1 International Strategic Marketing Chair for Marketing and Retailing Trier University Prof. Dr. Prof. h.c. B. Swoboda Univ.-Professor Dr. Prof. h.c. Bernhard Swoboda Summer Term 2016 Trier University MARKETING & RETAILING Prof. Dr. Prof. h.c. B. Swoboda 2 Which country, how to enter, globally standardized or locally adapted? IM is not only multiplied domestic marketing!
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Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
1
International Strategic Marketing
Chair forMarketing and RetailingTrier UniversityProf. Dr. Prof. h.c. B. Swoboda
Univ.-Professor Dr. Prof. h.c. Bernhard Swoboda
Summer Term 2016
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
2
Which country, how to enter, globally standardized or locally adapted?
IM is not only multiplied domestic marketing!
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
3
Objectives of the course
You should learn and know the basic strategic decisions in International Marketing(i.e. from a country-specific and inter-country perspective) and selected challenges.
1. Overview of dynamic internationalization, the international strategies and the decisions within International Marketing (incl. complexity and determinants).
2. Core decisions of market entry: Market assessment/selection (+exit) and timing as well as market entry strategies/operation modes (+mode changes/switches).
3. Core decisions of market servicing: Standardization vs. adaptation as basic options in the design of the Marketing mix instruments (initial designs during the going international and chances during the being international).
4. Overview on implementation and international Value Added Management.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Marketing Mix decisions
Product Price Communication Distribution
Market engagement (Segmentation/selection and timing)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTasks for presentations
Organizational matters Presentation: 45 minutes, about 25-30 charts (use PPT template from download
area on www.muh.uni-trier.de).
Each group prepares three questions for the discussion.
Max. five points on top of the exam for each presentation.
On the day of presentation: bring your charts digitally (on a USB drive) and printed (one copy for each participant).
Tasks
Each participant with his or her group prepares one presentation on paper no. 5.
Critically comment on the content of the paper. Differentiate between the theory/framework used and the empirical method.
Organize your presentation according to the structure of academic papers (see PPT template).
7
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Exam structure and explanations
Exam structure
Open questions Question 1 20 points
Question 2
Question 3
Sum 60 points
20 points
20 points
Explanations
6 sub-questions with 5 points each,you must answer 4 sub-questions(mostly reproduction)
You must answer all sub-questions(50% reproduction, 50% application)
You must answer all sub-questions(mostly application)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Advices on the exam
Check for your exam's completeness.
Writer your student number on each page.
Do not write with a pencil or in red.
You may use a non-programmable calculator.
Pay attention to the readability of your writing.
Please clearly indicate to which questions you refer and differentiate your answers clearly on the respective sub-questions.
Note the wording of the task (Name, Define, Describe, Explain, Discuss).
Not only the quantity of your answer matters, rather the focus on systematics, clearness of formulation, and completeness of content are essential.
The recommended number of minutes equal to the maximum number of points per question.
Advices…
…in general
…on answering the questions
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing-Mix
I. Marketing mix: Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
10
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Economic level –Worldwide development of …
0
5000
10000
15000
20000
25000
1970 1980 1990 2000 2010 2014
3172'376
4'261
7'941
18'969 23'725
2,62,72,82,8
3,03,13,53,6
8,08,5
12,3
0% 2% 4% 6% 8% 10% 12% 14%
RussiaUK
ItalyHong Kong
KoreaFrance
NetherlandsJapan
GermanyUSA
China
…international export trade volumes – bn. USD
…direct investment stocks – bn. USD
Source: UNCTAD 2015.
Source: UNCTAD 2015.
Leading export countries- Share of world foreign trade %
Source: WTO 2015.
0
5000
10000
15000
20000
25000
1980 1990 2000 2010 2014
6982'081
7'511
20'371 25'823
11
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Basic forms of internationalization
Foreign trade Export is defined as the cross-frontier provision of commercial goods and
services to sell abroad (direct and indirect exports).
Analogical, import is defined as the cross-frontier buying of commercial goods and services from abroad.
Foreign Direct Investment (FDI) is defined as capital asset within a foreign country, which are used by the investor to: Gain direct influence on companies’ business operations (e.g., M&A, JV),
Set up a new company.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Source: Destatis 2016.
Relevance of German companies' foreign trade partners (2015, in bn. EUR)
480
BE41
CH49
PL52
AT58
IT58
CN71
NL79
UK89
FR103
USA114
1.196
Exports Imports
9.5
8.6
7.5
6.6
6.0
4.9
4.4
4.1
4.9
3.5
CZ
38UK
37AT
948
391
39
CH 43
44PL
IT 49
USA 59
FR 67
NL 88
CN 92 9.7
9.3
7.1
6.3
5.2
4.7
4.1
4.0
4.5
3.9
Total (exports + imports)
IT 107
UK 128
CN 163
NL 168
FR 170
USA 173
Others 874
BE 78
CH 92
AT 95
PL 97
Total 2.144
8.1
7.9
7.8
7.6
5.9
5.0
4.4
4.3
4.5
3.6
Others
Total
% %%
13
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Relevance of Foreign Direct Investments of German companies
14
28%
3%
31%
12%
22%
4%
Europe
Africa
North America
South America
Asia
Oceania
Source: Destatis 2016.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Business area strategies Competitive Strategies: Cost leadership, quality leadership, focused strategy
Business are development strategies: growth, consolidation, exit
Functional Strategies Marketing
HRM
Purchasing
…
Company level –International strategy levels
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Company level –International strategies
Preasures for Local Responsiveness
highlow
high
low
Preasuresfor GlobalIntegration
Global Transnational
MultinationalHome marketoriented
highlow
high
low
Need forIntegration
Need for Responsiveness
Global
Transnational
Multi-nationalHome
marketoriented
Bartlet/Ghoshal (1989) Prahalad/Doz (1987)
1. Paper: Preferences and Performance of International Strategies in Retail Sectors: An Empirical Study, Long Range Planning, Swoboda/Elsner/Morschett (2014, obligatory).
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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International strategies
Multinational companies try mainly to reach the goal of outstanding profits in a high number of “national markets“. Foreign units have a vary high autonomy, which allows them to adapt to local needs and pressures in each of the foreign country markets and to act as a autonomic and local company.
Global companies are characterized by a high integration of all business activities in a cohesive overall system (mostly standardized) of market servicing and (mostly a tight) management of foreign activities.
Transnational companies try to adapt locally by high/tight integration.
Preferred international strategy determines - International Marketing (market selection, timing, market entry strategy, marketing mix)
- International Management of the firm (configuration and coordination of value chain activities and the value chain)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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low highAdvantages of
localization
Advantages ofglobalization
hig
hlo
w
Globalorientation
Multinationalorientation
Home countryorientation
Transnationalorientation
International strategies – Examples
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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International strategies – Paper No. 1
Abstract This study examines the international strategies of retailers that have been
internationalising aggressively.
By applying the I-R-framework, we hypothesise that retailers use all four strategies (international, global, multinational and transnational) but that their preferences for these strategies vary across retail sectors (food and non-food).
From the inter-sector-based and sector-specific perspectives, we also hypothesise that the strategies correspond to different levels of performance.
Research questions Do retail firms have a preferred international strategy for their store activities?
If so, which strategy is more successful?
By assuming strong differences, we further ask the following: are different strategies preferred, and are they differently successful in specific retail sectors?
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Generation/dispersion of knowledge (central, home, dislocated, networks)
Competitive advantages (costs/global, capabilities at mother, local presence, networks)
Axes (5 point Likert-type scales) Integration: Focus on international economies of scale and
competitive position regional/global equal/global competition
Responsiveness: FU act autonomously, look at local competitive advantages and differences in culture/customer behavior is addressed with local offers.
International strategies – Measures (1)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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International strategies – Measures (2)
Appendix 2 Measurement of internationalization strategy (1) Axis* Statement – pre-test according to Harzing, 2000
Integration Our company’s strategy is focused on achieving economies of scale by concentrating its important activities at a limited number of locations. (economies of scale) Our company’s competitive position is defined in world-wide terms. Different national markets are closely linked and interconnected. Competition takes place on a global basis. (global competition)
Responsiveness
Our company’s competitive strategy is to let each subsidiary compete on a domestic level as national product markets are judged too differently to make competition on a global level possible. (domestic competition)Our company not only recognizes national differences in taste and values, but actually tries to respond to these national differences by consciously adapting products and policies to the local market. (local responsiveness)
Statement – survey
Integration Our firm focuses internationally on achieving economies of scale by concentrating important activities in a small number of international locations.
Our competitive position has an identical regional/global orientation; competition is global.
Responsiveness
Our competitive strategy is multi-national, i.e. each foreign company deliberately acts alone/autonomously in order to generate domestic/ international competitive advantages.
Our firm considers the differences in buying behaviour/culture in different countries and reacts to them with customized services adapted on a broad basis to suit the markets concerned.
* The questionnaire did not contain this column. Each question was measured on a 5-point Likert scale from totally disagree to totally agree.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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International strategies – Measures (3)
Appendix 3. Measurement of international strategy (self-typing)
Strategy According to Leong/Tan (1993), Pla-Barber (2002)
We achieve competitive advantages in an international context by …
Global … achieving cost advantages with identical regionally/globally oriented and largely standardized activities.
International … making use of knowledge and skills of the parent company and implementing and adapting these skills internationally/worldwide.
Multinational … generating a strong local presence, with an intuitive feel and adapting to special features of the countries concerned.
Transnational … creating networked resources, i.e. foreign subsidiaries perform specialist tasks and operations between countries are networked.
Our strategic skills and resources are …
Global … centralized and oriented towards all markets (regional/global).
International … available at the parent company in the home market and are passed on to the foreign subsidiaries.
Multinational … are spread at international level, each foreign subsidiary acts independently.
Transnational … are spread internationally over specialized foreign subsidiaries that interact to a large extent with other foreign subsidiaries.
New knowledge is…
Global … generated, is tested centrally and is equally aimed at all regional/global markets.
International … mostly created in the home market and is passed on from there to all foreign subsidiaries.
Multinational … mostly created in the countries where there are foreign subsidiaries but is not transferred to other subsidiaries.
Transnational … generated in subsidiaries and in the parent company and is also exchanged via cross-links among the subsidiaries (not via the headquarters).
The respondents were asked which of the four statements per dimensions best represented their own strategies.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Comparison of self typing and scales (Ward and correspondent analysis)
Empirical results (1)
Dimension 1
Dim
ensi
on
2
Legend:Self typingCluster analyse
home market oriented
home market oriented
= Global= Multinational= International
= Transnational
high
high
low
low
Local responsiveness
Glo
ba
l in
teg
rati
on
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Performance in retail sectors (correspondent analysis)
Empirical results (2)
Food Non-food
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing mix
I. Marketing mix: Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
31
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Development of international marketing
Kahler/Kramer (1977) Export and international business operations
Czinkota/ Planning and execution of (markt-) transactions across bordersRonkainen (1993)
Meffert (1998) Analysis, planning, execution, coordination, and control of market oriented business activities in more than one country.
Zentes/Swoboda/ Characteristics for International Marketing: On the one hand Schramm-Klein cross-border activities, on the other hand country specific (2013) and cross country thinking and acting.
1st stage: Export as most important form of Internationalization Hellhauer (1910); Sonndorfer (1910); Oberparleiter (1913)
2nd stage: Export marketing as sales policy in foreign countries Weinhold (1965); Fischer (1973); Smith (1977), Peter (1978)
3rd stage: International marketing as active exploitation and servicing of foreign countries Kulhavy (1981); Meffert (1982); Meissner (1987)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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From national to international marketing
1. Unique culture and language2. Market rather homogeneous3. Easy to find and rather reliable
information4. Easy use of market intuition5. Political factors have a lesser
importance6. Rather stable environment with
visible trends7. Weak influence of financial flows
(exchange rate)8. Internal organization simple and
cheap (time - travelling)
1. Diverse cultures and languages2. Markets are diverse/heterogeneous3. Very disparate information, uneasy to
find – synthesis is a heavy task requiring adequate personnel
4. Intuition is very difficult to use in a first stage
5. Political factors (norms, tariffs, taxes, investments) play a major role)
6. Very unprecise environment with invisible trends
7. Financial flows and change rates are very influential
8. Complex and costly organization (time – travelling)
National International
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
International strategy of the firm
General host and home country factors
Tradition IM decisions –Going international
FOREIGN OPERATIONMETHODS (HOW?)
SALES OBJECTS(WHAT/HOW?)
MARKETS(WHERE?)
Capacity /Implementation
Organizational Structure Finance Personnel
Source: According to Welch, Lawrence S.; Luostarinen, Reijo (1988), Internationalization: Evolution of a Concept, in: Journal of General Management, 14 (2), p. 34-55, p. 39 .
Ind
ust
ry a
nd
Co
mp
etit
ion
Co
mp
anies in
ternal facto
rs
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Changing characteristics of internationalization
70er / 80er years 90er / 00er years
International situation Pioneers /Early Starter
International mmong others
International competition Low High
Relevance of international strategy
Low High
Transaction forms of internationalization
Exports, agents, sales subsidiaries
Alliances, acquisitions, own companies
Area orientation Neighbor countries, regions (e.g. Europe)
World
Primary international dimensions
Country /sales activities
Value chain dimensions / coordination
Dynamics of international processes
Low High
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Evolution periods of internationalization
Source: Swoboda, B.: Internationalisierung als strategische Option des Großhandels, in: Zentes, J.; Swoboda, B.; Morschett, D. (ed.): B2B-Handel – Perspektiven im Groß- und Außenhandel, Frankfurt/Main 2002, pp. 147-175, p. 164.
Period of evolution Mother country Foreign markets
Period IIIa Presence “at the face”
Assort-ment
Presentation & service
Human Resource Management
Period IV Global integration
Finance, value systems, corporate identity etc.
