LECTURE ONE

The Rationale for International Marketing Globalisation

Overview of Lecture Session

 Readings this week Chapters 1 and 11. Ideally read BEFORE lectures.
 Overview of International Marketing
 Motivation to Internationalise
 Globalisation
 Definition of SMEs

International Marketing
 International marketing relates to the process of:
o Planning and undertaking transactions across national boundaries;
o Faces a different set of macro environmental forces;
o May have different micro environmental forces (competitors, customer types, stakeholders);
 don’t presume it’s the same as your home market
o May require adjustment of the 4Ps.

International marketing definition

 “International Marketing is the performance of business activities designed to plan, price, promote
and direct the flow of company’s goods and services to consumers or users in more than one nation
for a profit.
 “The uniqueness of foreign marketing comes from the range of unfamiliar problems and the variety
of strategies necessary to cope with different levels of uncertainty encountered in foreign markets”.
(Cateora et al, 2012, p9)

International Marketing Considerations

 The Home Country (your domestic base)
 The Host Country (country where you are exporting to or operating overseas)
 Cultural elements may relate to: staffing, employment, customers, management systems
o Lifestyles of people in other countries
o How to manage staff
 Competitors may be quite different – international and local
o Strong local competitors with a lot of loyalty
o Hard to gain market share
 Pressure groups, activist groups, communities
o How is Australia viewed in those groups’ eye
o May not want to trade with Australia

Categories of Global Markets

 Advanced markets – 500 million population,
 Emerging Markets
 Developing Markets – less purchasing power but more people
o People focus on advanced and emerging markets
o Opportunities to sell to consumers of ‘low pyramid markets’
 Invent a new product to meet needs of those buyers

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The New Marketing Environment – implications and trends to look beyond own borders

The world has changed:

 Shrinking Communications, increase in knowledge
o Pressure to be operating 24/7
o Not constrained to business hours
 Open trade, economic integration
o Free trade agreements to encourage trade
o Australia has a number of FTA – reduce tariffs and taxes to make it more cooperative
 China, New Zealand, Singapore, South Korea
 See a win win situation for working together
 Increased technology and diffusion
o Efficency in producing and transporting goods
o Diffusion: ideas a spread more easily amongst different countries
 Unprecedented pressure on resources and environmental sustainability
o Need to reduce electricity, water, look for alternative sources of energy, plastic in the ocean
 Emergence of Conflict, Terrorism, security concerns
o Money laundering, cyber security
 Increased governance competence
o Under pressure to be ethical (virality)

Increases in Information and Knowledge

 Needs to make workforces relevant to shifting knowledge environment
o Ageing workforce: governments have had to address this
o Companies need to make adjustments so younger people can learn from older workers
 New levels of learning for new workers
 Need to keep older workers trained
 Major technological advances can relate to:
o Cloud Computing
 Sales offices in different parts of the world
o Robotics
 Less human employment
o Nanotechnology
 Medicine surgeries
o Biotechnology
 Improve plant life etc.

Discuss this now ....

 What are the implications in business of changes in technology (mobile and smart phones,
teleconferencing, data storage and transfer, computer powers)
o Travel
o Banking and finance
o Education
 Online courses
 Adelaide University is competing with entities all over the world
o Services
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  PR services all online

Example: Aircraft
• Suppliers are from different parts of the world
• Manufacturing in a different market because manufacturing is cheaper
• Countries are best to focus on what they do best
o Look at areas where they have a national global advantage

Can you name Australia’s trading partners?

 What do you think are the top five exports (goods or services)?
 Discuss now .....
o Iron ore
 Iron ore price goes down has an impact on Australian economy
o Coal
o Education
o Natural gas
o China, US, Japan, New Zealand

Stakeholder Pressure (Fletcher et al, 2017, p6) THEORY MODEL

• Different groups that have an influence on the companies operation in that part of the world
o Customers in foreign market
 Different values
o Expatriate staff
 Home management go over to entity? How will they communicate to suppliers?
o Beurocrats?
 Slow beauracy?
o Local political situation
 Australian government attitude to the country? Trump put tariffs on steel from China
o Local retailers and competitors
o Host government
o Suppliers
o Activist groups
 Some people don’t like foreign companies coming into their country

Stakeholder Theory Model

• Consider all stakeholders and repercussions

Global Connections
 Our world is actually small. People are more readily connected than in the past.
o Quick to get a bad reputation
o Relates to ethics
 So a company cannot ‘hide’ its actions for long.
 A company needs to consider implications for its treatment of suppliers, its workers, offshore or
supplier workers, its treatment of customers both at home and in international markets.

