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International Marketing

Dipl.-Wirtsch.-Ing. Kati Kasper-Brauer

Marketing Department

Freiberg University of Technology

MBA Programm – International Business in Developing and Emerging Markets

Summer Term 2015

Introduction

2

Chair of Marketing and International Trade

Univ.-Prof. Dr. Margit Enke

Research assistants:

▪ Jennifer Glinka, M.Sc.

▪ Nicole Ritter, Dipl.-Kffr.

▪ Kati Kasper-Brauer,

Dipl.-Wirtsch.-Ing.

▪ Nicole Schütz, M.A.

(f. l. t. r.)

Introduction

3

Contact Details

Prof. Dr. habil. Margit Enke

Lessingstraße 45

Room: 1302B

Phone: +49 (0) 3731 39-2543

E-Mail: [email protected]

Make an appointment please.

Dipl.-Wirtsch.-Ing Kati Kasper-Brauer

Lessingstraße 45

Room: 1007

Phone: +49 (0) 3731 39-3552

E-Mail: [email protected]

Make an appointment please.

Introduction

4

Overview of the Lectures

Marketingmanagement - Grundlagen

Marketing-

management -

Instrumente

Integrative Lehrformen

(Exkursionen, Fallstudien,

Marketing live mit dem Prof.)

Proseminar MarketingProjektstudium

Marketing

Marketing (IMRE) Marketing Intelligence Brand Management

International

Marketing (IBDEM)

International

MarketingSeminar Marketing

Applied Marketing Science

Ba

ch

elo

rmo

du

leM

aste

rmo

du

le

Introduction

Lectures

+ Lecture notes and cited literature

+ Case studies

+ In-Lecture Repetition

+ Guest lectures by marketing experts

_______________________________

= Exam (written test - 90 minutes)

5

Scope

Introduction

Handout

You can download the lecture notes on our website. The file will be available

by next Monday.

http://tu-freiberg.de/fakult6/marketing/downloads

Password: SS_2015

6

Sessions, Exam, and Handout

Introduction

Download Instruction for Lecture Notes

7

Download Instruction for Lecture Notes

SS_2015

Case Studies

• learn to develop solutions for complex problems

• transfer knowledge from the course and gain new knowledge during

case study work

• practice soft skills, especially:

• self-organisation

• intercultural teamwork

• presentation skills

• discussion skills

8

Why Case Studies

Case Studies

• In 2002 August Busch III, Chairman and President ofAnheuser Busch Group, was reflecting on the future of itsbrewery operations

• Reputation as the world´s largest brewer is mainlycreated by the companie´s dominance in the USA

• Anheuser-Busch is losing out in the international marketto lower volume players such as Heineken, Carlsberg andGuiness

• One of the important Asian markets of Carlsberg Asia, thelargest brewer in Asia, is Malaysia.

• Busch decides to enter the Malaysian market.

9

Case study 1: Internationalisation of Anheuser-Busch

Case Studies

Tasks

1. Analyze the macro environment of Malaysia.

2. Analyze the micro environment of Malaysia.

3. Develop a segmentation and positioning strategy for Anheuser-Busch.

4. Develop a market entry strategy for Anheuser-Busch.

5. Develop the marketing mix for the first year in Malaysia.

10

Case study 1: Internationalisation of Anheuser-Busch

Case Studies

• Unilever´s Home Care Division in Brazil has already

a market share of 81 % in the detergent powder category.

• Nevertheless, 48 million predominantly low-income consumers in Brazil´s

Northeast are a segment that Unilever does not reach with its current

brands Omo, Minerva, and Campeiro.

• Unilever Brazil discusses how the segment can be reached and developed

for Unilever´s detergent powder.

• Critics at Unilever highlight the threat of cannibalization for existing brands.

• Should Unilever change its current marketing and branding strategy in the

detergent powder category?

11

Case study 2: Marketing Strategy for Low-Income Consumers

Case Studies

Tasks

1. Analyze the economic and sociocultural environment of the low-income segment Brazil northeast. Show differences to the southeast where the brand Omo is very strong.

2. Analyze the market for detergent powder in the northeast of Brazil and derive a solution for the threat of cannibalization.

3. Develop a brand strategy for the low-income segment.

4. Develop the marketing mix for the segment. Discuss different solutions for product packages, prices, promotion, and distribution.

12

Case study 2: Marketing Strategy for Low-Income Consumers

Case Studies

• Since the end of 2006, the French group Sarbec Cosmetics had been trying to establish its brands on the Indian cosmetics market, which had just begun to show enormous potential. In the beginning, the company decided to build on its network in the region and worked mainly through Sarbec’sDubai agent, who had business connections in India.

• Soon enough, it became clear that this strategy could not be sustained and all activities in the country were temporary suspended.

• Can Sarbec find a niche among the big multinationals and numerous local producers that have started to raid the market?

• What will be the company´s critical success factors in India?

13

Case study 3: International Expansion in India

Case Studies

Tasks

1. Analyze the macro environment of India.

2. Analyze the micro environment for Sarbec Cosmetics in India.

3. Which products and brands of Sarbec Cosmetics have a chance in India?

4. Develop a segmentation and positioning strategy for Sarbec Cosmetics in India.

5. Develop a successful market entry strategy for Sarbec Cosmetics in India.

14

Case study 3: International Expansion in India

Case Studies

Please find all case studies on the website!

One of each team (maximal 6 students per team) should send me an email with your chosen case study and the names and e-mail addresses of all team members by the end of the week!

Please use our ppt-layout for your presentation which is available for download on our website!

Please send me your completed ppt-presentation by Friday, June 19th!

The presentations are scheduled for the end of June. Please prepare a presentation of approx. 20 minutes (No additional written case solution necessary).

Please contact me via email or in the lectures if you have any questions!

15

Further procedure

Introduction

1 Marketing Basics

2 The Decision Whether to Internationalize

3 Deciding Which Markets to Enter

4 Market Entry Strategies

5 Global Marketing Strategies

6 International Marketing Mix

7 Implementing and Coordinating the International Marketing

16

Structure

1 Marketing Basics1.1 Markets as Focal Points of Marketing1.2 Development and Scope of the Marketing Concept1.3 The Strategic Triangle1.4 International Marketing







17

Structure

1 Marketing Basics

18

Learning Objectives

In this chapter you will become familiar with:

the characteristics of markets, different types of markets, and how

markets can be differentiated from one another

the historical development of marketing

the various perspectives of marketing

1.1 Markets as Focal Points of Marketing

19


Marketing is derived from “market” and “to market”

(1) markets define the framework for marketing practiced by companies

(2) within the course of their marketing activities, companies strive to actively

exert a controlled influence on the behavior of customers and

competitors

Market

A market is any place where supply meets demand, thus leading

to the formation of prices. Supply and demand can meet at a physical

or at a virtual location.

20

Markets

Homburg et al. (2013), p. 2ff.


Stakeholders which influence market activities

(1) buyers

(2) companies

(3) sales partners

(4) public institutions

(5) lobbyists

21

Markets

See Homburg et al. (2013), p. 2ff.


Different types of markets – a classification by types of goods

(1) markets for consumer goods

(2) markets for business - to - business goods

(3) markets for services

22

Markets

See Homburg et al. (2013), p. 4ff.

1.2 Development and Scope of the Marketing Concept

23


24

History of the Marketing Concept

Homburg et al. (2013), p. 6.

Sales

Advertising

Sales

Pricing

Decisions

Sales

Decisions

Communication

Decisions

Sales

Decisions

Communication

Decisions

Pricing

Decisions

Product

Decisions

Product

Decisions

Sales

Decisions

Communication

Decisions

Pricing

Decisions

Product

Decisions

Marketing Mix Marketing Mix

Marketing

ImplementationMarketing

Implementation

Marketing Mix

Ma

rket-

orie

nte

d

ma

na

gem

ent

Rela

tio

nship

ma

rketing

1900 - 1920 1920 - 1950 1950 - 1980 1980 - 1990 Starting 1990


Approaches of defining marketing

(1) activity-oriented definitions

marketing is a bundle of market-driven activities

(2) relationship-oriented definitions

marketing aims at establishing, maintaining, and strengthening

relationships with customers

(3) management-oriented definitions

marketing focuses on managing a company from a market perspective

Deriving an integrative definition of marketing

25

Definition of Marketing

See Homburg et al. (2013), p. 7.


Integrative definition of marketing

Marketing has a company-external and a company-internal facet.

• Regarding the company-external aspects, marketing comprises the

conception and implementation of the market-related activities that are

practiced by a company and geared towards buyers or potential buyers of

its products.

• Regarding the company-internal aspects, marketing refers to creating the

necessary prerequisites and conditions within the company in order to

facilitate the effective and efficient implementation of the market-related

activities.

• Both facets of marketing aim at designing and structuring customer

relationships so that company objectives can be achieved.

26

Definition of Marketing

See Homburg et al. (2013), p. 7f.

1.3 The Strategic Triangle

27


28

The Strategic Triangle as Conceptual Basis


Global environmental factors

(= Macro environment)

Market

(= Micro environment)

Buyers in

marketCompetitors

Company

situation


Elements of the Strategic Triangle

(1) Customers of a Company

(2) Competitors of a Company

(3) The Company itself

29



Company

Customers Competitors

1.4 International Marketing

30


Definition of International Marketing

International marketing refers to design and realization activities on the part of

a company, directed at its customers and potential customers located in more

than one country.

31

International Marketing what it is…

See Homburg et al. (2013), p. 406; Keegan/Green (2013), p. 30.

multinational

international

global

national

local

international

marketing

domestic

marketing


Characteristics of International Marketing

32

International Marketing what it is…

Higher level of

uncertainty

Higher need of

information

Higher level

of coordination

requirements

Higher level of

complexityInternational Marketing


33

1 Marketing Basics

2 The Decision Whether to Internationalize2.1 Barriers/Risks to Internationalize2.2 Motives to Internationalize2.3 Internationalization Theories






34

Structure


35

Learning Objectives


pros and cons of internationalization

overview about theories to explain internationalization processes of

companies

EPRG-Framework

2.1 Barriers/Risks to Internationalize

36


Critical (internal) factors hindering internationalization initiation

• Insufficient finances

• Insufficient knowledge

• Lack of foreign market connections

• Lack of internationalization commitment

• Lack of productive capacity to dedicate to foreign markets

• Lack of foreign channels of distribution

• Management emphasis on developing domestic markets

37

Barriers of Internationalization

See Hollensen (2014), p. 61.

