International Marketing 463-441 (3-0-3) Introduction
Murray Hunter firstname.lastname@example.org email@example.com Telephone: 6019 5233801 (Malaysia) 0843 3134105 (Local)Available Weekends (Most) &Mondays before & after lectures
What We are Going to Cover in this unit •The Global Environment & International Marketing Concepts •International Marketing from the ASEAN region perspective • The basic tools of marketing redefined in the international context •Identifying International Market opportunities and undertaking market research •Formulation of market entry strategies •International new Product Development •Company readiness for international markets •International Supply chain approach •Negotiation and international regulation •Trends in International Marketing
ability to research theSmall Research Thesis dynamics of the topic and argue their case 8-12K words should be commenced during the first week of class 40%
A Case Study 20%about a product/market in an international setting The case study will be presented as a written report and presentation An allocation of marks will be reserved for student’s defence of their conclusions
the selection of a product and targetinternational market to undertake a study upon submission of both a report and formal presentation the construction of a general business model and strategy to successfully enter the product in the target market This assignment will involve using all the tools and skills learnt during the course This will also be a group assignment. 30%
Books/References Cateora, P., R., and Graham, J., International marketing, 13thEdition, McGraw-Hill, New York, 2007.
Anything that can offered to a market that will satisfy a want or need. It includes physical objectives, services,events, persons, places, organisations, and ideas.
TheThe Level of BrandingCompetition Paradigm The Channel of Distribution
What is a Market?The set of all actual and potential buyers of a product or service
Market Segment A group of consumers whorespond in a similar way to a given set of marketing efforts
Arranging is market positioning? a What for a product to occupyclear distinctive and desirable placerelative to competing products in theminds of target consumers
Examples of Market Positioning 1. Line extensions2. Different Pack Sizes 3. Different Price/consumer categories
Same Product – Different PositioningDifferent Market
Low End Strategies • Match Medium End Quality or lower Medium End • Compete on Price (?) Low End • Incentives to retailers In this case: Medium end was once the high end, then company redefined the market by adding an extra premium product. Medium End Strategies Normally medium end product have very limited strategies • Benchmark Quality other than price to utilise. • Price Reference Australia: very few medium•end products, Malaysia many Strong General Media High End Strategies • High QualityHigh End • Premium Price • Targeted Niche • Specialised Media Campaign
The Marketing MixProduct Customer Solution Customer Cost PricePosition ConveniencePromotion Communication
Product Life Cycle• Getting shorter • Changing tastes • 33% sales from • Changing Technologyproducts less than 5 years old • Product Evolution
First Part of the ProductDevelopment Process Developing Product Specifications Market & Product Concept & Prototype Planning Generation Product Packaging Design Registration Further Formulation Development Continued
Cont. Further Formulation Development Manufacturing System Design Final Packaging & Optional Today Formulation Review Test Marketing/ Pilot ProductionPost Launch ProductModifications Marketing Review Refining of Product Before Major Launch Major Launch
The Outcomes (potential targets) Key internal The process of Key external influences on the product/market influences on theSize and depth of change development development development Time process process The base potential for development Where the business is currently performing Gibb & Scott 1988
Profile of business in terms of performance:PerformanceBase • Market trends: current product mix, market mix, competition • Production trends: Utilisation, efficiency, quality •Financial and Management: net worth, liquidity, gearing, trendsKey internalinfluences on Administrative, marketing, production and Managerialthe resources and capabilities.developmentprocessKey external Competition, market restrictionsinfluences onthe developmentprocess All influence the type of product and market development that will take place
Environmental Analysis: Threats and Opportunities Market: product position and prospects Competition: Traditional, new firms, new industries, profits Technology: Changes and developments The Economy: Growth, inflation, Law Operating Needs Personal Business Strategies Operating & Tactics ProductsObjectives Objectives Budgets Manpower Finance Feedback loops Business Analysis: Strengths and WeaknessesProduct: 4 Ps or 4 customer wants Profit/Cash flow: its sources and usesPeople: Management and Skills Facilities: age, technology and utilisation Burns & Dewhurst 1993
Sources of Competitive Advantage (The reason for any product development in a company) Importance of price to customers, distributors, the extend ofCosts: demand elasticityKnowledge: Stage of industry lifecycle, common industry knowledge verses your own specialised knowledge Links with customers, suppliers, distributors, relativeRelationships: power Appropriate organisational structures, Ability to respondStructure: to market, leadership.
