STRATEGIES FOR SME INTERNATIONALISATION : STRATEGIES FOR SME INTERNATIONALISATION Exporting
International niche marketing
Domestically delivered or developed niche services
Direct marketing including electronic commerce
Participation in the international supply chain ch6_2
KEY MOTIVATORS TO INTERNATIONAL MARKETING : KEY MOTIVATORS TO INTERNATIONAL MARKETING Reactive stimuli:
adverse domestic market conditions
opportunity to reduce inventories
availability of production capacity
favourable currency movements
opportunity to increase the number of country markets and reduce market related risk
unsolicited orders from overseas customers Proactive stimuli:
attractive profit and growth opportunities
ability to easily modify products for export markets
public policy programmes for export promotion
foreign country regulations
possession of unique products
economies resulting from additional orders
Managerial elements:
presence of export minded manager
opportunity to better utilise management talent and skills
management believes about the value of exporting ch6_3 Source: Katsikeas (1996)
THE DIFFERENCE BETWEEN EXPORTING & INTERNATIONAL NICHE MARKETING : THE DIFFERENCE BETWEEN EXPORTING & INTERNATIONAL NICHE MARKETING ch6_6 Marketing strategy
Financial objective
Segmentation
Pricing
Management focus
Distribution
Market information
Customer
relationship Selling production capacity
To amortise overheads
Usually by country and customer characteristics
Cost based
Efficiency in operations
Using existing agents or distributors
Relying on agent or distributor feedback
Working through intermediary Meeting customer needs
To add value
By identifying common international customer benefit
Market or customer based
Meeting market requirements
Managing the supply chain
Analysing the market situation and customer needs
Building multiple level relationships Exporting International Marketing
FACTORS AFFECTING SME INTERNATIONALISATION : FACTORS AFFECTING SME INTERNATIONALISATION ch6_7 Generic
Strategy SME
Internationalisation
Strategy Country
Selection Market
Factors Company
Factors Segmentation, Targeting, Positioning Motivations
Barriers
Support Network Customer
Segment Owner’s ambition,
capabilities and
attitude to risk Industry
Competitive
Structure Stage of
Internationalisation
GEOGRAPHIC DEVELOPMENT OF SMEs : GEOGRAPHIC DEVELOPMENT OF SMEs ch6_11 Birth Domestic Supply
Chain Concentration Network Expansion Global Regional Piggybacking on OEM
internationalisation High tech firms,
born globals,
direct marketing,
eCommerce Home market
is trading bloc Contracts through
family, friends,
business &
supply chains
OUTSOURCING FOR SMES : OUTSOURCING FOR SMES Advantages
opportunities for learning from OEM (Original Equipment Manufacturer)
security of reliable and predictable ordering
able to focus on production and technical issues Disadvantages
need for dependence on one/two major customers
internationalisation driven by demands of OEM
continual pressure to improve product and operations
weakening external marketing ch6_14
MEANING OF ‘GLOBALISATION’ : MEANING OF ‘GLOBALISATION’ Market access
Market opportunities
Industry standards
Sourcing
Products & services
Technology
Customer requirements Competition
Co-operation
Distribution
Communication
The company’s strategy, business programmes & processes ch7_2
WIDE STRATEGIES : WIDE STRATEGIES ch7_7 Multi-Domestic Regional Global One Global
Segment Region is One
Market Individual
Country
Strategy Transnational
Strategy Standardised Identity & Values
With Composite Strategies
CONTINUUM OF STANDARDISATION : CONTINUUM OF STANDARDISATION ch7_8 Pricing
Distribution
Sales Force
Sales Promotion
Product
Image
Objectives
Strategy Differentiation Standardisation
GLOBALISATION PUSH & PULL FACTORS : GLOBALISATION PUSH & PULL FACTORS ch7_9 Source: Meffet and Bolz (1993) in Hallibuton and Hunerberg (eds) European Marketing Readings and Cases Addison Wesley 1993 ‘Globalisation Pull’ ‘Globalisation Push’ Globalisation of Markets
Homogenisation of demand
Global market segments
Globally active customers Marketing Standardisation
Programme standardisation
Process standardisation Globalisation of Industries
R&D expenses
Reduced pay back cycles
Experience curve effects Globalisation of Competitors
Market interdependence
Global competitors
Cross subsidisation
FORCES DRIVINGA MULTI-DOMESTIC APPROACH : ch7_10 FORCES DRIVINGA MULTI-DOMESTIC APPROACH Industry standards remain diverse
Customers continue to demand locally
Being an insider remains critically important
Global organisations are difficult to manage
Management myopia
DEMAND FOR CUSTOMISED SOLUTIONS : DEMAND FOR CUSTOMISED SOLUTIONS customers cannot be classified into simple, stable segments
the customer in not monodimensional
