1. International Marketing 463-441 Lecture 5Formation of Market Entry Strategies
2. Types of Entry Strategies Assessment of Threats and Opportunities Strengths and Weaknesses Product/Market SuitabilityAssessment of Resources Required to Implement
3. Degree of Involvement
4. The Extent of International Involvement Internet Exporter Exporting Greater Control Importer And Greater Distributor Risk Direct SalesContractual Arrangements Licensing & Franchising Strategic Alliances Strategic Alliances Joint Ventures Ownership Direct Foreign Investment Cateora & Graham P. 323
5. Generic Global Marketing Strategies Strategic Option Comment1 Product and marketing practice Using the same strategies everywhere extension2 Product extension marketing While using the same products everywhere, using adaptation marketing strategies according to local market characteristics3 Product adaptation marketing While using the same marketing strategies, extension adapting the product offering according to market needs4 Dual adaptation Adjusting the product and marketing strategies according to market needs5 Product and market invention Innovating a new product and developing a new marketing strategy for it in each market Keegan, W., Global Marketing Strategies, Prentice Hall, NJ, 1999
6. Global Product Standardisation Types High (Global Scale) Global Standardisation Modular standardisation Aircraft and multi-brands Microprocessors Elevators Basic Chemicals IT services Pulp and Paper BeerMinimum Size Examples: BASF, Dell, Intel Examples: OTIS, Heinekenof Production Process standardisation Local Adaptation Cement Foods Consulting services Examples: Siam Cement Example: McDonalds, Carrefour Low (Local Scale) Similar Different (Local Segments) (Global Segments) Customers’ Needs Around the World
8. Distribution and Sales depend on third party Retail Distribution Very costly to undertake own distribution if limited number of products Manufacturer Distributor Retailers Wholesaler
9. Retail MarketLocal International Limited by Geographical Locations Supplier Retail Outlet Consumer Own Manufacturingi.e., Bata Shoes Variation: McDonalds, Pizza Hut, KFC Good Profit Margins
10. Good margins/rely on regular change in Direct Marketing merchandise Direct Manufacturer Marketing Consumer Company Dealer ConsumerLow Margin/HighVolume LackLimited by number consistency in of dealers and efforts customers in network Rely on continual motivation and getting new dealers
11. Direct Marketing Distributor Distribution Export Market Cost 20 Cost 20 Cost 20 Margin % 58.33 Margin % 47.11 Selling 37.82Margin % 55.50 Price Selling 48 Price Freight, 37.82 Selling 45 Tax, Price Landing A&P 48 12% Dealers & 25% Margin 44Discounts 65(SLM) 45% Margin 64 55% 83(MLM)65% 20% Store 80 Store Price 80 PriceConsumer 100 Price Consumer 100 Consumer 100 (128) Price Price • Not including VAT etc.
13. Benefits and Technologies in Cleaning Clothes Problem Dirty Clothes Hand Automatic local Dry Washing Washer/Dryer Launderette Cleaners MachineLaundryPowders Electrical Technology Washing Powders Solvents LiquidDetergents Fabric Conditioners Benefit Clean Clothes
14. 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)
15. Some General Differences Between European and Asian Cultures European Asian Modes of Thinking Causal, functional Network, whole vision Linear, absolutely horizontal Nonlinear, relatively vertical Decision Making To suit controls Based on trust Individual free Group solidarity To suit the majority Reaching Consensus Behaviour True to principals To suit a situation Based on legal principals To suit a community Dynamic, facing conflict Harmonious, conservative Open, Direct, Self confident Restrained, indirect without assurance Extrovert Introvert Purchase Patterns Individualistic Group Influences Opportunistic Systematic Horizontal Vertical communication
16. Demographics of Odour Communication Objective: to reinforce the belief of the Product consumer in the desired and projected image of the product Differentiation Cleanliness Citrus Lemon Perfumery Marketing Softness Mix Herbal Green Psychological AssociationSynergy with product presentation: packaging, colour, advertising, corporate image
18. Structure of Attributes for a Fragrance in a Product Fragrance Attributes Signal Features Benefits Attributes Tangible Intangible Base Strength Cover Benefits Benefits Impact Romance Pleasant Performance Odour Fragrance Profile Well-Being Variant Malodour LastingCounteractant Caring Fragrance Indicator of UseSubstantivity Security Offensive Life StatusIngredientsEg essential Odour oils Lifestyle Cover Freshness Association
