International Marketing Dr. Matti J. Haverila

©Matti Haverila, Infacs Oy Phrases There will be two kinds of CEOs in the next five years; Those who think globally and those who are unemployed. Peter Drucker We (Coca-Cola) used to be American Company with a large international business. Now we are a large international company with a sizeable American business. Robert Goizueta

©Matti Haverila, Infacs Oy Contents Introduction Starting Point Deciding what Markets to Enter Phases of Internationalization Prerequisities of Internationalization Special Issues –Problems of the international business –Problems in the parent/subsidiary relationship Summary: Marketing In The International Environment

©Matti Haverila, Infacs Oy Cross-Cultural Reasons for Failure Inability to find right market niches. Unwillingness to adapt and update products to local needs. Not unique products viewed higher added-value by customers in local markets. Low commitment. It takes time to operate in foreign countries. Assigning wrong people. Picking wrong partners. Inability to manage local stakeholders. Developing mutual distrust and lack of respect between HQ and the affiliates at different levels of management. Inability to leverage ideas developed in one country to other countries worldwide.

©Matti Haverila, Infacs Oy Introduction Deciding whether to go abroad? Deciding which markets to enter? Deciding how to enter the market? Deciding on the marketing program? Deciding on the marketing organization?

©Matti Haverila, Infacs Oy Affecting Factors Domestic Market Factors Growth strategies International Strategy Dynamics of International Business Small size Openess Pressure factors Domestic International Operation Strategy Market Strategy Product Strategy Internationalization Of The Company

©Matti Haverila, Infacs Oy Goal Internationalization is not a goal in itself, but rather a means to good profitablity its should start from the strategy of the company's SBA- unit's strategy Internationalization is a learning process, which touches the whole company and its personnel; not onlythose persons, who go abroad to work. It requires the right attitude and corporate culture in all levels of the company.

©Matti Haverila, Infacs Oy Starting Point Strategy, mission and business idea Motives and the end result Why and what is the objective of the investment? Feasibility studyof the Alternatives = (Go/No Go) Know-How from many fields is needed Establishment Investment #Means #Strategy = Objective or goal in itself

©Matti Haverila, Infacs Oy Which Markets? Objectives and policies Example: Innopac acquired companies during 90s from: –Singapore, Malaysia, Indonesia, Philippines, Thailand –Hong Kong, Taiwan, China, The Middle East, Malta –Hungary, Poland, Mexico, Jamaica, United States éOutcome: Innopac lost S$26.7 M

©Matti Haverila, Infacs Oy Marketing Mix - Product (2) Introductory Growth MatureDecline Product not ModifiedProduct Modified Market share achieved

©Matti Haverila, Infacs Oy Degree of product modification Zone of minimal product adaptation Zone of minimal Product adaptation (minor type) Zone of minimal Product adaptation (major type) Costs Incremental gains

©Matti Haverila, Infacs Oy Few countries vs. Many countries Generally it makes sense to operate in fewer countries with deeper commitment and penetration in each. Also company should enter fewer countries when – Market entry and market control costs are high – Product and communication costs are high – Population and income size and growth are high in the initial countries chosen – Dominant foreign firms can establish high barriers of entry.

©Matti Haverila, Infacs Oy Evaluation Grid Market attractiveness Competitive Advantage Risk High Medium Low H M L H M L China Indonesia Vietnam India Myanmar Low High

©Matti Haverila, Infacs Oy Evaluation Grid Attractiveness GNP/capita population growth, workforce imports/exports statistics, etc. Competitive advantage of the company: prior business dealings comfortability of the management to work in the country Risk political stability, currency stability, repatriation of profits

©Matti Haverila, Infacs Oy Financial analysis Estimate current market potential Forecast of future market potential and risk Forecast of sales potential Forecast of sales and profits Estimate of rate of Return on Investment (ROI)

©Matti Haverila, Infacs Oy PHASES OF INTERNATIONALIZATION Traditional phase New export phase Phase of international operations Phase of Internationalization The Progress of Internationalization Indirect Export Phase Direct Export Phase Licensing Phase Joint Ventures/Strategic Alliances Direct Investment Phase Multinatinal Phase Global Phase

©Matti Haverila, Infacs Oy Yes No Company related prerequisities Is internationalization suitable to current business idea? Do we know the future markets and segments? Do we have enough capacity or can the capacity be acquired? Can we adapt our products to the needs of markets? Do we have human resources? Continue with the market related factors! Can we organize financing?

©Matti Haverila, Infacs Oy Yes No Market related prerequisities Determine potential suitable market areas Are the economic or political barriers for entry too large? Is the competitive situation suitable for entering the market? Do a careful analysis regarding: selected market segments, products/services amd operation methods Determine the internationalization strategy of the company and set the objectives for the future Are there any social or legal barriers to entry to start operation?

©Matti Haverila, Infacs Oy Problems in the parent/subsidiary relationship IBO- research project in England Communication problems37 % Lack of attention by the parent company31 % Difficulty to get results quickly28 % Adaptation of the product27 % Lack of decision making capability 8 % Other 5 %

©Matti Haverila, Infacs Oy Summary: The prerequisities for efficient global marketing The framework of the operations of company. – Mission, Business idea, Objectives and Strategies Operational planning system – Strategic and Operational planning Clear and measurable objectives. Who sets objectives and participation to the planning process. Agreement, how control and evaluation will be done. Right, open and fair management style – set your own example – cooperative corporate culture – reasonable education – understanding of distances (geographical, cultural, and economical) – comparability

©Matti Haverila, Infacs Oy At Your Service!