Higher level of uncertainty


General market risks

• Market distance

• Existing competition in target markets

• Differences in product usage, language, and culture

• Differences in product specification

• Complexity of shipping services to overseas buyers

Commercial risks

• Exchange rate fluctuations

• Delays or damage in the distribution process

• Failure of int. customers to pay due to contract dispute, bankruptcy, or fraud

38

Risks to Internationalize



Political risks

• Foreign government restrictions

• National export policy

• Complexity of trade documentation

• Civil strife, revolution, or wars

39

Risks to Internationalize


2.2 Motives to Internationalize

40


Reduction of threat

• Domestic market too small

• Stabilization of sales by supplying several markets with different economic

life cycles

• Compensation for market shares lost to competitors in the domestic market

• Counteract potential loss in domestic markets

• Maintenance of established market positions in international markets by

means of intensified commitment

• Following competitors abroad in order to balance the competitive situation

• Overproduction/excess capacity

41

Motives to Internationalize

See Homburg et al. (2013), p. 428f; Hollensen (2014), p. 104ff.


Realization of opportunities

Sales opportunities

• Leverage of new sales sources

• Following important customers abroad

• Participation in the growth of international markets

• Achievement of growth targets that could not be achieved in the

domestic market

Sales-rated opportunities

• Reduction of costs as a result of economies of scale arising from higher

sales volume

• Utilization of lower market development costs in international markets

Price opportunities

• Leverage of higher willingness to pay on the part of international customers

42

Motives to Internationalize


2.3 Internationalization Theories

43


Basic theories

• The Uppsala School Approach

• The internationalization/transaction cost approach

• The network approach

• The ERPG-Framework

44

Overview about Internationalization Theories

See Homburg et al. (2013), p. 420ff.; Hollensen (2014), p. 72ff.


Basic framework

• Companies tend to intensify their commitment towards foreign markets as

their experience grows.

• Four successive stages of entering an international market

• Internationalization starts in fairly nearby markets

45

The Uppsala School Approach

See Hollensen (2014), p. 75ff.

No regular

export

Independent

representatives

Foreign sales

subsidiary

Foreign

production and

sales subsidiary

Market A

Market B

Market C

…

Market n

StagesMarket

(Country)

Increasing market commitment

Increasing

geographic

diversification


Criticism

• Does not account interdependencies of different country markets.

• Is not valid for service industries.

• Trends to leapfrog stages.

• Is not valid in situations of highly internationalized firms and industries.

• Globalization trends decrease psychic distance to a new country.

• Today’s market uncertainty is reduced by market research and

consulting firms.

• Number of people with experience in doing business abroad has increased.

46

The Uppsala School Approach

See Hollensen (2014), p. 75f.


Model foundation

• A firm will tend to expand until the cost of organizing an extra transaction

within the firm (control costs) will become equal to the cost of carrying out

the same transaction by means of an exchange on the open market.

• Transaction costs are a result of friction between buyer and seller.

47

The Transaction Cost Analysis Model


Seller

(Producer)

Buyer

(Export

Intermediary)

End-

customer

Friction

Transaction cost

1. Ex ante cost:

• Search cost

• Contracting cost

2. Ex post cost:

• Monitoring costs

• Enforcement costs


Internationalization models based on TCA

• If transaction costs through externalization (e.g. importer or agent) are higher

than the control costs through an internal hierarchical system, then the firm

should seek internationalization of activities, i.e. implementing the global

marketing strategy in wholly owned subsidiaries.

48



Seller

(Producer)

Internal firm

(foreign

subsidiary)

End-

customer

Transaction costs higher

than internal control costs

Seller

(Producer)

Buyer

(Export

Intermediary)

End-

customerTransaction costs lower

than internal control costs


Criticism

• Narrow assumption of human nature

• Excluding internal transaction costs

• Is not valid for small and medium-sized enterprises (SME)

• Importance of production cost is understated

49




Basic concept

• Focus on relationship of business actors

• Actors are linked to each other through exchange relationships.

• Needs and capabilities are mediated through interaction.

• Network structure is more flexible in fast changing environments.

• The individual firm is dependent on resources controlled by other firms.

• Companies get access to external resources through their network position.

• To enter a network requires that other actors are motivated to engage in

interaction and make adaptations in their ways of performing business.

50

The Network Model



Applying the network model for international marketing

• Networks in a country may well extend far beyond country borders.

• Internationalizing firms are initially engaged in a domestic network.

• The relationships in the domestic network are bridges to networks of other

countries .

51

The Network Model


Supplier head office Supplier subsidiary

Governmental

organization

Governmental

organization

Production

subsidiary

Agent

Customer

Sales subsidiary

Customer

Head office

Bank

Bank

Cou

ntr

y C

Hom

e c

ou

ntr

y

Cou

ntr

y D

Cou

ntr

y B


EPRG-Framework

The form and substance of a company’s response to global market opportunities depend greatly on management’s assumptions or beliefs – both conscious and unconscious – about the nature of the world.

• Ethnocentric orientation: assumption that home country is superior to the rest of the world.

• Polycentric orientation: assumption that each country in which a company does business is unique.

• Regiocentric orientation: a region becomes the relevant geographic unit; management’s goal is to develop an integrated regional strategy.

• Geocentric orientation: views the entire world as a potential market and strives to develop integrated global strategies.

52

The Network Model

See Keegan/Green (2013), p. 40ff.; Hollensen (2014), p. 19f.


Characteristics

Product planning

• Product Development for home country customers

Marketing mix decisions

• Made at headquarters

Type of marketing

53

Ethnocentric Orientation

See Kotabe/Helsen (2011), p. 14ff; Homburg et al. (2013), p. 421.

Country Choice Export

Timing and Sequencing

of Entry

1960s-1970s


Characteristics

Product planning

• Local product development based on local needs


• Made in each country

Type of marketing

54

Polycentric Orientation


Modify

Marketing Strategy

Develop and Acquire

New National Brands

Share Advertising,

Promotional, and

Distribution Costs

Country 1

Country 2

Country 3

Country 4


Characteristics

Product planning

• Standardized within regions, but not across regions


• Made regionally

Type of marketing

55

Regiocentric Orientation

See Kotabe/Helsen (2011), p. 14ff;


Modify

Marketing Strategy

Develop and Acquire

New National Brands

Share Advertising,

Promotional, and

Distribution Costs

Country 1

Country 2

Country 3

Country 4

Region 2

Region 1


Characteristics

Product planning

• Global products with local variations


• Made jointly with mutual consultation

Type of marketing

56

Geocentric Orientation


Coordinate Marketing

Mix across countries

and regions

Integrate sourcing

and production

with marketing

Allocate resources to

achieve portfolio balance

and growth


57

1 Marketing Basics


3 Deciding Which Markets to Enter3.1 The International Market Selection Process3.2 Macro Environment

3.2.1 The Political and Legal Environment3.2.2 The Economic Environment3.2.3 The Technological Environment3.2.4 The Sociocultural Environment3.2.5 The (Corporate) Social Responsibility Orientation

3.3 Micro Environment3.3.1 Analysis of National Competitiveness3.3.2 Competitive Analysis in an Industry3.3.3 Value Chain Analysis

3.4 Market Research and Information Systems




7 Implementing and Coordinating the Intern. Marketing58

Structure


59

Learning Objectives


the international market-screening model

issues of the political environment like quotas or local content

economic aspects to consider when choosing target markets

technological and sociocultural differences of countries

diverse attention to corporate social responsibility aspects in different

countries

3.1 The International Market Selection Process

60


Why is it important to identify the ‘right market’ to enter?

• Influences likelihood of success

• Influences nature of marketing programs

• Affects firm’s ability to coordinate foreign operations

61

Relevance of Identifying the Right Markets



Factors influencing the market selection process of SME

• Short psychic distance

low uncertainty about foreign markets and low perceived difficulty of

acquiring information about them.

• Short cultural distance

low perceived differences between the home and destination culture

• Short geographic distance

62

Selecting Process of SME



63

Internationalization of GEO

www.gujmedia.de

since 1976


64

International Market-Screening Model


The firm

• Degree of internationalization

and overseas experiences

• Size/amount of resources

• Type of industry/nature of the

business

• Internationalization goals

• Existing networks of relationship

Macro environment

Step 1: Selection of segmentation criteria

Step 2: Development of segments

Step 3: Screening of segments

Step 4: Microsegmentation

Market entry

Micro environment

3.2 Macro Environment

65

3.2 Macro Environment

66



Political & Legal

Environment

Market

(= Micro environment)

Buyers in

marketCompetitors

Company

situation

CSR-

Orientation

Economic

Environment

Socio-

cultural

Environment

Techno-

logical

Environment

3.2.1 The Political and Legal Environment

67


Aspects of the political/legal environment

• Home country

• Host country environment

• General international environment

68

Barriers in the Political/Legal Environment

Hollensen (2014), p. 204f.


Governmental support

• Promotional activities sponsored by governmental organizations

• Financial activities

• Information services

• Export-facilitating activities

• Promotion by private organizations

• State trading

69

The Home Country Environment



Kinds of information typically available

• Economic, social, political data on individual countries

• Summary and detailed information on aggregate global market transactions

• Individual reports of foreign firms

• Specific export opportunities

• Lists of potential overseas buyers, distributors, and agents for various

products in different countries

• Information on relevant government regulations

• Foreign credit information

70

The Home Country Environment



Political risks

• Ownership risks

• Operating risks

• Transfer risks

71

The Host Country Environment



Effects of political risk

• Import restrictions

• Local content laws

• Exchange controls

• Market controls

• Price controls

• Tax controls

• Labor restrictions

• Change of government party

• Nationalization

• Domestication

72




Tariff barriers

• Specific

• Ad valorem

• Discriminatory

Non-tariff barriers

• Quotas

• Embargoes

• Administrative delays

• Local content requirements

73

Categories of Trade Barriers


Why do countries levy tariffs?