Total local integration of allbusiness divisions on side
Period IIIb Autonomoussubsidiaries
Sourcing/Buying
Period I Import Sour-cing
Lo-gis-tic
Ass-ort-
ment
Mar-ke-ting
Pre-sent-
ation
Ser-vice
TraderPeriod II Export Sour-cing
Lo-gis-tic
Ass-ort-
ment
Mar-ke-ting
Pre-sent-
ation
Ser-vice
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Markt engagement Marketing operations
Operation strategy
Dynamic and dependent decisions –Going and being international
Source: Zentes/Swoboda/Schramm-Klein 2013.
INTEGRATION/ COORDINATION
Organizational structure
Processes/systems
Corporate culture/HRM
Coun. A
Coun. CCoun. B Coun. D
Inter country
Country ECountryspecific
Market selec-tion/ entry
Market exit/clear up
Market entrystrategy
Enlargement/switch
Adaptation/change
Primaryarrangement
Business model and pre-decisions: Corporate strategies/principles, resources, preferred internationalization strategy, goals
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Complexity of decision making in IM
Different views and situational contexts thinkable Going vs. being international
Country specific vs. across countries (interdependencies)
Industrial goods, consumer goods vs. service/retailing firms
A very high number of determinants of decision making and thus success External environment (host country and home country)
Micro: Preferred international strategy, capabilities/ resources, international knowledge
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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International marketing vs. management
Int. value added management has two goals (levels of management) Design and management of value added processes
(i.S.v. configuration and coordination)
Design and management of the whole value added system(i.S.v. organizational structure, systems und culture)
Source: OC&C-Partner 2015, data for 2014.Source: Bloomberg 2016, data for 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Case study –Growing but young internationalization
2. Paper: International Expansion of the Four World’s Largest Retail Companies, Swoboda/ Elsner, Fallstudien zum Int. Management (Gabler 2011, optional)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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1 >
1 >
1
1
2
2
2
4
5
7
11
15
19
22
25
Safeway (USA)
*Schwarz Group (D)
Costco (USA)
Tengelmann (D)
Delhaize Le Lion (B)
Tesco (GB)
Metro/Makro-SVH (D/NL)
*Auchan (F)
Casino (F)
*Aldi (D)
Leclerc (F)
Carrefour, Promodes etc. (F)
Ahold (NL)
17
17
36
9
13
12
12
6
11
2
12
12
40
16
34
11
[1]
[1]
[1]
[2]
[2]
[2]
[1]
[2]
[1]
[1]
[3]
[7]
[10]
[2]
[5]
[4] 42
*ITM Intermarche (F)
Wal-Mart (USA)
Edeka (D)
Other (out of the biggest) retailers with foreign turnovers < 2 percent
Internationally most active grocery retailers 1992
Total salesin EUR bn
Share of sales inforeign countries (in %)[No. of]
Source: M+M Planet Retail 1993 (* estimated); own research.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
13
15
19
29
27
28
33
45
32
61
56
55
59
61
Others under TOP 30 worldwide<1% 5. Kroger; 9. Walgreens;
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing mix
I. Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
46
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
47
General conditions
- entry barriers- numbers, disposition, size of competitors
- competition intensity- competitors‘ offering- …
- numbers, disposition, size of suppliers
- quality / suppliers’ offering
- level of concentration- …
- demand behavior- structural disposition ofneeds
- disposition / sizeof market segments
- distribution conditions- power of demanders- …
Industry structure /competition
Sourcing markets Markets
Industry/ competition framework
- structure of resources (tangible/intangible)- internationalization strategy- objectives- competitive strategy - characteristics of product line/range of services
- …
Company specific factors
International Marketing
General antecedences within Int. marketing/management – An overview
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Levitt (1983) – Worldwide homogenization of consumer needs
Standardization of IM for consumer products is predicated on: an international equalization of relative income levels increasing personal consumption and ownership patterns of consumer durables increased and better communications worldwide travel patterns of consumers spread of MNCs
Global companies can reduce their unit costs which allows them to price penetrate markets and force non-global competitors out
Global Media Consumption But then …
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Example 1 – Income differences in the world (GNI per capita, 2015)
Source: Worldbank 2016.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Income as a potential driver of convergence of markets
Per capita income is an important determinant of consumer buying behavior. less than US$ 10,000, much of the income is spent on food and other necessities,
and very little disposable income remains As a country reaches US$ 20,000, the disposable portion of income increases dra-
matically, results in increased convergent pressures on consumer buying behavior.
Typical cross border segments are younger, richer and more urban than the rest of the population
Source: Keegan/Green.
Thailand average income: approx.
400 US$ per month
But then …
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Example 2 –Diverse influences of legal systems
More general economic freedom in general
labour law
tariffs
subsidies for FDI (or locals), government attitude towards foreign companies
reliability of the justice system, type of justice system (e.g. jury law in USA with high fines)
More Marketing-Mix related protection of intellectual property rights
advertising laws and promotions laws
price regulation (e.g. books in many markets), taxes
sector regulation, e.g. opening hours in retailing, regulation of certain products as medicals, cigarettes
regulation concerning product features
Source: Adapted from Hill 2008.
Market selection
Market entry strategy
Marketing-Mix
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Example 3 –Socio-demographics
Different Socio-Demographics across Europe Different income levels Different share of old/young inhabitants Different share of single households (old/young) Different age of marriage Different no. of children in household Different share of double income households Different level of urbanization ... Percentage of People 65+
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Example 3 –The aging of the population as trend
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Example 4 –Culture and international marketing
Source: Kotabe/Helsen 2008.
Culture is the collective programming of the mind which distinguishes the members of one human group from another. The ways are learned in which a society understands, decides and communicates (Hofstede 1996).
Culture is a key pillar of international marketing success, e.g. Product policy: certain products are more culture-bound than other products
(food/beverages and clothing vs. high-tech).
Promotion Policy: major influence on a firm’s communication strategy because of local cultural taboos, norms, different decoding of colors etc.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Culture – Hofstede’s approach
Cultural dimensions (50 countries, more than 100,000 IBM respondents)
Power distance: extent to which people see power distributed unequally- high PD: hierarchy and inequality is natural and beneficial (CEE)- low PD: minimizing social, class inequalities, reducing hierarchical structures (DE)
Uncertainty avoidance: people feel threatened by uncertain situations- high UA: stability, rules, not tolerating irregular ideas and behavior (CEE) (DE)
- low UA: willing to risk, flexible, relaxed, encourage initiative
Individualism/ collectivism: people’s relation to the larger social groups- Individualistic: independence, privacy, individual decision making (DE) - Collectivist: group interests over personal ones (CEE)
Masculinity/ femininity: the degree to which masculine (achievement/ assertiveness) and feminine (nurturance/ social support) traits prevail- Highly masculine: earnings, ambition, recognition, leadership (DE)
- Highly feminine: quality of life, relationships to people (CEE)
Source: Hofstede, Geert (1996): Differences and Danger, Higher Education in Europe, 21(1).
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Bottom left quadrant:German-speaking countries plus Finland, Hungary, Israel, mental programs: - low PD little social inequality- high UA need for a structure
Bottom right quadrant:Latin Europe, Americas, Asian, Muslim countries, South East European countries plus Russia: - high PD - high UA
Note: Top left quadrant: Anglo-Saxon, Scandinavian countries low PD, low UA
Relative positions of the answers –Power Distance/ Uncertainty Avoidance
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Bottom right quadrant:German-speaking countries plus Anglo-Saxon countries and some others:individualistic/ masculine
Top left quadrant: Slovenia, Croatia, Serbia, Russia:collectivistic/ feminine, (Russia more individualistic)
Relative positions – Individualism/Collectivism and Masculinity/ Femininity
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Formula
59
Kogut & Singh index (1988; JIBS)
CDj stands for the distance between a host country j and the home country (e.g. US) on the ith dimension
IUS is the score of the US on the same dimension as for Iij
Vi is the variance of the dimensions score
Example: Portugal as Home country and US as Host country Home country
PDI = 38UAV = 53IND = 80MAS = 14
Host countryPDI = 63UAV = 104IND = 27MAS = 31
DifferencesPDI = 25UAV = 51IND = 53MAS = 17
CD = [25²/503,2+51²/605,5+53²/620,8+ +17²/324,1]/4 = 2,73
/4
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaCross-national distances (I)
FinancialDistance
EconomicDistance
Definition Measurement
Differences in economic development andmacroeconmic characertistics
Income (GDP/capita) Inflation Exports Imports
Differences in financial sector development Private credit Stock market capitalization Listed companies
PoliticalDistance
Differences in political stability, democracy, and trade block memebership
Policy-making uncertainty Democratic character Size of the state WTO member Regional trade agreement
AdministrativeDistance
Colonizer-colonized link Common language Common religion Legal system
Differences in colonial ties, language, religion, and legal system
Source: Berry, H., M.F. Guillén and N. Zhou (2010), An instituional approach to cross-national distance, Journal of International Business Studies, 41 (9), 1460 – 1480. 60
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaCross-national distances (II)
DemographicDistance
Cultural Distance
Definition Measurement
Differences in attitudes toward authority, trust, individuality, and importance of work andfamily
Power distance Uncertainty avoidance Individualism Masculinity
Differences in demographic characteristics Life expectancy Birth rate Population under 14 Population above 65
ConnectednessDistance
Differences in tourism and internet use Number of Internet user Int. tourism expenditure Int. tourism receipts
GrographicDistance
Great circle distance between geographiccenter of countries
Great circle distance
KnowledgeDistance
Differences in patents and scientific production Number of patents Number of scientific articles
Source: Berry, H., M.F. Guillén and N. Zhou (2010), An instituional approach to cross-national distance, Journal of International Business Studies, 41 (9), 1460 – 1480. 61
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing mix
I. Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
62
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
63
Decisions on market entry (engagement)
Country specific view ("going international") Market entry on the base of
Market assessment and selection, Projects in foreign countries and follow-the-customer strategy
Country specific timing-decision
Across-country view ("being international") Market expansion on the basis of
Country comparisons/portfolios, market exist or re-nationalization Bridge head strategy and interdependencies between markets
Across-country timing-decision
Two types of studies are common Explaining which country markets were entered by firms (descriptive) Models explaining rational ways of entry/categorization of markets (normative)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
64
Example – Nestlé’s segmentation of the Americas
Source: Nestlé.
Turnover (bn. CHF) 91.6Op. Income (bn. CHF) 14.0Employees 339,000Number of countries 170
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
65
Two basic forms of market segmentation
International segmentation:Market selection in the narrow sense
Intra-national segmentation:country-specific groups
Identical cross-national customer segments
Country A Country B Country C
Integral segmentation:
International vs. integral market segmentataion
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
66Source: Zentes/ Swoboda/ Schramm-Klein 2013.
Frameworks for international market segmentation and selection
Framework for integral market segmentation and selection
Characteristics Customers within mass market Dyadic customer relationships
Decision problem Selection of customer groups Selection of partners
Level of investigation Company Networks
Integration within strategic context
Segmentation as a basis for internationalization
Not specified
Type of information Customers across countries Key customer
Number of coutry markets Across countries Country specific
Framework for international market segmentation and selection
Characteristics Normative Descriptive
Decision problem Country selection Country selection
Level of investigation Company Company
Integration within strategic context
Not integrated Integrated within internationalization process
Type of information Country/market indicators Subjective perception
Number of coutry markets Across countries/ country specific Across countries/ country specific
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
67
Rumania (S)Algeria (S)Morocco (S)PR China (S) Hungary (S)Poland (S)
Russia (S)
Indonesia (P)Saudi Arabia (P/S)
Venezuela (P/S)Indonesia (S)Nigeria (S)
Iran (P/S) Malaysia (P/S)Columbia (P/S)Thailand (P/S)
Taiwan (P)Philippines (P/S)Philippines (P)
Japan (P)Australia (S)
Rodesia (P/S)
Mexico (P/S)Brasilia (P/S)
Pakistan (P/S)India (P/S)
South Korea (P/S)
Turkey (P/S)
USA (P/S) Canada (P/S)
P = private customer
S = real estatecustomer
B2B segments
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
68
Why segmentation?Heterogeneity of consumers
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
69
Heterogeneity of consumerswithin one country
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
70
But then…
Namibia
HipHop
USA
Germany
France
Benetton, Esprit …
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
71
Lifestyle groups in fashion business
Defining and selecting effective segmentation criteria Measurability of criteria, possibility to identify segments Behavioral relevance of criteria: often, easy-to-measure and easy-to-access
criteria (as language, income, geography) are low on behavioral relevance Accessibility of resulting segments (and potential to isolate the segments) Profitability and stability of segments
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
72
Integral market segmentation –Consumer typology
1. Risk perception and brand loyalty
2 3 4 5 6 7 8
week
Brandloyalty
high
2
3
1
UprootedSurfers
Traditionalists
Rulemakers
lowPerceived
risk high
2. Importance of the typologies
Total
Netherla.
Mexico
SaudiArabia
Turkey
USA
Traditionalists
32
Uprooted
25
Rule-makers
17
Surfers
26
48 17 17 18
39 36 19 6
38 14 15 33
29 35 16 20
19 23 17 41
Thailand 18 17 19 46
Source: Müller/Kornmeier 1995.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
73Source: GfK.
