Presentation on theme: "INTERNATIONAL MARKETING"— Presentation transcript:
1 INTERNATIONAL MARKETING Krista DuniachUniversité d’Angers
2 BIBLIOGRAPHYCzinkota and Ronkainen (2002), International Marketing, Thomson South-Western.De Mooij (2003), Global Marketing and Advertising, Understanding Global Paradoxes, Sage.Keegan and Green (2005), Global Marketing, Prentice Hall.Kotler and Armstrong (2006), Principles of Marketing, Prentice Hall.Prime et Usunier (2004), Marketing international, Développement des marchés et management interculturel, Vuibert.Usunier (2000), Marketing across Cultures, Prentice Hall.Periodicals: MOCI, HBR, JIBS, JM, JMR…
3 Orientations: Export, Internationalization, Globalization IntroductionWhat is international business?Wide range of activities involved in conducting business transactions across national boundariesDescribed as being heterogeneous, universal and sequentialComprehensive approach to operations of both large and small firms engaged in business abroadConcerns all activities of the firm (selling, procurement, outsourcing…)About seizing global opportunities (market expansion or diversification)Driving forces (regional economic agreements, converging needs and wants, communication improvements, quality, leverage…) and restraining forces (management myopia, corporate culture, national controls, globaphobia…)Orientations: Export, Internationalization, Globalization
4 Introduction EPRG Model Ethnocentric: everything is centered on the domestic market.Polycentric: several important foreign markets exist.Regiocentric: the market is composed of several large economic regions.Geocentric: the world is one large global market.
5 EPRG Model - Characteristics EthnocentricPolycentricGeocentricApproachInternational operations are secondaryEach country is relatively independentThe world is one common marketVisionCentered on the domestic marketEach market is uniqueGlobal vision of the worldPrioritySearching for identical segments in foreign marketsTaking into consideration differences in foreign marketsUnifying differences in the world marketPlanning centerNational headquartersSubsidiary in each countryWorld headquartersStructureInternational divisionDivision for each zoneMatrix structure
6 EPRG Model - Characteristics EthnocentricPolycentricGeocentricStaffCitizens from the domestic marketCitizens from each marketMost qualifiedMarketing strategyExtensionAdaptationExtension, Adaptation, CreationManagement styleCentralizedDecentralizedIntegrated and interactiveProductionDomesticLocalLow-cost sources of supplyPartnershipsAgent, licensingJoint-venturesStrategic alliancesPerformance measuresDomestic market shareLocal market shareWorld market share
7 Process, exchange, value IntroductionWhat is marketing?“Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others.” (Kotler)Process, exchange, value
8 Marketing process Capture value from customers in return Create value for customers and build customer relationshipsConstruct a marketing program that delivers superior valueBuild profitable relationships and create customer satisfactionCapture value from customers to create profits and customer qualityUnderstand the marketplace and customer needs and wantsDesign a customer-driven marketing strategyMarketingtechnologyGlobalmarketsEthics andsocial responsibility
9 Introduction What is international marketing? - “International marketing is the process of planning and conducting transactions across national borders to create exchanges that satisfy the objectives of individuals and organizations” (Czinkota and Ronkainen)- “International marketing focuses its resources on global market opportunities and threats” (Keegan and Green)- “International marketing is the motor of the internationalization process of the firm” (Usunier)- It is a tool used to obtain improvement of the firm’s position in the global market- Strategy and action, global and local
10 Introduction International Marketing Decisions Deciding whether to go abroadDeciding which markets to enterDeciding how to enter the marketDeciding on the marketing programDeciding on the marketing organization
11 IntroductionWhat are the similarities and differences between international marketing and domestic marketing?Similarities: basic concepts, practices and tools are almost identical, key success factors are the same…Differences: more strategic, more variables, more complex, cultural differences, legal constraints, information sources, managing distances, entry mode choice…
15 Culture and international marketing Concepts of cultureDimensions and models of cultureExamples and international marketing consequences
16 What is culture?“Culture is the integrated sum total of learned behavioral traits that are shared by members of a society” (Hoebel)“Culture is the entirety of societal knowledge, norms and values” (Antonides and Van Raaij)“Culture is the collective mental programming of the people in an environment. Culture is not a characteristic of individuals; it encompasses a number of people who were conditioned by the same education and life experience” (Hofstede)Culture both affects and describes human behavior,it is essential in international marketing
17 Fundamentals of culture Culture is a total pattern of behavior that is consistent and compatible in its components. It is not a collection of random behaviors…Culture is a learned behavior. It is not biologically transmitted. It depends on environment, not heredity.Culture is behavior that is shared by a group of people, a society. It is a distinctive way of life.
18 Culture vs. personality Personality is the individual’s unique personal set of mental programs that he/she does not share with any other human being.Culture is what members of a group have in common. “It is the glue that binds groups together” (De Mooij)Human nature depends on culture: ideas, values, acts, emotions… are cultural products. Cultural patterns help people to live together in a society.
19 Manifestations of culture SymbolsHeroesRitualsExpressions of cultureValues and Norms
20 SymbolsSymbols are words, gestures, pictures, or objects that carry a particular meaning recognized only by those who share a culture.This is the most superficial manifestation of culture.New symbols are easily developed and old ones quickly disappear.Symbols from one cultural group are regularly copied by others.
21 HeroesHeroes are people, alive or dead, real or imaginary, who possess characteristics that are highly prized in a society.They serve as role models for behavior.They can become globally known, but their stories often become local.
22 RitualsRituals are the collective activities considered socially essential within a culture.They are carried out for their own sake.They are easily observed, but not always understood.
23 Values Values are at the core of culture. Values are stable beliefs regarding desired behavior or end states.They often have a religious, ideological or humanistic background.Goals are derived from values.Values are among the first things children learn, not consciously but implicitly.Core values are resistant to globalization; they vary across cultures and are not likely to change frequently.
24 Norms Norms and values are part of the “non-material” culture. Norms are beliefs regarding how to behave and how not to behave (do’s and don’ts).People differ in the extent to which they accept and comply with norms.They create expectations and criteria regarding the conduct of others.
25 Explicit vs. implicit culture Explicit culture: languages, behavior, know-how, institutions (directly observable)Implicit culture: moral values, learning process, beliefs and representations (subconscious)
26 According to Hoebel…There are 3 types of cultural norms in terms of behavior:10% of norms are technical:explicit, logical and transferable; written norms of a society (laws, technical manuals, rules, etc…)30% of norms are formal:explicit, moral and transmissible; traditions of a culture; learned through education (manners, courtesy…)60% of norms are informal:implicit, instinctive and imitated; sunken part of the iceberg (facial expressions, body language, cultural perspective on time and space…)How do these cultural norms influence international business and marketing?
27 Two levels of cultural diversity in international business External cultural diversityCultural determinants influencing purchasing and consumption behaviors (Who buys? What? Where? How? Why?)Cultural determinants influencing negotiations (relationships with suppliers, buyers, partners)Internal cultural diversityObserved within all MNCs (identity and corporate culture)Cultural differences that affect the way subsidiaries work together
28 Four levels of culture in marketing DOMINANT CULTURENon-material consumer cultureMaterial culture of products(market)Non-material culture of the firm(corporate culture)
29 Transfer of culture Two main cultural transfer processes: Socialization: transfer of culture to new generations; older generation to younger generation; education.Acculturation: transfer of culture to adults who have grown up in different cultures, who have been socialized in different cultures; ethnic minorities; multicultural societies.
30 Cultural transfer and change SOCIALIZATIONCULTURAL TRANSFER AND CHANGE, DYNAMIC PROCESSAgentsLEARNING BY OBSERVATIONAgentsACCULTURATION
31 Agents involved in cultural transfer Age (years)Most important valuesParentsObedience, cleanliness, honestySiblings2Responsibility, social recognitionSchools, teachers6Ambition, capability, logical behaviorFriendsCourage, social recognitionChurchHonesty, peace, salvation, forgivenessSport, clubs12Ambition, courageMass mediaPleasure, intellect
32 Processes of cultural change Socialization and acculturation usually imply a gradual cultural change because transfer agents tend to favor cultural continuity rather than jeopardize their powerful position.In contrast, innovative forces are less conservative and may challenge the status quo.4 processes: cohort effects, age effects, democratization and exclusivation.
