International Marketing

1. Fundamentals of International Market Research Reference: HBR Article: Fundamentals of International Market Research

Key Informational Needs

What are the most attractive country markets? What is the degree of suitability of our products and services for target country customers? How substantial is the industry market potential in each market? What level of company sales can we anticipate? What do we know about the customers and their requirements? What do we know about distribution channel intermediaries?

Key Informational Needs

How qualied are potential distribution partners? What is the most appropriate mode of market entry? For example, should we enter via exporting, licensing, or foreign direct investment? How competitive is the market? What are the relative strengths and weaknesses of rival rms? What government regulations apply to our operations (e.g., regulations related to marketing, selling, pricing, and distribution)? What should be the key features of our marketing strategy?

Three Types of Research Methods

Descriptive Research: that is occurring. Provides an accurate description of something

Exploratory research: Seeks to discover general information about a topic that is not well understood by the marketer.

Causal research: can be used to test other phenomena as well, such as what might happen to sales if changes are made to a products design or if advertising is changed. If performed well, causal research can be used for forecasting what might happen if the changes are made.

The Knowledge Pyramid

Knowledge & insights refer to information and intelligence that has been processed, analyzed, and interpreted, and can lead to action.

Information and intelligence refer to facts, gures, and observations that have been organized or arranged around a specic theme.

Data refer to raw facts, gures, and observations that have not been organized or arranged.

Examples of How the Knowledge Pyramid Works

Data National trade statistics Information and Intelligence Arranged by a countrys imports and exports to nearby countries Knowledge and Insights Implications about the pattern of trade fows among countries, including the nding that some countries serve as gateways to others. Implications regarding the most appropriate locations of retail outlets; insights that aid in capacity planning; knowledge about how best to set up logistical arrangements Insights about the size of a market; implications about the concentration of customers; insights about what cities and regions to target in order to maximize the effectiveness of marketing activities.

Retail Outlets Arranged by size, location, and average turnover

Population

Arranged by age, region, and density

The Four Layers of Knowledge in International Business

International Transactional Knowledge
Required to offset financial and commercial risks Product Adaptation Financing Options Transfer Pricing Commercial Infrastructure Product Standards & Approvals Cultural Differences Decision Making Styles International Logistics Taxation Financial Regulations Market Access Intermediaries and facilitators Legal Climate General Pricing Tactics Accounting Tactics Channel Characteristics Regulations and Contract Laws

Country Knowledge
Required to offset Country Risk

Cross Cultural Knowledge

Required to offset Cross Cultural Risk

Language Negotiation Styles

Ethical Values Organizational Features

Knowledge about the Home Country Market

2. Dimensions of International Consumer Behavior

Reference: HBR Article: Fundamentals of International Market Research Page: 46 - 53

Dimensions of International Consumer Behavior

Psychological Profiles
Consumer Purchase Intentions

Sociological Profiles
Specific Needs and Tastes

Motives

The Buyers Cultural Values Tradition

Perceptions Personalities Attitudes Beliefs

Ethnicity

The Psychological Ingredients of Purchase Behavior

Motives
Motives are generally based on aspirational aspects of a persons selfconcept Motives help the consumer to establish its identity Aspirations, expressions of the consumers self-concept, are culturally bounded

Perceptions
Perceptions help consumers interpret the world around them and assign meaning to that world Consumers make a purchase based on their perceptions of the attributes of the marketers product Attributes can be concrete (price, warranty) or abstract (quality, value)

The Psychological Ingredients of Purchase Behavior

Personality
Refers to the distinctive and enduring patterns of thoughts, emotions, and behaviors that describe how the individual respond to the stimuli in the environment Personality can aid in identifying appropriate target segments and designing the most appropriate marketing strategies

Beliefs
Are formed on the basis of direct observation or information received from outside sources or by way of inference processes. The consumer learns or forms beliefs about an object and associates that object with a number of attributes.

The Social Ingredients of Purchase Behavior Attitudes

The totality of the consumers beliefs serves as the informational base that determines consumer attitudes Attitudes are the evaluations of brand attributes as positive or negative Attitudes are enduring and difcult to change.

Attitudes Influence purchase behavior in a least four major ways Utilitarian Orientation - The consumers with a utilitarian orientation is driven to consume products that fulfill vary practical needs Value-expressive Orientation Consumer seeks to reflect its selfconcept to the world via the brands he/she consumers Ego-defensive Orientation Consumer aims to protect himself from threats to his/her ego Knowledge Orientation addresses the consumers need for consistency

Target Marketing Selection

Reference: HBR Chapter: Target Markets and Modes of Entry

What makes global market selection and entry so difcult?

Cultural differences can lead companies to overestimate the appeal of their products or the strength of their brands

Administrative differences can slow expansion plans, reduce the ability to attract the right talent, and increase the cost of doing business

Geographic distance impacts the effectiveness of communication and coordination.

Economic distance directly in uences revenues and costs.

