international marketing strategy

International Marketing : 

International Marketing 1

Definition : 

Definition International Marketing is the performance of business activities designed to plan, price, promote, and direct the flow of a company’s goods & services to consumers or users in more than one nation for a profit. 2

BCG Matrix : 

BCG Matrix 3

PEST Analysis : 

PEST Analysis 4

Slide 5: 

Industry General Competitive The Database Identify and quantify relevant factors Identify, quantify and timefy the impact of the relevant factors Draw scenarios, forecast and / or profiles Other Factors The Environmental Radar Scan the environment continuously. The environment must be continuously scanned for getting accurate and reliable information about the market. 5

Slide 6: 

Strategy formulation is dependant on the market, internal analysis and competitor analysis. Marketing Strategy formulation an approach. Segmentation Logic/Size/Growth Key Success Factors Trends/Opportunities. Positioning Competitive Advantages/ disadvantages Strategic gaps (e.g. product gaps) Strategy Synthesis Target Segments Business Strategy Value Added Structure Financial Objective Strategy Vision/Strategy Systems/HR/Operations Processes .. .. .. Input from other sources Manufacturing / Sales / Service Portfolio considerations. Input from Parent company Regional / Global Strategy Regional/global Value Added Structure Financial Targets 6

Slide 7: 

Strategy formulation involves a seven step approach. 1 Market Mapping 2 Market Sizing 3 Forecasting 4 Identification of the changing market requirements and key success factors 5 Analysis of competition 6 Identification of imperatives for each business unit 7 Synthesis of imperatives for the entire product portfolio A suggested approach for each business unit Source Booz Allen and Hamilton – Strategy formulation paper. Market Assessment Competitive Assessment 7

Slide 8: 

Understanding the seven steps of strategy formulation. A suggested approach for each business unit Source Booz Allen and Hamilton – Strategy formulation paper. Objective : to gain an understanding of product segments, user groups and channels Key Activities Segment product range in terms of:-- -Technical specifications -Applications -Value demanded -Geographic - .. .. .. Identify the user groups and match with the applications and segments Understand the channel structure -by product segments, -by user groups etc. Data Source Channel Interviews Key customer interviews Internal Company Interviews Published product information Deliverables Detailed map of the product segments, channels and user groups Understanding of product segment / channel / user group links etc. 8

Slide 9: 

Understanding the seven steps of strategy formulation. A suggested approach for each business unit Source Booz Allen and Hamilton – Strategy formulation paper. Objective : to quantify the relative importance of product segments, user groups and channels Key Activities Determinants of the total market size of each product segment -Estimate the demand and the growth of each user group Quantify the importance of the different channels. Map the quantified product segment flows through the channels to user groups. Data Source Channel Interviews Key customer interviews Internal Company Interviews and sales data Published and unpublished information from industry associations and analyst reports. Deliverables Quantified product flow from the marketer / manufacturer to the user groups through the various channels. 9

Slide 10: 

Understanding the seven steps of strategy formulation. A suggested approach for each business unit Source Booz Allen and Hamilton – Strategy formulation paper. Objective : to develop a 3 to 5 year forecast by product segment and also by user groups. Key Activities Determine historic key demand drivers: -for each product segment -for each user group Analyze the potential changes in demand drivers in future Develop a 3 to 5 year forecast for each product group / user group depending on the demand drivers (using the qualitative techniques and / or quantitative techniques. Establish process requirements to capture the relevant information periodically. Data Source Channel Interviews Key customer interviews Internal Company Interviews and sales data External interviews with industry experts as well as with competitors if possible. Published and unpublished information from industry associations, analyst reports, RBI reports, CMIE / Capital Line etc. Other statistical information. Deliverables 3 to 5 year forecast for each product segment and major user group. Establish process requirements to capture the relevant information periodically. 3 Forecasting 10

Slide 11: 

Understanding the seven steps of strategy formulation. A suggested approach for each business unit Source Booz Allen and Hamilton – Strategy formulation paper. Objective : to understand the future key success factors in each business. Key Activities Identify current success factors: Product Range Cost Position -Technological Position -Channel access -Established brand position -Service offering (e.g. logistics, after sales service etc etc. ) Identify the changing requirements w.r.t. customer demand, channel structure, price levels etc. Data Source Channel Interviews Key customer interviews Internal Company Interviews and sales data External interviews with industry experts as well as with competitors if possible. Deliverables Understanding parameters which are required to succeed in the market and capture the growth potential. 4 Identification of the changing market requirements and key success factors 11