33 Cohort effectsAcceptance of new values and behaviors begins at a young age.These values and behaviors are retained over the years.They are spread in society because young people grow older and the “old” values gradually disappear with the extinction of the older cohorts.Implies a slow cultural change.
34 Age effectCertain values or behaviors are associated with a particular age group.Behaviors are modified as age groups change.Age-bound consumer behavior.Possible reverse socialization.
35 Democratization Cultural “leveling” or “spreading” Cultural differences across social classes decrease.Results from an increasing level of general welfare, the influence of mass media and the stress on the equality ideal.Mechanisms of democratization: trickle-down, trickle-up, trickle-across.
36 Exclusivation Reverse of democratization Occurs less frequently Implies limited social spreading of values, goods and behavior.Cultural change is limited to a certain group (“elite”, “leading edge”).
37 Dimensions of cultureWhat makes one culture different from another culture?How can we compare cultures or cluster cultures according to behavioral characteristics?Stereotypes vs. cultural dimensionsDifferent cultures have different stereotypes of other cultures.Ethnocentrism and SRC
38 Cultural dimension models Hall – High-context vs. low-context culturesKluckhohn – Relationship to natureHofstede – Five dimensions of culture
39 Hall’s cultural modelFocuses on communication patterns found within culturesFour essential dimensions in terms of communication patterns:ContextTimeSpaceInformation flowHigh-context vs. low-context cultures
40 Low-context and high-context cultures Messages are explicitWords carry most of the information in communication (facts, data)Effective verbal communication is expected to be explicit, direct, and unambiguousHigh-contextLess information is contained in the verbal part of the messageMuch more information resides in the context of communication (background, associations, symbols, basic values of the communicators)Verbal mode is only one part of communication, nonverbal is often seen as having greater importanceDegree of context of cultures: comparison of law (US and France)
41 TimeDifferent cultures have different concepts of time. This can explain differences in behavior.Dimensions of time:Closure: a task must be completed, if not perceived as “wasted”Long-term vs. short-term thinkingOrientation toward past, present or futureLinear or circular (tangible or intangible)M-time and P-timeCause and effectTime as symbol (“time is money”, efficiency, waiting, discretionary time)
42 A few examples… Factors High-context Low-context Lawyers Less importantVery importantA person’s wordTo be trusted« Get it in writing »Responsibility for errorTaken by the highest levelPushed to the lowest levelSpacePeople breathe on each otherPeople maintain a bubble of private spaceTimePolychronic, circularMonochronic, linearNegotiationsAre lengthyProceed quicklyCompetitive biddingInfrequentCommonExamplesJapan, China, Middle EastUS, Germany, Switzerland
43 Kluckhohn’s cultural model 3 types of relationships between humanity and nature:Mastery-over-nature (man is to conquer nature)Harmony-with-nature (man is to live in harmony with nature)Subjugation-to-nature (man is dominated by nature)Further developed with: nature of people, duty, mode of activity, privacy of space, temporal orientation…
44 Subjugation-to-nature Humanity and NatureMastery-over-natureHarmony-with-natureSubjugation-to-natureHumanity is separate from natureNature should be controlled“To move a mountain”No distinction between humanity, nature and supernaturalCommunion, exchange, subtle intimacyIdentification with nature-People are dominated by nature-Supernatural forces play a dominant role in religion-Nothing can be done to control nature“Western” world,North AmericaAsia, JapanAfrica, South AmericaUse in international marketing?
45 Hofstede’s cultural model Hofstede’s 4D or 5D modelQuantitative and longitudinal study of cultural differences between countriesWhy some concepts of motivation do not work in all countries in the same way“Culture’s Consequences” and “Cultures and Organizations: Software of the Mind”Scores for each country explain why people and organizations in various countries differ, comparative data.Reference in international business and international marketing
46 How do we measure cultural distance? Geert Hofstede’s Cultural Index- National character surveyIBM employees- 72 countries and 20 languagesFive different poles make up the cultural index:- Power distance- Uncertainty avoidance- Individualism- Masculinity- (Long term orientation)Original scores for 56 countries, extended to nearly 90
47 Work-related values to consumption-related values 5D ModelPDI100LTOUAI100100Work-related values to consumption-related values100100MASIDV
48 Power distance (PDI) High PDI vs. Low PDI “the extent to which less powerful members of a society accept and expect that power is distributed unequally”Reflected in the values of both the less powerful and more powerful members of societyInfluences the way people accept and give authorityShows class or social structureFocuses on the degree of equality, or inequality, between people in the country’s society
49 Uncertainty avoidance (UAI) High UAI vs. Low UAI“ the extent to which people feel threatened by uncertainty and ambiguity and try to avoid these situations”Strong UAI = need for rules and formality to structure life, search for truth and belief in expertsConflict and competition are threateningHigher level of anxiety, show of emotions is accepted
50 Individualism (IDV) Individualistic vs. Collectivistic “people looking after themselves and their immediate family only, versus people belonging to in-groups that look after them in exchange for loyalty”“I”-conscious and “we”-consciousFocuses on the degree the society reinforces individual or collective achievement and interpersonal relationshipsDistinguishes between societies where the group and being a member is important (collectiveness) and societies where the group is less important (individualism)
51 Masculinity (MAS) Masculine vs. Feminine “the dominant values in a masculine society are achievement and success; the dominant values in a feminine society are caring for others and quality of life”Focuses on the degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, performance, control and powerShows the importance of status in societiesIndicates the degree of gender differentiation and the importance of masculine values (assertiveness, money, material goods, success…)
52 Long-term orientation (LTO) Long-term vs. Short-term orientationChinese value survey, “Confucian dynamism”“the extent to which a society exhibits a pragmatic future-oriented perspective rather than a conventional historic or short-term point of view”High LTO = perseverance, ordering relationships by status, thrift, sense of shame, family ties, long-term thinking, paternalismFocuses on the degree the society embraces, or does not embrace, long-term devotion to traditional, forward thinking valuesIndicates whether the country prescribes to the values of long-term commitments and respect for tradition
54 Some country examples France 68 86 71 43 World average 49 Country PDI UAIIDVMASLTOAustralia3651906131Belgium65947554Denmark18237416France68867143Germany356766Great Britain8925India77404856Italy507670Japan92469580Netherlands38531444Spain5742USA916229World average49
55 Comparison of cultural dimensions More information on
56 American cultureClassical dimensions: M-time culture, linear time-pattern, low-context, low PDI, individualistic, high MAS, low UAI, short-term orientationOther dimensions: success, obsession with change (new and better), credit card culture, education for competitiveness, independence, ethnocentrism, strong role differentiation, innovativeness, creativity, private opinions expressed, education teaches students to be critical (ask “why” not “how”), man must conquer nature, (De Mooij)
57 Japanese cultureClassical dimensions: P-time culture, circular time concept, high-context, high PDI, collectivistic, masculine, strong UAI, long-term orientationOther dimensions: pressure to behave like neighbors, shame-based society, avoid jolting social harmony, dependence, private opinions not expressed, status is important (success) but avoid standing out in a crowd, cash culture, thrift and perseverance, strong role differentiation, education (“how” instead of “why”), education has an intrinsic value, obsession with cleanliness, harmony with nature… (De Mooij)
58 Limits to Hofstede’s model Generalization, reductive, simplistic (unproven and unprovable, flawed assumptions, “storytelling”…)Original objective: how values in the workplace are influenced by cultureThree discrete culturesOrganizationalOccupationalNationalQuestionnaire – quantitative dataDifferences in location – intracultural differences, subcultures?