Dreamers
Motivated to achieve happiness
Homebodies
Desire material security and status
Settled
Long for peace and harmony
DemandingSeek a balance between responsi-bility, duty and pleasure
OrganicsSeek for sustainability and self-actualization
Open-minded
Seek a balance between self-actualization, social responsibility and pleasure
Adventurers
Driven by passion
RealistsValue work and responsi-bililty
Need: PossessingMaterialism, price-consciousness
Need: BeingPost-materialism, quality orientation
Nee
d: L
ivin
g ou
t pa
ssio
nsH
edo
nis
m,
ple
asu
reN
eed: Peace and security
Pu
ritanism
, orien
tation
tow
ards secu
rity
Integral market segmentation –GfK Roper Consumer Styles (RCS)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
CCA/Europanel with Roper Consumer Styles by GfK – www.gfk.com
Identification of cross –country “GfK-Roper Consumer Styles“ using peace/security vs. change and having vs. being
Survey within 38 countries:
Crafty World, Cosy Tech World, New WorldMagic World, Authentic World, Standing World, Secure World, Steady World
SRI Consulting with VALS (Values and Life Styles) – www.sric-bi.com
Basis: Values and needs according to Maslow and Riesman‘s Theory of social behavioral constants (VALS I) VALS II incluedes behavioral characteristics , from socio-demographic and psychological criteria, assets
VLAS I includes only 13 European countries; VALS II includes USA
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
76
Contrasting views of integral segmentation
Conventional wisdom Assumes heterogeneity between
countries
Assumes homogeneity within a country
Focuses on macro level cultural differences
Relies on clustering of national markets
Less emphasis on within-country segments
Modern view Assumes emergence of segments
that transcend national boundaries
Recognizes existence of within-country differences
Emphasizes micro-level differences
Segments micro markets within and between countries
Source: Keegan/Green 2005.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
7777
Unsolicited request for company’s products
Casual discovery of market potential
Third party referral; observation of competitors
Trade Fairs
Projects in foreign countries
Follow-the-customer
Expansion from neighbouring countries
Bridgehead strategy
I. Opportunisticidentification
II. Without initialmarket selection
Identification of foreign markets/countries
Evaluation of a single country
Selection of a country (e.g., elimination)
Comparison of countries (e.g., portfolios)
III. Systematic marketevaluation, to decide
Function of a model Number of selection steps Choice of selection criteria
Source: Zentes/Swoboda/Schramm-Klein 2013.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
7878Source: Zentes/Swoboda/Schramm-Klein 2013.
Follow-the-customer strategy
The Follow-the-customer strategy is defined as an activity pattern of international market engagement where a corporation follows its customer(s), ideally with its own subsidiaries, in order to be present in the host countries with its goods and services
(c.f. Gerlach/Brussig 2004, p. 133).
Driving forces of Follow-the-customer
strategy
Concentration on core competencies
Increased outsourcing: Parts of the value chain are outsourced to suppliers, service providers etc.
New dyadic-cooperative or network-like structures emerge
Increasing internationalization International configuration of
value chain activities, e.g., sales activities in industries which were only national (retailing) or construction of production sites abroad etc.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
range, fine-tuned services Volume and frequency of purchase Potential for standardization and
imitation Level of complexity
Internal factors Sourcing strategy (single sourcing) Scope of specific investments Organizational structure Conception of sourcing (key supplier
and key account management)
Propensities of involved corporations Strategic propensity Risk propensity
Inter-company and social factors Trust: long-term commitment, intense
information exchange, technical support, joint development of services
Ethical position
Industry characteristics Bargaining power of customers Bargaining power of suppliers Competitive intensity of foreign market Risk of new competitors Threat by substitution
Environmental factors Legal conditions Country risk Other macro economic factors, e.g.,
growth, inflation rate, exchange rate Societal and social systems, e.g.,
values, attitudes
Inte
rnal
Ext
ern
al
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
8181Source: Zentes/Swoboda/Schramm-Klein 2013.
Follow-the-customer strategy –Advantages and disadvantages
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages Disadvantages+ –
For suppliers / service providers Guaranteed volume of orders for a certain
time period Known general conditions Lower investment risk Raising barriers to entry for potential
competitors Gain experience in foreign (growth) markets Competence development
For customers Transaction cost advantage at building
supply relations Coordination advantage with higher
potential for mutual adjustment, i.e., increased flexibility
General risk of international market engagement
Resource intensive internationalization process (construction of subsidiary network)
Challenge of organizing subsidiary network Investment risk from building subsidiaries Cost of foreign market cultivation Potentially missing experience with
respective foreign market Language and psychological / cultural
barriers
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
82
Systematic identification of international markets
Markets, which are filtered out due tolack of necessary
conditions(Must-Criteria)
Detailed Screening
All countries
Source: Schneider, Dieter . J. G.; Müller, Ralph U.: Datenbankgestützte Marktselektion, (Poeschel) Stuttgart 1988, p. 17.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
85Source: Henzler, Herbert A.: Neue Strategie ersetzt den Zufall, in: m m, 1979, H. 4, p. 122-129, p. 122.
29
150Countries
16 Attractivecountries
Preliminary screening- Political situation- Legislative issues
72
Preliminary screening- Population size- GNP
22
Countries with low potential on:- Housing demand- Economic basis
11
Evaluated based on:- Potential- Market size per capita- Technical level- Rules and regulations- Resources availability
Multiple stage (II) –Function filtering one country out
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
86
Markets selected Markets rejected
Preliminary screeningof potential markets
Stage 2: Reduction in number of potential markets
Stage 1: Reduction innumber of potential markets
Step 3: Final reductionin number of potential markets
Markets rejected
Markets rejected
Markets rejected
Estimate industry salespotential in each market
Estimate company salespotential in each market
Aware of specificmarket opportunities
Markets tested
Multiple stage (III) –Function filtering one country out
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
87
Entry conditions
Different possibilities for market entry / foreign trade policy Investment incentives/ concessions for foreign business
Prospects of transformation
Speed of market economy reforms / abolition of government monopolies Degree of decentralization and deregulation / restriction of inflation
Evaluation criteria for market selection
Main Criteria Sub criteria (examples)
Market capacity/ potential
Population figures / gross national product / gross domestic product Individual household incomes and expenditures
Market growth Estimates for GDP development / income development Development of equipment in individual households
Market volume Sales volume per industry / budget Purchasing power and demand behavior
Degree ofprivatization
Conditions for participation of foreign business in privatization Possibilities of buying real estate
General legalframework
Conformity of economic legislation with the standards of the Western countries Degree of equality of foreign business to domestic business enterprises
Distribution Availability and efficiency of Marketing channels up to the ultimate buyers Logistic infrastructure and expenses
Intensity ofcompetition
Foreign competition / domestic competition Preconditions for fair competitive terms
Business risk Risk in the interpretation of the terms of a contract / buyer/purchaser risk Payment / credit / product / distribution / price / risk of inflation
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
88Source: Swoboda et al. 2009: Market Selection in Garment firms, JFM.
Factors of market selection on the purchase and sales side
low labour costs/wages
advantages of production costs
low product/material prices
low capital/investment costs
higher level of productivity
high (product) knowledge
quality of products/labour
present technology know-how
securing supply sources
sales market potential
anticipation of competition
saturation of home market
affinity to culture/mentality
physical market proximity
market knowledge
competitive environment
sharpen own profile
cost advantages
factor 1:cost advantages
factor 2:advantages of productivity/quality
factor 3:sales potential/attractiveness
factor 4:market proximity/distance
factor 5:firm-specific issues
,755
,879
,883
,857
,721
,829
,770
,893
,470
,695
,671
,572
,769
,891
,869
,562
,469
,398
,872
low labour costs/wages
advantages of production costs
low product/material prices
low capital/investment costs
higher level of productivity
high (product) knowledge
quality of products/labour
present technology know-how
securing supply sources
sales market potential
anticipation of competition
saturation of home market
affinity to culture/mentality
physical market proximity
market knowledge
competitive environment
sharpen own profile
cost advantages
factor 1:cost advantages
factor 2:advantages of productivity/quality
factor 3:sales potential/attractiveness
factor 4:market proximity/distance
factor 5:firm-specific issues
,755
,879
,883
,857
,721
,829
,770
,893
,470
,695
,671
,572
,769
,891
,869
,562
,469
,398
,872
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Decisio
n fu
nctio
nM
AN
AG
EM
EN
T
Pre-decisionsfor an foreign expan-sion and a MS-model development
Product line/product strategy/
Iindustry
Internationalknowledge and
goals
Critical factors
Internationalmode of entry
Principles and strategies
(Order of)selection
steps
Modelfunction
Choice ofselectioncriteria
Constructionof MS models
Construction of country selection models
3. Paper: Towards a Conceptual Model of Country Market Selection,Swoboda et al., Int. Rev. of Retail, Distribution & Consumer Research (2007, optional)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
90
Country-specific evaluationInter-country market selectionAll Countries (without METRO operating countries)
Preliminary evaluation
Knock-out criteria
Country scoring model
Primary ranking
Competition/Adjustment factors
Final country-ranking pipeline
New
country openings
Feasibility study process
1. Desk
research
2. Pre-
feasibility study
3. Full-
feasibility study
Candidate for step 2
Candidatefor step 3
Candidate for entrance
if positiveresult
if positiveresult
if positiveresult
Management-decision
Market selection at Metro C&C
Pre-decision: Emerging countries, first mover, organic growth, limited resources, three formats …
Source: Swoboda et al. 2007.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
91
Portfolio-based selection with the function of country comparisons
Market barriersfor car imports
Market growthpotential
2001-2011
high
low
highlow
China
India
Vietnam
Philippines
Thailand
Indonesia
Taiwan
Singapore
Hong Kong Korea
Malaysia
Size of car markt 2001
Size of car markt 2011 (prognosis)
Source: Urban, M. (2000), S. 269-286.
Market barriers / risks
Marketattractiveness
Peripheral /casual
markets
Coremarkets
Abstinencemarkets
Speculativemarkets
high
low
low high
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
92
Approaches which accent the companies contexts
Source: Zentes/Swoboda/Schramm-Klein 2013.
Relative competitive advantages (strength)
Mar
ket
attr
acti
vity
low high
high
low
mid
dle
middle
Finland
Sweden
Denmark
Ukraine
Norway
Competition intensityin host country
Str
ateg
ic r
elev
ance
of
the
ho
st c
ou
ntr
y
low high
high
low
Danger/correct
Maintaining/develop
DefendingAvoidance/
attack
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
93
Systematization of concepts for assessment of country risk
Debt ratio Debt-service ratio Net borrowing
requirements Import backing Euro money-Index
Country reports of the Federal Foreign TradeInformation Office
PRL AGEFI country
index
World Bank‘stwo-gap model
US EXIM Bankmodel
Statisticalratios
Econometricmodels
Qualitative(purely descriptive)
Quantitative
Objective(cardinal)
Subjective(interval led)
Investment climate (political/economical) BERI BI-Country Ratings
Firms/sector specificCountry risks FORELEND Euromoney-Index International Country
Political (in)stability Coplin-O´Leary-System Political Systems Stability Index (PSSI) World Political Risk Forecast (WPRF)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
94
Structure and weighting schema of the Operation Risk Index (BERI) – Example
Criteria (i = 1, 2, ..., 15) (ai) (gi) (ai · gi)
1. Political stability 2,3 3,0 6,902. Attitude towards foreign investments 2,1 1,5 3,15 3. Expropriation 1,8 1,5 2,704. Inflation 1,3 1,5 1,955. Balance of payments 1,1 1,5 1,656. Bureaucratic obstacles 1,6 1,0 1,607. Economic growth 2,0 2,5 5,008. Currency convertibility 1,6 2,5 4,009. Enforceability of contracts 1,7 1,5 2,5510. Labour costs / productivity 1,8 2,0 3,6011. Availability of local specialists 1,6 0,5 0,8012. News / transport 1,7 1,0 1,7013. Management and partners 1,8 1,0 1,8014. Availability of short-term credit 1,7 2,0 3,4015. Availability of long-term credit 1,8 2,0 3,60
*Forecast
max. 25 · 4 = 100 points 15 15 gi = 25 ai · gi = 44,4
i=1 i=1ai: Average occurence of characteristic; 0,0 ( = not acceptable) bis 4,0 ( = very positive) gi: Weighting
Country rating+70 points: Typical situation of an overal stable developed country55-70 points: Countries with moderate risk and certain complications with daily business40-55 Punkte: High risk and bad business climate for foreign corporationsless than 40 points: Not acceptable for foreign investments
Development of ORI
Year ORI2000 46
2001 37
2002 37
2003 38
2004 37
2005 42
2006 42
2007 43
2008 42
2009 37
2010 38
2011 41
2012 44
2013* 48
2015* 52
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
95Source: Benito/Welch 1997, p. 20
Market exits – Forms, reasons, and consequences/barriers
Within the context of market exits Benito (2005, p. 242) talks about divestments and understands this as adjustments, failures
and results of restructuring.
The reasons/determinants of market exits are the following: Changes in the attitudes or foreign commitment of the management (1)
Change in the organization, as strategy changes (e.g. product-market/ competitive strategy) (2), resource-based decisions (3), new management, which follows new ideas (4)
Changes in the external environment, for example in the macro environment (political-legal, economical, technological) (5), or in the meso environment (customer, competitor) (6)
Changes in performance, in the host country as well as in other markets (7)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
96
Company Country / year ReasonsM&S (UK) US 2006;
F/E/B/NL/D/P/LUX 2001• resource-concentration in core countries• corporate restructuring program
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing mix
I. Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
98
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
99
Country-specific timing strategies
Industry turnover
Timet0 t1 t2
Early
mover
Second
mover
Competitorsshake-out 1
Late
mover
Competitorsshake-out 2
Level of uncertainty
Market life cycle
Entry continuum Phases of market processingSource: Swoboda 2002.
