INTERNATIONAL MARKETING

Krista Duniach Universit dAngers krista.duniach@univ-angers.fr

BIBLIOGRAPHY
Czinkota and Ronkainen (2002), International Marketing, Thomson South-Western. De Mooij (2003), Global Marketing and Advertising, Understanding Global Paradoxes, Sage. Keegan and Green (2005), Global Marketing, Prentice Hall. Kotler and Armstrong (2006), Principles of Marketing, Prentice Hall. Prime et Usunier (2004), Marketing international, Dveloppement des marchs et management interculturel, Vuibert. Usunier (2000), Marketing across Cultures, Prentice Hall. Periodicals: MOCI, HBR, JIBS, JM, JMR

Introduction
What is international business?
Wide range of activities involved in conducting business transactions across national boundaries Described as being heterogeneous, universal and sequential Comprehensive approach to operations of both large and small firms engaged in business abroad Concerns all activities of the firm (selling, procurement, outsourcing) About seizing global opportunities (market expansion or diversification) Driving forces (regional economic agreements, converging needs and wants, communication improvements, quality, leverage) and restraining forces (management myopia, corporate culture, national controls, globaphobia)

Orientations: Export, Internationalization, Globalization

Introduction
EPRG Model Ethnocentric: everything is centered on the domestic market. Polycentric: several important foreign markets exist. Regiocentric: the market is composed of several large economic regions. Geocentric: the world is one large global market.

EPRG Model - Characteristics

Ethnocentric Approach International operations are secondary Centered on the domestic market Searching for identical segments in foreign markets Polycentric Each country is relatively independent Each market is unique Taking into consideration differences in foreign markets Subsidiary in each country Division for each zone Geocentric The world is one common market Global vision of the world Unifying differences in the world market World headquarters Matrix structure

Vision Priority

Planning center National headquarters Structure International division

EPRG Model - Characteristics

Ethnocentric Staff Marketing strategy Management style Production Polycentric Geocentric Most qualified Extension, Adaptation, Creation Integrated and interactive Low-cost sources of supply Strategic alliances World market share Citizens from the Citizens from domestic market each market Extension Adaptation

Centralized Domestic

Decentralized Local

Partnerships Performance measures

Agent, licensing

Joint-ventures

Domestic market Local market share share

Introduction
What is marketing? Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others. (Kotler)

Process, exchange, value

Marketing process
Create value for customers and build customer relationships Capture value from customers in return

Understand the marketplace and customer needs and wants

Design a customerdriven marketing strategy

Construct a marketing program that delivers superior value

Build profitable relationships and create customer satisfaction

Capture value from customers to create profits and customer quality

Marketing technology

Global markets

Ethics and social responsibility

Introduction
What is international marketing?
transactions across national borders to create exchanges that satisfy the objectives of individuals and organizations (Czinkota and Ronkainen) - International marketing focuses its resources on global market opportunities and threats (Keegan and Green) - International marketing is the motor of the internationalization process of the firm (Usunier) - It is a tool used to obtain improvement of the firms position in the global market - Strategy and action, global and local

- International marketing is the process of planning and conducting

Introduction
International Marketing Decisions
Deciding whether to go abroad Deciding which markets to enter Deciding how to enter the market Deciding on the marketing program Deciding on the marketing organization

Introduction
What are the similarities and differences between international marketing and domestic marketing?
Similarities: basic concepts, practices and tools are almost identical, key success factors are the same Differences: more strategic, more variables, more complex, cultural differences, legal constraints, information sources, managing distances, entry mode choice

Introduction
International marketing concept
Export marketing Global marketing

Inter-cultural, multi-cultural marketing

Course Outline
Culture and international marketing International marketing research International marketing strategy and programs

Chapter 1 Culture and international marketing

Culture and international marketing

Concepts of culture Dimensions and models of culture Examples and international marketing consequences

What is culture?
Culture is the integrated sum total of learned behavioral traits that are shared by members of a society (Hoebel) Culture is the entirety of societal knowledge, norms and values (Antonides and Van Raaij) Culture is the collective mental programming of the people in an environment. Culture is not a characteristic of individuals; it encompasses a number of people who were conditioned by the same education and life experience (Hofstede)

Culture both affects and describes human behavior, it is essential in international marketing

Fundamentals of culture
Culture is a total pattern of behavior that is consistent and compatible in its components. It is not a collection of random behaviors Culture is a learned behavior. It is not biologically transmitted. It depends on environment, not heredity. Culture is behavior that is shared by a group of people, a society. It is a distinctive way of life.

Culture vs. personality

Personality is the individuals unique personal set of mental programs that he/she does not share with any other human being. Culture is what members of a group have in common. It is the glue that binds groups together (De Mooij)
Human nature depends on culture: ideas, values, acts, emotions are cultural products. Cultural patterns help people to live together in a society.

Manifestations of culture
Symbols Heroes Rituals Values and Norms

Expressions of culture

Symbols
Symbols are words, gestures, pictures, or objects that carry a particular meaning recognized only by those who share a culture. This is the most superficial manifestation of culture. New symbols are easily developed and old ones quickly disappear. Symbols from one cultural group are regularly copied by others.

Heroes
Heroes are people, alive or dead, real or imaginary, who possess characteristics that are highly prized in a society. They serve as role models for behavior. They can become globally known, but their stories often become local.

Rituals
Rituals are the collective activities considered socially essential within a culture. They are carried out for their own sake. They are easily observed, but not always understood.

Values
Values are at the core of culture. Values are stable beliefs regarding desired behavior or end states. They often have a religious, ideological or humanistic background. Goals are derived from values. Values are among the first things children learn, not consciously but implicitly. Core values are resistant to globalization; they vary across cultures and are not likely to change frequently.

Norms
Norms and values are part of the non-material culture. Norms are beliefs regarding how to behave and how not to behave (dos and donts). People differ in the extent to which they accept and comply with norms. They create expectations and criteria regarding the conduct of others.

Explicit vs. implicit culture

Explicit culture: languages, behavior, know-how, institutions (directly observable) Implicit culture: moral values, learning process, beliefs and representations (subconscious)

According to Hoebel
There are 3 types of cultural norms in terms of behavior:
10% of norms are technical: explicit, logical and transferable; written norms of a society (laws, technical manuals, rules, etc) 30% of norms are formal: explicit, moral and transmissible; traditions of a culture; learned through education (manners, courtesy) 60% of norms are informal: implicit, instinctive and imitated; sunken part of the iceberg (facial expressions, body language, cultural perspective on time and space)

How do these cultural norms influence international business and marketing?

Two levels of cultural diversity in international business

External cultural diversity Cultural determinants influencing purchasing and consumption behaviors (Who buys? What? Where? How? Why?) Cultural determinants influencing negotiations (relationships with suppliers, buyers, partners) Internal cultural diversity Observed within all MNCs (identity and corporate culture) Cultural differences that affect the way subsidiaries work together

Four levels of culture in marketing

DOMINANT CULTURE

Non-material consumer culture

Material culture of products (market)

Non-material culture of the firm (corporate culture)

Transfer of culture
Two main cultural transfer processes: Socialization: transfer of culture to new generations; older generation to younger generation; education. Acculturation: transfer of culture to adults who have grown up in different cultures, who have been socialized in different cultures; ethnic minorities; multicultural societies.

Cultural transfer and change

SOCIALIZATION

Agents

LEARNING BY OBSERVATION

CULTURAL TRANSFER AND CHANGE, DYNAMIC PROCESS

Agents

ACCULTURATION

Agents involved in cultural transfer

Agents Parents Siblings Schools, teachers Friends Church Sport, clubs Mass media Age (years) 0 2 6 6 6 12 12 Most important values Obedience, cleanliness, honesty Responsibility, social recognition Ambition, capability, logical behavior Courage, social recognition Honesty, peace, salvation, forgiveness Ambition, courage Pleasure, intellect

Processes of cultural change

Socialization and acculturation usually imply a gradual cultural change because transfer agents tend to favor cultural continuity rather than jeopardize their powerful position. In contrast, innovative forces are less conservative and may challenge the status quo. 4 processes: cohort effects, age effects, democratization and exclusivation.

