Global marketing - questions of choice
Outline the five main selection criteria for evaluating foreign distributors.
1. Financial and company strengths (financial soundness, ability to finance initial sales, raise additional funding and provide adequate promotion funds, ability to maintain inventory and form longer marketing plans, quality of management team, reputation). 2. Product factors (quality and sophistication of product lines, product complementarity - whether there is synergy or conflict - familiarity with the product, technical know-how, patent security). 3. Marketing skills (marketing management expertise and sophistication, ability to provide adequate geographic coverage of markets, experience with target customers, customer service, market share and on-time deliveries). 4. Commitment (willingness to invest in sales training, commitment to achieving minimum sales targets, willing to drop competing products and commit advertising resources, undivided attention to product, willing to keep sufficient inventory). 5. Facilitating factors (connections with influential people - networks, working experience/relationships with other manufacturers - exporters, track records with past suppliers, proficiency in English)
Discuss the concept of globalization and outline the main forces driving global integration and market responsiveness.
1. Glocalization (the development/selling of products/services intended for the global market, but adapted to local cultures and behaviors. The concept of 'thin globally, act locally' - standardizing and localizing - is key. Is made up of global integration and market responsiveness. 2. Global integration (recognizing similarities between international markets and integrating them into the global strategy). Main forces driving: - Removal of trade barriers (reduces time, cost and complexity in trading across boundaries). - Global customers (customers become global and demand global services to their needs). - Relationship management and networks (the market becomes more global and therefore, networks of relationships with external organizations like customers and business alliances become more important). - Standardized worldwide technology (gaining scale and scope in production, meaning worldwide availability of products can grow). - Worldwide markets (and world demographics, both emerging meaning that products can be sold to the 'same' target group worldwide). - Global village (the world shares cultural symbols and similar products can be sold in almost all countries). - Cultural homogenization (emergence of worldwide convergence of markets and a global marketplace). - Global cost drivers (like economies of scale). 3. Market responsiveness (responding to each market's needs and wants. Main forces driving: - Cultural differences (cultural diversity means difficulties in international negotiations and marketing - markets are people, not product, and there is no 'global people'). - Regionalism/protectionism (grouping countries into regional clusters functioning as trading blocs, like the EU). - The deglobalization trend (a return to old values, promoting barriers of globalization - like 'McDonaldization' which describes US cultural imperialism).
Outline Hollensen's three stages model for understanding the development of a firm's international competitiveness.
1. Macro-level - analysis of national competitiveness. Specific conditions can explain why some nations are more competitive than others in certain industries. The characteristics of the home nation play a significant role in the firm's international success. The home base is an important determinant of the firm's strengths and weaknesses relative to foreign rivals (and it's important to understand the home base of these as well). There are a few key aspects determining the national competitiveness: - Factor conditions (like human/natural resources). - Demand conditions (the presence of home demand, market size, rate of growth etc.). - Related and supporting industries (like how some kinds of workforces may be attracted to a specific area) - Firm strategy, structure and rivalry (the ways companies are organized/managed). - The government (financing needed infrastructure, encouraging development of industries). - Chance (random events). 2. Meso-level - competitive analys of an industry, aiming to find where the company can best defend itself and influence balance of power. The state of competition and profit potential in an industry is rooted in the economic structure. The state of competition depends on five forces determining the profit potential of the industry: - Market competitors (intensity of rivalry). - Bargaining power of suppliers (when supply is dominated by a few companies, they have unique product or don't find the market to be important, their bargaining power increases). - Bargaining power of buyers (when they're concentrated or purchase in large volumes, products are undifferentiated or when there are many sellers). - Threat of substitutes (can reduce industry attractiveness since it constrains price levels. When buyer is willing to substitute/when substitute has high performance or low price, the threat increases). - New entrants (if there are barriers, market entry may be unattractive to new entrants). 3. Micro-level - analysis of the value chain, looking at customer perceived value and the competitive triangle. - The competitive triangle is made up of customers, firms and competitors. The firm or competitor 'wins' the customer's favor depending on the perceived value offered, compared to the relative costs between the firm and competitor. - Customer perceived value is the customer's overall evaluation of a product. The better the relation between perceived value and perceived sacrifice (the relative cost - what the customer will pay), the better the competitiveness. If the benefits exceed cost, the consumer will consider purchase.