20. Where in the Supply chain are you going to enter?
21. Producers of Chemical Feed Small Holder Forest, Jungle wild Animal Extracts Stock Producers plant Gatherers Manufacturer Research Local Collectors Institutes & Universities Aroma Chemical Manufacturer Producers of GovernmentEssential Oils as By- Plantation Products Producers Producer Specialty/Aroma Trader & Exporter Associations Chemical Manufacturer Broker National FDAs Trader, Importer & Exporter FEMA IFEAT IFRA Agent Flavour and Fragrance RIFM House IOFI Standards Agent Flavour and Fragrance Associations REACH House (subsidiary) SCCP Cosmetic & Household Food & Other Food & Personal Care Product Beverage Non Foods Manufacturer Manufacturer Manufacturer Manufacturer Wholesale Networks Retail Networks Consumers
22. The Essential Oil Value Chain (Flavour & Fragrance Industry) Flavour & Consumer Essential Trading Fragrance End Oil Compoundi Product Wholesal RetailerProduction ng Manufactur er e1.0 1.6 2-3.0 (6-9) 2-2.5 (18-24) 1.1-1.2 (19.8- 1.2-1.4 28.8) (23.76-Relative and (Absolute) Value Added Through Chain 40.32)
23. The continuum from media reports to wisdom in relation to availability and usefulness Media Reports The Continuum from media reports to wisdom in relationAvailability Increases Ideas to availability and usefulness Data Information Knowledge Wisdom Usefulness Increases
24. Validity based Risk Environment in Essential Oil on information Development & Judgement Laboratory Field Research Research Market Requirements of an Essential Oil WeatherKnowledgeand Skills Required Oil Yield, Quality for Evaluation & production/market Viability selection of suitable planting Land materials Suitability Propagation and Planting Costs Assumptions & Patience Market Crop Management Contacts & Plant physiology & Knowledge of Network propagation specific crop protocols management Harvesting & Extraction Costs techniques All factors effect on yield & quality Knowledge of Actual Yields and Oil Quality harvesting, handling & extraction techniques De-stabilising Event – competitor, Volume and Market Acceptance Other unforseen regulation, new external factors – substitute politics, disaster, Economies of scale & correct war, regulation, etc business model, Market strategy
25. Venture Focus Along Different Parts of the Supply Chain Manufacture of end products. Focus on Consumers formulation and end Consumer product Trends development Important Wholesalers & retailersVertcal Integration Along the Supply Essential oil as an ingredient in i a product. Focus on uses and applications Technical • Branding research Trends • Theme Manufacturers Important • Consumer Marketing • Reaching Essential oil as • Application primary Product. Mass or Focus Flavour & Fragrance Focus on market selected • Technology Markets Houses demand & supply Focus and meeting • New Product standard • IP Focus (?) Development • Specific Demand & Customer Traders & Brokers Supply, Buying Criteria Important Chain • Technical Primary Producer Focus • General or Niche Customers Agro Industrial Consumer Orientation Orientation Orientation
26. Supply Chain/Product Focus Usually direct to consumers through internet and/or direct Consumers marketing organisation. Need branded Usually specialised end specialised products with high profit product, high margins volume Usually branded item small depends on packs, end product. Either coverage selective (region or retailer Retailers type), or general Business focus distribution. High value, lowtowards consumer volume with added marketing away distribution costs. from agricultural This part of supply chain for production smaller packs and end Wholesalers products. Can be local, national or international. Value added method like branding in use.Need differentiated With differentiated product. Above product some flexibility average returns, Manufacturers to sell to higher marketing manufacturers, costs costs higher but increased margin maybe compensate. Need high volume due to Usually bulk oils to traders low margin Trader who do all distribution. unless Lowest price and little specialised control over market, but product wide distribution Bi-products to Other Essential Oil Producer Supply Chains
27. Cosmetic High Organic production for Cosmetic international Essential Oil production for market Based Agro- international chemical marketMarketGrowth Essential Oil under CO2 extraction Crude Essential Oil Steam Distilled Low Strong Weak Relative Competitive Position
28. The Outcomes (potential targets) Key internal The process of Key externalSize and depth of change influences on the product/market influences on the development development development Time process process The base potential for development Where the business is currently performing