59 Intracultural differences Few cultures are homogeneous in terms of cultural traits and normsConsequence of globalization?Intracultural differences (nationality, religion, race, language or geographic areas) result in the emergence of distinct subculturesExistence of cross-cultural and intracultural differences: opportunities and threats
60 To summarize on culture… Culture is complex and multi-dimensional, but classification is important in businessCultural distance is essential in international marketingCulture influences perceptions and drives how we communicate and what we communicateSRC and ethnocentrism can explain the failure of many companies in the international arenaAcculturation (adjusting and adapting to a specific culture other than one’s own) is one of the keys to success in international operations
61 How does culture affect international marketing? Languages and the use of language in communicating, advertising, negotiating…Marketing research is much more difficult to conduct from a methodological perspectiveBuying patterns and behaviors will vary in different cultural contextsMarketing mix will be perceived differently from one country to anotherManagement styles will be directly related to culture…
62 Marketing and cultural differences Marketing areaInfluence of cultural differencesConsumer behaviorDecision-making, cross-cultural attitudes, local vs. globalMarketing researchCross-national equivalencesGlobal marketing strategyGlobal strategy vs. customized strategySegmentation & targetingInter-national (regional, global) vs. intra-nationalProduct policyAdapt or standardize product attributesBrand imageBrand perception, country of origin, “made in”Pricing policyPrice-quality ratio, influence of price in decision-makingDistribution channelsType of channel, distributor relationshipsCommunicationValues, visions of the world, communication stylesAdvertisingAdvertising messages, symbols, adaptation of strategySalesSales force management, PR, corruption, ethicsNegotiationNegotiation strategies, process, results, styles…Source: Usunier
63 Culture’s consequences on international marketing Marketing research (understanding consumers)Segmentation (classifying consumers)Product policy (satisfying consumers)Distribution channels (reaching consumers)Advertising (communicating with consumers)
65 International marketing research Review of marketing research techniquesSpecific problems in international markets
66 Review of marketing research techniques General principles of marketing researchQualitative researchQuantitative research
67 What is marketing research? Marketing research is the link between the marketer and the market…It is the starting point of marketing…Marketing research is the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company.MIS: consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.
68 Marketing process Capture value from customers in return Create value for customers and build customer relationshipsConstruct a marketing program that delivers superior valueBuild profitable relationships and create customer satisfactionCapture value from customers to create profits and customer qualityUnderstand the marketplace and customer needs and wantsDesign a customer-driven marketing strategyMarketingtechnologyGlobalmarketsEthics andsocial responsibility
69 Position of marketing research ANALYSISMARKETING RESEARCHPLANNINGMARKETING STRATEGYIMPLEMENTATIONMARKETING RESEARCHCONTROL
70 Marketing research goals UNDERSTANDDESCRIBEEXPLAINMEASUREFORECASTVERIFYProduct, consumer, distributor, competitor, environmental analysis
71 Marketing research process Define problem and research objectivesDevelop the research planCollect the informationAnalyze the informationPresent the findings
72 Research designThe research design formally describes the characteristics of the survey and the procedures used to conduct the study.It is the methodological framework of the research.Contents:GoalsInformation sourcesVariablesSurvey methodSampling methodData analysisCalendarBudgetInternal validityExternal validity
73 Types of marketing research EXPLORATORYDocumentaryQualitativeDESCRIPTIVEDocumentaryQuantitativeCAUSALExperimentationObservation
74 Research methods Observational research - Audit: inventories, facing, pantry check…- Mechanical: scanning, EDI, eye camera…Experimental research- Product/concept tests: prototype, comparative or not- Market/store tests: laboratory stores, catalog sales, mobile stores, in-store tests, city tests…Ad hoc researchQualitative research: interviews, focus groups…Quantitative research: surveys, opinion polls…
75 Qualitative and quantitative research The distinction between qualitative and quantitative research depends on the nature of the research problem.If “why?” or “how?”QUALITATIVE RESEARCHIf “how many?” or “how much?”QUANTITATIVE RESEARCH
76 Information SourcesSecondary sources: Existing data. All forms of documentary research.DESK RESEARCHPrimary sources: Data collected for a specific situation at company’s request.FIELD RESEARCH, AD HOCThese sources can be internal or external.The choice will depend on the marketing problem, objectives, resources…
77 Documentary Research First step to marketing research 4 steps Define the topic (clear, feasible, pertinent)Identify key words associated to the topicSearch for available sources of informationConsult, sort and summarize informationQuestions to askDoes the data correspond to the situation?Is there a risk of obtaining biased information?Was the research design technically coherent?Are the findings clear, precise…?
78 Research and polling institutes These institutes collect information for resale.They can give 2 types of information:Standardized periodic information: panels, longitudinal studies. Firms subscribe to this information. This is a secondary information source.On-order studies: reserved solely for one company or omnibus studies. This is a primary information source.
79 Advantages and disadvantages of information sources SecondaryPrimaryAdvantagesLow in costDiversityAvailableProblem definitionFamiliar with marketAdapted informationRecent, up-to-dateNot available to competitorsDisadvantagesIncomplete, outdatedInadequateFalse informationDifficult to controlCostlyDifficult to collectTime consuming
80 Sequence and relationship between different sources of information SECONDARY SOURCES(Desk Research)InternalExternalPRIMARY SOURCES(Field Research)QualitativeQuantitative
82 What is qualitative marketing research? Collecting and analyzing psycho-sociological elements which explain facts, attitudes, opinions, motivations and behaviors of all people involved in a given marketing situationQualitative research methods are used for in-depth exploratory studies of the decision-making process and psychological mechanisms that affect individual or group behavior
83 Why use qualitative research? Qualitative research studies lead to understanding the causes or the basis for behaviors, attitudes and opinions.They are often based on analyzing how a product or company is perceived by individuals or consumers.However, results cannot be extrapolated. They cannot be considered as being representative of the entire population. Sample size =
84 Qualitative research is used in the following cases: Defining the marketing problem is difficult (explore market)Finding causes, decision-making criteria of consumer behaviorSecondary information is insufficientConstructing questionnaire for a surveyExplaining surprising results of quantitative researchPromoting creativity
85 Advantages and disadvantages of qualitative research Quick and flexible (maximum 70 people)Less costlyAllows explorationAttitudes, motivations, opinions are studiedReveals deep feelings and thoughtsNon-representative sampleResearch design is difficult to planQuality of the study depends on researcher skills
86 Different types of qualitative research Two ways of classifying qualitative studies:Degree of induction (level of consciousness)Unstructured interview (pure exploration)Centered or focus interview (exploration and in-depth analysis)Structured interview (identification and verification)Number of people being interviewedIndividualGroup
87 Choosing a Type of Interview Levels of consciousnessOPINIONSStructured interviewATTITUDESCentered or Focus interviewUnstructured interview or centered with projective testsMOTIVATIONS / BELIEFS
88 Unstructured interviews Conducted in a face-to-face situationLarge, ambiguous openingFunnel approachThe respondent is free to express his feelings as wishes and for as long as he wishesNon-directive, but reformulation techniquesUse in marketing
89 Unstructured interviewing steps Large opening statement or questionsPresent research objectivesResearcher adopts a non-directive attitudeReformulation techniques (« mirror effect »)Respondent goes further in-depth« auto-exploration »
90 Centered or focus interviews Same general structure and basic principles as the unstructured interviewHowever, an interview guide is usedThis guide is composed of topics or questions to be addressed during the interviewThe interviewer will bring up topic if and only if respondent does not spontaneously address issuesThis is NOT a questionnaire (no order, modifications possible, different versions allowed)This is the most popular form of qualitative research
91 Projective techniques Used to avoid psychological obstacles (taboos, reluctance, courtesy bias, subconscious…) or to go further in-depthVisual or written stimuliThe respondent will overcome hesitationsDifficult to analyze, ambiguousDifferent testsWord associationSentence completionStory completionFrustration or cartoon testTAT (Thematic Apperception Test)Haire test
92 Example – Nescafé (Haire test) List 11 lb. of carrotsRoast beef1 can of Delmonte cornHeinz ketchupFolgers ground coffeeTide laundry detergent3 onionsList 21 lb. of carrotsRoast beef1 can of Delmonte cornHeinz ketchupNescafé instant coffeeTide laundry detergent3 onions??
