International Marketing exam 2

primary data

newly collected and specifically for the purpose of the research study.

Sampling unit

who is being surveyed, what is our target population

Sample size

how many people should be surveyed

Sampling procedure

How should prospective respondents be chosen from the population

Secondary Data

Data or information which is already available

Four problems with secondary data

1. Reliability over time

2. Age of data

3. lumping of data

4. accuracy/comparability of data

Three major approaches to a market size assessment

1. trade audit

2. method of analogy

3. chain ratio method

Trade audit

• estimate the market size of the country of interest based on local production and import and export figures for the industry of interest

• Industries that are analyzed on the scale of international trading activities.

• Using country-level and industry-level data to estimate a country’s specific market size

  • local production

  • import

  • export

• Equation: Market size in a country = Local production + imports - exports
  

Method of analogy

• estimate the market size of the country of interest for a company of interest based on another company that 1. is in the same stage of economic development as the country of interest and 2. has an established market and the market size is known.

• Assumption: the upper limit of the market size is comparable between countries in similar economic development stages.

Chain Ratio Method

• estimate the market size of the country of interest for a product of interest by starting off with a rough base number (the country’s entire population) and gradually fine tuning with relevant information

• What is the potential market size in France for Nicotine gum?

Aggregate segmentation - the traditional approach

• pick prospect countries on one or more country-level dimensions

Two international segmentation

1. Macro Segmentation: pick a country (or country clusters) based on country characteristics that are relevant for marketing purposes.

   1. the country’s economic trends, cultural foundations and consumer consumption patterns; industry level characteristics in the country such as market size or competition.

2. Miro segmentation: identify consumer segments for the country or country cluster, based on consumer characteristics (4 major types)

4 major types of consumer characteristics

1. Demographics: age, gender, family statues

2. Socioeconomic: consumer wealth or the country’s level of economic development

3. Behavioral": degree of brand loyalty, usage rate, product penetration, and benefits sought after.

4. Psychographics: some subjective mental considerations, emotional attributes, and aspirations of prospective consumers.

6 criteria for an ideal segment

Identifiable: easy to define and measure

sizable: large enough to be worth going after

stability: less likely to change their behavior over time

accessible: easy to reach through promotional and distributional efforts

responsive: respond to marketing practices

Actionable: marketing programs can be formed to attract and serve the segment

Universal positioning strategies

appeal to consumers anywhere in the world, regardless of their cultural background

• basic human needs

• general product features

Localized positioning strategy

tailored to individual markets, highlighting the unique benefits for local consumers.

Uniform vs. Localized positioning strategies

• Universal is better for the same positioning globally

• Localized is better for adapting to each market

unique/diverse segmentation

different in each country

regional segmentation

similar within a region

4 Positioning combinations

1. Universal Segment with uniform positioning strategy: snickers

2. Universal segment with different positioning strategies: coke

3. Different segments case by case with uniform positioning strategy: honda

4. Different segments case by case with different positioning strategies: pizza hut

Global consumer culture positioning (GCCP)

the brand is a symbol of a global culture, apple

• in emergin markets, this approach might be more beneficial as a global brand is associated with status and prestige.

local consumer culture positioning (LCCP)

the brand even a global brand, is an intrinsic part of the local culture. Mcdonalds

Foreign consumer culture positioning (FCCP)

the brand is a symbol of a specific positive foreign culture

• french and italian fashion brands

Global strategy

helps a company navigate foreign market environments and achieve competitive advantages

Global industries:

a firm’s competitive position in one country is affected by its position in other countries and vice versa

Cross subsidization of markets

companies using profits from a market where they have a strong competitve position to strengthen their competitiveness in a market where they struggle

Porter’s 5 forces

1. Competitive rivalry: existing firms

2. threat of new entrants: determined by entry barriers

3. threat of substitutes: above and beyond the most direct competitors

4. The bargaining power of suppliers: supplier control over inputs

5. The bargaining power of buyers: customer influence on price

Competitive advantages

• technology driven approach: tech leadership and constant innovation

• competitor focused approach: being different from or better than competitors

• customer driven approach: customer benefits

3 Main functional areas

1. R&D: technology development, product design, engineering

2. Operations: manufacturing, production

3. Marketing: being consumer-oriented, targeting and positioning strategies

Connecting the 3 main functional areas

1. R&D/ Operations Interface: balance effective R&D and efficient manufacturing to achieve cost advantages and strengthen competitive advantage.

