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Lecture 1: Introduction to International Marketing Why is ‘International’ Marketing Different? Well the ‘principles’ are the same: Vision, mission, situation analysis, competitive advantage and differentiation, product/service development, marketing mix, implementation and adaptation But evaluating ...

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Lecture 1: Introduction to International Marketing Why is ‘International’ Marketing Different? Well the ‘principles’ are the same: Vision, mission, situation analysis, competitive advantage and differentiation, product/service development, marketing mix, implementation and adaptation But evaluating each and all of those in an international environment IS MUCH MORE COMPLEX … Why? Because the information that you need to do all that evaluation and analysis IS MUCH MORE DIFFICULT TO GET What is International Marketing? •

“International marketing is the process of planning and undertaking transactions across national boundaries that involve exchange” Why Is International Marketing Important?

The opportunity that it gives to: (1) Countries: (a) economic advantage - what is China really good at? - what is Oz’ really good at? - opportunity for trade (b) economic multiplier - local communities China / Oz’ - new jobs - income impacts The opportunity that it gives to: (2) Firms – additional growth from new markets, additional profits - Microsoft - McDonalds - Apple - Coca Cola The opportunity that it gives to: (3) People - opportunity

- new jobs, growth existing jobs - income, - security, - lifestyle The opportunity that it gives to: (4) Trade Relations: - via formal / informal contacts … - government to government trade agreements (makes “rules” for trading easier / cheaper) - business to business contracts The opportunity that it gives for: (5) Cultural exchange: - better understanding of “who” we / you are …. - closer political, commercial, personal relationships - tourism, sport, education exchanges - all above ‘help’ security ... Case Study: What International Marketing can do in Ethakota (India) • • • • • • • •

10 hrs train from Hyderabad, then 2 hrs car Village hall has 47 people ……. and PC’s PC’s connect via radio link to internet Used to book car servicing / check expense a/c’s / arrange job interviews for applicants – all remotely Set up by “gram IT” – an NGO … (70% Indian pop in villages) Income is now 4 times higher than from farming They get to ‘stay’ in village, = greater social / local cohesion And, brought some villagers back from other jobs outside village Important Learning and Revision Points

1. Learn why IM is different to domestic marketing. 2. Learn the 5 points as to ‘Who IM is Important To’. 3. Learn some examples of the benefits that IM brings. 4. Learn some examples of the challenges that IM firms have in ‘getting-it-right’ – i.e. in making their IM operations profitable.

Lecture 2(a): International Strategic Planning and Competitive Strategy International Strategic Planning •

The process through which a firm considers its long term profitable growth options … and believes that international market(s) development is an important part of this … maybe even the only part It then needs to consider:

(1) which markets are (most) attractive? (2) what (type of) business models are required to do business in those markets? (3) the basis for competitive advantage in those markets? (4) profit (dollar profit) and profitability (return on investment) expectations? Important Concepts in International Strategic Planning (a) Schumpeter’s Theory of ‘Creative Destruction’ (b) The International Business “failure rate” …. (c) Planning is simple but most firms do it badly: poor processes … poor inputs, effort, co-ordination … 91% don’t know / understand process (‘Kaplan’ Survey 2014) 1% “inspiration” / 99% “perspiration” (d) Concept of ‘outside-in’ v’s ‘inside-out’ thinking (e) ‘Polaris Consulting’ concept: “if you always do what you’ve always done, you’ll always get what you’ve always got” Why is it important? •

Because it is this process (strategic planning) that allows executive management to consider (and evaluate) the best business options and direction for the future profitable growth of the firm The Theory of Internationalisation

Step 1. Partially interested firm … begin enquiries / research Step 2. Exploring firm … test marketing Step 3. Experimental exporter … trial marketing Step 4. Experienced small exporter … Step 5. Experienced large exporter … Note! “Born Global Firms” are an exception to these steps – but they face very special challenges of their own because once they switch the internet on, they are GLOBAL …

The Theory of ‘Market Difference’ 1. Each marketplace (macro, micro issues) is unique ... (Bangladesh, Finland, Myanmar, Germany …) 2. So product / service options may be different ... (Avon USA / China, Apple China / India…) 3. So there will be different competitive positions ... (Kellogg’s - USA / China) 4. So strategies to achieve market needs (and the firm’s objectives) will therefore be different (Wal-Mart Japan / USA) There are 2 Important Planning ‘Models’ 1. The Strategic Planning Model

2. The Market Schematic Model

The Major ‘Types’ International Marketing Reasons can be ‘proactive or reactive’, ‘internal or external’ This leads to 4 possible combinations: 1. Proactive external 2. Reactive external 3. Proactive internal 4. Reactive internal ‘External’ Driven International Marketing

