Assignment 220
Delp10
B207BPowerpoint-Week31.pptxB207B
Shaping Business Opportunities II
Block 2 Session 13: International marketing in a global context
The global marketplace
Today’s businesses operate in a global marketplace.
most companies will find themselves competing against global businesses
Operating only in their domestic markets
Wishing to expand by offering their services or goods to international market
International marketing: macro and micro environment factors
Go to reading 20
Block 2- Reading 20
International marketing- the global marketplace
The global marketplace
Transnational company (a multinational company): defined as ‘a firm that has the power to coordinate and control operations in more than one country, even if it does not own them’.
Global firm defined as ‘a firm that, by operating in more than one country, gains R&D, production, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors and ‘sees the world as one market’’
Reading 20: International marketing- the global marketplace
Globalization
Globalization refers to “greater permeability and interdependence across national boundaries and is an economic, political and cultural phenomenon”
Risks
possible economic and government instability
different legislative restrictions
trade barriers
diverse cultural preferences and practices.
Reading 20: International marketing- the global marketplace
Globalization
When considering whether to operate globally, an organization goes through the marketing process:
pursuing the organization's mission, vision and values by analyzing the market, choosing a marketing strategy, formulating the offering and implementing, monitoring and evaluating the marketing programmed.
Reading 20: International marketing- the global marketplace
Triggers for international expansion
Saturated domestic markets: This is where there are limited opportunities in an organization's domestic market.
Small domestic markets: For organizations in some industries, larger markets are necessary for survival where the scope of domestic markets is too small. Technology industries that involve large investments into research and development need large markets to cover their costs.
Low-growth domestic markets: Economic recession in an organization's domestic market can motivate it to seek growing markets overseas.
Customer drivers: An organization might extend its operations globally as a result of expectations by customers for the organization to have global presence (for example, airlines) or to serve customers who have themselves expanded globally.
Reading 20: International marketing- the global marketplace
Triggers for international expansion
Competitive forces: Global expansion by an organization’s competitors might provoke it to follow suit or to compete against global organizations encroaching on an organization's domestic market.
Cost factors: An organization might try to reduce its costs by taking advantage of lower labor, energy or raw material costs overseas or benefiting from economies of scale by serving a larger market.
Portfolio balance: Operating in variety of markets allows temporarily unfavorable conditions in one country to be offset by more favorable ones in others.
Reading 20: International marketing- the global marketplace
The macro environment: STEEPLE
STEEPLE stands for:
Social
Technological
Economic
Environmental
Political
Legal
Ethical
Reading 20: International marketing- the global marketplace
Additional aspects to STEEPLE
Trading systems: Individual governments and trading blocs may try to protect domestic companies, control trade and raise revenues through a variety of means. These may include imposing charges (tariffs or duties) on foreign companies, setting quotas on goods that can be imported, etc..
Socio-cultural considerations: It can be easier for an organization to operate, at least initially, in countries that are socially and culturally similar to its domestic market and also close geographically before expanding further afield.
Technological considerations: The level of technological development of a country can affect the viability of operating in it.
Reading 20: International marketing- the global marketplace
Additional aspects to STEEPLE
Economic considerations
Organizations need to take account of a range of economic considerations in prospective foreign markets, including:
economic development
Income distribution
employment level
exchange rate differences and stability
transport and communication infrastructure.
Reading 20: International marketing- the global marketplace
Additional aspects to STEEPLE
Political and legal considerations: Some countries are more encouraging to international trade than others. Countries also vary in their political stability and level of regulation, which can affect their attractiveness to companies considering trading in them.
Ethical and legal considerations: In a globally connected world, news spreads fast and revelations of any ethical issues arising from an organization's operations in less developed countries can be damaging to its reputation and business. So while organizations may seek to minimize costs by operating in countries with lower costs, they also need to consider the potential risk of ethical issues that could arise, such as subcontracting that involves child labor.
Reading 20: International marketing- the global marketplace
The micro environment
a range of factors in both an international market and an organization that need to be taken into account include: Market attractiveness includes assessment of:
the market’s size and growth rate: growth rate is particularly important for predicting future demand.
competition: the strength and volatility of competition.
costs of serving the market: principal costs include distribution and control, which increase with distance, but other costs that may need to be considered are labor and marketing expenditure.
profit potential: characteristics of the market may limit the potential for profit.
market access: existing links between suppliers, distributors and customers may inhibit access to a market.
