: A market in flux” Bookseller 5086, 20-22


• Francis (2003) “Taiwan: a star dragon” Bookseller 5062, 22-25

These articles provide detailed information on the Taiwanese and Indian book
markets. The framework you will use to analyse these two markets will be
explained during the lecture, so don’t conduct the market evaluation yet – you
will do this in groups in the tutorial session. At this stage write down any
thoughts or questions that occur to you so that you can raise them in class.

During Class

During the class, you will work in groups on an assessment of the two markets
using Lassere’s (2003) framework, and discuss your group’s conclusions with
the rest of the group.

After the class

During this session, we examined a framework for evaluating the attractiveness


of overseas markets, and discussed the limitations of the framework itself, and
the problems of applying it rigorously. As soon as possible after the class,
spend half an hour making a note of these problems and limitations.

Post-topic activities
Take the multiple-choice test to ensure you have a good grasp of this week's
and last week’s key ideas. Then write your test scores in Appendix A; and jot
down the areas you know well, and those areas you need to review for the final
examination. List a numbers of things from this week that you would like
‘clarified’ in next week’s class.

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© University of Gloucestershire Business School
First edition January 2008
Module ILP304 International Marketing

___________________________________
Assessing Market Attractiveness
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 4
1

___________________________________
Lecture Aims
___________________________________
™ Build a market profile analysis of a foreign ___________________________________
country market.
___________________________________
™ Appreciate the relevance of generic strategic
marketing models in assessing international market ___________________________________
attractiveness.

™ Segmentation, Targeting & Positioning (STP) ___________________________________


fundamentals apply to international marketing
strategy. ___________________________________
2

___________________________________
Assessing (potential) Country Returns
___________________________________
Market factors
e.g. growth,
size, margins,
___________________________________
loyalty etc.

___________________________________
Resources Competitive factors
e.g. size, strength,
e.g. Skills,
raw materials, labour,
Country market
opportunities aggression, ___________________________________
learning, location etc. entry barriers etc.

___________________________________
Incentives
Source:
Adapted from Lasserre, P. (2003: 161)
Global Strategic Management. Palgrave
e.g. Taxes,
subsidies,
NOTE:
Used in the Tutorial Case
___________________________________
Macmillan: Basingstoke. infrastructure etc.

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© University of Gloucestershire Business School
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Module ILP304 International Marketing

___________________________________
Assessing Country Risks
Political
___________________________________
Stability of political
Structures governing
Control and security of ___________________________________
Assets (Financial, physical,
human and market).
___________________________________
Competitive
Economic
Non-economic
Stability of growth rate,
customer income, inflation, Country risks Distortion of competition
e.g. corruption, networks,
___________________________________
currency value etc..
Cartels etc.
___________________________________
OperationaI
Source:
Adapted from Lasserre, P. (2003: 175)
Global Strategic Management.
Reliability of infrastructure
and stability of regulatory
NOTE:
Used in the Tutorial Case ___________________________________
Palgrave Macmillan: Basingstoke framework.
4

___________________________________
A Framework for Analyzing International Marketing
Blunders and their Possible Causes
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
Source:
Dalgic, T. and Heijblom R. (1996: 83) “…. International Marketing Blunders Revisited…”
Journal of International Marketing, Vol.4, 1. pp.81-91 5

___________________________________
Porter’s Industry/ Market Forces
___________________________________
New Competitive Entrants
___________________________________
Threat
___________________________________
Bargaining Industry/Market

Suppliers
Power Competitors
Customers
___________________________________
Intensity of Bargaining
Rivalry Power ___________________________________
Threat
___________________________________
Substitute Products
Source: Porter (1980)
6

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© University of Gloucestershire Business School
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Module ILP304 International Marketing

Strategic Options: ___________________________________


Boston Consulting Group (BCG) Matrix
___________________________________
RELATIVE MARKET SHARE
High Low ___________________________________

High
PROBLEM ___________________________________
STAR CHILD
(Question Mark)
___________________________________
MARKET
GROWTH
DOG
___________________________________
CASH (Re-launch or Exit)
Low COW ___________________________________
Note: Whilst developed for home-country product-market portfolio planning, the model can be
used to rate international market attractiveness.
7

Strategic Options: ___________________________________


Ansoff’s Product/ Market Matrix
___________________________________
4 Main Ways to Increase Sales are:

Present Products New Products


___________________________________
I. Market Penetration II. Product development
• Add product features, ___________________________________
• Increase/ maintain market share product refinement
Present • Increase/ maintain product usage • Expand product line
Markets - Frequency used
- Quantity used
• Develop a new generation
product
___________________________________
- New applications for current users • Develop totally new products
• Brand/ company image • Brand/ company image
IV. Diversification involving
___________________________________
III. Market development *
new products & new markets *
New
Markets
• Expand geographically
• Target new segments • Related & Unrelated
___________________________________
• Brand/ company image • Brand/ company image

* Via ‘International / Global Marketing 8

___________________________________
The STP Process
___________________________________
Market Segmentation
___________________________________
S 1. Identify bases for segmenting the market
2. Develop profiles of resulting segments
___________________________________
Market Targeting
___________________________________
T 3. Develop measures of segment attractiveness
4. Select the target segments(s)
___________________________________
Market Positioning
P 5. Develop positioning for each target segment
6. Develop marketing mix for each target segment
___________________________________
Source: Kotler et al. (2001: 316) 9

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© University of Gloucestershire Business School
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Module ILP304 International Marketing

___________________________________
Market Segmentation Questions
___________________________________
What’s the
competition doing?
1. Who are the ___________________________________
customers?
What are their
need & wants? ___________________________________
2. What product/ service offerings
will meet/ exceed the
___________________________________
target segments’ needs?

___________________________________
3. What strategies & processes
are required to effectively develop
and implement superior
___________________________________
product/ service solutions?
Source: Baker (2000: 183)
10

Systematic approach to international market


___________________________________
selection
___________________________________
Stage 1: Macro criteria Markets rejected
Preliminary screening
___________________________________
Stage 2: Industry criteria Markets rejected
Industry sales potential
___________________________________
Stage 3: Micro criteria Markets rejected
Company sales potential
___________________________________
Stage 4: Decision
Market segments identified
___________________________________
Markets tested Markets rejected

___________________________________
Markets seelcted

Source: Bradley F. (2005) International Marketing Strategy, 5th Edition, Prentice Hall.
11

___________________________________
Evaluation and Segmentation
___________________________________
™ level of market development
___________________________________
™ level of risk
___________________________________
™ market attractiveness/company compatibility
___________________________________
___________________________________
___________________________________
12

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Module ILP304 International Marketing

___________________________________
Bases for Market Segmentation ___________________________________
1. Socio-Economic 3. Psychographics
™ Occupation
™ Income
™ Lifestyle
™ Attitudes
___________________________________
™ Education ™ Benefits sought
™ Social class ™ Loyalty
™ User status
___________________________________
2. Demographics
™ Age 4. Situational Bases
An individual may be
___________________________________
™ Gender
™ Family life cycle
classified into a further sub-
segment based on:
™ Household composition
™ Buying process stage
___________________________________
™ Ethnicity
™ Use occasion
™ Frequency of purchase/
lifetime value ___________________________________
13

___________________________________
Bases for Market Segmentation
___________________________________
5. Geodemographic 6. Bases for B2B
Segmentation Segmentation ___________________________________
™ Size of firm
™ Combines many approaches
to segmentation ™ Firms’ formality of buying
___________________________________
™ Based on postal code processes
analysis (neighbourhood) ™ Industry sector ___________________________________
™ Urban, Suburbs and Rural
™ Where we live is correlated ___________________________________
with many buying behaviour
aspects
___________________________________
14

___________________________________
Blueprint for Strategic Action
Firm versus Competition * ___________________________________
Parity
Firm
Superior
Both
Excel
Neither
Excels
Firm
Inferior
___________________________________

High
Immediate
Positioning
Price of
Potential
Opportunity
Key
Weakness
___________________________________
Entry
Opportunity for Someone

Importance ƒ Enhance ƒ Maintain ƒ New


Product?
ƒ Fix
___________________________________
to
Customer
Potential Over
___________________________________
Positioning Investment No No
Opportunity
Low
ƒ Increase ƒ Cut Costs
Action Action
___________________________________
Source: Salience?
Clancy and Shulman (1992)
14
* Country/market attractiveness can be affected by assessing the firm’s strengths & weaknesses

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___________________________________
Brand Positioning
___________________________________
“Positioning is the act of designing the
company’s offer and image so that it occupies a ___________________________________
distinct and valued place in the target
customers’ minds”
___________________________________
Methodology
1. Determine how consumers evaluate options ___________________________________
2. Identify how you & your competitors are perceived
3 Identify gaps in positions held ___________________________________
4. Develop positioning map
5. Plan & carry out positioning strategy
6. Monitor the position for ‘strategic drift’
___________________________________
7. Reposition when needed
16

___________________________________
Main Ways to Differentiate
___________________________________
Product People
™ Better ways to perform existing ™ Employee professionalism
___________________________________
functions (new features); new (friendly, polite, helpful,
functions (bundle/ unbundle);
design & style; performance
knowledgeable, empathy);
‘class’ of clientele
___________________________________
(consistency, durability,
reliability, repairability)
Image ___________________________________
™ Country/region image
Services
™ Information & reassurance;
™ Brand & company
‘personality’
___________________________________
convenience; installation & ™ name, logo, symbols,
repair; training; speed; delivery;
choice; financing; contextual
public relations, social
causes & sponsorships
___________________________________
17

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ILP304 International Marketing – Topic 5

International Marketing
Research
Learning Outcomes
At the end of this session the student should be able to:
• Appreciate the key roles of marketing research in international marketing.
• Outline the marketing research process, methods and techniques
• Discuss the difficulties and issues that arise in developing multi-country
primary research studies
• Identify strategies for addressing these issues.

Pre-session activities
Read Chapter 4 of the Doole and Lowe (2004) textbook.
Tutorial session pre-reading (see below).

Overview of the session


Discussions in previous sessions have illustrated the highly risky and complex
environment in which the international marketing manager operates. If a
company is to survive in such a market place it is important that it searches for
methods to reduce, as far as possible, the risk of making a wrong decision.
This session examines the role of marketing research in helping the manager
reduce risk by ensuring the starting point for decision making is knowledge not
guesswork. Lack of knowledge of foreign markets is one of the first major
barriers an international marketing manager has to overcome. An effective
marketing research strategy is the first step in overcoming that barrier.
The development of analytical skills is a critical pre-requisite to the international
marketing manager's ability to make effective decisions. In order to develop such
skills the manager needs a sound knowledge of the market in which they
operate.

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To achieve this, managers need to acquire the skills to carry out international
marketing research through systematic and structured research methodology
from which the strategies developed in Parts Two and Three of this module will
be built.
The different stages in the marketing research process are examined with a look
at the factors involved in agency selection. The problems in carrying out
international marketing research are discussed and the difficulties in the use of
comparative analysis in international markets and co-ordinating multi-country
studies are highlighted.

TOPIC 5 TUTORIAL: International Marketing Research

Before the class:

Download (and read!) Arnold, C (2004) “Global perspective” from the


University’s Business Source Premier database, and summarise the key
challenges of international marketing research identified in the article. You
should also look back at your lecture notes for help in identifying these
challenges.
When you have a list of challenges, download and read Wright & Nancarrow
(1999) “Researching International `brand equity’: a case study” from the same
database. The article sets out in detail an international research programme by
the wine and spirits manufacturer Seagram into international perceptions of one
of its whisky brands (Chivas Regal). You will discuss the paper in more depth
during the tutorial, but at before the class, make a few notes which:

i. Identify the research problem and objectives


ii. Sketch out the research design (i.e. the main stages and methods used)
iii. Identify the rationale for the research design (i.e. why they did it that
way?)

During class:

In class you will work in groups on the following questions:

i. What were the advantages and disadvantages of the secondary research


conducted by Seagram? To what extent would a small business, which is
trying to enter international markets for the first time, experience the same
disadvantages?

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ii. Why did Seagram opt for qualitative research into the Chivas Regal
brand, and how did it determine which geographical markets to research?

iii. What were the advantages and disadvantages of the qualitative research
(as opposed to quantitative research) in this case?

iv. What were the key challenges or dangers in conducting the qualitative
research, and how did Seagram seek to address these challenges or
minimise these dangers?

After the class:

The Seagram case provides a useful example of an international marketing


research programme. However, you will have discussed in class how the
company was able to use its own data and experience of its various international
markets in order to ensure that the research was both valid and reliable. For a
company seeking to enter international markets of which in which it currently has
no presence, the challenges of gaining reliable and valid data are much greater.
At the same time the need for valid and reliable data is also greater, as an
organisation in this position cannot rely on past experience to inform marketing
decisions. Spend half an hour reflecting on the information that Seagram would
need if it were deciding how to enter a new market, and how it might go about
getting this information.

Post-topic activities
Take the multiple-choice test to ensure you have a good grasp of this week's key
ideas. Then write your test scores in Appendix A; and jot down the areas you
know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.