‘Internal’ Driven International Marketing

The Important International Planning ‘Tools’ 1. Which Country – ‘GE / McKinsey’ matrix (key learning point) 2. Market ‘Power’ Analytics – ‘Porter’s 5 Forces’ 3. SWOT (weighted) – (key learning point) 4. Market Structure / Positioning 5. Market Segmentation and Target Markets (key learning point) 6. Market ‘Entry’ Options – business model evaluation 7. Core Competence Evaluation 8. Competitive Advantage Evaluation (key learning point) 9. Product / Service requirements 10. Marketing Strategy Evaluation 11. Value Chain Evaluation 12. Supply Chain Evaluation 13. Management experience / expertise evaluation (key learning point) 14. Risk Management Evaluation (key learning point) 15. Business Objectives – ‘goals / targets’ for the plan

Market Power Analytics

SWOT (Weighted) (key learning point) ‘Weighted’ SW – OT (known as ‘SWOT’) Analysis S = (company) strengths … W = (company) weaknesses … O = (market) opportunities … T = (market) threats … This analysis enables you to consider what the advantages / disadvantages of a market are, matched against the competencies / incompetency of your company Often the firms assessed strengths / weaknesses will vary from market to market

Example Weighted SWOT Analysis for ‘OpLab’ (Optical Laser Surgery Equipment)

Strategic Groups and Positioning Key Issues: Industry / market structure … Size, share and position of existing groups? Which ‘group’ (positioning) could / should you be in? potential for movement to new groups? What is Market Segmentation? It’s a concept that suggests that not everyone wants / needs the same things: - food - music - colours - clothes - cars - houses - holidays - entertainment

And so, if you’re evaluating a product / service for a potential customer, you FIRST need to understand what they WANT The Concept of Market Segmentation

To create these ‘pictures’ of customer’s wants/ needs we use 4 basic ‘tools’: 1. Geographics (where they are) - say region, country, state, city, area of city or even street 2. Demographics (who they are) - age, sex, income, address, education, type of job, religion… 3. Psychographics (their lifestyles) - personality, lifestyle 4. Behaviouristics (how important it is to them) - attitude to and usage of product International Market Segmentation 1. Use the segmentation ‘tools’ to build ‘pictures’ of potential customers 2. ‘Drill down’ using the ‘tools’ to make these ‘pictures’ as accurate as possible (like Universities) 3. Complete the ‘market segment analysis’ grid (over …) Market Targeting You don’t (and probably can’t – resources and expertise) sell to every segment that you have identified …

So, Which Segments LOOK MOST ATTRACTIVE? This is called ‘Market Targeting’ Segment 2 has been identified as the most attractive segment. It therefore becomes your ‘target segment’ (you can have more than one) So now ALL of your MARKET ACTIVITIES should be completely focused on this target segment … i.e. EVERYTHING THAT YOU DO FROM NOW ON … Core Competencies 1. Core Competencies are those “success criteria” that you must have in order to succeed in the offshore market. 2. Your firm may already ‘have’ them or can ‘acquire’ them Examples: Apple in design 3M in ‘innovation’ Honda in motors and power trains Intel in semiconductors Amazon in online business model(s) McDonalds in ‘localisation’ Tesla in the design of high performance / efficient battery power Strategy Formulation 1. How are you going to compete? - beware of just exporting ‘domestic’ CA! (‘The Great Australian Pie Company’) 2. Key local competitors and how they compete? - may be Government affiliates – e.g. China ‘SoE’s 3. How are you going to build it? - McDonald’s 4. Can you make it sustainable? - ‘Nike’s repeated reformulation of their business model How Do You Evaluate and then Build Competitive Advantage? 1. Use market research to identify the key customer ‘buyer criteria’ (the factors that they consider in making a ‘buy’ decision) this is what we call the “buyer criteria” 2. Also, get the customers to ‘weight’ their buyer criteria (degree of importance of each factor). This is what we call the “buyer hierarchy”

Evaluating Competitive Advantage 3. Then get them to tell you the names of the other suppliers they would consider buying the car from … say they mention firms A, B and C 4. Ask them to rate / evaluate their ‘buyer criteria’ against each of the competitor offers, out of 10 (1 being low, 10 being high) 5. Construct a ‘differential / importance matrix’ to show this information 6. Now consider the most effective offer that you can make to potential customers … 7. Validate it against the competitive offers … 8. Build it / Test it / Launch it ….

