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International Marketing

Dr. Matti J. Haverila

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PhrasesThere will be two kinds of CEOs in the next five years; Those who think globally and those who are unemployed.

Peter Drucker

We (Coca-Cola) used to be American Company with a large international business. Now we are a large international company with a sizeable American business.

Robert Goizueta

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Contents

• Introduction

• Starting Point

• Deciding what Markets to Enter

• Phases of Internationalization

• Prerequisities of Internationalization

• Special Issues– Problems of the international business

– Problems in the parent/subsidiary relationship

• Summary: Marketing In The International Environment

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Cross-Cultural Reasons for Failure• Inability to find right market niches.• Unwillingness to adapt and update products to local needs.• Not unique products viewed higher added-value by customers in

local markets.• Low commitment. It takes time to operate in foreign countries.• Assigning wrong people.• Picking wrong partners.• Inability to manage local stakeholders.• Developing mutual distrust and lack of respect between HQ and

the affiliates at different levels of management.• Inability to leverage ideas developed in one country to other

countries worldwide.

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Introduction

Deciding whether to go abroad?

Deciding which markets to enter?

Deciding how to enter the market?

Deciding on the marketing program?

Deciding on the marketing organization?

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Affecting FactorsDomestic Market

FactorsGrowth strategies

International Strategy

Dynamics ofInternational Business

Smallsize

Openess

Pressurefactors

Domestic

InternationalOperationStrategy

MarketStrategy

ProductStrategy

Internationalization

Of

The

Company

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Goal

Internationalization is not a goal in itself, but rather

• a means to good profitablity• its should start from the strategy of the company's SBA-unit's strategy

Internationalization is a learning process, which touches the whole company and its personnel; not onlythose persons, who go abroad to work. It requires the right attitude and corporate culture in all levels of the company.

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Starting Point

Strategy, mission

and business

idea

Motives and the

end result

Why and what is the

objective of the

investment?

Feasibility studyof the

Alternatives

= (Go/No Go)

Know-How from many

fields is needed

EstablishmentInvestment

#Means#Strategy= Objective or goal in itself

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Which Markets?• Objectives and policies

• Example: Innopac acquired companies during 90s from:– Singapore, Malaysia, Indonesia, Philippines, Thailand

– Hong Kong, Taiwan, China, The Middle East, Malta

– Hungary, Poland, Mexico, Jamaica, United States

Outcome: Innopac lost S$26.7 M 1989-91

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Marketing Mix - Product (2)40

20

30

10

Introductory Growth Mature Decline

Product not Modified Product Modified

Market share achieved

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Degree of product modification

0 2 4 6 8 10 12 14 16 18 20Zone of minimalproductadaptation

Zone of minimalProduct adaptation(minor type)

Zone of minimalProduct adaptation(major type)

CostsIncremental gains

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Few countries vs. Many countries

• Generally it makes sense to operate in fewer countries with deeper commitment and penetration in each.

• Also company should enter fewer countries when– Market entry and market control costs are high

– Product and communication costs are high

– Population and income size and growth are high in the initial countries chosen

– Dominant foreign firms can establish high barriers of entry.

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Evaluation GridMarket attractiveness

CompetitiveAdvantage

Risk

High Medium Low

H

M

L

H

M

L

China

Indonesia

Vietnam

India

Myanmar

Low

High

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Evaluation GridAttractiveness

• GNP/capita

• population growth, workforce

• imports/exports statistics, etc.

Competitive advantage of the company:• prior business dealings• comfortability of the management to work in the country

Risk• political stability, currency stability, repatriation of profits

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Financial analysis

• Estimate current market potential

• Forecast of future market potential and risk

• Forecast of sales potential

• Forecast of sales and profits

• Estimate of rate of Return on Investment (ROI)

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PHASES OF INTERNATIONALIZATION• Traditional phase • New export phase • Phase of international operations• Phase of Internationalization

The Progress of Internationalization• Indirect Export Phase• Direct Export Phase• Licensing Phase• Joint Ventures/Strategic Alliances• Direct Investment Phase• Multinatinal Phase• Global Phase

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Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

Company related prerequisitiesIs internationalization suitable to current business idea?

Do we know the future markets and segments?

Do we have enough capacity or can the capacity be acquired?

Can we adapt our products to the needs of markets?

Do we have human resources?

Continue with the market related factors!

Can we organize financing?

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Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

Market related prerequisitiesDetermine potential suitable market areas

Are the economic or political barriers for entry too large?

Is the competitive situation suitable for entering the market?

Do a careful analysis regarding: selected market segments,products/services amd operation methods

Determine the internationalization strategy of the company and set the objectives for the future

Are there any social or legal barriers to entry to start operation?

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Problems in the parent/subsidiary relationship

IBO- research project in England

• Communication problems 37 %

• Lack of attention by the parent company 31 %

• Difficulty to get results quickly 28 %

• Adaptation of the product 27 %

• Lack of decision making capability 8 %

• Other 5 %

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Summary: The prerequisities for efficient global marketing• The framework of the operations of company.

– Mission, Business idea, Objectives and Strategies

• Operational planning system– Strategic and Operational planning

• Clear and measurable objectives.

• Who sets objectives and participation to the planning process.

• Agreement, how control and evaluation will be done.

• Right, open and fair management style– set your own example

– cooperative corporate culture

– reasonable education

– understanding of distances (geographical, cultural, and economical)

– comparability

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