Discuss Hofstede's (1988) model of national cultures and its relevance to global marketing.
1. Power distance (whether people accept inequalities in power. In high power distance societies, there are big gaps between weak and powerful, management is autocratic ad lower-level employees have little autonomy. E.g. Malaysia, Philippines. In low power distance societies, gaps are small, firms have flat organizational structures with equal relations, like Sweden and Norway with socioeconomic equality insurance that has been institutionalized). 2. Uncertainty avoidance (whether people tolerate risk and uncertainty in their lives. In high uncertainty avoidance societies, there are institutions to minimize risk and ensure security, firms emphasize stable careers and decisions are made slowly. E.g. Belgium, France. In low uncertainty avoidance societies, managers are entrepreneurial and risk taking, employees are comfortable with changing jobs and decisions are made quickly. E.g. Ireland, US). 3. Individualism/collectivism (whether a person primarily functions as an individual or as member of a group. In individualistic societies, people emphasize their self-interest, compete for resources and are rewarded for 'winning. E.g. UK, US. In collectivistic societies, ties between people are important, business is conducted in the group context, conformity and compromise help maintain harmony. E.g. China, Japan). 4. Masculinity/femininity (whether the society is oriented towards traditional male or female values. In masculine cultures, competitiveness, ambition and success is important, focus is on earning money and being successful. E.g. Australia. In feminine cultures, nurturing roles, interdependence and caring for less fortunate is key. E.g. Sweden where welfare systems are highly developed and education subsidized). 5. Long-term/short-term orientation (the degree to which people defer gratification to achieve long-term success. Long-term oriented cultures emphasize long view in planning and living, focusing on the future far ahead. E.g. China, Japan. Short-term oriented cultures are common in the US and Western countries). 6. Indulgence/restraint (whether people are raised to indulge themselves in whatever they please, or be restraint). This is relevant to global marketing because it can explain differences in consumption behavior and product use, differences in cross-cultural negotiation practices (as people interpret things differently), issues of business ethics (like bribery and gift giving). It also explains how people from different cultures require different 'amounts' of information, emphasize relationship building or 'getting down to business' and for managers lacking time to obtain comprehensive knowledge of a culture, familiarizing oneself with these cultural differentiators is useful.
Identify the proactive and reactive motives of firm internationalization, and barriers that may hinder internationalization initiation.
1. Proactive motives. Firm's interests in exploiting competences and market possibilities. There are a few different ones: - Profit/growth goals (ambition to make a profit). - Managerial urge (manager's urge towards global marketing/expansion and previous international experience). - Technology competence/unique product (producing something not widely available, something superior or having unique competencies pose good reasons for exporting). - Foreign market opportunities/market information (reasons to respond to opportunities and information about markets giving the firm an advantage). - Economies of scale (ability to reduce costs of production). - Tax and other benefits (allowing the firm to offer products at a lower cost or profit more). 2. Reactive motives. Firm's reaction to pressures/threats. There are a few different ones: - Competitive pressures (if competitors are internationalizing, they may take control over foreign market or increase domestic market share due to economies of scale). - Small/saturated domestic market (difficulties achieving economies of scale or products declining in life cycle). - Overproduction/excess capacity (inventory above desired levels due to lower domestic sales triggers export via short-term price cuts). - Unsolicited foreign orders (enquiries from foreign markets due to advertising in magazines/exhibitions). - Extend sales of seasonal products (international markets may give a more stable demand over the year is seasons overlap/are longer). - Proximity to international customers (short distance may not even be considered international, rather an extension of the domestic activities. Like Germany - Austria). 3. Barriers to internationalization initiation. - Insufficient knowledge. - Lack of foreign market connections. - Lack of export commitment. - Lack of capital. - Lack of productive capacity. - Lack of foreign channels of distribution. - Management emphasis on developing domestic markets. - Cost escalation due to high manufacturing, distribution and financing expenditure.
Outline the four steps in the systematic international market segmentation process.
