International Marketing: Capital Markets & Information

• International marketing was presented on 01.08.2024

Overview

• Includes:
  • Introduction to international marketing, capital markets and information efficiency
  • Stock & business

Capital Markets & Informational Efficiency

• Transactional or cross-border business activities are done by expanding from domestic to international markets to achieve economic goals and competitiveness
• Coordination is crucial because national markets are interconnected; actions in one market affect other markets
• It is impossible to develop strategies for one market without considering others
• National economies are increasingly interconnected due to developments like:
  • Creation of economic and monetary unions, decrease trade tariffs and establishing free trade zones
  • Companies becoming increasingly mobile and barrier-free communication across borders from technology advances

International Marketing

• The process of expanding into and operating within global markets using specific marketing-mix tools
• Companies respond to issues that arise from crossing national borders: information demand, business risk, complexity, and uncertainty
• Marketing mix: choosing and adjusting marketing tools and deciding how intensely to use them to meet marketing objectives
• Marketing mix is associated with the four P's: product, price, promotion, and place (distribution)

Information Demand

• Additional information is needed due to foreign to domestic market differences
• Examples: legal system, geography, culture, or competitive environment
• A particular type of additional information is cultural features of national markets
• Knowledge about a culture does not equal experienced knowledge from traveling or relocating employees

Business Risk

• Companies face greater uncertainty operating in a foreign market compared to a domestic market, when information is limited
• This is linked to information demand
• The outcome is unpredictable when there is insufficient information, which leads to uncertainty

Complexity

• Complexity in management tasks increases when developing new aspects of a business: innovation, technologies, new markets
• This always has greater risk.
• Management responsibilities and marketing tasks are interdependent
• Careful preparation and decision-making is needed due to the needed skills of management working transnationally
• At the management level, crossing borders has 2 dilemmas:
  • How to enter a new national market
  • How to function within a new national market

Uncertainty

• Entering a new market is high risk because of the degree of uncertainty
• This requires a high demand for information
• Effective responses to uncertainty are:
  • Designing measures to procure necessary information to make data-driven decisions
  • Modeling different scenarios and analyzing consequences to answer questions of whether and how
  • Experience helps management improve their ability to assess different marketing strategies and instruments

Market Development

• This is beginning to operate in a new market
• Both information demand and business risk decline during market development

Feedback

• Getting feedback from the market allows for data-driven decisions
• Responses provide feedback on information demand, business risk, and complexity
• 3 main types of feedback define the scope of nation marketing activities: supplier, consumer, and competitor

Supplier Feedback

• This provides insight from producers of goods and services, as company goals, and the financial position:
  • Market position: market share, sale, market coverage
  • Cost: efficiency and productivity are important to achieve an objective
  • Profitability: profit and return on capital
  • Financial goals/liquidity
  • Social goals: security and job satisfaction
  • Prestige goals/image recognition

Fixed Costs

• Fixed costs grow steadily for companies, primarily fixed labor costs, in addition to R&D, capital, and maintaining infrastructure.
• Infrastructure costs are offset by greater sales volumes, leading to distributing those fixed costs and lowering costs per unit
• The distribution of fixed costs is known as "economies of scale."
• Companies internationalize their activities to realize economies of scale

Case Study UMTS (GSM – UMTS – LTE) – Consumer Feedback

• Mobile network operators invested to offer UMTS technology
• T-Mobile bought UMTS services in Germany and Europe to leverage operational knowledge from the German market for multiple locations.
• Cross-border exchange of information and goods impacts national marketing activities by providing consumer feedback.
  • Consumer preference on cellular usage
  • The spread of consumer and consumer buying behavior such as quickly adopting tech increases consumer needs
• Increased standardized consumer's needs are related to standardization of information and the Globalization of markets
  • Easier access to info has created a need for coordination, which means companies must collect, analyze, and distribute info about supply and supplier behavior
• Liberalizing information and communication markets simplifies the gathering of information but requires planning and coordination by the companies
• Internet has allowed consumers, companies and merchants, to choose between regional and national markets
• Arbitrage occurs when consumers take advantage of price differences in different markets
• They purchase from one market and sell the same product in another at a profit
• Charging different prices across different markets for the same product is differentiated/differential pricing