29. Strengths Weaknesses• Personal and enterprise competencies, • Competency gap knowledge & experience that can be utilised • Short term timeframe, no fall back position for the benefit of the enterprise if positive results delayed or there are• Facilities, infrastructure, financial backing & technical or market failures liquidity, long timeframe view • Poor infrastructure that hinders production• Ability to learn through research and or marketing experimentation • Shortage of funds to undertake project to• Any network connections with industry and completion access to the supply chain for both • Qualified or lack of commitment by any key information and marketing people within organisation• Ambition and vision (but not delusional), • Lack of network, knowledge and access to focus & commitment supply chain• Ability to innovate technically, market and organisational wise Any factor or group of factors that can Any factor or group of factors that can assist the enterprise gain competitive hinder the enterprise gain competitive advantage over its competitors. advantage over its competitors. Opportunities Threats• An identified market where enterprise • Competitors identifying the same resources and competencies will be able to opportunities and enacting upon them exploit • The regulatory environment and potential• The potential opportunity will have a large changes within it enough market size to sustain the enterprise • Inability to penetrate the existing supply• The enterprise will be able to take advantage chain and make alternative strategies of this opportunity better than any other • Dependence on survival from a single or competitors very few customers• Outside elements in the supply chain will • Depending on a single product for total support the enterprise revenue • Adverse acts of God, bad weather, drought, etc. Any factor or group of factors that will Any factor or group of factors that may allow the enterprise to grow in a potentially hinder enterprise growth in a sustainable manner from the market sustainable manner without any environment. contingencies.
30. Local or International Market Opportunities Local Market International Market Essential Very Limited Unless Much Larger Market Oil Large Domestic Market with CompetitionDifferentiated Limited Unless a Potential Large Market Product Specific Market Exists Dispersed WorldwideSpecialty/End Potential with Right Potential with Right Product Products and Correct Products and Correct Distribution and Distribution and Branding BrandingDiversification Depend on Location
31. Market Entry Strategy Typologies
32. General Competitive Strategies Type Technique Frontal Attack Meeting competitors head on Outflanking Locating competitors weaknesses and attacking them Encirclement Producing more types, sizes, colours, and styles of products at similar or lower prices Bypass Ignoring competitors present markets and technologies and doing something differentGuerilla Warfare Using local dealers and distributors to attack certain products, product lines, or channels
33. Timing of Entry
34. Potential Product Lifecycle IP Value &Profitability Novelty IP Va lue Competitive Concept Risk Taking Risk Taking it of Pr Pioneers Early Early Late Late followers Majority Followers Time Majority
35. Trade Offs between Early and Late EntryHigh First Mover Advantage Low Early Entry Late Entry Cost Advantage Technology Advantage Behavioural Advantage Pre-emptive Advantage Low Information High
36. Igor AnsoffCorporate Strategy
38. Red Ocean Verses Blue Ocean Strategy Red Ocean Strategy Blue Ocean StrategyCompete in existing market space Create uncontested market spaceBeat the competition Make the competition irrelevantExploit existing demand Create and capture new demandMake the value-cost trade-off Break the value cost trade offAlign the whole system of a firm’s activities Align the whole system of a firm’s activitieswith its strategic choice of differentiation or in pursuit of differentiation and low costlow cost
39. The Six Principals of Blue Ocean Strategy Risk factor for each principal Formulation Principals Reconstruct market boundaries Lower search riskFocus on the big picture, not the numbers Lower planning risk Reach beyond existing demand Lower scale risk Get the strategic sequence right Lower business model risk Risk factor for each principal Execution Principals Lower organisation risks Lower management risks Overcome key organisational hurdles Build execution into strategy
40. The Four Actions Framework • Which of the factors that the industry Takes for granted can be eliminated Reduce • Which should be reduced below the Which factors should The industries standard be reduced well • Which should be raised above the below the industry’s Industry’s standard standard? • Which should be created that the Industry has never offered Create Eliminate Which factors should Which factors that A New Value be created that thethe industry takes for Curve industry has never granted should be offered? eliminated? Raise Which factors should be raised well above industry’s standards?