1. Selection of the relevant segmentation criteria (influence by both firm and environment). Criteria is usually measurability (if the size and purchasing power can be measured) (if the segments can be reached and served effectively), substantiality/profitability (if the segments are large and profitable) and actionability (if the organization has the resources to 'make things happen'). 2. Development of appropriate segments (the bases of international market segmentation is created). Usually both general characteristics (like geographic, language, political factors, demography, economy, technology, religion and education) which have a high degree of measurability, accessibility and actionability, and specific characteristics (like culture, lifestyle, personality, attitudes and taste) which are harder to measure but usually very important. 3. Screening of segments to narrow down the list of markets/countries, and choice of target markets/countries (two steps: preliminary screening, and fine-grain screening). In the preliminary screening, macro-oriented methods are used to screen the market and look at political stability, legal framework, export and FDI policies, economic growth etc. (like using a PESTEL analysis). In the fine-grained screening, the firm tries to match market opportunities to firm strengths. Market attractiveness is assessed alongside competitive strength (like the market attractiveness is high in buying power, the competitive strength fitting product to market demands is important). The goal is to grow in countries high in both competitive strength and market attractiveness. 4. Micro-segmentation: develop segments in each qualified country or across countries (once prime markets have been identified, they are segmented across variables like demographics, lifestyles, consumer motivations and buyer behavior) Segmentation is an act of balancing. Geographic segmentation by country is easy (and common), but relying on it alone may lead to a fragmented strategy with national stereotyping. It may be useful to use cluster analysis to identify cross-national segments that can be marketed to in similar ways (for instance EU that can be divided into clusters like Scandinavia, former Yugoslavia and the English islands). Once a firm chooses the target market, the next step is to decide what to export and thereafter how many markets to enter, when and in what sequence.
Compare and contrast the models of internationalization: the Uppsala internationalization model, the Transaction cost approach, the Network approach and Born globals.
1. The Uppsala internationalization model.
Compare the Uppsala internationalization model, the TCA model and the Network model.
1. The unit of analysis - UM looks at the firm, TCA at the transactions and NM at the inter-organizational relationships between firms. 2. The basic assumption - UM beliefs internationalization is slow, with little influence from competitive marketing factors, and that the internationalization process is gradual, learning-by-doing. TCA means that there are frictions between buyers and sellers, mainly caused by opportunistic behavior. NM means that the 'glue' keeping networks together is based on economic, legal and personal ties (with managers' personal influence being strongest in the beginning and later on, routines and systems are more important). 3. The explanatory variables affecting the development - UM means the firm's knowledge, market commitment and psychological distance between countries is key while TCA means the transactional difficulties and costs increase (which is influenced by uncertainty and frequency of transactions and assets). NM means the individual firms dependency on resources controlled by others, and the emerge of business networks where frequent coordination between actors and conditions change quickly, is key. 4. The normative implications for international marketers - in UM, the idea is that additional market commitment should be in small, incremental steps (choosing a new geographic market with a small psychological distance and entry modes with small risks). In TCA, due to the high transaction costs, firms should internalize activities (implement global marketing and wholly-owned subsidiaries) and select entry modes where transaction costs are minimized. The relationships of firms in domestic networks can be used as bridges to networks in other countries, which can be important in the initial step abroad and the subsequent entry of new markets.
How can Born global be assessed to the other models, especially the Uppsala internationalization model?
Born globals make up a new research field within marketing and the basis of them is that they possess unique assets, focus on narrow global market segments, are strongly customer-oriented and that the entrepreneur's vision and competence is key. Being global is a necessity to the firm which is pushed into globalization by local customers and national segments being too small. Can sustain immediate global reach thanks to visions and competences of their competitive advantage. The major difference between this model and the UM is that when the born global decides to internationalize, it sells to home market and global markets at the same time - it doesn't start with a specific market (with a close psychological distance) and the gradually increase distance.
What is culture, which are its different elements and how should these elements be considered in international marketing?
