Why Go International? 1. Exploiting market potential and growth 2. Gaining scale and scope returns...
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Transcript of Why Go International? 1. Exploiting market potential and growth 2. Gaining scale and scope returns...
Why Go International?
1. Exploiting market potential and growth
2. Gaining scale and scope returns at home
3. Learning from a leading market
4. Pressuring competitors
5. Diversifying markets
6. Learning how to do business abroad
International Business Philosophies
Multinational Mentality
– Focused on marketing to different countries with local adaptation of products and promotions; production localized and technology less advanced
Global Mentality
– Involves more standardization of products and integration across countries; driven by strong foreign competition and growing homogenization of world markets
Rationale for “Global” Mentality
Customers & Common customer needs, globalMarkets: customers, global channels, transferable
marketing, leading markets
Competition: Common competitors using global strategies
Cost Savings: Scale economies, scope economies, sourcing advantages, avoidance of duplication
Government Favorable trade policies, acceptance of foreignPolicies: investment, compatible technical standards,
common marketing regulations
Multidomestic vs. Global Markets: Key Differences Multidomestic Markets Global Markets Market boundaries
Markets are defined within country borders. Customers and competitors are of local origin.
Markets transcend country borders. Customers and/or competitors cross frontiers to buy and to sell.
Customers Significant differences exist among customers from different countries; segments are defined locally.
Significant similarities exist among customers from different countries; segments cut across geographic frontiers.
Competition Competition takes place among primarily local firms; even international companies compete on a country-by-country basis.
Competitors are few and present in every major market. Rivalry takes on regional or global scope.
Interdependence Each local market operation in isolation from the rest. Competitive actions in one market have no impact elsewhere.
Local markets operate interdependently. Competitive actions in one market impact other markets.
Strategies Strategies are locally based. Little advantage exists in coordinating activities among markets.
Strategies are regional or global in scope. Great advantage exists in coordinating activities within regions or worldwide.
Major Benefits from Global Business
CAPITALIZING ON THE GROWTH POTENTIAL OF THE FOREIGN MARKET AND NEIGHBORING COUNTRIES.
TRANSFERRING COMPETITIVE INFORMATION AND NEW PRODUCTS FROM THOSE MARKETS TO OTHER MARKETS.
STRETCHING AND BUILDING UP THE FIRM’S MARKETING CAPABILITY.
Global vs. Multinational Marketing Mentality
GLOBAL MULTINATIONAL
R & D, DESIGN
MANUFACTURING
MANAGEMENTSALES & MKTG
CUSTOMER
AFTER-SALES SERVICE
INTERNATIONAL MARKET ENTRY
CENTRALIZED AND STANDARD
DECENTRALIZED ANDCUSTOMIZED
LIMITD LOCATAIONS MANY LOCATIONS
CENTRALIZED ANDINTEGRATED
INDEPENDENT LOCALCOUNTRY MANAGERS
IN-COUNTRY OR REGIONSEGMENTS
GLOBAL SEGMENTS
LOCAL-SUBCONTRACTED LOCAL-COMPANYHANDLED
EXPORTING-LICENSING WHOLLY-OWNED OR J.V.LOCAL MANUFACTURING
CONSUMERELECTRONCS
DETERGENTS TELECOMM
SONY, DAEWOO
& THE EAST
PHILIPS, RCAAND THE
WEST
KAO& THE EAST
P& G, UNILEVER
& THE WEST
Not Applicable
NECFujitsu & the East
ITT & the West
ERICSSONThink
Global Act Local