Time
Market saturation100%
Cantle
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
100
Advantages and disadvantages
Early/Firstmover
Secondmover
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages Disadvantages+ –
Establishment of market standards Longer pay-back period Market share-based cost advantages Development of business experience Strategic autonomy/ monopoly profits
Higher costs for market development Higher effort to convince customers Higher R&D costs Risk of technological leaps Uncertainty about future market
development
Participation in the market development of the pioneer
Risk reduction (waiting for the market development of the pioneer)
Entry compared to late moveroption - influence of standards
Less strategic autonomy as a pioneer Cost and experience disadvantages
compared to the pioneer Compared to the late movers higher
investment and higher risk
Cost reduction in R&D Following established standards Standardization potential
Disadvantages in image building Entry barriers Competitive problems in case of price
reduction by competitors
Latemover
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaExample – Tablets in Germany
May 28, 2010: Apple iPad (announced on January 27, 2010, by Steve Jobs at an Apple press conference)
October 11, 2010: Samsung Galaxy Tab
March 15, 2011: Apple iPad2
June 15, 2011: BlackBerry PlayBook
July 15, 2011: HP Touchpad
August 15 2011: Samsung Galaxy Tab 10.1
March 16, 2012: Apple the new iPad
101
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
102
First mover advantages
Source: Kalynaram/Gurumurthy 1998.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
104
Turnover
Time
Country C
Country A
Country B
Turnover
Intro-ducti
on
Gro-wth
Matu-rity
Satur-ation
Degener-ation
Traditional product life cycle
Time
t2 t3t1
Inter-country timing
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
105
Inter country timing (product level or company level)
Country 1(France)
Country 2 (UK)
Country 3(Poland)
Homecountry
Country 1
Country 2
Country 3
Country 4
Homecountry
Time1-2 Years
Time
t1 t5t4t3t2
Sequential strategy(cascade, waterfall)
Simultaneous strategy(sprinkler, shower)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Advantages and disadvantages of the cascade and the sprinkler model
Cascademodel
Sprinklermodel
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages Disadvantages+ –
Limited resource use Organizational learning process Limited risk Possibility to prolong the life cycle Possibility of stepwise adaptation to
heterogeneous country markets Indispensable when certain markets
have lead function for region
Danger of short attention spans to specific markets (too early end of marketing activity)
Danger of imitation Danger of competitive reaction Danger of unsatisfied consumer need
and negative image effects (iPhone)
Indispensable with short product / technology life cycles / long R&D times
Possibility to build up first mover advantages
Establishment of market entry barriers High volumes, EoS, experience effects Risk portfolio
High coordination efforts High resource use High risk of general failure
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaExample – Sony Company information
Company information (historical)
1946: Foundation of Tokio Tsuchin Kogyo
1958: Naming SONY
1960: Sony Europe, Sony CooperationUS
1968: Sony UK, 1970: Sony Germany
1972: First foreign production plant in San Diego, followed by Bridgend in 1972
1985: Acquisition of CBS Records, 1989 Columbia Tristar, 2001 Sony Ericsson Mobile, 2004 FeliCa Network
2013: More than 146,000 employees, 72 bn. USD annual sales, approx. 1,000 subsidiaries
Global innovation leader for more than four decades, early mover, strong brand, well-balanced regional sales: approx. 25% each in Japan, USA, Europe, others; five business units (BU)
Focus BU Games: 8% of all company sales (2013), growth sector, 2006: world market leader
107
1955 1968 1979 1982 1995 2004 2013
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Example – Sony's worldwide product launch of PS3
Playstation 1 Playstation 2 Playstation 3 Playstation 4
1994 2000 2006 2013
2006 Business Unit Games
14% of all company sales
Profit: approx. 2 bn. USD (2005)
Worldwide market share <50%
PS3: Worldwide market launch in March 2006; high-priced premium product
No simultaneous product launch in triad markets
Production and delivery problems with blue- ray player
Launch in November 2006 in the US and Japan subject to a quota
Launch in Europe in March 2007 due to focus on US bulk business
Enormously high distribution cost
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Example – Consequences of Sony's misplanning
Time (2006/07)
Indus-trysales
Nintendo-Wii
X-Box
Sony PS3
50 m. USD
20 m. USD
Wii with motion sensor 250 USD in Nov 2006
PS3 with blue ray 499 USD with time delay March 2007
Scheduled product launch of PS3
Stylized product lifecycle
Consequences for Business Unit GamesShort-term Time advantage for competitors with cheaper
products (up to €200); overnight loss of market share to Nintendo and Microsoft
High positioning in terms of quality and price (but price advantage only for first mover)
Customer wishes change within one year, possibly even target groups (customers > 20 years old)
Amplifier: Loss of win-win-situation with software producers (who sell more games with competitors' products) and of trade and distribution partners
Long-term Only little recovery of BU Games: loss of 590
m. USD (2009), no world market leader 1 year handling of old product instead of new R&D Amplifier: sales problems of strongest BU
Electronics (70% of total sales), financial crisis, tsunami
Status as of 2014 With PS4 ahead of Microsoft (Xbox One) and
Nintendo (Wii U and 3DS); Sony again market leader
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing mix
I. Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
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Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
111
Decisions on market entry strategy
Basic perspectives/tasks Initial choice of market entry strategy/operation mode
Alternative operation modes and selection criteria
(Success related) advantages of each operation mode
Mode combinations
Mode changes or switches
Different forms of mode switches
Different reasons for mode switches
Interdependencies: mode choice, market selection and preferred internationalization strategy
One of the major research topics in international business research
Source: Zentes/Swoboda/Schramm-Klein 2013.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Value-added dominantlyin home country
Value-added dominantlyin host country
Without FDIin host country
Export (Direct or indirect)
e.g. licensing, franchising,
management contracting
With FDIin host country
Greenfield investment
Acquisition(Brownfield investment)
Cooperation Hierarchy
Classification of selected foreign market entry strategy/operation modes
Market entry strategy or operation modes are defined as contractual arran-gements/institutional background of market activities in foreign countries.
Jointventures
Wholly-ownedsubsidiaries
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Basic types of exporting –Direct and indirect
Border
Company BuyerWholesaler /
export company
Company BuyerDirect
Indirect
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Evaluation of direct and indirect exporting
114Source: Zentes/Swoboda/Schramm-Klein 2013.
Direct export Indirect exportExogeneous factors
Rapid market entry + +
Rapid multiplication of product successes – +
Specific upgrading of the marketing program – x
Good absorption of market potential – +
Endogeneous factors
Higher coordination costs over time – +
High control and possibilities to influence + –
Danger of losing competences concerningcompetitive advantages
– +
Decreased use of human resources – +
Strategic flexibility + ++ given; – not given; x no assertion possible
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Exporting –Advantages and disadvantages
Source: Hill 2008.
Advantages
Avoids the substantial cost of establishing manufacturing operations in the host country
Easy way to sell a surplus, thus helps to achieve experience curve advantages at home
There may be lower-cost locations for manufacturing abroad
Transport costs Tariff barriers Agents/distributors in a foreign
country may not act in exporter's best interest
Inter-nal
Exter-nal
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Different distribution channel alterna-tives for the case of direct exporting
Border
Company BuyerDistributor
Company BuyerSales subsidiary
Company Buyer
Company Buyer
Sales representative(Domestic-based or resident)
Company BuyerAgent
1
2
3
4
5
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaIncoterms
117
Incoterms Definition Key points Arrangement of shipping
EXWEx works(named place)
Delivery takes place at the seller's premises or another named place (i.e., works, factory, or warehouse).
EXW represents minimal obligations for the seller, the buyer bears all the costs and risks involved in claiming the goods from the seller's premises.
Buyer arranges shipping
FOBFree on board(named portof shipment)
Delivery takes place when the goods pass the ship's rail at the named port of shipment, the port of origin in the seller's home country.
The buyer bears all the costs and risks of loss and damage upon delivery. The seller clears the goods for export.
Buyer arranges shipping
CIFCost,insurance, and freight (named portof destination)
Seller pays the cargo insurance and delivery of goods to the named port of destination. From the destination port, buyer is responsible for customs clearance and other costs and risks.
The seller pays for freight and insurance to transport the goods to the named port of destination. At that point, responsibility for the goods transfers from the seller to the buyer.
Seller arranges shipping and insurance
Source: Cavusgil/Knight/Riesenberger 2014.
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Choice of an intermediary
The partner is financially well consolidated
The partner covers the whole geographic area, e.g., the country
The partner has a high level of expertise in the industry
The partner's staff have a high level of technical know-how
The partner's staff offer a high level of service support
The partner's staff have excellent relations with the industry
Manufacturer's seeking criteria ("wish" profile)
Partner's activity
Partner's type of customer Partner 1 Partner 2
strong weak strong weak strong weak
Manufacturer'sseeking criteria("wish" profile)
Manufacturer's evaluation of the competences of the two partners
Manufacturer would expect similarities in activities and types
of customers
Source: Hollensen 2007.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Some questions on exporting
What are the differences between direct and indirect exports?
Which role do exports play for small versus large companies, and for the companies' internationalization process? Non-exporters: Willingness to start exports (export ratio = 0%)
Reactive involvement: reactive exporters (export ratio = 1-9%)
Active involvement: growing number of markets abroad (export ratio = 10-39%)
Committed involvement: (highly) engaged firms (export ratio = 40-100%)
How are exports conducted and which challenges do they bear? Shipping documents, foreign trade assurance etc.
Direct customer access, sales-broker control, switch from indirect to direct export
Which possibilities do firms have to coordinate their exports?
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaSubsidiaries
120
Subsidiaries
Sales subsidiariesWholly owned
production subsidiaries (WOPS)
Sales facilities (usually combined with services) that serve the host country market and that are in the 100%-ownership of the company
Production facilities (usually combined with sales department) that serve the host country market and that are in 100% ownership of the company
Located and operated in the host country by the MNC, under the laws and regulations of the host country
Different legal forms and strategic roles are
common
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Internal advantages and disadvantages of WOPS
121
Disadvantages
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages
Low transportation cost
Potentially lower labor cost
Independent marketing & business strategies / full control over operation
High level of control over knowledge outflow (protection of unwanted know-how diffusion)
Easy integration into own organizational structures
High capital investment necessary
Acquisition of country-specific know-how is more difficult
Firms bear the full costs and risks of setting up overseas operations
High investment might reduce flexibility in international strategy
Source: Kotabe/Helsen 2008; Hollensen 2007.
+ –
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
External advantages and disadvantages of WOPS
122
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages Disadvantages+ –
Full and own presence in the market
Uniform market appearance (brands, CI, etc.)
Enhanced market power over suppliers, competitors, etc.
Circumvention of market barriers (e.g. host country restrictions, non-tariff barriers)
Often subsidized by host country government
Local value added considered beneficial by host country officials; image as local company (job creation)
Need to develop a foreign market presence without the support of a third party
Company might have limited market knowledge
High risk (country risk, risk of expatriation…)
Source: Kotabe/Helsen 2008; Hollensen 2007.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
123Source: Bartlett/Goshal 1986.
Black holeImplementer
Strategic leaderContributor
low high
low
high
Strategic importanceof local environment
Com
pete
nce
oflo
cal o
rgan
izat
ion
Strategic roles of WOPS
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Market shares and production location of Japanese manufacturers
Source: Blaser et al. 2009 (Case Study Group).
Local production
Exports
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Some questions on subsidiaries
Which role do subsidiaries play during the internationalization process; especially for firms that start their internationalization with exports?
How are subsidiaries established, and which added value do they deliver? Greenfield vs. brownfield investments
Sales subsidiaries, production subsidiaries vs. autonomous subsidiaries
Which possibilities to coordinate subsidiaries abroad do you know? E.g., structural, technocratic/process oriented, cultural
Which strategic roles can subsidiaries play in connected and transnational companies?
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Establishing WOPS – Assessment of greenfield investments and acquisitions
126
Greenfield investment Acquisition
Market access Delayed Directly
Market share Has to be captured Will be taken over
Capital expenditure Gradual increase High contribution in the beginning
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Establishing WOPS via acquisitions –Advantages and disadvantages
127
Inter-nal
Exter-nal
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages Disadvantages (why they fail)+ –
Economies of scale (from the beginning)
Often quick cash flow generation from the acquisition
High information and search costs ("lemons") (information asymmetry, acquiring firms often overpay the assets of the acquired company, synergy potentials often lesser than expected)
Opposition by host country government Necessity to integrate different systems,
cultures, people… (cost of integration) Potentially brain drain
Quick access to the local market Access to additional local resources
(brands, management expertise, market knowledge, government relations, distribution networks, suppliers, sites)
Buying into a market position / image Competitive intensity in host market is not
enhanced (lower risk of over-capacity)
Available and adequate take-over object necessary
High risk Opposition by local company
Source: Kotabe/Helsen 2008; Hollensen 2007.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTypology of acquisitions
128
Horizontal acquisition
Vertical acquisition
Conglomerate acquisition
Sup-plier
Sup-plier
Sup-plier
Pro-ducer
Cus-tomer
Sup-plier
Pro-ducer
Cus-tomer
Same products / markets
Sup-plier
Pro-ducer
Cus-tomer
Customer-supplier-relationship
No specific relationship
Acquisitions over time, 1990–2011
Source: Herger/McCorriston, 2014.
Residual: where it is not clear whether a deal is driven by a horizontal or verticalmotive (or both).
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Economic logic of an acquistion decision
129
Firmvalue before the acqui-sition
Value ofthe acquiredfirm
Buyingprice
Restruc-turingpoten-tial
Synergypoten-tial
Inte-grationcost
Firm valueafterthe acqui-sition
Pricepremium
Source: Hungenberg, H.: Strategisches Management in Unternehmen, Springer/Gabler, 2012, S. 524.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Example of a partial acquisition with partnership
Nestlé
• Strong gain in German pizza market forNestlé (Wagner holds 27%)
• Access to Nestlé distribution networkabroad for Wagner
• Some Wagner pizza sold under Nestlé-brands (e.g., Buitoni in Italy and CH)
• Access to financial capital for Wagner (20 Mio. EUR invested in production, 6.5 Mio. EUR invested in distribution center)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Factors to consider in selecting foreign direct investment locations
131
Market factors Size and growth of national
market Size and growth of regional
market Proximity to key export markets
Human resource factors Cost, availability, and
productivity of skilled labor Involvement of labor unions Availability and quality of
managerial workforce
Profit retention factors Types and level of taxes Tax rates for profit
repatriation Complexity of tax system Rate of inflation
Economic factors Cost of land and facilities State of the local
economy Stability of currency Extent of free trade
Legal and regulatory factors Regulations on FDI and technology
transfer Nature of legal system and laws Intellectual property protection Extent of tariffs, other trade barriers
Infrastructural factors Availability and quality of local manufacturing Efficiency of physical distribution Cost, availability, and quality of utilities and
finance Quality of marketing and distribution
Political and governmental factors Political stability and corruption Openness to foreign investment Extent of bureaucracy and red tape
(excessive regulation or rigid conformity to formal rules that is considered redundant)
Source: Cavusgil/Knight/Riesenberger 2014.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
132
Some huge acquisitions
Some questions on mergers & acquisitions
When do firms choose acquisitions as market entry strategy?