Slide 12: 

Understanding the seven steps of strategy formulation. A suggested approach for each business unit Source Booz Allen and Hamilton – Strategy formulation paper. Objective : to understand the intentions, investments and the relative strengths of key competitors (including cost structure, channels, product portfolios etc.) Key Activities Understand the likely development of the tariff structure and its impact on the competitive environment. Map the competitive environment of the established and the new competition (including imports) in terms of product range, channel structure, relative market position / market share etc. Match the competitors’ capabilities against future success factors w.r.t. product range, product technology, cost position, channel access, channel cost, service offerings (e.g. logistics, etc) Data Source Channel Interviews Key customer interviews Internal Company sales interviews External interviews with industry experts as well as with competitors if possible. Press Reports Analysts reports Deliverables Understanding future competitive environment.. Understanding the likely WINNERS and their competitive strengths. 12

Slide 13: 

Understanding the seven steps of strategy formulation. A suggested approach for each business unit Source Booz Allen and Hamilton – Strategy formulation paper. Objective : to identify key improvement opportunities to capture the market. Key Activities Identify the key imperatives to succeed in the market place especially w.r.t. -adjustment in the product range -adjustment in the manufacturing blue print -adjustment in the cost structure -changes in the sales organization -changes in the channel structure -changes in the overall service offering (training of customers / internal personnel / information / after sales etc. -changes in the logistic structure etc etc Data Source Workshop with senior business line managers based on the insights from the market assessment and the competitive analysis. Deliverables Identify key improvement opportunities as a base for implementation initiatives. 13

Slide 14: 

Understanding the seven steps of strategy formulation. A suggested approach for each business unit Source Booz Allen and Hamilton – Strategy formulation paper. Objective : to identify the synergy potential of the various improvements across the total product portfolio. Key Activities Identify common themes in the various business segments: -Channel management -sales force management -Service management -logistic management etc. etc. Assess the potential to address these imperatives across all business units by -combining resources -leveraging common customer relationship (key accounts) .. .. .. Data Source Workshop with senior management based on the insights from the market assessment and the competitive analysis. Deliverables Identified areas where common improvement opportunities exist across all the product portfolio. 14

Foreign Uncontrollables : 

Foreign Uncontrollables Political / Legal Forces Economic Forces Competitive Forces Level of Technology Geography & Infrastructure Cultural Forces 15

Stages of Development of Company in Intl Mktg : 

Stages of Development of Company in Intl Mktg Ethnocentric Polycentric Regiocentric Geocentric 16

Entry Strategies in International Market… : 

Entry Strategies in International Market… Decision of which foreign markets to enter, when to enter & on what scale Choice of entry mode - Exporting, Licensing or franchising, Joint Ventures, Wholly owned subsidiary, Acquire established enterprise Advantages & disadvantages – depend on transport costs, trade barriers, political & economic risk, costs & firm strategy 17

Basic Market Entry Decision- Which Market : 

Basic Market Entry Decision- Which Market Different long-run profit potential for firms Size of market Purchasing power (present wealth) Future wealth Balance cost & risks – rank markets Future economic growth rates Free market system & country’s capacity for growth Favorable = Stable and developing markets without upsurge in inflation rates or private-sector debt Value an international business can create in a market Suitability of product for market Nature of indigenous competition Not widely available & satisfies an unmet need Greater value = ability to charge higher prices & build sales volume more rapidly 18

Entry Modes - Exporting : 

Entry Modes - Exporting Advantages Avoids the often substantial cost of establishing manufacturing May help firm achieve experience curve & location economies Firm may manufacture in centralized location & export to other national markets to realize scale economies from global sales volume (Sony/TV, Matsushita/VCR, Samsung/Chips) Disadvantages Not appropriate if lower cost manufacturing locations High transport costs can make exporting uneconomical especially bulk products Tariff barriers can make exporting uneconomical Can set up wholly owned subsidiaries to handle local marketing & sales -> can exercise tight control while reaping cost advantage of manufacturing in a single location 19

Entry Modes – Turnkey Project : 

Entry Modes – Turnkey Project Advantages Means of exporting process technology (chemical, pharmaceutical, petroleum, mining) Know-how to assemble & run technologically complex process is valuable asset – earn economic benefit from asset Strategy useful where governments restrict FDI - less risky than conventional FDI Disadvantages Firm has no long term interest in the country – can take minority equity interest in company Firm may inadvertently create a competitor (middle east oil refineries) If firm’s process technology is a source of competitive advantage, then selling technology is also selling competitive advantage to potential competitors 20