74

Political Risk Analysis

Hollensen (2014), p. 212.

Step 1: Issues of relevance to the firm• Determine critical economic/business issues relevant to the firm

• Assess the relative importance of these issues

Step 2: Potential political events

• Determine the relevant political events

• Determine their probability of occurring

• Determine the cause and effect relationships

• Determine the government’s ability and willingness to respond

Step 3: Probable impacts and responses• Determine the initial impact of probable scenarios

• Determine possible responses to initial impacts

• Determine initial and ultimate political risk


Important factors to determine the political risk

• Change in government policy

• Stability of government

• Quality of host government’s economic management

• Host country’s attitude towards foreign investment

• Host country’s relationship with the rest of the world

• Host country’s relationship with the parent company’s home government

• Attitude towards the assignment of foreign personnel

• Closeness between government and people

• Fairness and honesty of administrative procedures

75




Legal systems

• Common Law

• Code Law

• Theocracy

Implementation of laws

• Litigious societies

• Unimportant role of laws

76

Legal Environment



77

Legal Issues Facing the Company

Kotabe/Helsen (2011), p. 168f.

15,600-26,000 $

Nov. 1. 2008


Differences in property rights

• Patent (first-to-file vs. first-to-invent, period of time)

• Copyright (period of time)

• Trademark (first-to-use vs. first-to-file)

• Trade Secret

78

Intellectual Property Protection

See Kotabe/Helsen (2011), p. 176f.; Seyoum (1996), p. 56.

vs.

50 years 95 years


Relationship building

• Build relationships with government

• Build relationships with customers

• Build relationships with employees

• Build relationships with local community

79

Influencing Politics and Laws

See Hollensen (2014), p. 212f; Czinkota/Ronkainen (2013), p. 86ff.

3.2.2 The Economic Environment

80


Relevant characteristics

• Population growth rates

• Age distribution

• Life expectancy

• Size of a household

• Urbanization

81

Market Characteristics - Population

See Czinkota/Ronkainen (2013), p. 95ff.


82

Market Characteristics - Population

Population Reference Bureau (2012)


Indicators

• Per capita GDP

• Income distribution

• Purchasing power parities (PPP)

Income classification for International Marketing

• Very low family incomes

• Very low, very high family incomes

• Low, medium, high family incomes

• Mostly medium family incomes

83

Income

See Czinkota/Ronkainen (2013), p. 97f.


84

The Global Economy/Economic Strength

See Czinkota/Ronkainen (2013), p. 93.

.


Criticisms of using per capita income figures

• Uneven income distribution

• Purchasing power not reflected

• Lack of comparability

Purchasing Power Parities

PPPs show how many units of

currency are needed in one country

to buy the amount of goods and

services that one unit of currency

will buy in another country.

85

Purchasing Power Parities (PPP)



Consumer spending by categories (Engel’s Law)

• Spending on food decreases with increasing family income

• Percentage spend on housing and household operations is roughly constant

86

Consumption Patterns



Forms of economic integration in regional markets

87

Regional Economic Integration

Czinkota/Ronkainen (2013), p. 107.


Definition: An emerging market is a country making an effort to change and

improve its economy with the goal of raising its performance to that of the

world’s more advanced nations.

88

Emerging Markets

See Czinkota/Ronkainen (2013), p. 116; GlobalEdge (2014)

3.2.3 Technological Environment

89



• Electric power supply

• Road system

• Transportation system

• Communication systems

• Usage of electronic devices

90

Infrastructure



91

Internet Usage

http://de.statista.com (2015)

3.2.4 Socio-cultural Environment

92

3.2.4 Sociocultural Environment

Definition

“Culture is the collective programming of the mind which distinguishes the

members of one human group from another.” –Geert Hofstede-

It is the learned way in which a society understands, decides and

communicates.

• Culture is learned

• Culture is interrelated

• Culture is shared

93

Culture


http://www.mongolei.de/bilder/tt/index.htm

http://www.mongolei.de/bilder/tt/index.htm


Hofstede’s 4 + 1 culture dimensions

Trompenaars’ additional culture dimensions

Hall’s additional culture dimensions

94

Models to Describe Cultures

See Hollensen (2014), p. 245f; Homburg et al. (2013), p. 409ff.

Power

DistanceIndividualism Masculinity

Uncertainty

Avoidance

Long-Term

Orientation

Emotionality Quality of RelationshipAttitudes Towards the

Personal Environment

high-context vs. low-context cultures


Power distance

Power distance refers to the

degree of inequality among

people that is viewed as being

equitable. With a high power

distance, the weaker members of

a society expect or accept a

relatively unequal distribution of

power. Societies with low power

distance are characterized by a

certain degree of egalitarianism.

95

Hofstede’s 4+1 Culture Dimensions

See Homburg et al. (2013), p. 409ff.; www.geert-hofstede.com (2013)

Country Power Distance

Brazil 69

China 80

Germany 35

Hong Kong 68

India 77

Japan 54

Netherlands 38

Pakistan 55

United States 40


Individualism

Individualism describes the

degree to which people refer to

act as individuals rather than

group members (“me” vs. “we”

societies). In an individualistic

society, the focus is on people’s

own interests; there is little need

for loyalty to a group. In

collectivistic societies, the

interests of the group take center

stage.

96


See Homburg et al. (2013), p. 409ff; www.geert-hofstede.com (2013).

Country Individualism

Brazil 38

China 20

Germany 67

Hong Kong 25

India 48

Japan 46

Netherlands 80

Pakistan 14

United States 91


Masculinity

If a country culture demonstrates

a high degree of masculinity,

individuals tend to be more

assertive and display competitive

behavior; with low masculinity,

values such as modesty and

care-taking predominate.

97


See Homburg et al. (2013), p. 409ff.; www.geert-hofstede.com (2013).

Country Masculinity

Brazil 49

China 66

Germany 66

Hong Kong 57

India 56

Japan 95

Netherlands 14

Pakistan 50

United States 62


Uncertainty avoidance

Uncertainty avoidance is defined

as the extent to which people in a

culture prefer structured

situations, with clear rules, over

unstructured ones. With a high

uncertainty avoidance, members

of a society feel threatened by

uncertain or unfamiliar situations;

cultures with a low level of

uncertainty avoidance show a

greater willingness on the part of

individuals to take risks.

98



Country Uncertainty Avoidance

Brazil 76

China 30

Germany 65

Hong Kong 29

India 40

Japan 92

Netherlands 53

Pakistan 70

United States 46


Long-term orientation

With long-term orientation,

members of the culture are very

forward-looking, and value

perseverance and economical

behavior (e.g. thriftiness). If a

culture is characterized by short-

term orientation, its members

prioritize values connected to the

past and present, such as respect

for tradition.

99



Country Long-Term Orientation

Brazil 65

China 118

Germany 31

Hong Kong 96

India 61

Japan 80

Netherlands 44

Pakistan 0

United States 29


Strengths

• Large scale sample (116,000)

• Dimensions tap into deep cultural values and make significant comparisons

between national cultures possible

• Highly relevant dimensions for international managers

Weaknesses

• Cultural homogeneity of nations (assumption)

• Population of a single industry and a single multinational company (IBM)

• Overlapping discrimination problems between certain dimensions

• Definition of cultures may be different from country to country

100




Emotionality (affective vs. neutral cultures)

• Are feelings and emotions displayed openly or kept concealed?

• Do people rather use affective or rational aspects to make judgments?

Quality of relationship (specific vs. diffuse cultures)

• Are different living situations strictly separated from another?

Attitudes towards the personal environment (self determined vs. heteronomous cultures)

• Can individuals dominate the environment (including nature)?

• Do people respond to change with open minds or skepticism?

• Do individuals focus on themselves or others?

101

Trompenaars’ Additional Dimensions



102

High- and Low-Context Cultures


Characteristica Low-context (e.g. ) High-context (e.g. )

Communication Explicit, direct Implicit, indirect

Sense of self and space Informal handshakes Formal hugs, bows, and handshakes

Dress and appearance Varies widely, dress for success Indication of position in society,

religious rule

Food and eating habits Eating is a necessity, fast food Eating is social event

Time consciousness Linear, exact, promptness is valued,

time = money

Elastic, relative, time = relationships

Family and friends Nuclear family, self-oriented,

value youth

Extended family, other oriented,

loyalty

Values and norms Independence, confrontation of conflict Group conformity, harmony

Beliefs and attitudes Egalitarian, challenge authority,

gender equity

Hierarchical, respect for authority,

gender roles

Mental process and learning Linear, logical, sequential, problem

solving

Lateral, holistic, accepting

life’s difficulties

Business/work habits Deal oriented, rewards based on

achievement

Relationship oriented, rewards based

on seniority


Low-context cultures

• Rely on spoken and written

languages for meaning

• Senders of messages encode their

messages, expecting that receivers

will accurately decode the words

used to gain a good understanding of

the intended message.

103

Hall’s Context Dimension of Culture

See Homburg et al. (2013), p. 413f; Hollensen (2014), p. 237f.; Usunier (2013).

High-context cultures

• Use and interpret more of the elements surrounding the message to develop

their understanding of the message.

• The social importance + the knowledge of the person + the social setting add

extra information.


104

Onion Ring Model of Culture

Trompenaars (1993).

Values

Rituals

Heroes

Symbols


Iceberg

105

The Iceberg Model of Culture



Elements

• Language

• Manners and customs

• Technology and material culture

• Social institutions

• Education

• Values and attitudes

• Aesthetics

• Religion

106

Elements of Culture



Verbal language

• syntax

• semantics

• phonology

• morphology

107

Language


alphabetic

language systems

i.e. English, German

logographic

language systems

i.e. Chinese, Japanese

symbols, intonation

interpretation of

symbolic meaning

d-o-g

d-r-a-g-o-n

dog

(guo)

dragon

(long)

characters

pronunciation


108

Language

Enke/Geigenmüller (2014).