Not Applicable
MANAGEMENTMARKETING & SALES
CUSTOMER
AFTER SALES CUSTOMER CARE
IDEA GENERATION
R & D
DESIGN
MANUFACTURING
UPSTREAMACTIVITIES
DOWNSTREAMACTIVITIES
LOCALACTIVITIES
Global vs. Multinational Corporate Structures
Marketing Finance Technology Operations
USA
China
UK
Japan
Ingredients for International SuccessDoes the Company Have what it Takes to Succeed in International Markets: The Internal Corporate Audit
Capital To:– Cross Subsidize International Product & Market Expansion
– Attack Competitors Profit Centers Worldwide if Needed
Product Core Competency: Important & Different Attribute Risk Taking & First Mover Advantage International Market Knowledge and Ethnocentrism
– Cross-Culturally Competent Management and Human Resources
International Distribution Network Corporate Structure & International Marketing Mentality
– Long-Term vs.. Short Term Orientation, Human Resources
– Global vs.. Multinational Mentality
MACROECONOMIC ENVIRONMENT
Size– GDP, GNP, Trade
– Population
– Growth Rates
Affordability– Per Capita GDP or GNP
– Personal Income
– PPP-measures
Corporate Capabilities & Objectives– Develop The List Of Most
Economically Optimum Countries & Regions
Need– Economic Need
– social Need
– Maslow’s Concept
– Engel’s Law
Cultural Need Satisfaction Priority
Basic Needs:
Safety Needs:
Ownership:
Esteem:
SuperNeeds
Percentage of Income Left forHigher Levels of Needs in USA:
MICROECONOMIC ENVIRONMENT
Product– New
– Differentiated
– Existing
Demand– Exists & Is Satisfied
– Exists & Is Unsatisfied
– Is Expected To Emerge
Corporate Capabilities & Objectives– Determine The Actual &
Desired Product Positioning In Foreign Markets
Competition– Highly Competitive
– Niche Competition
– Non-Existent
Microeconomic Environment
New To Themor New To All
Modified forThem-Differentiated
Common or“Me Too”
Satisfied Needs
UnsatisfiedNeeds
Emerging Needs
Innovative Companies
ChineseShoesIn USA
ChineseHigh-TechIn Vietnam
Vaccine forCommon Cold
CDMA-WirelessTelephones inChine
Types of Political & Financial Risks
Multinational Corporations
Emerging Economies
Government Intervention
Global Companies
Mature Markets
Citizens Actions
Economic Rationale Political Reasons
Confiscation or Seizure of Assets
Long-TermDomestication
Do Not
Worry!+ + Regulation of MNC
NOW WORRY!!!
Nationalization/Expropriation
Corporate Safety Factors
Low High
Low
High
R & D
Natural Time Trend
Political, Economics & the Time Factors
Socialism
Capitalism
Democracy
Non-Democracy
0
Time 0
Time
USASweden
Cuba PeruRussia89
Russia89
RISK-RETURN TRADE OFF
LOW
LOW
LET ME KNOW WHEN YOU FIND THEM!!!
DIRECT/INDIRECTEXPORTING
LICENSINGJOINT VENTURE
FDI
High Low Verbal Behavior Words chosen have
numerous possible interpretations; meaning is derived from matching words with non-verbal cues and the specific situation
High reliance on verbal communication to convey meaning; words are carefully selected to convey precise, specific meanings.
Nonverbal Behavior
High reliance on nonverbal behavior to convey meaning
Nonverbal aspects play secondary or confirming role
Societal Makeup Homogeneous Diverse
Ability to communicate relies heavily on similarity in communicants' backgrounds
yes no
High Low Verbal Behavior Words chosen have
numerous possible interpretations; meaning is derived from matching words with non-verbal cues and the specific situation
High reliance on verbal communication to convey meaning; words are carefully selected to convey precise, specific meanings.