Culture is the collective programming of the mind which distinguishes members of one human group form another. It is learned ways a society understands, decides and communicates in. A few key points is that it is learned, interrelated and shared. Different elements: 1. Language (both verbal and non-verbal). 2. Manners/customs (key to avoiding misunderstandings in negotiations). 3. Technology/material culture (how a society organizes economic activities and what kind of financial, social and marketing infrastructure that is available - can people watch the same TV shows all over the world?). 4. Social institutions (business, family, political class etc. which influences people's behaviors and may function as reference groups). 5. Education (both the education of the new generation in culture/tradition, and particular discipline study). 6. Values/attitudes (right and wrong, important, desirable etc.) 7. Aesthetics (attitudes towards beauty, 'good' music/art etc.). 8. Religion. It's important to consider these elements because it determines the success or failure of international business. Take for instance how language is key to culture as it's important in information-gathering, provides access to local societies, helps communication within organizations and helps interpret contexts - companies need to understand language to communicate effectively. An example of not considering culture is the blunder of Pepsi - trying to say 'Come alive with Pepsi' in Taiwan but accidentally translating it to 'Pepsi brings your ancestors back from the dead'.
Discuss Born globals.
Firms that from 'birth' globalizes rapidly without any preceding long-term internationalization period. Small, tech oriented companies operating internationally since day one. Are usually SME's with less than 500 employees and sales of less than $100 million annually. Born global rely on technology to develop unique offerings and are managed by entrepreneurs with visions, viewing he world as a single marketplace. Are usually born on the Internet and are supported by factors like niche markets, advances in technology production, flexibility of SME's, global networks and advances in speed of information technology.
Discuss the concept of high- and low-context cultures (Hall, 1960) and its relevance to global marketing.
Low-context cultures: individualistic cultures relying on explicit explanations, spoken words and written language to understand meaning. These cultures emphasize clear, efficient, logical messages and communication is direct. Agreements are concluded with specific, legal contracts. E.g. Western Europe and the US. High-context cultures: collectivistic cultures emphasizing nonverbal/indirect language, interpreting surroundings to understand meaning. Communication aims to promote smooth, harmonious relationships and there is a preference for polite, 'face-saving' communication focused on a mutual sense of care and respect for others. Care is taken not to embarrass others and contracts may be made through handshakes. E.g. Japan, China, Saudi Arabia. This is relevant to global marketing because what somethings means in a low-context culture may not be the same as in a high-context culture. Things are interpreted differently and misunderstandings occur easily. Take for instance that in low-context culture, there is a preference for informal handshakes, time is linear, exact and promptness is valued ('time is money'), confrontation of conflict is valued, people strive for independence and gender equality, challenge authority, feel they control their own destiny, and get down to business quickly. In high-context cultures, there is instead a preference for formal hugs, bows and handshakes, time is elastic and needed or relationships and enjoyment, group conformity and harmony is valued, authority and elderly are respected, gender roles are strong, society hierarchical and individuals accept their destiny. People are 'relationship-oriented) - first you make a friend, then a deal, and deal aren't only made on the basis of best price/product but also on the person being deemed most trustworthy.
Discuss the transaction cost analysis model.
The assumption is that firms internalize to minimize transaction costs, and will continue to do so as long as it's more cost efficient than externalizing (to licensor, agents etc.). Transaction costs emerge when markets fail to operate under the requirements of perfect competition (friction free). However, rationality is bounded (uncertainty concerning future circumstances in the environment means perfect information to make decisions isn't available) and there is usually friction between buyer and seller than results in costs. The friction can be explained by opportunistic behavior (characterized by self-interest in the form of misleading, distorting, disguising and confusing. To protect oneself against these, firms may use safeguards or governance structures, like legal contracts). When frictions between buyer and seller emerge, so does transaction costs. The idea of the TCA is that firms internalize to reduce costs and if the friction between buyer and seller is too high (too costly), the firm should internalize (with own subsidiaries) instead of externalizing (with importers, agents etc.). Hence, costs determine entry mode. The firm tries to reduce several costs: ex ante (search and contracting costs) and ex post (monitoring and enforcement costs). The firm then chooses a solution that minimizes the sum of these costs. TCA has been criticized for excluding international costs, having a narrow assumption of human nature (and complex business relationships), being questionably relevant for SME's (as these don't really have the choice of letting the transaction costs determine entry mode) and understanding the importance of product costs (and inherent R&D costs).