Cohort effects
Acceptance of new values and behaviors begins at a young age. These values and behaviors are retained over the years. They are spread in society because young people grow older and the old values gradually disappear with the extinction of the older cohorts. Implies a slow cultural change.

Age effect
Certain values or behaviors are associated with a particular age group. Behaviors are modified as age groups change. Age-bound consumer behavior. Possible reverse socialization.

Democratization
Cultural leveling or spreading Cultural differences across social classes decrease. Results from an increasing level of general welfare, the influence of mass media and the stress on the equality ideal. Mechanisms of democratization: trickle-down, trickle-up, trickle-across.

Exclusivation
Reverse of democratization Occurs less frequently Implies limited social spreading of values, goods and behavior. Cultural change is limited to a certain group (elite, leading edge).

Dimensions of culture
What makes one culture different from another culture? How can we compare cultures or cluster cultures according to behavioral characteristics?

Stereotypes vs. cultural dimensions Different cultures have different stereotypes of other cultures.
Ethnocentrism and SRC

Cultural dimension models

Hall High-context vs. low-context cultures Kluckhohn Relationship to nature Hofstede Five dimensions of culture

Halls cultural model

Focuses on communication patterns found within cultures Four essential dimensions in terms of communication patterns:
Context Time Space Information flow

High-context vs. low-context cultures

Low-context and high-context cultures

Low-context
Messages are explicit Words carry most of the information in communication (facts, data) Effective verbal communication is expected to be explicit, direct, and unambiguous

High-context
Less information is contained in the verbal part of the message Much more information resides in the context of communication (background, associations, symbols, basic values of the communicators) Verbal mode is only one part of communication, nonverbal is often seen as having greater importance
Degree of context of cultures: comparison of law (US and France)

Time
Different cultures have different concepts of time. This can explain differences in behavior. Dimensions of time:
Closure: a task must be completed, if not perceived as wasted Long-term vs. short-term thinking Orientation toward past, present or future Linear or circular (tangible or intangible) M-time and P-time Cause and effect Time as symbol (time is money, efficiency, waiting, discretionary time)

A few examples
Factors
Lawyers A persons word Responsibility for error Space Time Negotiations Competitive bidding Examples

High-context
Less important To be trusted

Low-context
Very important Get it in writing

Taken by the highest level Pushed to the lowest level People breathe on each other Polychronic, circular Are lengthy Infrequent People maintain a bubble of private space Monochronic, linear Proceed quickly Common

Japan, China, Middle East US, Germany, Switzerland

Kluckhohns cultural model

3 types of relationships between humanity and nature:
Mastery-over-nature (man is to conquer nature) Harmony-with-nature (man is to live in harmony with nature) Subjugation-to-nature (man is dominated by nature)

Further developed with: nature of people, duty, mode of activity, privacy of space, temporal orientation

Humanity and Nature

Mastery-over-nature -Humanity is separate from nature -Nature should be controlled -To move a mountain -Identification with nature -Nothing can be done to control nature Western world, North America Asia, Japan Africa, South America Harmony-with-nature -No distinction between humanity, nature and supernatural -Communion, exchange, subtle intimacy Subjugation-to-nature -People are dominated by nature -Supernatural forces play a dominant role in religion

Use in international marketing?

Hofstedes cultural model

Hofstedes 4D or 5D model Quantitative and longitudinal study of cultural differences between countries Why some concepts of motivation do not work in all countries in the same way Cultures Consequences and Cultures and Organizations: Software of the Mind Scores for each country explain why people and organizations in various countries differ, comparative data.

Reference in international business and international marketing

How do we measure cultural distance?

Geert Hofstedes Cultural Index
- National character survey - 116.000 IBM employees - 72 countries and 20 languages
Original scores for 56 countries, extended to nearly 90

Five different poles make up the cultural index: - Power distance - Uncertainty avoidance - Individualism - Masculinity - (Long term orientation)

5D Model
PDI 100 LTO 100 100 Work-related values to consumptionrelated values 100 IDV UAI

100 MAS

Power distance (PDI)

High PDI vs. Low PDI the extent to which less powerful members of a society accept and expect that power is distributed unequally Reflected in the values of both the less powerful and more powerful members of society Influences the way people accept and give authority Shows class or social structure Focuses on the degree of equality, or inequality, between people in the countrys society

Uncertainty avoidance (UAI)

High UAI vs. Low UAI the extent to which people feel threatened by uncertainty and ambiguity and try to avoid these situations Strong UAI = need for rules and formality to structure life, search for truth and belief in experts Conflict and competition are threatening Higher level of anxiety, show of emotions is accepted

Individualism (IDV)
Individualistic vs. Collectivistic people looking after themselves and their immediate family only, versus people belonging to in-groups that look after them in exchange for loyalty I-conscious and we-conscious Focuses on the degree the society reinforces individual or collective achievement and interpersonal relationships Distinguishes between societies where the group and being a member is important (collectiveness) and societies where the group is less important (individualism)

Masculinity (MAS)

Masculine vs. Feminine the dominant values in a masculine society are achievement and success; the dominant values in a feminine society are caring for others and quality of life Focuses on the degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, performance, control and power Shows the importance of status in societies Indicates the degree of gender differentiation and the importance of masculine values (assertiveness, money, material goods, success)

Long-term orientation (LTO)

Long-term vs. Short-term orientation Chinese value survey, Confucian dynamism the extent to which a society exhibits a pragmatic future-oriented perspective rather than a conventional historic or short-term point of view High LTO = perseverance, ordering relationships by status, thrift, sense of shame, family ties, long-term thinking, paternalism Focuses on the degree the society embraces, or does not embrace, longterm devotion to traditional, forward thinking values Indicates whether the country prescribes to the values of long-term commitments and respect for tradition

Examples of Hofstedes Dimensions

Some country examples

Country Australia Belgium Denmark PDI 36 65 18 UAI 51 94 23 IDV 90 75 74 MAS 61 54 16 LTO 31

France
Germany Great Britain India Italy Japan Netherlands Spain USA

68
35 35 77 50 54 38 57 40

86
65 35 40 75 92 53 86 46

71
67 89 48 76 46 80 51 91

43
66 66 56 70 95 14 42 62 29 80 44 31 25 61

World average

57

65

43

49

50

Comparison of cultural dimensions

More information on www.geert-hofstede.com

American culture
Classical dimensions: M-time culture, linear timepattern, low-context, low PDI, individualistic, high MAS, low UAI, short-term orientation Other dimensions: success, obsession with change (new and better), credit card culture, education for competitiveness, independence, ethnocentrism, strong role differentiation, innovativeness, creativity, private opinions expressed, education teaches students to be critical (ask why not how), man must conquer nature, (De Mooij)

Japanese culture
Classical dimensions: P-time culture, circular time concept, high-context, high PDI, collectivistic, masculine, strong UAI, long-term orientation Other dimensions: pressure to behave like neighbors, shame-based society, avoid jolting social harmony, dependence, private opinions not expressed, status is important (success) but avoid standing out in a crowd, cash culture, thrift and perseverance, strong role differentiation, education (how instead of why), education has an intrinsic value, obsession with cleanliness, harmony with nature (De Mooij)

Limits to Hofstedes model

Generalization, reductive, simplistic (unproven and unprovable, flawed assumptions, storytelling) Original objective: how values in the workplace are influenced by culture Three discrete cultures
Organizational Occupational National

Questionnaire quantitative data Differences in location intracultural differences, subcultures

Intracultural differences
Few cultures are homogeneous in terms of cultural traits and norms Consequence of globalization? Intracultural differences (nationality, religion, race, language or geographic areas) result in the emergence of distinct subcultures Existence of cross-cultural and intracultural differences: opportunities and threats

To summarize on culture
Culture is complex and multi-dimensional, but classification is important in business Cultural distance is essential in international marketing

Culture influences perceptions and drives how we communicate and what we communicate SRC and ethnocentrism can explain the failure of many companies in the international arena Acculturation (adjusting and adapting to a specific culture other than ones own) is one of the keys to success in international operations

How does culture affect international marketing?

