International Marketing Strategy and Planning

• These are study notes for ESCP Marketing course

Session 1 - 13.01.2025 - Introduction

• Key questions involve what decisions to make, when, why, and based on what data

• Also involves consideration of options, pros and cons, risks, and mitigation strategies

• International marketing decisions entail execution in diverse business contexts

• International marketing decisions are taken in steps to penetrate, develop, and animate foreign markets for sustained business performance

• Internationalization steps are:

• Measuring the attractiveness of a country

• Measuring the assets of a company

Session 2 - 20.01.2025 - Researching international consumers and markets

• Focus involves the pitfalls and protocols in international market research
• Three types of international marketing research:
• Gathering general macro-environment information about a country, such as population, income distribution, education level, and urbanization; GDP is an example, but it does not account for grey market or informal economy
• Collecting consumption-related data like digital and media penetration, sustainability issues, and habits; digital banking in Kenya via GSM (2G) network broke digital divide with World Bank, public organizations, and government support to equip Kenyans (farmers) with means to trade using simple GSM telephones, leading to online banking development
• Acquiring specific information, directly applicable or useful for developing 4P decisions like local distributors in a specific category or assessing price consciousness

Potential Pitfalls of International Market Research

• Risk of ethnocentrism is present; where people behave, think, and consider things as "normal", Unilever in Brazil adapted to field conditions with no running water or electricity

• Time frames and costs will vary; Europe has vast discrepancies, Europe is not a single market

• For example, Spain and the Netherlands require different strategies

• Internet research relies on the internet penetration among the population

• Important to check some beliefs against data

• Education and background affect negative information which makes people more sensitive to negative information

• There may be a feeling of being privileged

• It is important to acknowledge that people do not know certain things

• 10 reasons mankind is wrong about the world: "dramatic instincts"

• Gap: Look for the majority

• Negativity: Expect negative news

• Straight line: Things do not develop in straight lines

• Fears: Control your fears

• Size: Check proportions

• Generalization: Question your categories

• Destiny: Notice slow changes

• Single tool: Use multiple tools

• Blame: Resist blaming

• Urgency: Take small steps

• Pitfall #1: The Research Problem Formulation Across Country Markets

• Example: P&G Ace detergent research in Mexico involved asking the wrong starting question

• Wrong question example: What about Mexican washing machine?

• Right question example: How do Mexicans wash their clothes?

• A solution is decentering

• Self-Reference Criterion (SRC) refers to managers' unconscious tendency to resort to their own cultural experience and value systems to interpret a given business situation

• Steps to define the business problem properly:

• Define the business problem in terms of reference cultural traits

• Define the business problem in terms of host cultural traits

• Isolate the SRC interference of the problem and see how it interferes

• Redefine the business problem without the SRC influence and solve the optimal business issue

• Pitfall: Significant Digital Divides

• As of 2024, internet penetration rates vary significantly across major regions, as do mobile penetration rates

• Pitfall: Problems with secondary data research

• Poor accuracy due to:

• Various definitions of some indicators (e.g. social class)

• Poor quality of data collection processes (e.g. international statistics do not consider cross-border smuggling

• Political sensitivity of data (e.g. GDP in China)

• Limited data age due to:

• Frequency is much less outside of Triad markets

• Some important data (e.g., frequency of census taking) is not always available easily

• Poor Reliability over time due to :

• Changes in definitions of economic indicators (e.g., statistics of unemployment, of inflation)

• Comparability problems

• Cross-country assessments require conceptual and functional equivalence of products

• Biases exist in international research (e.g., response style, questions, scales, samples)

• Lumping of data

• Statistics are grouped in too broad categories for interpretation by international marketers

Biases

• There are several biases in international market research

• Courtesy bias is present in Asia, the Middle East, and India

• Social desirability bias skews responses due to symbols of wealth and power

• Cultural biases cause non-response as a function of social role, status, and sensitivity

• Extreme response bias is the tendency to over or underestimate answers

• Pitfall: Respondents' cultural norms create research biases that impact data comparability

Protocol

• The protocol to mitigate bias is:
• Define the business problem in terms of native cultural traits
• Define the business problem in terms of the host cultural traits
• Isolate the SRC influence in the problem and see how it interferes
• Redefine the business problem without the SRC influence and solve the optimal business issue

