Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected].

Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu

Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected]

HT EntrepreneurshipMay 6-7, 2008

Tuija Mainela

D.Sc., Professor of International Marketing

Department of Marketing

University of Oulu



Objectives and contents

Aim of the lectures

To create understanding of marketing and internationalization of HT firms

Describing typical features of HT marketing and internationalization

What kinds of issues make HT marketing especially challenging?

What kinds of customer strategies HT firms can utilize?

How HT firms create customer relationships in international markets?



Lecture I: Typical Characteristics of HT Businesses and

Specificities of HT Marketing



Key marketing tasks

to attract, establish contact with and keep customers

to perform business activities that direct the flow of goods and services from producer to consumer or user

to know and understand the customer so well that the product or service fits her/him and seems like selling itself



Exercise 1

Form teams of 2-3 persons

Discuss the features of HT business that create specific challenges to their marketing (10 min)

Develop a list of 5 most important features (5 min)

Characteristics of their business environment Characteristics of their products or services Characteristics of their customers



Characteristics of high tech businesses

High turbulence of business environment

difficulty of forecasting uncertainty and risks rapid changes obsolete technology -> going out of business decision making based on weak signals from the markets

Short product/service life cycles

new/better/more effective applications high development costs adoption times should be short dependence on the latest technologies self-evident



Fast growth

demand sometimes growing faster than supply

possible quick returns attract followers and copiers

Threat of too heavy product focus and technocracy

product developers rule also marketing

newest and most sophisticated technology seen always as the best solution

product development without customer contact

market analysis ignored



Born globals

niche type of markets real competition takes place in global markets

Mergers and acquisitions

small producers of special applications and services extremely important to a few big multinationals

securing critical supplies sharing product development costs and expertise



Characteristics of high tech markets

Market uncertainty

Technological uncertainty

Competitive volatility

HT marketing




New technologies risky investments Can they be commercialized? Will the new product function as promised? Will the new technology make our present technology obsolete?

Technological development takes often more time than expected Several bugs may be found when the product is already in the market



Market uncertainty New technologies difficult for the buyers to evaluate and

appreciate What needs might be met by the new technology? How large is the potential market? How will needs change and how fast will the innovation

spread? Will the market adopt industry standards?

Competitive volatility Who will be our competitors? What products will we compete with? What will be the tactics for competition?



Role of marketing with respect to market features


Speeding up the product launching (note! Bugs and beta versions)

Securing service for customers

User experience analysis (beta versions)

Market uncertainty Recognizing the market uncertainty customers face Reducing fear of bad choice and reducing uncertainty Market education

Competitive volatility Following the development also outside the industry Being aware of the alternative ways to satisfy the customer needs



Types of innovations and their marketing

Marketing strategy

Type of innovation-Incremental-Radical

Success of a new product

Contingency theory of HT Marketing

= Marketing tools matching the innovation type -> Odds of success increase

Match between customer and supplier perceptions -> Make marketing clearer



Note! Radical and incremental innovations are the extremes and most innovations are situated somewhere in between

Incremental

Extension of existing

Characteristics well defined

Low-cost production

Response to specific market need

”Demand-side” market

Customer pull

Radical

New technology + new market

R&D invention

Superior performance over ”old”

Specific market need of secondary concern

”Supply side” market

Technology push



Marketing of different types of innovations

Incremental

Objectives in terms of market share product positioning targeted segments

Competition Breath down our necks Cause short window of

opportunity Emphasize differentiation

Speed to market critical Market learning through

customer surveys Importance acknowledged

inside the firm Key customers known,

possibly the idea creators

Radical

Objectives broadly in terms of solving unsolved problems beginning a new platform

Competitors not known Will the technology work is the

critical question Close allies and partners used

to validate the concept Big need to convince various

stakeholders also inside the firm Application areas and early

potential users unclear and unfamiliar



Customer typesDiffusion of innovations (Rogers 1983; Moore 1991)