Languages and the use of language in communicating, advertising, negotiating Marketing research is much more difficult to conduct from a methodological perspective Buying patterns and behaviors will vary in different cultural contexts Marketing mix will be perceived differently from one country to another Management styles will be directly related to culture

Marketing and cultural differences

Marketing area Consumer behavior Marketing research Global marketing strategy Segmentation & targeting Product policy Brand image Pricing policy Distribution channels Communication Advertising Sales Negotiation Source: Usunier Influence of cultural differences Decision-making, cross-cultural attitudes, local vs. global Cross-national equivalences Global strategy vs. customized strategy Inter-national (regional, global) vs. intra-national Adapt or standardize product attributes Brand perception, country of origin, made in Price-quality ratio, influence of price in decision-making Type of channel, distributor relationships Values, visions of the world, communication styles Advertising messages, symbols, adaptation of strategy Sales force management, PR, corruption, ethics Negotiation strategies, process, results, styles

Cultures consequences on international marketing

Marketing research (understanding consumers) Segmentation (classifying consumers) Product policy (satisfying consumers) Distribution channels (reaching consumers) Advertising (communicating with consumers)

Chapter 2 International Marketing Research

International marketing research

Review of marketing research techniques Specific problems in international markets

Review of marketing research techniques

General principles of marketing research Qualitative research Quantitative research

What is marketing research?

Marketing research is the link between the marketer and the market It is the starting point of marketing Marketing research is the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company. MIS: consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.

Marketing process
Create value for customers and build customer relationships Capture value from customers in return

Understand the marketplace and customer needs and wants

Design a customerdriven marketing strategy

Construct a marketing program that delivers superior value

Build profitable relationships and create customer satisfaction

Capture value from customers to create profits and customer quality

Marketing technology

Global markets

Ethics and social responsibility

Position of marketing research

ANALYSIS MARKETING RESEARCH

PLANNING MARKETING STRATEGY IMPLEMENTATION MARKETING RESEARCH

CONTROL

Marketing research goals

UNDERSTAND DESCRIBE EXPLAIN MEASURE FORECAST VERIFY

Product, consumer, distributor, competitor, environmental analysis

Marketing research process

Define problem and research objectives Develop the research plan

Analyze the information

Collect the information

Present the findings

Research design
The research design formally describes the characteristics of the survey and the procedures used to conduct the study. It is the methodological framework of the research. Contents: Goals Information sources Variables Survey method Sampling method Data analysis Calendar Budget

Internal validity External validity

Types of marketing research

-Documentary EXPLORATORY -Qualitative

DESCRIPTIVE

-Documentary -Quantitative

CAUSAL

-Experimentation -Observation

Research methods
Observational research - Audit: inventories, facing, pantry check - Mechanical: scanning, EDI, eye camera Experimental research - Product/concept tests: prototype, comparative or not - Market/store tests: laboratory stores, catalog sales, mobile stores, in-store tests, city tests Ad hoc research - Qualitative research: interviews, focus groups - Quantitative research: surveys, opinion polls

Qualitative and quantitative research

The distinction between qualitative and quantitative research depends on the nature of the research problem. If why? or how? QUALITATIVE RESEARCH If how many? or how much? QUANTITATIVE RESEARCH

Information Sources
Secondary sources: Existing data. All forms of documentary research. DESK RESEARCH Primary sources: Data collected for a specific situation at companys request. FIELD RESEARCH, AD HOC These sources can be internal or external. The choice will depend on the marketing problem, objectives, resources

Documentary Research
First step to marketing research 4 steps
Define the topic (clear, feasible, pertinent) Identify key words associated to the topic Search for available sources of information Consult, sort and summarize information

Questions to ask
Does the data correspond to the situation? Is there a risk of obtaining biased information? Was the research design technically coherent? Are the findings clear, precise?

Research and polling institutes

These institutes collect information for resale. They can give 2 types of information:
Standardized periodic information: panels, longitudinal studies. Firms subscribe to this information. This is a secondary information source. On-order studies: reserved solely for one company or omnibus studies. This is a primary information source.

Advantages and disadvantages of information sources

Secondary Advantages
Low in cost Diversity Available Problem definition Familiar with market Incomplete, outdated Inadequate False information Difficult to control

Primary
Adapted information Recent, up-to-date Not available to competitors

Disadvantages

Costly Difficult to collect Time consuming

Sequence and relationship between different sources of information

SECONDARY SOURCES (Desk Research) Internal External

PRIMARY SOURCES (Field Research)

Qualitative

Quantitative

Qualitative marketing research

What is qualitative marketing research?

Collecting and analyzing psycho-sociological elements which explain facts, attitudes, opinions, motivations and behaviors of all people involved in a given marketing situation Qualitative research methods are used for in-depth exploratory studies of the decision-making process and psychological mechanisms that affect individual or group behavior

Why use qualitative research?

Qualitative research studies lead to understanding the causes or the basis for behaviors, attitudes and opinions. They are often based on analyzing how a product or company is perceived by individuals or consumers. However, results cannot be extrapolated. They cannot be considered as being representative of the entire population. Sample size = 10 - 70

Qualitative research is used in the following cases:

Defining the marketing problem is difficult (explore market) Finding causes, decision-making criteria of consumer behavior Secondary information is insufficient Constructing questionnaire for a survey Explaining surprising results of quantitative research Promoting creativity

Advantages and disadvantages of qualitative research

Advantages -Quick and flexible (maximum 70 people) -Less costly -Allows exploration -Attitudes, motivations, opinions are studied -Reveals deep feelings and thoughts Disadvantages -Non-representative sample -Research design is difficult to plan -Quality of the study depends on researcher skills

Different types of qualitative research

Two ways of classifying qualitative studies:
Degree of induction (level of consciousness)
Unstructured interview (pure exploration) Centered or focus interview (exploration and in-depth analysis) Structured interview (identification and verification)

Number of people being interviewed

Individual Group

Choosing a Type of Interview

Levels of consciousness

OPINIONS

Structured interview

ATTITUDES

Centered or Focus interview

MOTIVATIONS / BELIEFS

Unstructured interview or centered with projective tests

Unstructured interviews
Conducted in a face-to-face situation Large, ambiguous opening Funnel approach The respondent is free to express his feelings as wishes and for as long as he wishes Non-directive, but reformulation techniques Use in marketing

Unstructured interviewing steps

Present research objectives Reformulation techniques ( mirror effect ) Respondent goes further in-depth

Large opening statement or questions Researcher adopts a non-directive attitude

auto-exploration

Centered or focus interviews

Same general structure and basic principles as the unstructured interview However, an interview guide is used This guide is composed of topics or questions to be addressed during the interview The interviewer will bring up topic if and only if respondent does not spontaneously address issues This is NOT a questionnaire (no order, modifications possible, different versions allowed) This is the most popular form of qualitative research

Projective techniques
Used to avoid psychological obstacles (taboos, reluctance, courtesy bias, subconscious) or to go further in-depth Visual or written stimuli The respondent will overcome hesitations Difficult to analyze, ambiguous Different tests
Word association Sentence completion Story completion Frustration or cartoon test TAT (Thematic Apperception Test) Haire test

Example Nescaf (Haire test)

List 1 1 lb. of carrots Roast beef 1 can of Delmonte corn Heinz ketchup Folgers ground coffee Tide laundry detergent 3 onions List 2 1 lb. of carrots Roast beef 1 can of Delmonte corn Heinz ketchup Nescaf instant coffee Tide laundry detergent 3 onions

Structured interviews
Most directive method in qualitative marketing research A questionnaire is used However, the questionnaire is only composed of open-end questions Questionnaire facilitates the research process as well as analysis Confusion between qualitative and quantitative research It is theoretically incorrect to extrapolate or generalize the findings

Focus groups
Nearly always use the centered approach (interview guide, group discussion is directed by interviewer) About 7 to 10 participants per group The role of the interviewer is very important Interviewer must manage the group in terms of participation, conflict, domination, summaries, etc Organization and logistical aspects

Focus group phases

Three phases during the group interview:
Presentation (warming up): explanations, rules of the game, individual introductions, anonymous responses Exchange: each participant gives his or her opinions, thoughts, group dialogue, tests Summarize: verify all topics of interview guide, repeats, star technique (circept), gift

Comparing different types of interviews

Unstructured : large opening statement and nondirective attitude ( 500 to 800 ) Centered : interview guide to center discussion ( 250 to 500 ) Structured : qualitative questionnaire ( 150 to 200 ) Focus group : centered interview, 7 to 10 participants per group ( 5000 to 8000 )

