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Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu Tel. +358 8 553 2595, Fax. +358 8 553 2906

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Presentation on theme: "Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu Tel. +358 8 553 2595, Fax. +358 8 553 2906"— Presentation transcript:

1 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax HT Entrepreneurship May 6-7, 2008 Tuija Mainela D.Sc., Professor of International Marketing Department of Marketing University of Oulu

2 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Objectives and contents Aim of the lectures  To create understanding of marketing and internationalization of HT firms  Describing typical features of HT marketing and internationalization  What kinds of issues make HT marketing especially challenging?  What kinds of customer strategies HT firms can utilize?  How HT firms create customer relationships in international markets?

3 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Lecture I: Typical Characteristics of HT Businesses and Specificities of HT Marketing

4 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Key marketing tasks  to attract, establish contact with and keep customers  to perform business activities that direct the flow of goods and services from producer to consumer or user  to know and understand the customer so well that the product or service fits her/him and seems like selling itself

5 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Exercise 1  Form teams of 2-3 persons  Discuss the features of HT business that create specific challenges to their marketing (10 min)  Develop a list of 5 most important features (5 min)  Characteristics of their business environment  Characteristics of their products or services  Characteristics of their customers

6 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Characteristics of high tech businesses High turbulence of business environment  difficulty of forecasting  uncertainty and risks  rapid changes  obsolete technology -> going out of business  decision making based on weak signals from the markets Short product/service life cycles  new/better/more effective applications  high development costs  adoption times should be short  dependence on the latest technologies self-evident

7 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Fast growth  demand sometimes growing faster than supply  possible quick returns attract followers and copiers Threat of too heavy product focus and technocracy  product developers rule also marketing  newest and most sophisticated technology seen always as the best solution  product development without customer contact  market analysis ignored

8 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Born globals  niche type of markets  real competition takes place in global markets Mergers and acquisitions  small producers of special applications and services extremely important to a few big multinationals  securing critical supplies  sharing product development costs and expertise

9 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Characteristics of high tech markets Market uncertainty Technological uncertainty Competitive volatility HT marketing

10 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Technological uncertainty  New technologies risky investments  Can they be commercialized?  Will the new product function as promised?  Will the new technology make our present technology obsolete?  Technological development takes often more time than expected  Several bugs may be found when the product is already in the market

11 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Market uncertainty  New technologies difficult for the buyers to evaluate and appreciate  What needs might be met by the new technology?  How large is the potential market?  How will needs change and how fast will the innovation spread?  Will the market adopt industry standards? Competitive volatility  Who will be our competitors?  What products will we compete with?  What will be the tactics for competition?

12 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Role of marketing with respect to market features Technological uncertainty  Speeding up the product launching (note! Bugs and beta versions)  Securing service for customers  User experience analysis (beta versions) Market uncertainty  Recognizing the market uncertainty customers face  Reducing fear of bad choice and reducing uncertainty  Market education Competitive volatility  Following the development also outside the industry  Being aware of the alternative ways to satisfy the customer needs

13 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Types of innovations and their marketing Marketing strategy Type of innovation -Incremental -Radical Success of a new product Contingency theory of HT Marketing = Marketing tools matching the innovation type -> Odds of success increase Match between customer and supplier perceptions -> Make marketing clearer

14 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Note! Radical and incremental innovations are the extremes and most innovations are situated somewhere in between  Incremental  Extension of existing  Characteristics well defined  Low-cost production  Response to specific market need  ”Demand-side” market  Customer pull  Radical  New technology + new market  R&D invention  Superior performance over ”old”  Specific market need of secondary concern  ”Supply side” market  Technology push

15 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Marketing of different types of innovations  Incremental  Objectives in terms of  market share  product positioning  targeted segments  Competition  Breath down our necks  Cause short window of opportunity  Emphasize differentiation  Speed to market critical  Market learning through customer surveys  Importance acknowledged inside the firm  Key customers known, possibly the idea creators  Radical  Objectives broadly in terms of  solving unsolved problems  beginning a new platform  Competitors not known  Will the technology work is the critical question  Close allies and partners used to validate the concept  Big need to convince various stakeholders also inside the firm  Application areas and early potential users unclear and unfamiliar

16 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Customer types Diffusion of innovations (Rogers 1983; Moore 1991) Innovators Technology enthusiasts Just for technology Early adopters Visionaries Competitive advantage Early majority Pragmatists Proven applications productivity enhancement Late majority Conservatives Risk averse and technology shy Just to stay even Laggards Skeptics If all the other alternatives of action are certainly worrse time

17 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Example: possible customer segments in HT-markets

18 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Different types of customers for new mobile services Resources & knowhow Willingness to invest Motivated Pioneers Technical Non- Experts Profit Hungry Idea Supporters

19 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Different types of customers for new mobile services Resources & knowhow Willingness to invest Motivated Pioneers Can imagine the possibilities Want first-hand experience Expect a lot from technology and user experience Have both marketing and technological resources Technical Non-Experts Inexperienced electronic advertisers Little time and other resources for testing -> impatient Taking care of basic business the most important Profit Hungry Don’t yet see the opportunities Don’t want to experiment Have resources but don’t want to use them without proofs Idea Supporters Don’t really have resources No view of the possibilities Positive attitude towards experimenting