Many Factors Change Markets and Give rise to Opportunities Social Social and cultural trends and drivers. Reviving historical trends Product Opportunity Gap Economic State of the economy Technology Shift in focus on where State of the art and to spend money emerging Level of disposable technology income Re-evaluating existing technology Cagan, J. and Vogel, C., M., (2002),
Present timeThe Past A Radical change in technology Will radically This changes the change the parallel of the a timeline into market gradually new industryWe know the past The effect of competitor and present Without any changes our innovation will bring timeline will remain product evolution relatively unaltered
InventionLess than 2% of filed patents are ever commercialisedDoes a new invention have consumer benefits or create anycompetitive advantage?Can consumers accept the new invention?
New Knowledge Innovation is the most riskyBetter to focus on other sources of innovation: ie, applications of existing ideas and technologies as new knowledge technology development is extremely long term. Bright ideas are the riskiest source of innovation and rarely succeed. Receptability is always the problem (look at patents files but never commercialised)
Table 6.1. Drucker’s Sources of Innovation Source Explanation Examples The unexpected Success of a revolutionary product or the application of •Apple computer success, failure or technology from one industry to another, sudden or •Rapid decline of Proton’s marketexternal occurrence unnoticed demographic changes caused by wars, share insurgencies, migration, etc. An incongruity A change that is already occurring or can be made to •Sugar free products and sugarbetween reality as occur within an industry. It may be visible to those replacements due to concern for health it actually is and inside the industry, often overlooked or taken for •Increasing demand for travel andwhat it ought to be granted. holidays due to increasing incomes and leisure time Inadequacy of an An improvement in process that makes consumers •Caffeine free productsexisting technology more satisfied based on an improvement or change in •Microwave ovensor business process technology. •Mobile phonesChanges in industry New ways and means of undertaking business based •Health care industryor market structure on identified opportunities or gradual shifting of the •Education industry – private education nature of the industry.Perceptual changes Changes in peoples awareness founded on new •Leisure and exercise industry aerobics knowledge and/or values or growing affluence leading & gyms to new fashions and tastes Demographic Gradual shift of demographics in population by age, •Establishment of more retirement changes income groups or ethnic groups, etc homes New knowledge New knowledge or application of existing theoretical •Video and VCD industry knowledge into an existing industry that can create •Robotics new products not previously in existence •Biotechnology
Types of InnovationType Description ExamplesInvention Totally new product Wright Bros – plane Edison – light bulb Bell – telephoneExtension New use or different application Kroc – McDonald’s of an already existing product Bushnell – Atari Wilson – Holiday InnDuplication Creative replication of an Wal Mart – Dept Stores existing concept Pizza Hut – Pizza restaurantSynthesis Combination of existing Smith - Fedex concepts and factors Merryil Lynch – Home equity into new use Financing
“Too much focus onprocess, on a static agenda, while it may get a lot done initially, will tend to drivecore competencies towards core rigidity.”
