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International*Marketing*–*Revision*lecture*1*(May*exam*2016)* * 5"questions"in"the"exam,"choose"3."" * Case*study*1*-*Ikea*in*India* ! • Ikea!–!Scandinavian! • Contemporary!furniture!design,!aesthetics!!! o Ergonomics! • Global!fusion!! • Market!entry!! EXAM:!Indian!marketing!environment!! Market!entry!strategies!and!criteria!for!market!entry! ! Case*study*2*–*Green*Toys** * • Formed!in!San!Francisco!(after!Mattel’s!toy!scandal)!* o Mattel!–!outsourcing!in!china,!problems!with!safety!and!toxic!toys!* § 2007!–!29million!toys!were!recalled!* • Why!set!up!in!San!Francisco?!* o California!has!the!highest!regulations!for!exporting/importing!products!in!the! states,!21st!century!equivalent!hippies!–!high!interest!with!the!environment! and!being!“green”!etc.!* o Global,!regional!and!national!consumer!behaviour* o Corporate!social!responsibility* o California!is!the!venture!capital!capital!of!the!world* o Integrated!marketing!communications!* o Course!related!marketing* o Segmentation!strategy* * CS2!-!Relates!to:!green!toys!from!California,!international!marketing!trends,!green! marketing,!value!base!marketing,!corporate!social!responsibility!and!segmentation.!! ! Case*study*3*–*Tata*nano* * • Cheap!car!! • Made!in!India!! • Dacia!and!Tata!nano!–!both!share!in!common!segmentation!! • Question!in!the!exam!has!to!do!with!international!segmentation!! • They!go!it!it!wrong,!and!its!all!to!do!with!understanding!segmentation!! • International!segmentation!theory!and!practice! ! • about!them!reflects!that!particular!area! • Branding,!marketing!communications,!and!market!entry!! • Theories!of!internalisation!–!Uppsala!module!! !

! * Ikea*in*India** * Indian!marketing!environment:!! • According!to!Vietor!(2007),!India!(along!side!with!China)!has!become!a!major!player! in!the!world!eonomy.!! • This!remarkable!economic!resurgence!and!future!promise!of!China!and!India!has! made!entering!these!markets!critical!to!the!survical!and!success!of!many!firms! (Wilson!and!purushothaman,!2006).!! • The!study!undertaken!by!joseoh!jognson!and!Gerard!J.!Tellis!–!reveals!that!In!India,! smaller!firms!rather!than!larger!firms!have!a!higher!success!rate.!! • Success!is!higher!for!firms!that!use!a!mode!of!entry!with!greater!control.!! • Joint!ventures!are!the!most!popular!mode!of!entry!accounting!for!41%!of!entry! modes.!! • Success!is!higher!for!entry!into!emerging!markets!with!lower!openness,!lower!risk! and!economically!close!to!the!home!market.!! • Earlier!entranats!enjoy!greater!success!than!later!entrants,!in!India.!! • In!india!there!is!a!string!effect!of!cultural!distance.!Economic!and!cultural!proximity! between!the!home!nation!and!host!nation!favour!successful!entry!into!emerging! markets.!! Important!to!know!that!India!has!an!inconsistent!opolicy,!varying!demand!across!the! india!market.!! ! ! Market*entry*strategies:** A market entry strategy is the planned method of delivering goods or services to a new target market and distributing them there. When importing or exporting services, it refers to establishing and managing contracts in a foreign country.!

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The!most!appropriate!one!is!determined!by!market!potential,!your!degree!of! international!expertise!and!experience!and!the!resources!that!you!can!commit! to!entering!your!chosen!international!market.!The!strategy!that!you!choose!is! also!determined!to!a!certain!extent!by!the!country!you!have!chosen!to!enter!as!