Competitor Feedback and International Marketing

• Airline competition grew after deregulation
• They formed global networks for worldwide transportation
• After Lufthansa, United Airlines and others founded the Star Alliance other carriers internationalized and joined international networks
• Competitor feedback is important for:
  • Development of international commercial activity during planning, trialing, and continuing international commercial activities
  • Competitors' behavior of price cutting and market entry forces a change in company strategies across all markets
  • Competitive positions can reduce an international company’s “degree of freedom” in business activity
  • Competition assessment is complex, especially when competitors cooperate in some segments and compete in others

Definition of International Marketing

• Requires gathering info and strategy implementation in the international context while taking advantage of economies of scale
• Risk, uncertainty, and complexity are relevant when operating across borders
• Tasks involve: accessing and managing relevant feedback (supplier, consumer, and competitor feedback) at the business segment level
• Also coordinating national marketing activities for new markets and optimizing profits across markets

Environmental Factors

• Technological, political-legal, and socio-cultural factors characterize international business
• Technological factors are influential on the development of international markets.
• Advances in communication and transport/freight impact labor distribution, management, and production
• Reduced costs are associated with sourcing materials, producing goods and services, and selling them multiple locations.
• Available technology varies in different locations, affecting decision-making of suppliers, consumers, and competitors

Political-Legal Factors

• These involve the stability of a country with the development and implementation of their legal systems of domestic and international legal structures
• Qualitative methods include country checklists that determine the degree of risk factors, such as currency and security risks
• Quantitative methods determine the intensity of specific risk in business, such as the BERI and ICRG indexes
  • The BERI and ICRG indexes are indicator models for determining risk values for individual countries.
  • BERI is the average sum of political, operative and investment risk, where max is 100: no risk and min is 0: full risk
• Cross-national trade barriers are factors when analyzing political-legal factors.
• Free trade agreements reduce cross-national barriers:
  • Examples: ASEAN, NAFTA, and GAFTA
  • Common markets: The European Union and Mercosur

Socio-Cultural Factors

• Essential for designing international market policies such as when cultural differences affect communication and product introduction, and leadership behavior of managers
• Geert Hofstede's 5 cultural dimensions characterize a country's culture:
  • Power distance: High power distance means that people accept and expect an unequal power distribution
  • Low power distance societies have more egalitarian policies
  • Individualism: Individualistic societies have loose bonds between members
  • Collectivist societies have strong group integration
  • Masculinity: Strong masculinity leads to competitive and assertive behavior, while weaker masculinity emphasizes modesty and care
  • Uncertainty avoidance: Strong uncertainty avoidance makes people seek security and avoid risks
  • Weaker uncertainty avoidance means people are more open to taking risks.
  • Long-term orientation: focuses on the future, emphasizing values like endurance and thriftiness
  • Short-term orientation values the past and present, respecting traditions.

Buying Behavior

• Is influenced by socio-economic structure and values
• Sinus-Milieus: model that classifies consumer target groups according to differences in attitudes and values
• These target groups cross national borders
• It groups consumers into “milieus” like traditional milieu and new middle-class milieu.
• There are many product variations like dish soap and yogurt
• Other variations are needed due to climate, religious reasons etc

Organizational Buying Behavior

• Focuses on centralized procurement processes to bundle resources and strengthen competitiveness
• Prices are negotiated centrally rather than in individual countries.
• It involves multiple organizations and personalities, country-specific demands, and emphasizes standardization with high supply and demand interaction

Buying Behavior as a Whole

• Societal and cultural conditions are becoming homogenized
• Cultural changes lead to contradictory behavioral patterns
  • Adapting across borders as customer behaviors converge
  • Resistance is growing; consumers favor regional and cultural products. Noticeable when comparing the Western world to the Arab world

Reasons for Consumer Needs Convergence

• Similar socio-demographic trends in industrial nations, like smaller families and longer life expectancy
• Societies are integrating foreign cultures through education institutes
• Advancements in transport and communication with cheaper flights and widespread internet use

Company Reaction

• Standardizing offerings and centralizing decision-making
• US and Japanese companies in Europe use standardized advertising strategies, viewing EU countries as similar
• Economies of scale drive consumer needs convergence by enabling price reductions

Market Segmentation and Market Selection

• Market segmentation divides a heterogeneous market into homogeneous sub-markets by using the distinct features of actual and potential buyers
• There are 2 tasks of selecting and developing segments
• Depending on the company strategy, 2 approaches can be taken

