International Marketing Lecture 4

Identifying International Market Opportunities and Undertaking Market Research

International Marketing 463-441Lecture 4

Undertaking Market Research

Identifying International Market Opportunities(Various Approaches)

Market Research

Marketing Managers

Analysis Planning Implementation Organisation Control

Internal Databases

Market Intelligence

Information Analysis

Marketing Research

Developing Needed Information

DistributionInformation

AssessingInformation

Needs

Marketing Environment

Target Markets Marketing Channels Competitors Publics Macro environment forces

Developing Market Opportunities and Strategies

Market Segmentation

Identify bases for segmenting the market

Develop segment Profiles

Market Targeting

Develop Measure of segment attractiveness

Select target segment

Market Positioning

Develop positioning for market segments

Develop a marketing mix for each segment

Major Segment Variables for Consumer Markets

Geographic VariablesWorld Region and/or country

City and/or regionDensityClimate

DemographicAge, gender, family size, family life cycle, income, occupations, education, religion, race, generation, nationality

PsychographicSocial class, lifestyle, personality

BehaviouralTypes of occasions and festivals, existing market cultures, user status, loyalty status,

concept readiness stage, attitude towards products

Existing Product Sales, Market share, Growth and Decline,Relative market sizes, etc.

Defining the problem and research objectives

Developing the research plan for collecting information

Implementing the research plan – collecting and analysing the data

Interpreting and reporting the findings

Primary Data Collection

Observation, Survey, ExperimentResearch Approach

Mail, Telephone, Personal, OnlineContact Methods

Sampling Plan Sampling unit, Sample size, Sampling Procedure

Research Instruments Questionnaire, Mechanical Instruments

Strengths and Weaknesses of Each Method

Mail Telephone Personal Online

Flexibility Poor Good Excellent Good

Quantity of data that can be collected

Good Fair Excellent Good

Control of interviewer effects

Excellent Fair Poor Fair

Control of sample Fair Excellent Fair Poor

Speed of data collection

Poor Excellent Good Excellent

Response Rate Fair Good Good Good

Cost Good Fair Poor Excellent

Types of Samples

Simple Random Sample

Every member of the population has a known and equal chance of selection

Stratified Random Sample

The population is divided inot mutually exclusive groups (such as age groups) and random samples are drawn from each group

Cluster (area) Sample

The population is divided into mutually exclusive groups (known as blocks) and the researcher draws a sample of the groups to interview

Probability Sample

Nonprobability Sample

Convenience Sample

The researcher selects the easiest population members from which to obtain information, using their own judgment as to which members are good prospects to collect information.

Judgment Sample The researcher finds and interviews a prescribed number of people in each of several catagories.

Steps in the Market Research Process

1. Define the research problem and establish research objectives2. Determine the sources of information to fulfill the research objectives

3. Consider the costs and benefits of the research effort4. Gather the relevant data from primary or secondary sources, or both

5. Analyse, interpret and summarize the results6. Effectively communicate the results to the decision makers

Cateora and Graham pp. 216-221

Measuring Market Segments

Must attempt to determine how big is the actual market

Technique Method Impact

Multifactor Analysis Analysing the target market potential by comparing it to the US economy

A real assessment of the target market, subject to cultural differences

Coefficient of Income Sensitivity

Evaluating the target market economy by detecting marginal changes and their implications

A good estimate of the expected changes in the target market

Trend Analysis Looking at the performance of the target market, projecting into the future

A simple way of estimating the target market growth

Macrosurvey Observing relative level of development of the target market to decide how ready it is for products

A crude method of determining the quality of the target market and its potential

Approaches to Estimating Market Sizes (making assumptions)

Multifactor Analysis

Evaluate a market on the basis of the size of another market. Utilize indicators like refrigerator ownership, per capita, TV sets

Per capita, establishing a quality index for the target market.

i.e., US is 100%, target market may have index of 15%Population of target market x as percent of US market.

Adjusted market figure x by sales of refrigerator, TV sales in US.

If the quality of the market is 15% of the US and population 10% of the USThe market potential is

0.15 x 0.10 = 0.015% or 1.5% of the US

Coefficient of Income Sensitivity

As income of a target market is set to change, the impact of the change is not homogeneous.

A 1% change in income may bring a 27% increase in food items and a 2% decline in public transportation.

Trend Analysis

Using past information about a target market’s income and Consumption patterns, by using trend analysis, this information

Can be projected into the future.

Macrosurvey

In countries where inadequate data exists, can observe how advancedCommunities are. Then approximate the level of advancement of these

Communities.

Focus Groups

A simple product checklist

Is there a need or demand?

Can the product be produced in the target market?

Can we distribute efficiently?

Can we price the product attractively?

Can our partner play the needed critical roles?

Can we compete with local competition?

Can we preempt future competition?