“ben chi“ “run fast“

“bao ma“ “race-horse“

“ke kou ke la” “tasty and happy“

Mercedes Benz

BMW

Coca Cola

“Sheng Lu”

“Ye Ge ”


Mistranslation

Fiat Uno

Toyota MR2

Chevrolet Nova

Japanese hotel notice to guests:

“You are invited to take advantage of the chambermaid.”

Bangkok dry cleaner to potential customers

“Drop you trousers here for best results.”

A Roman laundry innocently suggests:

“Ladies, leave your clothes here and spend the afternoon having a good time.”

109

Language



Relevance of manners and customs

• Negotiation

• Product usage and positioning

• Gifts

110

Manners and Customs

See Hollensen (2014), p. 242.; Czinkota/Ronkainen (2013), p. 71ff.

When and what to

give as gifts

China Japan Mexico India

When Chinese New Year Oseibo (Jan, 1st.) Christmas/New Year Hindu Diwali festival

Recommend Modes gifts like

books, ties, pens

Scotch, brandy, round

fruits

Desk clocks, fine

pens, gold lighters

Sweets, nuts, and

fruits, candleholders

To be avoided Clocks, Taiwanese

products

Gifts that come in sets

of 4 or 9

Sterling silver items,

food baskets

Leather objects,

snake images


111

Influences of Religions



112

Religions of the World




• Symbolism of colors, forms, and music

• taste

113

Aesthetic Differences



Aesthetic differences - taste

114

Aesthetics

metallic

hoppy

bitter

burning

malty

watery

fruity

sweet

alcoholic

dry

persistent taste

furry


115

Aesthetics - Example


116

Values and Attitudes

3.2.5 The (Corporate) Social Responsibility Orientation

117


118

Social Responsibility

Hollensen (2014), p. 123ff.


119


Eurobarometer (2014), p. 12.

Considering your own values, how important is environmental protection for you?

Very important Quite important Quite unimportant Unimportant I do not know


120


EUROBAROMETER Spezial 295 (2008).

Which measures shall have priority to protect the environment?

Separation of garbage and recyclables

Save energy at home

Try to use as often as possible public transportation

Reduce waste by higher packages or boycott of

certain warped goods

Buy environment-friendly products

Buy local products

Buy cars with low energy consumption and

pollution

Consider environmental aspects of greater

investments (voyages, cars, houses)

Willingness to pay higher taxes

75%

64%

60

44%

42

40 %

37%

24%

10%

43%

23%

23%

14%

12%

9%

7%

6%


121

Case Nestlé Kit Kat

Hollensen (2014), p. 123ff.

23%

23%

14%

12%

9%

7%

6%

../Marketing Intelligence/Skriptaktualisierung/Videoarchiv/greenpeace - kitkat - Ask Nestlé CEO to stop buying palm oil from destroyed rainforest.wmv

../Marketing Intelligence/Skriptaktualisierung/Videoarchiv/greenpeace - kitkat - Ask Nestlé CEO to stop buying palm oil from destroyed rainforest.wmv


Definition

Corporate social responsibility encompasses not only what companies do with

their profits, but also how they make them.

It goes beyond philanthropy and compliance and addresses how companies

manage their economic, social, and environmental impacts, as well as their

relationships in all key spheres of influence: the workplace, the marketplace,

the supply chain, the community, and the public policy realm.

122

Corporate Social Responsibility

www.hks.havard.edu (2013).

3.3 Micro Environment

123

3.2.4 Micro Environment

124

Development of a Firm’s Int. Competitiveness


3.3.1 Analysis of National Competitiveness

125


126

Analysis of National Competitiveness (Porter’s Diamond)


Firm strategy,

structure,

and rivalryChance

Factor

conditions

Related and

supporting

industries

Demand

conditions

Govern-

ment


127




• Climate

• Physical infrastructure

• Natural resources

• Educational system

• Human resources

• Technological infrastructure

• Capital

128



Factor conditions Demand conditions

• Nature of home demand

• Size of home demand

• Economies of scale

• Transportation costs

• Buyer sophistication

3.3.2 Competitive Analysis in an Industry

129


130

Porter’s Five Forces Model


Market

competitors

Intensity

of rivalry

New entrants

Suppliers Buyers

Substitutes

Market levelIndustry level


Market competitors

• Concentration of industry

• Rate of market growth

• Structure of costs

• Degree of differentiation

• Switching costs

• Exit barriers

131




Bargaining power of suppliers

• Supply is dominated by a few companies

• Products are unique

• High switching costs

• Forward integration is possible

• Backward integration is unlikely

• Market is not an important customer to supplier group

132




Bargaining power of buyers

• Buyers are concentrated and/or purchase in large volumes

• Backward integration is likely

• Products are standardized

• Many suppliers exist

• Buyers earn low profits

• Industry product is unimportant to quality of buyer’s products, but price is

important

133




Substitutes

• Buyer’s willingness to substitute

• Relative price and performance of substitutes

• Costs of switching

New entrants


• Product differentiation and brand identity

• Capital requirements in production

• Switching costs

• Access to distribution channels

134



3.3.3 Value Chain Analysis

135


136

The Roots of Performance and Competitive Advantage


Resources

Core competences

Competences

Competitive advantage

Performance

Intangible

Assets

Tangible

Assets


137

Benchmarking


3.4 Market Research and Information Systems

138

3.4.1 Market Research

139


140

Tasks of Int. Marketing Research by Decision Phase


Phase 1:

Deciding whether to

internationalize

Phase 2:

Deciding which markets

to enter

Phase 3:

Deciding how to enter

foreign markets

Phase 4:

Designing the international

marketing program

Phase 5:

Implementing/ controlling the

international marketing

program

Assessment of

• Global market opportunities

• Competitiveness of firms

• Global demand vs. domestic demand

Assessment of

• Negotiation styles by culture

• Sales by product line, etc.

• Contribution margin

• Marketing expenses per market

Assessment of

• Buyer behavior

• Competitive practice

• Available distribution channels

• Media and promotional channels

Assessment of

• Behavior of local competition and potential intermediaries

• Transport costs

• Government requirements

Assessment of

• Local competition

• Political risks/trade barriers

• Psychic distance


141

Categorization of Data for Assessment of Market Potential



Advantages

• Less expensive

• Less time consuming

• Low level of commitment

• No constraints by overseas customs

• Speed

142

Secondary Research


Disadvantages

• Non-availability of data

• Reliability of data

• Data classification

• Comparability of data

• Data privacy concerns

How to judge the reliability of data sources???


143

Comparing Qualitative and Quantitative Research


Characteristic Quantitative Qualitative

Objective To quantify data and generalize the

results to the population of interest

To gain an initial understanding of

underlying reasons and motives

Type of research Descriptive and/or causal Exploratory

Flexibility Low due to standardized, structured

questionnaires

High due to use of two-way

communication

Sample size Large Small

Choice of respondents Representative sample of

population

Persons with considerable

knowledge of problem

Information per respondent Low High

Data analysis Statistical summary Subjective; interpretative

Ability to replicate High Low

Interviewer requirements No special skills Special skills required

Time consumption High during design phase; low

during analysis phase

Low during design phase; high

during analysis phase


144

Research Design Considerations


What is the research problem? What are the objectives?

What research approach should be used?

What is the best contact method?

What are the details of the sampling plan?

What is the contact medium?

How should the data be analyzed?


145

Research Design Considerations

See Berndt/Altobelli/Sander (2010), p. 47.

One (sub)culture Several ethnics

One nation One-cultural-research Cross-cultural-

research

Several nations Cross-national-

research

Cross-national-

research


Difficulties of international market research

• Suitable data collection methods

• Cross-national equivalence of measuring instruments:

146

Problems of Cross-National-Research


Question equivalence


Difficulties of international market research

• Response equivalence:

• Social acceptability of answers

• Communication patterns

• Tendency to extreme values

• Tendency to mean values

• Tendency to “yes”

• General usage of language

147

Problems of Cross-National-Research


vs.

&

3.4.2 International Marketing Information System

148

3.4.2 International Marketing Information System

An international marketing information system is an interacting

organization of people, systems, and processes devised to create a

regular, continuous and orderly flow of information essential to the

marketer’s problem-solving and decision-making activities.

149

International Marketing Information System



150

1 Marketing Basics




4.1 Segmentation, Targeting, and Positioning

4.2 Entry Modes

4.2.1 Export Modes

4.2.2 Intermediate Modes

4.2.3 Hierarchical Modes

4.3 Timing Decisions



7 Implementing and Coordinating the Intern. Marketing

151

Structure

152

Learning Objectives


Explore how international marketing screens potential markets

Distinguish between preliminary and ‘fine-grained‘ screening

Realize the importance of segmentation in the formulation of the

global marketing strategy

Choose among alternative market expansion strategies


153


154

International Market-Screening Model


The firm

• Degree of Internationalization

and overseas experience

• Size/amount of resources

• Type of industry/nature of the

business

• Internationalization goals

• Existing networks of relationship

Macro environment

Step 1: Selection of segmentation criteria

Step 2: Development of segments

Step 3: Screening of segments

Step 4: Microsegmentation

Market entry

Micro environment


Criteria included in the overall BERI Index

• Political stability

• Economic growth

• Currency convertibility

• Labor cost/productivity

• Short-term credit

• Long-term loans/venture capital

• Attitudes

• Nationalization

155

Business Environment Risk (BERI) Index


• Monetary inflation

• Balance of payments

• Enforceability of contracts

• Bureaucratic delays

• Communications

• Local management

• Professional services


156

The Market Attractiveness/Competitive Strength Matrix


• A countries: primary

markets offering the best

opportunities for long-term

strategic development

• B countries: secondary

markets where

opportunities are there but

risk is high

• C countries: tertiary

markets with high risk


Dimensions of market/country attractiveness

• Market size

• Market growth

• Buying power of customers

• Market seasons

• Average industry margin

• Competitive conditions

• Market prohibitive conditions

• Government regulations

• Infrastructure

• Economic and political stability

• Psychic distance

157




Dimensions of competitive strength

• Market share

• Marketing ability and capacity

• Products to fit market demands

• Price


• Image

• Technology position

• Product quality

• Market support

• Quality of distributors

• Financial resources

• Access to distribution channels

158




Criteria to develop segments

• Demographics

• Lifestyles/Psychographics

• Consumer motivations

• Buyer behavior

159

Development of Sub-Segments/Micro-Segments



160

Example International Market Segmentation Process



Positioning is the process of developing strategies for ‘filling a slot’ in the

mind of target customers.