Innovators

Technology enthusiasts

•Just for technology

Early adopters

Visionaries

•Competitive advantage

Early majority

Pragmatists

•Proven applications

•productivity enhancement

Late majority

Conservatives

•Risk averse and technology shy

•Just to stay even

Laggards

Skeptics

•If all the other alternatives of action are certainly worrse

time



Example: possible customer segments in HT-markets

Consumers

M-advertising

service provider

M-ad

Focus of this study

Professionalservicerelationship

Advertising agency

M-advertiser

Interaction,Purchases

M-ad

M-ad system



Different types of customers for new mobile servicesResources & knowhow

Willingnessto invest

Motivated Pioneers

Technical Non-Experts

Profit Hungry

Idea Supporters



Different types of customers for new mobile servicesResources & knowhow

Willingnessto invest

Motivated Pioneers• Can imagine the possibilities• Want first-hand experience• Expect a lot from technology and user experience• Have both marketing and technological resources

Technical Non-Experts• Inexperienced electronic advertisers• Little time and other resources for testing -> impatient• Taking care of basic business the most important

Profit Hungry• Don’t yet see the opportunities• Don’t want to experiment• Have resources but don’t want to use them without proofs

Idea Supporters• Don’t really have resources• No view of the possibilities• Positive attitude towards experimenting



Exercise 2. Marketing to different customer types

What kind of a product/service package would you offer?What do these customers value in new HT products/services?What kind of marketing arguments could be effective?

Resources & knowhow

Willingnessto experiment

Motivated Pioneers

Technical Non-Experts

Profit Hungry

Idea Supporters



Lecture II: Internationalization of High-Tech Firms



Challenge: Distance between business partners

DISTANCE

GEOGRAPHIC

PHYSICAL TIME-time zones-conception of time-from contact to delivery

PSYCHIC TECHNOLOGICAL-product and process tech

CULTURAL-national-language-norms, values-political env.-economic env.

TRUST-BASED-firm-levela) competenceb) contractualc) goodwill

SOCIAL-individual level-knowledge oneach other-experience

Influence on:Transfer of productsTransfer of knowledge

Influence on:CommunicationTeam workUnderstanding needs of the other



Challence: Information needs in internationalization

3 types of knowledge:

Institutional knowledge Foreign institutions and their activities Laws and regulations

Business knowledge Knowledge on customers Knowledge on the needs of the customers Knowledge on the decision making processes of the customers

Internationalization knowledge Knowledge on internal resources (e.g. adoption capability) Knowledge on external resources



Basic assumptions in traditional internationalization

Market uncertainty Difficult to evaluate current and future market development Lack of market-specific knowledge

Market commitment Market uncertainty leads to minimum commitment of resources Increase in commitment leads to decrease in uncertainty

Knowledge Central regulator of market commitments Lack of knowledge creates uncertainty

Leads to gradual, experience-based internationalization



Basic assumptions in traditional internationalization

Operation strategy no regular exports exports via an agent sales unit manufacturing subsidiary

Market strategy company starts from a foreign market to which the psychic distance is

considered to be low

Factors explaining internationalization: Experience (”learning by doing”), psychic distance Development of internal knowledge and experience and other resources



Critics of process models from the HT-viewpoint

Deterministic, no room for strategic choice and decision making

Fits only to small firms Leapfrogging in the development processes

Phenomenon of ”born globals”

Early, significant internationalization of activities of the firm



Internationalization of born globals

From inception seek to derive significant competitive advantages from use of resources and sale of outputs in multiple countries

Traditional stepwise approaches in internationalization not followed

Why not?

highly competitive and turbulent environment

short life-cycles of the products & rapid speed of innovation

small domestic markets (niche-markets)

following growth opportunities

being close to particular customers

R&D cooperation to exploit the technological know-how



Exercise 1: What kind of factors favour born globals?