Identifying International Market Opportunities

Ideas Opportunities Solutions Realisation Performance

Spots Evaluates Selects Targets

Creativity Innovation Strategic Thinking

Management Capability

Capabilities Governing Competitive Scope

Competitive Advantage

Costs: to customers Knowledge: Industry/market/technical/p rocess Relationships: Customers/suppliers/distri butors/relative power Structure: Ability

Differentiation

Competencies Entrepreneurial, Opportunity

Identification, Network, Conceptual, Organisational, Strategic, Commitment,

Resources

Where the business is

currently performing

The base potential for development

The process of product/market development

The Outcomes

(potential targets)

Siz

e an

d de

pth

of c

hang

e

Tim

e

Key internal influences on the development process

Key external influences on the development process

Gibb & Scott 1988

Performance Base

Profile of business in terms of performance:

• Market trends: current product mix, market mix, competition

• Production trends: Utilisation, efficiency, quality

•Financial and Management: net worth, liquidity, gearing, trends

Key internal influences on the development process

Administrative, marketing, production and Managerial resources and capabilities.

Key external influences on the development process

Competition, market restrictions

All influence the type of product and market development that will take place

Personal

Objectives

Business

Objectives

Strategies & Tactics

Operating

Needs

Products

Manpower

Finance

Operating

Budgets

Feedback loops

Business Analysis: Strengths and Weaknesses

Product: 4 Ps or 4 customer wants Profit/Cash flow: its sources and uses

People: Management and Skills Facilities: age, technology and utilisation

Environmental Analysis: Threats and Opportunities

Market: product position and prospects Competition: Traditional, new firms, new

industries, profits

Technology: Changes and developments The Economy: Growth, inflation, Law

Burns & Dewhurst 1993

Sources of Competitive Advantage

(The reason for any product development in a company)

Costs:Importance of price to customers, distributors, the extend of demand elasticity

Knowledge: Stage of industry lifecycle, common industry knowledge verses your own specialised knowledge

Relationships:Links with customers, suppliers, distributors, relative power

Structure:Appropriate organisational structures, Ability to respond to market, leadership.

Technology State of the art and emerging technology Re-evaluating existing technology

Product Opportunity

Gap Economic State of the economy Shift in focus on where to spend money Level of disposable income

Social Social and cultural trends and drivers. Reviving historical trends

Cagan, J. and Vogel, C., M., (2002),

Many Factors Change Markets and Give rise to Opportunities

Areas of Firm Innovation

Pioneers Early followers

Early

Majority

Late

Majority

Late

Followers

Product LifecyclePotential Profitability

Time

Concept

Risk Taking

Competitive

Risk Taking

IP Value &

NoveltyIP Value

Prof

it

Sty

le

TechnologyLow High

Lo

wH

igh

Hotel Coffee Shop

Kedai Kopi Fast Food

Coffee Bean

Technology/Market Positioning

Table 6.1. Drucker’s Sources of Innovation

Source Explanation Examples

The unexpected success, failure

or external occurrence

Success of a revolutionary product or the application of technology from one industry to another, sudden or unnoticed demographic changes caused by wars, insurgencies, migration, etc.

Apple computerRapid decline of Proton’s market share

An incongruity between reality as it actually is

and what it ought to be

A change that is already occurring or can be made to occur within an industry. It may be visible to those inside the industry, often overlooked or taken for granted.

Sugar free products and sugar replacements due to concern for healthIncreasing demand for travel and holidays due to increasing incomes and leisure time

Inadequacy of an existing

technology or business process

An improvement in process that makes consumers more satisfied based on an improvement or change in technology.

Caffeine free productsMicrowave ovensMobile phones

Changes in industry or

market structure

New ways and means of undertaking business based on identified opportunities or gradual shifting of the nature of the industry.

Health care industryEducation industry – private education

Perceptual changes

Changes in peoples awareness founded on new knowledge and/or values or growing affluence leading to new fashions and tastes

Leisure and exercise industry aerobics & gyms

Demographic changes

Gradual shift of demographics in population by age, income groups or ethnic groups, etc

Establishment of more retirement homes

New knowledge New knowledge or application of existing theoretical knowledge into an existing industry that can create new products not previously in existence

Video and VCD industryRoboticsBiotechnology

Types of InnovationType Description ExamplesInvention Totally new product Wright Bros – plane Edison – light bulb Bell – telephoneExtension New use or different application Kroc – McDonald’s of an already existing product Bushnell – Atari Wilson – Holiday InnDuplication Creative replication of an Wal Mart – Dept Stores existing concept Pizza Hut – Pizza restaurantSynthesis Combination of existing Smith - Fedex concepts and factors Merryil Lynch – Home equity into new use Financing

Dispelling the myths about innovation

• Most new products are incremental steps in enhancement, rather than something

completely new (similar to the automobile industry)