   1. product innovation

   2. designing for manufacturability

   3. manufacturing process innovation

   4. components sourcing

2. Operations/Marketing Interface: Balance manufacturing cost and marketing effectiveness

   1. product and component standardization

   2. product modification

3. Marketing/R&D Interface: use knowledge of consumers to facilitate R&D, making sure the new product meets consumer needs.

   1. new product development

   2. product positioning

Interdependency

usually happens because of resource limitations, companies relying on external partnerships.

Universal product

same product worldwide

core component standardization

global products that require only minimal changes for local adaptation

Product design families

creating a series of related products

First mover advantage

being the first to bring a new product to the market allows the firm to:

• set the standard

• establish entry barriers

• build relationships early

Location Selection

depends on a company’s strategic objective

resource seeking

possession of natural resources and related transport infrastructure

market seeking

abundance of strong market demand and customers willing to pay

efficiency seeking

economies of scale and abundance of low cost factors

innovation seeking

abundance of innovative individuals, firms, and universities

Non equiity modes

entry without ownership

equity (FDI) modes

entry with partial or full ownership

how non equity and equity modes differ

• the commitment of resources required

• the control over foriegn operations

• the degree of risk

Non-equity mode: exporting

products manufactured in one country and then sold in another country

Indirect exporting

working with an independent intermediary, avocados from mexico

• pros:

  • low commitment

  • low risk

• cons:

  • lack of control

  • lack of contact with foreign markets

  • limited direct learning about foreign markets

direct exporting

handling exporting activities internally and selling directly to foreign markets

• pros: more control

  • opportunity to build up a network in the foreign market

  • gaining more knowledge and expertise in the foreign market and international expansion

• cons:

  • need to build up export organization

  • more demanding for resources

Non-equity mode: contractual agreements

• licensing and franchising

Licensing

the firm offers some proprietary assets to a foreign company in exchange for royalty fees

• the licensee has the capabilities to develop, product, and or market the product in foreign markets

Franchising

the franchisor gives the franchisee the right to use its branding and operating procedures in a given territory in exchange for royalty fees.

• the franchisee pays for the whole package and is committed to the franchisor’s instructions

• the franchisor wants to replicate the entire business format across different countires

Pros of licensing and franchising

• little or no investment (less demanding on resources for the licensor/franchisor)

• overcome import barriers

• cost savings

Cons of licensing and franchising

• hard to maintain full control

• need for quality control

• risk of creating competitors

Joint Venure

foreign company agrees to share equity and other resources with other partners to establish a new entity in the host country

• the new entity is co-owned by both parties in a joint venture

• Pros:

  • risk and resource sharing

  • less demanding on resources

• cons:

  • risk of conflict with partners

  • less control

Wholly owned subsidiaries

100% owned by the parent company (full control)

• a foreign owner may be perceived as a threat to the cultural and or economic sovereignty of the host country

Acquisition

the parent company buys an existing company

• Pros:

  • full control

  • faster entry with access to local assets

• cons:

  • costly

  • high risk

  • need to integrate different national/corporate cultures

Greenfield operations

the company starts a new venture in the host country by creating new facilities from scratch.

• Pros: full control

  • latest technologies

  • no risk of conflicts with partners

• Cons:

  • Costly

  • time consuming

  • high political and financial risks

Trade audit (easy)

tracks how much product is available in the market

• follow the product

• what gets shipped/stocked = what gets sold

Method of analogy (Easy)

• find a similar place

• similar countries/markets will have similar demand patterns

Chain ratio method (easy)

starts with a large population and narrows it down using percentages

• break it down step by step