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Module ILP304 International Marketing

___________________________________
___________________________________
International Marketing Research ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 5
1

___________________________________
Lecture Aims ___________________________________
™ Appreciate the key roles of marketing research in ___________________________________
international marketing.
___________________________________
™ Outline the marketing research process, methods
and techniques . ___________________________________
™ Discuss the difficulties and issues that arise in
developing multi-country primary research studies
___________________________________

™ Identify strategies for addressing these issues . ___________________________________

___________________________________
International Marketing Research: ‘Meta-Perspective’

“Unknown” Facts & Events


___________________________________
and
“Potential Markets”
Domestic Marketplace ___________________________________
Existing Facts & Events
• Industry } Sense ___________________________________
• Product-Markets }
}
• Customers
• Suppliers
}
}
Analysis/
Action
___________________________________
• Competitors }
• Macro-environment }
International (SLEPT factors) }
Respond
___________________________________
Global Company
Marketplace ___________________________________
Source: Adapted from Lewin (1957)

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___________________________________
Marketing Research Process ___________________________________
Define the problem
and research objectives Market Intelligence ___________________________________
is a core element of the
‘Market-Orientation’
Develop research plan ___________________________________
for collecting information Organisation-wide:
• Generation of data
___________________________________
Collect the data • Dissemination of data
Secondary Primary • Inter-functional ___________________________________
coordinated response to
Analyse the data that market intelligence
___________________________________
Present the findings
Source: Palmer (2004: 132)
4

___________________________________
Market Profile Analysis ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________

___________________________________
Scanning International Markets ___________________________________
™ Identification of opportunities ___________________________________
¾ Accessibility
¾ Profitability ___________________________________
¾ Market size
___________________________________
___________________________________
___________________________________

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___________________________________
Information from Secondary Published
Sources ___________________________________
™ Background economic data ___________________________________
™ Domestic supply position
™ Domestic demand forecasts ___________________________________
™ Domestic price information
™ Access to the market ___________________________________
™ Competitor data
™ Local trading practices ___________________________________
™ Advertising standards
___________________________________

___________________________________
Sources of Information Institutions ___________________________________
™ Business libraries ™ Export councils
™ University libraries ™ Overseas distributors ___________________________________
™ International chambers of ™ Overseas sales subsidiaries
commerce
™ International Market
™
™
Foreign brokerage houses
Foreign trade organisations
___________________________________
Intelligence Centre (Trade such as JETRO
Partners UK)
™ Business Links
¾ (Japanese Export Trade and
Research Organisation)
___________________________________
™ Embassies
™ Banks ___________________________________
™ Trade associations

___________________________________

___________________________________
Problems in Using Secondary Data ___________________________________
™ Availability ___________________________________
™ Accessibility
™ Accuracy ___________________________________
™ Scarcity
™ Timeliness of collection ___________________________________
™ Way data is reported / interpreted
___________________________________
___________________________________

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___________________________________
Specific Overseas Problems ___________________________________
Data collection methods
™ Sampling difficulties
___________________________________
™ Communications problems
™ Cultural differences ___________________________________
™ Infrastructure differences

___________________________________
Field research operations
™ Training difficulties
™ Cultural barriers
___________________________________
™ Access to representative samples
___________________________________

10

___________________________________
Difficulties in Obtaining Representative
Samples ___________________________________
Out of date / unreliable registers ___________________________________
™ Random sampling impossible

™ Stratified sampling difficult ___________________________________


Erratic street numbering ___________________________________
™ Sequential sampling ruled out
___________________________________
Lack of consumer data
™ Quota samples difficult to organise ___________________________________

11

___________________________________
Organising The Research Study:
Questions for the International Manager ___________________________________
™ Should the research be carried out by foreign local ___________________________________
subsidiaries or should all marketing research be
centralised at headquarters?
___________________________________
™ Should the fieldwork be carried out in house or by an
agency? ___________________________________
___________________________________
___________________________________

12

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___________________________________
Organising the Research Study:
Options when Choosing An Agency ___________________________________
™ Local agency in the market under investigation ___________________________________
™ Domestic agency with offices overseas
™ Domestic agency with overseas associate ___________________________________
companies
™ Domestic agency which subcontracts fieldwork to an ___________________________________
agency in the market under investigation
™ Domestic agency with competent foreign staff ___________________________________
™ Global agency with offices around the world
___________________________________

13

___________________________________
Comparative Evaluation of
International Markets ___________________________________
Cultural Values
™
___________________________________
™ Consumption Patterns
___________________________________
™ Economic Conditions

™ Information Sources
___________________________________
™ Market Segments ___________________________________
___________________________________

14

___________________________________
Approaches to Cross-cultural Comparability ___________________________________
Decentering
™ Eliminating any cultural bias arising from development in the ___________________________________
country of origin, adaptation to the specific national or cultural
context of interest.
___________________________________
Convergence
™ Combining research instruments designed by researchers
from different culture and administering the instruments in
each culture.
___________________________________
Construct validity ___________________________________
™ Extent to which an operationalisation measures the concept
that it purports to measure.
___________________________________
Data equivalence
™ Construct equivalence, measure equivalence, etc.

15

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___________________________________
Issues in Collecting Primary Data ___________________________________
™ Important to establish ‘comparability and equivalence’ of
the research data and research instruments during the ___________________________________
design of the research.

Comparability ___________________________________
™ Data that have (as best as possible):
¾
¾
Same meaning of interpretation; and
Same level of accuracy, precision of measurement, or
___________________________________
reliability in all countries and cultures.
___________________________________
™ How to achieve comparability: The “emic/ etic” dilemma.
___________________________________

16

___________________________________
Comparability: The “Emic/ Etic” Dilemma ___________________________________
The ‘Emic’ approach:
___________________________________
™ Attitudes, interests and behaviour are unique to one
culture, they can be best understood in their own term.
___________________________________
™ Each country or cultural context is characterised by a
unique pattern of socio-cultural behaviour patterns.
¾ Values, attitudinal and behavioural phenomena may be
___________________________________
expressed in different ways.

™ Emphasis is placed on studying the specific context of


___________________________________
each country and on identifying and understanding its
unique facets. ___________________________________
Source: Lonner and Adamtopoulos (1997)

17

___________________________________
Comparability: The “Emic/ Etic” Dilemma ___________________________________
The “Etic” approach:
___________________________________
™ Tries to develop pan-cultural or cultural free measures
to identify and assess attitude and behaviour. ___________________________________
™ The danger of a “pseudo-etic” approach: ___________________________________
¾ Constructs and measures developed in one country are
applied without or with minimal adaptation to the specific
contest in other countries.
___________________________________
___________________________________

18

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Part II:
Development of international
marketing strategies
(Topics 6, 7, 8)

In Part One (Topics 1 - 5), we discussed the importance of the international


marketing environment in identifying the international marketing opportunities
that exist.

Part Two builds on this analysis by discussing the development of marketing


strategies. This involves four elements of decision making: (1) planning and
organising international marketing; selection of appropriate strategies for (2)
smaller firms and (3) global companies, and (4) choice of market entry methods.

There is no clear distinction between the stages of development and


implementation and certain elements. Thus, market entry could easily be
considered within both stages.

Key Learning Objectives

Topic 6
Appreciate how niche market strategies for smaller firms are developed.
Evaluate what globalisation means for international firms.

Topic 7
Understand the advantages and disadvantages of the alternative methods of
market entry.

Topic 8
Evaluate the various elements of an international product policy.

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ILP304 International Marketing – Topic 6

International Marketing
Strategies
Two inter-related topics are covered in Chapter 5 of the core text: international
niche marketing and global strategies. Due to the constraints of time, this
session will focus on global strategies. It’s worth reading the sections of the
chapter on niche marketing strategies, however, as these provide some useful
parallels with and contrasts to the issues involved in developing a global
strategy.

Pre-session activities
Read Chapters 5 and 6 of the Doole and Lowe (2004) textbook.
(See also tutorial session pre-reading)

Learning Outcomes
On completion of this session, the student should be able to:
• Appreciate the various aspects of globalisation and be able to compare and
contrast the alternative global strategies.
• Discuss the factors that determine a firm’s choice of global strategy.
• Identify the challenges that firms face in developing a global presence
• Appreciate the role of branding in globalisation.
• Understand the factors affecting global marketing management.

Overview
Globalisation does not necessarily mean globally standardised marketing
because the term ‘globalisation’ is used in many ways. A worldwide strategy for
a firm therefore embraces a variety of alternative approaches, including multi-
domestic, regional, global and trans-national strategies.

Globalisation is about building a global presence through increasing global reach


and this leads to decisions about how this can achieved in order to maximise the
benefits derived from the firms’ competitive advantage. In most developed

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markets this can be brought about through the merger of equals whereas, in
emerging markets, alliances with local market leaders may be more effective.
Underpinning the development of a global marketing strategy are decisions
about the product or service offer and geographic development. The competitive
advantage of the firms’ products and services must be recognisable to
customers around the world and may be derived from any aspect of the total
product offer. The geographic development must follow from finding common
needs of cross border segments. It may be that these lead to global strategies,
regional strategies or multi-domestic strategies in which in each case the
questions centre on the degree to which the elements of the offer are
standardised or adapted to local needs.
Typically it is the global brand which provides the focus for integration of the
firm’s strategies and implementation activities and the brand must be the
element of the globalisation strategy that most reflects the closeness to
customer needs. In practice a global firm needs to operate a variety of
strategies, including those involving co-operation and competition with other
MNEs and it is the ability to integrate a diverse range of activities that leads to
success.
Globalisation sets the challenge to managers of coping with a number of
conflicting demands including the desire to standardise but also satisfy local
expectations, cultural differences, the risks of entering more challenging
markets, the need to take an ethical stance and the need to motivate staff in the
disperse organisational structure, as well as being entrepreneurial as well as
efficient in the day-to-day operations.

TOPIC 6 TUTORIAL: Starbucks Case Study


INTRODUCTION

The purpose of the tutorial session is to explore the challenges that firms face in
building a global presence and to examine the role of branding in the
globalisation process.

ACTIVITY

Before the class:

1. Read the Starbucks case study and following two articles:

Holmes, S. (2005) “Strong Lattes, Sour Notes at Starbucks”, Business


Week [online], 20 June, Available from:
<http://www.businessweek.com/magazine/content/05_25/b3938087
.htm?chan=search>
Holmes, S (2002) Planet Starbucks: To keep up the growth it must go
global quickly” Business Week [online], 20 June, Available from:

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<http://www.businessweek.com/magazine/content/02_36/b3798001
.htm?chan=search>

2. Prepare outline answers to the following:

a. Referring to the options for strategic development described on


pages 189-195, how would classify Starbuck’s approach. What
problems has this approach created?
b. What challenges does Starbucks face in attempting to create a
global brand?
c. What must it do to realise its global ambitions?

During the class

You will be asked to work in teams to prepare a 5-10 minute presentation


addressing each of the questions outlines above.

After the class

During this week’s session we have considered different international


development strategies and their implications. During next week session we will
be methods of market entry. Spend approximately 30 minutes thinking about
how a decision to adopt a global approach and develop a global brand might
influence a firm’s choice of entry method. With reference to the Starbucks case,
what are the implications for the brand of using licensing as method market
entry?

Post-topic activities
Take the multiple-choice tests to ensure you have a good grasp of this week's
key ideas. Then write your test scores in Appendix A; and jot down the areas
you know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.

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STARBUCKS COFFEE COMPANY 2007

Company Background

Since opening its first store in Pike Place Market, Seattle, Washington (USA) in
1971, Starbucks has established itself as the world’s leading retailer, roaster and
brand of speciality coffee with over 13,000 outlets in 39 countries (Starbucks
Corporation, 2007a, b)1. The company, which ranks amongst the world’s top
100 global brands (Interbrand, 2006)2, has an impressive record of sales and
profit growth (See Table 1). In FY2006 Starbucks achieved a sales turnover of
$7.8bn, an increase of 22% on 2005, and operating margin of 11.4%.
Table 1: Starbucks Coffee Company: Selected Financial Data (Starbucks Corporation,
2006, 2007e)

1-Apr- 1-Oct- 2-Oct- 3-Oct- 28-Sep- 29-Sep-


Period ending 07 06 05 04 03 02
OPERATING RESULTS
Net Revenues ($ Millions):
Company-operated retail 1,923 6,583 5,392 4,457 3,450 2,793
Speciality
Licensing 235 861 673 566 410 312
Foodservice and other 98 343 304 271 216 184
Total Speciality 333 1,204 977 837 626 496

Total net revenues ($ Million) 2,256 7,787 6,369 5,294 4,076 3,289

Operating Income ($ Millions) 241 894 780 606 421 313

STORE INFORMATION
Stores opened during period
United States
Company-operated stores
271 810 580 521 514 507
Licensed stores 142 733 596 417 315 264
International
Company-operated 42 230 166 144 126 118
Licensed stores 105 426 330 262 246 288
Total stores opened 560 2,199 1,672 1,344 1,201 1,177

Since 2002, revenues have more than doubled, fuelled by rapid expansion in the
number of domestic and international outlets (See Figure 1, above). The

1
As of 1 April 2007, Starbucks had 13,728 stores of which 7,834 were company owned and operated and
5,894 were licensed outlets (Starbucks Corporation, 2007c and d)
2
According to Interbrand’s annual survey of global brands (2006) Starbucks ranked 91st with a brand value
of $. It was also one of the top 3 gainers, its brand value growing by 20% over 2005.

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company has ambitious plans for future growth and over the next 4-5 years aims
to double the size of its business and open a further 10,000 stores. Its long-term
ambition is to establish some 40,000 stores worldwide (Casey, 2007).
Figure 1: Starbucks Store Growth 2002-2007 (Starbucks Corporation, 2007a and b)

Starbucks Store Count 2002-2007

16000

14000

12000

10000

International
8000
United States

6000

4000

2000

0
2002 2003 2004 2005 2006 2007
International 1614 1986 2392 2888 3544 3914
United States 4272 5239 6177 7353 8896 9814
No of Stores

Starbucks roasts high-quality Arabica beans which it sources from the major
growing regions of Latin America, Africa/Arabia and Asia/Pacific. Alongside
fresh-brewed coffee, pastries and cakes, Starbucks sells hot and iced espresso
beverages, Frappuccino© light blended coffee beverages and juice blends,
Tazo© teas and EthosTM bottled water, an ethical water brand that it acquired in
2005 (Adbrands, 2007; Superbrands, 2007). Additionally, Starbucks offers a line
of super-premium ice creams through a joint venture partnership with Dreyer’s
Grand Ice Cream and a range of coffee making equipment (espresso machines
and coffee brewers) and related accessories. In some markets, a selection of
sandwiches, paninis and salads are also provided (Starbucks, 2007b).
The company’s primary route to market is via its retail outlets, which comprise a
network of company-operated and licensed coffee houses. Its whole-bean
coffees, bottled Frappuccino© and Tazo Tea products are also sold via
supermarkets and online at Starbucks.com.
The Starbucks Experience

Starbucks regards itself as more than just a coffee shop and sought to
differentiate itself through what it refers to as the “Starbucks experience” built
around brightly lit cafes with comfortable seating, the aroma and taste of coffee,
friendly staff, the bustle of customers and the relaxing vibe of its background
music (Adbrands, 2007). Starbucks has attempted to position its brand as a

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lifestyle choice and central to this is the idea of Starbucks stores being “third
place” to spend time in, away from work and home. As CEO Shultz put it:
“I tried to build and environment and place that could provide our customer with
an oasis, a ‘third place’, away from home and work that would exceed their
expectations. You get more than the finest coffee when you visit a Starbucks –
you get great people, first rate music and a comfortable and upbeat meeting
place.”

(Starbucks, 2007b)

The company has sought to enhance the in-store experience in recent years
through a variety of initiatives. Outlets have been equipped with places to charge
laptops and wireless hotspots have been introduction via a partnership with
Hewlett Packard and T-Mobile (Adbrands, 2007 and Superbrands, 2006). The
company also redesigned and relaunched its food lines to emphasis local
sourcing and biodegradable packaging.
In the UK Starbucks entered into a partnership with Times newspapers and
introduced pre-payment cards aimed at increasing loyalty (Godsell, 2007).
Entertainment has been the main focus of its most recent initiatives to build the
brand. 2007 saw the much publicised launch of the Starbuck music label, Hear
Music, and signing of Paul McCartney as its first artist (Daniels, 2007, Talbot,
2007). This followed the introduction in USA of Hear Music Media Bars and a CD
burning service, which received a lukewarm reception and an attempt to launch
an Internet lifestyle portal and magazine, the national roll out for which was
scrapped. Forays into book publishing and film production were also ultimately
successful. (Holmes, 2005) [See Exhibit 1].
Rapid Global Expansion

Starbucks opened its first international store in Tokyo, Japan in 1996. Japan
remains one of the most important international markets, with 689 outlets
operated under licence. The next largest is Canada with 564 outlets and then the
UK with 532 (Starbucks Corporation, 2007a)
As of 1 April 2007, Starbucks coffee shops had 3,914 coffee houses in 38
counties outside North America. The company sees further international
expansion as key element of its future growth strategy and aims to increase to
4,200 by the end of the current financial year. As part of the company’s objective
to become the most recognised and respected brand in the world, Starbucks
plans to establish 15,000 stores outside the US and ultimately establish 40,000
on a global basis (Economist, 2007, Holmes, 2006).
Further expansion in the Far East is seen as a key business driver and the
company has already established a foothold in China (Beijing, Shanghai, Macao,
Hong Kong), Taiwan, Indonesia, Thailand and Malaysia.
Concerns have expressed, however, that the company has expanded too quickly
and in the process allowed its original value proposition to erode. The store
portfolio in the US now includes 1,400 drive-through outlets and in some cases
automated espresso machines have replaced manual versions. CEO is quoted

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as saying that some customers regard its stores as “sterile, cookie-cutter, No


longer reflecting the passion our partners feel about coffee” and stressed the
need for Starbucks to “go back to its roots” (Economist 2007)
The distinctiveness of the company’s brand has also undermined by
strengthening competition. As well as offering its own brand of coffee,
McDonalds has altered interiors to look like coffee chains (Dickinson, 2006).
Indeed, American magazine Consumer Reports revealed that consumers
preferred McDonald’s coffee to that of Starbucks. Other brands such as Dunkin’
Donuts have also attempted to move up market. In 2007 Brand Key’s annual
survey of consumer loyalty revealed that the brand had ousted Starbucks from
its number 1 position in the coffee and donuts category (Economist, 2007).
As the company looks toward the future, a major issue facing the firm is how far
they can successfully expand the brand and whether some degree of brand
retrenchment will be necessary.