Measuring Market Attractiveness

Four key factors in selecting global markets are 1. 2. 3. 4. A market s size and growth rate A particular country or region s institutional contexts, A region s competitive environment A market s cultural, administrative, geographic, and economic distance from other markets the company serves.

Measuring Market Attractiveness

1. A market s size and growth rate Research by John Quelch and others suggests that Consumers increasingly evaluate global brands in cultural terms and factor three global brand attributes into their purchase decisions: A. what a global brand signals about quality B. what a brand symbolizes in terms of cultural ideals C. What a brand signals about a company s commitment to corporate social responsibility.

Measuring Market Attractiveness

1. A market s size and growth rate
consumers who perceive global brands in the same way appear to fall into one of four groups:
Global citizens rely on the global success of a company as a signal of quality and innovation. At the same time, they worry whether a company behaves responsibly on issues like consumer health, the environment, and worker rights. Global dreamers are less discerning about, but more ardent in their admiration of, transnational companies. They view global brands as quality products and readily buy into the myths they portray. They also are less concerned with companies social responsibilities than global citizens. Antiglobals are skeptical that global companies deliver higher-quality goods. They particularly dislike brands that preach American values and often do not trust global companies to behave responsibly. Given a choice, they prefer to avoid doing business with global rms. Global agnostics do not base purchase decisions on a brand s global attributes. Instead, they judge a global product by the same criteria they use for local brands.

Measuring Market Attractiveness

2. A particular country or region s institutional contexts

Khanna and others developed a ve-dimensional framework to map a particular country or regions institutional contexts. Specically, they suggest careful analysis of a countrys 1. Political and social systems 2. Openness 3. product markets 4. labor markets 5. capital markets

Measuring Market Attractiveness

3. Competitive Environment

The number, size, and quality of competitive rms in a particular target market compose a second set of factors that affect a companys ability to successfully enter and compete protably.

4. Cultural, Administrative, Geographic, and Economic Distance

Generic Strategies for Global Value Creation

Reference: HBR Chapter: Generic Strategies for Global Value Creation

Ghemawats AAA Global Strategy Framework

Ghemawat so-called AAA framework offers three generic approaches to global value creation. There are three generic strategies for creating value in a global context:

1. Adaptation 2. Aggregation 3. Arbitrage

Ghemawats AAA Global Strategy Framework

1. Adaptation Strategies (Adjusting to Differences)

Adaptation strategies seek to increase revenues and market share by tailoring one or more components of a companys business model to suit local requirements or preferences.

Ghemawats AAA Global Strategy Framework

1. Adaptation Strategies
Ghemawat subdivides adaptation strategies into ve categories: variation, focus, externalization, design, and innovation

Ghemawats AAA Global Strategy Framework

1. Adaptation Strategies

Ghemawats AAA Global Strategy Framework

2. Aggregation Strategies Aggregation strategies focus on achieving economies of scale or scope by creating regional or global ef ciencies. These strategies typically involve standardizing a signi cant portion of the value proposition and grouping together development and production processes. The objective is to exploit similarities among geographies rather than adapting to differences but stopping short of complete standardization, which would destroy concurrent adaptation approaches. The key is to identify ways of introducing economies of scale and scope into the global business model without compromising local responsiveness.

Ghemawats AAA Global Strategy Framework

3. Arbitrage
Arbitrage is a way of exploiting differences, rather than adapting to them or bridging them, and de nes the original global strategy: buy low in one market and sell high in another.

Favorable effects related to country or place of origin have long supplied a basis for cultural arbitrage. Legal, institutional, and political differences between countries or regions create opportunities for administrative arbitrage. Ghemawat notes, in a sense, all arbitrage strategies that add value are economic. Here, the term economic arbitrage is used to describe strategies that do not directly exploit cultural, administrative, or geographic differences. Rather, they are focused on leveraging differences in the costs of labor and capital, as well as variations in more industry-speci c inputs (such as knowledge) or in the availability of complementary products.

Ghemawats AAA Global Strategy Framework

Which A Strategy Should a Company Use A company s nancial statements can be a useful guide for signaling which of the A strategies will have the greatest potential to create global value. Firms that heavily rely on branding and that do a lot of advertising, such as food companies often need to engage in considerable adaptation to local markets. Those that do a lot of R&D think pharmaceutical rms may want to aggregate to improve economies of scale, since many R&D outlays are xed costs. For rms whose operations are labor intensive, such as apparel manufacturers, arbitrage will be of particular concern because labor costs vary greatly from country to country.

Ghemawats AAA Global Strategy Framework

Which A Strategy Should a Company Use Which A strategy a company emphasizes also depends on its globalization history. Companies that start on the path of globalization on the supply side of their business model, that is, that seek to lower cost or to access new knowledge, rst typically focus on aggregation and arbitrage approaches to creating global value Whereas companies that start their globalization history by taking their value propositions to foreign markets are immediately faced with adaptation challenges. Regardless of their starting point, most companies will need to consider all A strategies at different points in their global evolution, sequentially or, sometimes, simultaneously.