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International Marketing
 DRIVING forces towards international marketing:
o Market needs (transcend national boundaries)
 Companies go overseas because they have a saturated domestic market so need to find
new buyers. Merging unmet demand in a different part of the world (when China
opened up to trade everyone went there)
o Technology
 Cost reduction, easier to coordinate marketing efforts
o Cost – economies of scale

o Governments
 Assist trade. Austrade offer export grants to increase trade.
o Communications
 Emergence of global media, internet and capacity to reach those markets

International marketing categorised by Cavugsil (2004)

 RESTRAINING Forces
o Differences between national markets
 Too costly
o Government controls, protection
 Governments are not open to trade
o Actual or perceived risk
 Political and Legal risk
 Instability, government intervention (sieze assets), conflict in the country,
intellectual property concerns
 Cultural risk
 Will it take a lot of research to understand that culture? Translation materials?
 Commercial risk
 Is there a lot of competitor rivalry? Will there be issues of being pushed out?
 Currency or Financial risk
 Taxation, financial risk etc.

Perlmutter’s Classifications – THEORY

 Theorist Perlmutter (1995 cited in Fletcher et al, 2017, p9) has these classifications:
o Ethnocentric Orientation
 Home focused, domestic focused, not focused on export (may sell it overseas if
surplus of stock)
o Polycentric Orientation
o Regiocentric Orientation
 Regions and markets having some integration. Several countries that have the same
economy/language
o Geocentric Orientation
 Global mindset, strategy that seeks to operate in as many countries as possible

Reasons to Market Overseas

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 • IP
o Want to go overseas
o Unique features of product that has a global application
o Less demand here lets go somewhere else
• IR
o Seasonality – north and southern hemisphere; look for opportunity in summer region
o Too much risk in domestic market
• EP
o Growing demand
o Export initiatives from government that make it easier
• ER
o External order coming in which has led them to change operations

View this now

 Tasmania company, grew apples. Found over supply in domestic market. Then sold to India
 Negotiated with Japanese prefecture to import specific variety of cherries.
o Tasmania has counter seasonality (big markets in northern hemisphere)
o In Japan cherry giving was a thing they did in winter
 Got the rights to grow particular cherry type in Australia and now they supply high
end high price cherries to Japan
o Developed a good relationship with Japanese partners, had expertise in that industry, saw a
niches market
o Completive advantage outside of domestic industry (FTA assists that company)

Approaches to International Marketing

 From Domestic to Transnational
o Shipment overseas, not regular, not fixed
 From Indirect to Foreign Direct Investment
 From Export Focus to Holistic Focus
o Get a company overseas to produce something under a license, more exposure to global
scene, involves many partners

Globalisation
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  Integration of operations and markets between countries so they are ‘invisible’
 Search for global market segments
o Business to business etc.
 Divergent set of choices, may converge amongst some customers

Definitions related to Globalisation

 Global Companies
o Produce for the world market; looking worldwide where they can produce cheaply
o Production occurs where it can be produced most cheaply;
o Firms aim for standardised high-volume production and seek experience curve benefits.
o Co-ordinate activities across markets and may subsidise activities in some markets with
resources generated in others.
 Transnational Companies (Multinationals or MNEs)
o Produce goods or services or manage investments in more than one country;
o Blend the market specific approach with standardised production methods;
 Production model to use as standardisation
o Transfer this distinctive competence while responding to pressures for local responsiveness.
 Multi-Domestic Companies
o Aim for maximum local responsiveness;
 How we adjust things to best meet differences
o Willing to customise both the product offering and market strategy to different local
conditions;
o Do well in situations which require strong local responsiveness and weak pressure for cost
reductions.

Let’s view some companies now ....

