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Why Go International? 1. Exploiting market potential and growth 2. Gaining scale and scope returns at home 3. Learning from a leading market 4. Pressuring.

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Presentation on theme: "Why Go International? 1. Exploiting market potential and growth 2. Gaining scale and scope returns at home 3. Learning from a leading market 4. Pressuring."— Presentation transcript:

1 Why Go International? 1. Exploiting market potential and growth 2. Gaining scale and scope returns at home 3. Learning from a leading market 4. Pressuring competitors 5. Diversifying markets 6. Learning how to do business abroad

2 International Business Philosophies F Multinational Mentality –Focused on marketing to different countries with local adaptation of products and promotions; production localized and technology less advanced F Global Mentality –Involves more standardization of products and integration across countries; driven by strong foreign competition and growing homogenization of world markets

3 Rationale for Global Mentality Customers &Common customer needs, global Markets:customers, global channels, transferable marketing, leading markets Competition:Common competitors using global strategies Cost Savings:Scale economies, scope economies, sourcing advantages, avoidance of duplication GovernmentFavorable trade policies, acceptance of foreign Policies:investment, compatible technical standards, common marketing regulations

4 Multidomestic vs. Global Markets: Key Differences

5 Major Benefits from Global Business CAPITALIZING ON THE GROWTH POTENTIAL OF THE FOREIGN MARKET AND NEIGHBORING COUNTRIES. TRANSFERRING COMPETITIVE INFORMATION AND NEW PRODUCTS FROM THOSE MARKETS TO OTHER MARKETS. STRETCHING AND BUILDING UP THE FIRMS MARKETING CAPABILITY.

6 Global vs. Multinational Marketing Mentality GLOBALMULTINATIONAL R & D, DESIGN MANUFACTURING MANAGEMENT SALES & MKTG CUSTOMER AFTER-SALES SERVICE INTERNATIONAL MARKET ENTRY CENTRALIZED AND STANDARD DECENTRALIZED AND CUSTOMIZED LIMITD LOCATAIONSMANY LOCATIONS CENTRALIZED AND INTEGRATED INDEPENDENT LOCAL COUNTRY MANAGERS IN-COUNTRY OR REGION SEGMENTS GLOBAL SEGMENTS LOCAL-SUBCONTRACTED LOCAL-COMPANY HANDLED EXPORTING-LICENSING WHOLLY-OWNED OR J.V. LOCAL MANUFACTURING

7 CONSUMER ELECTRONCS DETERGENTSTELECOMM SONY, DAEWOO & THE EAST PHILIPS, RCA AND THE WEST KAO & THE EAST P& G, UNILEVER & THE WEST Not Applicable NEC Fujitsu & the East ITT & the West ERICSSON Think Global Act Local Not Applicable

8 MANAGEMENT MARKETING & SALES CUSTOMER AFTER SALES CUSTOMER CARE IDEA GENERATION R & D DESIGN MANUFACTURING UPSTREAM ACTIVITIES DOWNSTREAM ACTIVITIES LOCAL ACTIVITIES

9 Global vs. Multinational Corporate Structures

10 Ingredients for International Success Does the Company Have what it Takes to Succeed in International Markets: The Internal Corporate Audit F Capital To: –Cross Subsidize International Product & Market Expansion –Attack Competitors Profit Centers Worldwide if Needed F Product Core Competency: Important & Different Attribute F Risk Taking & First Mover Advantage F International Market Knowledge and Ethnocentrism –Cross-Culturally Competent Management and Human Resources F International Distribution Network F Corporate Structure & International Marketing Mentality –Long-Term vs.. Short Term Orientation, Human Resources –Global vs.. Multinational Mentality

11 MACROECONOMIC ENVIRONMENT Size –GDP, GNP, Trade –Population –Growth Rates Affordability –Per Capita GDP or GNP –Personal Income –PPP-measures Corporate Capabilities & Objectives –Develop The List Of Most Economically Optimum Countries & Regions Need –Economic Need –social Need –Maslows Concept –Engels Law

12 Cultural Need Satisfaction Priority Basic Needs: Safety Needs: Ownership: Esteem: Super Needs Percentage of Income Left for Higher Levels of Needs in USA:

