International Marketing

MKT303 International Marketing

Market entry Workshop 9

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What will we be learning? Week Topic

1 Introduction to International Marketing

2 Political and economic factors impacting international marketing

3 Social and technological factors impacting international marketing

4 Legal and environmental factors impacting international marketing

5 Assignment presentations

6 Study week (Attendance is compulsory).

7 Trade relations

8 Culture and communications

9 Market entry – an international marketing approach

10 Getting a product to the customer – international context

11 Product management and surviving in an international market

12 Future of international marketing and ethics

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Learning Objectives 1. Examine problems faced by firms in international business

when selecting a new international market 2. Assessing a country’s attractiveness in terms of its potential,

its membership of trading blocs, its competitive intensity and its entry barriers

3. Create a portfolio of the most attractive foreign markets to enter given the circumstances of the firm and the potential offered by the market

4. Recognise the different available modes for entering an international market and the advantages and disadvantages of each

5. Explain the differences between export-based entry modes, manufacturing-based entry modes and relationship-based entry modes

Why am I learning this?

Market entry explores how you enter a new market.

This is integral knowledge for any marketer considering international opportunities.

Workshop Activity

Revision

What did we discuss last week? Identify the three main points that you’ve learned during

last week’s class.

Share your thoughts with the rest of the class.

This Topic’s Big Idea

“If your dreams don’t scare you, they’re not big enough.”

Ellen Johnson Sirleaf

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International Market Selection

Two critical questions: 1. Which market?

• Which country and why?

• What are the advantage and disadvantages?

2. How to enter? • How do I serve this

market? • What are the costs and

opportunities?

Microenvironment (the firm)

Macroenvironment

Determine Suitable Markets

Stage 1: Domestic Regulation and Management Preferences

• Which international markets to exclude regardless of their apparent potential?

• Need to consider regulation and policy and what the organisation can do in a country.

• Outcome: exclude markets with unfavourable Australian regulations.

Examples

Trade restrictions between the domestic country and international (eg US and Iran)

Particular views of management towards countries

Stage 2: Initial Entry Assessment

• Which remaining overseas markets have the least attractive political and social environments?

• Which remaining overseas markets are least attractive because of their nature and potential size?

Examples Is there political instability? Do political processes make it too difficult to do business? Is the market size too small?

Stage 3: Competitive Environment

• Consider the amount of competitors in a country

• Eliminate overseas markets with substantial trade barriers.

• Countries protecting domestic industry or favouring other countries to trade with.

• Overseas markets to avoid when competitors are saturating the market.

Examples Are there too many competitors? Do local subsidies exist? Are there trade barriers through tariffs or quotas?

Stage 4: Market Responsiveness

• Which remaining international markets prohibit the presence of your type of company?

• Which international markets are unattractive because of costs and problems of reaching them from the home market?

Examples Do laws or cultural values prohibit operations? (eg alcohol in Saudi Arabia) Is it too difficult to get the product/services to consumers due to transport or other factors?

Stage 5: Internal Trade-off Analysis

• Unattractive markets due to commitment of resources and accessibility.

• Do any of the markets still under consideration fail to meet the company’s objectives or match its competitive advantages?

Examples What costs are required to enter the market? Does the company have priorities elsewhere?

Workshop Activity

In groups of three to four:

Recall the PESTLE analysis – how would this tool help you with these

five stages?

Share your discussion with the rest of the class.

Depth of Entry Answers the questions: • Does the organisation

want to invest a substantial amount of resources?

• Should multiple countries be entered at once?

• What risks are the organisation willing to take?

• Timing? Source: This Photo by Unknown Author is licensed under CC BY-NC

Incremental Entry

• Learn from previous market and enter based on these learnings.

• Fewer resources and risks; provides for learning experiences; may preclude economies of scale.

Source: Disney

Disneyland believes in an incremental expansion approach learning from each city they open before stating another. 1954 – Anaheim 1965 – Orlando 1971 - Florida 1983 – Tokyo Disneyland 1995 – Disneyland Paris 2005 – Hong Kong Disneyland 2016 – Shanghai Disneyland

Simultaneous Entry

• Open in multiple countries at the same time.

• Resource intensive, higher operating risk, acquire overseas experience rapidly, facilitate economies of scale.