Reading 20: International marketing- the global marketplace
The micro environment
The organization's capabilities include:
skills: whether the organization already has or can buy in the necessary skills to market abroad
resources: whether the organization has the necessary resources to service the market to compete in it.
product adaptation: whether the offering can be adapted to the needs of the market if required (either because of local preferences or regulations)
competitive advantage: whether the organization has a competitive advantage in the market.
Reading 20: International marketing- the global marketplace
Advantages and disadvantages of globalization in the micro environment
Reading 20: International marketing- the global marketplace
| Disadvantages | Advantages | Stakeholders |
| Greater risks | Potential for greater profitability | The organization |
| Erosion of own culture Separation from production | - Potential to meet needs Lower prices | Consumers |
| Regulation by MNC | Opportunities for work | Marketing intermediaries |
| Regulation by MNC | Opportunities for orders | Suppliers |
| Increased competition from MNCs | Some consumers will value individuality and authenticity | Competitors |
| Erosion of national culture | Convergence of culture | Publics |
International marketing: entering and operating in international markets
Go to reading 21
Block 2- Reading 21
International marketing-
Entering and operating in international markets
International markets
Learning outcomes:
Modes of entry
Globalization vs. customization
Reading 21: International marketing – entering and operating in international markets
Mode of entry
Indirect exporting
Direct exporting
Joint ventures
Strategic alliances
Global strategic partnerships
Licensing
Franchising
Contract manufacturing
Management contracting
Direct investment
Reading 21: International marketing – entering and operating in international markets
Indirect exporting
An organisation may choose to start by exporting indirectly through an independent organisation based in the organisation’s domestic market, by buying its goods to sell abroad, selling them on behalf of the organization as an agent, allowing the organisation to use its distribution or as a cooperative acting for a number of producers
This approach enables an organisation to utilise the independent organisation’s exporting expertise, so requires less investment and less risk.
Reading 21: International marketing – entering and operating in international markets
Direct exporting
Direct exporting is where an organisation exports its offerings itself and manages contracts in its international markets, transportation and documentation and the marketing mix.
Exporting may be handled by a domestic-based or foreign-based office, through intermediaries in the international markets and/or via the internet.
An example of direct exporting using intermediaries and/or the internet is niche sports equipment and clothing, such as for figure skating.
Reading 21: International marketing – entering and operating in international markets
Joint ventures
Joint ventures involve two or more organisations forming a partnership, in which the costs, risks and profits are shared between the domestic and foreign organisations.
If they create a separate entity for the partnership, it is called an equity joint venture, otherwise it is known as a contractual joint venture
For example, airlines engage in contractual joint ventures to pool routes to provide passengers with a more extensive range of travel options
Reading 21: International marketing – entering and operating in international markets
Strategic alliances
Strategic alliances are similar to joint ventures, being defined as ‘cooperation between two or more industrial corporations, belonging to different countries, whereby each partner seeks to add to its competencies by combining its resources with those of its partner’
Reading 21: International marketing – entering and operating in international markets
Global strategic partnerships
Global strategic partnerships are defined as ‘link-ups between companies from two or more regions which jointly decide to pursue a marketing opportunity, share resources and combine ideas’.
These are common in high technology, automotive and power technology industries, with partners sometimes dividing up markets between them or each using their own brand but the same technology or design to pursue market opportunities individually.
Reading 21: International marketing – entering and operating in international markets
Licensing
Licensing involves an organisation selling the rights to use its technology, patent, trademark or know-how to one or more organisations in foreign markets
for an agreed time period in exchange for royalty payments based on the volume of sales or some other consideration.
A prominent example is the wide range of Star Wars-themed products licensed to many different companies globally by Lucas Film Ltd.
Reading 21: International marketing – entering and operating in international markets
Franchising
Franchising is a type of licensing, whereby companies in foreign markets pay to use the product or trade name belonging to an organisation.
This allows an organisation to enter foreign markets using resources and local knowledge supplied by the franchisees.