20 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Exercise 2. Marketing to different customer types What kind of a product/service package would you offer? What do these customers value in new HT products/services? What kind of marketing arguments could be effective? Resources & knowhow Willingness to experiment Motivated Pioneers Technical Non- Experts Profit Hungry Idea Supporters

21 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Lecture II: Internationalization of High-Tech Firms

22 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Challenge: Distance between business partners DISTANCE GEOGRAPHIC PHYSICALTIME -time zones -conception of time -from contact to delivery PSYCHICTECHNOLOGICAL -product and process tech CULTURAL -national -language -norms, values -political env. -economic env. TRUST-BASED -firm-level a) competence b) contractual c) goodwill SOCIAL -individual level -knowledge on each other -experience Influence on: Transfer of products Transfer of knowledge Influence on: Communication Team work Understanding needs of the other

23 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Challence: Information needs in internationalization  3 types of knowledge:  Institutional knowledge  Foreign institutions and their activities  Laws and regulations  Business knowledge  Knowledge on customers  Knowledge on the needs of the customers  Knowledge on the decision making processes of the customers  Internationalization knowledge  Knowledge on internal resources (e.g. adoption capability)  Knowledge on external resources

24 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Basic assumptions in traditional internationalization  Market uncertainty  Difficult to evaluate current and future market development  Lack of market-specific knowledge  Market commitment  Market uncertainty leads to minimum commitment of resources  Increase in commitment leads to decrease in uncertainty  Knowledge  Central regulator of market commitments  Lack of knowledge creates uncertainty  Leads to gradual, experience-based internationalization

25 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Basic assumptions in traditional internationalization  Operation strategy  no regular exports  exports via an agent  sales unit  manufacturing subsidiary  Market strategy  company starts from a foreign market to which the psychic distance is considered to be low  Factors explaining internationalization:  Experience (”learning by doing”), psychic distance  Development of internal knowledge and experience and other resources

26 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Critics of process models from the HT-viewpoint  Deterministic, no room for strategic choice and decision making  Fits only to small firms  Leapfrogging in the development processes  Phenomenon of ”born globals”  Early, significant internationalization of activities of the firm

27 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Internationalization of born globals  From inception seek to derive significant competitive advantages from use of resources and sale of outputs in multiple countries  Traditional stepwise approaches in internationalization not followed  Why not?  highly competitive and turbulent environment  short life-cycles of the products & rapid speed of innovation  small domestic markets (niche-markets)  following growth opportunities  being close to particular customers  R&D cooperation to exploit the technological know-how

28 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Exercise 1: What kind of factors favour born globals?  Form teams of 2-3 persons  Discuss the features of HT business that favour fast internationalization (10 min)  Develop a list of 5 most important features (5 min)  Characteristics of entrepreneurs  Characteristics of production processes  Characteristics of business environment

29 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Internal drivers of Born Globals  Technically oriented, market oriented people  Entrepreneurial drive (search for opportunities, organizing, networking capability, ability to handle risks, innovativeness)  International experience and enthusiasm for internationalization of the managers  Basis in a significant product- or process innovation  Products with remarkable added value  Internationally recognized leadership in certain product category (specialization)  More resources than the average SMEs have

30 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax External drivers of Born Globals − Success in foreign market entry more dependent on the relationships with current markets than on the chosen market and its cultural characteristics Existing relationships initial trigger to foreign market and entry mode selection e.g. a distributor taking contact Relying on trusted persons with e.g. common history offer contacts to customers help to develop partners and positions provide access to local market knowledge provide initial credibility provide access to distribution channels may restrict the firms growth initiatives

31 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Major network partners have a great influence Important to follow the “right” partner Great dependence Good in the beginning To compensate the limited marketing experience and infrastructure Following the performance of the partners Unsatisfactory relationships terminated or replaced Not sufficiently committed or qualified Serving own interests through marketing policies Establishing own sales/service offices Developing new products for diversified markets Acquiring equity ownership in the partner To increase management control and market performance

32 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Activities kept on oneself Core competence of software development Activities given to/shared with the partners Market research Customer education and service Market intelligence Product modifications Technical service Pricing New market entry decisions Along time firms develop in-house marketing and sales expertise To preserve independence

33 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax  To High Tech firms the network-based activities are almost unavoidable  To realize innovations  To get information and knowledge  To share costs and risks  Possible problems  Lack of coordination of cooperation  R&D cooperation takes time and results are to be seen slowly  What information to share and what to keep on oneself

34 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Networks and information for internationalization  Network relationships  company-specific i.e. difficult to copy  same information not available to everyone  relationships influence  availability of information: what is going on in the market?  timing of information: when does the information reach the firm?  spread of information: e.g. reference customers/ partners take care that the company is on view in positive way in the right place  central position in the network is relevant

35 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Networks as a basis for born globals

36 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Influence of social network on acquisition of knowledge for internationalization  Social networks  May initiate unplanned internationalization  Tell about opportunities in foreign markets e.g. upcoming purchases  Provide information to evaluate possible business partners  Introduce you to a potential customer  Informally market your products  May be the basis for initial market and operation mode selection  Personal trust  Common background  e.g. Finnish HT-firm starting international business in Thailand because of a previous colleague working there  When you hire a person you may hire his/her relationships also

37 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Influence of social network on acquisition of knowledge for internationalization

38 Faculty of Economics and Business Administration P.O. Box 4600, University of Oulu Tel , Fax Feedback  What do you consider as the most important/ interesting issue that you learned today or yesterday?  How did he different exercises influence your learning?


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