How to Identify International Consumer Segments

• Market clustering involves two methods

• Statistical procedures divide countries -or squared distances- into similar groups

• Macro-segmentation on macro variables identifies attractive geographic segments

• Micro-segmentation segments customers on the micro level

• Both methods lead to clusters

• Top-down segmentation defines regions and segments customers, from macro to micro

• e.g. Scandinavia, Middle East

• Bottom-up segmentation identifies consumer segments and country clusters, from micro to macro

• Classic country-level micro segmentation uses four criteria: demographics, socio-economics, behavior, and psychographics

• Advantage: Tailored to the local market for multi-local marketing provides a tight market segmentation

• Limits: More complex and costly with specific strategies and 4Ps for each country

• Example of segmentation: Cinema segmentation in the UAE using the experiences sought

Session 3 - 27.01.2025 - International Product & Branding Decisions

• This involves conceptual equivalence of the product (meaning) and functional equivalence (usage)

• Key points:

• Advantages exist for both standardization and adaptation

• MNCs must optimize standards (global) and localization on product attributes, leading to international products

• Economies of scale make compromise difficult between customization and large manufacturing Managing Country-of-Origin (COO) effects is important for categories and brand names

• Coffee is a case application

• A case study considering occasion, content type, time of day, and consumer tastes when considering coffee

• Different ways of making coffee depend on the country

• Level 1: Deciding for Physical Attributes

• Compulsory adaptations: climate, usual sizes, regulations, taste

• International standardization is present with CEN, CENELEC, ETSI, and ISO

• New products are better for better compromise

Adapting Products

• New products are:

• Are based on common parts

• Involve mass customization

• Use lagged differentiation

• Can involve international product design

• Level 2: Deciding for Symbolic attributes

• This covers symbolic associations, brand names, and origin as well as perceptions related to origin

• Cultural risks are ever-present

• Henkel in Russia with the Ukrainian flag

• Level 3: Deciding for Service attributes

• Standardizing service attributes is difficult

• Local differences vary in delivery and expectations

• Culture as affects waiting time

• Varying smartphone Apps

• Arguments exist for adapting to standards in physical attributes

• Adapting can meet local standards, comply with hygiene, safety, and regulations

• In symbolic attributes, adaptation helps to tap local marketing knowledge, consumer behavior, and physical environments

• For services attributes exist around maintenance and the distribution

• Arguments in favor of standardization involve:

• Experience and economy of scale

• Decision implementation requires "structures cultures - strategy" alignment

Standardization vs Adaptation

• Standardization offers the same products at the same prices, with the same methods and channels.
• Efficiency goal is key for Standardization
• Adaptation tailor-makes products, prices, promotion and distribution policies with no standardized element
• Key for Adaptation is effectiveness goals

Session 4 - 03.02.2025 - Product & Branding Decisions

• Case study - Wine Rhone Valley

• Push strategy works to convince customers to purchase a product

• Push focuses on features

• Push is best with technical valued products, new products, and improved products

• Pull strategy attracts customers with values or desires

• Pull focuses on values and aspirations

• Pull is best with well-known products

• The Rhone valley requires a push strategy

• In distribution channels, core function is exchange efficiency

• Functions of a channel are:

• Distribution: transporting and storing the goods

• Contact: finding and communicating with potential buyers

• Promotion: developing and distributing information about an offer

• Matching: fitting the offer to the buyer's needs

• Negotiation: reaching an agreement on price and other terms and conditions

• Financing: acquiring and using funds to cover costs of channel work

• Risk taking: assuming the risks of carrying out the channel work

• Information: providing information about market actors and trends

Distribution

• The slide shows the flow between the manufacturer, distributor, and consumer

• The unit of analysis is the system of firms that function in the delivery process

• Marketing channel emphasizes transactions and relationships

• Supply chain emphasizes coordination and integration

• Important factors for distribution:

• Degree of control

• Ownership equals %100 control like Zara Walmart -

• International franchising requires local knowledge for partners like McDonalds -

• Exclusive dealers involve distributors like Lamborghini-

• Channel flows

• Channel actors

• Prepare to answer questions about pricing

This quiz covers key aspects of international marketing, including initial steps for internationalization, macro-environment assessment, GDP limitations, digital banking impacts, and the 4Ps. It also addresses ethnocentrism risks, company asset measurement, micro-segmentation disadvantages, and segmentation criteria in global markets.