Market Development Strategy and Management Orientations

Market Development Strategy

  • Involves seeking new customers by introducing existing products or services into new geographical markets.
  • Competitive Advantage:
    • Achieved when a company creates more value for customers than its competitors.

Management Orientations

  • The worldview of a company’s personnel can be classified as ethnocentric, polycentric, regiocentric, and geocentric (EPRG Framework).
  • These orientations reflect progressive levels of development or evolution.
Ethnocentric Orientation
  • Definition: Home country orientation; international firms pursue opportunities outside the home market by extending elements of the marketing mix.
  • Key Assumptions:
    • Home country managers are perceived as more capable.
    • Success at home will similarly succeed abroad.
    • Headquarters practices become the default standard for subsidiaries.
  • Advantages:
    • Overcomes shortages of qualified managers in host nations by using expatriates.
    • Creates a unified corporate culture.
    • Facilitates core competence transfer within the organization.
  • Disadvantages:
    • Can lead to cultural short-sightedness.
    • Possible neglect of talent in host countries.
Polycentric Orientation
  • Definition: Host country orientation; country managers operate independently and adapt the marketing mix to local conditions.
  • Key Assumptions: Host cultures vary significantly; autonomy is essential for local operations.
  • Advantages:
    • Aligns better with local preferences, boosting acceptance and sales.
    • Reduces risks of cultural misunderstandings.
  • Disadvantages:
    • Higher costs due to duplicative functions.
    • Loss of economies of scale.
    • Challenges in global coordination due to lower control from headquarters.
Regiocentric Orientation
  • Definition: Focuses on integrating activities across a region (e.g., Europe, Asia) rather than individual countries.
  • Key Features:
    • Management aims for functional rationalization on a regional basis.
    • Allows local responsiveness with less corporate integration compared to ethnocentric views.
Geocentric Orientation
  • Definition: Views the entire world as a potential market and focuses on integrated global strategies.
  • Key Features:
    • Seeks the best managers regardless of nationality.
    • Balances global standardization and local adaptation.
  • Advantages:
    • Efficient human resource use leads to a strong company culture.
    • Enhances customer satisfaction by addressing regional preferences.
  • Disadvantages:
    • Potential confusion between regional and global objectives.
    • Could overlook differences within regions, leading to ineffective strategies.

Culture

  • Definition: Ways of living passed down through generations; includes both conscious and unconscious values, ideas, attitudes, symbols.
  • Components of Culture:
    • Physical (e.g., clothing, tools) and non-physical (e.g., beliefs, values).
  • Geert Hofstede’s Cultural Typology:
    • Key dimensions include Power Distance, Individualism/Collectivism, Masculinity, Uncertainty Avoidance, Long-term Orientation.
  • Emerging Global Consumer Cultures:
    • Global interconnectedness leads to shared consumption symbols (e.g., pub culture, fast-food culture).

Export Marketing

  • Definition: Selling the same product, at the same price, with the same promotional tools internationally.
  • Requirements:
    • Understanding the target market environment.
    • Conducting market research to identify potential.
    • Making decisions about product design, pricing, distribution, and advertising.

Entry Strategies

1. Foreign Direct Investment (FDI)
  • Definition: Ownership of operations outside the home country.
  • Forms:
    • Joint ventures, minority/majority equity stakes, outright acquisitions.
  • Examples: Volkswagen's stake in Skoda; Honda's assembly plant in Indiana.
2. Licensing
  • Definition: A contractual agreement for one company to make an asset available to another in exchange for compensation.
  • Advantages:
    • Low initial investment and attractive ROI; circumvents tariffs and quotas.
  • Disadvantages:
    • Risk of limited participation; licensees may become competitors.
3. Joint Ventures
  • Definition: Partners share ownership of a new business entity.
  • Advantages:
    • Risk sharing; learning about new environments; synergy opportunities.
  • Disadvantages:
    • Requires strong coordination; potential for partner conflict.

Pricing Strategies

Market Skimming
  • Definition: Setting a high initial price to target consumers willing to pay a premium.
  • When to Use:
    • During the introductory phase of the product life cycle; suitable for unique products (e.g., Apple iPhone).
Market Penetration
  • Definition: Setting lower prices to quickly build market share.
  • When to Use:
    • When companies aim for market saturation before competitors can imitate products.