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References

Adbrands (2007) Company Profile: Starbucks (US), [online] Adbrands, March


2007 Available from:
<http://www.warc.com/ArticleCenter/PDFViewer.asp?AID=81831&PID=star
bucks_us_p.htm&NID=&CType=P&Tab=>
Casey (2007) Starbucks Coffee Company: William Blair & Company 27th Annual
Growth Stock Conference, Chicago, IL, [online], Starbucks Corporation, 21
June 2007. Available from;
< http://media.corporate-
ir.net/media_files/irol/99/99518/20070621_WmBlair.pdf>
Daniels, C. (2007) “Coffee Maker Brews Fans”, Fast Company, Jul/Aug, pp.25
Dickinson, H. (2006) Relentless coffee chains march on, Marketing, 21 June, p.
13.
Economist (2007) “Brand Management: Trouble Brewing”, The Economist, 3rd
March
Godsell, M. “Starbucks to push food line”, Marketing, 5th February, p.11
Holmes, S. (2005) Strong Lattes, Sour Notes at Starbucks, Business Week
[online], 20 June, Available from:
<http://www.businessweek.com/magazine/content/05_25/b3938087.htm?c
han=search>
Holmes, S. (2006) “What’s behind Starbuck’s Price Hike?”, Business Week
[online], 22 September, Available from:
<http://www.businessweek.com/bwdaily/dnflash/content/sep2006/db20060
922_252348.htm?chan=search>
Interbrand (2006) Best Global Brands 2006: A ranking by brand value [online],
Available from Interbrand, 28 July, Available from:
< http://www.ourfishbowl.com/images/surveys/BGB06Report_072706.pdf>
Starbucks Corporation (2006) Fiscal 2006 Annual Report [online], Starbucks
Corporation. Available from
<http://www.shareholder.com/visitors/dynamicdoc/document.cfm?Company
ID=SBUX&DocumentID=1382>
Starbucks Corporation (2007a) Company Profile [online] Starbucks Corporation,
May 2007. Available from:
< http://www.starbucks.com/aboutus/Company_Profile.pdf>
Starbucks Corporation (2007b) Company Fact Sheet [online] Starbucks
Corporation, May 2007. Available from:
<http://www.starbucks.com/aboutus/Company_Factsheet.pdf>
Starbucks Corporation (2007c) Historical Summary of Store Counts [online].
Starbucks Corporation, 1 April 2007. Available from:
<http://media.corporate-
ir.net/media_files/irol/99/99518/fin_highlights/Q207/Historical_Summary_of
_Store_Counts.pdf >
Starbucks Corporation (2007d) Year-to-date Store Counts by State and Country,
[online] Starbucks Corporation, 1 April 2007. Available from:
<http://media.corporate-
ir.net/media_files/irol/99/99518/fin_highlights/Q207/Starbucks_YTDStoreCo
untsbyStateandCountry.pdf>

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Starbucks Corporation (2007e) Second Quarter Results Fiscal 2007 [online],


Starbucks Corporation. Available from
<http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-
newsArticle&ID=995524&highlight
Superbrands (2007) Starbucks UK Brand Profile 2006, [online], Superbrands UK,
Available from:
http://www.warc.com/ArticleCenter/PDFViewer.asp?AID=85410&PID=&NID
=&CType=A&Tab=
Talbot, M. (2007) Mocha with McCartney is a success, Media Week, 16 June, p.
10.

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___________________________________
___________________________________
___________________________________
International Marketing Strategies ___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 6
1

___________________________________
Learning Outcomes ___________________________________
™ Appreciate the various aspects of globalisation ___________________________________
and be able to compare and contrast the
alternative global strategies.
___________________________________
™ Discuss the factors that determine a firm’s
choice of global strategy.
___________________________________
™ Identify the challenges that firms face in
developing a global presence
™ Appreciate the role of branding in globalisation.
___________________________________
™ Understand the factors affecting global
marketing management. .
___________________________________

___________________________________
Key Motivators to International
Marketing ___________________________________
Reactive stimuli Proactive stimuli
™ adverse domestic market ™ attractive profit/growth opportunities ___________________________________
conditions ™ ability to easily modify products for
™ opportunity to reduce export
inventories ™ public policy programmes for export ___________________________________
™ availability of production promotion
capacity ™ foreign country regulations
™ favourable currency ™ possession of unique products ___________________________________
movements ™ economies from additional orders
™ opportunity to increase the
number of country markets Managerial elements
___________________________________
and reduce market related
™ presence of export minded manager
risk
™ unsolicited orders from
overseas customers
™ opportunity to better utilise
management talent and skills
___________________________________
™ management belief in value of exporting

Source: Katsikeas (1996)


3

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___________________________________
Barriers to Internationalisation ___________________________________
™ Too much ‘red tape’ ___________________________________
™ Trade barriers
™ Transportation difficulties
™ Lack of trained personnel
___________________________________
™ Lack of export incentives
™ Lack of coordinated assistance
___________________________________
™ Unfavourable conditions overseas
™ Slow payments by buyers ___________________________________
™ Lack of competitive products
™ Payment defaults ___________________________________
™ Language barriers

___________________________________
Meaning of ‘Globalisation’ ___________________________________
™ Market access
™ Competition ___________________________________
™ Cooperation
™ Market opportunities
™ Distribution
™ Industry standards
™ Communication
___________________________________
™ Sourcing
™ Company’s strategy,
™ Products & services
business programmes and ___________________________________
™ Technology processes
™ Customer requirements
___________________________________
___________________________________

___________________________________
Strategic Options:
Ansoff’s Product/ Market Matrix ___________________________________
4 Main Ways to Increase Sales are:
Present Products New Products
___________________________________
I. Market Penetration II. Product development
• Add product features,
___________________________________
• Increase/ maintain market share product refinement
Present • Increase/ maintain product usage • Expand product line
Markets - Frequency used
- Quantity used
• Develop a new generation ___________________________________
product
- New applications for current users • Develop totally new products
• Brand/ company image • Brand/ company image ___________________________________
III. Market development * IV. Diversification involving
new products & new markets *
New • Expand geographically
• Related & Unrelated
___________________________________
Markets • Target new segments
• Brand/ company image • Brand/ company image

* Via ‘International / Global Marketing 11

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International Competitive Posture Matrix ___________________________________
___________________________________
Barons Kings
Product
___________________________________
Strength
___________________________________
Commoners Crusaders
___________________________________
Geographic Coverage
___________________________________
Source: Adapted from Gogel, R and Larreche, JC (1989)
7

___________________________________
Alternative World Wide Strategies
___________________________________
Multi-Domestic Regional Global ___________________________________
___________________________________
Individual
Region is One One Global
Country
Strategy
Market Segment ___________________________________
Transnational
Strategy
___________________________________
Standardised Identity & Values ___________________________________
With Composite Strategies
17

___________________________________
Continuum of Standardisation ___________________________________
Pricing Differentiation ___________________________________
Distribution
Sales Force ___________________________________
Sales Promotion
___________________________________
Product
Image ___________________________________
Objectives
Strategy Standardisation ___________________________________
9

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___________________________________
Forces Driving
a Multi-domestic Approach ___________________________________
™ Industry standards remain diverse. ___________________________________
™ Customers continue to demand locally.
___________________________________
™ Being an insider remains critically important.
___________________________________
™ Global organisations are difficult to manage.
___________________________________
™ Management myopia.
___________________________________

10

___________________________________
Transnational Strategies ___________________________________
™ Transnational companies aim to build three strategic ___________________________________
capabilities:
¾ Global scale efficiency and competitiveness
¾ National level responsiveness and flexibility
___________________________________
¾ Cross market capacity to leverage learning on a world wide
basis ___________________________________
___________________________________
___________________________________

11

Globalisation Push & Pull Factors


___________________________________
‘Globalisation Pull’ ___________________________________
Globalisation of Markets
Homogenisation of demand
Global market segments ___________________________________
Globally active customers
___________________________________
Marketing Standardisation
Programme standardisation
Process standardisation ___________________________________

Globalisation of Industries Globalisation of Competitors


___________________________________
R&D expenses Market interdependence
Reduced pay back cycles
Experience curve effects
Global competitors
Cross subsidisation
___________________________________
‘Globalisation Push’
Source: Meffet and Bolz (1993) in Hallibuton and Hunerberg (eds) European 21
Marketing Readings and Cases Addison Wesley 1993

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Achieving Global Competitive Advantage ___________________________________
™ Simple and complex individual product and market ___________________________________
policies.

™ Customer segments specific and unique to specific


___________________________________
market or transnational group.
___________________________________
™ Working closely with firms and simultaneously ensuring
that values of company are maintained and demonstrated
to stakeholders. ___________________________________
™ Maintaining / building added value in the supply chain. ___________________________________

13

___________________________________
Building a Global Presence ___________________________________
™ Changing basis of competitive advantage ___________________________________
™ Global brand ___________________________________
™ Global reach ___________________________________
™ Management of diverse and complex activities ___________________________________
___________________________________

14

___________________________________
MCKINSEY 7S FRAMEWORK ___________________________________
___________________________________
Structure Strategy
___________________________________
Systems
Shared
Style ___________________________________
values
___________________________________
Skills Staff
___________________________________

Source: McKinsey and Co 15

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Reasons for Failure ___________________________________
™ Failure to effectively scan
™ Failure to plan financial
resources and not planning
___________________________________
the international environment
for fluctuation in currency
™ Over dependence on one
product
™
values
Failure to manage and
___________________________________
™ Ease with which larger, more
powerful competitors or a resource both market and
number of smaller local operations expansion ___________________________________
competitors can copy the ™ Prohibitive cost of enforcing
idea patents and trademarks in
™ Failure to respond to foreign courts which may ___________________________________
worldwide changes in favour local firms
customer needs
___________________________________
16

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ILP304 International Marketing – Topic 7

Market Entry Strategies


Learning Outcomes
On completion of this session, the student should be able to:
• Identify the alternative market entry options available to firms seeking to
develop new country markets.
• Compare the different levels of involvement, risk and marketing control of
these market entry methods.
• Understand the criteria for selecting between the market entry options.
• Appreciate the advantages and disadvantages of the different market entry
methods.
• Understand the motivations and challenges of market entry partnership
strategies, such as alliances and joint ventures.

Pre-session activities
Read Chapter 7 of the Doole and Lowe (2004) textbook.
See also tutorial session pre-reading

Overview of the session


The most significant international marketing decision a firm takes is how it
should enter new markets, as the commitments made will affect every aspect of
the business for many years ahead. The choice of an appropriate market entry
method has a crucial role in enabling the firm to meet its objectives, solve
particular problems and exploit opportunities. There is, however, no ideal
market entry strategy and different market entry methods might be adopted by
different firms entering the same market and/or by the same firm in different
markets.
It also is important to emphasise the risk that any firm takes in its market entry
strategy. Therefore, much of the session is concerned with the factors that
affect the strategic choices, such as market situation, company objectives and
competitor activity, but also, how the entry selection might be made against the
background of the need to reduce risks and improve the chances of success.

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The selection of the entry method also is vitally important in ensuring that
products and services have the right image and level of exposure in each
market. Selecting an entry method with little direct commitment to the market
sends confusing and often negative messages to the market, for example, lack
of availability of products, the image of products made overseas or high prices
because of a long supply chain. A joint venture or strategic alliance, if not
managed well, may present confused-branding to consumers.
For most companies exporting in some form is the automatic choice. But there
are other methods to consider as few market entry strategies can be undertaken
alone by a company. Most involve relationships with other individuals or
companies and it is these relationships that are usually central to the success of
the entry strategy.
For small and medium sized businesses (SMEs) these entry options are
presented as a first step, and for established companies as methods to exploit
opportunities within the context of their existing network of international
operations.
Multi-national enterprises (MNEs) have the problem of managing their levels of
involvement in substantially different market situations. The selection of
individual markets and methods of entry plays a significant part in the overall
regional or worldwide strategy in achieving market concentration, market
extension or global development. Often this leads to the need to make decisions
about whether they should co-operate or compete with other companies.
As the involvement of a firm in overseas markets increases, so the sensitivity to
the culture in the host country becomes more important. To what extent should
the firm adapt to the local situation or attempt to uphold its domestic business
standards becomes increasingly important.

TOPIC 7 TUTORIAL: Market entry strategies


Introduction

There a number of alternative market entry methods, and choosing appropriate


on is critical in determining the success of international marketing strategies.
The tutorial will therefore focus on advantages and disadvantages of the various
methods, and examine the criteria that organisations can apply in evaluating
these options.

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ACTIVITY

Before the class:

i Re-read Chapter 7 of Doole & Lowe, making a note of the various


methods of market entry. You may find it helpful to structure these around
the framework provided by Pan & Tse (2000) set out in the lecture.
ii Re-read the HMV case, and identify the company’s preferred mode of
market entry. What are the advantages and disadvantages of this entry
method?
iii Have a look back at the topic 4 tutorial exercise, in which you evaluated
the attractiveness of the Indian and Taiwanese Book markets for
Waterstone’s.

During Class

The class will begin with a general review of the various entry methods and their
advantages and disadvantages. Using the Pan & Tse (2000) framework for
classifying entry strategies, you will be asked (in groups) to review the various
options for Waterstone’s entry into one of these markets. Recommend your
preferred method, justifying your choice.

After the class

Whilst evaluating the market entry options for Waterstones you will have noticed
the importance of risk and control in making such decisions. Risk is often seen
purely in financial terms, and the equity-based methods of market entry are
therefore seen as high risk. However, as marketers, we must also think about
the risk to brand equity of relinquishing control of marketing operations through
methods such as franchising. In the next four weeks, we will look in detail at the
business of managing the marketing mix to create a strong brand positioning.
For now spend half an hour thinking about why Waterstones might wish to take
measures to control product quality if it decided to enter an overseas market
using franchising. What form would these measures take?

Post-topic activities
Take the multiple-choice test to ensure you have a good grasp of this week's key
ideas. Then write your test scores in Appendix A; and jot down the areas you
know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.
The case study for the formative examination will be issued this week. Read the
case study, and do some research on the sector/industry and company. Make a
note of any questions or queries for next week’s class.