13 MICROECONOMIC ENVIRONMENT Product –New –Differentiated –Existing Demand –Exists & Is Satisfied –Exists & Is Unsatisfied –Is Expected To Emerge Corporate Capabilities & Objectives –Determine The Actual & Desired Product Positioning In Foreign Markets Competition –Highly Competitive –Niche Competition –Non-Existent

14 Microeconomic Environment New To Them or New To All Modified for Them- Differentiated Common or Me Too Satisfied Needs Unsatisfied Needs Emerging Needs Innovative Companies Chinese Shoes In USA Chinese High-Tech In Vietnam Vaccine for Common Cold CDMA-Wireless Telephones in Chine

15 Types of Political & Financial Risks Multinational Corporations Emerging Economies Government Intervention Global Companies Mature Markets Citizens Actions Economic Rationale Political Reasons Confiscation or Seizure of Assets Long-Term Domestication Do Not Worry! + + Regulation of MNC NOW WORRY!!! Nationalization/ Expropriation

16 Corporate Safety Factors Low High Low High R & D Natural Time Trend

17 Political, Economics & the Time Factors Socialism Capitalism Democracy Non-Democracy 0 Time 0 Time USA Sweden Cuba Peru Russia89

18 RISK-RETURN TRADE OFF LOW LET ME KNOW WHEN YOU FIND THEM!!! DIRECT/INDIRECT EXPORTING LICENSING JOINT VENTURE FDI

19 Attributes of High vs. Low Context Cultures

20 Hofstedes Dimensions F INDIVIDUALISM VS COLLECTIVISM F HIGH/LOW POWER DISTANCE F MASCULINE VS FEMININE F WEAK/STRONG UNCERTAINTY AVOIDANCE F CONFUCIANIST DYNAMICS F (LONG RUN ORIENTATION)

21 Power Distance and Individualism Scales ARGArgentina BRABrazil CHL Chile COL Columbia GRE Greece HOKHong Kong IND India IRA Iran JAP Japan MEXMexico PAK Pakistan PER Peru PHI Philippines POR Portugal SIN Singapore TAI Taiwan THA Thailand TUR Turkey VEN Venezuela YUG Yugoslavia Small Large Power Distance Individualism Collectivist 12 50 30 Small power distance collectivist Large power distance collectivist PAK COL VEN TAI PER THA SIN CHL POR HOK YUG MEX PHI GRE TUR BRA IRA ARG JAP IND +11+28+44+64+77+94

22 Power Distance and Individualism Scales AULAustralia AUTAustria BELBelgium CAN Canada DEN Denmark FIN Finland FRA France GERGermany GBR Great Britain IREIreland ISRIsrael ITA Italy NET Netherlands NZLNew Zealand NOR Norway SAF South Africa SPASpain SWE Sweden SWISwitzerland USAUnited States Small Large Power Distance Individualism Individualist 53 91 71 Small power distance individualist Large power distance individualist SPA SAF FRA BEL ITA AUT ISR FIN GER NOR SWI SWE IRE DEN NZL CAN NET GBR USA AUL +11+28+44+64+77+94

23 Uncertainty Avoidance and Masculinity Scales Feminine Masculine Masculinity Uncertainty Avoidance Strong 8 56 32 Weak uncertainty avoidance/feminine Weak uncertainty avoidance /masculine Weak SIN HOK IND PHI AULAustralia CAN Canada DEN Denmark FIN Finland GBR Great Britain HOK Hong Kong INDIndia IREIreland NET Netherlands NZLNew Zealand NOR Norway PHIPhilippines SINSingapore SAF South Africa SWE Sweden SWISwitzerland USAUnited States DEN SWE NOR NET FIN GBR IRE USA SAF AUL NZL CAN +23+44+59+77+95

24 Uncertainty Avoidance and Masculinity Scale Feminine Masculine Masculinity Uncertainty Avoidance Strong 59 112 84 Strong uncertainty avoidance/feminine Strong uncertainty avoidance/masculine Weak ARGArgentina AUTAustria BELBelgium BRABrazil CHL Chile COL Columbia FRAFrance GERGermany GRE Greece IRA Iran ISRIsrael ITAItaly JAP Japan MEXMexico PAK Pakistan PER Peru POR Portugal SPASpain SWISwitzerland TAI Taiwan THA Thailand TUR Turkey VEN Venezuela YUG Yugoslavia JAP GRE BRA THA IRA VEN COL MEX ARG TUR PER CHL YUG POR PAK TAI ISR SPA FRA BEL ITA SWI GER AUT FIN +23+44+59+77+95