Discuss the Uppsala internationalization model.
The assumption is that internationalization is a slow, time consuming, iterative process. Focus is on gaining market knowledge and companies begin their internationalization by exporting to nearby markets (that are psychologically close) and gradually penetrate more distant (psychologically as well) markets. Companies enter through export, rarely through sales organizations or subsidiaries. There are four steps: 1. No regular export activity (only sporadically). 2. Export via independent agents. 3. Establishment of a foreign sales subsidiary. 4. Foreign production/manufacturing units established. There are a few firms that can make exceptions to these steps. If they have large resources they make internationalize through fewer, bigger steps, and when market conditions are stable and homogenous, relevant market knowledge can be gained in other ways than through experience and when the firm has substantial experience from similar markets, it may be able to generalize. The model has been criticized for being too deterministic, not taking the interdependencies among countries into account and not having empirical evidence that it can be applied to service industries. Also, the internationalization process has speeded up in the last years and firms can leapfrog stages (enter distant markets first, or establish a FDI without previous experience).
Discuss the Network model.
The individual firm is dependent on resources controlled by other firms, and the 'glue' keeping relationships together is based on technical, economic, legal and personal ties. The networks are organized by the actors' willingness to engage in exchange relationships (meaning they can all break the relationships off). The relationships a firm has in its domestic networks can be used as bridges to networks in other countries, and business networks (business actors linked to each other through relationships) are key. The networks' ties can influence market selection, foreign market entry and choice of exchange partner (like how entrepreneurs use business network partners at the initial trigger for foreign-market selection). Usually, personal relationships are key in the beginning and later on, routines and systems are.
Discuss the major channel decisions in global marketing strategy and the factors influencing these decisions.
The major channel decisions are: 1. Decisions concerning the structure of the channel (types of intermediary, coverage, length, control resources a degree of integration). 2. Managing and controls the distribution channels (screening and selecting intermediaries, contracting, motivating, controlling and termination). 3. Managing logistics (movement of goods through the channel systems - handling orders, transportation and storehouses). The factors influencing these decisions are: 1. Customer characteristics (keystone in all channel designs - shopping and usage habits, geographics). 2. Nature of product (important for distribution decision - for low-priced convenience product, an intensive distribution network is important but for a prestigious product, distribution channels could be more narrow). 3. Nature of demand/location (the perception consumers have about the products, as well as geography development of transportation infrastructure, can influence distribution). 4. Competition (channels used by competitors are important since consumers expect to find particular products in particular outlets). 5. Legal regulations/local business practices (laws may rule out some channels - like in Sweden where alcohol can only be sold in state-owned outlets. Local business practices may also interfere with efficiency, forcing manufacturers to employ longer distribution channels - like in the Japanese market where firms forge tight collaborations, only buying form each other).
Explain how Hofstede's model of national cultures can be useful for understanding cross-cultural negotiation practices across different countries and cultural settings.
The model is useful for understanding cross-cultural negotiation practices in several ways: - Ethical principles aren't the same everywhere and concepts of right and wrong are culture bound. - Cultures can also be either rule-based (like Western countries, where bargaining is key and rules are logical and valid - like contracts) or relationship based in negotiations (loyalty, harmony and trust is important to build relations and bargaining may be inappropriate). - One needs to beware of stereotypes, have good communication skills, be perceptive to different situations, show tolerance and be flexible (like understanding how people from different cultures require different 'amounts' of information). Other important aspects are the negotiation process and the gap analysis. The negotiation process is influenced by cultural distance between buyer and seller, both on non-task related interactions (status distinction, impression formation accuracy and interpersonal attraction) and on task-related interactions (exchange of information, persuasion and bargaining strategy, concession making, agreement and negotiation outcome). The of non-task and task related interactions make up the cultural 'distance' between buyer and seller, which affects the negotiation process. The gap analysis looks at the gaps between national cultures and the differens in cultural dimensions that are significant to the firm's international negotiation strategies. Apart from the main gap of cultural distance between sellers' and buyers' national/organizational cultures, thee cultures also lead to individual seller/buyer behaviors which creates another gap. And to close that one, market research and education of salespeople is key.