Comparing individual interviews and focus groups

Advantages Individual -Personal, in-depth questions interview -Lower cost per respondent -Only solution in some cases (B to B, competitors) Focus -More information during groups discussion -Quicker to conduct -Possible to study interactions and influences during the decision process -Stimulate ideas and creativity Disadvantages -Researcher training -Analyzing findings -Long to conduct -No in-depth motivations -Risk of conformity, strong group influence -Organizational and logistic difficulties

Qualitative sampling
No representative sample, but variety of individuals is important No important profiles should be excluded Sequential procedure (arborescence) is used:
List of criteria explaining differences of behavior Rank criteria from most important to least important List possibilities for each criteria Build arborescence Verify coherency of arborescence

Sampling in focus groups

Same basic principles (arborescence) All participants must feel equal However, there are two important rules:
Group must be heterogeneous (cover all of the profiles of the populations) Group must be homogeneous (for criteria that may lead to an unbalanced group)
Many groups may be need to be organized in order to avoid unbalanced groups or inter-group pressure

Qualitative data analysis

Two different methods can be used:
Summaries of interviews, verbatims Content analysis
Requires re-transcribing of all interviews Specialized software Quantification, scientific rigor Time and budget

Quantitative marketing research

Differences compared to qualitative research

Associated with descriptive research Objectives are different: verify, measure, estimate... Sampling methods are different Large sample size (300 1000+) Methods of administration change Precision of an estimation, margin of error Data analysis is more sophisticated

Advantages and disadvantages of quantitative research

Advantages
-Delivers precise numerical estimations (forecasting, market share, intentions) -Extrapolation possible -Representative sample -Superior objectivity -Statistical techniques -Inter-group comparisons -Longitudinal studies

Disadvantages
-Does not explain why or how -Precision tool, not a discovery tool -Self-report data -Broad but shallow data -Long and costly -Difficult in B to B -Participation is unrewarding (direct marketing)

Categories of quantitative research

Census
Collect information from each member of the population Complete canvass of the population Depends on the size of the target population

Survey
Most familiar of all market research methodologies Collect information from a portion of the population Procedure in which a fixed set of questions is asked of a sample of respondents On the basis of information collected on the subset, it is possible to infer something about the larger group Inference depends on the sampling method

Census vs. Survey

Census: n = N Survey: n/N = subset of the population, survey rate or sampling rate Exhaustive or non-exhaustive survey

Generalization and extrapolation of findings

Validity of quantitative research

Representative sample sampling method and response rate Precision sample size and margin of error Quality of questionnaire and administration Researcher training and experience Quality of information processing Quality of data analysis

What is sampling?

70%

70% + e

Sampling is necessary every time the population size is too large to be able to collect information from all elements of the population.

Probability vs. non-probability sampling

Probability
Each population element has a known, non-zero chance of being included in the sample Final elements are selected objectively by a specific process Equal probabilities are not necessary Allow an assessment of the amount of sampling error likely to occur Requires an exhaustive sample frame

Non-probability
No way of estimating that probability that any population element will be included in the sample Rely on personal judgment somewhere in the process Statistically, precision (sampling error) cannot be evaluated

Quantitative sampling methods

PROBABILITY SAMPLES NON-PROBABILITY SAMPLES

Simple random sample Cluster sample Area sample Level random sample Stratified random sample

Quota sample Random route sample Judgment sample (onthe-spot sample) Convenience sample

Probability sampling
SRS: each population element has a know and equal chance of being selected; central-limit theorem (when n is large, the sample mean will be normally distributed). Cluster and area: first parent population is divided into mutually exclusive and exhaustive subsets, then a random sample of the subset is selected. LRS: random sampling occurs at several different levels of the population. Stratified: population is divided into strata or subpopulations and random sampling occurs in each stratum (proportionate and disproportionate).

Non-probability sampling
Quotas: attempt to ensure that the sample is representative by selecting sample elements in such a way that the proportion of the sample elements possessing a certain characteristic is approximately the same as the proportion of the elements with the characteristic in the population. Random route: each field worker is given a random route to follow, leading to the selection of people to interview. Judgment: sample elements are handpicked because it is expected that they can serve the research purpose and it is believed that they are representative of the population of interest (purposive samples). Convenience: sometimes called accidental samples because those composing the sample enter by accident (volunteers, radio shows)

Choosing a sampling method

Do we have a sample frame?
Yes No

Is SRS too costly?

No Yes Yes

Do we have a frame of clusters?

No Yes

Is the population stratified?

No Yes

Is it too costly?
No

Are there frames at different levels?

Yes No

SRS

Stratified sample

Cluster or area sample

Level random sample

Do we know the structure of the population for several variables that explain differences in behavior?
Yes No

Quota sample

Is the population widely dispersed?

Yes No

Are there mandatory passage points?

Yes No

Random route

Judgment or on-the-spot sample

Snowball or other convenience sample

Sample size and precision

With probability samples, precision and minimal sample size can be determined Sample size must be greater than 30 Estimation, confidence level, confidence interval and margin of error Probability sampling methods or Kish coefficient Precision of an estimation is not proportional to sample size, but to the square root of the sample size. To double precision, the sample size must be multiplied by four.

Sample size and margin of error

n=t
2

pq e
2

Non-exhaustive sample

n = (n x N) / (n + N) e = s t pq n n = budget fixed costs

direct cost per unit

Exhaustive sample

Margin of error for probability samples Budget approach

Procedure for developing a questionnaire

Specify what information will be collected Determine type of questionnaire and method of administration Determine content of individual questions Determine form of response to individual questions Determine wording of each question Determine sequence of questions Determine physical characteristics of questionnaire Reexamine and revise Pretest questionnaire and revise if necessary

Type of questionnaire and method of administration

These two decisions are interdependent The length of the questionnaire will influence the choice of the method of administration Self-administered questionnaires (mail, Internet, questionnaire in magazine, etc): response rate is generally low (< 20%) Questionnaires completed with researcher (direct personal interviewing, phone): longer questionnaire and higher response rate (50%)

Form of response
Open-ended Dichotomous: 2 possible answers Multiple choice: 3 or more possible answers Likert scale: a statement with which the respondent shows the amount of agreement or disagreement (strongly agree strongly disagree) Semantic differential scale: a scale connecting two bipolar words, respondent selects the point that represents his/her opinion (enthusiastic unenthusiastic) Importance scale: rates the importance of some attribute (extremely important extremely unimportant) Rating scale: rates some attribute from poor to excellent Intention-to-buy scale: describes respondents intention to buy a product or service (definitely buy definitely not buy)
Avoid halo effect (change direction in scales to avoid repetition)

Question wording
The phrasing of a question can directly affect the responses. General rules:
Use simple words Avoid technical vocabulary in consumer research Avoid double negations Avoid ambiguous words and questions Avoid leading questions Avoid double-barreled questions

Examples

Question sequence
General rules: Questionnaire should be very logical and easy to respond to. Use simple, interesting opening question. Use the funnel approach (start with broad questions and progressively narrow down in scope). Avoid jumping around from topic to topic. Use transitions. Design branching questions with care. Place difficult or sensitive questions late in the questionnaire. Ask for classification information last.

Question sequence
Knowledge and awareness questions Factual behavior questions Attitude questions Intention questions Classification questions

Questionnaire pretest
Data collection should never begin without an adequate pretest of the instrument. Can be used to assess both individual questions and their sequence. Small sample of 10 to 30 Questionnaire followed by interview to identify problems and misunderstandings Pretest results are not included in the final results of the survey The pretest is the most inexpensive insurance the marketer can buy to ensure the success of the questionnaire and the entire research project

Quantitative data analysis

Univariate analysis descriptive statistics and graphical information Multivariate analysis cross-tabulations, Chi square tests, correlation analysis, multiple regression analysis, cluster analysis (perceptual mapping), factor analysis.

Cost factors affecting surveys

Sample size Accessibility Survey length Analysis 100 per respondent

Specific problems in international markets

General context of international marketing research

Globalization, but change at different rates in different parts of the world Challenge of conducting high quality research as quick as possible in multiple diverse settings Research conducted simultaneously in developed and developing world Unbalanced spread of marketing research expenditures Multi-faceted issues (where, how, who, tools, comparisons) New technologies (CATI, CAPI, scanners, Internet)

3 specific problems in international marketing research

Who will conduct the research? degree of research centralization Is the information comparable? cross-cultural research equivalences What are the sources of bias? five bias types

Who will conduct international marketing research?