Small to Medium Sized Enterprises (SMEs)

 OECD defines SMEs as:
o Fewer than 250 employees
o Annual turnover not exceeding 50 million Euro;
o Micro company has up to 10 employees
o Some definitions put 200 employee cap;
o US definition shows SME can be up to 500 employees.
 Other Criteria for definition
o Owner managed or operated
o Has most capital supplied by owners
o Owned by one or a few persons, perhaps in a partnership structure
o Is independent of external financial and managerial control
o May even be defined as having a small share of its market (Cateora et al, 2012, p 344)

Global Economics and Implications

 There is a rapid growth in the World Trade. The World Trade Organisation.
 Faster transport, data sharing, technology sharing can bring challenges and also opportunities.
o Spread of diseases such as Zika Virus and computer viruses.
 Ausralia and New Zelaand is good because they can avoid infections
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 o Opportunity also to do business beyond your borders.
 Trend towards free trade across borders.
 Shift in power – rise of China, India being more significant in the world
o More countries are doing business with them

Threats and Opportunities

 Rise of terrorism and super violence
o Is there risk to their employees?
 Difficulty of controlling this across borders
 Need to plan for the future, ensure the county is skilled for the future.
 With the growth of world trade, companies cannot operate in isolation.
o Coles and Woolworths had largest market share and now Costco and Aldi are taking away
that market share
 It may be that INTERNATIONAL firms can come and take business from your HOME markets.

Internationalisation
 Growth of the WTO (World Trade Organisation) and regional Free Trade Agreements
 Acceptance of a free market system
 Fundamental changes to commerce from phones, the internet, global media
 Companies cannot operate in isolation.

International Marketing Theory

• A commodity may be in decline in Australia but could be growth in a different country that may not
be advanced

Theory Concepts Underlying International Marketing

 The Theory of Comparative Advantage (Keegan and Green)
o A country can gain if it chooses one thing to be good at
o Australia should focus on areas with global expertise e.g. creative industries, organic food
etc.
 Theory of Product Trade Cycle (Keegan and Green)
o Looks at relationship of a company and offshore work
1. Initial export to overseas market
2. Production starts in overseas market
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 3. Export to nearby countries from that overseas market
4. No longer produced in original market, purely made overseas
 Theory of International Trade Cycle (Keegan and Green, 2003)

o Products triple down from advanced economies to less advance economies

Concepts Underlying International Marketing

 Internationalisation (Issue of cost vs control) How much control is important for the company to
keep, should it all be in house? Or should some control be in overseas entities?
o Internationalisation is more risky than domestic marketing.
 Producing technology
o Problems can be control over the purchase and conditions of sales overseas
o Problems can be control of marketing outlets in that country
o Problems can relate to the relationship with the overseas government.
o Or can relate to issues of controlling promotions.

Model Wheel of International Marketing

• Inner circle = controllable factors

o Research, distribution, price etc.
• Domestic environment
o Cant control political system in Australia
 Attitude for that industry, country, what is the legal requirement in Aus?
• Commercial forces
o A lot of competition? Knowledge
• Economic climate
• Outside circle = forein uncontrollable
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 o Social and cultural forces; different attitudes, values, what is their family size
o Geography & indfrastrcut; poor ports and roads to make it diffifuclt to distribute?
o Iplitical and leage; government? Legal requirements?
o Economic and techonology; overseas may not have steady internet or be literate
o Obligations; sanctions and embargos to stop Aus countries trading

So this can be complex

 May need to adapt product or service for culture
 May need to make pricing changes to cover costs or different legal or tax structures in different
countries
 May need to change promotion depending on how people interact and learn about products in the
specific country
 May need to change distribution depending on how people access or buy that product

Theory of Psychic Distance

 Companies are more at ease when exporting to places with similarities
 Factors preventing or disturbing the flows of information between firm and market
 Risk minimisation by entering markets that are culturally and politically similar (UK)
 Less Psychic Distance  More likely to enter
 Dow, Douglas (2000) “A note on psychological distance and export market selection”, Journal of
International Marketing, 2000, Vol. 8, Issue 1, pp51-64.