41. From Head to Head Competition to Blue Ocean Strategy Head to head Blue Ocean Strategy CompetitionIndustry Focus on rivals within the industry Looks across alternative industriesStrategic Group Focuses on competitive position Looks across strategic groups within within the strategic group industryBuyer group Focuses on maximising the value Redefines the industry buyers group of product and service offerings within the bounds of the industryScope of product Focuses on maximising the value Looks across complementary product of product and service offerings and service offeringsor service offered within the bounds of the industryFunctional- Focuses on improving price Rethinks the functional-emotional performance within the functional- orientation of the industryemotional emotional orientation of theorientation industryTime Focuses on adapting to external Participates in shaping external trends trends as they occur over time
42. The Four Steps in Visualising Strategy 1. Visual 2. Visual 3. Visual Strategy 4. Visual Awakening Exploration Fair Communication• Compare your •Go into the filed to •Draw your “to be” •Distribute your beforebusiness with your explore the six paths to strategy canvas based and after strategiccompetitors by drawing creating blue oceans on insights from field profiles on one page foryour “as is” strategy •Observe the distinctive observations easy comparisoncanvas advantages of •Get feedback on •Support only those•See where your alternative products alternative strategy projects andstrategy needs to and services canvases from operational moves thatchange •See which factors you customers, competitors allow your company to should eliminate, customers and close the gaps to create or change noncustomers actualise the new •Use feedback to build strategy the best “to be” future strategy
43. Buyer UtilityThe Blue Ocean Is there exceptional buyer utility in your business idea? Strategy Sequence No rethink Yes Price Is your price easily accessible to the mass of buyers? No rethink Yes Cost Can you attain your cost target to profit your strategic price? No rethink Yes Price What are the adoption Hurdles in actualising your business idea? Are you addressing them up front? No rethink Yes Commercially Viable Blue Ocean Idea
44. The Buyer Experience Cycle Purchase Delivery Use Supplements Maintenance DisposalHow long does it How long does it Does the product Do you need Does the product Does use of thetake to find the take to get a require training other products require external product createproduct you product or expert and services to maintenance? waste items?need? delivered? assistance? make the product work? How easy is it to How easy is it toIs the price of the How difficult is it Is the product upgrade and dispose of thepurchase to unpack and easy to store How costly are maintain the product?attractive and install the new when not in use? they? product?accessible? product? Are there any How effective are How much time How costly is legal orHw secure is the Do buyers have the product’s do they take? maintenance? environmentaltransaction to arrange features and issues inenvironment? delivery functions? How much pain disposing of theHow rapidly can themselves? If product safely? do they cause?you make a yes, how costly Does the productpurchase? and difficult is or service deliver How costly is this? far more power disposal? or options than required by the average consumer? Is it overcharged with bells and whistles?