93 Structured interviews Most directive method in qualitative marketing researchA questionnaire is usedHowever, the questionnaire is only composed of open-end questionsQuestionnaire facilitates the research process as well as analysisConfusion between qualitative and quantitative researchIt is theoretically incorrect to extrapolate or generalize the findings
94 Focus groupsNearly always use the centered approach (interview guide, group discussion is directed by interviewer)About 7 to 10 participants per groupThe role of the interviewer is very importantInterviewer must manage the group in terms of participation, conflict, domination, summaries, etc…Organization and logistical aspects
95 Focus group phases Three phases during the group interview: Presentation (warming up): explanations, rules of the game, individual introductions, anonymous responses…Exchange: each participant gives his or her opinions, thoughts, group dialogue, tests…Summarize: verify all topics of interview guide, repeats, star technique (circept), gift…
96 Comparing different types of interviews Unstructured : large opening statement and non-directive attitude (≈ 500 to 800 €)Centered : interview guide to « center » discussion (≈ 250 to 500 €)Structured : qualitative questionnaire (≈ 150 to 200 €)Focus group : centered interview, 7 to 10 participants per group (≈ 5000 to 8000 €)
97 Comparing individual interviews and focus groups AdvantagesDisadvantagesIndividual interviewPersonal, in-depth questionsLower cost per respondentOnly solution in some cases (B to B, competitors)Researcher trainingAnalyzing findingsLong to conductFocus groupsMore information during discussionQuicker to conductPossible to study interactions and influences during the decision processStimulate ideas and creativityNo in-depth motivationsRisk of conformity, strong group influenceOrganizational and logistic difficulties
98 Qualitative samplingNo representative sample, but variety of individuals is importantNo important profiles should be excludedSequential procedure (arborescence) is used:List of criteria explaining differences of behaviorRank criteria from most important to least importantList possibilities for each criteriaBuild arborescenceVerify coherency of arborescence
99 Sampling in focus groups Same basic principles (arborescence)All participants must feel “equal”However, there are two important rules:Group must be heterogeneous (cover all of the profiles of the populations)Group must be homogeneous (for criteria that may lead to an unbalanced group)Many groups may be need to be organized in order to avoid unbalanced groups or inter-group pressure
100 Qualitative data analysis Two different methods can be used:Summaries of interviews, “verbatims”Content analysisRequires re-transcribing of all interviewsSpecialized softwareQuantification, scientific rigorTime and budget
102 Differences compared to qualitative research Associated with descriptive researchObjectives are different: verify, measure, estimate...Sampling methods are differentLarge sample size (300 – 1000+)Methods of administration changePrecision of an estimation, margin of errorData analysis is more sophisticated
103 Advantages and disadvantages of quantitative research Delivers precise numerical estimations (forecasting, market share, intentions…)Extrapolation possibleRepresentative sampleSuperior objectivityStatistical techniquesInter-group comparisonsLongitudinal studiesDoes not explain why or howPrecision tool, not a discovery toolSelf-report dataBroad but shallow dataLong and costlyDifficult in B to BParticipation is unrewarding (direct marketing)
104 Categories of quantitative research CensusCollect information from each member of the populationComplete canvass of the populationDepends on the size of the target populationSurveyMost familiar of all market research methodologiesCollect information from a portion of the populationProcedure in which a fixed set of questions is asked of a sample of respondentsOn the basis of information collected on the subset, it is possible to infer something about the larger groupInference depends on the sampling method
105 Census vs. Survey Census: n = N Survey: n/N = subset of the population, survey rate or sampling rateExhaustive or non-exhaustive surveyGeneralization and extrapolation of findings
106 Validity of quantitative research Representative sample sampling method and response ratePrecision sample size and margin of errorQuality of questionnaire and administrationResearcher training and experienceQuality of information processingQuality of data analysis
107 What is sampling? n N 70% 70% + e Sampling is necessary every time the population size is too large to be able to collect information from all elements of the population.
108 Probability vs. non-probability sampling Each population element has a known, non-zero chance of being included in the sampleFinal elements are selected objectively by a specific processEqual probabilities are not necessaryAllow an assessment of the amount of sampling error likely to occurRequires an exhaustive sample frameNon-probabilityNo way of estimating that probability that any population element will be included in the sampleRely on personal judgment somewhere in the processStatistically, precision (sampling error) cannot be evaluated
109 Quantitative sampling methods PROBABILITYSAMPLESNON-PROBABILITYSAMPLESQuota sampleRandom route sampleJudgment sample (on-the-spot sample)Convenience sampleSimple random sampleCluster sampleArea sampleLevel random sampleStratified random sample
110 Probability samplingSRS: each population element has a know and equal chance of being selected; central-limit theorem (when n is large, the sample mean will be normally distributed).Cluster and area: first parent population is divided into mutually exclusive and exhaustive subsets, then a random sample of the subset is selected.LRS: random sampling occurs at several different levels of the population.Stratified: population is divided into strata or subpopulations and random sampling occurs in each stratum (proportionate and disproportionate).
111 Non-probability sampling Quotas: attempt to ensure that the sample is representative by selecting sample elements in such a way that the proportion of the sample elements possessing a certain characteristic is approximately the same as the proportion of the elements with the characteristic in the population.Random route: each field worker is given a random route to follow, leading to the selection of people to interview.Judgment: sample elements are handpicked because it is expected that they can serve the research purpose and it is believed that they are representative of the population of interest (purposive samples).Convenience: sometimes called accidental samples because those composing the sample enter by accident (volunteers, radio shows…)
112 Choosing a sampling method Do we have a sample frame?YesNoDo we have a frame of clusters?Is SRS too costly?YesNoYesNoIs the population stratified?Is it too costly?Are there frames at different levels?YesNoYesNoYesNoStratified sampleCluster or area sampleLevel random sampleSRS
113 Is the population widely dispersed? Quota sample Do we know the structure of the population for several variables that explain differences in behavior?YesNoIs the population widely dispersed?Quota sampleYesNoAre there mandatory passage points?Random routeYesNoJudgment or on-the-spot sampleSnowball or other convenience sample
114 Sample size and precision With probability samples, precision and minimal sample size can be determinedSample size must be greater than 30Estimation, confidence level, confidence interval and margin of errorProbability sampling methods or Kish coefficientPrecision of an estimation is not proportional to sample size, but to the square root of the sample size. To double precision, the sample size must be multiplied by four.
115 Sample size and margin of error 2n = t pqeNon-exhaustive sample2n’ = (n x N) / (n + N)Exhaustive samplee = t √pqnMargin of error for probability samplesn = budget – fixed costsdirect cost per unitBudget approach
116 Procedure for developing a questionnaire Specify what information will be collectedDetermine type of questionnaire and method of administrationDetermine content of individual questionsDetermine form of response to individual questionsDetermine wording of each questionDetermine sequence of questionsDetermine physical characteristics of questionnaireReexamine and revisePretest questionnaire and revise if necessary
117 Type of questionnaire and method of administration These two decisions are interdependentThe length of the questionnaire will influence the choice of the method of administrationSelf-administered questionnaires (mail, Internet, questionnaire in magazine, etc…): response rate is generally low (< 20%)Questionnaires completed with researcher (direct personal interviewing, phone): longer questionnaire and higher response rate (50%)
118 Form of response Open-ended Dichotomous: 2 possible answers Multiple choice: 3 or more possible answersLikert scale: a statement with which the respondent shows the amount of agreement or disagreement (strongly agree – strongly disagree)Semantic differential scale: a scale connecting two bipolar words, respondent selects the point that represents his/her opinion (enthusiastic – unenthusiastic)Importance scale: rates the importance of some attribute (extremely important – extremely unimportant)Rating scale: rates some attribute from “poor” to “excellent”Intention-to-buy scale: describes respondent’s intention to buy a product or service (definitely buy – definitely not buy)Avoid halo effect (change direction in scales to avoid repetition)
119 Question wordingThe phrasing of a question can directly affect the responses.General rules:Use simple wordsAvoid technical vocabulary in consumer researchAvoid double negationsAvoid ambiguous words and questionsAvoid leading questionsAvoid double-barreled questionsExamples
120 Question sequence General rules: Questionnaire should be very logical and easy to respond to.Use simple, interesting opening question.Use the funnel approach (start with broad questions and progressively narrow down in scope).Avoid jumping around from topic to topic.Use transitions.Design branching questions with care.Place difficult or sensitive questions late in the questionnaire.Ask for classification information last.
122 Questionnaire pretest Data collection should never begin without an adequate pretest of the instrument.Can be used to assess both individual questions and their sequence.Small sample of 10 to 30Questionnaire followed by interview to identify problems and misunderstandingsPretest results are not included in the final results of the survey“The pretest is the most inexpensive insurance the marketer can buy to ensure the success of the questionnaire and the entire research project”
123 Quantitative data analysis Univariate analysis descriptive statistics and graphical informationMultivariate analysis cross-tabulations, Chi square tests, correlation analysis, multiple regression analysis, cluster analysis (perceptual mapping), factor analysis….