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___________________________________
MARKET ENTRY STRATEGIES ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 7
1

___________________________________
Lecture Aims ___________________________________
™ Identify the alternative market entry options available
to firms seeking to develop new country markets. ___________________________________
™ Compare the different levels of involvement, risk and
marketing control of these market entry methods. ___________________________________
™ Understand the criteria for selecting between the
market entry options. ___________________________________
Appreciate the advantages and disadvantages of the
™
different market entry methods.
___________________________________
™ Understand the motivations and challenges of market
entry partnership strategies, such as alliances and
___________________________________
joint ventures.
2

___________________________________
Market Selection Decisions ___________________________________
™ Market potential
¾ Size ___________________________________
¾ Competition
¾ Income
¾ Growth ___________________________________
™ Market similarity
¾ Location
___________________________________
¾ Culture
___________________________________
™ Market accessibility
Logistics
¾
¾ Trade barriers
___________________________________
3

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Market Entry Strategies ___________________________________


Entry Strategy Alternatives
___________________________________
Foreign Production
Exporting
Indirect Exporting Licensing ___________________________________
Direct Exporting Franchising
Contract Manufacturing
Assembly ___________________________________
Fully Integrated Production
Entry Analysis
Sales ___________________________________
Costs Ownership Strategies
Assets Entry Joint Ventures
Competencies Strategy
Decisions
Alliances ___________________________________
Profitability Acquisitions
Risk Factors
___________________________________
Exit Strategy Re-entry Strategies

Source: Jeannet & Hennessey (1998: 308)

A Hierarchical Model of Choice of Entry Modes ___________________________________


Choice of Entry Modes ___________________________________
Non-Equity Modes Risk Vs. Control Equity Modes ___________________________________

Export Contractual Equity Wholly


___________________________________
Agreements Joint Ventures Owned Subsidiary

Licensing
___________________________________
Direct Export Minority EJV Greenfield

Indirect Export
R&D contracts
50% share EJV Acquisition ___________________________________
Alliances
Others Majority EJV Others ___________________________________
Others

Source: Pan Y. & Tse D. (2000). “The hierarchical model of Market entry modes”.
Journal of International Business Studies 31,4, 535-554 5

___________________________________
The “Uppsala model” of the
Internationalisation Process ___________________________________
™ Perceived risk is a barrier to internationalisation.
™ Perceived risk is determined by `psychic distance’.
___________________________________
™ Organisations with a high psychic distance from an ___________________________________
overseas market tend to opt for low risk/involvement
entry methods.
™ As they gain experience of the overseas market, ___________________________________
psychic distance reduces, and they make increasing
commitments to the market.
___________________________________
™ Internationalisation therefore tends to be an
incremental process.
___________________________________
Source:
Johanson, J & Vahlne, J (1990) “The mechanism of internationalisation”
Journal of International Business Studies 7, 4 11-25.
6

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Market Entry Methods & the Levels of ___________________________________


Involvement in International Markets ___________________________________
Wholly-owned subsidiary
Company acquisition
Assembly operations
___________________________________
Joint venture
Strategic alliance ___________________________________
Levels Licensing
Contract manufacture
of Direct marketing ___________________________________
involvement Franchising
Distributors and agents
Sales force ___________________________________
Trading companies
Export management companies
Piggyback operations ___________________________________
Domestic purchasing

___________________________________
Successful Market Entry Criteria ___________________________________
™ Company objectives and expectations relating to the size and
value of anticipated business ___________________________________
™ Size and financial resources of the company
™ Existing foreign market involvement ___________________________________
™ Skills, abilities and attitudes of the company management
towards international marketing
™ Nature and power of the competition with the market ___________________________________
™ Nature of existing and anticipated tariff and non-tariff barriers
™ Nature of the product itself, particularly areas of competitive
advantage, such as trademark or patent protection
___________________________________
™ Timing of the move in relation to market and competitors
___________________________________
8

___________________________________
Indirect Exporting #1 ___________________________________
Domestic Purchasing
™ Foreign organisation purchases the product for export to
___________________________________
another country
™ Gives access to and limited knowledge of the international
market
___________________________________
™ Little control over choice of markets entered
™ For longer term, need a more proactive approach ___________________________________
Export Management Companies (EMCs)
™ Specialist companies act as the export department for a
___________________________________
range of companies
™ Help SMEs to initiate/develop/maintain international sales ___________________________________
™ Deal with documentation, government regulation

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___________________________________
Indirect Exporting #2 ___________________________________
Trading Houses
™ Their extensive operations and controls enable operation in ___________________________________
more difficult trading areas
™ Manage countertrade activities
___________________________________
Piggy Backing
™ Established international distribution network of one ___________________________________
manufacturer used to carry products of a second
™ Particularly good for firms from developing countries
™ Often poorly considered terms and conditions
___________________________________
___________________________________
10

Components of the Export ___________________________________


Marketing Mix ___________________________________
Pricing: Promotion:
Policy, strategies, discount Corporate promotions & local
selling, trade shows & literature
___________________________________
structures & trading terms

Product: EXPORT
___________________________________
Technical:
Selection, development MARKETING Specifications, testing &
& sourcing MIX product quality ___________________________________
Distribution: Services:
Sales force management, Market research, training &
agents, distributors & logistics sales servicing ___________________________________
Finance & Administration:
Budgets, order processing, insurance & credit
control
___________________________________
11

Important Factors for Successful ___________________________________


Exporting ___________________________________
™ Commitment of the firm’s management
™ Exporting approach reliant on strong skills base
___________________________________
™ Good marketing and information communication
system ___________________________________
™ production capacity & capability, product superiority,
competitive pricing ___________________________________
™ Effective market research
™ Effective national export policy ___________________________________
___________________________________
Source: Katsikeas et al (1996)
12

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Initiation and Development of Export


___________________________________
Product Portfolios ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
13

___________________________________
Functions of Agents and Distributors ___________________________________
AGENTS DISTRIBUTORS
™ Sellers representative ™ Buy goods themselves
___________________________________
™ Introduce customers ™ Re-sell to customers
™ Provide local support ™ Act independently ___________________________________
™ Channel information ™ Operate as principals
___________________________________
-Do not act as principals
-Never own the products
___________________________________
___________________________________
14

___________________________________
Selection Criteria for a Suitable Agent ___________________________________

™ Financial strength of the agent


___________________________________
™ Their contacts with potential customers
™ The nature and extent of their responsibilities to other
___________________________________
organisations
™ Their premises, equipment and resources (including ___________________________________
sales representatives)
™ Experience ___________________________________
___________________________________
15

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Achieving Satisfactory Manufacturer-


___________________________________
agent Relationship ___________________________________
Allocate time and resources to find a suitable agent
™
___________________________________
™ Ensure that both understand what each expects of the
other ___________________________________
™ Ensure that the agent is motivated to improve performance
___________________________________
™ Provide adequate support on a continuing basis

™ Ensure that there is sufficient advice and information


___________________________________
transfer in both directions
___________________________________
16

Reasons for Setting up Overseas


___________________________________
Manufacture ___________________________________
™ Product – avoiding problems, e.g. perishability
™ Costs of transporting and warehousing
___________________________________
™ Tariff barriers and quotas
™ Government regulations e.g. local investment ___________________________________
™ Local manufacture viewed favourably by market
™ Government contacts ___________________________________
™ Market information feedback
™ International culture in firm ___________________________________
™ Local manufacture - faster response and just-in-time
delivery
™ Lower labour cost
___________________________________
17

Foreign Manufacturing Strategies


___________________________________
without Direct Investment ___________________________________
™ Contract manufacture
¾ Allows concentration on sales and marketing with ___________________________________
minimum investment
¾ Makes withdrawal relatively easily and less costly
¾ e.g. Sara Lee, Ikea
___________________________________
™ Licensing ___________________________________
¾ Good for film, television and sports industries
¾ Low financial and management commitments
¾ Reduced the high cost of direct investment
___________________________________
¾ Avoid tariff and non-tariff barriers
¾ Particularly useful for difficult markets ___________________________________
18

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Minimising the Potential Problems of


___________________________________
Licensing ___________________________________
™ Develop a clear policy and ™ Supply the critical
plan ingredients ___________________________________
™ Allocate licensing ™ Obtain equity in licensee
responsibility to a senior ™ Limit the product and ___________________________________
manager territorial coverage
Select licensees carefully ™ Retain patents,
™

™ Draft the agreement trademarks, copyrights


___________________________________
carefully to include: ™ Be an important part of the
¾ duration, royalties, trade licensee’s business. ___________________________________
secrets, quality control
and performance
measures ___________________________________
19

Foreign Manufacturing Strategies with


___________________________________
Direct Investment ___________________________________
™ Reasons for investment in local operations
¾ To gain new business: local production demonstrates
___________________________________
strong commitment
¾ To defend existing business ___________________________________
¾ To move with an established customer
¾ To save costs: e.g. labour, raw materials and transport ___________________________________
¾ To avoid government restrictions

¾ Types:
___________________________________
„ Assembly
„ Wholly owned subsidiary
___________________________________
„ Company acquisitions and mergers
20

___________________________________
Cooperative Strategies ___________________________________
™ Joint ventures: shared ownership of a specially set up
new company for marketing and/or manufacturing. ___________________________________
™ Strategic alliances: two companies combining value ___________________________________
chain activities for the purpose of competitive
advantage. ___________________________________
™ Reciprocal share holdings: a firm that has taken an ___________________________________
equity stake in another firm.
___________________________________
21

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Who Provides What in East-West ___________________________________


Partnerships ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
22

Driving Forces for the Formation & ___________________________________


Operation of Strategic Alliances ___________________________________
™ Insufficient resources
™ Pace of innovation and market diffusion
___________________________________
™ High research and development costs
™ Concentration of firms in mature industries ___________________________________
™ Government co-operation
™ Self protection ___________________________________
™ Market access
___________________________________
___________________________________
23

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ILP304 International Marketing – Topic 8

International Product and


Service Management
Learning Outcomes
On completion of this session, the student should be able to:
• Explain the elements that make up the product and service offer and the
nature of international product and service marketing.
• Evaluate the factors affecting international product and service strategy
development both external and internal to the firm.
• Explain the issues that affect international product and service
management across borders.
• Identify the implications of the image, branding and positioning of products
and services in international markets.

Pre-session activities
Read Chapter 8 of the Doole and Lowe (2004) textbook.
See also tutorial session pre-reading

Overview of the session


In this session, we focus upon recent trends of international product policy, the
nature of the product offered, its relationship with the market and how new
products can be developed.

Central to the international marketing strategy is the product or service 'offer'. It


is not just the core physical properties, but also additional elements such as
packaging, warranties, after-sales service and branding that make up the total
package for the purchaser. Thus it is a combination of the marketing mix
elements, which comprise the product offer.

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The strongest link is perhaps between product and communication because of


the power of branding and image, which acts as a focus for customer
perceptions and values. Consumer attitudes to products can be affected by their
perceptions of different countries. This can be demonstrated by asking students
to complete and compare the sentences (Japanese products are..., French
products are..., Russian products are..., American products are, etc).
A number of trends in international marketing such as shortening product life
cycles, increase in counterfeiting, grey marketing and private label brands are
having a greater effect on product policy, with firms finding it increasingly difficult
to retain clear positioning by differentiating their offer from that of their
competitors. And because of the importance of keeping the product portfolio
fresh, emphasis is increasingly placed upon new product development, and
exploiting new processes and systems.
The issue of standardisation has absorbed many writers time over the last
decade but the truly globally standardised brand or product - a highly desirable
objective for some firms – is still rare. Even the 'sweetness' of Coca-Cola is
adjusted to suit local market tastes!
Positioning of a product or service too, is extremely difficult, where countries are
at different levels of development. Few firms practise truly effective global
segmentation, so a product may be an everyday purchase in one country and a
luxury in another.

TOPIC 8 TUTORIAL: Standardisation versus Adaptation

INTRODUCTION

A key decision faced by international marketers is whether to standardise or


adapt the product or service offer (or elements thereof). The standardisation
versus adaptation debate continues to attract a great deal of attention amongst
academics and practitioners and it is this theme that provides the focus for
lecture and tutorial session.

ACTIVITY

Before the class:

3. Read the following articles and draw up a list of the arguments in 1) in


favour of standardisation of the product/service offer and 2) in favour
adaptation. Supplement these with your own views.

Kotler, P. (1986) “Global Standardization-Courting Danger”, The Journal of


Consumer Marketing, Vol 3(2), pp.13-15
Levitt, T. (1983) “The Globalization of Markets,” Harvard Business Review,
(May-June) pp. 92-102

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You may find it useful to refer to some of the additional articles and
websites listed in the resources section (below).

4. Identify examples to illustrate each of the issues that you identify. So, for
example, if you identify cultural variations as factor leading firms towards
adaptation, give an example that would illustrate the types of cultural issue
that firms face and how they might vary elements of the product/service to
deal with them.

During the class

You will be asked to work in teams to prepare a 5-10 minute presentation


summarising the main arguments in favour of standardisation and adaptation.
Ensure that you are armed with sufficient examples to help illustrate the
importance of the different issues that you identify.

After the class

During this week’s session we have considered standardisation and adaptation


as it applies to the product/service element of the marketing mix. During next
week session we will be considering international distribution decisions. Spend
approximately 30 minutes thinking about how the arguments identified during
today’s session apply to distribution. What additional factors might apply? What
has been the impact of technology on distribution channel strategies and the
scope or need for standardisation.

RESOURCES

Articles:

Vrontis, D. (2003) “Integrating Adaptation and Standardisation in International


Marketing: The AdaptStand Modelling Process”, Journal of Marketing
Management, 19, pp. 283-305.
Rau, A.P. And Preble, J.F (1987) “Standardisation of Marketing Strategy by
Multinationals”, International Marketing Review, Autumn, pp. 18-28

See also the following Web page reviewing of progress since Levitt’s seminar
article on the globalization of markets: http://hbswk.hbs.edu/item/3543.html

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Post-topic activities
Take the multiple-choice test to ensure you have a good grasp of this week's key
ideas. Then write your test scores in Appendix A; and jot down the areas you
know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.