Nonverbal Behavior
High reliance on nonverbal behavior to convey meaning
Nonverbal aspects play secondary or confirming role
Societal Makeup Homogeneous Diverse
Ability to communicate relies heavily on similarity in communicants' backgrounds
yes no
Attributes of High vs. Low Context Cultures
Hofstede’s Dimensions
INDIVIDUALISM VS COLLECTIVISM HIGH/LOW POWER DISTANCE MASCULINE VS FEMININE WEAK/STRONG UNCERTAINTY
AVOIDANCE CONFUCIANIST DYNAMICS (LONG RUN ORIENTATION)
Power Distance and Individualism ScalesPower Distance and Individualism Scales
ARG ArgentinaBRA BrazilCHL ChileCOL ColumbiaGRE GreeceHOK Hong KongIND IndiaIRA IranJAP JapanMEX MexicoPAK PakistanPER PeruPHI PhilippinesPOR PortugalSIN SingaporeTAI TaiwanTHA ThailandTUR TurkeyVEN VenezuelaYUG Yugoslavia
Small LargePower DistanceIn
divi
dua
lism
Col
lect
ivis
t
12
50
30
Small power distance collectivist
Large power distance
collectivist
•PAK •COL •VEN
•TAI •PER
•THA •SIN
•CHL•POR •HOK
•YUG•MEX •PHI
•GRE
•TUR
•BRA•IRA
•ARG •JAP
•IND+11 +28 +44 +64 +77 +94
Power Distance and Individualism ScalesPower Distance and Individualism Scales
AUL AustraliaAUT AustriaBEL BelgiumCAN CanadaDEN DenmarkFIN FinlandFRA FranceGER GermanyGBR Great BritainIRE IrelandISR IsraelITA ItalyNET NetherlandsNZL New ZealandNOR NorwaySAF South AfricaSPA SpainSWE SwedenSWI SwitzerlandUSA United States
Small LargePower DistanceIn
divi
dua
lism
Indi
vidu
alis
t
53
91
71
Small power distance
individualist
Large power distance
individualist
•SPA
•SAF
•FRA
•BEL•ITA
•AUT•ISR
•FIN
•GER•NOR•SWI
•SWE•IRE
•DEN
•NZL •CAN•NET
•GBR
USA•
AUL•+11 +28 +44 +64 +77 +94
Uncertainty Avoidance and Masculinity ScalesUncertainty Avoidance and Masculinity Scales
Feminine MasculineMasculinity
Un
cert
ain
ty A
void
ance
Str
ong
8
56
32
Weak uncertaintyavoidance/feminine
Weak uncertaintyavoidance /masculine
Wea
k
•SIN
•HOK
•IND
•PHI
AUL AustraliaCAN CanadaDEN DenmarkFIN FinlandGBR Great BritainHOK Hong KongIND IndiaIRE IrelandNET NetherlandsNZL New ZealandNOR NorwayPHI PhilippinesSIN SingaporeSAF South AfricaSWE SwedenSWI SwitzerlandUSA United States
•DEN
•SWE
•NOR
•NETFIN
•
GBR• •IRE
USA•
•SAF
•AUL
•NZL•CAN
+23 +44 +59 +77 +95
Uncertainty Avoidance and Masculinity ScaleUncertainty Avoidance and Masculinity Scale
Feminine MasculineMasculinity
Un
cert
ain
ty A
void
ance
Str
ong
59
112
84
Strong uncertaintyavoidance/feminine
Strong uncertainty avoidance/masculine
Wea
kARG ArgentinaAUT AustriaBEL BelgiumBRA BrazilCHL ChileCOL ColumbiaFRA FranceGER GermanyGRE GreeceIRA IranISR IsraelITA ItalyJAP JapanMEX MexicoPAK PakistanPER PeruPOR PortugalSPA SpainSWI SwitzerlandTAI TaiwanTHA ThailandTUR TurkeyVEN VenezuelaYUG Yugoslavia
JAP•
•GRE
BRA•
THA•
•IRA
•VENCOL•
•MEX•ARG
TUR•
•PER
CHL•
YUG•
•POR
•PAKTAI•
ISR•
•SPAFRA•
•BEL
ITA•
SWI•
•GER
•AUT
•FIN
+23 +44 +59 +77 +95
Luxembourg Denmark, Sweden, Finland United Kingdom, Netherlands
Belgium Austria Germany
Portugal, Greece Ireland
Italy
France
HighMediumLow
Market Attractiveness
Competition
High
Med.
Low
High
Med.
Low
Low Risk
High Risk
International Brand StrategyGlobal Brand Manager’s Objective: Global Brand DominanceKleenex, Coke, Hoover, Band Aid, Lee, Jeep, Evian)
BrandingStandard brand name (imac, Tabasco) or use of company name (IBM, Honda)Brand Name Adaptation (Tide vs.. Ariel)Different Names (Lexus vs.. Toyota)
Private BrandingWalmart (worldwide)Sears (in NAFTA)
GLOBAL PRODUCT POSITIONINGGLOBAL PRODUCT POSITIONING
THERE ARE THREE PSYCHOLOGICALLY DIFFERENT EFFECTS ON BUYERS WHEN A GLOBALLY STANDARDIZED PRODUCT OR SERVICE IS INTRODUCED ON A LOCAL MARKET:
1. CUSTOMERS’ EXISTING PERCEPTUAL MAPS OF THE PRODUCT CATEGORY REMAIN INTACT BUT THE NEW BRAND TARGETS ONE UNTAPPED SEGMENT.