Practice/Process Trade-offInnovation Optimal Innovation Area Organisation Ideas becomes rigid Little gets done Practice Process
Definition: International Marketing involves Establishing and CoordinatingMarketing Activities Across National Boundaries - Requires a global “mindset”
Lecture 1 The Global Environment& International Marketing Concepts
1. Historical Market Evolution 2. Drivers to International Marketing 3. Our place in the international Market4. The evolution of the international Marketing Company5. The Influence of Technology and Competition on International Marketing
Domestic Market Competitors Tastes Trends Feed forward Promotion Competencies BrandingChannels Chemical Raw Materials Relative Style Logistics Competitive Packaging Advantage Sourcing Finance Company Fit Manufacturing Processes RegulationFeedback Material Technology Availability International Markets
Breakfast in the World OrWhere is this? Thailand Australia
Cuisines with most potential for growth North America Europe South America Asia/Pacific USA Mediterranean Fusion style Fusion style influence Asian Influence Thai, Indonesian, Thai/Chinese Indian influence Vietnamese influences Sesame, wasabi, Western/Chinese ginger, noodle and Middle East influence Contemporary Indonesian/Thai Asian cabbage cuisine American/Mediterranean Slow Food Indian Influence Mediterranean Italian influence Fruit, spice andtoasted nuts, chutney, Exotic combinations French quince pear, roasted coriander, pistaschio,almond & walnutBlue and goat cheese Mexico Tarmarind, squash flowers, huitlacoche (corn mushroom),portobello mushroom, duck meat
Geography (Climate, Topography, Flora, Fauna, Microbiology) Adapted from Cateora & Graham P. 99 HistoryAdaptation Technology and Political Economy Social Institutions Socialisation (Family, Religion, School, Media, Government, Corporations) Application Imitation Elements of Culture Peers (Values, rituals, symbols, beliefs, though processes Consequences Consumption decisions Market and behaviours Management Styles Structure
Culture Theories in action Stories, myths, heroes, artifacts, informal behaviours verses EspousedNorms and Productivity & Values effectiveness Organisationalgroup behaviour learning (single or double looped Leadership Beliefs Assumptions
Interpersonal InteractionsNetworking Team/Individual Orientation Sincerity Warmth Personality Character Culture Judgment Hunter, Baharuddin (OUM) & Rozhan (UIA): Alpha Model of Innovation
FMCG Market Fragmentation/Concentration Comparison Between Malaysia, Thailand, Hong Kong and Australia Outlet Type Malaysia Thailand Hong Kong AustraliaHyper & 20% 68% 91% 85%Supermarkets(Chain Owned)Independent 20% 2% 2% 10%Hyper &SupermarketsWholesale 57% 10% 2% 3%Trade – Sundry& convenienceStoresOther 3% 20% 5% 2% Convenience Chains
Malaysian Retail ManufacturerMarketChannels & Structure National Distributors Wholesalers Super- Sundry Convenience Chinese Hypermarkets markets Stores Stores Medical Halls Consumers
Australian RetailMarket Channels and ManufacturerStructure Sales Broker Major Retailers Retail Outlets
Fulfillment: (dreams) Actualisation (The Artist) Study after retirement Self-fulfillment Fresh vegetables (Organic) BooksFine Dining & Processed Foods Aromatherapy products Luxury cars Esteem Nutraceuticals & herbs Travel & Vacations (The Executive) Achievement, Fine Fragrances prestige,fulfillmentCar Air Fresheners Responsibility: (hope) Fashion Clothes (e.g. Social (Worker) Jeans) Chewing Gum Family, relationships, workgroups Community: (acceptance) Most Water Household Safety (The Farmer) Purifiers Cleaning Home, Security and stability Necessities: based on what is good (existence) Products FreshSoap Vegetables Physiological (The Hunter) Rice Basic Biological Needs – Food, water, air Staples: based on survival (fear)
Geert Hofstede studied 88,000 employees of one MNC over sixty-seven countries to develop a framework for understanding cultural differences and defined cultural differences along five dimensions[ii]; • Individual verses collective orientation: the extent to which people have an individual orientation, concerned primarily for themselves and families, verses to the extent that an individual identifies with a group and feels their interests are best served in a group context, which they will give loyalty, [ii] Hofstede, G., (1991), Cultures and Organisations: Software of the Mind, Berkshire, McGraw-Hill.
• Power-distance relationships: the extent to which people accept that power is distributed to individuals and institutions unequally, thus in high power-distance relationships there is more respect for authority, where one would not be expected to go over their boss, than in low power-distance cultureswhere people would be sensitive to peopleshowing authority and seek help from those they believe they could get it from[i],[i] Hofstede, G., (1980), Culture’s consequences: International differences in work-related values, Beverly Hills, Sage.
•Uncertainty avoidance: the extent to which people feel threatened and stressful towards ambiguity and the importance attached to rules and procedures, i.e., workers characterised high on uncertainty avoidance like in Malaysia would tend to value security over self actualisation[i],[i] Hofstede, G., (1980), ‘Motivation, Leadership and Organization: Do American Theories Apply Abroad?’, Organizational Dynamics, Summer, pp. 42-63.