discussed!in!the!section!on!market!research.! ! In!terms!of!india,!the!one!with!!most!control!would!be!the!most!ideal!one.!! ! Shipping!goods!out!of!your!home!country!to!your!overseas!market.! Indirect!exporting:!more!extrernal!agents,!allowing!external!agents!to!deal!with!the!logistics.!! Advantages:!someone!else!is!in!charge!of!the!logistics,!don’t!have!to!worry!about!it!! Disadvantages:!lost!of!control,!expensive! Direct!exporting:!more!control!of!profit!margins,!control!over!the!customer!service!and!the! brand.!! Lowest!level!of!involvement:!Indirect!exporting!! Joint!venture:!partner!one!or!more!companies!to!set!up!a!subsidiary.!Bi-latural!–!normally! international!and!local?!i.e!BMW!getting!into!china!! Strategic!alliance:!don’t!set!yo!subsidary!company!just!have!a!contract!to!work!together.! This!will!be!used!instead!of!joint!venture!where!the!political!barriers!aren’t!high!but!the! localization!factors!other!complexities!are!very!high! Foreign!direct!investment:!highest!capital!! ! ! Criteria*for*market*entry:**

! In!an!exam:!What!criteria!do!you!use!to!justify!your!choice!of!mode!of!entry.!! Internal!and!external! Companies!position! What!market!share!do!they!have?! Can!they!go!into!high!involvement!strategies!because!they!don’t!have!enough!resources?! Product!attributes!and!the!context!–!that!can!also!affect!the!mode!of!entry! Market!growth!rate!–!the!potential! The!level!of!complexity!might!reduce!the!level!of!capital!introduced! Exporting!is!a!less!risky!investment!than!Foreign!direct!investment! *

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Green*Toys*Inc.** • ‘created!a!line!that!would!appeal!to!parents!who!identigied!with!the!green! movement’! • founded!in!2006!–!started!with!manufacturing!eco!toys!from!recycled!milk!jugs! • Today!green!toys!Inc.!makes!a!line!of!classic!children’s!toys!constructed!from! recycled!plastic!and!other!environmentally!friendly!materials.!(This!helps!reduce! fossil!fuel!use!and!greenhouse!gas!emissions,!improving!the!overall!health!of!the! planet.! • 2010!–!turnover!approx.!of!17.5!million!US$.!Number!of!employees!at!that!time:!75.! • Green!toys!contracts!with!companies!only!in!California.!(sourcing!locally!means! butning!less!fossil!fuel!and!creating!or!maintain!more!US!jobs.! • Key!customer!segement:!parents!between!ages!of!25-40!(predominantly!female,! well!educated!and!online)! • Green!toy’s!products!=!about!30%!more!expensive!than!similar!toys!from!major! players.! • Last!year,!eco-friendly!toys!generated!just!$21!million!in!sales!through!US!retailers,!a! freatcion!of!the!22$!billion!for!the!US!toy!industry!as!a!whole.!! • Green!toy!products!sold!in!5,000US!Stores.!! • Majority!if!green!toy’s!marketing!budget!is!spent!online.!! ! Internationalization*strategy:** • Green!toys!has!distributors!in!35!countries.!But!until!now!90%!of!sales!is!from!US! market.! • No!plans!to!move!production!out!of!US.!However,!in!the!future!=!they!do!not! exclude!the!possibility!of!MANUFACTURING!abroad!with!LOCAL!SOURCING!of! materials.!! ! Global*toy*industry:** • Global!child!population!has!been!declining!due!to!falling!family!sizes.! • In!2010,!0-14!year!olds!made!up!26.3!%!of!the!global!population!compared!with! 35.2%!in!1980.!à!this!trend!reflects!cultural!and!social!changes!towards!smaller! family!sizes!both!developed!and!developing!markets.!! • Eastern!Europe!has!seen!the!largest!decrease!in!the!child!population.!(annual! average!rate!of!2%!between!2000!and!2010)!à!this!could!be!partly!due!to!large!scale! migration!to!western!Europe!and!also!due!to!the!transition!period!from!communism! in!the!1990s!and!the!2000s!when!fertility!and!life!expectancy!fell!due!to!economic! hardship.!! • However,!many!of!the!worlds!developing!countries!still!have!‘sizeable!and!rising! child!populations’!+!in!some!developed!countries!child!population!is!also!rising.!! • The!overall!downturn!in!the!child!population!globally,!has!meant!smaller!household! sizes!and!greater!consumer!expenditure!per!child.!This!has!created!more!allowance! for!discretionaty!spending!on!non!essentials!for!children.!! • Asia!pacific!and!the!middle!east!and!Africa!=!the!biggest!regions!in!terms!of!0-14!year! olds.!Followed!by!latin!America.!! • The!Philippines,!Egypt!and!Saudi!arabia!=!top!three!countries!in!terms!of!bitrth!rates.!!