Source: https://investor.uber.com/news-events/news/press-release-details/2020/Uber-Announces-Results-for-Fourth-Quarter-and-Full-Year-2019/

Uber Between 2013 to 2014 Uber accelerated its international expansion. The company now operates in about 400 cities, up from fewer than 100 at the start of 2014. Uber’s international business made a loss of $237 million in 2014. 2013 – loss was $32 million. 2019 – loss was $615 million

Concentrated Approach

• Resources concentrated in limited number of markets, reduced costs, operating risks, economies of scale.

• Coca Cola is an example of a brand that uses a concentrated approach.

Source: Coca Cola

Diversified Approach

• Spreads risk exposure, broadens market knowledge, strategic flexibility, resources spread thinly

• Virgin is a brand that uses a diversified approach

Source: http://marktruelson.com/a-branded-house-masterpiece/

Workshop Activity

Let’s watch this video: bit.ly/mkt303virginbrands

Should Virgin continue the diversification strategy?

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Modes of Entering Foreign Markets: Overview

1. Export-based entry 2. Manufacturing-based

entry 3. Contract

manufacturing, offshoring and countertrade

4. The ‘born global’ entry mode

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1. Export-based Entry • In indirect

exporting, a manufacturer turns international sales over to a third party,

• while in direct exporting, a manufacturer handles the export process itself.

• Indirect export – Minimum resources

commitment – Third party distributor

• Direct exporting – Greater resources/control – Foreign agent – End-user

• Establish sales office in foreign market

• Licensing • Franchising

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International Franchises • A franchise is a type of license

• A party (franchisee) acquires the license to have access to a proprietary knowledge, processes and trademarks (franchiser)

• Allow the party to sell a product or provide a service under the business's name.

• Increasing in importance domestically and internationally

• Shifts costs to the franchisee (average $500,000 in Australia)

Workshop Activity

• McDonald’s Franchise • THE FOUNDER Official Trailer (2016) • McDonald's Franchise Movie HD:

bit.ly/mkt303founder

• Can you think of any other recently successful franchise? Share it with the person sitting next to you.

2. Foreign Direct Investment

• Often referred to as foreign direct investment (FDI)

• Can take a number of forms: – Joint venture – Consortia – Acquisition – Greenfield operation

• Balance risks and return

Joint Venture • A joint venture (JV) is a

business arrangement in which two or more parties agree to pool their resources for a specific project.

• This task can be a new project or any other business activity.

• In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.

• The venture is its own entity, separate and apart from the participants' other business interests.

Examples: Queens Wharf in Brisbane - Joint venture between Star Entertainment Group, Chow Tai Food and Far East Consortium.

Source: https://queenswharfbrisbane.com.au/news/destination-brisbane-consortium/

Workshop Activity

• In groups research examples through of the following modes of entry and then share with the class.

• Australian export company • Australian-China joint venture company • Australian based franchise company

Consortia & Acquisition

Consortia • A consortium is a group

made up of two or more individuals, companies or governments that work together toward achieving a chosen objective.

Acquisition • An acquisition is a corporate

action in which a company buys most, if not all, of another firm's ownership stakes to assume control of it. An acquisition occurs when a buying company obtains more than 50% ownership in a target company.

Greenfield Operation

Greenfield Operation • A greenfield investment is a

form of foreign direct investment where a parent company builds its operations in a foreign country from the ground up.

• In addition to the construction of new production facilities, these projects can also include the building of new distribution hubs, offices and living quarters.

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3. Contract Manufacturing, Offshoring and Countertrade

• Contract manufacturing – Marketing firm contracts

the manufacturing of the product to overseas manufacturers but retains control of the marketing of the product

• Offshoring – Involves the relocation to

another country of business processes that were previously undertaken by the firm itself

• Countertrade – A foreign market entry

method that involves linking of an import and an export transaction in a conditional manner

• Each option has associated risks and returns

• For example: Contact manufacturing – what if the overseas manufacturer copies the product?

4. Born Global • Born global is designed with

a vision of becoming global • Globalises rapidly without

any preceding long term domestic or internationalization period.

• Usually born global companies are small companies, technology oriented companies that operate in international markets from the earliest days of their establishment.

Source: Uber

Next Week

Getting the product to the customer – an international approach.