Masculinity: the nature of dominant values in the organisation such as assertiveness and directness, View of time: refers to the different time frames used by people and organisations,which influences values about certain actions relating to procedures and decision making, status and rewards, etc.
Trompenaars and Hampden-Turner postulate that culture is an extremely complex phenomenon which cannot be easily rationalised. Even within a single country acultural trait can differ significantly within an ethnically homogeneous population.Trompenaars and Hampden-Turner surveyed 15,000 managers in 28 countries toexplore the differences in cultures and hypothesised there are seven areas where diametrically opposed paradoxes occur[i]; Universalism verses Particularism Universalists (US, Canadians, Australians and Swiss) tend to follow sets of rules, seek clarity, and follow logically and systematically, therefore assuming there is one correct way of doing things. In contrast particularists (South Koreans, Chinese and Malaysians) are pragmatic, flexible, make exceptions according to situations and thus act more in ambiguity, therefore focus on the peculiar nature of the situation. [i] Trompenaars, F. and Hampden-Turner, C., (1993), Riding the Waves of Culture, London, Nicholas Brealey.
Individualism verses Communitarianism Individualists are orientated towards the self and family, while communitarialists are orientated towards a group. Neutral verses Affective Neutralists are orientated towards not expressing opinions and emotions openly, while affectivistsare orientated towards giving opinions and showing emotion in public.
Specific verses Diffuse Specificists tend to separate relationships between business and personal lives, where diffusists tend to blend relationships together. Achievement verses AscriptionAchievement is orientated towards what one does,whereas ascription is orientated towards who we are.
Sequential verses SynchronicSequential view time as separate periods and are orientated with the present, while synchronic isorientated to blending in past, present and future together in ones outlook. Internal verses External Control Internal views dominance over nature, while external views are subservient to nature.
Country Cultural Dimensions - Ranking for Selected Countries Power Individualism Masculinity Uncertainty Long-term Distance Avoidance OrientationUSA L H H L LGermany L H H M MJapan M M H H HNetherlands L H M M MHong Kong H L H L HIndonesia H L M L LMalaysia* H M M M MThailand M L L M* Estimated national average L = low M = medium H = high
Malaysia: Cultural Dimension Ranking By Race Overseas Chinese Malays IndiansPower distance H H LIndividualism L M HMasculinity H M MUncertainty Avoidance L H MLong-term Orientation H L HSource: Estimates H=High M=Medium L=low Sayed Mushtaq Hussain, CULTURAL CONSTRAINTS IN LEADING MALAYSIAN SMEs TO GLOBAL MARKETS, 2ND NATIONAL CONFERENCE ON ENTREPRENEURSHIP AND SMALL BUSINESS VISTANA HOTEL, PENANG, DECEMBER 9-10, 2006
How are pick ups advertised in Thailand? http://www.uwsp.edu/geo/courses/geog100/CarCult-Ideol.htm
What affect does culture have on consumer tastes and preferences? What affect does culture have on necessary product form to be successful?What affect does culture have on forms of distribution, promotion, pricing, etc? How will culture affect the ways of doing business?