45. Guerilla Strategy
46. Guerilla Marketing Strategy• Levinson identifies the following principles as the foundation of guerrilla marketing:• Guerrilla Marketing is specifically geared for the small business and entrepreneur.• It should be based on human psychology instead of experience, judgment, and guesswork.• Instead of money, the primary investments of marketing should be time, energy, and imagination.• The primary statistic to measure your business is the amount of profits, not sales.• The marketer should also concentrate on how many new relationships are made each month.• Create a standard of excellence with an acute focus instead of trying to diversify by offering too many diverse products and services.• Instead of concentrating on getting new customers, aim for more referrals, more transactions with existing customers, and larger transactions.• Forget about the competition and concentrate more on cooperating with other businesses.• Guerrilla Marketers should always use a combination of marketing methods for a campaign.• Use current technology as a tool to empower your marketing.Source Levinson, Jay Conrad and Goodin, Seth. The Guerrilla Marketing Handbook. Boston: Houghton Mifflin Company, 1994
47. Guerilla Activity Components Evaluation Questions Feature EvaluationHow well is the dealer or distributor known? A company must work with a seasoned dealer or distributorHow good is the dealer or distributor for entry? A company must enter a particular target market effectively A company must penetrate the market as deeplyHow powerful is the dealer or distributor in as possiblepenetrating the market?Can the dealer or distributor focus on the A company needs a concentrated effort from the dealer or distributor in order to enter the marketproducts and provide the necessary attention? and succeedCan the dealer or distributor change orientation, ifnecessary, to accommodate unexpected changes The dealer or distributor must be flexible enough to help a company to cope with changes in thein the market? market A company must expect loyalty from the dealer orWhat level of loyalty can be expected from the distributor – that the dealer or distributor will notdealer or distributor? abandon the partnership
48. Viral Marketing
49. • BusinessWeek (2001) described web-based campaigns for Hotmail (1996) and The Blair Witch Project (1999) as striking examples of viral marketing, but warned of some dangers for imitation marketers.• Burger Kings The Subservient Chicken campaign was cited in Wired as a striking example of viral or word-of-mouth marketing.• In 2000, Slate described TiVos unpublicized gambit of giving free TiVos to web-savvy enthusiasts to create "viral" word of mouth, pointing out that a viral campaign differs from a publicity stunt.• Cadburys Dairy Milk 2007 Gorilla advert was heavily popularised on YouTube and Facebook.• With the emergence of Web 2.0, mostly all web startups like facebook.com, youtube.com, collabotrade.com, myspace.com, and digg.com have made good use of Viral Marketing by merging it with the social networking.• The release of the 2007 album Year Zero by Nine Inch Nails involved a viral marketing campaign, including the band leaving USB drives at concerts during NINs 2007 European Tour. This was followed up with a series of interlinked websites revealing clues and information about the dystopian future in which the album is set.• The film Cloverfield initially released one teaser trailer that did not reveal the title--only the release date. The subsequent online viral marketing campaign for the film is remarkably complex, making use of everything from fictitious company websites to MySpace profiles for the films main characters.• In 2007, World Wrestling Entertainment promoted the return of Chris Jericho with a viral marketing campaign using 15-second cryptic binary code videos. The videos contained hidden messages and biblical links hinting Jerichos return and were shown interrupting WWE broadcasts.
51. Acquisition Framework Acquisition Acquisition Acquisition Acquisition Drivers Strategy Pricing Implementation Objectives Bidding Wars Organisation structureExternal Drivers Reservation Price Culture Negotiation Incentives Political Value Creation Pace Shares/Cash Economic Vertical Integration Regulations Industry Industry consolidation Objectives Technology Excess resourcesInternal Drivers Strategic Managerial Financial