General positioning strategies

• Attributes or benefit

• Quality and price

• Use or user

• Competition

161

International Positioning

See Keegan/Green (2013), p. 237ff.


“Global consumer culture positioning (GCCP) is defined as a strategy that

identifies the brand as a symbol of a particular global culture or segment.”

“Foreign consumer culture positioning (FCCP) is defined as a strategy that

associates the brand’s users, use occasions, or production origins with a

foreign country or culture.”

“Local consumer culture positioning (LCCP) is defined as a strategy that

associates the brand with local cultural meanings, reflects the local culture’s

norms, portrays the brand as consumed by local people.”

162

International Positioning

Keegan/Green (2013), p. 240ff.

4.2 Entry Modes

163

4.2 Entry Modes

164

Types of Entry Modes


Export

Intermediate

Hierarchical

control

risk

financial commitment

flexibility

4.2 Entry Modes

Factors affecting the foreign market entry mode decision

165

Model for Entry Mode Decision


4.2.1 Export Modes

166

4.2 Entry Modes

Partner mindshare

• Measurement of the strength of a relationship in terms of:

• Trust

• Commitment

• Cooperation

• High influence on sales performance

167

Success of Export Modes


4.2 Entry Modes

Indirect export modes

• Sale is like a domestic sale.

• Most appropriate for firms with limited international expansion objectives

• Appropriate for firms using international sales as a means of disposing of

surplus production

168

Indirect Export Modes


4.2.1 Export Modes

Indirect entry modes

• Export buying agent

• Broker

• Export management company

• Trading company

• Piggyback

169

Indirect Export Modes


4.2.1 Export Modes

Export management company

• Specialist companies that act as the export department

• EMCs spread selling, administrative, and transport costs because of economies involved making large shipments of goods from a number of companies

• EMCs offer far wider exposure for client products at a lower cost

Disadvantages export management company

• EMC specialization may not correspond to supplier objectives

• EMCs are paid by commission and may focus on opportunities that enhance returns quickly

• EMCs may represent too many clients to provide outstanding service to any single one

• EMCs may carry competing products

170

Export Management Company


4.2.1 Export Modes

Disadvantages for the carrier

• Quality control concerns

• Continuity of supply issues

Disadvantages for the rider

• Loss of control over marketing of products

• Potential lack of commitment from carrier

• Carrier may wish to acquire rider

171

Piggyback Considerations


4.2.1 Export Modes

Advantages for the carrier

• Enables use of excess export capacity

• May fill gap in product line

• Broadens product range without development and manufacturing costs

Advantages for the rider

• No need for distribution system

• Opportunity to learn from carrier

172

Piggyback Considerations


4.2.1 Export Modes

Direct export modes

• Sells directly to a buyer or to an importer in a foreign market

• Export through foreign-based agents

• Export through foreign-based distributors

173

Direct Export Modes


How to find an intermediary?

4.2.1 Export Modes

174

Matchmaking Between Manufacturer’s Potential Partners


4.2.1 Export Modes

Functions of export marketing groups

• Exporting in the name of the association

• Consolidating freight, negotiating rates, and chartering ships

• Performing market research

• Appointing selling agents abroad

• Obtaining credit information and collecting debts

• Setting prices for export

• Allowing uniform contracts and terms of sale

• Allowing cooperative bids and sales negotiation

175

Cooperative Export Modes


4.2.1 Export Modes

176

Advantages and Disadvantages of Export Modes


Export Mode Advantages Disadvantages

Indirect exporting • Limited commitment and investment

• High degree of market diversification

possible

• Minimal risk

• No export experience required

• No control of marketing mix elements

other than product

• Costs of domestic companies reduces

profit to the producer

• Lack of contact to the market

Direct exporting • Access to local market and contact

with potential customers

• Shorter distribution chain

• Market knowledge acquired

• More control over marketing mix

• Local selling support and services

available

• Little control of market price

• Some investments in sales organizations

(contact from home base with distributors

or agents)

• Cultural differences, providing

communication problems and information

filtering

Export marketing

groups (EMG)

• Shared costs and risks of

internationalization

• Provide complete product line or

system sales to the customer

• Risk of unbalanced relationships

• Participating firms are reluctant to

give up their complete independence

4.2.2 Intermediate Entry Modes

177


Factors encouraging foreign market production

• Desirability of being close to foreign customers

• Foreign production costs are low

• Transportation costs may render heavy products non-competitive

• Tariffs can prevent entry of an exporter’s products

• Government preference for national suppliers178

Intermediate Modes


Contract manufacturing

Licensing

Franchising

Strategic alliances/joint ventures


Contract manufacturing is the term used to refer to manufacturing which is

outsourced to an external partner, one that specializes in production and

production technology.

• Quality and specification requirements are important

• Offers substantial flexibility

• Typical problems with contract manufacturing:

• Delivery

• Product warranties

• Fulfilling additional orders

179

Contract Manufacturing



Licensing is the transfer of usage rights for the intellectual property of the

licensor to the licensee for a lump sum fee or for royalties.

Typical rights given in a license agreement

• Patent covering a product or process

• Manufacturing know-how not subject to a patent

• Technical advice and assistance

• Marketing advice and assistance

• Use of a trade mark/trade name

180

Licensing

See Homburg et al. (2013), p. 431; Hollensen (2014), p. 358ff.


Motives for licensing out

• Licensor firm will remain technologically superior in its product development

• Licensor is too small to have financial, managerial or marketing expertise for

overseas investment

• Product is at end of product life cycle in advanced countries but stretching

product life cycle is possible in less developed countries

• Opportunity for profit on key components

• Government regulations may restrict foreign direct investment

• Constraints may be imposed on imports

181

Intermediate Modes



Licensing in

182

Intermediate Modes



Franchising refers to the exchange of rights between a franchisor and

franchisee, such as the right to use a total business concept including use of

trade marks, against some agreed royalty.

Franchising is a marketing-oriented method of selling a business service,

often to small independent investors who have working capital but little or no

prior business experience.

Major types of franchising

• Product and trade name franchising

• Business format ‘package’ franchising

183

Franchising



Business format ‘packages’

• Trade marks/trade names/designs

• Patents and copyrights

• Business know-how/trade secrets

• Geographic exclusivity

• Store design

• Market research

• Location selection

Key success factors in the franchisor-franchisee relationship

• Integrity of business system

• Capacity for renewal of business system

184

Franchising



Joint ventures are partnerships between two or more parties. It involves two

‘parents’ creating the ‘child’. The ‘child’ is the joint venture acting in the market.

Reasons for using joint ventures

• Complementary technology or management skills can lead to new

opportunities.

• Firms with partners in host countries can increase speed of market entry.

• Less developed countries may restrict foreign ownership.

• Costs of global operations in R&D and production can be shared.

185

Intermediate Modes



Joint venture types

• Upstream-based collaboration (Y coalition)

• Downstream-based collaboration (Y coalition)

• Upstream/downstream-based collaboration (X coalition)

186

Intermediate Modes



Stages in joint venture formation

187

Intermediate Modes


1: Joint venture objectives

2: Cost/benefit analysis

3: Partner selection

4: Business plan development

5: Joint venture agreement

6: Contract writing

7: Performance evaluation


Principal objectives for forming a joint venture

• Entering new markets

• Reducing manufacturing costs

• Developing and diffusing technology

Factors to consider during the cost/benefit analysis

• Financial commitment

• Synergy

• Management commitment

• Risk reduction

• Control

• Long-run market penetration

188

Intermediate Modes



Stages for partner selection

• Establishing a desired partner profile

• Identifying joint venture candidates

• Screening and evaluating possible joint venture partners

• Initial contact/discussion

• Choice of partner

Relevant issues of the business plan

• Ownership split

• Management

• Production

• Marketing

189

Intermediate Modes



Joint-venture agreement

• Is determined by the relative bargaining power of both prospective partners.

Contract writing

• ‘Marriage’ conditions

• ‘Divorce’ conditions

• Future of the child after ‘divorce’

Performance evaluation

• Should be measured in a long-term orientation

• Not only conventional output measures

• Joint ventures need considerable time to be measured by cash flow, market share, etc.

190

Intermediate Modes



Sources of potential conflicts

• Changes in bargain power

• Diverging goals

• Double management

• Repatriation of profits

• Mixing cultures

• Shared equity

• Developing trust

• Providing an exit strategy

191

Intermediate Modes



Strategic alliances are partnerships between two or more parties. The formal

difference between a joint venture and a strategic alliance is that a strategic

alliance is typically a non-equity cooperation.

192

Intermediate Modes


Parent

firm

A

Parent

firm

B

Joint venture C

Parent

firm

A

Parent

firm

B


193

Advantages and Disadvantages of Contract Manufacturing



Contract

manufacturing

• Permits low-risk market entry.

• No local investment

• Retention of control over R&D,

marketing, and sales/after-sales

service.

• Avoids currency risks and financing

problems.

• A locally made image assists in sales

to governments.

• Entry to market otherwise protected by

tariffs, barriers.

• Possible cost advantages if local costs

are lower.

• Avoids intra-corporate transfer-pricing

problems that can arise with a

subsidiary.

• Transfer of production know-how is difficult.

• Contract manufacturing is only possible when a

satisfactory and reliable manufacturer can be

found.

• Extensive technical training will often need to be

given to the local manufacturer’s staff.

• As a result, at the end of the contract, the

subcontractor could become a formidable

competitor.

• Control over manufacturing quality is difficult to

achieve.

• Possible supply limitation if the production is

taking place in developing countries.


