International Marketing Activities PDF

2. Introduction to international marketing activities Definition: Marketing activities targeting markets locating in a foreign country. countries are still existing administrative and social boundaries There are differences (gaps) between the company’s original markets/operations and t...

2. Introduction to international marketing activities Definition: Marketing activities targeting markets locating in a foreign country. countries are still existing administrative and social boundaries There are differences (gaps) between the company’s original markets/operations and the new international market. These gaps must be bridged for successful market presence. The main gaps are: geography (distance, climate, settlement structure, etc.) time (time of transport or other operations, time zones, etc.) information (availability or reliability of data, lack of information sources, methodology of gathering information, etc.) values (corporate or business culture, consumer behavior, etc.) ownership (product handover, liabilities, reps & warranties, etc.) The areas of activity for bridge those gaps in international marketing: collecting information, market entry planning, marketing mix design, etc. Companies do various levels of efforts for their respected profit/benefit on the international market. export marketing (opportunity based, delivery process driven activities) international marketing (market driven for limited area, full marketing mix applied) multinational marketing (market driven for various markets, full marketing mix applied) global marketing (global customer base driven, full marketing mix applied) Companies driven by different basic concepts in their marketing activities in a foreign market. ethnocentric (use their domestic marketing concept and apply that abroad) national (use various concepts in countries/nations) regional (use the same concept in a homogeneous region) geocentric concept (use one concept all around the world – designed for global use) Similarly they use different strategies to cover the foreign markets. Benchmark-centric (original strategy, opportunistic international presence) Country based (various strategies to cover individual countries)  Regional (same strategy in geographical regions) Global (single strategy on the globe) What makes it necessary to deal with international marketing? Because of customer pressure the countries reacting with trends in trade o integrations make international trade easy (EU, NAFTA, ASEAN etc.) o organizations pro international trade (GATT, WTO, JETRO etc.) Competition and focus on efficiency underlines competitive advantages o absolute advantage (more effective value creation in one country) o relative (comparative) advantage (internal exchange rate differences between two products in countries)) o terms of trade (customer needs forces trade to be more intensive and easier to execute) International product life cycle provides ground for trade (see charts) Global market conditions urging international marketing. Global economy - local needs and necessities (customers are more and more expect individual solutions) International competitors – foreign players are present on every market Cross-border business activities without limitation are possible – via electronic channels, less language barriers etc. Notes: More on the topics above: Global Marketing book (Keegan, W.J. and Green, M) Chapter 1 page 44 – 49  3.- 4. The international environment Elements of the business environment customers competitive situation competitors We are only interested to the environment factors if those have a direct impact on the above 3! Environmental factors: 1, Business and Technology factors country economy (GDP, income, trade balance, purchasing power etc.) competition (number of competitors, market shares, competitive advantages etc.) technological development and costumer awareness (level of technology applied in production/operations, technology used and accepted by the customers etc.) 2, Legal and Political and factors political structure (legislation, government, local authorities etc.) risks and stability (potential nationalization, sudden change of laws, unrests etc.) legal structure and law enforcement (the structure of acts and measures, police and court activities and practices etc.) 3, Cultural factors language (“lost in translation”, local flavor of meanings) religion (events, symbols, traditions must be well known and respected) esthetics (preference of beauty may vary culture by culture, favorite colors, shapes and sizes) social interactions (Interactions with the customer as well as with business partners has local protocol. Greetings, “bubble” in personal interaction, seating order, dress code etc.) user expectations (service quality, frequencies of interaction, reps and warranties etc.) Notes: More on the topics above: Global Marketing book (Keegan, W.J. and Green, M) Chapter 2 page 60 – 84, Chapter 3 page 91 – 95, 105 – 114, Chapter 4 page 125 – 147, Chapter 5 page 151 – 174.  5. Preparation for effective use of marketing mix Market segmentation Market segments may be formed by new (local) needs and necessities. Segmentation criteria follows more the cultural aspects than traditional parameters: cross- cultural segmentation. Targeting Finding the relevant groups for our business is not only a question of business strategy but also possible market excess. Business processes might be global however we need to reach local costumers. New element: Market selection and reach The international markets requires adequate go-to-market methodology for the identified available markets (target groups). Decisions to be made:  market presence with or without investment  risk and control analysis  local participation Positioning Need to synchronize the product image with costumer expectations – they might be significantly different on the new markets as benchmark. Possible go-to-market methodologies Decision based on business rational: Which functions of the company shall be located on new market? Go-to-market methodology is a result of conditions below: Risk and Market control With or without Investment (FDI) With or without foreign participation Production located on the new market: Investment No production located on the new market: Investment Notes: More on the topics above: Global Marketing book (Keegan, W.J. and Green, M) PART 3 Chapter 7 page 216 – 235, page 236 - 244 Chapter 9 page 280 – 295  6. Product policy Companies develop products for international markets with different market coverage: Global products Very few products designed for global coverage. Labels may vary in countries based on local regulations. Adapted products Adaptation may be mandatory in case of o Circumstances of use (driving side, voltage of electricity etc.) o Legal obligation (food health and safety, standards etc.) Adaptation chosen for business success in case of o Taste and expectation of local customers o Market conditions such as climate, culture etc. o Cost of production or service delivery Adaptation may change the product/solution on the following fields: o Function o Design, color o Size, quantity o Accessories o Services and support o Product portfolio Designed for new market only -products Basically new concept of product for the foreign market only elements were taken from the original. Importance of service products are rising on the international markets. How to export services without unreasonable cost rise is a challenge. Possible strategies are Local partner, global concept. Market expectations are dominating the service markets. Local partner shall be more aware of the expectations and service more effectively.  “Lego” concept in services are widely common. Costumers are building their own local service brick by brick like Lego allowing the company to use standard elements for highly localized final service content. Challenges to reach end-user customers: the “last mile” regarding delivery and payment Cost allocation in multinational service networks Revenue shall be realized in one country (service order or delivery) however the costs occurs in various locations. How to distribute the income fair and motivating manner? Notes: More on the topics above: Global Marketing book (Keegan, W.J. and Green, M) PART 4 Chapter 10 page 313 – 321, Chapter 11 page 343 – 370  7. Pricing policy Pricing process is similar to the domestic market. However the input parameters has to come from the new market conditions, population and target groups. 1, Strategic goal of prices Difference might be in pricing goals in new market. 2, Demand estimation Difference might be in price elasticity as well as the demand dependency factors. (Product might be less replaceable or unique etc.) 3, Cost calculation Difference might be in allocation protocols in case of multiple products on multiple markets. New element of cost occurs. 4, Examine the competitor prices Difference might be in product-pyramid concept so must avoid price-independence. 5, Pricing methodology No difference with proper input parameters. 6, Final pricing Difference might be the market acceptance of specific methods for price adjustment. The strategic question is to use single pricing process or multiple pricing on markets. Both has advantages and disadvantages as described below:  Global (single) pricing General pricing for multiple markets o risk of profit erosion o no undesired trade Can be effective with single source of production.  Differentiated prices Several prices according to the local environment. o risk of undesired trade o precise profit planning is possible o cost of pricing process is higher due to need of information. Precise pricing is only possible with calculating the new elements of the cost of “internalization”. Delivery terms and conditions o Incoterms shipment parities describes well the costs and liabilities of trading partners. Note: See Coospace documents for brief Incoterms handout Payment solutions o Cost and risk of different payment methods are vary on markets. Account receivables also has a price, the risk and cost of non-payment. Companies has to pay attention to legal obligations regarding international pricing: Transfer pricing o Artificial prices between companies with common ownership. Tax implication under heavy surveillance by governments. Dumping prices (the issue is present on local market as well) o Trading with prices under reasonable cost of the product. There are no international benchmark, usually the country of the buyer initiates legal process. WTO handles several cases mainly related to Asian suppliers. Notes: More on the topics above: Global Marketing book (Keegan, W.J. and Green, M) PART 4 Chapter 11 page 343 – 370  8. Delivery (channel) policy The standard (most common) delivery channel holds the players below: Based on their specific functions in the channel distributors may be types like,  Wholesale  On-line  Etc. Resellers may be types like,  VAR –value added reseller  SI – System Integrator  Retail stores  Etc. Crossing a country boarder is a new function resulting new players like export and/or import agencies, companies, trade houses etc. Every new participant has to add value. The end-user pays for all the margin through the channel. This has to cover the profit of all players. Establishing new delivery channels the company has to decide on the followings:  Capital Our investment needed to set up the channel.  Cost Our running cost for the channel (including inventory).  Control Our capability to monitor and control the channel according to own business needs.  Coverage The total available market for this channel.  Character If the style and image of the channel fits to our product/company. Channels in the new market can be characterized by the aspects below: Length Number of participants after each other from production to end-user. Wide Number of participant in the same function. Diversity Number of parallel channels from same production to the market. Companies mostly busy with managing their sales team in the foreign market, hence they are the “last mile” (direct contact) to their customers. 1, The challenge is to motivate the team with financial incentives or other means of benefits. Possibilities are (among others):  fix salary  salary with bonus  commission only  etc. 2, Multiple sales organizations in the same geographical area results internal competition – channel conflicts. Notes: More on the topics above: Global Marketing book (Keegan, W.J. and Green, M) PART 4 Chapter 12 page 375 – 379, page 380 – 394, PART 5 Chapter 16 page 511 – 517.  9. Promotion policy The most important task in international marketing communication to bridge the gap between the domestic and the foreign message-design. Coding and decoding are in different environment. The promotion goals may vary in the new market vs. the domestic. Attention capture – how difficult it is in the new environment? How busy the new customer? Interest hold – what keeps it up? What kind of message the customer sensitive of? Desire create – why it should be attractive to the new customer? Action initiate – when are reasons and occasions to buy? Are there different on the new market? The promotional activities may be different because of the new conditions. Based on local data and measures we design the promotional mix. How busy is the receiver? How expensive to reach (Cost Per Thousand - CPT)? What makes bigger impact (rational vs. emotional message)? Markets/products are on various stages of their development on the Foote, Cone & Belding (FCB) matrix. As international markets evolve they follow the curve show on the figure. The promotional mix must be adapted to international use: Advertisement Global reach, local adaptation required. Sales promotion Tools and intensity vary a lot. The international fairs & conventions represents a special kind of toolset for global sales promotion. Publicity Mainly crisis communication by today. Personal selling Convincing is key and requires cultural sensitivity. PR Building trust in international environment needs global messaging. International message design resulted a new category of argumentation: Product message Brand image message Country message – Using the positive image of a foreign nationality. Regarding promotion policy globalization is truly a current tendency. There are several reasons to support this process: Economy of scale – global budgeting in the multinational firms Global image and perceptions of brands – customers see the brand message in multiple locations Global media and channels – media coverage no longer stops at country borders in the digital age Global agencies – the leading communication agencies are present in every country Notes: More on the topics above: Global Marketing book (Keegan, W.J. and Green, M) PART 4 Chapter 13 page 407 – 430, Chapter 14 page 435 – 461,,