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Birth!rates!have!been!falling!around!the!world!as!women!wait!longer!before!having! children.!Young!adults!can!now!afford!interests!and!lifestyles!that!are!not!compatible! with!large!familities,!not!only!in!more!affluent!countries!but!also!in!a!number!of! developing!countries.!They!often!choose!to!postpone!birth!in!favour!of!building!a! career!or!simply!enjoying!their!freedom.!!

! Spending!on!green-toys!target!end-customers:!! • There!are!2!worlds!of!spending:!! o The!markets!of!western!Europe,!north!America!and!japan!where!despite! the!low!birth!rates,!spending!=!high.!! o Fast!growing!markets!of!asia!pacific,!latin!America!and!middle!east!and! Africa,!where!children!are!plentiful!and!spenfing!=!much!lower.!! ! Summary!and!future!trends:!! • Environmentally!friendly,!hazard!free!features!will!continue!to!be!amongst!the! main!selling!points!of!traditional!toys!and!games.!! • Sales!via!internet!retailers!are!expected!to!grow!dramatically!over!the!forecast! period,!particularly!in!light!of!the!demise!of!small!and!independent!toys!and! games!retailers.!! ! Summary!of!CS:!! ! • Formed!in!San!Francisco!(after!Mattel’s!toy!scandal)!* o Mattel!–!outsourcing!in!china,!problems!with!safety!and!toxic!toys!* § In!2007!–!29million!toys!were!recalled!* • Why!set!up!in!San!Francisco?!* o California!has!the!highest!regulations!for!exporting/importing!products!in!the! states,!21st!century!equivalent!hippies!–!high!interest!with!the!environment! and!being!“green”!etc.!* o Global,!regional!and!national!consumer!behaviour* o Corporate!social!responsibility* o California!is!the!venture!capital!capital!of!the!world* o Integrated!marketing!communications!* o Course!related!marketing* o Segmentation!strategy* ! CSR:** Definition:!a!number!of!corporate!activities!that!focus!on!the!welfare!of!stakeholder!groups! other!than!investors,!such!as!charitable!and!community!organisations,!employees,!suppliers,! customers!and!furture!generations.!! * Green*marketing:*

Integrating business practices and products that are environment friendly, while also meeting needs of consumer. More and more consumers are aware of ‘green’ brands. * * *

International*Marketing*Segmentation*for*Green*Toys:** *

Marketing segmentation is, defined by Kotler and Armstrong (2005), “dividing a market into distinct groups of buyers who have distinct needs, characteristics, or behaviour and who might require separate products or marketing mixes”. Market segmentation is a process of dividing into several segments based on demographic, geographic, psychological, and behavioural factors (Thomas, 2007). By that, the company is able to understand better of their target customers and conduct their marketing effectively (Gunter and Furnham, 1992). Target Segments for Green Toys Inc.* *

Targeted to: psychological – eco-friendly personality and healthy lifestyle.* * International*product*strategy** * To!standardized!or!to!customize,!that’s!the!question!* * * • Extension:!Sell!the!product!as!it!is.!! • Adaptation:!Modify!the!existing!for!different!countries!or!regions.!! • Creation:!Design!new!products!for!foreign!markets.!! • Reverse!innovation:!introducing!new!product!developed!in!emerging!markets!back! to!developed!markets.!! • Globalization:!Introduce!one!product!globally.!! * Advantages*of*Standardization* Disadvantages*of*Standardization** • Economies of scale in • A product orientation, not

