Global - (1.4) Characteristics of International Marketing Strategies Flashcards
What are special decisions related to international marketing strategy?
1) Determination of degree
2) Selection/prioritization of markets
3) Design & structure of int. mar. dev.
(form and timing)
4) Decision on cross-nat standardization
5) Decision on relationship between headquarter and local entities
Describe the motives for internationalization
- Risk reduction and diversification
» Stabilization sales through various business cycles
» Compensation for (potential) domestic losses
» Stronger commitment abroad
» Following competitors abroad - Realization of opportunities
» SALES = new sources, following customers, participation in growth on foreign markets, escape from saturated markets
» PRICE = skimming of customers’ higher willingness to pay
» COST = cost reduction through economies of scale, utilization of lower market development cost
How is degree of internationalization?
The degree is variable:
> Expand only sales to foreign markets
> Expand more than sales: R&D, logistics, ..
Describe the importance of country selection
- Impossible to operate in all countries at the same time
- Not all countries are profitable (dependent on the firm)
- Financial consequences of poor selection are large
> Sunk cost = keep pushing a project because you already invested a lo
> Costs to close
> Negative image transfer
What are the steps in the process of selecting a country =
(1) Macro segmentation = develop broad criteria to get a group of interesting countries
(2) Prelimitary screening = additional criteria to reduce the number of candidate countries
(3) Secundary screening = firm assesses its own capabilities relative to the market
(4) Final selection through site visits
What are market attractiveness and market entry barriers criteria? (Macro segmentation + prelimitary screening)
Attractiveness
» Institutional = political stability, local infrastructure, access to resources
» Demand-based = population, buying power, market volume and growth, size of segments,
» Competitor-based = compentitive intensity and advantages
Market entry barriers
» Institutional = quotas, prices, norms and standards, regulations
» Demand-based = patterns, language, loyality toward competitors, switching costs
» Competitor-based = economies of scale advantaged by competitors, positive image of established competitors
What is the best way to decide on market attractiveness and market entry barriers?
Portfolio approach - visualize the countries on a 2 dimension quadrant
What are important factors to match capabilities between the firm and selected countries?
- Price > income levels, competition, tarrifs
- Product quality > position, perceived Q
- Innoavtiveness > differentiation
- Reputation > country of origin + overall brand image
- Firm know-how > patents, knowledge of market, management, adaptability, experiences with strategic partnerships
Explain the quantitive approach for assessing market potential
Based on sales/penetration information –> linear regression on country and product characteristics (dependent varibale = sales or market share)
Market entry mode =
Institutional arrangement necessary for the entry of a company’s products, technology and human capital into a foreign market
» key determinant for internationalization success
» depends on objectives, available capital, phase of internationalization
Explain the entry mode “direct export”
Sales without an intermediary, primarly via agencies, representatives of brances
Explain the entry mode “indirect export”
Acquisition of orders and delivery via third-party companies acting as intermediaries
Explain the entry mode “licensing”
Transfer of usage rights for the intellectual property of the licensor to the licensee for a fixed fee
Explain the entry mode “contract manufacturing”
Manufacturing of the entire product or individual modules by third parties on contractual basis
Explain the entry mode “franchising”
Franchisor gives a right to the franchisee against payment = a right to use a total business concept/system
Explain the entry mode “joint venture”
Establishment of a jointly managed company = partner capital, knowhow and existing shares are brought into the joint ventures.
3 types based on the distribution of capital shares: majority ; equity ; minority
Explain the entry mode “subsidiary”
Direct capital commitment in international market, without third party involvement. The subsidiary may perform sales, production or even independent R&D
Drivers of opening a subsidiary =
- Higher power distance (centralized authority makes it more easy)
- Low foreign country risks (ROI)
- Low restrictions
- Low market growth, so that you can glide in easy
- Low market size, otherwise better to go for a cooperative way
Explain the location-competence assimilation
Activities should be carried out in the location where the best conditions prevail > if R&D is best in Sillicon Vallety, do it there
Explain the Waterfall strategy (with advantages and disadvantages)
On lead country to entry, other lag countries follow
GOOD
* Successive development and expansion of financial and human resources
* Temporal diversification of risks
* Marketing can be adjusted
* Potential extension of product life cycle
BAD
* Risk of market entry by competitors before you
FACTORS FAVORING
* Necessity for reference markets
* Longer product life cycles
* Lower competitive intensity
Explain the Sprinkler strategy (with advantages and disadvantages)
All country entries at once
GOOD
* Establishment of market entry barriers for followers
* Regional+geographical diversication of risks
BAD
* Increased financial and HR requirements
* Major losses if strategy fails
FACTORS FAVORING
* Short product and technology life cycles
* Long R&D times
Conclusie: HIGH SALES BUT HIGH RISKS
Compare standardization and differentiation in internationalization
STANDARD
» Good: potential for international cost synergies
»Bad: limited flexibility to adress differences, intensification of demand-based feedback effects
DIFFER
» Good: adaptation to specific local market and demand charact.
»Bad: high cost
Standardization tends to be more succesful if …
- customers in target countries are similar
- potential for transnational economies of scale
- product modifications are associated with high costs
- price elasticity of demand
- managemen team has intensive markeitng experience and competence