126 General context of international marketing research Globalization, but change at different rates in different parts of the worldChallenge of conducting high quality research as quick as possible in multiple diverse settingsResearch conducted simultaneously in developed and developing worldUnbalanced spread of marketing research expendituresMulti-faceted issues (where, how, who, tools, comparisons…)New technologies (CATI, CAPI, scanners, Internet…)
127 3 specific problems in international marketing research Who will conduct the research? degree of research centralizationIs the information comparable? cross-cultural research equivalencesWhat are the sources of bias? five bias types
128 Who will conduct international marketing research? The firm can use internal or external research services.The unknown competitive situation and different cultural backgrounds complicate the choice between internal and external research.Problem: exclusive contracts with marketing research firms…To what degree should international marketing research be centralized?Three choices: internal marketing department, domestic research firm, foreign research firm
129 The degree of centralization of international marketing research Access to informationInformation sourcesQuality and reliability of informationAdaptation to firm’s problemMonitoringCostInternal marketing departmentLow access.Network problem.Competitive analysis difficult.Limited knowledge of sources in foreign market.Risk in terms of analysis. Language problems. Cultural bias.Excellent.Low in cost. Travel expenses and use of staff.Domestic research firmGood if the firm has an important local network.Excellent in France. Perhaps limited in foreign market.Risk in terms of analysis. Language problems. Depends on the informal network.Very good. Easy to clarify if problems.Good. Easy to monitor during the research process.High in cost. Specific project fees.Foreign research firmVery good. Low risk of ignoring essential information.Excellent in foreign market, but only local.Excellent.Limited. The firm may be unknown.Limited. Risk of non-conformity with initial objectives.Variable.
130 Is the information comparable? This question is very important in cross-cultural or comparative studies.Some words, ideas, concepts, practices, etc… will have different meanings in different cultural contexts.Research equivalence is necessary, but not always easy to achieve.Equivalences must be verified before conducting research on “foreign” consumer behavior.
131 International equivalences Functional equivalence: do products serve the same function?Conceptual equivalence: do relevant concepts have the same meaning and/or importance?Category equivalence: does the product belong to the same category or domain?Translation equivalence: cross-check, translation-retranslationMetric equivalence: scaling, odd/even, do adjectives have the same strength and distances?Respondent equivalence: who should answer questions? same social role? sampling unit…Sampling frame equivalence: how will sample be chosen?
132 Sources of biasBias = distorted results, incorrect or false compared to reality…Biased responses are more likely to occur in international marketing research than in domestic research and are harder to avoidImportance of control, pre-test, acculturation…Research plans must be adapted to reduce the risk of biased responses
133 5 sources of biasCourtesy bias: concerns the social desirability of answers, the respondent hopes to please the interviewerSubject bias: concerns the way a society perceives an issue as being more or less sensitiveCultural-trait bias: a given cultural trait can alter the findings (IDV, MAS…)Response style bias: some responses are more or less extreme in some cultures (scaling, ranking), coefficientsNon-response bias: non-response style varies according to country, gender, race…
134 Practical consequences in international marketing… Qualitative research only accounts for less than 20% of research expenditures around the world (emerging markets, innovation, brand renewal…), but this is increasingLength of interview and compensation will vary from one market to the other (monochronic and low-context = shorter interviews and larger compensation)Some techniques are unknown or unfeasible (projective techniques, on-line surveys, CAGI/CATI…)Focus groups are very culture-bound (collectivistic vs. individualistic societies, social status, disagreement…)Sampling techniques are limited (reliable information is not widely available, statistics, sampling base…)Collecting information is difficult (level of economic development, illiteracy, local authorizations…)Cross-cultural research is limited (comparison is difficult, concepts/rituals…)Recent developments in international marketing research
135 Chapter 3 International Marketing Strategy and Programs
136 Expanded marketing process model Capture value from customersCreate value for customers and build customer relationshipsCapture value from customers to create profits and customer qualityUnderstand the marketplace and customer needs and wantsConstruct a marketing program that delivers superior valueDesign a customer-driven marketing strategyBuild profitable relationships and create customer satisfactionProduct and service design: build strong brandsSelect customers to serve: segmentation and targetingCRM and CEM: build strong relationships with chosen customersResearch consumers and marketCreate satisfied loyal customersPricing: create real valueCapture customer lifetime valueManage marketing information and customer dataDecide on a value proposition: differentiation and positioningPartner relationship management: build strong relationships with marketing partnersDistribution: manage demand and supply chainsIncrease share of market and share of customerPromotion: communicate VPMarketing technologyGlobal marketsEthical and social responsibility
138 Market segmentation What is it? Why? Identifying and profiling distinct groups of buyers who might require separate products and/or marketing mixesClustering consumers in terms of behavior, needs, attitudes, opinions…Why?Buyers/consumers differ in many waysThey do not respond to the same stimuli in the same waySo, different offers for different types of buyersMarket segmentation represents an effort to increase a company’s targeting precision.
139 Levels of market segmentation Mass marketingMass production, distribution and promotion of one product for all buyersLargest potential market, “one size fits all”Lowest costs = lower prices or higher marginsSegment marketingLarge identifiable group within a marketBuyers differ in their wants, purchasing power, location, attitudes and habits…but the company is not willing to customize its offer to each individual customerMore appropriate products and services, distribution and communication easier, fewer competitorsNiche marketingMore narrowly defined group, a small market whose needs are not being well servedSmaller companies can become more competitive through specializationBetter understanding of customers who willingly pay a price premiumIndividual marketingSegments of one, customized marketing, one-to-one marketing…More frequent in B to B than in B to CNew technologies allow “mass customization” ; ability to prepare on a mass basis individually designed products and communications to meet each customer’s requirements
140 Market segmentation procedure Market segments and niches can be identified by applying successive variables to subdivide a market. 3 steps:Research stage: gain insight into consumer motivations, attitudes and behavior and collect important data (attributes and ratings, brand awareness and rating, product-usage patterns, attitudes toward product category, customer characteristics…).Analysis stage: factor analysis to remove highly correlated variables and cluster analysis to create a specific number of maximally different segments.Profiling stage: each cluster is profiled in terms of its distinguishing attitudes, behavior, customer characteristics…Market segmentation must be redone periodically because market segments change over time, especially in international markets
141 Segmentation variables Consumer characteristicsMarketing characteristicsGeographicNationsStatesRegionsCities…Demographic-Age and life-cycle stage- VALS or psychographics-Gender-Income-Generation-Social class…-Consumer responses to benefits sought, use occasions or brands(consumer-response segments)Hierarchy of attributes in choosing a brand, shifts in consumer priorities(market partitioning)Marketing mix variables: product, price, placement, promotion(price-quality-type dominant)In international marketing, broader market segments compared to domestic segments, transnational segments
142 Example 1: culture-based segmentation Size (million)PDIUAIIDVMASMarketing implicationsCluster 1Austria, Germany, Switzerland, Italy, GB, Ireland203SmallMediumMedium-HighHighPreference for “high performance” products, use “successful-achiever” them in advertising, desire for novelty, variety and pleasure, fairly risk-averse market.Cluster 2Belgium, France, Greece, Portugal, Spain, Turkey182StrongVariedLow-MediumAppeal to consumer’s status and power position, reduce perceived risk in product purchase and use, emphasize product functionality.Cluster 3Denmark, Sweden, Netherlands, Norway37LowRelatively weak resistance to new products, strong consumer desire for novelty and variety, high consumer regard for “environmentally friendly” marketers and socially conscious firms.