25 HighMediumLow Market Attractiveness CompetitionCompetition High Med. Low High Med. Low Low Risk High Risk

26 International Brand Strategy Global Brand Managers Objective: Global Brand Dominance Kleenex, Coke, Hoover, Band Aid, Lee, Jeep, Evian) Branding Standard brand name (imac, Tabasco) or use of company name (IBM, Honda) Brand Name Adaptation (Tide vs.. Ariel) Different Names (Lexus vs.. Toyota) Private Branding Walmart (worldwide) Sears (in NAFTA)

27 GLOBAL PRODUCT POSITIONING THERE ARE THREE PSYCHOLOGICALLY DIFFERENT EFFECTS ON BUYERS WHEN A GLOBALLY STANDARDIZED PRODUCT OR SERVICE IS INTRODUCED ON A LOCAL MARKET: 1. CUSTOMERS EXISTING PERCEPTUAL MAPS OF THE PRODUCT CATEGORY REMAIN INTACT BUT THE NEW BRAND TARGETS ONE UNTAPPED SEGMENT. 2. THE PRODUCT SPACE IS ALTERED, BY ADDING DIMENSIONS OR EXTENDING END-POINTS. 3. BUYER PREFERENCES ARE CHANGED. IN PRACTICE, ALL THREE PROCESSES ARE OFTEN AT WORK SIMULTANEOUSLY.

28 BRAND IMAGE F MISPOSITIONED PRODUCTS CAN BE ATTRACTIVE TO POTENTIAL CUSTOMERS BECAUSE OF BRAND IMAGE AND STATUS. GLOBAL BRANDS OFTEN DO BETTER THAN LOCAL BRANDS THAT MAY BE BETTER SUITED TO CUSTOMER NEEDS FOR THAT AND OTHER REASONS: F CONSPICUOUS CONSUMPTION -- LET EVERYONE SEE WHAT YOU BUY AND HOW MUCH YOU BUY. F LOWER PERCEIVED RISK.

29 COUNTRY OF ORIGIN WHERE A PRODUCT OR BRAND COMES FROM OFTEN COUNTS A GREAT DEAL WITH CONSUMERS. F COUNTRY-OF-ORIGIN EFFECT DEALS WITH QUALITY PERCEPTIONS OF PRODUCTS. THIS EFFECT DIFFERS BY PRODUCT CATEGORY. ALSO, THE QUALITY LEVEL AT WHICH A COUNTRY PRODUCES IS FACTORED IN. F COUNTRY-OF-ORIGIN BIAS CUSTOMERS TEND TO OVERSTATE THE POSITIVE AND NEGATIVES OF PRODUCT ATTRIBUTES ANDTHIS CAN CAUSE A BIAS TOWARDS PRODUCTS FROM A GIVEN COUNTRY.

30 LOWER PRICE F THROUGH A REDUCED PRICE, A CUSTOMER CAN BE INDUCED TO BUY A MISPOSITIONED BRAND BECAUSE THEY FEEL THAT THEY ARE GETTING A GOOD DEAL. F HOWEVER, THIS CAN BACKFIRE ON THE MARKETER, SINCE THE PRICE PAID GRADUALLY LOSES SALIENCE, WHILE THE PRODUCT STAYS. MARKETER BECOMES VULNERABLE TO LOWER-COST MANUFACTURERES ENTERING THE MARKET (Japanese products vs. Koreans).

31 International Price Escalation Effects (in $U.S.)

32 Export Pricing Issues Price quotes (Ex-Factory or Ex-Work) Exchange rates Method of payment (Cash, LOC, Countertrade…) Government regulations (Walmart-Germany) To whom you sell (Government vs. Private Sector). Consumer affordability (per capita income). Competition (domestic or global). Country of origin and local consumer perception.