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___________________________________
___________________________________
INTERNATIONAL PRODUCT
and SERVICE MANAGEMENT ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 8
1

___________________________________
Learning Outcomes
___________________________________
™ Appreciate the elements that make up the international
product and service offer. ___________________________________
™ Evaluate external and internal factors affecting international
product and service strategy development. ___________________________________
™ Explain the issues that affect international product and
service management across borders. ___________________________________
™ Identify the implications of the image, branding and
positioning of products and services in international markets. ___________________________________
™ Understand how new product development contributes to the
international product and service strategy. ___________________________________

___________________________________
Developing Global Power Brands
___________________________________
Understanding
customer needs
Advertising & other
marketing communications
___________________________________
Employee
involvement
Relationship
marketing ___________________________________
Superior quality on Market-
attributes that
matter to customers
perceived
quality
Exceptional ___________________________________
customer value

Low "cost of quality” ___________________________________


& overall cost leadership

Effective positioning,
design & quality control Value chain
Brand power &
dominant market share ___________________________________
relationships
High Brand Equity
Source: Adapted from Gale (1994:125)
3

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The Total Product Offer


___________________________________
What’s the ___________________________________
brand’s USP ? ?

Augmented Installation
Selection
Potential
Everything potentially
___________________________________
Freephone
Value-added features feasible to attract
& benefits to the Packaging
target market Brand
and hold customers.
The Ideal.
___________________________________
Name Styling/
Core Design After-
Delivery

Core
Benefit sale
service ___________________________________
Basic problem-solving Quality
Actual
benefits; utility of the Features
physical product
Credit
Customer's minimal ___________________________________
or service
? product attributes
Warranty
? and use conditions
___________________________________
4
Source: Adapted from Kotler et al. (1999: 562)

Sources of Value-Added Competitive Differentiation ___________________________________


(Brand Equity = Product + Service + Intangibles)

MARKETING
___________________________________
INTANGIBLES

SERVICES
Buyer/seller
relations
What’s the
brand’s USP ?
___________________________________
Pre-sale information,
Brand advice & assurance
Image
Warranty Features Convenience
Reputation ___________________________________
Packaging Design Time

Delivery PRODUCT Use/


Quality context
Availability
___________________________________
Performance Choice Cognitive
Corporate Installation Dissonance
Image
Maintenance
Price
Finance ___________________________________
Post-sale
service/ communication
Word-of-mouth

Standardise or Adapt
recommendations
Firm’s hidden
differences ___________________________________
Relative Quality and
to Value/Price Perceptions
International Markets?
Source: Adapted from Piercy (1991) 5

___________________________________
International Product Policy Options
___________________________________
Extension Product Adaptation
___________________________________
Promotional
One product and
Extension campaign has
promotional mix
worldwide
worldwide appeal,
product adapted
___________________________________
Promotion
One product and Differentiated ___________________________________
promotional effort approach: Both
Adaptation message and
adapted to cater for
consumer/market product adapted to ___________________________________
differences each market

Product Invention: Products specifically developed to meet the needs of


___________________________________
individual markets
Source: Adapted from Keegan, W.J. (1989) Multinational Marketing Management, Englewood Cliffs: Prentice Hall
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International Brand Strategies
___________________________________
Standardized brand
™ Core and augmented components tailored to domestic market but have
global appeal.
___________________________________
Adapted brand
™ Core components’ attributes same as standardised brand but augmented ___________________________________
components modified to cater for mandatory local requirements (e.g. legal
restrictions).

Customized brand
___________________________________
™ Core and augmented components tailored to meet local
requirements.
___________________________________
Globalized brand
™ Uniform core component, with an augmented component added to
meet unique country (or regional) requirements and expectations. ___________________________________
Source: Medina J.F. and Duffy M. (1998: 233). “Standardization vs. globalization: a new perspective of brand
strategies.” Journal of Product & Brand Management, 7, 3, 223-243.

___________________________________
Evaluating the ‘Product’
___________________________________
™ For what purpose has the product been developed
¾ how would it be used in that country? ___________________________________
What distinctive properties does it have?
™
___________________________________
™ What benefits is the consumer expected to gain?
___________________________________
™ How is it positioned
¾ what image do consumers perceive it to have?
___________________________________
™ Which consumer segments are expected to buy it
¾ on what occasions and for what purpose? ___________________________________
™ How does it fit into the total market?
8

Factors Affecting International


___________________________________
Management of Products and Services ___________________________________
Balance between standardisation and adaptation
™
¾ Cultural, usage and legal factors
___________________________________
™ Product accessibility and ethical issues ___________________________________
™ Green environmental issues
™ Shortening product life cycles ___________________________________
™ Effect of differing market entry methods
™ Changes in marketing management
___________________________________
™ Warranty problems, etc.
___________________________________
™ Counterfeiting

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Determining the Product Range
___________________________________
™ Overall growth/profit objectives
™ Experience, philosophies and attitude of the company
___________________________________
™ Characteristics of the market
™ Requirements, expectations and attitudes of the ___________________________________
consumers
™ The products and services themselves ___________________________________
™ Ease of distribution
™ Support required from elements of the marketing mix
™ Environmental constraints
___________________________________
™ Level of risk the company is prepared to take
___________________________________

10

___________________________________
Six Sector Service Matrix
Degree of Consumer/Producer Interaction
___________________________________
Lower Higher

Sector 4
___________________________________
Relative Involvement of Goods

“Pure” service
Sector 1 •Domestic •Engineering •Advertising
Low on goods mail delivery •Consulting •Education
•Knife
sharpening
•Management •Insurance
•Medicine ___________________________________
Services
with Sector 2 •Retailing •Shipping •Banking Sector 5
some
goods or
delivered
Couriers
•Fast food
•Air Freight •Air Travel
•Maintenance
___________________________________
•Hotels
through
goods

Sector 3 •Music/CDs
•Software
Sector 6
___________________________________
Services •Teleshopping
•Movies/DVDs •Email
embodied
•Training/books
in goods
•Journals
•Online New services
___________________________________
Source: Vandermerwe, S. and Chadwick, M. (1989) “The Internationalisation of Services”, Service
Industries Journal, Vol.22(4), p.82
11

Factors Influencing Standardisation or ___________________________________


Adaptation
___________________________________
STANDARDISATION DIVERSIFICATION

™ Economies of scale ™ Consumer tastes


___________________________________
™ Development costs ™ Legal requirements
™ Stockholding costs ™ Climatic differences
___________________________________
™ Consumer mobility ™ Development status
___________________________________
Product Adaptation Approaches ___________________________________
• Standardised products (Extension)
• Modified products (Adaptation)
• Develop new products (Innovation) ___________________________________

12

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Product Standardisation
___________________________________
Suitable Not suitable
™ Aircraft ™ Food and drink ___________________________________
™ Automobiles ™ Clothing and fashion items

™ Beverages ™ Beauty accessories ___________________________________


™ Electronics ™ Architecture and

Petroleum furnishings
™

™ Pharmaceuticals ™ Banking and insurance


___________________________________
___________________________________
Towards Standardisation
• Markets are becoming more homogeneous
• More identifiable international consumer segments ___________________________________
• Increase in number of firms moving towards globalisation

13

___________________________________
The International Product Life Cycle
___________________________________
Sales
Market D Domestic ___________________________________
Market
Market C
___________________________________
Market B ___________________________________
___________________________________
Market A
___________________________________
Time
14

___________________________________
Service Quality
___________________________________
Customer Service represents 40+% of the
importance weight in most customer decisions ___________________________________
(PIMS data)
___________________________________
Customer Service expectation levels:
1.Customer Delight: Service superiority; exceed desired
expectations
___________________________________
2. Desired: Blend of what customer believes can/
should be delivered ___________________________________
3. Adequate: Minimum service level the customer will
tolerate
4. Inadequate: Fails to meet even the minimal standards
___________________________________

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___________________________________
SERVQUAL Model: Service Quality Shortfalls

Word-of-Mouth Personal Needs Past Experience


___________________________________
Communications

___________________________________
Expected Service

CUSTOMER Gap 5
Perceived Service
___________________________________
FIRM
Service
Delivery
Gap 4 External
Communications
to Customers
___________________________________
Gap 3
Gap 1

Service Quality
___________________________________
Specifications

Gap 2

Management
___________________________________
Perceptions of
Customer Expectations
16
Source: Berry, Parasuraman and Zeithaml (1990)

SERVQUAL:
___________________________________
Expected Vs. Perceived Service Quality Gaps
___________________________________
Gap 1 Expectations -- Management Perceptions
Overlook/ underestimate need to fully understand customers’ ___________________________________
expectations and which characteristics connote high quality service

Gap 2 Management Perceptions -- Service-Quality ___________________________________


Specifications
Executives experience difficulties in translating their tacit
understanding of customers’ expectations into explicit specs
___________________________________
Gap 3 Service Quality Specifications -- Service Delivery ___________________________________
Excecutional difficulties in delivering service quality standards

Gap 4 Service Delivery -- External Communications ___________________________________


Propensity to ‘over-promise and under-deliver’ via media & staff

17

___________________________________
Staff and Internal Service Quality
___________________________________
Employee Employee ___________________________________
retention productivity

Employee The virtuous circle ___________________________________


External
satisfaction Reichheld et al 2000
service quality
(aka)
___________________________________
Internal service The service profit chain Customer
quality Heskett et al 1994 satisfaction
___________________________________
Profitability Customer
and growth loyalty
___________________________________
But see also Kamakura et al (2002) “Assessing the
Service profit chain” Marketing Science 29, 3, 294-317
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___________________________________
World’s Most Valuable Brands (2001)
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
Source: Interbrand

19

___________________________________
Brand Valuation
___________________________________
The most basic criteria for brand evaluation include:
___________________________________
™ Title to the brand has to be clear and separately
disposable from the rest of the business. ___________________________________

™ Value has to be substantial and long term, based ___________________________________


on separately identifiable earnings that have to be
in excess of those achieved by unbranded ___________________________________
products.
___________________________________

20

___________________________________
International Branding Options
___________________________________
TYPE OF STRATEGY SPECIFICATION
___________________________________
™ Global brands ™ Identical in all markets
™ Multi-national brands ™ Identical in most areas ___________________________________
™ International brands ™ Varied for many areas
™ National brands ™ Unique to one market
___________________________________
___________________________________
___________________________________

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___________________________________
New Product Development Process
___________________________________
New Product
Strategy
Idea
Generation
Idea ___________________________________
Screening

___________________________________
Concept Development
and Testing
Marketing
Strategy
Business
Analysis
___________________________________
___________________________________
Product Test Commercialisation
Development Marketing (‘Roll out’) ___________________________________
Source: Kotler et al. (2000:501)
22

___________________________________
Research & Development Strategies
___________________________________
Companies must take decisions on: ___________________________________
™ Location of their own internal R&D facilities
™ Extent to which they contract out certain parts of their ___________________________________
R&D programme.
™ Whether they might acquire a company which can ___________________________________
provide either new technology or a new product.
™ Licensing the technology and process from another ___________________________________
company.
™ Funding joint ventures or strategic alliances with ___________________________________
companies that have complementary technology.

23

The Arguments For & Against ___________________________________


Centralisation of R&D
___________________________________
ARGUMENTS FOR CENTRALISATION ARGUMENTS AGAINST CENTRALISATION
• economies of scale • pressure from subsidiaries
___________________________________
• easier and faster communication • pressure from governments
• better co-ordination • benefits of public relations
___________________________________
• greater control over outflow of • use of a wider range of skills and abilities
information with implications for secrecy • financial savings
___________________________________
• greater synergy • benefits from comparative advantage
• avoiding duplication • greater sensitivity to local tastes
___________________________________
• overcoming problems of ownership • better monitoring of local competitive activity
• closeness to possible acquisitions
___________________________________
• access to new technology wherever located
24

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___________________________________
New Product Categories
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________

25

___________________________________
Failure of New Product Development
___________________________________
™ Tariff and non-tariff barriers.
___________________________________
™ Local competitor subsidiaries.

™ Cultural insensitivity.
___________________________________
™ Poor planning. ___________________________________
™ Lack of unique selling proposition.
___________________________________
™ Product deficiencies.
___________________________________
™ Misguided enthusiasm of top management.

26

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ILP304 International Marketing – Topic 9

Case Study Activity


Learning Outcomes

To help you prepare for the final examination, we will hold a formative
assessment, which covers Topics 1 to 8 inclusive.

Pre-session activities
Re-read Chapters 1-7 of the Doole and Lowe (2004) textbook; and review your
tutorials session notes. Look at the HMV case study that was issued in topic 7,
and at the marking criteria set out at the beginning of this guide.

Overview of the session


Formative assessment case study paper--covering Topics 1 to 7 inclusive.

No tutorial. Next week’s Tutorial session will be devoted to providing feedback


on the case study paper and suggested answers.

Post-topic activities
None.

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Part III:
Approaches to Implementation
(Topics 10, 11, 12, 14)

Having discussed the development of marketing strategies in Part Two (Topics 5


to 7), we now move on to the approaches that might be adopted in the
implementation of the decisions made. In doing this, we emphasise the need to
obtain a balanced view in the implementation stage between the strategic
choices available and the tactical detail that is required to ensure success in
marketing communications, distribution and logistics and international pricing.

The final stage in the implementation of the international marketing strategic


process should be a feedback element so that frequent evaluation can be made
and new decisions taken as new challenges emerge from the environment and
the firm sets new objectives.

Key Learning Objectives

Topic 10
Recognise the increasingly important role of distribution and logistics in
achieving success in international marketing strategies within the context of the
international markets.

Topic 11
Understand how pricing can be used strategically and tactically within the
marketing mix.

Topic 12
Once the customer value proposition is fine-tuned, we then need to effectively
and efficiently communicate the offer in meaningful, creative ways to our target
audience and other stakeholders.

Topic 14
We will explore the impact of enabling technologies and consider how these will
drive future international marketing activities.

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ILP304 International Marketing – Topic 10

International Distribution and


Logistics
Learning Outcomes
On completion of this session the student should be able to:
• Strategically evaluate potential foreign distribution options for a given
situation.
• Discuss the complexities of efficiently managing intermediaries in an
international marketing context.
• Appreciate the difference in retailing infrastructures across the globe.
• Advise and recommend potential solutions to developing a logistics strategy
in foreign markets.

Pre-session activities
Read Chapters 10 of the Doole and Lowe (2004) textbook.

Overview of the session


In international marketing, the strategic and tactical use of distribution to gain
competitive advantage is imperative. Primarily because companies are
operating in many markets the actual management of the channels of
distribution constitutes a major portion of the marketing costs. Efficiency and
cost effectiveness are therefore essential.
This session is very much a follow on from the market entry strategies session
(Topic 5). Frequently the market entry strategy chosen will determine the
distribution options available to firms. Likewise the distribution strategy will be
closely tied to the pricing strategy employed (Topic 10).

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The selection of the best distribution channel to move the product from the
marketing company to the end customer is dependent on the objectives of the
company, its resources and the availability of the desired channel option. Often,
the ideal channel is not available to the company, in which case alternatives
have to be sought.
Because the distribution channels of countries have often been developed in
response to their different traditions and cultures (see Topic 3), firms never have
a free choice in developing distribution strategies, but instead have to fit their
strategy to the country's infrastructure.
Typically, companies have less control over international channels than they
have in their domestic market. The usual pattern is to have a smaller market
share and to use longer distribution channels; that is, using more layers of
distribution intermediaries. Both of these factors reduce the ‘channel power’ of
the manufacturer. Less channel power usually results in less control over other
channel members, which can result in a conflict of interests that must then be
sensitively managed.
There is a concentration on retailing in this session because the efficiency,
decision processes and the behaviour of retailing companies – key buyers of the
output of consumer goods companies – vary from economy to economy and
have a major impact upon international marketing planning. Moreover, the
emergence of the World Wide Web and Internet Marketing has major strategic
implications on global routes to markets.

Tutorial session
The Tutorial session will be devoted to going through the Formative Assessment
and giving feedback on the group’s performance. In preparation for this, look at
the marking scheme for the `Starbucks’ specimen exam paper again, and make
a note of any questions you have on this.

Post-topic activities
Take the multiple-choice test to ensure you have a good grasp of this week's key
ideas. Then write your test scores in Appendix A; and jot down the areas you
know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.