desires guide consumption
functional and techonolgoical attributes of products or services are balanced by its aesthetics and cultural attributes
quality is now more subjective
a wide permanent variety of products is required
the quest for authenticity orientates consumption ch7_13 Source: Halliburton (1994)
MARKET ENTRY METHODS & THE LEVELS OF INVOLVEMENT IN INTERNATIONAL MARKETS : MARKET ENTRY METHODS & THE LEVELS OF INVOLVEMENT IN INTERNATIONAL MARKETS ch8_2 Wholly-owned subsidiary
Company acquisition
Assembly operations
Joint venture
Strategic alliance
Licensing
Contract manufacture
Direct marketing
Franchising
Distributors and agents
Sales force
Trading companies
Export management companies
Piggyback operations
Domestic purchasing Levels
of
involvement
SUCCESSFUL MARKET ENTRY #1 : SUCCESSFUL MARKET ENTRY #1 Criteria for Selecting Appropriate Market Entry Method
The company objectives and expectations relating to the size and value of anticipated business
The size and financial resources of the company
Existing foreign market involvement
The skills, abilities and attitudes of the company management towards international marketing
The nature and power of the competition with the market ch8_3
SUCCESSFUL MARKET ENTRY #2 : SUCCESSFUL MARKET ENTRY #2 Criteria for Selecting Appropriate Market Entry Method
The nature of existing and anticipated tariff and non-tariff barriers
The nature of the product itself, particularly any areas of competitive advantage, such as trademark or patent protection
The timing of the move in relation to the market and competitive situation ch8_4
INDIRECT EXPORTING #1 : INDIRECT EXPORTING #1 Domestic Purchasing
Foreign organisation purchases the product for export to another country
Gives access to and limited knowledge of the international market
Little control over choice of markets entered
For longer term, need a more proactive approach
Export Management Companies (EMCs)
Specialist companies act as the export department for a range of companies
Help SMEs to initiate/develop/maintain international sales
Deal with documentation, government regulation ch8_6
INDIRECT EXPORTING #2 : INDIRECT EXPORTING #2 Trading Houses
Their extensive operations and controls enable operation in more difficult trading areas
Manage countertrade activities
Piggy Backing
An established international distribution network of one manufacturer used to carry products of a second
Particularly good for firms from developing countries
Often poorly considered terms and conditions ch8_7
IMPORTANT FACTORS FOR SUCCESSFUL EXPORTING : IMPORTANT FACTORS FOR SUCCESSFUL EXPORTING commitment of the firm’s management
exporting approach reliant on strong skills base
good marketing and information communication system
production capacity & capability, product superiority, competitive pricing
effective market research
effective national export policy ch8_10 Source: Katsikeas et al (1996)
AGENTS #1 : AGENTS #1 Selection Criteria for Finding a Suitable Agent
Financial strength of the agent
Their contacts with potential customers
The nature and extent of their responsibilities to other organisations
Their premises, equipment and resources (including sales representatives) ch8_11
AGENTS # 2 : AGENTS # 2 Achieving Satisfactory Manufacturer-agent Relationship
Allocate time and resources to find a suitable agent
Ensure that both understand what each expects of the other
Ensure that the agent is motivated to improve performance
Provide adequate support on a continuing basis
Ensure that there is sufficient advice and information transfer in both directions ch8_12
REASONS FOR SETTING UP OVERSEAS MANUFACTURE : REASONS FOR SETTING UP OVERSEAS MANUFACTURE Nature of product e.g. perishable
Costs of transporting and warehousing
Barriers to trade e.g. tariffs and quotas
Government regulations e.g. local investment
Local manufacture viewed favourable by market
Contributions to local economy
Market information feedback
International culture in firm
Faster response and just-in-time delivery
Lower labour cost ch8_13
FOREIGN MANUFACTURING STRATEGIES WITH DIRECT INVESTMENT : FOREIGN MANUFACTURING STRATEGIES WITH DIRECT INVESTMENT Reasons for investment in local operations
To gain new business: local production demonstrates strong commitment
To defend existing business
To move with an established customer
To save costs: e.g. labour, raw materials and transport
To avoid government restrictions ch8_16
DRIVING FORCES FOR THE FORMATION & OPERATION OF STRATEGIC ALLIANCES : DRIVING FORCES FOR THE FORMATION & OPERATION OF STRATEGIC ALLIANCES Insufficient resources
Pace of innovation and market diffusion
High research and development costs
Concentration of firms in mature industries
Government co-operation
Self protection
Market access ch8_18