A Market Typology Developed Market• Local production followinginternational trends•Cooperation with internationalfirms•Large customers developingalthough market still Developingfragmented Market•Beginning of marketsegmentation •Open market to the world •Own production with exports •Markets adequately • Most Items Imported covered with products Underdeveloped •Fragmented with few large •Full market segmentation customers Market •Heavy use of intermediaries •No market segments Hunter (1993)
Still many market gaps Poor Innovation Large customers developing bringing more market concentration Local firms exporting to the world Developed Category management still in infancy MarketBeginning to relyon imports again:Colgate, Unilever ThailandAspect of market Still undevelopedglobalisation Global trends do not necessary follow logistic systems Developing Underdeveloped Market Market Market segmentation still weak; along ethnicity lines only
Strategic Decisions Related To Stage of Development StagesStrategic Decisions Entry Growth Consolidation Ambition •Identify opportunities •Gain market share •Achieve long-term goal •Initiate Investments •Expand aggressively •Make Country/region a •Develop Partnerships •Reach critical mass major contributor in the •Start operations •Reach economies of scale corporate portfolio •Reach break-even point •Produce positive returns Positioning •Test/Product/Service •Operate out of key •Integrate with global concept countries network •Trial and Error •Combine global •Search for •Start presence in platform standardization and local products/services countries adaptation optimisation •Initiate presence in key countries Capabilities •Invest in strategic and •Invest in building assets •Rationalization and marketing intelligence •Acquisitions, JV and specialization of operations •Look for acquisitions Greenfield operations •Regional logistics •Negotiate JVs •Invest in distribution, •Regional facilities •Invest in building contacts branding and human resources Organization •Operate out of platform •Local autonomy of •Mosaic of operations countries (i.e., Singapore, countries subsidiaries •Global/regional integration Hong Kong) •Regional HQ as with some local autonomy •Rep offices in key contributor and resource •Regional HQ as countries provider coordinator
Solely Focused on Company covers partial ofDomestic Market complete domestic market. No or very few export sales.Company exports Company exports to customers with existingon an ad-hoc basis products. Tends to be passive marketerto customers overseas responding to customer inquiriesCompany exports A successful product line in theexisting products domestic market is exported toand lines to a single third countries or a number ofor multiple exportmarkets countries (with or without some modification)Company exports A successful product (range) is exported allits product range around the world to customersglobally
Company The company saves on freight and tariffs throughmanufactures manufacturing the product in other markets, eitherproducts in other directly, under contract, license, etc.markets fordistribution inthose marketsCompany sets upsales & Marketingoperationsregionally, globallyfor sales, service tocustomersCompanymanufacturersproducts in othermarkets for exportto third markets inregionalmanufacturingoperations
Marketing Company Manufacture & MarketManufacture & Market Manufacture & Market Marketing Company Marketing Company Manufacture & Market
Production Layouts Logistics R&D Economies of scales are not enough: have to be coupled with innovation,customer service and correct strategies to maintain competitive advantage. Competitive advantage is also a fluctuating state Economies of Scale
Figure 9.2. Twenty Largest Patent Filing Countries 2004 Poland Italy Argentina Singapore Hong Kong (SAR) Norw ay Mexico France India Brazil United Kingdom Russian Federation Australia Canada Germany European Patent Office China Korea, Rep. USA Japan 0 50000 100000 150000 200000 250000 300000 350000 400000 450000 Number of Patent Filings Resident Patent File ApplicationsSource: WIPO Statistics Non-Resident Patent File Applications
Figure 9.3. Number of Resient Patent Filings per Million Population 2004 M exic o 5 India 7 Turkey 7 Thailand 11 B razil 21 A rgentina 28 B eligium 50 C hina 51 C zec h R epublic 61 P o land 62 S pain 67 Hungary 75 Ukraine 86 B elarus 108 Italy 111 C anada 125 Netherlands 134 S ingapo re 147 Wo rld A verage 148 World Average R us s ian 160 S witzerland 217 Is rael 227 F ranc e 236 A us tria 275 S weden 308 UK 320 No rway 335 D enmark 347 F inland 385 New Z ealand 402 A us tralia 479 G ermany 587 US A 645 Ko rea, R ep. 2189 2884 J apan 0 500 1000 1500 2000 2500 3000 Number of Resident Patent Filings/Million Population 2004Source: WIPO Statistics