194

Advantages and Disadvantages of Licensing


Licensing • Increases the income on products.

• Permits entry into markets that are

otherwise closed on account of high rates

of duty, import quotas, etc.

• Viable option where manufacturer is near

the customer’s base.

• Requires little capital investment.

• The licensor is not exposed to the danger

of nationalization or expropriation of assets.

• Because of the limited capital requirements,

new products can be rapidly exploited.

• Licensor can take immediate advantage of

the licensee’s local marketing and

distribution organization and of existing

customer contacts.

• Protects patents, especially in countries

that give weak protection for products not

produced locally.

• Local manufacture may also be an

advantage in securing government

contracts.

• Licensor is ceding certain sales territories to

the licensee. If they fail to live up their

expectations, renegotiations may be expensive

• When the licensing agreement expires, the

licensor may find a competitor in the former

licensee.

• The licensee may prove less competent than

expected at marketing activities. Costs may

grow faster than income.

• The licensee may not fully exploit the market

and leave it open to entry of competitors.

• Licensee fees are normally a small percentage

of the turnover and lower than the profits of a

company’s own manufacturing operation.

• Lack of control over licensee operations.

• Quality control of the product is difficult.

• Negotiations with the licensee, and sometimes

with the government, are costly.



195

Advantages and Disadvantages of Franchising



Franchising • Greater degree of control

compared to licensing.

• Low-risk, low-cost entry mode (the

franchisees are the ones investing

in the necessary equipment and

know-how)

• Using highly motivated business

contacts with money, local market

knowledge, and experience.

• Ability to develop new and distant

international markets, relatively

quickly and on a larger scale than

otherwise possible

• Generating economies of scale in

marketing to international

customers

• Precursor to possible future direct

investments in foreign market.

• The search for competent franchisees can be

expensive and time consuming.

• Lack of full control over franchisees operations,

resulting in problems with cooperation,

communications, quality control, etc.

• Costs of creating and marketing a unique package of

products and services recognized internationally

• Costs of protecting goodwill and brand name.

• Problems with local legislation, including transfer of

money, payments of franchise fees and government-

imposed restrictions on franchise agreements.

• Opening up internal business knowledge may create

potential future competitor

• Risk to the company’s international profile and

reputation if some franchisee underperforms (‘free

riding’ on valuable brand names).


196

Advantages and Disadvantages of Joint Ventures


Joint

Ventures

• Access to expertise and

contacts in local markets.

• Reduced market and political

risk.

• Shared knowledge and

resources: compared to wholly

owned subsidiary, less capital

and fewer management

resources are required.

• Economies of scale by pooling

skills and resources.

• Overcome host government

restrictions.

• May avoid local tariffs and non-

tariff barriers.

• Shared risk of failure.

• Less costly than acquisitions.

• Possibly better relations with

national governments through

having a local partner.

• Objectives of the respective partners may be

incompatible, resulting in conflict.

• Contributions to joint venture can become

disproportionate.

• Loss of control over foreign operations. Large

investments of financial, technical or managerial

resources favor greater control than possible in a joint

venture.

• Completion might overburden a company’s staff.

• Partners may become locked into long-term investments

from which it is difficult to withdraw.

• Transfer pricing problems as goods pass between

partners.

• The importance of joint ventures might change over time.

• Cultural differences may result in possible differences in

management culture

• Loss of flexibility and confidentiality

• Problems of management structures


4.2.3 Hierarchical Entry Modes

197


Hierarchical modes are entry modes, where the firm completely owns and

controls the foreign entry mode.

The degree of control that head office can exert on the subsidiary will depend

on how many and which value chain functions can be transferred to the

market.

198

Hierarchical Modes


Domestic-based representatives

Resident sales representatives/

foreign sales subsidiary

Sales and production subsidiary

Region centers


Domestic-based sales representatives reside in the home country of the

manufacturer and travel abroad to perform the sales function.

Domestic-based vs. resident sales representatives

• Order making or order taking

• Nature of the product

199

Domestic-Based Sales Representatives



Resident sales representatives: The sales function is transferred to the

foreign market.

Foreign branch is an extension and a legal part of the firm (often called sales

office). Taxation of profits takes place in the manufacturer’s country.

Foreign subsidiary is a local company owned and operated by a foreign

company under the laws and taxation of the host country.

200

Resident Sales Representatives

See Hollensen (2014), p. 387f


Sales and production subsidiary: The production and the sales function are

transferred to the foreign market.

Reasons for establishing local production facilities

• To defend existing business

• To gain new business

• To save costs

• To avoid government restrictions201

Sales and Production Subsidiary



Region centers are regional headquarters or appointment of a ‘lead country’, which will usually play the role of a coordinator and stimulator with reference to a single homogeneous group.

Coordinating role of region centers

• Country and business strategies are mutually coherent.

• One subsidiary does not harm another.

• Synergies are identified and exploited.

Stimulator role of region centers

• Translation of global products into local country strategies

• The development of local subsidiaries

202

Region Centers



203

Region Centers



204

Advantages and Disadvantages of Hierarchical Modes



Domestic-based

sales reprentative

• Better control of sales activities

compared to independent

intermediaries.

• Close contact with large customers in

foreign markets close to the home

country.

• High travel expenses.

• Too expensive in foreign markets, far

away from home country.

Foreign sales

branch/sales and

production

subsidiary

• Full control of operation.

• Eliminates the possibility that a national

partner gets a ‘fee ride’.

• Market access.

• Acquire market knowledge directly

(sales subsidiary).

• Reduce transport costs (production

subsidiary).

• Access to raw materials and labor

(production subsidiary).

• High initial capital investment

required.

• Loss of flexibility.

• High risk (market, political, and

economic).

• Taxation problems.


205

Advantages and Disadvantages of Hierarchical Modes



Region centers • Achieving potential synergies on a

regional/global scale.

• Regional/global scale efficiency

• Leverage learning on a cross-national

basis. Resources and people are

flexible and can be put into operating

units around the world.

• Increasing bureaucracy.

• Limited national-level responsiveness

and flexibility.

• A national manager can feel to have no

influence.

• Missing communication between head

office and region centers.


206


Waterfall strategy

207

Timing of International Market Entry


Country A

Market

Entry

Time

Country B

Country E

Country D

Country C

A=lead country B,C,D,E…=lag countries


Advantages

• Successive development and expansion of financial and human resources (including personnel with marketing skills) facilitated by learning effects

• Temporal diversification of risks

• Marketing can be adjusted with respect to a later entry into other markets

• Potential extension of product life cycle

Disadvantage

• Risk of market entry by competitors

Situational factors favoring the waterfall strategy

• Necessity for reference markets (e.g. USA for South America)

• Longer product cycles

• Lower competitive intensity in international markets208

Waterfall Strategy



Sprinkler strategy

209

Timing of International Market Entry


Country A

Market

Entry

Country B

Country E

Country D

Country C

Time


Advantages

• Establishment of market entry barriers to thwart followers

• Regional/geographical diversification of risks

Disadvantages

• Increased short-term financial and human resource requirements

• Major losses if strategy fails

Situational factors favoring the sprinkler strategy

• Short product and technology life cycles

• Long R&D times

210

Sprinkler Strategy



211

1 Marketing Basics







212

Structure

213

Learning Objectives


- The process of global marketing strategy formulation

- Competitive strategies

- Challenges of global marketing implementation


214

Global Marketing Evolution



“A global strategy is to array the competitive advantages arising from

location, world-scale economies, or global brand distribution, namely, by

building a global presence, defending domestic dominance, and overcoming

country-by-country fragmentation.”

215

Global Strategy

Kotabe/Helsen (2011), p. 254.


216

Global Strategy Formulation



Core strategy

• Begins with a clear definition of the business for which the

strategy is to be developed.

• The strategic business unit (SBU) represents groups

organized around product market similarities based on:

• Needs or wants to be met,

• End user customers to be targeted,

• Products or services used to meet needs of specific customers.

• Requires the participation of executives from different

functions.

217

Understanding and Adjusting the Core Strategy



Market and competitive analysis

• Helps to balance risks, resource requirements, competitive

economies of scale, and profitability to gain stronger long-term

positions.

• Helps to understand the structure of the global industry and

identify the forces that drive competition and determine

profitability.

Internal analysis

• Examines the readiness and capability of the firm to

undertake strategic moves with its current resources.

218




Formulating a global marketing strategy (I)

• Choice of competitive strategy

219




Formulating a global marketing strategy (II)

• Country market choice

• Segments

220




Marketing related decisions will have to be made in four areas:

• The degree of standardization in the product offering.

• Marketing approach - Uniformity is sought in elements that are

strategic in nature, while taking care to localize necessary tactical

elements; this approach is called glocalization.

• Location and extent of value-adding activities.

• Competitive moves - Cross-subsidization may be the competitive

advantage needed for the long term.

221




222




Challenges of global marketing implementation

• Insufficient research and the tendency to over-standardize.

• Inflexibility in planning and implementation.

• Local resistance in the form of not-invented-here syndrome (NIH), which

occurs when country organizations are not part of the planning process,

or if adoption is forced on them by headquarters

How to avoid the NIH syndrome

• Encourage local managers to develop ideas for regional or global use.

• Maintain a product portfolio that includes local as well as regional and

global brands.

• Allow local managers control over their marketing budgets so that they

can respond to local customer needs and counter global competition.

223




• Globalization enhances the flow of information, leading to idea

exchange and strengthening of organizational values.

• Encourage personnel interchange to gain experience abroad.

• Coordinate and leverage resources of the corporation.

• Permit local managers to develop their own programs within specified

parameters and subject to approval.

• Minimize the influence of the NIH syndrome by using motivational

policies.

224

Localizing Global Marketing



Organization structures

• Establish global or regional product managers and their support

groups at headquarters.

• The matrix structure is considered more effective in today’s global

marketplace.

• Execute global account management programs to build relationships

with important customers and allow development of internal systems

and interaction.

225




Corporate culture

• Affects and is affected by the manner in which a company holds

its operations together and makes them a single entity, and commits

to the global market place.

• The management development system has to be transparent; non-

national executives should have an equal chance for the fast track to

top management.