• Very few really novel innovations are

ever launched commercially

• Most companies are followers and not

innovators (even the Body Shop)

• Out of 100 new ideas, less than 2 become a commercial reality

•Less than 5% of new products launched

on the market are successful

Sources of Innovation

Drucker (1984) Identified seven sources of innovation

Unexpected occurrences unexpected success

Unexpected failure

Incongruities

Process needs

Demographic changes

Industry and Market Changes

Perceptual changes

Knowledge based concepts

Types of Innovation

InventionTotally new product

ExtensionNew use or different application of an already existing product

DuplicationCreative replication of an existing concept

SynthesisCombination of existing concepts and factors into new use

Other Examples

Teflon

Unexpected occurrences

incongruities

incongruities

incongruities

Process Needs

Industry Changes

Demographics

changes in perceptions

New knowledge

Principals of Innovation

• Scan opportunities through purposeful processes

• Be both conceptual and perceptual – get out into industry

• To be effective, it has to be simple and focused – has to be used by average people

• Pursue ideas that are going to make major change

• Market knowledge is important

New Knowledge Innovation is the most risky

Better to focus on other sources of innovation: ie, applications of existing ideas and technologies as new knowledge technology development is extremely long term.

Bright ideas are the riskiest source of innovation and rarely succeed. Receptability is always the problem (look at patents files but never commercialised)

Opportunity Feasibility

New MarketDetermination of Feasibility

Technical – feasibility of product or service

Market- Determination of market opportunities and risks

Financial – Analysis of financialFeasibility and

resources

Organisational – Analysis of organisational Capabilities and personnel

requirements

Competitive – analysis of the competition

Competitive Advantage

What specific competitive advantages does the product offer?What are the competitive advantages of companies/products already in the market?

How are competitors likely to respond?How will the initial advantage be maintained?

Buyers

Who will the customers be?How much will each customer buy?How many customers will there be?How will the customers be located?

How will they be serviced?

Marketing of Goods and Services

How much will be spent on advertising and promotion?What share of the market will the company be able to capture?

Time frame?Who will perform the selling functions?

How will prices be set?How will they compare to the competitors prices?

How important is location and how will it be determined?What distribution channels will be used?

What are the sales targets?

Production

Will the company make or buy?What are the sources available at reasonable prices?

Staffing

How will competence in each area of the business be developed and maintained?Who will need to be hired? How will they be found and maintained?

Financing

How much will be needed for the development of the product or service?How much will be needed for setting up operations?

How much will be needed for working capital?What assumptions are sales (financial) forecasts made?

Specific Activities of a Feasibility Analysis

Technical Feasibility AnalysisCrucial technical specifications

DesignDurabilityReliability

Product safetyStandardisation

Engineering requirementsMachines

ToolsInstrumentsWork flow

Product developmentPrototypes

Product testingField testing

Plant locationDesirable characteristics

SuppliersEnvironment

Market Feasibility AnalysisMarket potential

Identification of potential customersPotential customer dominant characteristics

Potential market sharePotential sales volumeSales price projections

Market testingAnalysis of market

Market planning issuesPreferred channels of distribution

Impact of promotional issuesDistribution costs

Specific Activities of a Feasibility Analysis

Financial Feasibility StudyRequired financial resourcesAvailable financial resources

Organisational Capability Analysis

Personnel requirementsRequired skill levels

Managerial requirementsDetermination of individual responsibilities

Potential organisation development

Competitive AnalysisExisting competitors size

Financial resourcesMarket entrenchment

Potential reaction of competitors toNewcomers by means ofPrice cutting, advertising,

Introduction of new products andOther

Potential new competitors

Opportunities are a product of our mind and these visions can become the design of our future with skilful and creative utilisation of scattered existing and forgotten resources to create great unimagined synergies. This is the true power of creativity that God has given humankind.

A Creative Person

enthusiastic, but risk assessor, who can think both serially and laterally, good at assessing opportunities, friendly, has good technical know-how, able to access what he or she doesn’t know, broad vision, an eye for detail, strong motivation to overcome hurdles, can give honest assessments and is aware of their personal strengths and weaknesses

“Too much focus on process, on a static agenda, while it may get a lot done initially, will tend to drive

core competencies towards core rigidity.”

Practice Process

Innovation Optimal Innovation Area

Ideas

Little gets done

Organisation becomes rigid

Practice/Process Trade-off

Industry Today is Looking for the “Innovation” Solution

How does a company become innovative and competitive?

The replacement of existing technologies is happening so fast that 40% of the Fortune 500 companies that existed in 1975

do not exist today. Griffin, A., (1997), The Drivers of NPD Success: The PDMA Report, Chicago,

Product Development & Management Association

Now, on average new products launched in the last five years make up 33% of most successful

companies profits.