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___________________________________
___________________________________
‘PLACE’:
___________________________________
INTERNATIONAL DISTRIBUTION
AND LOGISTICS ___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 10
1

___________________________________
Learning Outcomes ___________________________________
™ Strategically evaluate potential foreign distribution
options for a given situation.
___________________________________
™ Discuss the complexities of efficiently managing
intermediaries in an international marketing context.
___________________________________
™ Appreciate the difference in retailing infrastructures
across the globe.
___________________________________
™ Advise and recommend potential solutions to
developing a logistics strategy in foreign markets.
___________________________________
™ Understand the export documentation process. ___________________________________
2

___________________________________
‘Place’ (Routes to Market) ___________________________________
Designing channels
___________________________________
What’s the
Analyse competition doing?
customer
needs
___________________________________
Match channel
and Brand ___________________________________
objectives
Identify channel
alternatives ___________________________________
Evaluate
Marketing channels can influence
alternatives ___________________________________
customer’s perception of the brand !

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___________________________________
Considerations ___________________________________
™ Selection of foreign country intermediaries
___________________________________
™ How to build a relationship with them

™ How to deal with variety of retailing structures ___________________________________


™ How to maximise new and innovative forms of distribution
___________________________________
™ How to manage logistics of physical distribution
™ Customer Characteristics
¾ Market size and location
___________________________________
¾ Purchasing habits
¾
¾
Choice of outlets
Usage patterns
___________________________________
4

___________________________________
Inter-relationship of Channel Objectives ___________________________________
SELLER DISTRIBUTOR CUSTOMER ___________________________________
OBJECTIVES OBJECTIVES OBJECTIVES
Market share Exclusivity Product advice
___________________________________
Product access Growth in sales Good value
___________________________________
Profitability Product quality Product support

Joint Promotion Profit margin Variety / Choice


___________________________________
Stockholding Secure supplies Easy availability ___________________________________
5

___________________________________
Distribution Channels: Business Goods ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
6

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___________________________________
Distribution Channels: Consumer Goods ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
7

___________________________________
11 C MODEL:
Selecting Appropriate Channel Intermediaries ___________________________________
Customer characteristics Capital required ___________________________________
Culture Coverage needed ___________________________________
Competition
Control issues ___________________________________
Company objectives
Character of the market Continuity provided ___________________________________
Cost Communication effectiveness
___________________________________
Source: Czinkota & Ronkainen (2004)

ch11_5

___________________________________
JAPAN:
Typical Distribution System ___________________________________
Manufacturer
or Importer
___________________________________
Speciality
Distributor ___________________________________
Primary Self-Service Department
Wholesaler Store Store
Secondary
___________________________________
Wholesaler
Tertiary ___________________________________
Wholesaler

Retailer ___________________________________
Consumer
9

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___________________________________
Using a Company-Owned Sales Force ___________________________________
Advantages Disadvantages ___________________________________
™ Greater control over sales ™ Relatively larger
and marketing effort. resource commitment. ___________________________________
™ Facilitates formation of
™ Higher exit costs.
closer manufacturer-
customer relationships. ™ Increased exposure to ___________________________________
™ Can be used to identify unexpected changes in
and exploit new political/ social ___________________________________
international marketing environment of host
opportunities. country.
___________________________________
10

___________________________________
Differing Patterns of Retailing ___________________________________
™ Traditional retailing ___________________________________
™ Intermediary retailing
___________________________________
™ Structured retailing
___________________________________
™ Advanced retailing
¾ Interactive customer marketing
¾ Mass customisation
___________________________________
¾ Data mining
¾ Category management ___________________________________
¾ Effective consumer response

11

___________________________________
Retailers - Typical Differences Between
Developing & Developed Countries ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
12

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___________________________________
Internationalisation of Retailing:
PUSH Factors ___________________________________
™ Saturation of the home market or over-competition. ___________________________________
™ Economic recession or limited growth in spending.
___________________________________
™ A declining or ageing population.

™ Strict planning policies on store development. ___________________________________


™ High operating costs - labour, rents, taxation.
___________________________________
™ Shareholder pressure to maintain profit growth.

™ The ‘me too’ syndrome in retailing.


___________________________________
13

___________________________________
Internationalisation of Retailing:
PULL Factors ___________________________________
™ Underdevelopment of some markets or weak competition. ___________________________________
™ Strong economic growth or rising standards of living.
___________________________________
™ High population growth or high concentration of young adults.

™ A relaxed regulatory framework.


___________________________________
™ Favourable operating costs - labour, rents, taxation. ___________________________________
™ The geographical spread of trading risks.
___________________________________
™ Opportunity to innovate under new marketing conditions.

14

___________________________________
Top Ten Global Food Retailers
by Sales ($Bn) ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
Source: M+M Planet Retail
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___________________________________
Global Retailer Categories ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
16

___________________________________
Implications for Distribution Strategy
Development ___________________________________
™ 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 electronic transactions.
___________________________________
™ Unrelenting performance measures being demanded of ___________________________________
suppliers by international retailers.

™ Smart, demanding consumers expecting high levels of ___________________________________


customer service.

17

___________________________________
Retailers Demand ___________________________________
™ Streamlined and flexible supply chains. ___________________________________
™ Suppliers who can guarantee quality and reliability
across global markets. ___________________________________
™ Ability to supply high volumes and conduct intense
relationships with intermediaries in the supply chain.
___________________________________
™ Suppliers who can meet the global sourcing ___________________________________
requirements of large-scale retailers seeking to buy
centrally across the globe. ___________________________________
18

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___________________________________
International Electronic Forms of Retailing
___________________________________
Pure Internet Single
Exchanges Markets Buyer ___________________________________
Markets
Auctions ___________________________________
Market conditions conducive to electronic
channels of distribution ___________________________________
• Inefficiencies in traditional distribution channels
• Market fragmentation
• Minimum scale barriers
___________________________________
• Commodity-type products


Short life-cycle products
Trade association involvement
___________________________________
Source: Klein LA & Quelch JA (1997)

International Distribution Policies ___________________________________


___________________________________
Product
Policies
___________________________________

Communi-
___________________________________
Pricing Distribution
cations
Policies Density
Policies
___________________________________
___________________________________
Channel Distribution Distribution
Alignment & Strategy
Leadership
Logistics
___________________________________
Source: Jeannet & Hennessey (1998: 405) Channel Length

___________________________________
Logistics Approach to Physical Distribution ___________________________________
Customer Service ___________________________________
™ Order to delivery time ™ Invoicing procedures,
™ Consistency and reliability
documentation and accuracy ___________________________________
of delivery ™ Claims procedure
™ Inventory availability ™ Condition of goods ___________________________________
™ Order, size constraints ™ Salesperson’s visits
™ Ordering convenience ™ Order status information ___________________________________
™ Delivery time and flexibility ™ After-sales support
¾ Help-line
¾ Warranty ___________________________________
21

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___________________________________
Logistics Approach to Physical Distribution ___________________________________
IT and Physical Distribution ___________________________________
Information Technology Restructuring Physical
™ Electronic data Distribution Operations ___________________________________
interchange (EDI) ™ Changes in trading
structures
™ Tracking progress of
™ Physical movement is
___________________________________
products
™ Just-in-Time (JIT) high-cost activity
manufacturing and ___________________________________
distribution
___________________________________
22

___________________________________
Effective System of Physical Distribution ___________________________________
Requirements Considerations
™ clearly define areas of ™ How intermediaries can
___________________________________
responsibility enhance service
™ highly developed planning
system
™ modes of transportation to
be used
___________________________________
™ comprehensive information ™ how to make use of export
support system processing zones ___________________________________
™ expertise in distribution ™ documentation required
management ™ packaging requirements for
™ centralising planning body transit & the market ___________________________________
™ how should the export
sales contract be organised
___________________________________
23

___________________________________
Export Order & Physical Distribution
___________________________________
Importer
___________________________________
Importer’s Bank
___________________________________
Exporter Bank in Exporter’s
Country ___________________________________
Manufacturing
Import Warehouse ___________________________________
Secure Transportation
Ship Customs
___________________________________
& Documentation

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___________________________________
Export Processing Zones (EPZ) ___________________________________
The concept of EPZ
™
¾ duty-free manufacture or processing of products for export
___________________________________
purposes within a customs-controlled environment

™ Advantages
___________________________________
¾ All goods entering the EPZ are exempted from customs duties and

¾
import permits
Firms can use foreign currency to settle transactions
___________________________________
¾ EPZs can be used for assembly of products and so help reduce

¾
transportation costs
EPZs give greater flexibility, and help avoid unwanted bureaucracy
___________________________________
of customs and excise
___________________________________
25

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ILP304 International Marketing – Topic 11

Pricing for International Markets


Learning Outcomes
On completion of this session, the student should be able to:
• Discuss the issues that affect international pricing decisions.
• Evaluate different strategic options for pricing across international markets.
• Differentiate between the problems facing companies engaged in foreign
market pricing and those faced by companies trying to coordinate
strategies across a range of global markets.
• Select and justify a pricing strategy for a particular overseas market.

Pre-session activities
Read Chapter 10 of the Doole and Lowe (2004) textbook.
See also tutorial session pre-reading

Overview of the session


Most firms recognise the importance of pricing at a tactical level in stimulating
short-term demand, but few value the strategic role of pricing in international
marketing. In this session, we identify the internal and external factors that affect
pricing decisions, the role of pricing, the relationship between pricing and other
aspects of the firm's activities and the specific problems associated with pricing
in international marketing.

For many firms, the role of pricing and the factors affecting pricing have not been
given full recognition within the marketing strategies adopted. There is still
insufficient understanding of the benefits of price and non-price factors in
achieving competitive advantage. This is particularly important as the
expectations of consumers are changing (particularly during times of recession).
For example, there is a greater reluctance on the part of the consumer to pay a
premium either for branded products or for high levels of quality and service,
which are now taken for granted. Thus, it is important for the firm to develop a
superior customer value proposition vis-à-vis competitive alternatives.

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To achieve effective pricing policies in international markets it is essential to


avoid falling into the trap of believing pricing to be an independent controllable
variable within the marketing mix, because environmental and market factors
play a significant part too. In setting a price, it is important not only to consider
the firm's cost structure, particularly when exporting, but also to compare it with
the cost structure that competitors are likely to have. Pricing objectives, to a
considerable extent, are similar in international markets to those in the domestic
market, but there are many more implementation problems.
Issues of currency fluctuation, lack of hard currencies, transfer pricing and grey
marketing need to be given explicit consideration. There are a variety of
strategies that can be used to address these issues but all of them have
significant limitations.
Pricing management demands of the manager a greater understanding of the
complexity of international financial trading as well as better knowledge of how
the marketing management factors interact. Many new opportunities appear to
exist in newly industrialised countries but additional problems arising from the
lack of hard currency, inflation and debt problems often necessitate additional
management skills.

TOPIC 11 TUTORIAL: Pricing for international markets


Introduction

As we’ve seen in previous weeks, decisions relating to individual elements of the


mix cannot be taken in isolation; the various elements of the mix work together
to create a brand or product positioning in the minds of a clearly defined target
market. Pricing decisions are no exception to this, so the tutorial activity
examines price with the context of the whole mix for McDonald’s restaurants
worldwide.

Before the class:

i Re-read Chapter 11 of Doole & Lowe, making a note of the factors that
influence international pricing decisions.

ii Now read Vignali, C (2001) “McDonald’s: Think global, act local – the
marketing mix” British Food Journal 103, 2, 97-111. You can download
this from the Emerald Full text database through the University Website.
Have a look at the questions that you will work on in class, and jot down
some thoughts.

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During Class

The class will begin with a general review of the factors affecting pricing
decisions in international markets. You will then work in groups on the following
questions:

a. Compare McDonald’s pricing strategies in Australia and the UK (or any


other two countries at opposite ends of the pricing spectrum). Describe the
different brand positioning in each market.
b. Outline the implications of the respective positioning strategies for the two
markets, identifying how the other mix elements should differ between
markets. What are the cost implications of these differences?
c. Identify the factors that McDonald’s should take into account when setting
prices for each country.
d. Develop a pricing strategy for McDonald’s a new market/country of your
choice. Be sure to justify your pricing strategy by clearly identifying the
target market and the positioning that you hope to achieve, and explain
how your chosen pricing strategy would fit with the rest of the marketing
mix.

After the class

This week we have focussed on price, but we have also touched on issues
relating to other elements of the mix. In preparation for next week, look again at
Vignali (2001) and make some notes of McDonald’s international
communications strategies.

Post-topic activities
Take the multiple-choice test to ensure you have a good grasp of this week's key
ideas. Then write your test scores in Appendix A; and jot down the areas you
know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.

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___________________________________
___________________________________
PRICING FOR
INTERNATIONAL MARKETS ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 11
1

___________________________________
Learning Outcomes ___________________________________
™ Discuss the issues that affect international pricing
decisions. ___________________________________
™ Evaluate different strategic options for pricing across
international markets. ___________________________________
™ Differentiate between the problems facing companies
engaged in foreign market pricing and those faced by
___________________________________
companies trying to coordinate strategies across a
range of global markets. ___________________________________
™ Find solutions to the problems of pricing in high-risk
markets. ___________________________________
2

___________________________________
Definition of Customer Value ___________________________________
Customer Value can be defined as:
Relative Perceived Benefits
___________________________________
Relative Perceived Cost
___________________________________
Thus:
™ DISCOVER what’s important to your ‘best’ customers ___________________________________
™ DEVELOP a value proposition--better than competitive
alternatives
™ DELIVER a ‘defect free’ value proposition:
___________________________________
¾ Service recovery initiatives
¾ Relationship marketing mentality ___________________________________
3

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Development and Implementation of ___________________________________


Pricing Strategy ___________________________________
Factors Confirm impact Selection of Dealing with
international
___________________________________
affecting of corporate most
pricing: strategies on appropriate pricing
problems
Company and
product
pricing policy pricing option
___________________________________
Market
Environmental
___________________________________
___________________________________
___________________________________
4

Factors Influencing Pricing Strategy: ___________________________________


Company and Product Factors ___________________________________
™ Corporate and marketing objectives
™ Firm and product positioning
___________________________________
™ Product range, life cycle, substitutes, product
differentiation and unique selling propositions ___________________________________
™ Cost structures, manufacturing, experience effect and
economies of scale ___________________________________
™ Marketing, product development
™ Available resources ___________________________________
™ Inventory
™ Shipping costs ___________________________________
5

Factors Influencing Pricing Strategy: ___________________________________


Market Factors ___________________________________
™ Consumers perceptions, expectations and ability to
pay. ___________________________________
™ Need for product adaptation, market servicing. ___________________________________
™ Market structure, distribution channels discounting
pressures. ___________________________________
™ Market growth, demand elasticity.
___________________________________
™ Need for credit.
___________________________________
™ Competition objectives, strategies and strengths.