143 Example 2 : segmentation of CEE markets « Marketization »:Countries’ exposure to global communications, increased product availability and variety, and overall attempt to close the living standards gap with developed countriesReflects a set of institutional values and cultural requirements for the operation of effective private markets (materialistic values as a stimulus for greater production, competition, freedom of information…)« Westernization »:Countries’ proximity to the WestThe duration and the extent of their openness to Western influence and culture
144 CEE clusters Cluster 1 Cluster 3 Cluster 2 Cluster 4 High MarketizationCluster 1Cluster 3Low WesternizationHigh WesternizationCluster 2Cluster 4Clusters are likely to have common characteristics and share similar consumer needs and purchasing behaviorLow MarketizationSource: Lascu, Manrai and Manrai
145 Central and Eastern European clusters Cluster 1: High-marketization and high-westernization(Hungary, Poland, Czech and Slovak Republics, Slovenia)Geographic: Central Europe, border developed countries, more urbanizedCultural: Slavic languages (except Hungary), primarily Catholic religionEconomic: more developedCluster 2: Low-marketization and high-westernization(Bosnia, Serbia, Croatia, Montenegro, Macedonia)Geographic: Central Europe, more urbanizedCultural: Slavic languages, primarily Eastern Orthodox and MuslimEconomic: more developed, but less than cluster 1
146 Central and Eastern European clusters Cluster 3: High-marketization and low-westernization(Bulgaria and Romania)Geographic: Balkan peninsula, urbanized to a lesser extent than cluster 2Cultural: Latin and Slavic languages, Eastern Orthodox religionEconomic: slower in the development processCluster 4: Low-marketization and low-westernization (Albania and Western countries of the former Soviet Union)Geographic: Less urbanized than cluster 3Cultural: Slavic languages (Russian is the primary commercial language), Eastern Orthodox and MuslimEconomic: formerly “fierce” dictatorships, slower development
147 Market targetingAfter identifying different markets and market segments, the firm must:Evaluate the various segmentsDecide how many and which ones to target
148 Evaluating the market segments Overall attractiveness of the segmentSize, growth, profitability, scale economies, low risk…How easy is it to persuade buyers to shift their purchases (consumers, relative non-consumers, absolute non-consumers)?Brand loyalty vs. dissatisfied buyersCompany’s objectives and resourcesDo segments correspond to the company’s long-term objectives?Does company possess the skills and resources needed to succeed in the segment?The company should only enter market segments in which it can offer superior value
149 Selecting market segments 5 different target market strategies:Single-segment concentrationConcentrated marketingStrong knowledge of segment’s needsStrong market position in segmentEconomies through specialization = high returnsRisks are higher than normalSelective specializationSeveral segments that are objectively attractiveLittle or no synergy among segments but each is profitableDiversification of firm’s risk
150 Selecting market segments Product specializationConcentrate on certain product to several segmentsStrong reputation in specific product areaRisk of technologyMarket specializationConcentrate on serving many needs of a particular customer groupStrong reputation with group, channel for all new productsRisk of decreased buying power in the groupFull market coverageServe all customer groups with all products they needLimited to very large firmsUndifferentiated: ignore segment differences, one offer for entire marketDifferentiated: operate in several segments with different programs for each
151 Market positioningMarket positioning: act of designing the company’s offering and image so that they occupy a meaningful and distinctive competitive position in the target customer’s mind; refers to the consumer’s perception of a product or brand amongst other brandsObjective: attaining a prominent place for company’s brand amongst other brands in the minds of consumersPositioning mainly results from marketing communication regarding brands, social communication and personal experienceCategorization and positioning within categoryProduct differentiation, international coherency
152 Importance of product differentiation Market segmentationDemand sideHeterogeneous markets are divided into homogeneous submarkets(market segmentation)Supply sideHomogeneous products can be differentiated into products tuned to these homogeneous market segments(market positioning)
153 Differentiation attributes ProductServicesPersonnelChannelImageFeaturesPerformanceConformancePriceQualityDurabilityReliabilityRepairabilityStyleDesignOrdering easeDeliveryInstallationCustomer trainingCustomer consultingMaintenance WarrantyCompetenceCourtesyCredibilityResponsivenessCommunicationCoverageExpertiseValue propositionEmotional powerSymbolsMediaAtmosphereEventsDifferent attributes in different markets, cultural influence
154 Promoting the difference How many difference should a firm promote?USP: “best quality”, “best service”, “lowest price”, “best value”, “safest”, “fastest”, “most convenient”, “most advanced technology”…Double-benefit positioning: if two or more firms are claiming to be best on the same attribute, search for special niche within the target segment, two benefits must be compatible (“safest” and “most durable”)The number of differences should be limited (communication, clarity, credibility)Coherency in international markets is essential, between markets and between segments
155 Communicating the firm’s positioning Once positioning strategy chosen, the firm must communicate the positioning effectivelyMentally distinguish offerings, enter into the minds of consumersCommunication through physical signs and cuesMarketing mix is used to communicate the company’s positioning
156 From marketing strategy to marketing programs Marketing strategy must be implemented through marketing programsManagers must decide on marketing expenditures, marketing mix, and resource allocationInternal cultural diversityExternal cultural diversityMarketing mix allows firm to communicate and implement its strategy, formalized in marketing plan
157 Marketing mixMarketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market.4 Ps (McCarthy):ProductPricePromotionPlace4 Cs (Lauterborn)Customer needs and wantsCost to the customerCommunicationConvenience
158 The four P’s of the marketing mix ProductProduct variety, quality, design, features, brand name, packaging, sizes, services, warranties, returns…PriceList price, discounts, payment period, credit terms…PromotionSales promotion, advertising, sales force, public relations, direct marketing…PlaceChannels (direct, indirect, exclusive, selective, intensive), coverage, assortments, locations, inventory, logistics, transport…
159 Standardization vs. adaptation Debate in marketing since Buzzell (1968) and Levitt (1983)Factors encouraging standardizationEconomies of scale in productionEconomies in R&DEconomies in marketingGlobal competition“Shrinking” of world market“Converging, homogeneous cultures”Factors encouraging adaptationDiffering use conditionsGovernment and regulatory influencesLocal competitionDiffering consumer behavior patterns“True” to marketing conceptDegree of standardization, Degree of adaptation, global/local paradox
160 Degree of cultural grounding Need for adaptationHighDegree of cultural groundingLowIndustrial/Technology intensiveConsumerNature of productSource: Czinkota and Ronkainen
162 Consumption patterns Pattern of purchase Pattern of usage Is the product purchased by relatively the same consumer income group from one country to the other?Do the same family members motivate the purchase or dictate brand choice in all target countries?Do most consumers expect a product to have the same appearance?Is the purchase rate the same regardless of the country?Are most purchases made at the same kind of retail outlet?Do most consumers spend the same amount of time making the purchase?Pattern of usageDo most consumers use the product for the same purpose?Is the product used in different amounts from one area to another?Is the method of preparation the same in all target markets?Is the product used along with other products?
163 Psychosocial characteristics Attitudes toward the productAre the basic psychological, social, and economic factors motivating the purchase and use of the product the same for all target markets?Are the advantages/disadvantages of the product in the minds of consumers basically the same from one country to another?Does the symbolic content of the product differ from one country to another?Is the psychic cost of purchasing and using the product the same?Attitudes toward the brandIs the brand name equally known and accepted in all target countries?Are customer attitudes toward the package basically the same?Are customer attitudes toward pricing basically the same?Is brand loyalty the same throughout target countries for the product?
164 Cultural criteriaDoes society restrict the purchase and/or use of the product to a particular group?Is there a stigma attached to a product?Does the usage of the product interfere with tradition in one or more of the targeted markets?Does the message of the product correspond to core cultural values?How do the different dimensions of culture influence the purchase and use of the product?
