Lecture+3_+20400_International+Marketing%28aut+24%29Final.pdf

International Marketing - 24220 Lecture 3 Dr. Nigel Bairstow UTS CRICOS 00099F UTS CRICOS 00099F  Weekly themes International Marketing Introduction to Internat...

International Marketing - 24220 Lecture 3 Dr. Nigel Bairstow UTS CRICOS 00099F UTS CRICOS 00099F  Weekly themes International Marketing Introduction to International Marketing The International Macroeconomic Environment Researching International Markets and Market Entry Cultural Influences in International Marketing SME’s in International Marketing Digital Transformation in International Marketing Product and Promotions in International Marketing Pricing and Distribution in International Marketing Ethics and Sustainability in International Marketing Contemporary Issues in International Marketing 2 Researching International Markets and Market Entry Learning Objectives: Understand the importance of thorough research of International marketing opportunities. Understand segments and quantify E-Commerce global growth What are the various forms of market entry Proverb “Digging for facts is better than jumping to conclusions” Old Chinese Proverb Information needs for international marketing Information needs vary according to: The firm’s experience Prior involvement in international marketing Decisions need to be made about information: For initial market entry How to approach the foreign market For rationalising activities across international markets The need for international market research With emerging economies set to dominate international trade in the future, firms need to better understand these markets and the varying needs of consumers in these markets. International research decisions Whether to enter, leave or Whether to add, delete or Which international markets expand activities in an modify products in an Whether to go international to enter international market international market How to determine the appropriateness of How to assess the How to ascertain distribution How to develop appropriate promotional activities such relationship between price channels and the logistics of strategies for the intangible as copy, design, media and demand and resultant getting products to elements of products and selection and sales profitability of operating in an consumers in an services, including people, compensation in an international market international market process and physical cues international market Common international marketing research mistakes The need for research was ignored. Market research was inadequate. Market research was misdirected. Failure to appreciate cultural differences. Costs of international marketing research The cost of international marketing research is often higher than comparable domestic marketing due to the greater number of factors to be researched and the need for more exploratory research to become familiar with the market. SMEs often find the cost prohibitive. Costs of international marketing research Key cultural and linguistic boundary issues include: Language Information misinterpretation Information credibility Sampling The international research process Before undertaking international market research, it is useful to ask the following questions: What information is needed? From where can the information be obtained? Why is the information needed? When is the information required? What is the information worth? What is the likely cost of not getting the information? Marketing Research Process Stage 1: Problem identification Need to establish: Who the decision makers are The objective of the research Possible course of action to obtain the information Consequences of each alternative course of action Potential difficulties when formulating the research problem: Self-reference criterion—relates to the cultural norms and values of the party commissioning the research Lack of familiarity with the foreign market environment to be investigated New markets need new market research approaches  Stage 2: Research design Refers to the framework for studying the issues to be researched and needs to ensure: That the study is relevant to the problem That the study employs effective procedures Three critical issues within the design are: Construct equivalence - Make sure that the things you're trying to measure (like loyalty or satisfaction) mean the same in different cultures. Measurement equivalence - Ensure that the tools you're using to collect data, like surveys, are fair and make sense across different cultures. Data collection equivalence - Be certain that the way you gather information is consistent across cultures so that your findings can be compared accurately. Construct Equivalence Self-reference Criterion Stage 3: Collection of data What type of data to collect Is new (primary) data needed? Can we use existing (secondary) data? Secondary data Seven major sources of secondary data related to doing business overseas: 1. International agencies 2. For example, Australian or Chinese government 3. For example, Australian or Chinese consulting firms 4. For example, Australian or Chinese Government overseas representatives 5. Databases 6. Other commercial interests 7. Miscellaneous sources Problems with secondary data Problems can occur with using secondary