52. Successful and Unsuccessful AcquirersAcquisition Integration Issue Successful Acquirer Unsuccessful AcquirerIntegration Speed and Uses integration terms to Does not use integration terms.Decision Making integrate rapidly, usually within Merge at slow rates. Layoffs 3 months. Layoffs and other and other decisions deferred. painful measures are undertaken quicklyCommunication and Vision Communicate the new vision to Does not establish a new vision acquired employees or new roles immediately. immediately with a clear Minimizes communication definition of new roles efforts with acquired firm so not to over burden new employees.Networking and Socialisation Uses networking and Does not over actively network socialisation to discover new or socialise with employees in opportunities in the acquisition. the acquired firm.Who is in charge? Keeps the acquired firm’s senior Keeps all the acquired firm’s managers, but only if they agree senior managers through a with the vision of the acquired variety of fiscal and non-fiscal company post-acquisition incentivesIntegration Approach Integrates the acquired firm as Adopts a flexible policy to a business unit in its own right, integrate offering each acquired but with a tightly defined company a unique structure as functional role. part of the acquired firm
53. Michael E. PorterCluster Analysis, Value Chains & Competitive Strategy
54. Three Generic Strategies Strategic Advantage Uniqueness Perceived Low Cost Position By Consumer Overall Industrywide Differentiation CostStrategic Target Leadership Particular Segment Only Focus
55. What drives a competitor? Competitor Analysis What the competitor is doing Future Goals and can do At all levels of management And in multiple dimensions Current Strategy How the business is currently competing Competitor Response Profile Is the competitor satisfied with its current position? What likely moves or strategy shifts will the competitor take? Where is the competitor vulnerable? What will provoke the greatest and most effective retaliation by the competitor? Assumptions Capabilities Held about itself Both strengths and the industry and weaknesses Porter, Competitive Strategy, P. 49
56. New Market Entrants, eg: • geographical factors • incumbents resistance • new entrant strategy • routes to market Buyer Power, Competitive Rivalry, Supplier Power, eg: eg: eg: • brand reputation • buyer choice • number and size of • geographical • buyers firms coverageFigure 7. Porter’s Five Forces of Competitive Position size/number • industry size and • product/service level quality • change cost/frequency trends • relationships with • product/service • fixed v variable cost bases customers importance • product/service ranges • bidding • volumes, JIT • differentiation, strategy processes/capabilities scheduling Product/Technolog y Development, eg: • alternatives price/ quality • market distribution changes • fashion and trends • legislative effects
57. Threat of New Entrants Threat of competition from Porter’s Five Force new technology Analysis for Gernaiol (in past from petrochemicals) IndustryBargaining Power competitiveness Bargaining power of Of suppliers buyers Intensity of rivalry Restrictions on Concentration of The supply of usage into few major beta-pinene compounders The required strengthen buyer feedstock power Other producers of geraniol Adapted from Porter, M. E, Competitive Advantage: Creating and Sustaining Threat of substitutes Superior Performance, New Possible reformulation with York, Free Press, 1985 other rose materials eg. Phenyl ethyl alcohol
58. Regulation SCCP placed lemongrass oil under scrutiny as a cosmetic Trends & Technology ingredient in EU.Alternative technologies to Trends & Technologysteam distillation (CO2) Substitutescan make much smoother Citral (main constituents) can Regulationoil but will increase capital be produced from a number ofneeds greatly. chemical feed stocks.Natural, exotic, organic, Alternative oils (litsea cubeba)FAIRTRADE could cost much less to produce.increase oils popularity (?) Lemon myrtle oil muchif seen as exotic. smoother and acceptable to end users Many alternatives to lemongrass in product formulations. Substitutes Industry Competitors Bargaining Bargaining power of power of buyers suppliers Intensity of Rivalry Competitive Rivalries Bargaining Power of Buyers Currently small item of trade in flavour industry, strong relationships with established producers. Bargaining Power of Suppliers Collecting the most suitable Competitive Rivalries planting material require effort. Lemongrass quick yield and Extraction and straightforward to cultivate and distil harvest .technology needs to be – expect high elasticity of supply acquired or developed from both existing and new Analytical equipment or service producers. maybe expensive/remote. Producers of substitutes very aggressive
59. Role & Reach of SAIPRole & Reach of SAIP Industry Phase development of SAIP HIGH MARINE III SNP VALUE ADVANTAGE VALUE ADVANTAGE VALUE ADVANTAGE VALUE ADVANTAGE FRUITS FLOWERS I LIVESTOCK II VEGETABLES LOW LOW HIGH PRODUCTIVITY ADVANTAGE Phasing of SAIP in order to ensure a clear focus and fast cluster development! Depending on Logistics Infrastructure Scenario SAIP could provide a wider reach -> Starting with only a 100 km radius to entire Sabah!