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SETTING A PRICE ___________________________________


(Export pricing) ___________________________________
™ Determine export market potential.
___________________________________
™ Estimate the price range and target price.
™ Calculate sales potential at the target price. ___________________________________
™ Evaluate tariff and non-tariff barriers.
___________________________________
™ Select suitable pricing strategy in line with company
objectives.
™ Consider likely response.
___________________________________
™ Select pricing tactics, set distributor and end-user prices. ___________________________________
™ Monitor performance and take necessary corrective action.
7

THE EXPORT ORDER PROCESS ___________________________________


Initial Enquiry 1
___________________________________
2 Pro-Forma Invoice
___________________________________
Confirmed Order 3 C
C
U
O C
O
5 Letter of Credit 4 S ___________________________________
M N I T
P F
Shipping Goods S
A
6
I S O ___________________________________
R U M
N 7 M Shipment of Documents I
E
Y I
N
N
G R
___________________________________
8
G Commercial Invoice &
B
B Documents in Letter of Credit A ___________________________________
A N
N K
9 K Payment 10
8

SPECIFIC EXPORT COSTS ___________________________________


(International Cost Reduction) ___________________________________
™ Economies of scale
___________________________________
™ Learning curve
¾
¾
Greater labour efficiency
Task specialisation and method improvement
___________________________________
¾ New production processes
¾ Better performance of existing equipment ___________________________________
¾ Changes to the mix of resources
¾ Greater product standardisation
¾ Improved product designs ___________________________________
™ Location of Production Facility
¾ Comparative advantage
___________________________________
¾ Manufacturing costs in developed countries
9

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Additional Cost Factors Involved when ___________________________________


Exporting ___________________________________
™ Agency fees
___________________________________
™ Currency charges

™ Documentation charges and tariffs ___________________________________


™ Export packaging
___________________________________
™ Extended credit
™ Installation and after-sales service ___________________________________
™ Insurance premiums
™ Shipping charges
___________________________________
10

___________________________________
Influencing the Response to Pricing ___________________________________
Consumer response Competitors’ response
™ Distinctiveness of product ™ Commitment to markets
___________________________________
™ Level of perceived quality and products
™ Awareness of substitutes ™
™
Resources available
Internal cost structures
___________________________________
™ Ease of making
comparisons ™ Customer/distribution chain
™ Price as a proportion of loyalty ___________________________________
total expenditure
™
™
Perceived benefit
Use of product in
___________________________________
conjunction with another
™ Shared costs of purchase ___________________________________
™ Perishability

11

___________________________________
Comparative Pricing Strategies ___________________________________
HIGH MEDIUM LOW
PRICE PRICE PRICE ___________________________________
HIGH
QUALITY
Premium
product
Penetration
price
‘Gift’
price
___________________________________
MEDIUM Overpriced Average price Bargain price ___________________________________
QUALITY item

___________________________________
LOW QUALITY Hit and run Shoddy Cheap

___________________________________
12

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___________________________________
Pricing Problems ___________________________________
Co-ordination across markets
Multinational Retaining uniform price positioning
pricing Transfer pricing
Unauthorised importing ___________________________________
Foreign
currency
In what currency should products be priced?
Dealing with fluctuating exchange rates
___________________________________
Minimising exchange rate risk

___________________________________
Obtaining Risk of non payment
payment from Shortage of hard currency
LDCs Gaining up-front payment on long-term transactions ___________________________________
Administrative
problems
When do you release control and responsibility
Minimisation of delays
___________________________________
13

___________________________________
Currency of Pricing ___________________________________
Benefits of quoting in a foreign currency
___________________________________
™ Provide access to finance abroad
¾ At lower interest rates ___________________________________
™ Good currency managemen ___________________________________
¾ Leading to potential of gaining additional profit

™ Customers prefer quotes in own currency ___________________________________


¾ Allowing competitive comparison
___________________________________
14

___________________________________
Three Types of Grey Market ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
Source: Assmus and Weiss (1995) 15

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Parallel Importing or Grey Marketing ___________________________________
Conditions Defence Against Grey
™ Product priced lower in
Marketing ___________________________________
home market ™ Seek government intervention
™ Products available
internationally
or legal protection ___________________________________
™ Refusal to issue warranties in
™ Low trade barriers certain markets
™ Large price differentials ™ Buying out grey marketer ___________________________________
™ Price coordination strategies
¾
¾
Economic measures
Centralisation
___________________________________
¾ Formalisation
¾ Informal Co-ordination
___________________________________
16

___________________________________
Types of Counter-trade ___________________________________
™ Barter
___________________________________
™ Compensation trading
___________________________________
™ Counter-purchase
___________________________________
™ Offset

™ Switch deals ___________________________________


™ Cooperation agreements ___________________________________
17

___________________________________
Counter-Trade ___________________________________
Advantages Disadvantages/ Limitations

™ Lack of flexibility
___________________________________
™ New markets
™ Sell off surplus or poor ™ Exchange products difficult
quality products to sell ___________________________________
™ Strengthens political ties ™ Difficulties in locating /
™ Entry to high risk areas organising counter-trade ___________________________________
products
™ Circumvent government
™ No guide market prices
restrictions
™ Difficult profit evaluation
___________________________________
™ May create new competition
___________________________________
18

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ILP304 International Marketing – Topic 12

International Communications
Two inter-related topics are covered in this session: International
Communications; and 'Enabling Technology’. Given time constraints, only the
key issues of each will be covered in the Lecture. Thus it is imperative that you
read and understand the textbook chapters.

Pre-session activities
Read Chapter 9 of the Doole and Lowe (2004) textbook.
See also tutorial session pre-reading

Learning Outcomes
At the end of this session the student should be able to:
• Appreciate the nature and role of communications in implementing
international marketing strategies.
• Understand the challenges faced in the successful management of
international marketing communications.
• Be able to explain the use of the elements of an international
communications strategy, including corporate identity, products and
services promotion and the development of relationships with customers.
• Identify the use and the limitations of the communications tools in
international marketing.
• Recognise the value of integrating the communications by standardizing
programmes and processes, where possible, and adapting to local needs,
where necessary.

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Overview
Geographical and cultural separation of a company from its market places
causes great difficulty in effective communication. In this session the ways in
which companies develop and implement international communications are
explored. It takes a broader view of communications than is offered by the
traditional promotional mix including methods which have the objective of
developing better and more personalised relationships with global customers.

The session highlights the need to consider many stakeholder groups that may
have an impact on global development and international reputation. It is vital to
build good relationships with all those concerned through integrated
communications.

In this session the focus is upon the integration of the communications mix. Each
element of the mix is important in its own right but needs to be used in the
context of communicating relevant creative messages in a cost effective way to
a range of audiences. ‘SLEPT plus C’ is a useful way to examine the differences
and similarities in different countries. International marketing research (see
Topic 4) is useful to examine the relevance of standard and adapted messages.
Furthermore, the strategies developed by the firm (discussed in Part Two) will
act as the parameter for the development and implementation of international
marketing communications.

Managers need to develop communications that inform and persuade. To do


this, creativity is necessary to make messages stand out from those of the
competition and from all the surrounding 'noise' of the media business and social
world. Whilst it is cheaper to develop standardised messages, it is likely that
greater local responsiveness can be gained by using specially prepared
messages. An important managerial challenge is to balance the conflicting
pressures of standardisation or adaptation. It is also important to take account
of the cultural issues that influence the effectiveness of salespeople.

The management of international teams and cross border agency agreement is


a further issue, particularly if high quality creativity is the aim.

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TOPIC 12 TUTORIAL: CULTURE AND COMMUNICATIONS


INTRODUCTION

Differences in culture are an important factor constraining the use of


standardised international marketing communications. If communication is the
process by which individuals share meaning, then it follows that the parties must
understand the meaning of each other’s communication for an effective dialogue
to occur. (Holm, 2006; As discussed in week 3 and 4, cultural elements such as
religion, language, values and beliefs all have the potential to influence the
meanings that international consumers attach to particular products and brands
and the way in which they interpret communications in all its forms. International
marketers need to take account of these factors to ensure that, as far as
possible, their communications messages are perceived as intended (Hoecklin,
1995).

The tutorial activity is designed to encourage you to explore in greater detail the
impact of culture and national values on international marketing
communications.

ACTIVITY

Before the class:

Read the following articles and prepare answers to the questions below.

Vignali, C. (2001) “McDonalds’s: ‘think global, act local’-the marketing


mix”, British Food Journal, 103:2, pp. 97-111 (Note: You also used this
article for topic 11)
Baker, M and Sterenberg, G (2002) “International branding: resolving the
globallocal dilemma”, Market Leader, 19 (Winter), pp.42-48. Available
from: <http: www.warc.com>

1. McDonalds could be said to have adopted Taylor’s (1991) maxim of


“think global-act local”. How is this reflected in its international marketing
communications strategy?
2. Analyse the way in which culture has influenced McDonalds’ international
marketing communications mix decisions.
a. What factors have constrained their ability to implement a
standardised communications mix?
b. What particular challenges did McDonalds face when developing
an advertising campaign for China? How were these overcome?
c. How as culture influenced their ability to deliver consistent
messages via “interactive marketing”

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3. How might McDonalds’ American origin affect its brand perception in


international markets?

During the class

You will be asked to work in teams to prepare a 5-10 minute presentation


summarising the main points from the above. Ensure that you have gathered
sufficient evidence to help illustrate the importance of the issues that you
identify.

After the class

During this week’s session we have considered the challenges associated with
international communication and the particular constrains imposed cultural
differences. Next week’s session will be examining the role of technology in the
implementation of international communications strategies. The increased
visibility of firm’s operations bought about by the internet brings with it increased
potential for unintended messages and miscommunications. Spend
approximately 30 minutes thinking about the impact of internet on international
marketing. What are the potential applications? What are benefits and pitfalls of
using the internet as a marketing communications tool? How can it be used to
support the other elements of the marketing mix.

RESOURCES

Articles:

Wright, L.T. and Nancarrow, C. (1999) “Researching international ‘brand equity’:


a case study”, International Marketing Review, 16: 4/5, pp. 417-431

Baker, M and Sterenberg, G (2002) “International branding: resolving the


globallocal dilemma”, Market Leader , 19 (Winter), pp.42-48. Available
from: <http: www.warc.com>

Post-topic activities
Take the multiple-choice tests to ensure you have a good grasp of this week's
key ideas. Then write your test scores in Appendix A; and jot down the areas
you know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.
Read the case study that will be provided by the tutor in preparation for the
workshop, session 14.

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___________________________________
___________________________________
___________________________________
INTERNATIONAL COMMUNICATIONS
___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 12
1

___________________________________
Learning Outcomes ___________________________________
™ Appreciate the nature, role and challenges of international
marketing communications. ___________________________________
™ Explain the use of the elements of an international
communications strategy, including corporate identity, ___________________________________
products and services promotion and the development of
relationships with customers. ___________________________________
™ Identify the use and the limitations of the communications
tools in international marketing. ___________________________________
™ Recognise the value of integrating the communications by
standardizing programmes and processes, where possible, ___________________________________
and adapting to local needs, where necessary.

Marketing Communications Planning


___________________________________
SITUATION ANALYSIS ___________________________________
OBJECTIVES and POSITIONING
___________________________________
STRATEGIES & TACTICS
Advertising
{ ___________________________________
{
Sales Promotion
{ ‘Pros & Cons’
Public Relations
Sales Force { ___________________________________
Packaging; Direct Marketing; Internet {
___________________________________
BUDGET

MPLEMENTATION
___________________________________
Source: Rothschild (1992) EVALUATION 3

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___________________________________
Role of MarComms:
External, Internal and Interactive Marketing ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
4

___________________________________
Dimensions of External Marketing
Communications ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
5

___________________________________
Focusing on the Six Markets ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
6

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___________________________________
Failure in International Marketing
Communications ___________________________________
Company Control
™ Inconsistency of messages conveyed to customers
___________________________________
™ Different styles of presentation of corporate identity, brand
and product image ___________________________________
™ Lack of co-ordination of messages e.g. press releases,
advertising campaigns
™ Differences in fields of perception of sender and receiver
___________________________________
Outside Company Control ___________________________________
™ Counterfeiting

™ Parallel importing ___________________________________


™ Competitors, governments or pressure groups

___________________________________
Factors Preventing Communications
Standardisation ___________________________________
___________________________________
Experience

Cultures &
Commun-

Sub-cultures
Brand
ications

with
Syntax

Consumer ___________________________________
Differences

___________________________________
Environment
Economic
Factors

Media

Market
Differences
___________________________________
Development

Development

Advertising
___________________________________
Competitive

Category

Regulations

Source: Lee, K and Carter, S (2005) Global Marketing Management, Oxford: Oxford University Press. 8

___________________________________
Drivers for Communication:
Standardisation Versus Adaptation ___________________________________
Standardisation ___________________________________
™ Improve efficiency

™ Provision of added-value (perceived)


___________________________________
™ Consistency

___________________________________
Adaptation
™ Cultural differences
___________________________________
™ Political and legal constraints

™ Local circumstances
___________________________________
9

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___________________________________
International Communications ___________________________________
Principles Variations ___________________________________
™ Similar buying motives ™ Language differences
exist everywhere ___________________________________
™ Cultural factors
™ Principles of advertising
apply globally
___________________________________
™ Legal requirements

™ Promotional opportunities
___________________________________
™ Media availability
exist everywhere
___________________________________
10

___________________________________
International Communications
Approaches ___________________________________
Standardised Diversified ___________________________________
™ Good ideas have ™ Campaigns can be
universal application devised more quickly ___________________________________
™ Consistency provides cost ™ Content can be focused ___________________________________
savings on local culture

™ International images help ™ Campaigns are adaptable


___________________________________
global branding to local media
___________________________________
11

___________________________________
International Communications
Approaches ___________________________________
™ Global approach ™ Standardised message in
all markets
___________________________________

™ Clustered approach ™ Standardised message in ___________________________________


selected markets
___________________________________
™ Local approach ™ Varied message for each
market
___________________________________
___________________________________
12

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___________________________________
Social and Language Barriers ___________________________________
™ Literacy Standards ___________________________________
¾ Branding symbols

¾ Pictorial directions
___________________________________
¾ Oral messages

™ Social Conventions
___________________________________
¾ Gender bias

¾ Decision making groups (DMU)


___________________________________
___________________________________
13

___________________________________
Overcoming Language Barriers in
Written Text ___________________________________
™ Design material with translation in mind. ___________________________________
™ Use a native speaker to translate the copy.
___________________________________
™ Translate the idea rather than the words.

™ Remember dialects and regional variations. ___________________________________


™ Independently translate the copy to their language. ___________________________________
™ Use a specialist printer to produce the text.
___________________________________
™ Have a native speaker check the finished material.

14

___________________________________
Promotional Objectives:
Sales Related ___________________________________
™ Increasing market share at the expense of ___________________________________
local/international competitors.

™ Identifying new potential customers or obtaining a


___________________________________
specific number of responses to a promotional
campaign. ___________________________________
™ Reducing the impact of competitors in the market. ___________________________________
___________________________________
Source: Wilson R & Gilligan C (2003)

15

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___________________________________
Promotional Objectives:
Brand/ Product Communication Related ___________________________________
™ Increasing the value of the corporate brand and the ___________________________________
product image.

™ Helping to establish the position or re-position the ___________________________________


product or brand.

™ Increasing awareness levels especially in new ___________________________________


country markets.