• Implement compensation and mobility policies to avail the best talent

regardless of job location.

226




227

1 Marketing Basics






6.1 Product Decisions

6.2 Pricing Decisions

6.3 Sales Decisions

6.4 Communication Decisions


228

Structure

229

Learning Objectives


- The standardization and adaptation possibilities of products

- Pricing decisions for international products

- Characteristics of sales decisions like the design and structure of

sales systems

- Barriers to standardizing communication internationally


230

Standardization versus Adaptation



231




232


See Hollensen (2014), p. 458; Czinkota/Ronkainen (2013), p. 358f.

Factors favouring standardization Factors favouring adaptation

• Economies of scale in R&D,

production and marketing

• Global competition

• Convergence of tastes and consumer

needs

• Centralized management of

international operations

• Easier communication, planning and

control

• Stock cost reduction

• Standardized concept is used by

competitors

• Government and regulatory influences

• Legal issues

• Local competition

• Differing consumer behavior patterns

• Fragmented and decentralized

management with independent

country subsidiaries

• Adapted concepts are used by

competitors


233




234


Basic alternatives for approaching international markets are:

• Sell the product as it is internationally.

• Modify the product for different countries or regions.

• Design new products for foreign markets.

• Incorporate all differences into one flexible product design and introduce it

globally.

235

Main Product Decision



Consumption patterns

Patterns of purchase

• Is the product or service purchased by relatively the same consumer

income group from one country to another?

• Do the same family members motivate the purchase in all target countries?

• Do the same family members dictate brand choice in all target markets?

• Do most consumers expect a product to have the same appearance?

• Is the purchase rate the same regardless of the country?

• Are most of the purchases made at the same kind of retail outlet?

• Do consumers spend the same amount of time making the purchase?

236

Cultural and Psychological Factors Affecting Product Adaptation



Consumption patterns

Patterns of usage

• Do most consumers use the product or service for the same purpose or

purposes?

• Is the product or service used in different amounts from one target area or

country to another?

• Is the method of preparation the same in all target countries?

• Is the product or service used along with other products or services?

237




Psychological characteristics

Attitudes toward the product or service

• Are the basic psychological, social, and economic factors motivating the

purchase and use of the product the same for all target countries?

• Are the advantages and disadvantages of the product or service in the

minds of consumer basically the same from one country to another?

• Does the symbolic content of the product or service differ from one country

to another?

• Is the psychic cost of purchasing or using the product or service the same

for all countries?

• Does the appeal of the product or service for a cosmopolitan market differ

from one market to another?

238




Psychological characteristics

Attitudes toward the brand

• Is the brand name equally known and accepted in all target countries?

• Are customer attitudes toward the package basically the same?

• Are customer attitudes toward pricing basically the same?

• Is brand loyalty throughout target countries for the product or service under consideration?

Cultural criteria

• Does society restrict the purchase and/or use of the product or service to a particular group?

• Is there a stigma attached to the product or service?

• Does the usage of the product or service interfere with tradition in oneor more of the target markets?

239




240

Elements of a Product

See Kotabe/Helsen (2011), p. 332ff.


Subject to standardization

• Physical product features such as product functions and quality attributes

Degree of standardization

• Uniform

• Similar

• Country specific

241

Standardization vs. Adaptation of Core Product


The Simpsons in Arabic.wmv

The Simpsons in Arabic.wmv


Subject to standardization

• Brand name

• Brand logo

Standardization of brand names

• Translation

• Transliteration

• Transparency

• Transculture

242

Standardization vs. Adaptation of Brand Name

See Homburg et al. (2013), p. 436f.; Czinkota/Ronkainen (2013), p. 366f.


Brand positioning refers to consumers’ perception of a brand as compared

with that of competitors’ brands, that is, the mental image that a brand, or the

company as a whole, evokes.

Degree of brand positioning standardization is the compatibility between

the definition of the target segments and the brand promises to these

segments.

243

Standardization vs. Adaptation of Brand Positioning

See Homburg et al. (2013), p. 437; Czinkota/Ronkainen (2013), p. 364f.


244

Standardization vs. Adaptation of Brand Positioning

140 Regional Strategic Brands

Responsibility of strategic business unit

and regional management

•Nestle

•Carnation

•Buitoni

•Kit Kat

•Polo

•Cerelac

•Baci

•Mackintosh

•Vittel

•Contadina

•Stouffer’s

•Texicana

•Brigadeiro

•Rocky

•Soils

Examples

•Herta

•Alpo

•Findus

•Mighty Dog

•Smarties

•After Eight

•Coffee-Mate

•Maggi

•Perrier

•L’Oreal

7,500 Local Brands

Responsibility of local markets

45 Worldwide Strategic Brands

Responsibility of general management at

strategic business unit level

10 Worldwide Corporate Brands

See Kotabe/Helsen (2011), p. 370.


Packaging serves three major functions

• Protection

• Promotion

• User convenience

Barriers to standardization

• Cultural differences

• Legal issues

• Different ecological values

• Climate

• Different usage of packaging

245

Standardization vs. Adaptation of Brand Name

See Homburg et al. (2013), p. 437; Czinkota/Ronkainen (2013), p. 367f.


246


Relevance of pricing decisions

• The only element in the marketing mix that generates revenue.

• Serves as a means of attracting and communicating an offer to a potential

buyer.

• A competitive tool for dealing with rivals and substitutes.

• Used to position the product or service in the market.

• Pricing problems are technically identical in the domestic and international

market, but vary according to the degree of foreign involvement.

247

Pricing



Alternative strategies for first-time pricing

• Skimming - achieve the highest possible

contribution in a short initial time period, and

then gradually lower the price as more

segments are targeted and more products

are available.

• Penetration pricing – offer products at a low

price to generate volume sales and achieve

high market share, to compensate for lower

per unit return.

• Market pricing – Determined based on

competitive prices; production and marketing

is adjusted to the price.

248

Pricing Strategies


Price

p

Time t

Price

p

Time t


249

Stages in Setting of Prices for Foreign Markets



250

Structural Factors of Standardized vs. Differentiated Pricing


Price differentiation

Differences in:

• Average industry prices

• Price segments

• Methods and importance

of special offers

• Importance of own

brands

• Strength of local

competitors

• Retailer Power

• Terms and conditions

• Consumer preferences

• Price interest and

awareness

Price standardization

• Internationalization of

competition

• Homogenization of

competitive structures

• International activities

of large retail

organizations

• Low cost of obtaining

information

• Increased danger of

cross-border arbitrage

consumer prices,

retail prices,

price positioning,

terms and conditions,

product line pricing,

special offers


251

A Taxonomy of International Pricing Practices


3 Multilocal

price setter

4 Global

price leader

1 Local

price follower

2 Global

price follower

High

LowPre

pare

dness f

or

inte

rnationaliz

ation

Multilocal markets Global markets

Industry globalism


Incoterms

The internationally accepted standard definitions for terms of sale set by the

International Chamber of Commerce (ICC) since 1936.

They are grouped into four categories:

• E-terms - Seller delivers the goods to the buyer only at the former’s own

premises.

• F-terms - Seller delivers the goods to a carrier appointed by the buyer.

• C-terms - Seller contracts for carriage without assuming the risk of loss or

damage to the goods.

• D-terms - Seller bears all costs and risks to deliver goods to the destination

determined by the buyer.

252

Incoterms



253

Incoterms


EXW: Ex-works

FCA: Free carrier

FAS: Free alongside ship

FOB: Free on board

CFR: Cost and freight

CIF: Cost, insurance,

and freight

CPT: Carriage paid to

CIP: carriage and

insurance paid to

DDP: Delivered duty paid

DDU: Delivered duty

unpaid


Factors affecting terms of payment

• Practice in the industry

• Terms offered by competitors

• Relative strength of the buyer and the seller

254

Different Terms of Payment

Czinkota/Ronkainen (2013), p. 469ff.; Hollensen (2014), S. 539.

6.3 Sales Decisions

255

6.3 Sales Decisions

Main areas of international sales decisions

• Design and structure of the sales system

• Sales logistics

• Structure and organization of the relationships to sales partners and key

accounts

• Design of sales activities

256

International Sales Decisions


6.3 Sales Decisions

Sales channels

• Channels can vary from direct (producer-to-consumer types) to elaborate

(multilevel channels employing many types of intermediaries).

• Channel configurations for the same product will vary within industries, even

within the same firm, because national markets quite often have unique

features.

• Channel structures are designed to manage multidirectional connections for:

• Physical movement of goods and services.

• Transactional title flows.

• Information communications flows.

257

Design and Structure of the Sales System


6.3 Sales Decisions

Examples of different sales channels

258

International Sales Decisions


6.3 Sales Decisions

Determinants of channel structure

External

• Customer characteristics

• Distribution culture

• Competition

• Legal regulations/local business practices

259


See Czinkota/Ronkainen (2013), p. 499ff.; Hollensen (2014), p. 552f.

6.3 Sales Decisions

Determinants of channel structure

Internal

• Company objectives

• Product characteristics

• Capital

• Cost

• Coverage

• Control

• Continuity

• Communication

260


See Czinkota/Ronkainen (2013), p. 499ff.; Hollensen (2014), p. 555.

6.3 Sales Decisions

Problem gray market channels

Gray market channels refer to the legal export/import transaction involving

genuine into a country by intermediaries other than the authorized distributors.

Strategies against gray market channels

• Seek legal redress

• Change the marketing mix

• product strategy

• pricing strategy

• warranty strategy

261


See Kotabe/Helsen (2011), p. 563ff; Hollensen (2014), p. 575f.

6.3 Sales Decisions

Factors affecting transportation mode decision

• Cost of different transport alternatives

• Distance to the location

• Nature of the product

• Frequency of the shipment

• Value of the shipment

• Availability of transport

262

Sales Logistics

See Hollensen (2014), p. 565; Homburg et al. (2013), p. 444.