33 Transfer Pricing A C Delco USA ( Battery, stereo, auto parts) GM USA (Producing cars) Vietnam (export) Opel division European Union GM-JV in Shenyang, China Export pricing Transfer Pricing

34 The Hamburger Standard

35 *Prices may vary locally Purchasing power parity; local price divided by price in the United States **Against dollar Average of New York, Chicago, San Francisco and Atlanta Dollars per pound §Market rate

36 East-West Distribution Mentality Import House Manufacturer Large Wholesaler Medium Wholesaler Small Wholesaler Retailer End Buyer Cost 25%-50% higher for consumers in Japan West: USA- Basic Marketing Objective: Efficiency-Pay Per Performance East: Japan- Basic Marketing Objective: Relationship-permanency-pay per existence

37 Japanese Import Distribution Alternatives - Distribution Route of Italian Spaghetti Processing and packing plant Import agent Producer Primary wholesaler Intermediary wholesaler Small wholesaler Retailer Retail price: 170yen/300g package Retail price: 128yen/300g package Depots Distribution Wholesalers Distribution centers Retailer Processing and packing plant Importing company A/C Producer Savings: 25% Japanese Conventional Route US-Style Restructured Route

38 Size and Number of Retail Outlets in Selected Countries

39 East-West International Distribution Mentality Import House Efficient Manufacturer Inefficient Manufacturer Large Wholesaler Medium Wholesaler Small Wholesaler Retailer End Buyer Efficient Domestic Distribution Network Inefficient Domestic Distribution Network Efficient Global Distributors (e.g. JTCs) Expensive Global Distributors (e.g. EMCs) EAST (e. g. JAPAN) WEST (e. g. USA

40 East-West Distribution Mentality Manufacturer Large Wholesaler Medium Wholesaler Small Wholesaler Retailer End Buyer Commission Structure (PPP-loyalty) JIT (small apt. small retailers) Multiple Visits Per Day to Retailer by Small Wholesaler Return Policy- 2-way Channel Credit Extension- 150 days at low interest (0.06% now) Employment Buffer-economics environment Natural Import Barrier-trade policy Cultural, Political-Legal

41 Determinants of Choice of Channel 1. Product Requirements (Perishable lettuce, sensitive apples, fine china, scratched cars, beer without freshness, moldy cakes,...) 2. Logistic Feasibility (Equipment by DHL, autos by air, faxes of newsletters, freezer railroad cars, shock-absorbent packaging, vacuum-packed,...) 3. Demand Factors (Importance of speed for repairs, timing of raw materials for inventory, customers need for immediate gratification, quality standards of middleman and final user,...) 4. Competitive Factors (How fast is fast? How good is good? What are the alternatives for the buyer? Strategic importance of the market?) 5. Middlemen Resources (Storage capability? Credit or consignment or cash? Motivating with fast delivery? Just-in-time system? Promised supplies? Ability to support the marketing effort?) 6. Own Resources (Financial, manpower, production capacity)

42 Seikos Authorized and Unauthorized Channels of Distribution Distributors Retailers Importer EuropeHong KongJapanNorth America Broken arrows denote the flow of Seiko watches through unauthorized channels of distribution. Solid arrows denote the flow of Seiko watches through authorized channels of distribution.

43 Advertising Intensity in Selected Countries

44 Media Usage in Various Countries

45 Components of Global Advertising Strategy 1.Message (content) and Creative (form- the way the message gets across) 2.Media (radio, TV, outdoor, print, point of purchase, cinema. internet) 3.Target Audience (cross-cultural, provincial, demographic) 4.Product Nature (industrial.consumer, durable, non-durable) 5.Corporate Mentality (global, multinational) 6.Advertising Objective (awareness, understanding, interest, purchase)

46 Revisit Ads & Objectives International Communications Process Producer/ marketer/ advertiser Sets objectives and advertising budget(s) worldwide Mass Media Carries the message (Available & Acceptable Media In Each Country) Advertising agency Develops the message (Cultural Encoding) and selects the media Target Market Receives the message and interprets its content from media/ peers (Cultural Decoding) Recipients Think & feel (Cognition & Emotion); act & react to the message (hierarchy of effects) Marketing coordination and control Generate feedback on effects Results Vs. Ad Objectives Awareness Understanding Interest Purchase

47 International Product Life Cycle $ Trade$ Sales PLC IPLC Exports=Imports Line Time Country Monopoly Over the Industry Company Monopoly Over The Product Individual Monopoly Over The Technology Net Revenue From Trade For the First Mover Nation


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