The firm can use internal or external research services. The unknown competitive situation and different cultural backgrounds complicate the choice between internal and external research. Problem: exclusive contracts with marketing research firms To what degree should international marketing research be centralized? Three choices: internal marketing department, domestic research firm, foreign research firm

The degree of centralization of international marketing research

Access to information Internal marketing department Information sources Quality and reliability of information Risk in terms of analysis. Language problems. Cultural bias. Adaptation to firms problem Excellent. Monitoring Cost Low access. Network problem. Competitive analysis difficult. Good if the firm has an important local network. Limited knowledge of sources in foreign market. Excellent. Low in cost. Travel expenses and use of staff.

Domestic research firm

Excellent in France. Perhaps limited in foreign market.

Risk in terms of analysis. Language problems. Depends on the informal network. Excellent.

Very good. Easy to clarify if problems.

Good. Easy to monitor during the research process.

High in cost. Specific project fees.

Foreign research firm

Very good. Low risk of ignoring essential information.

Excellent in foreign market, but only local.

Limited. The firm may be unknown.

Limited. Risk of nonconformity with initial objectives.

Variable.

Is the information comparable?

This question is very important in cross-cultural or comparative studies. Some words, ideas, concepts, practices, etc will have different meanings in different cultural contexts. Research equivalence is necessary, but not always easy to achieve. Equivalences must be verified before conducting research on foreign consumer behavior.

International equivalences
Functional equivalence: do products serve the same function? Conceptual equivalence: do relevant concepts have the same meaning and/or importance? Category equivalence: does the product belong to the same category or domain? Translation equivalence: cross-check, translation-retranslation Metric equivalence: scaling, odd/even, do adjectives have the same strength and distances? Respondent equivalence: who should answer questions? same social role? sampling unit Sampling frame equivalence: how will sample be chosen?

Sources of bias
Bias = distorted results, incorrect or false compared to reality Biased responses are more likely to occur in international marketing research than in domestic research and are harder to avoid Importance of control, pre-test, acculturation Research plans must be adapted to reduce the risk of biased responses

5 sources of bias
Courtesy bias: concerns the social desirability of answers, the respondent hopes to please the interviewer Subject bias: concerns the way a society perceives an issue as being more or less sensitive Cultural-trait bias: a given cultural trait can alter the findings (IDV, MAS) Response style bias: some responses are more or less extreme in some cultures (scaling, ranking), coefficients Non-response bias: non-response style varies according to country, gender, race

Practical consequences in international marketing

Qualitative research only accounts for less than 20% of research expenditures around the world (emerging markets, innovation, brand renewal), but this is increasing Length of interview and compensation will vary from one market to the other (monochronic and low-context = shorter interviews and larger compensation) Some techniques are unknown or unfeasible (projective techniques, on-line surveys, CAGI/CATI) Focus groups are very culture-bound (collectivistic vs. individualistic societies, social status, disagreement) Sampling techniques are limited (reliable information is not widely available, statistics, sampling base) Collecting information is difficult (level of economic development, illiteracy, local authorizations) Cross-cultural research is limited (comparison is difficult, concepts/rituals) Recent developments in international marketing research

Chapter 3 International Marketing Strategy and Programs

Expanded marketing process model

Create value for customers and build customer relationships Understand the marketplace and customer needs and wants Construct a marketing program that delivers superior value Product and service design: build strong brands Pricing: create real value Distribution: manage demand and supply chains Promotion: communicate VP Marketing technology Global markets Capture value from customers Capture value from customers to create profits and customer quality Design a customer-driven marketing strategy Build profitable relationships and create customer satisfaction

Research consumers and market Manage marketing information and customer data

Select customers to serve: segmentation and targeting Decide on a value proposition: differentiation and positioning

CRM and CEM: build strong relationships with chosen customers Partner relationship management: build strong relationships with marketing partners

Create satisfied loyal customers Capture customer lifetime value Increase share of market and share of customer

Ethical and social responsibility

Corporate strategy vs. marketing strategy

Strategic segmentation Strategic positioning Market segmentation Market targeting

SBU

SBU Core market S1 S2 S3

SBU

Target segment
Consumer preferences

Competitor positioning Market positioning

Firm advantages

Positioning Marketing mix

-Sales objectives -Budgets -4 Ps

Market segmentation
What is it?
Identifying and profiling distinct groups of buyers who might require separate products and/or marketing mixes Clustering consumers in terms of behavior, needs, attitudes, opinions

Why?
Buyers/consumers differ in many ways They do not respond to the same stimuli in the same way So, different offers for different types of buyers

Market segmentation represents an effort to increase a companys targeting precision.

Levels of market segmentation

Mass marketing
Mass production, distribution and promotion of one product for all buyers Largest potential market, one size fits all Lowest costs = lower prices or higher margins

Segment marketing
Large identifiable group within a market Buyers differ in their wants, purchasing power, location, attitudes and habitsbut the company is not willing to customize its offer to each individual customer More appropriate products and services, distribution and communication easier, fewer competitors

Niche marketing
More narrowly defined group, a small market whose needs are not being well served Smaller companies can become more competitive through specialization Better understanding of customers who willingly pay a price premium

Individual marketing
Segments of one, customized marketing, one-to-one marketing More frequent in B to B than in B to C New technologies allow mass customization ; ability to prepare on a mass basis individually designed products and communications to meet each customers requirements

Market segmentation procedure

Market segments and niches can be identified by applying successive variables to subdivide a market. 3 steps: Research stage: gain insight into consumer motivations, attitudes and behavior and collect important data (attributes and ratings, brand awareness and rating, product-usage patterns, attitudes toward product category, customer characteristics). Analysis stage: factor analysis to remove highly correlated variables and cluster analysis to create a specific number of maximally different segments. Profiling stage: each cluster is profiled in terms of its distinguishing attitudes, behavior, customer characteristics
Market segmentation must be redone periodically because market segments change over time, especially in international markets

Segmentation variables
Consumer characteristics
Geographic -Nations -States -Regions -Cities Demographic -Age and life-cycle stage - VALS or psychographics -Gender -Income -Generation -Social class

Marketing characteristics
-Consumer responses to benefits sought, use occasions or brands (consumer-response segments) -Hierarchy of attributes in choosing a brand, shifts in consumer priorities (market partitioning) -Marketing mix variables: product, price, placement, promotion (price-quality-type dominant)

In international marketing, broader market segments compared to domestic segments, transnational segments

Example 1: culture-based segmentation

Size (million)
Cluster 1 Austria, Germany, Switzerland, Italy, GB, Ireland Cluster 2 Belgium, France, Greece, Portugal, Spain, Turkey Cluster 3 Denmark, Sweden, Netherlands, Norway 203

PDI

UAI

IDV

MAS

Marketing implications

Small

Medium

MediumHigh

High

Preference for high performance products, use successful-achiever them in advertising, desire for novelty, variety and pleasure, fairly risk-averse market. Appeal to consumers status and power position, reduce perceived risk in product purchase and use, emphasize product functionality.

182

Medium

Strong

Varied

LowMedium

37

Small

Low

High

Low

Relatively weak resistance to new products, strong consumer desire for novelty and variety, high consumer regard for environmentally friendly marketers and socially conscious firms.