How are market selection and acquisitions related?
Please explain the ideal process and the characteristics of a foreign acquisition process, so during the pre-merger and post-merger phase.
Buyer Goal Branch bn. EUR
Totalfina Elf Aquitane Oil 52.2
Rhône-Poulenc Hoechst Pharma 25.8
Carrefour Promodès Retailing 16.7
Vodafone Mannesmann Telecommunication 198.4
AOL Time Warner Medien / Internet 191.5
SmithKline Beecham Glaxo Wellcome Pharma 78.4
France Telecom Orange Telecommunication 48.4
AT&T Media One Telecom. / Media 46.3
Unilever Bestfoods Food industry 24.9
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Joint ventures as international market entry strategy
Source: Hollensen 2007.
Management,investment
and risk
(Equity) Joint ventures (JV) are partnerships between two or more economically and legally independent parties that involve the creation of a new company (or change in
ownership of an existing company) as a third entity in which the parties carry out economical activities (in our case: operations) together and in which they share
ownership and control (joint ownership).
Company 1 Company 2
Joint Venture
International JV: The 3 units must be located in at least two countries
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTypes of equity joint ventures
134
Characteristics
Number of cooperation partners
JV with one partnerJV with two or more partners
Area of cooperation JV for one value creation activityJV for two or more value creation activitiesCompany-wide, cross-functional JV
Location JV based in one partner's home countryJV based in a third country
Geographic scope of cooperation
Local JV for specific host countryJV for specific region / for world market
Type of cooperation Horizontal / Vertical / Concentric / Conglomerate JV
Equity investment Equal sharesUnequal shares
Time horizon Temporary JVJV without time limit
Source: Zentes/Swoboda/Schramm-Klein 2013.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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Cooperative options – Danone's activities in China
Joint Venture with Wahaha – Production and Product Know-how from Danone, Chinese Brand from Wahaha
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Internal advantages and disadvantages of joint ventures
136
Disadvantages
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages+ –
Low transportation costs, potentially lower labor cost, access to local inputs
Sharing the necessary investment (lowering capital needs and risk) and resources with partner
Complementary technology or management skills can lead to new opportunities
JV facilitate technology transfer compared to other entry modes
More control over the operations compared to other "lower" order entry modes
Long-term, intensive cooperation with joint objectives
Possibility to establish local government relationships
Knowledge dissemination Problematic in particular when JV is
terminated (who owns the resources that were established together?)
Lower control than in case of WOPS; might not be enough to realize experience curve or location economies
Managerial dependency between JV and one of the partners
Potential conflicts over strategies, resource allocation, transfer pricing, ownership of critical assets, repatriation or investment of profits, resources
Changes in the bargaining power of partners over time
Integration in international strategy of parent may be difficult
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
138
Some questions on alliances
When do firms choose alliances as entry strategy?
How are market selection and alliances related?
What are key challenges/success factors during different phases of international alliance evolution? First phase
Foundation phase
Management phase
Which role does foreign culture play during the alliance evolution?
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
139
Situational factors
Company characteristicsIndustry characteristicsEnvironment characteristics Decision-maker characteristics
Evolution phases of alliances
Building phase Managing phase
Basicdecisions
Searchfor
partners
Negotiationsconstitution
Management
Cooperationas possible
strategy?
Informationabout
partner
Goals andfigures
Structure,strategies
and culture
4. Paper: International SME Alliances: The Impact of Alliance Building and Configurational Fit on Success, Long Range Planning, Swoboda et al., Long Range Planning (2011, optional).
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Guidelines for successful collaborative ventures (1/2)
140
Pursue common goals
Be cogizant of cultural differences
International collaborations require that both parties learn and appreciate each other's corporate and national cultures
Cultural incompatibility can cause anger, frustration, and inefficiency
The partners may otherwise never arrive at a common set of values and organizational routines, especially if they are from very distinct cultures
Give attention to planning and management
When partners have differing goals for the venture, or their goals change over time, they can find themselves operating at cross-purposes
E.g., Japanese firms tend to value market share over profitability, U.S. firms value profitability over market share
To overcome such challenges, partners need to regularly interact and communicate at different levels of the organization
Without agreement on questions of management, decision making, and control, each partner may seek to control all the venture's operations, which can strain the managerial, financial, and technological resources of both
Source: Cavusgil/Knight/Riesenberger 2014.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Guidelines for successful collaborative ventures (2/2)
141
Adjust to shifting environmental circumstances
Safeguard core competencies
Collaborations take place between current or potential competitors that must walk a fine line between cooperation and competition
For example, Volkswagen and GE succeeded in China by partnering with the Chinese firm, Shanghai Automotive Industry Corporation (SAIC), and the Western firms transferred much technology and know-how to their Chinese partner
Having learned much from them, SAIC is now becoming a significant player in the global automobile industry and even a competitor to its earlier partners
When environmental conditions change, the rationale for a collaborative venture may weaken or disappear
An industry or economic downturn may shift priorities in one or both firms; cost overruns can make the venture untenable; new government policies or regulations can increase costs or eliminate anticipate benefits etc.
Flexibility is key for adjusting to changing conditions
Source: Cavusgil/Knight/Riesenberger 2014.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
142
Licensing
International licensing occurs when a firm provides (against payment), rights needed by another company to operate its business in a foreign market MAN B&W Diesel as licensor to Hyundai Heavy Industries
Licensing out vs. licensing in Active vs. passive licensing Licensor vs. licensee
Source: Hollensen 2007.
A licensing agreement is an arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specified time period, and in
return, the licensor receives a payment from the licensee
Example: A licensor allows another company to manufacture a certain product that is based on a patent against some agreed royalty.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
143
International licenses
400
350
300
250
200
150
100
50
0 10 20 30 40 50 60 70 80 90 100
Joop
Mövenpick
Boss
Camel
Aigner
MCM
Jil Sander
License salesin m. €
Share of license sales tototal sales in %
Source: Zentes/Swoboda/Morschett 2004.
Operationlicence
Trade namelicence
Productlicence
Distributionlicence
Types of licences
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTypes of license agreements
144
Operation license
Product license
Distribution license
Trade namelicenses
Grants a firm permission to produce another firm's product
Grants a firm permission to use another firm's proprietary names, characteristics, or logos
Grants a firm permission to distribute another firm's product or know-how
Grants a firm permission to use a production technology or parts of a larger system etc.
Source: Zentes/Swoboda/Schramm-Klein 2013.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
4,3
5,0
5,0
5,5
5,6
6,0
7,0
8,7
12,0
The CollegiateLicensing Company
Major LeagueBaseball
Sanrio
Nickelodeon &Viacomm
MarvelEntertainment
Warner Bros.Consumer Products
Mattel
Phillips-VanHeusen
ICONIX
Disney ConsumerProducts
28,6
Leading licensors ranked by licensing revenues (in bn. USD)
145
1
2
3
4
5
6
7
8
9
10
Toy and apparel licesing for Disney movies such as Hannah Montana and Mickey Mouse
Licensed merchandise for universities and collegiate sports teams
Licensor of iconic toy and game brands such as Barbie and UNO
Toy and apparel licensing from movies such as Batman and Harry Potter
Toy, game, and apparel licensing for comic characteristics such as Iron Man and X-Men
Toys and apparel tied to the Hello Kitty character
Source: Cavusgil/Knight/Riesenberger 2014.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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License contracts
Source: Hollensen 2007; Bradley 2002.
License packages contain elements such as: Patents, designs, trademarks, copyrights Product and process specifications Quality control procedures Manufacturing layout drawings and instruction manuals Commissioning to achieve a performance guarantee Technical and commercial training programmes Product literature and other sales support material
License transactions involve combinations of A down payment on release of the written part of the technology Progress payments leading up to commissioning one or more products to the
licensor‘s performance specification Minimum royalty – a guarantee that at least some annual income will be received by
the licensor Running royalty – normally expressed as a percentage of normal selling price or as
a fixed sum of money for units of output
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
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International licensing – Examples
Country Edition fromLicencee or JV-Partner
AUTO OGGI (Italien) 1986 Arnoldo Mondadori Editore
AUTO EXPRESS (Großbritannien)
1988 Dennis Publishing Ltd.
AUTO WEEK (Niederlande) 1990 Uitgeverij Sparnestad B.V.
AUTO TIP (TschechischeRepublik)
1991 Automedia
AUTO SHOW (Türkei) 1992 Hürriyet Istanbul
AUTO NEA (Griechenland) 1993 Lambrakis Press
AUTO FOCO (Portugal) 2000 JV SVD
AUTO BILD SUOMI (Finnland)
2004Sanoma Magaz. FinlandCorp.
AUTO BILD THAILAND (Thailand)
2004Hubert Burda Media Thailand
AUTO BILD LITHUANIA (Litauen)
2005Veidas PeriodicalPublishing
AUTO BILD SRBIJA CRNA GORA (Serbia/Monten.)
2006 Politika Magazines
AUTO BILD DANMARK (Dänemark)
2006 Forlaget de Luxe A/S
Autobild (by Axel Springer) Tokyo Disneyland
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Internal advantages and disadvantages of licensing out
148
Disadvantages
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages+ –
Good opportunity for small companies with limited financial, managerial or marketing resources to expand into a new market
Low own investment / low commitment of own resources
Low transport costs
Potentially lower labour cost
Access to local inputs
Easy way to improve cash flow from existing technology/know-how/brand (better exploitation of past R&D investment; stretching product life cycle is possible in less developed countries)
Might not give tight control over manu-facturing, marketing, and strategy that may be required to maximize profits
Problems with integration of market into international strategy (change in market entry strategy not possible in the short term)
Low initial cost might be accompanied with less than optimal long-term income in foreign market
Licensing includes transaction cost (identifying partner, monitoring, enforcing: risk of opportunism as greatest risk)
Low own value added by own company
Source: Hollensen 2007; Bradley 2002; Hill 2008.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
External advantages and disadvantages of licensing out
149
Disadvantages
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages+ –
Good opportunity to enter smaller foreign markets, higher risk markets
Fast and cheap introduction of licensed product (based on existing manufacturing facilities of licensee)
Use of market know-how, customer relationships and distribution channels of licensee
Improved delivery and service levels in local markets
Circumvention of market barriers (such as host country restrictions, tariffs, non-tariff barriers)
Local value added considered beneficial by host country officials
Only passive interaction with the market
Low possibility to influence the market policy of licensee
Creates possible future competitors (licensee may become a future competitor)
Establishment of competitors by know-how-transfer (esp. on third markets)
Lack of commitment of foreign partner can endanger the market success
Lack of control over licensee operations in the foreign market (potentially negative image effects in host country and spill-over effects)
Source: Hollensen 2007; Bradley 2002; Hill 2008.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaImpact of licensing on cash flow
150
Profits
Costs
Time
Cash flow for licensing in new product
technology
Cash flow for inhouse new product
development
Royalty costs
Research and market development costs
1
2
1
2
Technology adaptation andmarket development costs
Source: Bradley 2005.
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151
Internationalhotel company A(HQ: country X)
Owner of hotel BLocation: country Y (or third country)
Hotel BMarket: country Y
Managementcontract
Ownership(often: portfolio
investment)
Manages
Management contracts
A management contract is an arrangement whereby one party hands over the actual operational control of a company to another company which performs the necessary
management functions in return for a fee.
Example: Hotels, airports, casinos
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
152Source: Fraport AG 2015.
Civil Aviation MinistryEgyptian holding company for
airports and air navigation
Cairo Airport Company Cairo International Airport
Fraport AG Germany
Ow
ners
hip
100
%
man
agem
ent
Ownership100 %
Structure of a management contract system in the airport industry
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The Accor strategy –Trends by market segment
Current model
Owned/fixed leases
Owned/fixed leases
Owned/fixed leases
Owned/fixed leases/franchising
Variable leases/franchising
Management contracts/variable leases/
franchising
Management contracts/franchising
Preferred operating structure(in mature markets)
Management contracts
Source: Accor 2015.
Accor franchise
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Franchising (I)
Source: European Franchise Federation 2007.
Franchising is A system of marketing goods and/or services and/or technology, Which is based upon a close and ongoing collaboration between legally and
financially separate and independent undertakings, the franchisor and its individual franchisees,
Whereby the franchisor grants its individual franchisee the right, and imposes the obligation, to conduct a business in accordance with the franchisor's concept.
Autonomousfranchisor
Autonomousfranchisee
Franchise package
Directives and control
Long-term contractual cooperation
Compensation
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Business format franchising comprises of five essential elements A brand name (registered as a brand name and/or a trademark, etc.) which
serves as the umbrella sign for network, and a rallying sign for the consumer and public,
A licence to the use the brand, granted to the franchisee by the franchisor,
A business system - a business concept formatted into a duplicable value "package" founded on the franchisor's tested know-how and his continued assistance during the term of the agreement,
Payment by the franchisee of a financial consideration, either in a direct form, such as an entrance fee and/or continuing fee ("royalty"), and/or an indirect form such as a mark-up on supplied goods.
The investment in, and ownership of, the assets of the franchised business by the franchisee.
Different: Product and trade name franchising Similar to licensing
Source: European Franchise Federation 2007.
Franchising (II)
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Business format “packages”
Trade marks / trade names / designs
Patents and copyrights
Business know-how / trade secrets
Geographic exclusivity
Store design
Market research
Location selection
Source: Hollensen 2007.
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Obligations in a franchise system
The franchisor shall Have operated a business concept with success, for a reasonable time and in at
least one pilot unit before starting its franchise network
Be the owner, or have legal rights to the use of its network's trade name, trade mark or other distinguishing identification
Provide the individual franchisee with initial training and continuing commercial and/or technical assistance during the entire life of the agreement.
Extract taken from the „Code of ethics“ What is a code of ethics and why is it necessary?
Source: European Franchise Federation 2007.
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158
Franchising in Germany (2015)
Source: Deutscher Franchise-Verband 2016.
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Franchising in Europe (2015)
Source: European Franchise Federation 2016.
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Number of franchises
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Top 10 global franchises (2016)
Source: Franchise direct 2016.