Figure 9.4. International Patents Filed by Residents in Asia-Pacific Region 2006 Vietnam 9 12 Thailand Singapore 402 15 Philippines New Zealand 316 54 Malaysia 5935 Republic Korea 4 Dem. Rep Korea 26906 Japan India 627 6 Indonesia 3910 China 1Brunei Darussalam 2139 Australia 0 5000 10000 15000 20000 25000 30000 Number of International Patents Filed by Residents Source: WIPO Statistices
Figure 9.5. Resident Patent Filings per USD 1.0 Million R&D Expenditure 0.08 Belgium 0.14 Turkey 0.21 Mexico 0.23 Israel 0.23 Canada 0.23 India 0.26 Netherlands 0.27 Spain 0.28 Czech Republic 0.29 Sw eden 0.29 Sw itzerland 0.3 Brazil 0.37 Italy 0.41 France 0.41 Finland 0.43 Austria 0.46 Denm ark 0.51 Thailand 0.54 Hungary 0.56 Norw ay 0.61 Argentina 0.62 UK 0.71 USA 0.78 China 0.81 World Average 0.92 Germ any 0.99 Poland 1.13 Australia 1.18 Singapore 1.46 Russian 1.5 Ukraine 1.67 New Zealand 3.15 Belarus 3.49 Japan 4.6 Korea, Rep. 0 1 2 3 4 5 Number of Resident Patent Filings per USD 1 Million R&D ExpenditureSource: WIPO Statistics
Figure 9.6. Major Categories of International Patent Applications 2006 Consumer Goods & Civil Engineering, Building, Mining Other Transport Equipment 2% 1% Electrical devices & 3% 5% electrical engineering Mechanical Components 6% 3% Machine Tools, Engines, Audio-Visual Thermal Process 4% 5% TelecommunicationsMaterials Processing, 8% Textiles & Paper 3% Information Technology 8% Industrial Processes, Handling & Printing Semiconductors 7% 3%Agriculture and Food Processing Optics 2% 2%Pharmaceuticals & Cosmetics Analysis & Medical Biotechnology Organic, 8% Technology 4% Material & Surface Macromolecular & 13% Technology Chemical Engineering Polymer Chemistry Source: WIPO Statistics 5% 2% 7%
Electrical devices & 12% Audio-Visual 9%Telecommunications 15% Information 22% Semiconductors 28% Optics 16% Analysis & Medical 8% Organic, 11% Chemical 11% -5% Material & Surface 17% Biotechnology Pharmaceuticals & 21%Agriculture and Food 8% Industrial 13% Materials 13% Machine Tools, 12% Figure 9.7. Main Areas of Patent Filing Growth 2006 Mechanical 13% Transport 8% Consumer Goods & 13% Civil Engineering, 11% 0% 5% -5% 10% 15% 20% 25% 30% Percentage Growth (%)Source: WIPO Statistics
Figure 9.8. Integration between a Firm’s Core Mission and Intellectual Property 1. Recognition 2. Desirability To develop public recognition and carry over To enable companies to delivery good products certain desired values to consumers with superior performance to competitors, new features, extended product life, etc, so that Trademarks and certain Copyright products are competitive and desirable. Information Patents, Registered Designs and Proprietary Knowledge 3. Form 4. Emotional Connection To develop recognisable literary and visual To maximise financial returns for production forms that add value and assist in creating an undertaken by the company, add to product inherent desirability to the form of differentiation and develop an emotional communication between company and connection with consumers. consumer. Copyrights and Trademarks Brands and Trademarks [i] Stamm, O., A., (1993), ‘Intellectual Property Rights and Competitive Strategy: A Multinational Pharmaceutical Firm’, in
Figure 9.9. The General Tools of Intellectual Property in Business Strategy Influence of New Product Development Technology - Invention (new to the world) - New to company product Competitors - New Style, variant or benefits Patent, Registered Design, Proprietary Influence of Knowledge (secrecy and Product non-disclosure Lifecycle agreements) Process Development (manufacturing) Patent, Proprietary Knowledge (secrecy and non-disclosure The Market agreements) The General Business Market Strategy Place Strategy Market parameters (mix) Values Channels Expectations Knowledge Emotions Image & Story (target) Knowledge, Creativity, Recognition Branding, Trademarks, Potential Copyright Emotional Connections
Figure 9.10. IP/market scenarios with competitive advantage in slow and fast technology emerging industriesRelative Competitive Advant a. Slow Emerging Technology Market Air Fresheners Branding Primary Used IP Protection age Registered Designs Liquid Air Fresheners Patents Car Air fresheners Failure to advance IP and convert into new products results in competition in a price sensitive market where Gel Air Fresheners brands don’t attract consumer recognition 1960s 1970s 1990s TimeRelative Competitive Advant b. Fast Emerging Technology Market Electronic Media Storage Primary Used IP Protection ge Patents a Pen Drives Compact Rapid decline of media Disks use after introduction of new media until product ceases to be used anymore, Companies must cease operations or switch Floppy Disks to new technology 1960s 1970s 1990s Time
Innovation is needed to convert any factor into a source of competitive advantage