Example 2 : segmentation of CEE markets

Marketization :
Countries exposure to global communications, increased product availability and variety, and overall attempt to close the living standards gap with developed countries Reflects a set of institutional values and cultural requirements for the operation of effective private markets (materialistic values as a stimulus for greater production, competition, freedom of information)

Westernization :
Countries proximity to the West The duration and the extent of their openness to Western influence and culture

CEE clusters
High Marketization

Cluster 1
Low Westernization

Cluster 3

High Westernization

Cluster 4

Cluster 2

Low Marketization Source: Lascu, Manrai and Manrai

Clusters are likely to have common characteristics and share similar consumer needs and purchasing behavior

Central and Eastern European clusters

Cluster 1: High-marketization and high-westernization (Hungary, Poland, Czech and Slovak Republics, Slovenia)
Geographic: Central Europe, border developed countries, more urbanized Cultural: Slavic languages (except Hungary), primarily Catholic religion Economic: more developed

Cluster 2: Low-marketization and high-westernization (Bosnia, Serbia, Croatia, Montenegro, Macedonia)

Geographic: Central Europe, more urbanized Cultural: Slavic languages, primarily Eastern Orthodox and Muslim Economic: more developed, but less than cluster 1

Central and Eastern European clusters

Cluster 3: High-marketization and low-westernization (Bulgaria and Romania)
Geographic: Balkan peninsula, urbanized to a lesser extent than cluster 2 Cultural: Latin and Slavic languages, Eastern Orthodox religion Economic: slower in the development process

Cluster 4: Low-marketization and low-westernization (Albania and Western countries of the former Soviet Union)
Geographic: Less urbanized than cluster 3 Cultural: Slavic languages (Russian is the primary commercial language), Eastern Orthodox and Muslim Economic: formerly fierce dictatorships, slower development

Market targeting
After identifying different markets and market segments, the firm must: Evaluate the various segments Decide how many and which ones to target

Evaluating the market segments

Overall attractiveness of the segment
Size, growth, profitability, scale economies, low risk How easy is it to persuade buyers to shift their purchases (consumers, relative non-consumers, absolute non-consumers)? Brand loyalty vs. dissatisfied buyers

Companys objectives and resources

Do segments correspond to the companys long-term objectives? Does company possess the skills and resources needed to succeed in the segment? The company should only enter market segments in which it can offer superior value

Selecting market segments

5 different target market strategies: Single-segment concentration
Concentrated marketing Strong knowledge of segments needs Strong market position in segment Economies through specialization = high returns Risks are higher than normal

Selective specialization
Several segments that are objectively attractive Little or no synergy among segments but each is profitable Diversification of firms risk

Selecting market segments

Product specialization
Concentrate on certain product to several segments Strong reputation in specific product area Risk of technology

Market specialization
Concentrate on serving many needs of a particular customer group Strong reputation with group, channel for all new products Risk of decreased buying power in the group

Full market coverage

Serve all customer groups with all products they need Limited to very large firms Undifferentiated: ignore segment differences, one offer for entire market Differentiated: operate in several segments with different programs for each

Market positioning
Market positioning: act of designing the companys offering and image so that they occupy a meaningful and distinctive competitive position in the target customers mind; refers to the consumers perception of a product or brand amongst other brands Objective: attaining a prominent place for companys brand amongst other brands in the minds of consumers Positioning mainly results from marketing communication regarding brands, social communication and personal experience Categorization and positioning within category Product differentiation, international coherency

Importance of product differentiation

Market segmentation

Product differentiation

Demand side Heterogeneous markets are divided into homogeneous submarkets (market segmentation)

Supply side Homogeneous products can be differentiated into products tuned to these homogeneous market segments (market positioning)

Differentiation attributes
Product Features Performance Conformance Price Quality Durability Reliability Repairability Style Design Services Ordering ease Delivery Installation Customer training Customer consulting Maintenance Warranty Personnel Channel Image Value proposition Emotional power Symbols Media Atmosphere Events Coverage Competence Expertise Courtesy Performance Credibility Reliability Responsiveness Communication

Different attributes in different markets, cultural influence

Promoting the difference

How many difference should a firm promote? USP: best quality, best service, lowest price, best value, safest, fastest, most convenient, most advanced technology Double-benefit positioning: if two or more firms are claiming to be best on the same attribute, search for special niche within the target segment, two benefits must be compatible (safest and most durable) The number of differences should be limited (communication, clarity, credibility) Coherency in international markets is essential, between markets and between segments

Communicating the firms positioning

Once positioning strategy chosen, the firm must communicate the positioning effectively Mentally distinguish offerings, enter into the minds of consumers Communication through physical signs and cues Marketing mix is used to communicate the companys positioning

From marketing strategy to marketing programs

Marketing strategy must be implemented through marketing programs Managers must decide on marketing expenditures, marketing mix, and resource allocation
Internal cultural diversity External cultural diversity

Marketing mix allows firm to communicate and implement its strategy, formalized in marketing plan

Marketing mix
Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. 4 Ps (McCarthy):
Product Price Promotion

4 Cs (Lauterborn)
-Customer needs and wants -Cost to the customer -Communication

Place

-Convenience

The four Ps of the marketing mix

Product Product variety, quality, design, features, brand name, packaging, sizes, services, warranties, returns List price, discounts, payment period, credit terms Sales promotion, advertising, sales force, public relations, direct marketing Channels (direct, indirect, exclusive, selective, intensive), coverage, assortments, locations, inventory, logistics, transport

Price Promotion

Place

Standardization vs. adaptation

Debate in marketing since Buzzell (1968) and Levitt (1983) Factors encouraging standardization
Economies of scale in production Economies in R&D Economies in marketing Global competition Shrinking of world market Converging, homogeneous cultures

Factors encouraging adaptation

Differing use conditions Government and regulatory influences Local competition Differing consumer behavior patterns True to marketing concept

Degree of standardization, Degree of adaptation, global/local paradox

High

Need for adaptation

Degree of cultural grounding

Low Industrial/Technology intensive Nature of product

Source: Czinkota and Ronkainen

Consumer

Factors affecting adaptation

Consumption patterns Psychosocial characteristics Cultural criteria

Consumption patterns
Pattern of purchase
Is the product purchased by relatively the same consumer income group from one country to the other? Do the same family members motivate the purchase or dictate brand choice in all target countries? Do most consumers expect a product to have the same appearance? Is the purchase rate the same regardless of the country? Are most purchases made at the same kind of retail outlet? Do most consumers spend the same amount of time making the purchase?

Pattern of usage
Do most consumers use the product for the same purpose? Is the product used in different amounts from one area to another? Is the method of preparation the same in all target markets? Is the product used along with other products?

Psychosocial characteristics
Attitudes toward the product
Are the basic psychological, social, and economic factors motivating the purchase and use of the product the same for all target markets? Are the advantages/disadvantages of the product in the minds of consumers basically the same from one country to another? Does the symbolic content of the product differ from one country to another? Is the psychic cost of purchasing and using the product the same?

Attitudes toward the brand

Is the brand name equally known and accepted in all target countries? Are customer attitudes toward the package basically the same? Are customer attitudes toward pricing basically the same? Is brand loyalty the same throughout target countries for the product?

Cultural criteria
Does society restrict the purchase and/or use of the product to a particular group? Is there a stigma attached to a product? Does the usage of the product interfere with tradition in one or more of the targeted markets? Does the message of the product correspond to core cultural values? How do the different dimensions of culture influence the purchase and use of the product?

Product
A product is anything that can be offered to a market to satisfy a want or need (Kotler)
Physical goods Services Persons Places Organizations Ideas

Common product problems: Developing new products Managing life-cycle strategies Managing product lines Managing brands

Product policy, product mix

Product mix: product lines and brands

Product lines
Width: how many product lines the firm carries Length: how many items in each product line Depth: how many variants are offered of each product in the line Consistency: how closely related the various product lines are (end use, production, distribution channels, etc)

Branding
Identifies the company at six different levels: attributes, benefits, values, culture, personality and user Brand awareness, brand acceptability, brand preference, brand loyalty Global branding and international coherency Degree of adaptation in FMCG

Elements of a product
Installation

Augmented product

Tangible product

Packaging Brand name Delivery and credit Quality Features Core benefit or service Styling Aftersale service

Core product

Warranty

Global variations, adapt or standardize?