No. Name Business CoO Founded in Franchisesince
No. of countries
Total units
1 Mc Donald's Fast food USA 1955 1955 119 35,690
2 Subway Fast food USA 1965 1974 98 42,230
3 KFC Fast food USA 1939 1952 108 18,775
4 Burger King Fast food USA 1956 1956 76 13,260
5 Pizza Hut Fast food USA 1958 1959 92 14,970
6 7-Eleven Convenience store USA 1927 1964 15 51,000
7 Wyndham Hotel Group
Hotel USA 1990 1990 70 7,400
8 InterContinental Hotels and Resorts
Hotel UK 1946 1956 100 5,000
9 Hilton Hotels & Resorts
Hotel USA 1962 1965 78 560
10 Marriott International
Hotel USA 1967 1967 80 4,200
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaAccor case – Operation modes
161Source: Accor 2015.
Structure of the Accor network Accor contract types
Franchise
Management
You operate your hotel directly under one of our brands and you benefit from Accor's expertise (services)
You pay franchise fee to Accor (based on revenue)
We manage your hotel
We deploy our operating expertise to manage your hotel over the long term
You pay management fees to Accor (based on revenue and operational profit)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaBrand portfolio
162Source: Accor 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaPreferred operation modes
Franchising: You operate your hotel directly under one of our brands and you benefit from Accor expertise (Services).
Management: We manage your hotel directly and efficiently and your hotel benefitsfrom a full range of services.
Lease:We operate your hotel directly under one of our brands and in return pay you a variable rent.
163Source: Accor 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Choosing the right brand for the franchise contract
164Source: Accor 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaBenefits for the franchisee
Why choose a franchise contract with Accor for your hotel?
Because you would like to…
Benefit from the expertise of the 1st world hotel operator.
Attract and develop loyalty of new customers.
Take advantage of a famous strong brand and internationally known.
Join a powerful network.
Get the support of experts close to you and to your daily issues.
Optimize your project of investment increase your margins.
Attract talented employees and train your staff in operating excellence.
165Source: Accor 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Design and technicaladvisory service
Design and technicalservice teams around the world
190 construction experts around the world
Personal support in organizing and developingconstruction and renovation projects
600 projects a year trackedsimultaneously an all continents
Support in supply withhotel equipment like lighting, furniture, bedding
Benefits for the franchisee –Architecture and design
166
Services offered by Accor's design & technical team
Source: Accor 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Worldwide renowned brands Cooperations with leading airlines such
as Qantas and Air France, with banksand other service firms such as VISA
Improvement of brand image throughcommunication activities such assponsoring
Customer club "Le Club" with 14 millionmembers
Benefits for the franchisee –Marketing know-how
167
Benefits of "Le Club" 45% of members revisit Accor hotels vs.
16% for non-members year on year 5% acquisition cost vs. 16% for a non-
member booking x3 spending for a member vs. a non-
member on one year +40% spendings on-site per stay vs. a
non-memberSource: Accor 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Benefits for the franchisee –Accor booking system
Accor has a multi-channel distribution strategy that fits the brands from Luxury to Budget incorporating all segments and distribution channels, both direct and indirect via partners and intermediaries
The backbone of the distribution is Accor’s fully owned CRS, called TARS (Travel Accor Reservations System), that operates worldwide
TARS has a fully integrated interface with: All major GDS systems (Galileo, Amadeus,
Sabre, Worldspan) Pegasus – connecting a multitude of online
travel agencies as well as Touroperators/Wholesalers to provide access to dynamic inventory
Direct connectivity with key Global Online Travel Agencies
Alternate connectivity solution for smaller Online Travel Agents
168
Accor distribution system TARS
"Accor’s aim is to remain the market leader in providing a strong global distribution platform to our hotels through continual development of our own channels and developing business with qualified third party websites."
Source: Accor 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Benefits for the franchisee –Management support
Boost your revenue thanks to our high-performance booking tools and systems and our expertise in revenue management.
Ensure operational excellence every day with proven hotel operating procedures and standards that ensure you a high-quality, profitable hotel.
Design, build and renovate with technical experts in hotel design, construction, renovation, maintenance and installations, who are backed by more than 40 years of experience and can guarantee a high-quality project that meets your deadlines and budget.
Hire and retain the best people: As the world’s largest hotel employer, our goal is to hire, motivate, train and retain the most talented men and women in the market.
169Source: Accor 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Internal advantages and disadvantages of franchising
170
Disadvantages
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages+ –
For the franchisor
Revenues may not be adequate; depending on the franchisee(s)
Strong controlling system is needed
Absence of direct control over franchisee’s operations
Potential problem in performance standards
Firm avoids many costs and risks of opening up a foreign market
High motivation of franchisee (as compared to employed "store manager") due to independent entrepreneurship (franchisees’ profit directly tied to their efforts, low monitoring costs)
Mutual (bidirectional) know-how-transfer: local knowledge combined with support from headquarters; simultaneous usage of advantages of large system with small units
Source: adapted from Bradley 2005.
For the franchisee
Not fully independent in business decisions
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
External advantages and disadvantages of franchising
171
Disadvantages
Systematischer Überblick
Hohe Effizienz im Anfangs-stadium der strategischen
Analyse
Advantages+ –
Rapid expansion possible (see Fressnapf, McDonald’s)
Capital infusion by franchisee (direct or via bank)
Local network of the franchisee (existing community goodwill, existing local market knowledge)
Value added dominantly in the host country
Source: adapted from Bradley 2005.
For the franchisor
Availability of franchisees or a master franchisee sometimes not given
(European) franchise law grants substantial freedom to the franchisee ("in participating restaurants only")
Only passive interaction with the market
Risk of lowering quality of brand name (franchisees' effects on brand name)
For the franchisee
Residual risks of local operations
Only limited expansion possible
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Strategies of franchising
Franchiser
Franchisee Franchisee Franchisee
Franchisee
Franchisee
Franchisee
Franchise contract
Franchise contract
Franchiser
Franchisee Franchisee Franchisee
Masterfranchiser
Franchisee Franchisee Franchisee
Masterfranchise contract
Home country Foreign country
Franchiser
Franchisee Franchisee Franchisee
Joint venturesubsidiary
Franchisee Franchisee Franchisee
Corporation contract
Direct foreign fran-chising
Master fran-chising
Indirectfran-chising
Franchise contract
Franchise contract Franchise contract
Franchise contract
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Choice of a market entry strategy
Export Licenses
WOPS /acquisition
Joint venture
Market attractivity
Marketbarriers(risks)
high
low
low high
Indirectexport
Direct export /licenses
Joint venture
WOPS /acquisitions
Market attractivity
Competitive strength
high
low
low high
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
When contemplating international expansion, firms often struggle to decide which entry strategy is best. Experienced managers consider… Objectives of the firm, such as desired profitability, market share, or positioning
The degree of control the firm desires over decisions, operations, and strategic assets
The specific financial, organizational, and technological resources and capabilities available to the firm (for example, capital, managers, technology)
The degree of risk that management can tolerate in each proposed foreign market
The characteristics of the product or service to be offered
Conditions in the target country, such as legal, cultural, and economic circum-stances, and the nature of business infrastructure, such as distribution and transportation systems
The nature and extent of competition from existing rivals and from firms that may enter the market later
The availability and capabilities of partners in the market
The long-term strategic importance of the market
174
Factors to consider when deciding on the right market entry strategy
Source: Cavusgil/Knight/Riesenberger 2014.
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175
Control
Flexibility
High
Low
Perceiveduncertainly
High
Low
Desiredrole inmanagerialdecisions
Franchising /Joint venture
Exporting FDI
0 % 100 %Capital investment
Source: Bradley 2009.
Strategy trade-off
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Determinants of the choice between WOPS and JV
Host country factors Cultural distance Country risk (-) Legal restrictions (-) Market growth (-)
Income level (of host country) Industry concentration (in host country) Market size (-) Markt attractiveness Volatility of demand Trade barriers Competitive intensity Openness of host country to FDI
R&D intensity Capital intensity Sub size (absolute) Sub size (relative to MNC) Resource intensity (-) MNC sales MNC employees (+)
MNC assets Int. experience (country specific) (+)
Age of subsidiary Multinational experience Int. experience (general) Export intensity (+)
Diversification of MNCLegend (basis 600 studies, meta-analysis): Country Risk has a significant impact (negative) on the choice of WOPS, i.e. companies prefer JV. Determinants without “+/-“ have no significant impact on the choice.
5. Paper: Research on market entry modes, Journal of International Management,Morschett/Schramm-Klein/Swoboda (2010, obligatory).
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Examples:Different determinants of mode choice
Choices betweenWOS (1) or JV (0)
Geographic distance
Cultural distance
Firms size
Legal constrains
Strongeconomic growth
High competition
-
(-)
+
-
-
(+)
6. Paper: How do past mode choices influence subsequent entry? A study on the boundary conditions of preferred entry modes of retail firms, International Business Review, Swoboda/Elsner/Olejnik (2015, obligatory).
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing mix
I. Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
178
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Internationalization is a dynamic process Traditional perspectives focus on increases of foreign involvement (increasing
foreign commitment towards international markets, e.g. Uppsala Model) Reductions of activities or divestment rarely analyzed But: mode changes as adaptations to the environment
Research gap Huge knowledge on mode choice and reasons for mode choice Limited knowledge on the dimensions of mode change, and also the reasons for
a change in mode Especially in the case of reductions/divestments Empirical results are rare and barely comparable
Overview
1797. Paper: Changes in foreign operation modes: Stimuli for increases versus reductions,
International Business Review, Swoboda/Olejnik/Morschett (2011, optional).
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
The internationalization process approach suggests that mode changes are to be expected given the dynamic nature of the internationalization process. But the process perspective does not explicitly consider reductionsof modes or non-incremental changes (Pauwels/Matthyssens 2004).
‘‘The economic–strategic literature on foreign operation methods has largely taken for granted that whenever a choice is made, it will be the most suitable one given the circumstances. Thus, the firm will consider a change of mode only if drastic changes occur.’’ (Pedersen et al. 2002, p. 326)
Empirical studies on reasons for mode shifts mostly analyze mode increases (12), rarely mode reduction (8), and hardly ever both (1) Increases: From joint venture to WOPS (e.g. Gomes-Casseres 1987;
Puck et al.), from distributors/intermediaries to direct export (e.g. Rosson 1987; Ellis 2005; Petersen et al. 2006), from export to sales subsidiary (e.g. Ford/Rosson 1990; Millington/Bayliss 1999; Pedersen et al. 2002), and from indirect export to other modes (e.g. Buckley et al. 1990)
Reductions: divestments (e.g. Benito 2005; Ellis 2005; Pedersen et al. 2006) Calof/Beamish (1995) evaluate mode increase and reduction simultaneously
Review of selected perspectives
180
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaInternationalization paths/pattern
(7) Twodimensional reduction
(6) Country reduction
Rarespecial case
(3) Reduction(divestment)
(1) Integration/consolidation/stagnation
(2) Increase/penetration (investment)
Rarespecial case
(4) Country expansion
(5) Twodimensionalexpansion
no change (0)
very strong(++)
Changes of strategies/modes
very strong(--)
no c
hang
e (0
)ve
ry s
tron
g(-
-)
Ch
ang
es o
f co
un
trie
s/re
gio
ns
very
str
ong
(++
)
181
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Calof/Beamish (1995) examined 121 changes in in-depth interviews with 38 companies, and linked these to the reasons stated for the changes
We collected reasons (separately for mode increases and mode reductions) in terms of scaled items and in open-ended questions 265 German, Austrian and Swiss managers provided information on 320 mode
changes
Empirical design and sample
320 descriptions of mode changes(210 penetrations and 110 reductions)
182
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaStimuli
183
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaInternationalization patterns (I)
184
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaInternationalization patterns (II)
185
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaReasons for mode change (I)
186
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaReasons for mode change (II)
187
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaKey results and discussion
In general Relevance of incremental and “revolutionary” changes Selected self-reinforced constructs are insufficient as the only explanation for
internationalization processes
Comparison of the results to those of Calof/Beamish (1995) Comparable: internal environment is a dominant reason for mode increase
(but also important antecedent of mode reduction) Comparable: attitudes are strongly linked to mode increases Different: external environment significantly stimulates mode reduction Different: performance is not significantly more important for mode reduction
Further international adaptation (process) model Calof/Beamish differentiate between four process levels
Stimuli of internationalization change (e.g. opportunity, environ-mental/internal changes, performance, learning) connected with
The perception of modes and markets and both connected with Mediators (e.g. environment, resources, strategy) and Internationalization patterns (influenced by the mediators)
Extension: structural, organizational and cultural consequences 188
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing mix
I. Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
189
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Simple viewpoint (I):Marketing mix
ProductPolicy
PricingPolicy
Communication Policy
Distribution Policy
190
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Simple viewpoint (II): A continuum of the Marketing mix
The Marketing components perspective
(Full)Standar-dization
(Full)Localadaptation
Mixed strategy
(i.e.: some components standardized or adapted to some degree,others to a different degree)
191
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaExample: Voith Paper
Trade fairsABTCP (Brazil)
192
Trade fairsChina Paper (China)
Voith: founded 1867, 40,000 employees, 5,6 bn EUR turnover and presence in 50 countries
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195
Simple viewpoint (V):Degree of adaptation as success factor
Standardization Adaptation
Goals: - Harmonization of market presence- Easier inter-country planning/ expansion - Use of synergies
Goals: Higher market share -
Profile in the competition -Higher communication effects -
Advantages: - Critical mass- Scale and learning effects
Advantages: Better address of customers needs -Ability to adopt to market changes -
Source: Zentes/Swoboda/Schramm-Klein 2013.
Global Multinational
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196
More complicated viewpoints (1):Questions for studying int. Market. mix
How do companies form their Marketing mix? During the first entry into a foreign market (“going international“)
Multiplication/replication of existing products/offers?