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production, R&D, marketing Consistency in dealing with customers Improved coordination and control Leverage of good ideas Easier transfer of skills and information Conducive to building a global brand domination

market orientation Vulnerable to competitive attacks in individual markets • Ignorance of foreign idiosyncrasies • Local subsidiary resistance • Not feasible in certain countries or industries •

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* Type*of*product*adaptation:**

* * * Degree*of*adaptation/standardization*depends*on*external*and*internal*forces.* Adapt*when*necessary.*Standardize*when*feasible.** * Country-of-origin effect: The origin of a product may have a strong effect on

consumer perceptions and biases about foreign products. * * * * * * * * * * * * * * * * * *

* * Product*strategy* ! • To!standardized!or!to!customize,!that’s!the!question!! • Theodor!Levitt! • When!do!we!engage!in!product!customization! o Geophysical!environment!–!it’s!not!just!about!human!behaviour! o Fiat!didn’t!engage!in!geophysical!environment!! o Socio!economic!differences!! § Food!and!retailing!! ! ! ! LW5:!International!Market!segmentation:!! ! Market!segmentation!is!in!many!respects!a!logical!outgrowth!of!the!marketing!concept.! Given!the!heterogeneity!of!most!markets,!segmentation!in!both!domestic!and!international! markets!entails!breaking!down!the!market!for!a!particular!product!or!service!into!segments! of!customers!which!differ!in!terms!of!their!response!to!marketing!strategies.!By!doing!so,! the!firm!can!tailr!its!marketing!policies!to!the!needs!of!each!specific!segmenet,!hoping!to! obtain!more!favourable!response!and!this!greater!profits!than!by!folloging!uniform!strategy! aimed!at!the!entire!market.!Segmenetation!is!therefore!only!appropriate!if!profits!from!the! additional!sales!gained!from!a!such!a!strategy!outweigh!the!costs!of!focusing!on!a!specific! segment!or!of!following!different!policies!to!different!segments.!! ! In!international!markets!the!advantages!of!segmentation!=!appear!greater!than!in!domestic! marets.!Due!to!the!differences!in!cultural,!economic!and!political!environment!between! various!counties,!international!marketstend!to!be!more!heterogenrous!than!domestic! markets.! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !

! MAY!2016*EXAM*NOTES:* * LW2:*Internationalisation*and*globalization** !

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* LW3:*International*Market*Research*and*Analysis* ! Opportunities!Analysis:!Assessing!the!market!and!its!relative!potential! Risk!Analysis:!Assessing!potential!risks!&!challenges! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! The*12C*Framework*(to*analyse*international*markets)** ! • Country*-!What!are!the!political,!legal!and!economic!issues!of!your!potential! overseas!market,!as!well!as!its!current!market!potential!and!your!knowledge!and! experience!of!it?! • *Currency*-!If!foreign!currencies!fluctuate!a!lot!against!your!home!currency,!you!may! have!difficulties!in!pricing!your!goods!or!making!a!profit.!Some!countries,!like!China! don’t!allow!their!currency!to!leave!the!country,!so!you!may!have!to!work!in!$! • Culture*-!Every!culture!is!different!-!even!from!one!European!country!to!another.! Your!product,!advertising!and!even!brand!may!need!to!be!adapted!to!suit!your!new! market.! • Control*&*Co-ordination*-!Trading!abroad!is!not!only!about!selling,!but!also!after! sales!service.!All!these!people!will!have!to!be!hired,!trained,!managed!and!controled.! • Concentration*(of*markets)!–!some!countries!are!vast!(China,!India!etc).!It!may!not! be!so!easy!or!cost!effective!to!sell!to!different!groups!in!isolated!areas.!However,! there!may!be!opportunities!to!sell!cross-countries!to!different!nationalities!with! similar!cultural/language!attitudes! • Commitment*-!Selling!abroad!seriously!requires!long!term!planning,!significant! financial!investment,!time!and!skills!of!your!staff.!There!are!risks!and!the!return!on! investment!may!be!long!to!come.!! • Communication*-!You!need!to!consider!the!language!skills!of!you,!your!staff!and!your! contacts!abroad,!and!what!media!or!information!technology!they!have!(advertising,! telecommunications,!e-mail!etc).!If!it!is!difficult!to!communicate,!it!will!slow!up!and! complicate!matters.!It!may!also!prevent!you!from!developing!your!business!properly.!

