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Chapter 4: International marketing planning

International Market Selection (IMS) 1.Deciding whether to internationalize

2.Deciding which markets to enter (IMS)

• Market-screening model
 Preliminary screening 3.Deciding how to enter foreign markets (Market

 Fine-grain screening entry method)

• Market expansion strategies
4.Designing the international marketing programs
 Incremental versus simultaneous entry
 Concentration versus diversification 5.Implementing and controlling the international

marketing programs

Market-screening model Market-screening model

The screening process can be divided into two stages: 1. Preliminary screening

The number of markets is reduced by coarse-grained, macro-oriented

• Markets/countries are screened
screening methods based on criteria such as:
1.Preliminary primarily according to external • Population size
screening. screening criteria (the state of the • Gross national product (GNP) in total
market). • Gross national product (GNP) per capita
• Restrictions in the export of goods from one country to another
2. Fine- • The firm’s competitive power (and • Share of population with access to the internet
grained special competences) in the different • Smartphones owned per 1,000 of the population
screening markets can be taken into account. • Cars owned per 1,000 of the population
• Government spending as a percentage of GNP
• Population per hospital bed.

The specific choice of preliminary screening criteria may vary, dependent

on the product/ service or industry.

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Market-screening model Market-screening model

1. Preliminary screening 1. Preliminary screening

To measure ‘buying power’ regarding the specific

product/service.
• GNP in total
Selection • Used to include countries as • GNP per capita.
criteria potential future markets • ‘Country responsiveness’: reflects the tendency of
consumers to spend, in a specific product category, in
• Used to exclude countries in response to a rise in their income.
Knockout
advance as potential future
criteria
markets E.g: If consumers in a country spend more of their income increase on
smartphones than those in another country then that country is seen as
being more responsive. This would support the case for expansion of a
smartphone business into that country.

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Market-screening model Market-screening model

1. Preliminary screening
‘Knock-out’ criteria is screening criteria that are used to
exclude countries in advance as potential future markets
E.g:
Bosch Security Systems used the following ‘knock-out’
criteria in the first screening:
• The country must be politically stable and not be too
conservative with regard to religion (Iran was ‘knocked out’
on this)
• The country must not already be an established market for
Bosch fire detection (Egypt was ‘knocked out’ on this).
1. Preliminary screening
When screening countries, it is particularly important to
assess the political risk of entering a country.
 Business Environment Risk Index (BERI).
 Business Monitor International (www.businessmonitor.com)
 Economist Intelligence Unit (www.eiu.com)
 Euromoney’s country risk index: their country risk survey,
published twice a year, monitors the political and economic
stability of 186 sovereign countries

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a: 0- unacceptable; 1-poor; 2-average conditions; 3- above average conditions; 4-superior

conditions.

b: Total points: > 80, favourable environment for investors, advanced economy; 70–79, not so
favourable, but still an advanced economy; 55–69, an immature economy with investment
potential, probably a newly industrialized country (NIC); 40–54, a high-risk country, probably a
less developed country (LDC) – quality of management has to be superior to realize potential;
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< 40, very high risk – would only commit capital if there were some extraordinary justification.
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Market-screening model
2. Fine-grained screening

 Application of the market attractiveness/competitive strength

matrix (MACS matrix)
 the identification of the ‘best opportunity’ target countries

 Measures on these two dimensions are built up from a large

number of possible variables

Market Competitive
attractiveness strength

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Market size: The total market volume per year for a certain
country/market. It can be calculated as:

The outcome of
Figure 8.5 is a
‘place/location’
in Figure 8.4,
representing the
competitive
strength
(horizontal axis)
and the market
attractiveness
(vertical axis).

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• A countries. These are the primary

markets (i.e. the key markets), which offer
the best opportunities for long-term
strategic development.

• B countries. These are the secondary

markets, where opportunities are identified
but political or economic risk is perceived
as being too high to make long-term
irrevocable commitments.

• C countries. They will be perceived as high risk, and so the allocation of resources
will be minimal. Objectives in such countries would be short-term and opportunistic;
companies would give no real commitment.

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Market expansion strategies

The choice of a market expansion strategy is a key decision in export

marketing.

In designing their strategy firms have to answer two underlying questions:

1. Will they enter markets incrementally (the waterfall approach) or

simultaneously (the shower approach)?

2. Will entry be concentrated or diversified across international markets?

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Incremental versus simultaneous entry
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Incremental entry
(Waterfall approach)
Entry on an incremental basis, especially into small markets, may be
preferred where:
 a firm lacks experience in foreign markets and wishes to edge
gradually into international operations
 a firm is entering international markets late and faces entrenched
local competition
 a firm is small and has limited resources, or is highly risk-averse
 a firm prefer to enter a single or a limited number of markets and
gradually expand in a series of incremental moves rather than
making a major commitment to international expansion immediately
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Simultaneous entry
(shower approach)
 A firm may prefer a rapid entry into world markets because:
 It want to seize an emerging opportunity
 A rapid entry facilitates early market penetration across a number of
markets and enables the firm to build up experience quickly.
 It enables a firm to achieve economies of scale in production and
marketing by integrating and consolidating operations across these
markets.
 It wants to forestall pre-emption or limitation by other competitors
when the product or service involved is innovative or represents a
significant technological advance
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Incremental entry
(Waterfall approach)
A firm may decide to enter international markets on an incremental or
experimental basis, entering first a single key market in order to build
up experience in international operations, and then subsequently
entering other markets one after the other.
Based on the assumption that, initially, a
product or a technology may be so new or
expensive that only the advanced (wealthy)
countries can use it or afford it. Over time,
however, the price will fall until it is inexpensive
enough for developing and less developed
countries to buy it.
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Simultaneous entry
(shower approach)
A firm may decide to enter a number of markets simultaneously in
order to leverage its core competence and resources rapidly across a
broader market base.
While increasingly feasible due to
developments in global information
technology, simultaneous entry into
multiple markets typically requires
substantial financial and
management resources and entails
higher operating risk.
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Concentration versus diversification
The firm must also decide whether to concentrate resources
on a limited number of similar markets, or alternatively to
diversify across a number of different markets.
 Concentration: A company may concentrate its efforts by
entering countries that are highly similar in terms of market
characteristics and infrastructure to the domestic market.
Management could also focus on a group of proximate
countries.
 Diversification: Alternatively, a company may prefer to
diversify risk by entering countries that differ in terms of
environmental or market characteristics.
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