Entry Mode - Licensing : 

Entry Mode - Licensing Advantages Receive royalties for granting the rights to intangible property to licensee for specified period (patents, inventions, formulas, processes, designs, copyrights, trademarks) Licensee puts up most of the capital to get the operations going – mitigates development cost & risk Allows firm to participate where there are barriers to investment (Fuji-Xerox) Frequently used when firm possesses intangible property but does not want to develop the business application itself (Coco-Cola/clothing) Primarily used by manufacturing firms Disadvantages Does not give firm tight control over manufacturing, marketing & strategy to realize experience curve & location economies Does not allow firm to coordinate strategic moves across countries by using profits earned in one country for competitive attacks in another Firms can lose control over the competitive advantage of their technological know-how. Cross-licensing can mitigate risk by holding each other hostage for misuse Firms can reduce risk by forming a joint venture with each party taking equity stakes 21

Entry Mode - Franchising : 

Entry Mode - Franchising Advantages Involves longer term commitment than licensing. Primarily used by service firms (McDonalds) Franchiser sells intangible property (trademark) & insists franchisee agrees to abide by strict business rules (location, methods, design, staffing, supply chain) Royalty payments that are some percentage of franchisee’s revenues Firm relieved of many costs & risks of opening new market. Disadvantages No manufacturing so no location economies & experience curve May inhibit the ability to take profits out of one country to support competitive attacks in another Risk of worldwide reputation if no quality control Firm can set up “master franchise” in each country – subsidiary which is JV (McDonalds & local firm) 22

Entry Mode – Joint Ventures : 

Entry Mode – Joint Ventures Advantages Typically 50/50 with contributed team of managers to share operating control Firm benefits from local partner’s knowledge of competitive conditions, culture, language, political system & business system Sharing market development costs & risks with local partner In some countries, political considerations make JVs the only feasible entry mode Disadvantages Risk of giving away your technology to a partner Hold majority ownership for more control in venture Wall-off technology that is central to your core competency Does not give firm control over subsidiaries that it might need to realize experience curve or location economies Global strategic coordination – firm use JV for checking competitor market share and limiting cash available for invading other markets (TI & Japan) Shared ownership can lead to conflicts & battles for control if goals/objectives change or they take different views on strategy 23

Entry Mode – Subsidiary : 

Entry Mode – Subsidiary Advantages When there is technological competence wholly-owned subsidiary reduces risk over losing control Give firm tight control over operations in country -> engage in strategic coordination with profits Can realize location & experience curve economies – centrally determined decisions Disadvantages Most costly method of market entry Risk associated with learning to do business in a new culture 24

Greenfield or Acquisition : 

Greenfield or Acquisition Greenfield better ability to build organization you want Easier to establish own culture & operating routine Do not have revenue & profit history Slower to establish – need to understand how to do business in that country Acquisition 50%-80% of FDI is acquisition Quick to execute – rapidly build presence Acquisitions can preempt competition Buying known revenue & profit stream Need to marry divergent corporate cultures 25

Pricing Strategies : 

Pricing Strategies 26

Pricing Strategies : 

Pricing Strategies 27

Penetration Pricing : 

Penetration Pricing 28

Penetration Pricing : 

Penetration Pricing Price set to ‘penetrate the market’ ‘Low’ price to secure high volumes Typical in mass market products – chocolate bars, food stuffs, household goods, etc. Suitable for products with long anticipated life cycles May be useful if launching into a new market 29

Market Skimming : 

Market Skimming 30

Market Skimming : 

Market Skimming High price, Low volumes Skim the profit from the market Suitable for products that have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out) Examples include: Playstation, jewellery, digital technology, new DVDs, etc. 31 Many are predicting a firesale in laptops as supply exceeds demand. Copyright: iStock.com

Value Pricing : 

Value Pricing 32

Value Pricing : 

Value Pricing Price set in accordance with customer perceptions about the value of the product/service Examples include status products/exclusive products 33 Companies may be able to set prices according to perceived value.