International Product Markets Typically, there are 5 forms of development (usually starting in ‘developed’ markets …… then to ‘developing’ and then ‘emerging’ markets):-

1a - “Waterfall effect” – ‘Zara’ … 1b - “Shower effect” - new (say, anti-malarial) vaccines … 2. Local innovation – ‘Amazon’ ecommerce model 3. International involvement - local product becomes an ‘overseas Dreamliner’

opportunity’ – ‘Boeing

4. Mature local market – so set up overseas production and marketing High Speed Trains China … 5. Worldwide imitation – replacement export markets – ‘Cola’ wars …. ‘Mecca Cola’

Redefining the Product Remember that IN ALMOST EVERY CASE your product will need to adapt in some way for the overseas market: Here are some examples …. - Cars (left / right hand drive, emission control specs) - Clothes (sizes of … and size labelling) - Books (language) - Medical / Legal (local ‘certification’) - Engineering (specifications and safety standards) - Labels (ingredients – regulations vary in each country) - Electrical (different voltage, plug ‘pin’ configurations) - Food (tastes Product Life Cycle Offensive and Defensive Marketing Strategies

Marketing Strategy Considerations 1. Deterrence Strategies - Deterrence is a battle won in the minds of the enemy. You convince the competitor that it would be prudent to keep out of your markets. 2. Pre-emptive strike - Attack before you are attacked. 3. Frontal Attack - A direct head-on confrontation. 4. Flanking Attack - Attack the competitor’s flank. 5. Alliance Strategies - The use of alliances and partnerships to build strength and stabilize situations. 6. Position Defence - The erection of fortifications.

7. Mobile defence - Constantly changing positions. 8. Encirclement strategy - Envelop the opponents position 9. Counter-offensive - When you are under attack, launch a counter-offensive at the attacker’s weak point. 10. Strategic withdrawal - Retreat and regroup so you can live to fight another day. 11. Flank positioning - Strengthen your flank. 12. Leapfrog strategy - Avoid confrontation by bypassing competitive forces. Value Chain

Management Expertise / Experience What ‘specific’ skills and experience sets does your management team need to be successful in the export project? 1. Define the needs of each category carefully 2. Measure what skills / experience the team has at present 3. Compare (1) and (2) above 4. If there are ‘gaps’, explain how you will ‘fill’ them … Business Objectives Objectives, goals or targets are set in 4 main categories and need to be specific for specific periods – typically years 1, 2 and 3 of the plan: 1. Finance – $ profit and quality of profit (e.g. RoA) for (say) - Y’s 1, 2 and 3 2. Marketing – target segments, products needed, gross margins needed - Y’s 1,2 & 3 3. Operations – cost to income ratio (as a %) - Y’s 1, 2 and 3

4. People – key experience, expertise needed in specific areas - Y’s 1, 2 and 3 (senior management only – find, recruit, induct, train, reward, develop) International Planning Implementation, Management and Control This is all about how much work you need to do (remember! - 1% inspiration / 99% perspiration) This is the most difficult part of the plan to get right … Most firms do this …… badly! Learn the Following Key Points • • • •

1. The ‘Key Learning Points’ of the International Marketing Planning Tools (there are 6 of them …) 2. Theory of Internationalisation 3. How to draw (and explain) the ‘Strategic Planning and Market Schematic’ Models 4. Marketing Plan implementation, control and management Additional Slides The 5 Tasks of Strategic Management

Major Mistakes International Firms Often Make 1. Lack of market assessment and detailed analysis ... (“China is the biggest market, so we must be there”) 2. Plans not integrated to ‘fit’ the firm’s hierarchy / culture (1% inspiration, 99% perspiration – Telstra Asia in 1990’s) 3. Planning Content V’s Process

(Mongolian Gov’t negotiations with Rio Tinto - ‘Oyu Tolgoi’ - “it can’t be all that hard!” – took 7yrs) 4. Lack of understanding of creating business “relationships” (connections / “Guanxi” in China) 5. Proactive and adaptive strategies (Toyota’s first manufacturing operation in USA) Important International Strategy Considerations 1. local to global needs – anti malarial vaccine 2. independence to alliances – risk management, costs 3. quantum leaps in customer expectations – Hungary Telecom 4. protected to ‘open’ markets – trade barriers falling 5. management expertise / experience – are staff good enough for international operations? 6. structure of world trade – trade imbalances, reactions – short / long 7. economic cycles – “global financial crisis” - catches everyone 8. regional trade agreements – Oz’ with Japan, China and Sth Korea 9. “fads and fashions” – ‘Pokémon Go’ Using the G.E./McKinsey Matrix