During the ongoing presence in foreign countries (“being international“)
How companies adapt, in the sense of “pressures or strategy to adapt“? Pressures to adapt: norms (e.g. legal) force the company to adapt Strategy to adapt: all decisions which goes beyond such norms
A lot of further antecedences: e.g. host country, home country, micro (e.g. sectors because food mostly have to adapt to local tastes)
What do companies adapt and what do they standardize? Which Marketing mix components are stronger adapted (core vs. peripheral) vs.
general positioning strategy?
What's about a format specific strategies vs. perceptions by consumers?
What's about processes (marketing vs. supply chain processes)?
8. Paper: International transfer and perception of retail formats: A comparison study in Germany and Romania, Swoboda/Berg/Dabija, International Marketing Review (2014, optional)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion
Practical and theoretical relevance
Retail context
Strong internationalization, esp. since two decades (Gielens & Dekimpe, 2007), start in developed, an then more distant countries (Alexander, Rhodes & Meyers, 2007)
Local business with adapted marketing and efficient processes (Dawson, 1994)
Retail format transfer strategy central to success (Goldman, 2001; Alexander, 2008)
Visible offers and internal processes are transferred unchanged or modified compared to the home country
Many studies on standardization/adaptation (review by Schmid & Kotulla, 2011)
In retailing dominant case study research (review by Swoboda, Zentes & Elsner, 2009)
Format transfer strategy types between adapted & standardized (simple addition of visible offer and internal process elements by Goldman, 2001)
In general research focus on marketing program elements neglecting important processes, especially supply chain processes (e.g., Bianchi & Ostale, 2006, Coe 2004).
1979. Paper: Transferring the Retail Format Successfully into Foreign Countries, Swoboda/Elsner,
Journal of International Marketing (2013, obligatory)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaObjectives and contribution
1.Which process and marketing program elements are standardized or adapted, and how do the processes and offers interact?
2.Whether and how the degree of standardization of the marketing program elements and marketing and supply chain processes determines performance in a foreign country?
Contribution
We disaggregate the retail format transfer strategy by conceptualizing the determining role of process on marketing program elements and by investigating core and peripheral marketing and supply chain processes as well as marketing programs (calls of Goldman 2001)
We study the interaction among retail processes, marketing programs and performance in a country.
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion 198
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaConceptual framework
Marketing program elements, standardization degrees (Baalbaki & Malhotra, 1995)
Core: Purchasing and logistic systems, IRP and ERP systems
Peripheral: Purchasing processes, supply logistic, distribution logistic
Marketing processes (Griffith, Hu & Ryans, 2000; Walters, 1986)
Core: Procedure/planning of locations, store layout, trend analysis, CRM
Peripheral: Planning of categories, sales, sales promotion, service
– Theory – FFR: flexible format replication approach is used to determine the degree of
standardization of process and program elements and to draw advanced conclusions concerning the relationships between the more standardized core vs less standardized peripheral elements of a format (Jonsson and Foss 2011)
PMT: Profit maximization theory is used to determine how the standardization of processes and offers is associated with performance (Samiee and Roth 1992) 199
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion
Coremarketing elements
Peripheralmarketing elements
H1a
H1b
Coresupply chain processes
Coremarketing processes
Peripheralmarketing processes
Peripheralsupply chain processes
Literature review and hypotheses development I
Corporate elements
FFR: core elements are replicated in an unchanged form because of various advntages and based on a systematic evaluation and market-based learning
Global retailer standardize all elements, multinational may standardize elements before entry or as a result of experience
Very few studies may supportthis assumption empirically
HYPOTHESIS 1The higher (a) the degree of standardization of the core marketing processes and (b) the degree of standardization of the core supply chain processes, the higher the standardization of the core marketing program elements.
200
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion
Coremarketing elements
Peripheralmarketing elements
H2a
H2b
H3a
H3b
Coresupply chain processes
Coremarketing processes
Peripheralmarketing processes
Peripheralsupply chain processes
Literature review and hypotheses development II
Standardization of core processes drive standardization of peripheral marketing elements
FFR: Retailer use processes as a temple for international expansion (e.g. strict organizations like franchise systems)
Prior studies indicate such relationships but without empirical evidences, e.g. retailers like ZARA, IKEA
FFR: Positive relation between peripheral processes and marketing elements
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion
H5: All four processes performance (positive).
Financial performance
H4b
H4a
Marketing program elements
PMT: standardization/adaptation as trade-off between economies of scale & customer orientation/segmentation (Samiee & Roth, 1992)
Core: standardization of core format transfer strategy elements, thus core competencies of a retailer drives performance (Wigley & Chiang, 2009).
Peripheral: retailer benefits from adapta-tion (Dawson, 1994), missing adaptations lead to market failure (Bianchi, 2006)
H4: The higher (a) the degree of standardization of the core marketing program elements and (b) the higher the degree of adaptation of the peripheral marketing program elements, the higher the performance in a foreign country.
Coremarketing programs
Peripheralmarketing programs
Literature review and hypotheses development III
202
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Sample Identification of 793 retail chains in German-speaking countries, 193 international
102 firms (122 mangers) agreed for an personal in-depth interviews at the headquarter (CEOs 48%; expansion managers 52%; response rate of 52.9%)
Respondents were asked to evaluate two countries: one psychic close and psychic distant (according to Evans & Mavondo, 2002)
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion
Research methodology I
203
M SD Close country1 Distant country
Number of total sales in m. € 5,772 10,371 Western Europe 85.3% Eastern Europe 46.1%
Sales abroad in % 41.6 25.9 Eastern Europe 11.8% Asia 31.4%
Number of employees 25,508 56,268 Other 2.9% Americas 17.6%
Employees abroad in % 40.4 25.9 Other 4.9%
Number of operating countries 19.1 23.5 Entry modes
International experience in years 23.7 17.1 WOS 62.8% WOS 54.9%
Country experience in close countries in years 19.5 14.1 Franchising 16.7% Franchising 22.5%
Country experience in distant countries in years 10.9 5.2 M&A 13.7% M&A 11.8%
Notes: N=102; Country of origin: German = 80.4%, Austria = 11.8%, Switzerland = 7.8%. 1 Please choose two different countries to evaluate in which your company operates for at least five or more years: one psychically close country
(with similar legal, political, economic, business and cultural environment compared to your home country) and a psychically distant country. The country selection has been controlled according to Evans and Mavondo (2002) by using ten business and cultural dimensions; all mean value differences are significant at a p<.001 level (two-sided).
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion
Research methodology II
Measurements Pretests: three experts and two top management seminars
Further development of past scales (Goldman, 2001, Swoboda, Foscht & Cliquet, 2008)
8 items for marketing processes, 8 items for supply chain processes, 6 items for marketing programs (two factors for each MPR, SCP, MP)
Degree of standardization/adaptation measured on 5-point semantic differentials
Performance measured according to Evans & Mavondo (2002, combining three financial performance indicators (sales, ROI, market share) and one strategic effectiveness indicator (satisfaction) in the last three years).
Notes: 1 How strongly does your company adapt or standardize the following [elements] in country […] in comparison to the home market? (Please estimate as follows: 1 totally adapted to 5 totally standardized.).2 How successful was your company in country […] on average over the past three years? (Please estimate as follows: 1 Declining/ constant, 2 Increase of up to 10%, 3 Increase of 11-20%, 4 Increase of 21-30%, 5 Increase of more than 30%). How satisfied are you with the overall development? (1 very unsatisfied to 5 very satisfied).
3 Two-sided test of significance between close and distant countries: *p<.05, †p < .10, ns=not significant. 4 Excluded.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaDiscriminant validity
† p <. 10. * p < .05. ** p < .01.*** p < .001.ns Not significant.Note: Standardized beta coefficient are illustrated.
Results
---
Similar results for distant countries
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTest for mediation
Close countries Distant CountriesIndirect effect Sobel test Bootstrap analysis1 Sobel test Bootstrap analysis1 F-value M lower upper c2 F-value M lower upper c2
† p <. 10. * p < .05. ** p < .01. *** p < .001. ns Not significant. Notes: 1 Bootstrap samples = 5,000; 95% confidence interval; 2 Direct effect of independent variable on performance; CMP=Core marketing processes; CSCP=Core supply chain processes; PMP=Peripheral marketing processes; PSCP= Peripheral supply chain processes; CMI=Core marketing program elements; PMI= Peripheral marketing program elements; MV=Mean Values.
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion 209
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion
Findings Marketing elements drives performance directly, internal processes indirectly
Successful retail format transfer strategy has to be considered more differentiated (in contrast to Goldman, 2001)
Core marketing instruments have to be standardized (represent main factors in the retail format)
Peripheral marketing instruments have to be adapted (represent peripheral factors in the retail format)
Results are consistent in psychic close and psychic distant markets
Implications Contribution to the young field of retail internationalisation by focusing on
Combining the effects of visible offers and internal processes as well as
corporate- and product-related elements (Srivastava, Hervani & Fahey, 1999)
Theoretical and managerial implications
210
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTake-aways
How do retail firms successfully transfer their format strategy into foreign markets?
1. Which retail processes and instruments are rather transferred unchanged or modified and how does the standardization of corporate- and product-related processes and instruments correspond?Very different, but quite strong.
2. Is performance rather determined by the standardization or adaptation of different retail marketing elements and (Marketing supply chain) processes?Standardization of strategic elements and adaptation of product-related marketing program elements drive performance.
Format transfer strategy is not the addition of different processes and marketing elements, because these elements drive performance differently.
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion 211
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Limitatons and directions for future research
Data basis Sample is restricted to retailers from German-speaking countries.
Only managers from the headquarters have been interviewed.
Methodological and conceptual approach
Adapted measurements to the context of the retail industry.
Investigations of the mediating role of the standardization of marketing instruments could be assumed.
Standardizations of marketing instruments and processes could differ regarding retail sector.
Results could be biased by the employed entry mode so that further research should control for these effects
Introduction – Conceptualization and hypotheses development – Empirical study – Discussion 212
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing mix
I. Marketing mix: Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
213
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Brand, quality, design, packaging, price, size, etc.
Levels of a product
A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need (including physical
objects, services, persons, places, organizations and ideas).
Levels of product standardization
(2) Branding
(1) Core
product
Packaging
Size
Support
Positioning
Services
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Following topics on product policy
Core product Principles
Product policy as a process
Product ranges
Positioning and branding Product positioning/image (country,
corporate, product)
Corporate branding (guest speech winter term)
Product branding
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
45 Worldwide Strategic BrandsResponsibility of general management at strategic business unit level
140 Regional Strategic BrandsResponsibility of strategic business unit and regional management
7,500 Local BrandsResponsibility of local markets
Nestle Carnation Buitoni
Kit Kat Polo Cerelac Baci
Macintosh Vittel Contadina Stouffer’s
Texicana Brigadeiro Rocky Soils
Examples
Herta Alpo Findus
Mighty Dog Smarties After Eight Coffee-Mate
Maggi Perrier L’Oreal
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Positioning and branding –Competitive strategy and positioning
Competitive strategy: Activities a company undertakes to gain a sustainable competitive advantage in a particular industry.
Decision on the competitive advantage which the firm is attempting to achieve, i.e. what advantage should be used to elevate the company from its competitors
Traditional example is Porter’s cost leadership and differentiation
Related: Concept of positioning
More marketing oriented
Positioning is the deliberate, proactive, iterative process of defining, measuring, modifying and monitoring consumer perceptions of a marketable object.
Strategic positioning involves providing unique value: it involves selecting and then bringing to bear an integrated set of tools and communication techniques that identify and explain the product offer to the customer
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Positioning and branding: Different positions of standardized brands
high
low
high
low
PriceAdidas
H
AdidasD
AdidasF
Prestige/quality
GoldstarSamsung
Sonyhigh
low
high
low
PriceSony
GoldstarSamsung
Prestige/quality
Western EU Middle-/Eastern EU
Turnover (bn. EUR) 14.5Op. Income (bn. EUR) 1.0Employees 53,700Number of countries >160
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Positioning and branding –Image dimensions in foreign countries
(3) Productimage
(2) Corporate image
(1) Country image("Made in ...")
Determinants of perception Brain information Communication
But also Cultural differencesMarket position Competitive situation…….
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Global Brand Tracking- Determination of corporate brandvalue from cutomers viewpoint
- Linkage to employer branding
Ad-hoc surveys
User/Reader surveys- different media- different users
Audience survey Bayer culture
Focus groups
BayKomm visitor survey
Bayer Employee Survey
Sustainability Survey
Triple-i Survey
Core
Projects for Corporate Branding
Extended
Projects in cooperation with other units
Unit-wide
Projects for Corporate Communications
Quelle: Bayer AG.
Monitoring of local perceptions
Turnover (bn. €)* 42.3Op. Income (bn. €) 4.5Employees 120,000Number of countries 150
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Positioning and branding – Advantage from Country-of-Origin image
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Positioning and branding –Made-in-Image of countries
Product image
2 3 4
GB I F CH DUSA J
2
D
4
I F GB USA JCH
3
Corporate image
Source: GfK 2016.
Anholt-GfK Nation Brands Index (2015)"What people think of the people, the products, the governments, the culture, the education, the tourist attractions and the lifestyle of other countries."
Overall ranking 2015, Top10 of 50 nations
1. United States2. Germany3. United Kingdom4. France5. Canada6. Japan7. Italy8. Switzerland9. Australia10. Sweden
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
statement is true
Fashion industry1 2 3 4
D
J
CH F
GB
IUSA
1 2 3 4
DJCH FGB I USAAutomobile industry
1 2 3 4
DJ CHF
GB
I USAChemical industry
Jewel/watch industry
1 2 3 4
DJCHF GB
I
USAMachinery industry
1 2 3 4
D J CHFGB
I
USA
1 2 3 4
DJ CHF
GB
I
USAPharmaceutical industry
1 2 4
DJ CHF
GB
I USAFinancial industry
statement is not true
Basis: 3.419 respondents
"Companies of the following sector do have an international accepted excellent reputation."
Positioning and branding –Made-in-Image within sectors
Source: GfK.