Specific international product policy problems

Country of origin, made in effect Preference for national brands Global branding (mono, line, umbrella) Brand equity and extension International standards Product protection Product adaptation

International product policy

Existence of global product? International standard? Three common strategies
Straight extension Product invention Product adaptation
Technical adaptation Commercial adaptation

Consumer products vs. industrial products

Pricing
Select pricing objective Determine demand Estimate costs

Select pricing method

Analyze competitors costs, prices, and offers

Select final price

Common pricing methods

Mark-up pricing: add a standard mark-up to the products cost Target-return pricing: determine price that would yield its target rate of return (ROI) Perceived-value pricing: buyers perception of value, not the sellers cost, is the key to pricing Value pricing: low price for fairly high-quality (EDLP) Going-rate pricing: prices are largely based on competitors prices, rather than on costs or demand Sealed-bid pricing: competitive-based pricing based on expectations of how competitors will price Yield pricing: discriminatory pricing depending on customer segment and inventory level

International pricing policy

International price escalation problem Four types of strategies
Uniform price everywhere: different profit rates, too high in some countries Market-based price: ignores costs, parallel importations Cost-based price: standard markup everywhere, too high in some countries Identical pricing position: compare to local competition in each market

Transfer prices and dumping Gray-market problem, copies

Promotion
Identify target audience: research, image analysis Determine communication objectives: awareness, knowledge, liking, preference, conviction, purchase Design message: content, appeals, structure, format, source Select communication channels: personal, non-personal Promotion budget: weight of promotion in marketing mix Promotion mix: allocation between advertising, sales promotion, public relations, sales force and direct marketing Measure results: research

Promotion mix communication platforms

Advertising Sales promotion
Contests Sampling Gifts Fairs and trade shows Demonstrations Coupons Rebates Entertainment Loyalty programs Tie-ins

Public Relations
Press kits Speeches Annual reports Sponsorships Publications Community relations Lobbying Company magazine Special events

Sales force

Direct marketing
Catalogs Websites Mailings Telemarketing On-line sales TV shopping

Print and broadcast ads Packaging Motion pictures Brochures Directories Billboards P-P displays Symbols and logos

Sales presentations Sales meetings Incentive programs Samples Fairs and trade shows

International promotion policy

Three different levels of communication: Corporate communication: inform firms partners (shareholders, administrations, suppliers, press, etc) Institutional communication: communicate the firms values to the public and inside the organization Brand or product communication: image, consumers desires, technical characteristics, performance, etc Corporate and institutional communication are easily standardized, but brand/product communication is harder to standardize

Communication and advertising

Advertising is a form of communication A products position or difference is transmitted to target segment through communication Communication styles vary from country to country, they are culture-bound The role and importance of advertising/media also vary from one country to another Cultural factors affecting communication:
High-context vs. low-context Explicit vs. implicit Direct vs. indirect Informational vs. emotional

Cultural dimensions and advertising appeals

Power distance
High: status symbols, presence and importance of elders, master-learner relationships Low: independence, empowered consumers

Individualism/Collectivism
IDV: low context, direct, explicit (you, we, I), data, facts COL: high context, indirect, symbols, entertainment, groups

Masculinity/Femininity
MAS: winning, success, domination, persuasion, comparative advertising, reverse sexism FEM: less endorsement, caring, less role differentiation

Uncertainty avoidance
High: explanations, testing, technology, design, structure, well-groomed Low: results are important, change, subtle

LTO/STO
STO: sense of urgency, direct style LTO: build trust, nature, entertainment

Advertising models and culture (1/2)

Sales-response model
Simple stimulus-response model Very direct, buy now strategy, short term effect Low PDI, IDV, MAS, Low UAI (Anglo-Saxon model)

Persuasion model
Short term shift in attitude, buying intention, and brand preference through providing arguments Lecture form (presenters, demonstrations, testimonials), persuasive and direct US, UK, Germany, Switzerland, Austria

Involvement model
Build relationships between consumers and brands by creating emotional closeness Brand becomes a personality, indirect style FEM, IDV (Netherlands, Scandinavia, France)

Advertising models and culture (2/2)

Awareness model
Create awareness to differentiate brands from similar brands Associations, metaphors, humor, build trust, indirect Low IDV (Spain, Asia, Latin America...)

Emotions model
Create positive attitude and brand loyalty Builds connections between brands and emotions, emotion often linked with product category Low IDV, low MAS (Spain, Latin America, Africa)

Likability model
Liking the advertisement will lead to liking the brand Indirect, entertaining/story, make friends to build trust and dependence Japan, China

Symbolism model
Turn the brand into a symbol/code, cohesion to subculture Very culture specific (symbols of status, success, self-expression, stability) High PDI, High UAI, Low-Mid IDV (Asia, France, south of Europe)

Place - Marketing Channels

What is a marketing channel (or distribution channel)? Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user (Kotler) What about international marketing channels? These interdependent organizations allow goods and services to cross national boundaries. SCM, BtoC and BtoB, IMM

International channels
Seller
Channels between countries Channels within foreign countries Final buyers

1. Channels between countries: gets the products to the borders of the foreign market; decisions concerning types of intermediaries (agents, trading companies, etc), types of transport, financing and risk management 2. Channels within foreign countries: gets the products from entry point to final buyers and users; decisions concerning types of retailers (franchising, supermarkets, etc), local channels Channels of distribution vary considerably among countries. Distribution, by its nature, is a marketing activity that is performed close to the market.

Channel management
Channel design: types of intermediaries, number of intermediaries (exclusive, selective, intensive), contractual arrangements Managing retailing, wholesaling and market logistics Selecting, motivating and evaluating channel members (cooperation, conflict, competition) Channel dynamics: traditional, VMS, HMS, multi-channel marketing systems Most difficult part of the mix to standardize

Entry mode choice

Considered by many as the most important aspect of a firms internationalization strategy Entry mode will determine long-term success or withdrawal from foreign markets Poor decisions can be very costly for the firm

Factors in the entry mode decision

Target country market factors Target country environmental factors Target country production factors Home country factors

External factors

Internal factors

Entry mode decision

Company resource and commitment factors

Company product factors

Elements of market entry strategies

Entry operation

Choice of target product/market

Setting objectives and goals

Choice of entry mode

Design the marketing plan

Target market

Control systems: monitoring operations / Revising entry strategy

Different types of entry modes

Exporting (commercial strategy, commercial modes) Foreign direct investment (industrial strategy, integrated modes) Associated or contractual modes (contractual strategy, competitive alliances)

Entry mode continuum

Exporting

Contractual modes

FDI

Commitment, risk, control, profit potential

Types of exporting
Indirect exporting
Distributor / export merchants Export agent EMC

Direct exporting
Export department Export sales representatives E-business

Cooperative exporting
Export groups Piggyback exporting

Foreign direct investment (FDI)

The ultimate form of foreign involvement Direct ownership of foreign-based assembly, manufacturing or sales facilities The company can buy part or full interest in a local company (M&A) or build its own facilities (GFI, ex nihilo) Considered the preferred mode of entry

Advantages and disadvantages of FDI

Advantages
Cost economies (labor, raw materials, incentives, freight savings, etc) Better image in host country Deeper relationship with government, customers, local suppliers, distributors Better adaptation Full control of investments Long term objectives

Disadvantages
High initial and operating costs High level of risk

FDI options
Make-or-buy decision
Greenfield investment / Ex nihilo Mergers and acquisition

Branch or subsidiary?
Structure Legal status

Analyzing FDI project

Assessing profitability Discounted cash flow analysis

Associated entry modes

Newest, most recent forms of international business Transfer of technology or know-how between two firms Shared risks Only option in countries where the government requires foreign firms to use local capital Better access to local market knowledge

Types of associated entry modes

Joint venture: foreign and local investors share ownership and control of local operations Licensing: licensor licenses a foreign company to use a manufacturing process, trademark, patent, trade secret or other item of value for a fee Management contracts: firm exports management services instead of a product, separation between ownership and management International Franchising: contractual association between a franchisor (manufacturer, wholesaler or service organization) and franchisees (independent business people who buy the right to own and operate units in the franchise system). Franchising is based on some unique product, service or method of doing business. Industrial franchising Distribution franchising B.F.F. Service franchising

Example of international franchising entry modes

Direct modes
Direct franchising (16%) Subsidiary (19%) Area development agreements (14%)

Indirect modes
Joint venture (16%) Master franchising (34%)

International franchising comparative matrix

Strong Distance / Adaptation
 

Master franchising

Direct franchising Joint venture



FDI

 Area development agreement

Direct franchising

Weak Weak Commitment / Control Strong

Hierarchical model of entry mode choice

International franchising
Environmental factors

Level of commitment Equity

Organizational factors

Non-equity

Environmental factors

Direct or indirect mode

Organizational factors

FDI

Joint venture

Direct franchising or ADA

Master franchising

Determinants of entry mode choice in international franchising

Environmental factors Level 1 (commitment) Economic risk Market size Political risk Competitive situation Level of economic development Organizational factors Financial and human resources Management attitudes and orientation Recruiting and training franchisees Price-bonding ratio Brand image Experience Need for control Type of product/service Degree of standardization Brand recognition Dispersion of units