Form teams of 2-3 persons

Discuss the features of HT business that favour fast internationalization (10 min)

Develop a list of 5 most important features (5 min)

Characteristics of entrepreneurs Characteristics of production processes Characteristics of business environment



Internal drivers of Born Globals

Technically oriented, market oriented people

Entrepreneurial drive (search for opportunities, organizing, networking capability, ability to handle risks, innovativeness)

International experience and enthusiasm for internationalization of the managers

Basis in a significant product- or process innovation

Products with remarkable added value

Internationally recognized leadership in certain product category (specialization)

More resources than the average SMEs have



External drivers of Born Globals

− Success in foreign market entry more dependent on the relationships with current markets than on the chosen market and its cultural characteristics

• Existing relationships

• initial trigger to foreign market and entry mode selection

• e.g. a distributor taking contact

• Relying on trusted persons with e.g. common history

• offer contacts to customers• help to develop partners and positions

• provide access to local market knowledge• provide initial credibility• provide access to distribution channels

• may restrict the firms growth initiatives



Major network partners have a great influence

• Important to follow the “right” partner

• Great dependence

• Good in the beginning

• To compensate the limited marketing experience and infrastructure

Following the performance of the partners

• Unsatisfactory relationships terminated or replaced

• Not sufficiently committed or qualified

• Serving own interests through marketing policies

• Establishing own sales/service offices

• Developing new products for diversified markets

• Acquiring equity ownership in the partner

• To increase management control and market performance



Activities kept on oneself

• Core competence of software development

Activities given to/shared with the partners

• Market research

• Customer education and service

• Market intelligence

• Product modifications

• Technical service

• Pricing

• New market entry decisions

Along time firms develop in-house marketing and sales expertise• To preserve independence



To High Tech firms the network-based activities are almost unavoidable To realize innovations To get information and knowledge

To share costs and risks

Possible problems Lack of coordination of cooperation R&D cooperation takes time and results are to be seen slowly What information to share and what to keep on oneself



Networks and information for internationalization

Network relationships company-specific i.e. difficult to copy same information not available to everyone

relationships influence

availability of information: what is going on in the market?

timing of information: when does the information reach the firm?

spread of information: e.g. reference customers/ partners take care that the company is on view in positive way in the right place

central position in the network is relevant



Networks as a basis for born globals

Phase Dimension

I II III IV

Type of network

local networks communication networks

resource networks

business networks

Development driver

innovative milieu social relationships acting as if norms and structures

INV characteristic

technological breakthrough

past international experience networks

international bridge building

INV network coalition



Influence of social network on acquisition of knowledge for internationalization

Social networks

May initiate unplanned internationalization Tell about opportunities in foreign markets e.g. upcoming purchases Provide information to evaluate possible business partners Introduce you to a potential customer Informally market your products

May be the basis for initial market and operation mode selection Personal trust Common background e.g. Finnish HT-firm starting international business in Thailand

because of a previous colleague working there

When you hire a person you may hire his/her relationships also



Influence of social network on acquisition of knowledge for internationalization

Social Network

Introduction to potential

international partners

• Publicity• Contacts

• Legitimacy

Information aboutinternational

business opportunities

Initiation of Internationalisation

- establishing a business relationship with an international partner

Information aboutpotential

international business partners

Social Network

Introduction to potential

international partners

• Publicity• Contacts

• Legitimacy

Information aboutinternational

business opportunities

Initiation of Internationalisation

- establishing a business relationship with an international partner

Information aboutpotential

international business partners



Feedback

What do you consider as the most important/ interesting issue that you learned today or yesterday?

How did he different exercises influence your learning?

Faculty of Economics and Business Administration P.O. Box 4600, 90014 University of Oulu Tel. +358 8 553 2595, Fax. +358 8 553 2906 e-mail: [email protected].

Documents

business administration

features of ht business

faculty of economics

business activities

ht entrepreneurship

business decision making

understanding of marketing

key marketing tasks