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Choices*(of*consumers)*-!It!is!possible!that!there!are!perfectly!good!products!or! services!available!from!local!suppliers.!Yours!are!likely!to!be!more!expensive,!so! consider!what!would!make!your!product!better!or!more!desirable.! Channels*of*distribution*-!Getting!goods!and!services!to!overseas!markets!can!be! difficult.!Building!an!efficient!retail!network!is!usually!hard!and!long.! Contractual*obligations*-!Make!sure!that!the!contract!meets!everyone’s!needs!and! that!you!and!your!customer!are!fully!aware!of!the!commitments!listed.!Failure!to! meet!the!exact!requirements!of!the!contract,!can!result!in!non-payment.! Capacity*to*pay*-!You!should!take!a!look!at!the!customer!and!their!ability!to!pay!as! well!as!the!country!itself.!This!will!include!not!only!financial!health,!but!also!political! issues,!and!currency!and!banking!regulations.! Caveats*(laws)!-!Some!countries!have!laws!that!are!very!protective!of!their!local! traders!and!do!not!readily!accept!imports.!There!may!be!restrictions!or!differences! between!your!country!and!the!foreign!market!about!what!can!be!sold!and!under! what!circumstances.!

! ! Cross-cultural!challenges:!! • Level!of!infrastructure!and!data!(Developing!Countries)! • Internet!penetration! • Language!&!Semantics! • Understanding!Cultural!segmentation! • Research!techniques!&!responses! • Style!of!survey!questions! ! LW4:*Modes*of*entry* * Licensing!–!is!also!a!mode!of!entry,!using!local!partners!in!their!countries!to!manufacture!! Local!partners!provide!economies!of!scope,!local!planning!permission,!they!have!the! knowledge!of!the!distribution!network.! ! Entry!criteria:!!

! ! Internal!and!external! Companies!position! What!market!share!do!they!have?!

Can!they!go!into!high!involvement!strategies!because!they!don’t!have!enough!resources?! Product!attributes!and!the!context!–!that!can!also!affect!the!mode!of!entry! Market!growth!rate!–!the!potentialThe!level!of!complexity!might!reduce!the!level!of!capital! introduced! Exporting!is!a!less!risky!investment!than!Foreign!direct!investment! ! ! !

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! ! ! Shipping!goods!out!of!your!home!country!to!your!overseas!market.! Indirect*exporting:!more!external!agents,!allowing!external!agents!to!deal!with!the!logistics.!! • Advantages:!someone!else!is!in!charge!of!the!logistics,!don’t!have!to!worry!about!it!! • Disadvantages:!lost!of!control,!expensive! Direct*exporting:!more!control!of!profit!margins,!control!over!the!customer!service!and!the! brand.!! Lowest!level!of!involvement:!Indirect!exporting!! Joint*venture:*partner!one!or!more!companies!to!set!up!a!subsidiary.!Bi-latural!–!normally! international!and!local?!i.e!BMW!getting!into!china!! Strategic*alliance:!don’t!set!yo!subsidary!company!just!have!a!contract!to!work!together.! This!will!be!used!instead!of!joint!venture!where!the!political!barriers!aren’t!high!but!the! localization!factors!other!complexities!are!very!high! Foreign*direct*investment:!highest!capital!! !

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Exporting:!! Advantages! • Low!initial!investment! • Reach!customers!quickly! • Complete!control!over!production! • Benefit!of!learning!for!future!expansion! Disadvantages! • Potential!costs!of!trade!barriers! – Transportation!cost! – Tariffs!and!quotas! • Foregoes!potential!location!economies! • Difficult!to!respond!to!customer!needs!well! When!are!export!appropriate?! • Low!trade!barriers! • Home!location!has!cost!advantage! • Customization!not!crucial! ! Franchising!–!when!larger!organisations!partner!through!strategic!alliance!with!small! businesses!locally.!! ! !

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