165 Product policy, product mix “A product is anything that can be offered to a market to satisfy a want or need” (Kotler)Physical goodsServicesPersonsPlacesOrganizationsIdeasCommon product problems:Developing new productsManaging life-cycle strategiesManaging product linesManaging brands…Product policy, product mix
166 Product mix: product lines and brands Width: how many product lines the firm carriesLength: how many items in each product lineDepth: how many variants are offered of each product in the lineConsistency: how closely related the various product lines are (end use, production, distribution channels, etc…)BrandingIdentifies the company at six different levels: attributes, benefits, values, culture, personality and userBrand awareness, brand acceptability, brand preference, brand loyaltyGlobal branding and international coherencyDegree of adaptation in FMCG
167 Core benefit or service Global variations, adapt or standardize? Elements of a productAugmented productInstallationTangible productPackagingCore productBrand nameFeaturesCore benefit or serviceAfter-sale serviceDelivery and creditQualityStylingGlobal variations, adapt or standardize?Warranty
168 Specific international product policy problems Country of origin, made in effectPreference for national brandsGlobal branding (mono, line, umbrella)Brand equity and extensionInternational standardsProduct protectionProduct adaptation
169 International product policy Existence of global product? International standard?Three common strategiesStraight extensionProduct inventionProduct adaptationTechnical adaptationCommercial adaptationConsumer products vs. industrial products
170 Pricing Select pricing objective Determine demand Estimate costs Select pricing methodAnalyze competitors’ costs, prices, and offersSelect final price
171 Common pricing methods Mark-up pricing: add a standard mark-up to the product’s costTarget-return pricing: determine price that would yield its target rate of return (ROI)Perceived-value pricing: buyers’ perception of value, not the seller’s cost, is the key to pricingValue pricing: low price for fairly high-quality (EDLP)Going-rate pricing: prices are largely based on competitors’ prices, rather than on costs or demandSealed-bid pricing: competitive-based pricing based on expectations of how competitors will priceYield pricing: discriminatory pricing depending on customer segment and inventory level
172 International pricing policy International price escalation problemFour types of strategiesUniform price everywhere: different profit rates, too high in some countriesMarket-based price: ignores costs, parallel importationsCost-based price: standard markup everywhere, too high in some countriesIdentical pricing position: compare to local competition in each marketTransfer prices and dumpingGray-market problem, copies…
173 Promotion Identify target audience: research, image analysis… Determine communication objectives: awareness, knowledge, liking, preference, conviction, purchase…Design message: content, appeals, structure, format, source…Select communication channels: personal, non-personalPromotion budget: weight of promotion in marketing mix…Promotion mix: allocation between advertising, sales promotion, public relations, sales force and direct marketing…Measure results: research…
174 Promotion mix – communication platforms AdvertisingSales promotionPublic RelationsSales forceDirect marketingPrint and broadcast adsPackagingMotion picturesBrochuresDirectoriesBillboardsP-P displaysSymbols and logosContestsSamplingGiftsFairs and trade showsDemonstrationsCouponsRebatesEntertainmentLoyalty programsTie-insPress kitsSpeechesAnnual reportsSponsorshipsPublicationsCommunity relationsLobbyingCompany magazineSpecial eventsSales presentationsSales meetingsIncentive programsSamplesCatalogsWebsitesMailingsTelemarketingOn-line salesTV shopping
175 International promotion policy Three different levels of communication:Corporate communication: inform firm’s partners (shareholders, administrations, suppliers, press, etc…)Institutional communication: communicate the firm’s values to the public and inside the organizationBrand or product communication: image, consumer’s desires, technical characteristics, performance, etc…Corporate and institutional communication are easily standardized, but brand/product communication is harder to standardize
176 Communication and advertising Advertising is a form of communicationA product’s position or difference is transmitted to target segment through communicationCommunication styles vary from country to country, they are culture-boundThe role and importance of advertising/media also vary from one country to anotherCultural factors affecting communication:High-context vs. low-contextExplicit vs. implicitDirect vs. indirectInformational vs. emotional
177 Cultural dimensions and advertising appeals Power distanceHigh: status symbols, presence and importance of elders, master-learner relationships…Low: independence, “empowered” consumersIndividualism/CollectivismIDV: low context, direct, explicit (you, we, I…), data, factsCOL: high context, indirect, symbols, entertainment, groupsMasculinity/FemininityMAS: winning, success, domination, persuasion, comparative advertising, reverse sexism…FEM: less endorsement, caring, less role differentiationUncertainty avoidanceHigh: explanations, testing, technology, design, structure, well-groomedLow: results are important, change, subtleLTO/STOSTO: sense of urgency, direct styleLTO: build trust, nature, entertainment
178 Advertising models and culture (1/2) Sales-response modelSimple stimulus-response modelVery direct, “buy now” strategy, short term effectLow PDI, IDV, MAS, Low UAI (Anglo-Saxon model)Persuasion modelShort term shift in attitude, buying intention, and brand preference through providing arguments“Lecture” form (presenters, demonstrations, testimonials), persuasive and directUS, UK, Germany, Switzerland, Austria…Involvement modelBuild relationships between consumers and brands by creating emotional closenessBrand becomes a “personality”, indirect styleFEM, IDV (Netherlands, Scandinavia, France…)
179 Advertising models and culture (2/2) Awareness modelCreate awareness to differentiate brands from similar brandsAssociations, metaphors, humor, build trust, indirectLow IDV (Spain, Asia, Latin America...)Emotions modelCreate positive attitude and brand loyaltyBuilds connections between brands and emotions, emotion often linked with product categoryLow IDV, low MAS (Spain, Latin America, Africa)Likability modelLiking the advertisement will lead to liking the brandIndirect, entertaining/story, make friends to build trust and dependenceJapan, ChinaSymbolism modelTurn the brand into a symbol/code, cohesion to subcultureVery culture specific (symbols of status, success, self-expression, stability…)High PDI, High UAI, Low-Mid IDV (Asia, France, south of Europe)
180 Place - Marketing Channels What is a marketing channel (or distribution channel)?“Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user” (Kotler)What about international marketing channels?These interdependent organizations allow goods and services to cross national boundaries.SCM, BtoC and BtoB, IMM
181 International channels Channels within foreign countriesChannels between countriesFinal buyersSellerChannels between countries: gets the products to the borders of the foreign market; decisions concerning types of intermediaries (agents, trading companies, etc…), types of transport, financing and risk management…Channels within foreign countries: gets the products from entry point to final buyers and users; decisions concerning types of retailers (franchising, supermarkets, etc…), local channelsChannels of distribution vary considerably among countries. Distribution, by its nature, is a marketing activity that is performed close to the market.
182 Channel managementChannel design: types of intermediaries, number of intermediaries (exclusive, selective, intensive), contractual arrangements…Managing retailing, wholesaling and market logistics…Selecting, motivating and evaluating channel members (cooperation, conflict, competition)Channel dynamics: traditional, VMS, HMS, multi-channel marketing systems…Most difficult part of the mix to standardize
183 Entry mode choiceConsidered by many as the most important aspect of a firm’s internationalization strategyEntry mode will determine long-term success or withdrawal from foreign marketsPoor decisions can be very costly for the firm
184 Factors in the entry mode decision Target country market factorsTarget country environmental factorsTarget country production factorsHome country factorsEntry mode decisionExternal factorsInternal factorsCompany resource and commitment factorsCompany product factors
185 Elements of market entry strategies Entry operationChoice of target product/marketSetting objectives and goalsChoice of entry modeDesign the marketing planTarget marketControl systems: monitoring operations / Revising entry strategy
186 Different types of entry modes Exporting (commercial strategy, commercial modes)Foreign direct investment (industrial strategy, integrated modes)Associated or contractual modes (contractual strategy, competitive alliances)
188 Types of exporting Indirect exporting Direct exporting Distributor / export merchantsExport agentEMCDirect exportingExport departmentExport sales representativesE-businessCooperative exportingExport groupsPiggyback exporting
189 Foreign direct investment (FDI) The ultimate form of foreign involvementDirect ownership of foreign-based assembly, manufacturing or sales facilitiesThe company can buy part or full interest in a local company (M&A) or build its own facilities (GFI, ex nihilo)Considered the “preferred” mode of entry
190 Advantages and disadvantages of FDI Cost economies (labor, raw materials, incentives, freight savings, etc…)Better image in host countryDeeper relationship with government, customers, local suppliers, distributorsBetter adaptationFull control of investmentsLong term objectivesDisadvantagesHigh initial and operating costsHigh level of risk
191 FDI options Make-or-buy decision Branch or subsidiary? Greenfield investment / Ex nihiloMergers and acquisitionBranch or subsidiary?StructureLegal statusAnalyzing FDI projectAssessing profitabilityDiscounted cash flow analysis
192 Associated entry modes Newest, most recent forms of international businessTransfer of technology or know-how between two firmsShared risksOnly option in countries where the government requires foreign firms to use local capitalBetter access to local market knowledge
193 Types of associated entry modes Joint venture: foreign and local investors share ownership and control of local operationsLicensing: licensor licenses a foreign company to use a manufacturing process, trademark, patent, trade secret or other item of value for a feeManagement contracts: firm exports management services instead of a product, separation between ownership and managementInternational Franchising: contractual association between a franchisor (manufacturer, wholesaler or service organization) and franchisees (independent business people who buy the right to own and operate units in the franchise system). Franchising is based on some unique product, service or method of doing business.Industrial franchisingDistribution franchisingService franchisingB.F.F.