Multinational Market Segmentation

• Focuses on difference b/w countries and steps are organized in multiple stages
• Strategy is ideal for highly differentiated products, polycentric and ethnocentric orientation, similar to domestic market
• Task flow:
  • 1st: exclude countries that do not meet company reqs
  • 2nd: chose national market with potential development consumers are segmented
• Transnational segments are created when similar target groups are identified in multiple countries
• “Born-global” companies with a global marketing strategy from the beginning of operations, like Google

Features of Multinational Market Segmentation

• Used as a portfolio structure for classification of national markets
• Evaluation uses criteria for market attractiveness such as:
  • Market growth for a specific product, market volume, price level, population growth, and political stability
  • The possibility of establishing production in the respective country
• Also criteria for evaluating barriers to entry of norms and standards for product, state regulations, and customer loyalty
  • As well as language difficulties, competition within the market, and economies of scale of established competitors
• Criteria is inexpensive, assessable, accessible, and have data from secondary source countries' statistical offices
• Data quality strongly correlates with a country's level of development, but data can be influenced by political situations and comparisons can be difficult
• Strategy evaluation methods include checklist and scoring techniques

Market Segmentation

• Criteria to subdivide and select a market needs to be reasonable
• It relies on having economic, sociodemographic, political-legal, geographic, technological, and cultural variables

Global Market Segmentation

• A one-step approach for selecting countries is based on similarities, such as Europe
• It relies on Levitt's convergence theory and on consumer's lifestyle and behavior
• Strategy is used for global brand management, to standardize marketing and geocentric or regio-centric orientation
• It is more complex, but right approach for large, global brand in advanced internationalization stage based on classification.
  • Classification is through cross-national sociodemographic, psychographic, or behavioral characteristics.
  • Focus shifts to identifying worldwide target groups like teens with the same interest or middle-aged woman with disposable income

Other Market Approaches

• Multi-dimensional approach: utilizes single constructs of lesser complexity or multi-attribute constructs of greater complexity.
• Lifestyles: are complex behavioral patterns influenced by constructs like values and personality
• With BMW, there was a consumer profile shift: a shift from "social climbers" to more family-friendly consumers
• Consumers are categorized as:
  • Professionals with families called"Upper Liberals, and used the X5 vehicle
  • High-earning entrepreneurs and wealthy traditionalists called "Post-Moderns" & "Upper Conservatives" and used the Rolls Royce Phantom
  • Family-oriented buyers, with near-premium brands called “Modern Mainstream” and launched Mini and 1 Series models
• "GfK Roper Consumer Styles” did an analysis of the world to define 8 lifestyle segmentations following “Euro Socio Styles"

US Lifestyle Segmentation

• This is conducted according to values and lifestyles (VALS) developed by SRI International
• Consumers are segmented according to their primary motivation and resources
  • Dreamers are motivated to achieve happiness, Adventurers are driven by passions, and Open Minds seek self-actualization
  • Homebodies desire material security, and Organics search for sustainability while Rational-realists value hard work and Settlers peace
• Companies can segment consumers based on: preferences for products, interactions, ability to decide and their power and negotiation skills

Market Segmentation in the B2B Sector

• Client segmentation is easier in B2B markets; because the customers are international companies, it facilitates new market segmentation
• Analyzing new customers needs qualitative judgment for their values, and policies, as well as quantitative criteria for power and ordering patterns
• There are different segmentation options for the B2B sector:
  • Standardized product producers use customer segmentation
  • Producers of more limited products segment through direct contact to concrete groups
  • Those with few relations have a follow the customer system
• A case study features Long-term customer cooperation of Voith AG and used their global impact for their clients

Market Entry

• Strategy requires management to make 2 decisions, focusing on entry and timeline
  • Entry: export, franchise, joint venture, etc.
  • Timeline
• Mode of entry dictates organization type:
  • Sales are made using sales representatives or permanent offices through channels without intermediaries in direct export
  • In contrast sales are made via third parties in Indirect export
• Licensing follows contracts that allow the licensor allows licensee to use their property such as contract
• Joint ventures have partners to establish a company with shares in profits and rights but this is not always the case through a subsidiary model
• An Evaluation can then be made to direct strategic decisions based on different modes of action and risk

Evaluation Methods (4 Steps)

• Check advantages of differentiation and standardization
• Check the resources/competencies and make a corresponding strategy
• Evaluate the degree of control in a foreign country
• Evaluate the overall risk