1. Finalise the categories in both ‘business strengths’ and ‘industry attractiveness’ 2. ‘Weight’ each criteria (give each a mathematical degree of importance – usually /100 or 1.00) 3. ‘Score’ business strengths for each market /100 or 1.00 (they may be the same for different markets) 4. ‘Score’ industry attractiveness for each market /100 or 1.00 5. Multiply each score by its weight for each category … 6. Add totals for “Business Strength” and “Industry Attractiveness” for each market 7. Plot each market on ‘X’ and ‘Y’ axis …… (over) Value Chain You can also use it to evaluate total increment costs, margin and price (= value creation) 1. Evaluate project economics: - new coal mine in Mongolia (mine, transport, distribute, sell) - build cars for Asia (raw mats, factory, distribution, sell, service) - food sourcing (harvest, package, transport, distribution, stock, sell)

2. Evaluate international value chain options - e.g. ‘outsourcing’ - cost / quality / effectiveness The Risk Management Process 1. Identify the Risks - what can happen? how can it happen? 2. Analyze the Risks - controls? likelihood? consequences? level of risk? 3. Evaluate the Risks - evaluate the risks; rank the risks 4. Manage the Risks - options? best response? make plans, implement 5. Regularly review the above steps - at least every 6 months Risk Consequence Scale

Lecture 2(b) RESEARCHING INTERNATIONAL MARKETS What is International Market Research? The process that you set up to gather, analyse and evaluate information about ALL ASPECTS of your international plans and operations and that enables you to make recommendations about what actions you should take.

International market research is therefore (like domestic market research) involved in EVERY ASPECT of STRATEGY and MARKET PLAN DEVELOPMENT, IMPLEMENTATION, MANAGEMENT and PLAN REVIEW. Why Is It Important? To do anything – you need information … To build and operate an international business venture, you clearly need a great deal of information: - Which markets are (most) attractive? - What type of business model is required? - What positioning in those markets? - What strategy / competitive advantage? - What marketing plan (components)? - How to implement / manage the plan? - How to remain competitive and profitable? International Market Research is therefore about how to obtain and use all this information The International Marketing Research Process (there are 9 key steps) 1. Use the ‘market place schematic’ to consider all the information groups / sub-groups … that you require … over 2. After you’ve done this, consider the ‘types’ of information that you require (secondary / primary) and how to get it 3. Build a market research plan (details of what, how, when) (always get professional MR people to do this with you) 4. Consider the time needed and budget required for the plan (note the ‘zero-base’ aspects 5. Get the research plan approved (approval gets commitment to the budget and timeline) 6. Implement the research plan and manage the project (this is where mistakes will be made) 7. Evaluate / analyse the information (you may need to run ‘sensitivity scenarios’) 8. Prepare recommendations (always relate these to the research objectives) 9. Use the information to build a detailed business plan of preparing this costing) The External Environment Political – ‘structure’ / stability / attitude to FDI / incentives - Greece / Myanmar / North Korea / Syria Legal – ‘system’ / transparency / enforcement / access - time - China / Singapore

Economic – ‘cycle stage’ / aggregates / government involvement - Russia / Japan Cultural – how business is done / key customer issues - Saudi Arabia / Switzerland Social – ‘society structure – tribes’ / current issues / impacts - Rwanda (Tutsi / Hutu) / India (Caste System) Technological – banking system / infrastructure / reliability - Laos / UK Possible / ‘Target’ Customers? 1. Strategic group map(s) of possible markets? 2. Profitable positions? 3. Create market segments 4. Segmentation analysis? 5. = target segment(s)? 6. Marketing plan elements required for target segments? The Market Place – Research Decisions How do (target market) customers buy the p/s? - physical / online – both … What facilities are required? - retail / web / delivery – others … Interface(s) required? - people (skills) / systems / support – types … Logistics issues? - p/s supply / stock / inventory management … Others - service / repair & maintenance Competitor Analysis - Research Decisions Strategic ‘group’ map (perceptual / positioning map not all ‘market’ competitors compete with each other Identify key competitors only those in – or likely to be in your ‘group’ How do they compete (buyer criteria / hierarchy)?

this is very important research – surveys required Evaluate competitive advantage use ‘differential importance matrix’ Consider competitive strategy - evaluate attack / defensive strategies Your Business – Research Decisions The information you need to evaluate and build your business model and compete (successfully) … All the product / service issues / insights All the distribution issues / insights All the pricing issues / insights All the promotion / positioning issues / insights Key roles / skills / experience Financial evaluation criteria...