™ Changing consumers’ perceptions or products,


___________________________________
brands or the firm.
___________________________________
Source: Wilson R & Gilligan C (2003)
16

___________________________________
Push and Pull Strategies ___________________________________
___________________________________
Mass Advertising, Public Relations
Sales Promotion, Point of Sale ___________________________________
Customer
Pull
___________________________________
Customer
___________________________________
Customer
Producer Push Intermediary
Customer
___________________________________
Personal Selling, Discounts and Deals

17

___________________________________
Internal & External International
Communication Programmes #1 ___________________________________
Internally Focussed
___________________________________
™ Corporate identity
Internal marketing communications
™
___________________________________
™ Sales force, dealer and distributor training and
development
™ Retailing merchandising
___________________________________
™ First contact customer service
™ After sales service
___________________________________
™ Quality management
™ Brand management
___________________________________
18

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___________________________________
Internal & External International
Communication Programmes #2 ___________________________________
Externally Focussed (Marketing Mix) ___________________________________
™ Product attributes
™ Distribution channel
___________________________________
™ Price ___________________________________
™ Product/service promotion
™ People
___________________________________
™ Customer service process ___________________________________
™ Physical evidence for the service delivery
19

___________________________________
MarComms Planning
___________________________________
Communication Channels Use of Agencies and
Personal: Consultancies ___________________________________
™ Face-to-face (selling, sampling)
™ Financial
™ Telephone, Direct mail, e-mail

™ Specialist knowledge
___________________________________
™ Word of Mouth (opinion leaders)

™ Interactive (POS kiosks, Net) ™ Creative input


™ External perspective ___________________________________
Non-personal:
™ Print (newspaper, magazines, mail,

flyers, coupons) ___________________________________


™ Broadcast (TV, radio, Movies, Net)
™

™
Display (billboard, signs, posters)
Other (PR events, packaging;
___________________________________
specialties/ premiums

18

___________________________________
Marketing Communication Tools ___________________________________
™ Personal selling and word
of mouth
™ Sales promotions ___________________________________
™ Direct Marketing
™ Exhibitions and trade fairs ™ Communicating with a
™ Trade missions wider range of ___________________________________
™ Advertising stakeholders
¾ TV advertising ¾ Corporate identity ___________________________________
¾ Press advertising ¾ Sponsorship
¾ Public Relations
___________________________________
___________________________________
21

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___________________________________
To Determine Relevant Promotions… ___________________________________
™ Laws affect advertising & sales promotion ___________________________________
™ Sales techniques are accepted
___________________________________
™ Language, spelling is relevant?
___________________________________
™ What words, themes, colours etc. are taboo?
___________________________________
™ What media exists?

™ What are the media habits of the target market?


___________________________________
22

___________________________________
Dimensions of Transaction and
Relationship Marketing ___________________________________
Transaction
™ Purchaser-marketer
Relationship
™ Team based, integrated
___________________________________
interaction interactions
™ Features-benefits offer ™ Value added
___________________________________
™ Discrete interactions ™ Continuous interactions
™ Competitive ™ Co-operation ___________________________________
™ Winning new customers ™ Retaining customers
™ Top down directives ™ Horizontal interactions ___________________________________
™ Quality, value and service ™ Customer satisfaction

___________________________________
23

___________________________________
Transaction – Relationship
Marketing Continuum ___________________________________
___________________________________
Transaction marketing Relationship marketing
___________________________________
___________________________________
Consumer Consumer Services Industrial
packaged goods durables marketing marketing
___________________________________
___________________________________
Source: Adapted from Gronroos (1994)
24

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___________________________________
Partnership Linkages ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
25

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ILP304 International Marketing – Topic 13

Implementation through
enabling technologies
Learning Outcomes
On completion of this session the student should be able to:
• Understand how technology has changed the nature of international
marketing strategy.
• Appreciate the role of the enabling technologies in the international
marketing strategy process.
• Identify the technology enabling tools and their use in the international
marketing strategy.
• Understand the integration of solutions to international marketing strategy
problems through the use of enabling technologies.
• Identify the challenges posed by the use of enabling technologies now and
in the future.

Pre-session activities
Read Chapter 12 of the Doole and Lowe (2004) textbook.
See also tutorial session pre-reading

Overview
International marketing is evolving as the marketplace becomes increasingly
global. It can be argued that many of the changes taking place, such as the
greater homogenisation of consumer demand and the increasing speed and
intensity of competition have been accelerated because of advances in
technology and global communications.
This session focuses upon the impact of recent technologies on the nature of
international marketing, the role of technology in providing solutions to
international marketing problems and the mechanisms to exploit opportunities.

The ability to utilise and exploit technology has now become a primary
requirement for management at all level and a significant factor in creating
organisational efficiencies.

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The technology tools that are available to develop appropriate strategic


responses will be identified and discussed and these often involve integrating
separate elements of international marketing into a cohesive approach, for
example through supply chain and customer relationship management. The
importance of and reliance upon technology in modern business in relation to
research, analysis, planning, communication, operational activities,
implementation and control pervade all aspects of and, as such, this is the final
element which pulls together international marketing management.
Technology is a major driver of both the speed and intensity of competition and
the pace and magnitude of change in international marketing. It provides more
immediate methods of gathering marketing information from around the world
and quicker and more effective methods of analysis and prediction of future
customer needs and wants.
It also provides the enabling mechanism by which effective and integrated
strategic responses can be made to the changes and is therefore an essential
element in the development of the international marketing strategy. Technology
influences and underpins the choice of implementation strategies of the
marketing mix, facilitates the process of learning and sharing best practice and
enables the more effective control of a firm’s diverse international activities. And
from the simplicity of a small website SMEs now can compete in the in the global
marketplace.

TOPIC 13 TUTORIAL: THE FUTURE STORE CONCEPT

INTRODUCTION

Doole and Lowe (2004) highlight business solution integration as the most
significant international marketing strategy development enabled by technology.
According to the authors, a strategy based upon the effective integration of
marketing and business processes offers the potential to gain competitive
advantage by reducing costs, increasing responsiveness and developing new
and innovative market offerings that deliver value to customers. It also offers the
potential to build long lasting relationships with customers and other business
partners. Five inter-related topics are explored:

• Knowledge management
• Supply chain management
• Value Chain integration
• Customer relationship management and
• Customisation

The tutorial case “The shopper’s dream?” provides a practical illustration of


some these issues. It focuses on the use of technology in an international
retailing environment and potential benefits that may deliver in terms of cost

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savings (through supply chain efficiencies) and improvements in customer


satisfaction thorough customer relationship management.

The questions are designed to consolidate the issues that we have considered
over the course and will provide some useful revision in preparation for the final
exam.

ACTIVITY

Before the class:

Read the brief case entitled “The Shopper’s Dream? (See box below) and view
the video and accompanying material to be found at http://www.future-store.org.

Imagine that a decision has been made to launch the complete future-store
concept in your own country. What issues would the Metro Group need to
consider prior to implementation? Justify your choice of issues with reference to
the topics covered in previous sessions.

During the class

You will be asked to work in teams to prepare to summarise the main points
from the above. Ensure that you have gathered sufficient evidence to help
illustrate the importance of the issues that you identify.

After the class

Next week’s session is the final session of the programme and will be used to
summarise the content of the module and highlight areas for revision. Spend
about 30 minutes reflecting on the issues discussed during this week’s tutorial.
What topic areas were discussed? What are the main challenges that future-
store face? How might these be overcome?

RESOURCES

Textbooks

Dowle I. and Lowe R. (2004) International Marketing Strategy: Analysis,


development and implementation (4th Edition), London: Thompson Learning.
(Chapter 12)

Websites

http://www.future-store.org.

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Post-topic activities
Take the multiple-choice tests to ensure you have a good grasp of this week's
key ideas. Then write your test scores in Appendix A; and jot down the areas
you know well, and those areas you need to review for the final examination.
List a numbers of things from this week that you would like ‘clarified’ in next
week’s class.
The case study for the final examination will be issued this week. Read the case
study, and do some research on the sector/industry and company. Make a note
of any questions or queries for next week’s class.

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___________________________________
___________________________________
___________________________________
IMPLEMENTATION THROUGH
ENABLING TECHNOLOGIES
___________________________________
___________________________________
___________________________________
___________________________________
ILP304
Topic 13
1

___________________________________
Learning Outcomes ___________________________________
Understand how technology has changed the nature of
™
international marketing strategy.
___________________________________
™ Appreciate the role of the enabling technologies in the
international marketing strategy process.
___________________________________
™ Identify the technology enabling tools and their use in the
international marketing strategy.
___________________________________
™ Understand the integration of solutions to international
marketing strategy problems through the use of enabling
___________________________________
technologies.

™ Identify the challenges posed by the use of enabling


___________________________________
technologies now and in the future.
2

___________________________________
The Vicious Circle of Technology
and Competitive Advantage ___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
3

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___________________________________
The Internet Marketing Paradigm Shift ___________________________________
Old Paradigm New Paradigm
™ One-to-many ™ One-to-one or many-to- ___________________________________
communications model one communications
model ___________________________________
™ Mass marketing ™ Individualised marketing or
mass customisation
___________________________________
™ Monologue ™ Dialogue
™ Supply-side thinking ™ Demand-side thinking ___________________________________
™ Customer as a target ™ Customer as a partner
___________________________________
™ Segmentation ™ Communities

___________________________________
Role of the Internet for E-business ___________________________________
Provide a global marketplace, open to all… ___________________________________
™ Method of collecting and exchanging marketing and
business information. ___________________________________
™ Alternate route to market to traditional distribution channels.
___________________________________
™ Means of building customer relationships.

™ Device for digital delivery of certain information services. ___________________________________


™ Networked system for managing the supply chain.
___________________________________
™ Virtual marketplace, trading floor and auction house.
5

___________________________________
The Web Site
Contributing to International Marketing ___________________________________
™ Organisational sites ___________________________________
™ Services online
___________________________________
™ Information online
___________________________________
™ Business transactions online
___________________________________
___________________________________
6

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___________________________________
Additional Ways of Generating
Income from Web Sites ___________________________________
™ Subscription fees
¾ club membership
™ Transaction fee
¾ For sales resulting
___________________________________
™ License fee ™ Per use fee ___________________________________
¾ Access to software ¾ At each access

___________________________________
™ Activation fee ™ Invisible fee
¾ Activate service ¾ Click through fees
___________________________________
™ Sponsor fee ™ Advertiser fee
¾ In return for benefits ¾ space ___________________________________
7

___________________________________
Solution Integration ___________________________________
™ Knowledge management ___________________________________
™ Supply chain management
___________________________________
™ Value chain integration
___________________________________
™ Customer relationship management

™ Customisation
___________________________________
___________________________________
8

___________________________________
Impact on
International Marketing Strategy ___________________________________
™ Technology and analysis
___________________________________
™ Technology and strategy development

™ Market entry
___________________________________
™ Technology and strategic implementation and control; ___________________________________
¾ Product and service management
¾ Pricing
¾ Channel management ___________________________________
¾ Communications

™ Control, evaluation and learning


___________________________________
9

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___________________________________
Challenges for
International Marketing Strategy #1 ___________________________________
™ Customers in low context countries are likely to ___________________________________
embrace the internet more readily than those in high
context cultures.
___________________________________
™ Brand values depend on both explicit and implicit
communication, ___________________________________
¾ Thus need for integration on virtual and physical media.
___________________________________
™ E-commerce favours global players.
¾ To what degree will customers purchase internationally
rather than domestically. ___________________________________
10

___________________________________
Challenges for
International Marketing Strategy #2 ___________________________________
™ Poor construct can limit sales. Research suggests a site
with negative ratings would reduce sales by:
___________________________________
¾ 42% for a domestic company

¾ 87% for an international company


___________________________________
™ Marketing skills needed for success in e-business differ ___________________________________
from traditional business skills.
¾ Success depends on attracting consumers to sites.
___________________________________
™ Development of agents who search for specific
market information and suppliers ___________________________________
¾ marketers cannot rely on traditional marketing mix factors.

11

___________________________________
Customer-led Strategy ___________________________________
™ Focus not on markets but on quality customers from ___________________________________
anywhere in the world.

™ Focus on one-to-one relationships. ___________________________________


™ Increase both lifetime and short-term revenue from ___________________________________
customers.
___________________________________
™ Win-win.

™ Integrated and coordinated approach. ___________________________________


12

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___________________________________
Main Issues ___________________________________
Technology ™ B2B models have the greatest
™ changing way business is impact on international marketing ___________________________________
done ™ Other technologies and software
™ new solutions to old
problems ™
are important aspects of change
Better communication has made
___________________________________
™ Firms will under perform or supply chains more effective
fail if they fail to exploit ™ Need to work harder to find and ___________________________________
™ Facilitating new routes to retain customers:
market ¾ Embracing technology will make this
happen ___________________________________
___________________________________
13

___________________________________
Customer Acquisition Methods
___________________________________
The Net is predominantly a ‘Pull’
Portals

Search Engines medium. Customers initiate the ___________________________________


communications process to search/
Directories acquire information and/ or to buy.
___________________________________
Web addresses ___________________________________
(URLs) Web
site
Reciprocal content ___________________________________
Links
___________________________________
Banner
Advertisements Source: Chaffey et al. (2000: 18)
14

___________________________________
The Internet & the Marketing Mix ___________________________________
‘Product’ ‘Price’
™ New sales channel can
___________________________________
™ Product features can be varied
lead to price reductions
™ Customer service and brand
values can be enhanced
¾ Alternatively, if price points ___________________________________
can be maintained, the
™ Brand variants can be lower-cost route to market
produced in some markets can be used to increase ___________________________________
profitability
™ 1:1/ mass customised products
™ New information-based ™ Electronic payment ___________________________________
products can be provided, such systems:
as specialized market
information subscriptions
¾ Pre- and post-paid credit
systems ___________________________________
15

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___________________________________
The Internet & the Marketing Mix ___________________________________
‘Place’ Promotion
™ New ‘global’ sales channel. ™ New, additional marketing
___________________________________
™ Impacts relationships with communications channel to
channels partners: inform customers of product/
service benefits and assist
___________________________________
¾ Disintermediation
¾ Reintermediation them in the buying process.
™ Virtual organizations form as ™ Supplements range of
___________________________________
more non-core activities are promotional activities such
outsourced. as advertising, sale ___________________________________
™ Electronic/ virtual integration of promotion, PR and direct
the supply chain can improve marketing.
end-customer service quality ___________________________________
delivered (and JIT for mass
customisation of products)
16

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ILP304 International Marketing – Topic 14

Workshop Activity

Aims
The aims are to:
• consolidate student learning of the preceding weeks’ materials;
• identify areas where students’ understanding may be incomplete and rectify any
misunderstandings;
• prepare students for the examination; and
• clarify any areas where students may be uncertain about the requirements of the
final assignment

Pre-session activities
Review preceding course materials with a view to identifying areas where clarification is
needed.

Make notes on the case study given out during topic11 to bring to the revision workshop.

Inform tutor prior to the session of specific aspects of the course on which greater clarity is
required.

Session
The session will focus on aspects of the course identified by students as requiring
renewed study.

Any areas of student uncertainty regarding the upcoming final assessment will be clarified.

Students will work individually and in small groups to form model answers to the formative
assessment paper. These will be discussed with the tutor during the session.

Post-session activities
The student should continue the process of revision begun before this session and reflect
on learning outcomes from this session.

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Module ILP304 International Marketing

Appendix A

ILP304 -- My Multiple-Choice Test Results


Chapter Score Areas I know well Areas to Review
1

10

11

12

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