data in overseas settings, including: Availability of data Age of data Accuracy of data Reliability of data Comparability of data Primary data Specific research commissioned to be undertaken in the market Complicated by different environments, attitudes and market conditions Qualitative and quantitative Collection issues: Ability to communicate opinions Willingness to respond Sampling Language and comprehension Respondent bias / Interaction bias Quantitative Techniques Quantitative techniques involve gathering data from a large representative group Most common method used is the questionnaire Questionnaire design should be tailored to specific cultural norms and to avoid low response rate Question format Questions can be structure or unstructured Question content Content influences willingness to respond Question wording Simple rather than complex language should be used Qualitative Techniques Gather in-depth information and require fewer respondents Methods include: Interviews - which are the primary source of data in overseas countries Focus groups—consist of small groups of people who have discussions around specific topics Observations—involves watching consumers to see how they actually behave Delphi studies—involves aggregating the views of a number of experts who cannot come together physically Quantitative versus qualitative research Stage 4: Analysis and interpretation of data Interpretation The final step in the research process Involves interpreting the data Issues to consider: Range from cultural interpretations to different concepts of the product in various countries Stage 5: Dissemination of information / research report Preparing the final report Identify the sources of the data. Identify the participants in the study (where appropriate). Simplify statistical computations to facilitate understanding. Spell out alternative courses of action. Other issues in international market research: Research in developing countries New international research techniques Managing international research Test marketing Research in developing countries Need to research key economic and social indicators such as literacy rates In countries with low literacy rates and where there is a wide divide in terms of access to technology, traditional techniques like mail and internet surveys are inappropriate. New international research techniques Internet-based research: Online surveys / bulletin boards Chat groups / visitor tracking Focus groups / cookies Observational research Machine Learning / Artificial Intelligence / ChatGPT Longitudinal research: Omnibus surveys Scanner data Market Research in the Digital World Observational research Observational research is growing in importance as a tool and is particularly valuable in developing an understanding of new cultures and environments. It shows what is happening rather than what respondents think is happening. Managing international research Select a market research agency based on: Geographical area Industry specialisation and/or Multinational networks Test marketing Advisable if the decision to proceed would involve new capital investment in production facilities Can be carried out in cities, regions or countries Can be used in international marketing KFC China KFC's success in China stems from a transformative business model. Instead of replicating its U.S. strategy, KFC conducted market research, adapting to Chinese preferences. They expanded the menu beyond the limited U.S. options, introduced a higher- priced, dine-in experience, and prioritized local tastes. By embracing cultural nuances and emphasizing sit- down dining over takeout, KFC built a formidable presence with rapid expansion—opening one new restaurant daily. This approach, diverging from the U.S. model, demonstrates the importance of tailoring strategies to local markets, offering valuable insights for global executives navigating emerging economies and reevaluating established business models. Starbucks Failure in Australia In 2000, Starbucks faced a bitter brew in Australia, misjudging local coffee culture. Believing Aussies mirrored Americans, the U.S. giant encountered a slow burn of losses, closing 61 stores in 2008 with a reported $143 million hit. Australians favored local coffee movements, finding Starbucks too pricey. Despite perseverance, Starbucks conceded in 2014, transferring the last 24 stores to the Withers Group, known for the 7-11 chain. This misadventure highlights the importance of understanding regional nuances and adapting strategies to diverse markets, emphasizing that assumptions of cultural uniformity can lead to costly setbacks in global expansions. Mattel misses playtime in China In 2009, Mattel aimed to captivate Chinese consumers with a massive Barbie store in Shanghai. Despite the flashy setup, Mattel overlooked China's emphasis on skill-building and educational toys. Within two years, the 36,000-square-foot store closed. Mattel has since learned from the setback, adapting strategies for the Eastern market, signaling a renewed effort to resonate with Chinese consumers. Starbucks entry into China In 1999, Starbucks defied tradition by entering China's tea-centric market. Over the next 13 years, the coffee giant established 570 stores in 48 cities, reshaping Chinese beverage