2. THE PRODUCT SPACE IS ALTERED, BY ADDING DIMENSIONS OR EXTENDING END-POINTS.
3. BUYER PREFERENCES ARE CHANGED.
IN PRACTICE, ALL THREE PROCESSES ARE OFTEN AT WORK
SIMULTANEOUSLY.
BRAND IMAGE
MISPOSITIONED PRODUCTS CAN BE ATTRACTIVE TO POTENTIAL CUSTOMERS BECAUSE OF BRAND IMAGE AND STATUS. GLOBAL BRANDS OFTEN DO BETTER THAN LOCAL BRANDS THAT MAY BE BETTER SUITED TO CUSTOMER NEEDS FOR THAT AND OTHER REASONS:
CONSPICUOUS CONSUMPTION -- LET EVERYONE SEE WHAT YOU BUY AND HOW MUCH YOU BUY.
LOWER PERCEIVED RISK.
COUNTRY OF ORIGIN
WHERE A PRODUCT OR BRAND COMES FROM OFTEN COUNTS A GREAT DEAL WITH CONSUMERS.
COUNTRY-OF-ORIGIN EFFECT DEALS WITH QUALITY PERCEPTIONS OF PRODUCTS. THIS EFFECT DIFFERS BY PRODUCT CATEGORY. ALSO, THE QUALITY LEVEL AT WHICH A COUNTRY PRODUCES IS FACTORED IN.
COUNTRY-OF-ORIGIN BIAS CUSTOMERS TEND TO OVERSTATE THE POSITIVE AND NEGATIVES OF PRODUCT ATTRIBUTES ANDTHIS CAN CAUSE A BIAS TOWARDS PRODUCTS FROM A GIVEN COUNTRY.
LOWER PRICE THROUGH A REDUCED PRICE, A CUSTOMER
CAN BE INDUCED TO BUY A MISPOSITIONED BRAND BECAUSE THEY FEEL THAT THEY ARE GETTING A “GOOD DEAL.”
HOWEVER, THIS CAN BACKFIRE ON THE MARKETER, SINCE THE PRICE PAID GRADUALLY LOSES SALIENCE, WHILE THE PRODUCT STAYS. MARKETER BECOMES VULNERABLE TO LOWER-COST MANUFACTURERES ENTERING THE MARKET (Japanese products vs. Koreans).
International Price Escalation Effects (in $U.S.)
International marketing channel elements and cost factors
Domestic wholesale-retail channel
Export Prices Based on a typical distribution Channel
Manufacturer’s net price $ 6.00 $ 6.00 + insurance and shipping costs(c.i.f) 6.00 2.50 =Landed cost (c.i.f.value) 6.00 8.50 +tariff (20% on c.i.f.value) 6.00 1.70 =Importer’s cost (c.i.f.value + tariff) 6.00 10.20 +Importer’s margin (25% on cost) 6.00 2.55 +V.A.T. (16% on full cost plus margin) 6.00 2.40 =Wholesaler’s cost (=Importer’s price) 6.00 14.79
+ wholesaler’s margin (33 1/3% on cost) 2.00 4.93 +V.A.T. (16% on margin) 2.00 .79 =Local foreign jobber’s cost (=wholesale prices) 2.00 20.51 +jobber’s margin (33 1/3% on cost) 2.00 6.84 +V.A.T. (16% on margin) 2.00 1.09 =Retailer’s cost (=Wholesale or jobber price) 8.00 28.44 +retailer’s margin (50% on cost) 4.00 14.22 +V.A.T. (16% on margin) 4.00 2.28 =Retail price (what consumer pays) $12.00 $44.94 Percent price escalation over: Domestic 275% No VAT, Foreign Jobber, Foreign Importer $14.40 120%
Export Pricing Issues
Price quotes (Ex-Factory or Ex-Work)
Exchange rates
Method of payment (Cash, LOC, Countertrade…)
Government regulations (Walmart-Germany)
To whom you sell (Government vs. Private Sector).
Consumer affordability (per capita income).
Competition (domestic or global).