Foster, R., N., (2000), ‘Managing Technological Innovation for the Next 25 Years’, Research-Technology Management, 43, 1., Jan/Feb., P. 20.

The cost of new technology is a powerful driver for firms to expand product distribution over a large

number of international markets to recover investmentcosts quicker. New technologies are thus a push factor for the globalisation of companies due to the need to

obtain greater economies of scale.

To be effective requires a shared sense of purpose

The elements of innovation

Culture Ego

Strategic Thinking

Innovation

FocusCreativity

InterpersonalInteractions

Hunter, Baharuddin (OUM) & Rozhan (UIA): Alpha Model of Innovation

Tempera -ment

Ability

Skills

Learning

Creativity

Solutions Opportunities

Ideas

Creativity

Lateral thinking

Serial Thinking

GroupEducation

Culture

Strategic Thinking

Personality

Hunter, Baharuddin (OUM) & Rozhan (UIA): Alpha Model of Innovation

Ego

Environment, Family,Peers, Culture

Outer Ego; Responsibility,Accountability, courage

Inner ego: self assurance, dedication, motivation

Hunter, Baharuddin (OUM) & Rozhan (UIA): Alpha Model of Innovation

Culture

Values

Beliefs

Assumptions

Leadership

Theories in action verses Espoused

Norms and group behaviour Organisational

learning (single or double looped

Productivity & effectiveness

Stories, myths, heroes, artifacts, informal behaviours

Effect of Factors on Innovation

Variable Absent Extreme

Focus Random Tunnel vision

Strategic Thinking Switched off Unfocused

Creativity Unimaginative Over-imaginative, lose sight of big picture

Ego Purposelessness Self-deluded

Interpersonal Relationships

Individualistic and independent

Hesitant to take responsibility

Culture Self centered and moraless

Fanatical

Optimum Innovation

Innovation Component

Qualities (at mean spectrum)

Focus •Have control of the situation•Put the project first

Strategic Thinking •Able to spot and work towards exploiting the opportunity•Able to secure resources (beg, borrow or steal)

Creativity •Able to create both laterally and serially•Spot and exploit opportunities

Ego •Inner need to make a difference•Able to take risks

Interpersonal relationships •Able to network effectively

Culture •Spot and exploit causes•Create social capital

Optimum Innovation

Innovation Component

Qualities (at mean spectrum)

Focus •Have control of the situation•Put the project first

Strategic Thinking •Able to spot and work towards exploiting the opportunity•Able to secure resources (beg, borrow or steal)

Creativity •Able to create both laterally and serially•Spot and exploit opportunities

Ego •Inner need to make a difference•Able to take risks

Interpersonal relationships •Able to network effectively

Culture •Spot and exploit causes•Create social capital

The Creative Thinking Process

Incubation

Ideas Knowledge

Accumulation

Evaluation &

Implementation

Creative

Process

Two Approaches to Creative Problem Solving

Adaptor InnovatorEmploys a disciplined approach, Approaches tasks from unusualPrecise, methodical approach anglesIs concerned with problem solving, Discovers problems and avenuesRather than finding problems of solutionsTends to be means orientated Questions basic assumptionsIs capable of extended details work related to current practicesIs sensitive to group cohesion and Has little regard for means; isCooperation more interested in ends Has little tolerance for routine work Has no need for consensus; often insensitive to othersAdapted from: Kirton, M. (October 1976) Adaptors and Innovators: A description and Measure,

Journal of Applied Psychology

Processes Associated with the Two Brain Hemispheres

Left Right

Verbal Non verbal Analytical Synthesizing Abstract Seeing analogies Rational Non-rational Logical Spatial Linear Intuitive Imaginative

Ways to Develop Left and Right Hemisphere Skills

Left Hemisphere Skills Right Hemisphere Skills1. Step by step planning 1. Using metaphors & of your work and life activities analogies to describe things

2. Reading philosophy 2. Taking off your watch3. Establishing timetables when you are not working for all your activities 3. Listening to music4. Using and working with 4. Suspending your a computer program initial judgment of ideas, people TV shows etc 5. Recording your hunches, feelings, and intuitions and calculating their accuracy 6. Detailed fantasizing and visualising things and situations in the future 7. Drawing faces, caricatures and

landscapes

Field Dependence-Independence Perception

Embedded Figures Test (EFT)

Witkin 1954, 1973, 1977

Field Dependent (unable to see figures)

● Favour Social science & education ● strong social skills, gravitate towards others, more contextual in approaches ● Good at seeing connections between categories of information, look at environment holistically ● Process information in chunks ● Tend to rely on social information Holistic Approach to Issues

Field Independent (able to see figures)

● Favour Maths, engineering, science ● Function with more autonomy & display a more detached approach, ● Focus on individual issues in the scanned environment ● Can isolate issues in a complex setting (block out what is not important) Specific Issue Analysis