Evaluation Criteria and Questions

• How well is the strategy being adapted to new locations?
• Does standardization achieve cost-benefit economics?
• Evaluate potential risks, control and resource influence
• Determine dependency for the firm such as it can use efficient transfers of exiting resources
• Consider reconfiguration for the location

Timing Decisions

• Important criteria for a market and can be differentiated in different ways
• These different methods of analysis are used to analyze if there are any potential competitors
• One approach involves strengthening a marker then expanding, to facilitate entry into the foreign market
• Another includes entering the selected market with high resource management
• An alternative involves being involved before any competition occurs and establishing
• One can be a ‘free-rider’ where one lowers costs at significant risk
• One can also ‘test waters’ before expansion but it comes with barriers that others set up

Tesco Case Study

• Employs a mixed approach with expanding to other nations while trying to adapt
• The expansion then grew to nearby Europe and then shifted to Asia
• A large launch then took place in the US using these concepts and market data

Evaluation Criteria and Methodology

• It’s important to exit a market in a clean way through evaluation
• The impact can be seen through the company and the economic success as well as the stakeholders
• There are also barriers to market exist:
  • Strategic barriers from companies in the supply chains
  • Barriers involving difficulties from different company divisions during exit
  • Management barriers such as company image

Sunk Costs

• It is important to account for unrecoverable costs from an exit
• There are exogenous and endogenous sunk costs which influence the market

Gathering Market Research

• Increased market research is needed when farther away
• This can come from primary such as surveys and field studies
• Market research involves assessment and analysis
• The collection needs to quantitative data to provide an in-depth picture specific to location.

Gathering Market Data

• Market research helps with the functions of new incentives, forecasting, choice, assessing, and knowledge.
• The research can be useful for functions like new and old clients
• Further analysis includes different areas of impact as well

Methods for Assessment

• There are many ways to collect market data based on needs from simple surveys to studies
• An important factor is non influence of the surveyors and to account for the quality of the data
• Secondary sourced data from 3rd parties can be essential in some areas

International Surveys

• Secondary data can be collected official studies or from competitors
• Internal may utilize local staff and or complaints
• Other methods of surveys depend on the data needs such as more hands on approaches for personal reasons

Data Analysis Tools

• Focus on more clear and direct methods such as questionnaires and targeted
• In depth surveys involve a more hands on method that allows for follow ups
• Surveying also means to evaluate products reactions

Industrial Sectors

• Some sectors such as industries require very specific targeting and assessment
• Other factors such as consumers good
• Trade sales also require significant research

International Marketing Sector

• Industries are tied more to internal factors whereas goods are tied more to brand image.
• Business types are product, systems, etc depending on need
• Careful preparation and analysis helps solidify long term success through market research

Consumer Good Sectory

• Marketing happens through brand image and customer retention

Factors that Influence Market Success

• Some tools are the most key such as sales tools
• The right products will lead increased brand awareness

Different Models

• Many models will integrate a lot of sectors from supply to sales and this can be a major change

Brand Policy

• It’s tied to perception and consumer culture
• Innovation also helps drive customers that helps adjust consumers who have had problems over time.

Product Policy

• Product mix refers to numbers in supply chain
• It requires constant analysis

Product Innovation

• The levels must be reviewed depending on local consumers
• The marketing and supply must be optimized as well

New Products

• The goal is to get more consumers through the supply chain process

International Products

• You need to use the right socio and environmental factors as well

Degree Of Innovation

• The innovation must have proper testing and research to test it was successful

Standardization

• There must be an amount to test the target group and have the correct results
• Products need to be examined on many factor to find issues or improvements

Brand Policy

• Focuses must be very detailed and be able to market easily

Market Segmentation And Policy

• Brands need to be very adaptable

Pricing and International Markets

• It impacts various countries due to limitations
• You need good marketing that provides a sustainable image with strong scaling.

Price Structures

• There can be mixed strategies and some issues

Price Differentiation

• There must be costs set to scale at high levels

Market Factors

• You need to account for competition and any issues

Price Adjustments

• This relates to all the various laws and areas you must account for

Discount Policy

• This accounts for many marketing tools and psychology tools

International Distribution

• A strategy needs to have proper decisions to be successful.

Marketing Success

• Requires long term planning and market
• It requires local data collection

New Structures

Requires analysis and the right connections to other nations to facilitate the right resources