Level 2 Financial situation of partners (direct/indirect) Brand protection Local regulations Cultural differences Tax System Geographic distance Franchisors national culture

Entry mode choice summary

Entry modes vary in terms of resource or equity commitment to foreign markets Low-commitment modes can allow firm to reduce risk in high-risk countries, culturally diverse countries or limited potential markets Desired degree of control over international operations influences choice of entry mode Loss of control yields limited returns No market entry strategy is appropriate in all circumstances Most firms will have a vast portfolio of entry modes, depending on each specific market situation Comparative approach to entry mode choice (commitment, control, risk, adaptation, contribution of know-how)

Comparing different entry mode options

High
Franchising Licensing Management contract FDI Wholly owned subsidiary (M&A) Branch office

Contribution of know-how

AD / Concessionaire EMC Piggy back ITC / distributor Agent Minority shareholding through partial acquisition Majority JV investment (local partner know-how)

Low

Foreign buying department

Low

Level of ownership

High

Choosing the right entry mode

All entry modes Internal factors External factors Rejected entry modes All feasible entry modes

Comparative profit contribution analysis

Comparative risk analysis

Comparative analysis for nonprofit objectives

Ranking by overall comparative assessment Target market

The right entry mode

Marketing channels within markets

Local marketing channels (within markets)

What is a marketing channel or channel of distribution?
an organized network of agencies and institutions which, in combination, perform all the activities required to link producers with users to accomplish the marketing task (AMA)

They perform functions that add utility to a product or service:

Place utility: availability of a product or service in a location that is convenient to a potential customer Time utility: availability when desired by a customer Form utility: availability of the product processed, prepared, in proper condition and/or ready to use Information utility: availability of answers to questions and general communication about useful product features and benefits

B to C vs. B to B channels
Business-to-consumer channels
Designed to put products in the hands of people for their own use Alternatives: direct marketing, franchising, sales force, agents/brokers, internal sales force, wholesalers, retailers

Business-to-business channels
Deliver products to manufacturers that use them as inputs in the production process or in day-to-day operations Alternatives: internal sales force, distributors, wholesalers

Marketing channel alternatives for consumer goods

M M M
MSF Internet, mail order, door-todoor, house party, etc Companyowned, franchising

M
Agents, brokers

M
MSF

M
MSF

Consumers

Problems in international marketing channels

Global retailing
Case of hypermarkets

Multi-channel strategies
Case of franchising-Internet

Market-specific channels
Case of wine distribution

Global retailing
Global retailing since 1970s, but many variations Differences in the importance and types of retailing channels: shopping malls, department stores, discount stores, wholesale clubs, category killers, outlet centers, hypermarkets Factors affecting the success of hypermarkets: culture, income, market fragmentation, traditional stores, locations, demography Global retailing market entry
Wal-mart case

Global retailing market entry strategy framework

Culturally close

Organic growth
Easy to enter

Chain acquisition
Difficult to enter

Franchising

Joint-venture

Culturally distant

Concept of multi-channel strategies franchising and Internet

BRICK AND MORTAR CLICK AND MORTAR

Coexistence of traditional and virtual marketing channels brick and click Antagonostic or complementary?

Some practical advice

Brand structure rather than channel structure (reduce risk of network competition) Sell all products on-line Ensure multi-channel coherency Back-office motivation Use Internet to increase visits (locations, maps) Limit use of e-mail But does this apply to franchising?

Multi-channel strategies in franchising

Franchising firms are plural form networks Internet is another distribution channel Internet seems to be a priority Internet is revolutionizing franchising But, franchisors offering on-line sales are limited
32% in the US 30% in the UK Less than 20% in France

Opportunities and threats of multi-channel strategies (Franchising-Internet)

Opportunities New marketing channel Increased sales Network image Positive internal effects Threats Cannibalism Restriction franchisee sales Non-conformity websites Exclusive territories Definition catchment area Limits some entry modes

Coexistence of franchise system and internet

Are mixed networks complementary? Opportunities and threats? Consequences? Internet practices? The future of franchising and Internet?

Some results
Major -Better communication with franchisees consequences -Reduces distance -Cost-effectiveness, not dissuasive -Promotional tool for services -Recruiting and training franchisees Activities -2005: 80% website, 23% on-line sales -2010: 98% website, 54% on-line sales

Interpretations
Optimistic, franchise-Internet are complementary Opportunities > Risks B to B advantages > B to C advantages Better franchisor-franchisee relationship Service franchising > Distribution franchising Communication strategy > Sales strategy Internal sale of website before external sale Brick to click vs. Click to brick Internet explains evolution of entry modes

Market-specific channels wine distribution

Wine distribution varies enormously from one market to the next, distribution must be performed close to market Why?... Tradition, Old World vs. New World Transportation via freight forwarder or shipping agent, physical distribution, complex regulatory requirements, complex choice of distributor/broker

Wine distribution choices

Four possibilities for exporting
Import distributor (ngociant) Broker (courtier, agent) Export groups Direct sales

End of channel (off-premise, on-premise)

Supermarkets/Hypermarkets (FMCG) Specialized wine shops Duty-free HORECA Estate, e-commerce

Bottle vs. bulk

Brand image, packaging B to C approach Unbranded, supply chain B to B approach

Wine distribution systems

Regulatory framework, levels of marketing and market access Three types of systems around the world:
Regulated open market: normal FMCG Controlled markets: government intervention in nearly all aspects of wine marketing Mixed systems: both open and controlled

U.S. wine distribution system

18th Amendment (1919 Prohibition), 21st Amendment (1933 - authority to states), FAA Act Aim: separate suppliers and retail outlets (tied-house relationship) Result: three-tier system of distribution with independent licensed wholesaler in between the retailer and the supplier/exporter 31 open states, 19 control or monopoly states

Three-tier system
Open States
Winery, Supplier

Control States Tier I

Winery, Supplier

Distributor / Wholesaler

Tier II

Control States

Supermarkets, wine shops, HORECA, bars, transportation, etc

Tier III

State controlled retail stores

HORECA, clubs, etc

Consumers

Consumers

Comparing wine retail outlets

Outlet Supermarket / Hypermarket Characteristics High volume sales, low margins and low retail prices, usually low level of wine knowledge of staff Advantages to producer Quantity purchases, high brand awareness, help with mass appeal, convenience of location hand selling, strong service focus and CRM, interested in experimental styles or uncommon varieties High volume purchases can be made, national or regional access to market Disadvantages to producer Lack of freedom, low level of interest in experimental styles and varieties

Independent / specialist

Tends to cater to wine consumers with higher level of knowledge, high level of service, small producers Overall aim is to promote healthy drinking, high level of wine knowledge, access to a wide range of suppliers

Each outlet must be serviced and supplied individually, small volumes Importance of being stocked, if not, excluded from market

State monopoly retailer

Hall and Mitchell, 2007

Conclusion 7 Rules of International Distribution

Select distributors. Dont let them select you. Look for distributors capable of developing markets, rather than those with a few good customer contacts. Treat local distributors as long-term partners, not temporary market-entry vehicles. Support market entry by committing money, managers, and proven marketing ideas. From the start, maintain control over marketing strategy. Make sure distributors provide you with detailed market and financial performance data. Build links among national distributors at the earliest opportunity. Source: D. Arnold, HBR, 2005

Conclusion: SRC and cultural risk

Cultural risk is the most subjective of international business risks; it is the most difficult to assess SRC: the unconscious reference to ones own cultural values SRC is the root of many international marketing problems Recognizing and admitting SRC is quite often difficult

Analytical approach to reduce the influence of ones own cultural values (A.C. Samli)

4 step process to reducing SRC

1. Define the problem or goal in terms of domestic cultural traits, habits or norms. 2. Define the problem or goal in terms of foreign cultural traits, habits or norms. Make no value judgments. 3. Isolate de SRC influence in the problem and examine it carefully to see how it complicates the problem. 4. Redefine the problem without the SRC influence and solve for the optimal goal situation.