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Positioning and branding –International product evaluation
24
32
32
44
43
73
19
16
21
63
49
58
52
40
60
43
39
79„State of the Art”
Highly reliable
High product quality
Excellent reputation
Excellent design
Mainly for commercial companies
4
23
3
13
6
2
3
31
15
8
2
2
6
54
15
11
5
4
0 10 20 30 40 50 60
USA Japan Germany
Source: GfK.
Japanese products
Italian products„State of the Art”
Highly reliable
High product quality
Excellent reputation
Excellent design
Mainly for commercial companies
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241
Product level – Standardization of product and/or of brand name
Product
Brand
Standard.(“extension”)
Adaptation
AdaptationStandardization
e.g., Casio digital cameras,
Apple iPod,Sony Vaio notebooks,
Montblanc fountain pens
e.g.,Autobild, Vogue
e.g., Axe/Lynx deodorants,Lusso/Langnese/Streets
icecreams,Fressnapf/Maxi Zoo,
Snuggle/Kuschelweichfabric softeners
Often food products,e.g., Nestlé waters,Dr. Oetker/ Cameo
Source: Hollensen 2007.
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Product brand elements
ElementsSlogans
Brand
names URLs
Logos
SymbolsCharacters
Source: Kotler/Keller 2009.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaOptions in choosing brand names
243
Pronunciation(Phonetics)
Meaning(Semantics)
Structure/length(Morphology)
AdoptionUnchanged adoption ofthe original brand name
TransliterationReproduction of theoriginal pronunciation
TranslationLiteral translation of theoriginal brand name
CreationCreation of a completelynew brand name
= unchanged = changed
Standardization
Differentiation
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244
Global branding …
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
245
… vs. local (adapted) brands
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246
… and mixed strategies
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Motives for global branding
Possibility to achieve a consistent image across the world
also necessary requirement for global advertising campaigns
A global brand has much more visibility than a local brand.
The fact of being global adds to the image of a brand
Cost for creating / strengthening the brand can be spread over large sales volumes
Global brands reach the highest brand equity even though the value of a global brand (brand equity) usually varies a great deal
from country to country
brand equity / brand image can also serve as bases for brand extension (via image transfer to new product categories, see Swiss Army example)
Global brands are also able to leverage the country association for the product (country of origin)
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Barriers to global branding
Product offer in host country does not fit to the brand image
Adaptation of advertising message to each market (and of product recipes, etc.) is easier under different brand names
Price differentiation is easier with different brand names
Quality differentiation is easier with different brand names
Local brand names might be easier to understand
Country of origin effect may be only/mainly strong in the home country
Brand name is not adequate for internationalization
In case of acquisition of local brand high brand equity of acquired brand
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Decision fields Price level and structure (strategic and operative)
Price level setting and upper/lower limit country specific/across countries
Number and wideness of offers (price gap) und price coordination
mixed calculation (strategic and dynamic)
Determinants Economic (macro-)determinants
Economic development, level of purchasing power and cost situation
Legal conditions, political risks and influence of the government
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Price differentiation (I)
A firm can maximize profits by using price discrimination (charging consumers in different countries different prices for the same product)
For price discrimination to work the firm must be able to keep national markets separate and different price elasticities of demand must exist in different countries Price elasticity of demand is a measure of the responsiveness of demand for a
product to changes in price
Demand is elastic when a small change in price produces a large change in demand
Demand is inelastic when a large change in price produces only a small change in demand
Source: Hill 2008.
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The elasticity of demand is determined by a number of factors including Income level, income distribution
Consumer preferences (attitudes, culture…)
Competitive conditions
In general, price elasticities tend to be greater in countries with lower income levels and greater numbers of competitors
The ability to separate markets is determined by arbitrage costs for transactions between the markets Distance (cross-border shopping)
Logistics costs (value/weight ratio)
Information overlap (transparency!?)
Tariffs
Currency (transparency issue, risk issue)
Influence of regional integration agreements (EU)
Price differentiation (II)
Source: Hill 2008.
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But be aware: Target specific segments!
Boutiques in Bangkok
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
257Source: European Commission - Car Price Report 2011.
Renault Mégane 18.409 17.941 19.974 17.176 19.259 18.387 18.117 18.675
VW Polo 10.039 10.315 9.933 10.096 9.766 9.045 9.916 10.228
Highest price Lowest price
National price differences for cars
– Examples (end prices, excl. all taxes in Euro) –
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Grey markets
Production Country A- Price pA = 8
Country B- Price pB = 6
Country C- Price pC = 10
Costs per product c = 2
Transport costs per product:between A and B: 0,50between A and C: 1,00between B and C: 1,50
Source: Simon/Wiese, 1992, p. 250.
Lateral,
grey import
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Price
Country markets
CountryA
CountryB
LeadCountry
CountryD
CountryE
Costs of arbitrage
Source: Backhaus/Voeth 2010, p. 182.
Price corridors and the lead country concept
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Price differentiation (III)
Additional influence on price differentiation E.g. retailer power
Important: manufacturers do NOT set consumer prices
International customers (with attempt for global pricing?)
“Low” arbitrage costs between country markets combined with low willingness / ability to pay in a specific market thus may result in The necessity to demand a price that is so high that sales are very low
The risk of ruining the price level in other markets
The market exit (for that product) in the low-price market
Price differentiation can be accompanied by other marketing mix instrument differentiation Different branding (reduced transparency; see private label manufacturing by
consumer goods companies)
Product adaptation (see VW in the USA)
Source: Hill 2008.
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Regulatory influences (I)
The use of either price discrimination or strategic pricing may be limited by national or international regulations Example (international) antidumping regulations
Dumping occurs whenever a firm sells a product for a price that is less than the cost of producing it
Antidumping rules set a floor under export prices and limit firms’ ability to pursue strategic pricing
Competition policy Most industrialized nations have regulations designed to promote competition
and restrict monopoly practices Antitrust law (in particular in EU) strictly enforced
Taxes Influence final sales price VAT, but also additional taxes, e.g. on alcohol, coffee, cigarettes, petrol, luxury
goods, …
Source: Hill 2008.
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Regulations on pricing policy Not allowed to sell below purchasing price (to protect small retailers)
Not allowed for a manufacturer to give binding orders to retailers on what the consumer price should be
Controlled distribution as one potential solution
In some industries, it is allowed (books)
Not allowed for a manufacturer (or only under very strong regulatory rules) to limit the re-sales of a retailer to another one (cross-border) (VW case)
Regulated prices for pharmaceuticals
Regulatory influences (II)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Standardization of selected media vs. standardization of selection method (process standardization)
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaNet advertising expenses by media
274
29%
13%
26%
28%
19%
34%
39%
47%
17%
16%
29%
13%
10%
15%
40%
23%
19%
5%
17%
13%
16%
20%
4%
9%
11%
16%
25%
18%
12%
21%
23%
29%
7%
8%
7%
15%
14%
4%
11%
7%
14%
11%
9%
7%
8%
8%
4%
3%
4%
7%
11%
5%
7%
9%
3%
15%
4%
7%
13%
7%
4%
6%
100%
UK 30% 4%
Sweden 22% 3%
Spain 41% 9%
Russia 51% 5%
Poland 42% 9%
Netherlands 22% 6%
4%
Australia 33% 8%
Japan 43% 3%
Italy 53% 5%
Ireland 24% 9% 2%
India 42% 4%
Germany 23% 4%
France 32% 7%
China 43% 7% 2%
Canada 33% 13%
Brazil 67%
TV Newspapers Internet Radio Magazines Outdoor advertising
Source: Ofcom 2011.
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Culture specific meaning of colors
Source: www.farbenundleben.de.
Black White Red Green Blue Yellow
Brasil Death, secret
Freedom, pureness
Warmth, hate, passion
Aspiration, freedom, illness
Silence, cold
Sun, luck, happiness, envy
China Power, money
Death, saidness
Happiness, luck, wealth
Silence, hope, fresh
Diligence Patience, wisdom
Pakistan Saidness Elegance, sorrow
Danger, ladies colour
Energy, luck, long life
Virginity, shortcoming
Germany Death Pureness, virtue
Love, danger
Hope, envy Male, fealty, cold
Recreance, caution
Blue and white are often used to for toilettries: Nivea
Red as one color to express dynamic and power: Persil, Fairy
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Benefits of internationally standardized advertising
Reduction of planning and development costs
Establishment of uniform product and company image in all markets in particular important with international customers (see Cathay Pacific)
in particular important with cross-national segments
in particular important with international media overlap
Simpler coordination and control
Better use of good ideas and creative talents very good campaigns possible in countries with low subsidiary resources
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Advantages of locally adapted advertising messages (I)
Language Barriers are stronger than you might expect consumers do not understand foreign languages well
translation (in the case of standardized advertising) often has mistakes/misinterpretations/changed meanings
Standardization might be possible, but not as effective messages, celebrities, etc. have a higher appeal in one market than in another
Standardization might cause problems with cultural differences if product / use of product is culture-bound (e.g. food, see Courvoisier)
if advertising topic is culture-bound (e.g. hygiene products)
when advertising design is culture-bound (e.g. use of colors, background music)
when advertising content is culture-bound (e.g. women, nakedness)
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Advantages of locally adapted advertising messages (II)
Product might be in different stages of product lifecycle in different countries different advertising message necessary
Differences in media landscape (which might also influence advertising campaign)
Not-invented-here-syndrome by local subsidiary
Legal differences might restrict certain types of advertising/certain advertising messages in certain countries (advertising regulations) “vice” products such as alcohol, cigarettes, …
children in advertising…
comparative advertising
legal or “self-restrictions” by local advertising associations
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
International comparison of advertising styles
279
Germany
Finland
50
50
100
0
0 100PDI- PDI+
UA
I-U
AI+
Dire
ct &
Exp
licit
Ind
irect
& I
mp
licit
IDV
IDV
COL
IDV/COLFrance
Structure
NetherlandsSwedenDenmark
Humour
USA
UK
Personal
Metaphors
Entertainment
Drama
JapanSpain
ItalyBrazil
Songs play with
words
Singapore
China
India
Hong Kong
Symbolism
Source: de Mooij 2010; PDI: Power distance; IDV: Individualism; UAI: Uncertainty avoidance; COL: Collectivism
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaTable of contents
I. Dynamic of internationalizationII. Core decisions in International Marketing
(Case: International expansion of the Top 4 retailers)III. Determinants of decision making
1. Introduction, trends and challenges
2. Core decisions of market entry
I. Market segmentation/selection II. Country specific and across country timingIII. Market entry strategies/operation modesIV. Changes of operation modes
3. Core decisions on Marketing mix
I. Standardization vs. adaptationII. Design of the Marketing mix instruments
4. Implementation and int. value chain management
A
B
C
D
280
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281
International marketing vs. management
Int. value added management has two goals (levels of management) Design and management of value added processes
(i.S.v. configuration and coordination)
Design and management of the whole value added system(i.S.v. organizational structure, systems und culture)
Source: OC&C-Partner 2015, data for 2014.Source: Bloomberg 2016, data for 2015.
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Example –Cross border value chain activities
S 1
P 1
S 2
P 2
P 3
S 3
LI 3
R&D 3
CU 1 CU 2
CU 3
LI 2R&D 1
Legend:CU = Country unitP = ProductionS = SalesLI = Local inventoryR&D = Research & development
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Organization
Human Resource Management
Controlling und Information management
Finance / Taxes etc.
Supply-Chain-Processes
Purchasing Logistic Operations
Support processes
Managementprocesses
(i.n.S.)
Keyprocesses
A modifed model of the value chain
Market oriented processes
R & D Marketing
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Configuration of value added processes – Options and determinants
Geographicdispersion
Geographicconcentration
Economies of scale Learning curve effects Easier coordination of related activities
Risk reduction Knowledge and know-how growth Reduction of logistic costs Image as local corporation National / local adaptation (e.g., culture) Government influence (e.g., tariffs)
Location of sites as decision option
Number of sites as decision option
Comparative cost advantage (e.g., labor costs, subsidies), qualification advan-tages, legal landscape/governmental incentives, cultural proximity, attractivity Country market evaluation and selection
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Labor costs in the manufacturing industry
285
– EURO/working hour, (blue- and white-collar workers) –
6.1214.02
22.6823.34
24.4125.93
27.3927.61
30.9130.95
34.4134.45
35.3736.3936.77
41.2942.1942.65
48.9556.46
0 10 20 30 40 50 60
RussiaGriece
EspaniaJapan
UKUSA
CanadaItaly
IrelandLuxemburg
AustriaNetherlands
FinlandFrance
GermanyDenmarkSwedenBelgium
SwitzerlandNorway
Source: Institut der deutschen Wirtschaft, Köln 2015.
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. Swoboda
Coordination of value added processes –Options and determinants
286
low high
The differentiation of a system into elements is advanced (e.g., strong divi-sion of labor)
High complexity and intensity of the relations between the elements exists (extent of mutual dependency)
Large physical, temporal, objective and human distance exist The problems to be resolved are extensive, variable, or unstructured The dysfunctional behavior of elements seriously threatens the system's
target achievment
Need for coordination especially high if …
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Purchasing countries in fashion
•Greece
•Hong Kong
•Israel
•Malta
•Portugal
•Spain
•Turkey
•Bulgaria
•Czech Republic
•Estonia
•Hungary
•Morocco
•Poland
•Rumania
•Slovakia
•Thailand
•Bangladesh
•Cambodia
•China
•India
•Indonesia
•Moldavia
•Philippines
•Sri Lanka
•Ukraine
•Uzbekistan
•Vietnam
•Germany
•France
•Ireland
•Italy
•GB
•Czech Republic
•France
•Germany
•Poland
•Rumania
•Slovakia
•Turkey
119 81 49 34 59
Average CostIndex
Turnover (bn. EUR) 7.0Op. Income (bn. EUR) ca. 0.2Employees 36,300Number of countries 22
Trier UniversityMARKETING & RETAILINGProf. Dr. Prof. h.c. B. SwobodaExample: Endress+Hauser
288
Swiss-based instrumentation and process automation company (producing instrumentsmeasuring level, volume or mass flow, den-sity, pressure, temperature, water quality (also for use in dangerous environments/extreme conditions).