6.3 Sales Decisions

Guidelines for anticipating and correcting problems with international

distributors

• Select distributors – do not let them select you

• Look for distributors capable of developing markets

• Treat the local distributors as long-term partners

• Support market entry by committing money, managers, and proven

marketing ideas

• Maintain control over marketing strategy

• Make sure distributors provide you with detailed market and financial

performance data

• Build links among national distributors at the earliest opportunity

263

Relationship to Sales Partners


6.3 Sales Decisions

264

Relationship to Sales Partners


6.3 Sales Decisions

Specific characteristics related to international sales negotiations

• Verbal communication is required in order to convey needs and preferences.

• Negotiation strategies that are geared towards influencing the behavior and

attitudes tend not to be very successful.

• Risk of misunderstandings and misinterpretations can arise during the verbal

and non- verbal exchange of information between the negotiating parties.

265

Designing the Sales Activities


6.3 Sales Decisions

266



Recommended behavior Problematic behavior

US

customer

• Punctuality

• Create a friendly atmosphere

• Give feedback to positive anecdotes

• Include local attorneys in negotiations/

convert negotiation results into contractual

stipulations

• Religion, sexuality, race as topics of

conversation

• Overly abstract concepts instead of specific,

concrete examples

• Emphasis on academic titles

British

customers

• Search for pragmatic solutions

• Strive for fairness

• Wear conservative clothing

• Be prepared for subtle humor

• Recognize and detect discrete/

only implicitly expressed criticism

• Overly direct communication

• Expectation of open disagreement

• Misinterpretation of ‘understatement’

• Discussion of political matters during business

lunch/dinners

• Too much emphasis on detail

French

customers

• Communicate French

• Elegance, eloquence, and enthusiasm are

important components of communication.

• Introduce the topic by way of intellectual/

abstract/philosophical aspects

• Accept delays on the part of discussion

partners.

• Inadequate consideration of hierarchies

• Premature discussion on details

• Reducing the conservation down to facts

• Being put off by mental leaps/erratic

conversation patterns of the French discussion

partner.

6.3 Sales Decisions

267



Recommended behavior Problematic behavior

Russian

customer

• Be well informed about your counterpart

• Be serious, polite, and patient in

negotiations

• Clarify everything; Russians dislike

uncertainty

• Build personal relationships

• Keep the favors that you are promising:

they are serious obligations

• Compromising too early, as a sign of weakness

• Overestimating a contract

• delivery guarantees often do not mean a lot

Chinese

customers

• Make sure the negotiating partner has the

authority to close the deal.

• Always be polite

• Be patient; the same business takes six

times

• Build a good personal relationship and

make counter-invitations

• Document all results in detail; verbal

agreements do not last long

• Making the other side lose face

• Being too direct; a ‘no’ is a no-no


268


269

Elements of the International Communication Process



Merits of standardization


• Consistent image

• Global consumer segments

• Creative talent

• Cross-fertilization

270

Standardization vs. Adaptation of Communication


http://www.cathaypacific.com/

http://www.cathaypacific.com/


Barriers to standardization

• Cultural differences

• Advertising regulations

• Market maturity

• Not-Invented-Here (NIH) Syndrome

• Technological infrastructure

271


See Kotabe/Helsen (2011), p. 437f.


Advertising regulations

• Advertising of “vice products” and pharmaceuticals

• Comparative advertising

• Content of advertising messages

• Advertising targeting children

Channel regulations

• Product placement

• Ratio TV ad to content

• Other laws, e.g. Billboard ban of Sao Paulo

272




Types of standardization

• Laissez faire

• Export advertising

• Prototype standardization

• Regional approach

• Pattern standardization

273



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../Marketing Intelligence/Skriptaktualisierung/Videoarchiv/Apple iPhone 5 ad - Music Every Day (2013).wmv

Nokia Lumia 1520 Commercial.wmv

Nokia Lumia 1520 Commercial.wmv

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Nokia Lumia 1520 New Ad 2014 Relive.wmv


Adaption of advertising styles

• Appeal

• Communication style

• Basic advertising form

• Execution

274


De Mooji (2010) p. 169ff.


Connection between cultural dimensions and advertising form

275


De Mooji (2010) p. 169ff.


276

1 Marketing Basics







7.1 Organization of Global Marketing Activities

7.2 Global Account Management

7.3 Controlling the Global Marketing Program

7.4 Global Marketing Budget

277

Structure

278

Learning Objectives


How firms build their organizational structure internationally and what

roles headquarters can play

Global Account Management

The most important measures for marketing performance

How a global marketing budget is established


279


280

Structural Evolution of International Operations



281

Example of the Geographical Structure


Country

subsidiaries

Country

subsidiaries

Country

subsidiaries

Country

subsidiaries

Corporate

staff

CEO/Board

Production

Marketing

Finance

Production

Marketing

Finance

Production

Marketing

Finance

Production

Marketing

Finance

EuropeNorth

America

Latin

AmericaAsia/Pacific

Date Content

May, 28th Lecture

June, 2nd Lecture

June, 4th Guest lecture „International Market Reserch“

June, 9th Guest lecture „Brand Management“

… …

June, 19th Hand in your case studies

June, 25th Case study presentations

…

July, 2nd Exemplary test, Q&A (Questions before June 30th)

282

Schedule


283


Global account management is a relationship-oriented marketing

management approach focusing on dealing with the needs of an important

global customer (=account) with a global organization (foreign subsidiaries all

over the world).

Steps for implementing GAM

284



Identifying the selling firm’s global accounts

Analyzing the global accounts

Selecting suitable strategies

Developing operational capabilities


Criteria for determining strategically important customers

• Sales volume

• Age of the relationship

• Selling firm’s share of customers’ purchase

• Profitability of the customer to seller

• Use of strategic resources and extent of executive/management commitment

Steps for implementing GAM

• Basic characteristics of a global account

• Relationship history

• Level and development of commitment

• Goal congruence of parties

• Switching costs285




Criteria for determining strategically important customers

• Product/service development and performance

• Organizational structure

• Individuals (human resources)

• Information exchange

• Company and individual level benefits

286



http://www.agramkow.com/

http://www.agramkow.com/


Advantages of global account management

• Provides better fulfillment of customers’ global need for having only one

supplier

• Create barriers for competitors

• Increase sales of existing products and services through a closer

relationship with the key customer

• Facilitate the introduction of new products

• Coordinates marketing activities across borders

• May increase profit potential

• Reduces marginal costs of creating adapted programs for every new market

• Provides access to new customers through customer’s global network

287




Disadvantages of global account management

• Supplier will feel pressure to improve global consistency

• Pressure to ‘standardize’ pricing on a global basis

• Pressure to ‘standardize’ all terms of trade, not just price

• Supplier’s loss of GA due to major competitors using GAM strategy

• Multiple decision makers due to matrix structure

288




289


290

Controlling the Global Marketing Program


Decide objectives, strategies,

plans for implementation

Establish marketing

performance standards

Locate responsibility

Evaluate

Take corrective/

supportive action

Reward, promote,

advise, punish

Alter

sta

ndard

s

Alter

obje

ctives


291

Controlling the Global Marketing Program


Reward, promote,

advise, punish

Alter

sta

ndard

s

Alter

obje

ctives


Product

• Sales by market segments

• New product introductions each year

• Sales relative to potential

• Sales growth rates

• Market share


• Product defects

• Warranty expense

• Percentage of total profits

• Return on investment292

Measures of Marketing Performance



Pricing

• Response time to price changes of competitors

• Price relative to competitor

• Price changes relative to sales volume

• Discount structure relative to sales volume

• Bid strategy relative to new contacts

• Margin structure relative to marketing expenses

• Margin relative to channel member performance

293




Distribution

• Sales, expenses, and contribution margin by channel type

• Percentage of stores carrying the product

• Sales relative to market potential by channel, intermediary type, and specific

intermediaries

• Percentage of on-time delivery

• Expense-to-sales ratio by channel, etc.

• Order cycle performance by channel, etc.

• Logistics costs by logistics activity by channel

294




Communication

• Advertising effectiveness by type of media (e.g. awareness levels)

• Actual audience/target audience ratio

• Cost per contact

• Number of calls, enquires, and information requests by type of media

• Sales per sales call

• Sales per territory relative to potential

• Selling expenses to sales ratio

• New accounts per time period

• Lost accounts per period

295




296


297

Marketing Budget and Its Underlying Determinants


Berndt, R./ Altobelli, F. C./ Sander, M. (2010), Internationales Marketing-Management, 4thEdition, Springer Verlag, Berlin, Heidelberg.

Czinkota, M. R./ Ronkainen, I. A. (2013), International Marketing, 10th Edition, South-Western,

USA.

De Mooji, M. (2010), Global Marketing and Advertising: Understanding Cultural Paradoxes,Third Edition, USA.

Dicken, P. (2014), Global Shift: Mapping the Changing Contours of the World Economy,Seventh Edition, The Guilford Press.

Enke, M./ Geigenmüller, A./ Leischnig, A. (2014), Commodity Marketing, Grundlagen undBesonderheiten, 3.Aufl., Gabler Verlag, Wiesbaden.

Eurobarometer (2008), Attitudes of European citizens, Report towards the environmenthttp://ec.europa.eu/public_opinion/archives/ebs/ebs_295_en.pdf, March 2008."

GlobalEdge (2014), Market Potential Index (MPI) for Emerging Markets,http://globaledge.msu.edu/mpi, Michigan State University.

Hollensen, S. (2007), Global Marketing, Fourt Edition, Pearson Prentice Hall, Milan,

Italy.

Hollensen, S. (2014), Global Marketing, A decision-oriented approach, Sixth Edition, PearsonPrentice Hall, Harlow, Munich.

Homburg, C./ Kuester, S./ Krohmer, H. (2013), Marketing Management, A ContemporaryPerspective, McGraw-Hill, Second Edition, London.

Keegan, W. J./ Green, M. C. (2013), Global Marketing, Seventh Edition, Pearson PrenticeHall, USA.

298

List of References

Kotabe, M./ Helsen, K. (2011), Global Marketing Management, Fifth Edition, John Wiley & Sons,USA.

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http://geert-hofstede.com/-national-culture.html

http://geert-hofstede.com/-national-culture.html

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