culture. This strategic move challenged the age-old association of tea with China, marking Starbucks' significant success in expanding its global footprint. Rainbow Rice Leaves Rainbow Rice, born from cross-breeding a rare white- stripe leaf mutant and dark purple leaf rice for decoration, has evolved into a model for biofortified foods and agrotourism. Facing the challenge of feeding 9.8 billion people by 2050 with limited resources and climate change, traditional rice production lags. The triple burden of malnutrition persists globally, highlighting unequal food distribution. To address this, we've innovated a rice leaf with unique chlorophyll, anthocyanin, and carotenoid patterns, creating visually appealing plants rich in antioxidants, protein, and micronutrients. Summary Market research is essential when entering any market. Market research techniques are not equally relevant in all markets due to macro environmental issues such as literacy levels and access to technology. International marketers often have to be innovative in how they gather data so that they develop a true understanding of consumer behaviour in the international marketplace. Market Entry Modes Objectives Identify the different problems faced by firms in international business when selecting a new international market. Recognise the different available modes for entering an international market and the advantages and disadvantages of each. Explain the differences between export-based entry modes, manufacturing-based entry modes and relationship-based entry modes. Importance of Selecting Market Entry Modes Questions to ask in decision to go international 1. Which international market to enter 2. What form of market entry should involvement take? Market selection complicated by the following changes in the international business environment: Formation of regional trading groups / creation of strategic alliances. Spread of technology Breakdown of trade barriers / Globalisation  International market selection Decision based on a combination of: Firm’s strategic objectives Characteristics of the international market Structure of the global industry / current or potential competitors Incremental entry versus simultaneous entry Incremental entry: one foreign market at a time Fewer resources, less risk, provides for learning experiences, may preclude economies of scale Simultaneous entry: enter all foreign markets at the same time Resource-intensive strategy, higher operating risk, acquire overseas experience rapidly, facilitate economies of scale Market Entry Born global International New Venture (INV) or Global startup Companies who focus on foreign markets instead of their own Examples Software as a Service companies like Joi, Canva, CRM companies Photo by Fernando @cferdo on Unsplash Fintech companies – Revolut, Zara, Apple  Market Entry Options Market Entry Options Mergers & Acquisitions Foreign Subsidiary Foreign Direct Company commitment Greenfields Investment Knowledge of Assembly, Company risk Contract market commitment nd Manufacturing l a ntro , c o ter potential sales Marketing a Relationship competition e Licensing and strengths of local involvement Gr agreements Franchising Management buy-in resources and and strategic Joint Ventures and networks importance Strategic Alliances cultural and Financial resources Export language Direct differences Indirect (Distributors, agents) country restrictions Cross-border eCommerce and deregulation Born Domestic Global marcket Market (Experiential) knowledge HOW TO ENTER? MARKET ENTRY Export Merchants Specialist firms buys good from the firm and sells to international customer Direct Exporting Firm exports directly to international customer Distributors and Agents Agents do not hold stock (commission); Distributors hold stock and resells the product Licensing Firm permits another to use its intellectual property (trademarks, copyrights, tech how in exchange for royalty payments Franchising Firm grants the franchisee the right to do business in a specified manner Assembly in overseas market Hyundai Motor Contract Manufacturing/Outsourcing Firm contracts manufacturing overseas, but retains control of marketing; Outsourcing – relocation of business processes Mergers and Acquisitions (M&A) Two firms go forward as one; Merger, as a new company; Acquisition, when takes over the other Green Fields Building a new offshore facility eg Toyota Thailand Foreign Subsidiary Born Global Firms bypass domestic markets and supply international markets from the start BAIC Beijing Benz (officially Beijing Benz Automotive Co., Ltd - BAIC) is an automotive manufacturing company headquartered in Beijing, China BAICis a joint venture between BAIC Motor and Mercedes-Benz Group. Established in 1984 It was the first Chinese auto-making joint venture with a Western partner Evaluation Evaluation of entry of Entry modes Modes UTS CRICOS 00099F A schematic representation of entry choice factors Summary Selecting an international market is one of the most difficult decisions a firm can make. Selecting the wrong market is costly in profits and management morale. Market entry is another difficult area. A holistic view of market entry should be adopted, which will take account of inward, outward and linked forms of international behaviour.