Country of origin and local consumer perception.
Transfer Pricing
A C DelcoUSA
(Battery, stereo, auto parts)
GM USA(Producing
cars)
Vietnam
(export)
Opel division
European Union
GM-JV in Shenyang, ChinaExport pricing
Transfer Pricing
The Hamburger Standard
Big Mac prices
Prices in local currency*
Prices in dollars
Actual exchange rate April-93
Implied purchasing power
parity† of $US
Currency under (-)/ over (+)
valuation**,% USA $2.28 $2.28 Argentina Peso3.60 3.60 1.00 1.58 +58 Australia A$2.45 1.76 1.39 1.07 -23 Belgium BFr109 3.36 32.45 47.81 +47 Brazil Cr77,000 2.80 27,521 33,772 +23 Britain £1.79 2.79 1.56‡ 1.27‡ +23 Canada C$2.76 2.19 1.26 1.21 -4 Denmark Dkr25.75 4.25 6.06 11.29 +86 France Ffr18.50 3.46 5.34 8.11 +52 Germany DM4.60 2.91 1.58 2.02 +28 Holland F15.45 3.07 1.77 2.39 +35 Hong Kong HK$9.00 1.16 7.73 3.95 -49 Hungary Forint157 1.78 88.18 68.86 -22 Ireland I£1.48 2.29 1.54‡ 1.54‡ 0 Italy Lira4,500 2.95 1,523 1.974 +30 Japan ¥391 3.45 113 171 +51
H
*Prices may vary locally†Purchasing power parity; local price divided by price in the United States**Against dollar‡Average of New York, Chicago, San Francisco and Atlanta‡‡Dollars per pound§Market rate
Big Mac prices
Pricesin local
currency*Prices indollars
Actualexchange
rate13/4/93
Impliedpurchasing
powerparity† ofthe dollar
Localcurrencyunder (-)/over (+)
valuation**,%Malaysia Ringgit3.35 1.30 2.58 1.47 -43Mexico Peso3.60 2.29 3.10 3.11 0Russia Rouble780 1.14 686§ 342 -50S. Korea Won2,300 2.89 796 1,009 +27Spain Ptas325 2.85 114 143 +25Sweden SKr25.50 3.43 7.43 11.18 +50Switzerland SwFr5.70 3.94 1.45 2.50 +72Thailand Baht48 1.91 25.16 21.05 -16
H
East-West Distribution Mentality
Import House
Manufacturer
Manufacturer
Large Wholesaler
Medium Wholesaler
Small Wholesaler
Wholesaler
Retailer
Retailer
End Buyer
End Buyer
Cost 25%-50% higher for consumers in Japan
West: USA- Basic Marketing Objective: Efficiency-Pay Per Performance
East: Japan- Basic Marketing Objective: Relationship-permanency-pay per existence
Japanese Import Distribution Alternatives - Distribution Route of Italian Spaghetti
Processing and
packing plant
Import agent
Producer
Primarywholesaler
Intermediary wholesaler
Small wholesaler
RetailerRetail price: 170yen/300g package
Retail price: 128yen/300g package
Depots Distribution Wholesalers Distribution
centers
Retailer
Processing and
packing plant
Importing company
A/C
Producer
Savings: 25%
Japanese Conventional Route
US-Style Restructured Route
Number of enterprises(thousands)
Persons employed(thousands)
Turnover(billions ECU)
Belgium 127.8 274.7 35.0Denmark 48.1 199.7 24.0Greece 175.0 338.2 20.0France 461.8 2,090.0 260.0Ireland 29.3 131.4 11.0Italy 929.7 2,401.0 230.0Luxembourg 3.5 18.1 3.0Netherlands 95.0 637.5 45.0Portugal 173.3 366.3 20.0United Kingdom 348.2 3,030.0 280.0United States 1,503.6 19,085.0 1,350.0Japan 1,619.8 6,851.0 682.0
Size and Number of Retail Outlets in Selected Countries
East-West International Distribution Mentality
Import House
EfficientManufacturer
InefficientManufacturer
Large Wholesaler
Medium Wholesaler
Small Wholesaler
Wholesaler
Retailer
Retailer
End Buyer
End Buyer
Efficient Domestic Distribution Network
Inefficient Domestic Distribution NetworkEfficientGlobal Distributors(e.g. JTCs)
ExpensiveGlobal Distributors(e.g. EMCs)
EAST (e. g. JAPAN)
WEST (e. g. USA
East-West Distribution Mentality
Manufacturer
Manufacturer
Large Wholesaler
Medium Wholesaler
Small Wholesaler
Wholesaler
Retailer
Retailer
End Buyer
End Buyer
Commission Structure (PPP-loyalty)JIT (small apt. small retailers)Multiple Visits Per Day to Retailer by Small WholesalerReturn Policy- 2-way ChannelCredit Extension- 150 days at low interest (0.06% now)Employment Buffer-economics environmentNatural Import Barrier-trade policyCultural, Political-Legal
Determinants of Choice of Channel
1. Product Requirements (Perishable lettuce, sensitive apples, fine china, scratched cars, beer without freshness, moldy cakes,...)