Loss Leader : 

Loss Leader 34

Loss Leader : 

Loss Leader Goods/services deliberately sold below cost to encourage sales elsewhere Typical in supermarkets, e.g. at Christmas, selling bottles of gin at £3 in the hope that people will be attracted to the store and buy other things Purchases of other items more than covers ‘loss’ on item sold e.g. ‘Free’ mobile phone when taking on contract package 35

Psychological Pricing : 

Psychological Pricing 36

Psychological Pricing : 

Psychological Pricing Used to play on consumer perceptions Classic example – Rs 99 instead of Rs 999! Links with value pricing – high value goods priced according to what consumers THINK should be the price 37

Going Rate (Price Leadership) : 

Going Rate (Price Leadership) 38

Going Rate (Price Leadership) : 

Going Rate (Price Leadership) In case of price leader, rivals have difficulty in competing on price – too high and they lose market share, too low and the price leader would match price and force smaller rival out of market May follow pricing leads of rivals especially where those rivals have a clear dominance of market share Where competition is limited, ‘going rate’ pricing may be applicable – banks, petrol, supermarkets, electrical goods – find very similar prices in all outlets 39

Tender Pricing : 

Tender Pricing 40

Tender Pricing : 

Tender Pricing Many contracts awarded on a tender basis Firm (or firms) submit their price for carrying out the work Purchaser then chooses which represents best value Mostly done in secret 41

Price Discrimination : 

Price Discrimination 42

Price Discrimination : 

Price Discrimination Charging a different price for the same good/service in different markets Requires each market to be impenetrable Requires different price elasticity of demand in each market 43 Prices for rail travel differ for the same journey at different times of the day

Destroyer Pricing/Predatory Pricing : 

Destroyer Pricing/Predatory Pricing 44

Destroyer/Predatory Pricing : 

Destroyer/Predatory Pricing Deliberate price cutting or offer of ‘free gifts/products’ to force rivals (normally smaller and weaker) out of business or prevent new entrants Anti-competitive and illegal if it can be proved 45

Absorption/Full Cost Pricing : 

Absorption/Full Cost Pricing 46

Absorption/Full Cost Pricing : 

Absorption/Full Cost Pricing Full Cost Pricing – attempting to set price to cover both fixed and variable costs Absorption Cost Pricing – Price set to ‘absorb’ some of the fixed costs of production 47

Marginal Cost Pricing : 

Marginal Cost Pricing 48

Marginal Cost Pricing : 

Marginal Cost Pricing Marginal cost – the cost of producing ONE extra or ONE fewer item of production MC pricing – allows flexibility Particularly relevant in transport where fixed costs may be relatively high Allows variable pricing structure – e.g. on a flight from London to New York – providing the cost of the extra passenger is covered, the price could be varied a good deal to attract customers and fill the aircraft 49

Marginal Cost Pricing : 

Marginal Cost Pricing 50 Example: Aircraft flying from Bombay to New Delhi – Total Cost (including normal profit) = Rs15,000 of which Rs13,000 is fixed cost Number of seats = 160, average price = Rs9375 MC of each passenger = 2000/160 = £12.50 If flight not full, better to offer passengers chance of flying at £12.50 and fill the seat than not fill it at all!

Contribution Pricing : 

Contribution Pricing 51

Contribution Pricing : 

Contribution Pricing Contribution = Selling Price – Variable (direct costs) Prices set to ensure coverage of variable costs and a ‘contribution’ to the fixed costs Similar in principle to marginal cost pricing Break-even analysis might be useful in such circumstances 52

Target Pricing : 

Target Pricing 53

Target Pricing : 

Target Pricing Setting price to ‘target’ a specified profit level Estimates of the cost and potential revenue at different prices, and thus the break-even have to be made, to determine the mark-up Mark-up = Profit/Cost x 100 54

Cost-Plus Pricing : 

Cost-Plus Pricing 55

Cost-Plus Pricing : 

Cost-Plus Pricing Calculation of the average cost (AC) plus a mark up AC = Total Cost/Output 56

Influence of Elasticity : 

Influence of Elasticity 57

Influence of Elasticity : 

Influence of Elasticity Any pricing decision must be mindful of the impact of price elasticity The degree of price elasticity impacts on the level of sales and hence revenue Elasticity focuses on proportionate (percentage) changes PED = % Change in Quantity demanded/% Change in Price 58

Influence of Elasticity : 

Influence of Elasticity Price Inelastic: % change in Q < % change in P e.g. a 5% increase in price would be met by a fall in sales of something less than 5% Revenue would rise A 7% reduction in price would lead to a rise in sales of something less than 7% Revenue would fall 59

Influence of Elasticity : 

Influence of Elasticity Price Elastic: % change in quantity demanded > % change in price e.g. A 4% rise in price would lead to sales falling by something more than 4% Revenue would fall A 9% fall in price would lead to a rise in sales of something more than 9% Revenue would rise 60