194 Example of international franchising entry modes Direct modesDirect franchising (16%)Subsidiary (19%)Area development agreements (14%)Indirect modesJoint venture (16%)Master franchising (34%)
195 International franchising comparative matrix StrongMaster franchisingDirect franchisingDistance /AdaptationJoint ventureFDIArea development agreementDirect franchisingWeakCommitment /ControlWeakStrong
196 International franchising Direct or indirect mode Hierarchical model of entry mode choiceInternational franchisingEnvironmental factorsOrganizational factorsLevel of commitmentEquityNon-equityEnvironmental factorsDirect or indirect modeOrganizational factorsJoint ventureDirect franchising or ADAMaster franchisingFDI
197 Determinants of entry mode choice in international franchising Environmental factorsOrganizational factorsLevel 1 (commitment)Economic riskMarket sizePolitical riskCompetitive situationLevel of economic developmentFinancial and human resourcesManagement attitudes and orientationRecruiting and training franchiseesPrice-bonding ratioLevel 2 (direct/indirect)Financial situation of partnersBrand protectionLocal regulationsCultural differencesTax SystemGeographic distanceFranchisor’s national cultureBrand imageExperienceNeed for controlType of product/serviceDegree of standardizationBrand recognitionDispersion of units
198 Entry mode choice summary Entry modes vary in terms of resource or equity commitment to foreign marketsLow-commitment modes can allow firm to reduce risk in high-risk countries, culturally diverse countries or limited potential marketsDesired degree of control over international operations influences choice of entry modeLoss of control yields limited returnsNo market entry strategy is appropriate in all circumstancesMost firms will have a vast portfolio of entry modes, depending on each specific market situationComparative approach to entry mode choice (commitment, control, risk, adaptation, contribution of know-how…)
199 Comparing different entry mode options HighFranchisingFDILicensingWholly owned subsidiary (M&A)Management contractBranch officeContribution of know-howAD / ConcessionaireAgentEMCMinority shareholding through partial acquisitionPiggy backITC / distributorMajority JV investment (local partner know-how)Foreign buying departmentLowLowLevel of ownershipHigh
200 Choosing the right entry mode All entry modesInternal factorsRejected entry modesExternal factorsAll feasible entry modesComparative profit contribution analysisComparative risk analysisComparative analysis for nonprofit objectivesRanking by overall comparative assessmentTarget marketThe right entry modeMarketing channels within markets
201 Local marketing channels (within markets) What is a marketing channel or channel of distribution?“an organized network of agencies and institutions which, in combination, perform all the activities required to link producers with users to accomplish the marketing task” (AMA)They perform functions that add utility to a product or service:Place utility: availability of a product or service in a location that is convenient to a potential customerTime utility: availability when desired by a customerForm utility: availability of the product processed, prepared, in proper condition and/or ready to useInformation utility: availability of answers to questions and general communication about useful product features and benefits
202 B to C vs. B to B channels Business-to-consumer channels Designed to put products in the hands of people for their own useAlternatives: direct marketing, franchising, sales force, agents/brokers, internal sales force, wholesalers, retailers…Business-to-business channelsDeliver products to manufacturers that use them as inputs in the production process or in day-to-day operationsAlternatives: internal sales force, distributors, wholesalers…
203 Marketing channel alternatives for consumer goods Agents, brokersMSFMSFMSFInternet, mail order, door-to-door, house party, etc…Company-owned, franchisingWWRRRRConsumers
204 Problems in international marketing channels Global retailingCase of hypermarketsMulti-channel strategiesCase of franchising-InternetMarket-specific channelsCase of wine distribution
205 Global retailing Global retailing since 1970s, but many variations… Differences in the importance and types of retailing channels: shopping malls, department stores, discount stores, wholesale clubs, category killers, outlet centers, hypermarkets…Factors affecting the success of hypermarkets: culture, income, market fragmentation, traditional stores, locations, demography…Global retailing market entryWal-mart case
206 Global retailing market entry strategy framework Culturally closeOrganic growthChain acquisitionFranchisingJoint-ventureEasy to enterDifficult to enterCulturally distant
207 Concept of multi-channel strategies – franchising and Internet BRICK AND MORTARCLICK AND MORTARCoexistence of traditional and virtual marketing channels “brick and click”Antagonostic or complementary?
208 Some practical advice… Brand structure rather than channel structure (reduce risk of network competition)Sell all products on-lineEnsure multi-channel coherencyBack-office motivationUse Internet to increase visits (locations, maps)Limit use of …… But does this apply to franchising?
209 Multi-channel strategies in franchising Franchising firms are « plural form networks »Internet is another distribution channelInternet seems to be a priorityInternet is « revolutionizing » franchising…But, franchisors offering on-line sales are limited32% in the US30% in the UKLess than 20% in France
210 Opportunities and threats of multi-channel strategies (Franchising-Internet) New marketing channelIncreased salesNetwork imagePositive internal effectsCannibalismRestriction franchisee salesNon-conformity websitesExclusive territoriesDefinition catchment areaLimits some entry modes
211 Coexistence of franchise system and internet Are « mixed networks » complementary?Opportunities and threats?Consequences?Internet practices?The future of franchising and Internet?
212 Some results… Major consequences Better communication with franchisees Reduces distanceCost-effectiveness, not dissuasivePromotional tool for servicesRecruiting and training franchiseesActivities2005: 80% website, 23% on-line sales2010: 98% website, 54% on-line sales
213 Interpretations Optimistic, franchise-Internet are complementary Opportunities > RisksB to B advantages > B to C advantagesBetter franchisor-franchisee relationshipService franchising > Distribution franchisingCommunication strategy > Sales strategy« Internal sale » of website before « external sale »Brick to click vs. Click to brickInternet explains evolution of entry modes…
214 Market-specific channels – wine distribution Wine distribution varies enormously from one market to the next, distribution must be performed “close” to market…Why?...Tradition, Old World vs. New WorldTransportation via freight forwarder or shipping agent, physical distribution, complex regulatory requirements, complex choice of distributor/broker…
215 Wine distribution choices Four possibilities for exportingImport distributor (négociant)Broker (courtier, agent)Export groupsDirect salesEnd of channel (off-premise, on-premise)Supermarkets/Hypermarkets (FMCG)Specialized wine shopsDuty-freeHORECAEstate, e-commerce…Bottle vs. bulkBrand image, packaging… B to C approachUnbranded, supply chain … B to B approach
216 Wine distribution systems Regulatory framework, levels of marketing and market accessThree types of systems around the world:Regulated open market: normal FMCGControlled markets: government intervention in nearly all aspects of wine marketingMixed systems: both open and controlled
217 U.S. wine distribution system 18th Amendment (1919 – Prohibition), 21st Amendment ( authority to states), FAA ActAim: separate suppliers and retail outlets (tied-house relationship)Result: three-tier system of distribution with independent licensed wholesaler in between the retailer and the supplier/exporter31 “open” states, 19 “control” or “monopoly” states
218 Three-tier system Control States Open States Tier I Tier II Tier III Winery, SupplierWinery, SupplierDistributor / WholesalerTier IIControl StatesState controlled retail storesHORECA, clubs, etc…Supermarkets, wine shops, HORECA, bars, transportation, etc…Tier IIIConsumersConsumers
219 Comparing wine retail outlets CharacteristicsAdvantages to producerDisadvantages to producerSupermarket / HypermarketHigh volume sales, low margins and low retail prices, usually low level of wine knowledge of staffQuantity purchases, high brand awareness, help with mass appeal, convenience of locationLack of freedom, low level of interest in experimental styles and varietiesIndependent / specialistTends to cater to wine consumers with higher level of knowledge, high level of service, small producers“hand selling”, strong service focus and CRM, interested in experimental styles or uncommon varietiesEach outlet must be serviced and supplied individually, small volumesState monopoly retailerOverall aim is to promote healthy drinking, high level of wine knowledge, access to a wide range of suppliersHigh volume purchases can be made, national or regional access to marketImportance of being stocked, if not, excluded from marketHall and Mitchell, 2007
220 Conclusion – 7 Rules of International Distribution Select distributors. Don’t let them select you.Look for distributors capable of developing markets, rather than those with a few good customer contacts.Treat local distributors as long-term partners, not temporary market-entry vehicles.Support market entry by committing money, managers, and proven marketing ideas.From the start, maintain control over marketing strategy.Make sure distributors provide you with detailed market and financial performance data.Build links among national distributors at the earliest opportunity.Source: D. Arnold, HBR, 2005
221 Conclusion: SRC and cultural risk Cultural risk is the most subjective of international business risks; it is the most difficult to assessSRC: the unconscious reference to one’s own cultural valuesSRC is the root of many international marketing problemsRecognizing and admitting SRC is quite often difficultAnalytical approach to reduce the influence of one’s own cultural values (A.C. Samli)
222 4 step process to reducing SRC 1. Define the problem or goal in terms of domestic cultural traits, habits or norms.2. Define the problem or goal in terms of foreign cultural traits, habits or norms. Make no value judgments.3. Isolate de SRC influence in the problem and examine it carefully to see how it complicates the problem.4. Redefine the problem without the SRC influence and solve for the optimal goal situation.
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