A key difference is that franchising agreements offer an organisation more control over the use of its intellectual property than licensing through the provision of support services.
Reading 21: International marketing – entering and operating in international markets
Contract manufacturing
Contract manufacturing involves contracting a manufacturer in a foreign market to produce an organisation’s product or service.
Some clothing and automobile brands use contract manufacturing.
It saves an organisation on plant investment and transportation and may reduce tariff costs, but at the expense of some reduction in control
Reading 21: International marketing – entering and operating in international markets
Management contracting
Management contracting involves the export of management services rather than products;
The domestic organisation supplies the know-how and the foreign organisation provides the capital
The management by Hilton Hotels of locally owned hotels around the world that use the DoubleTree by Hilton brand and are managed by Hilton.
Reading 21: International marketing – entering and operating in international markets
Direct investment
Direct investment involves the greatest level of commitment to a foreign market and the highest level of control through ownership of a foreign subsidiary or division, but also entails many risks.
Foreign subsidiaries may operate with a high degree of autonomy that enables them to adapt to local markets.
Examples include car companies such as Volkswagen (VW) and Renault and the fast-moving consumer goods company Unilever.
Reading 21: International marketing – entering and operating in international markets
Globalisation versus customisation
Globalisation involves the permeability across borders of more than just goods and services; it also involves social and cultural trends
Organisations therefore need to decide how much they can standardise their approach and how much adaptation is needed when entering foreign markets.
Different segments (customer groups that have similar needs) have differing characteristics and the same applies when serving international markets; they cannot be treated as having identical needs and preferences
Reading 21: International marketing – entering and operating in international markets
Globalisation versus customisation
An organisation might also invent a new product for an international market.
For example, the global health company Vestergaard developed the LifeStraw® water filter that converts contaminated water into safe, clean drinking water for people who don't have access to safe drinking water
Recognising the needs of different groups of people, Vestergaard subsequently adapted the LifeStraw® technology to produce water-purifying products for in-home use and for purifying larger volumes of water
Reading 21: International marketing – entering and operating in international markets
Globalisation versus customisation
Marketing communications may also be adapted to varying degrees. Some advertisements may be suitable for using in multiple international markets,
whereas others need tailoring to cultural conventions and national contexts.
Some products such as perfumes and cars need little in the way of dialogue, as the short storyline of an advertisement can be communicated visually with perhaps a brief voice-over at the end and perhaps a disclaimer that the model featured may differ from the specification in a particular country in which the advertisement is shown.
Reading 21: International marketing – entering and operating in international markets
Globalisation versus customisation
There are also international differences in the use and reach of marketing communications channels.
For example, there are differences between countries in advertising regulations, coverage by national versus local newspapers, magazine readership and internet penetration, as well as cultural differences in taste, humour and what is considered acceptable.
Reading 21: International marketing – entering and operating in international markets
Globalisation versus customisation
The cost to service international markets will be higher owing to the need to transport goods, pay tariffs, etc.,
but customers in foreign markets may or may not be able to pay higher prices, so the formulation of the product may need to be adjusted to provide cheaper versions.
Distribution networks can also vary considerably in different international markets, depending on local customs and infrastructure.
For example, available transport networks will influence distribution options and the retail patterns vary from many small local stores to large out-of-town retail parks.
Reading 21: International marketing – entering and operating in international markets
Companies considering entering emerging markets need to consider the characteristics of three main market segments
premium segment – customers with high purchasing power, a willingness to pay for internationally admired brands and seeking highend products with advanced features
middle-market segment – customers with a mid-level income, seeking value and choosing products with a ‘good enough’ performance versus price ratio
low-end segment – customers only able to pay for basic products at a meagre price.
Reading 21: International marketing – entering and operating in international markets
Globalisation Difficulties
MNCs may find it difficult to compete against local companies in low-end segments, but this segment does encourage innovation.
Set against the opportunities, developing and emerging markets present a range of challenges
including a lack of operational infrastructure; weak legal protection for intellectual property; limited capabilities among suppliers, including unpredictable customer behaviour; and potential weakening of a premium brand image
Reading 21: International marketing – entering and operating in international markets