2. Logistic Feasibility (Equipment by DHL, autos by air, faxes of newsletters, freezer railroad cars, shock-absorbent packaging, vacuum-packed,...)
3. Demand Factors (Importance of speed for repairs, timing of raw materials for inventory, customers’ need for immediate gratification, quality standards of middleman and final user,...)
4. Competitive Factors (How fast is fast? How good is good? What are the alternatives for the buyer? Strategic importance of the market?)
5. Middlemen Resources (Storage capability? Credit or consignment or cash? Motivating with fast delivery? Just-in-time system? Promised supplies? Ability to support the marketing effort?)
6. Own Resources (Financial, manpower, production capacity)
Seiko’s Authorized and Unauthorized Channels of Distribution
Distributors Distributors Distributors Distributors
Retailers Retailers Retailers Retailers
Importer Importer Importer
Europe Hong Kong Japan North America
Broken arrows denote the flow of Seiko watches through unauthorized channels of distribution.Solid arrows denote the flow of Seiko watches through authorized channels of distribution.
Advertising Intensity in Selected Countries
CountryAdvertising as
percent of gross domestic productNorth America
Canada 1.17%United States 2.49
Latin AmericaArgentina 1.08Mexico 0.16
AsiaIndia 0.28Indonesia 0.39Japan 0.82Malaysia 0.85South Korea 1.21
Australia 1.20Europe
Belgium 0.54France 0.65Germany 0.82 (1990)Italy 0.57Sweden 0.63United Kingdom 1.35
Media Usage in Various Countries
Nation TV Print Radio Cinema Transit
Argentina 148 155 43 16 47
Brazil 126 77 10 — 4
France 2,712 4,717 611 57 1,108
Germany 2,826 13,423 641 157 550
Japan 133,434 12,900 1,913 — 5,231
South Korea 1,083 1,755 188 — 708
Spain 2,386 4,569 873 62 384
Sweden 143 1,560 — 13 82
United Kingdom 4,621 9,071 287 84 530
United States 45,410 67,536 14,022 — 1,672
Components of Global Advertising Strategy
1. Message (content) and Creative (form- the way the message gets across)
2. Media (radio, TV, outdoor, print, point of purchase, cinema. internet)
3. Target Audience (cross-cultural, provincial, demographic)
4. Product Nature (industrial.consumer, durable, non-durable)
5. Corporate Mentality (global, multinational)
6. Advertising Objective (awareness, understanding, interest, purchase)
Revisit Ads & Objectives
International Communications Process
Producer/marketer/advertiser Sets objectives and advertising budget(s) worldwide
Mass Media Carries themessage (Available & Acceptable Media In Each Country)
Advertisingagency Develops the message(Cultural Encoding)and selectsthe media
Target Market Receives themessage andinterprets its content from media/ peers (Cultural Decoding)
Recipients Think & feel (Cognition & Emotion); act & react to the message (hierarchyof effects)
Marketing coordinationand control
Generatefeedbackon effects
Results Vs. Ad Objectives
Awareness Understanding Interest Purchase
International Product Life Cycle
$ Trade $ Sales
PLC
IPLC
Exports=Imports Line
Time
Country Monopoly Over theIndustry
CompanyMonopolyOver TheProduct
IndividualMonopoly Over TheTechnology
Net Revenue From TradeFor the First Mover Nation