Born Global Companies – formed and quickly goes international

 Cutting-edge products
o Cochlear implants
 Knowledge-intensive
o New to the world product
 Sometimes bypass domestic markets
 Can internationalise quickly
 Term was created by McKinsey & Co for The Australian Manufacturing Council
 Often have innovation which has global impact – something new to the world OR niche operator that
fulfils the need of a specialst business or target market

Characteristics of Born Global firms

 Leading exemplars of successful international SMEs
 Occur in most major trading countries and across industry sectors
 Innovation in all processes of business
 Directly enter global markets with highly innovative products
 Provide understanding of means to overcome resource constraints.
o Overcome resource and people contraints

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Dynamic Capability Model of a Born Global firm

• Entrepreneurial outlook
• Prior international experience
• Learning orientation – have a learning culture within the company and adapt
• Acquire another company and spread information and integrate it through their staff
• Good networking ability
• Global position or niche market
• Technological or have something unusual

Globalisation – Chapter 11
 Globalisation: “A process by which firms operate on a global basis, organising their structure,
capabilities and resources and people in such a way as to address the world as one market” (Fletcher
el al, 2014, p367)
 Hamel and Prahalad (1994) say a firm must have core competencies:
o Customer Value: need a point of difference, an improvement of what already exists
o Competitor Differentiation: need something unique
o Extendability: extend and adapt for different markets

Motivations for Globalisation

 Theorist Yip suggests drivers are:
o Market Drivers: high per capita incomes, increase in wealth of customers, increase of travel
o Cost Drivers: economies of scale, adavnces in transport
o Government Drivers: reduction of trade barriers, govt supporting trade
o Competitive Drivers: having a point of differences or competitors leaving a gap in the market

Opportunities and Threats

 Globalisation creates an increasingly interlinked world
 It can offer opportunities to enter new markets
 It can also lead to threats....
o Extended supply chains can be difficult to manage and be vulnerable across multiple boarders
o Delivery times can increase
o Can be a decline in standards: have to keep close control to ensure standards are met
o Terrorism, security issues
o External factors such as earthquakes, floods can effect production which may be done in one
country before being sold to another

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Standardisation vs Localisation
 Companies can standardise their products, services and promotions across borders.
 Companies can be highly localised (creating marketing mix specifically for independent country
markets) change it according to requirements of that market (legal political etc.)
 Glocalisation – “Think Global, Act Local”
o Global and localised
o Thinking lgobaly but acting for local customers and understand what drives their behaviour

Glocalisation Framework Hollensen’s theory

Think now about the Marketing Mix .....

• Products: personal taste, legal requiremetns
• Promotion: how you promte, what you ise to promote
• Price: taxes, tariffs
• Place (distribution): do need expertise of foreign market people?

International Marketing III

Lecture TWO
Political and Legal Environment Technology and Change

Overview of Lecture Session

• Readings this week Chapters 2 and 5.
• Learning objectives:
o The role of government in international marketing
o Political Stability and Risk
o Differing Legal Systems
o Infrastructure development
o Technology change

Before We Cover This

• This week in week 2 you will be confirming your company and also viewing potential countries to
expand into.
• I can’t cover all topics in these early weeks.
• If you choose a company which offers a SERVICE you may find it useful to read Chapter 17 of the
required text which covers Services in International Markets. If you choose a country which can be
termed an ‘emerging market’ you may find it useful to read Chapter 18 of the text.
• These two topics will be covered in more detail Topic 10.

Emerging Markets
• Just to give you an idea, emerging markets are:
• Countries in Transition
o Countries who are experiencing radical change
• Developing markets which are growing to the next stage of better economic growth
• MSIC linkages

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 • Emerging markets can offer some opportunities for developed country markets.
o Rising middle class will have more money to spend, people earning more money
o Business to business markets can be useful, as the country gets more sophisticated they will
need more high tech expertise
o Can relate to PLC = having a product or service going from a developed country into the
‘introduction’ or ‘growth’ phase for an emerging market
 Something in decline in Aus could be in an introduction stage in another part of the
world
• Constraints may be:
o Political instability
 Civil unrest
o Weak legal systems
o Corruption
o Economic constraints such as exposure to external shocks such as financial crisis
 Stock market failures etc.
o Uneven income distribution
 Wealthy elite
o Infrastructure issues
 Governments are trying to improve their infrastructure

Uncontrollable External Influences

• Political system in international market country
- Is the political system stable?
o Unstable: difficult for a company to look long term, change of power, civil uprising that may
close down trading etc.
- What type of government is in place?
o Democracy, dictatorship; how important in the government on the business
- Who are the major political parties in that host country?
o Spread of political parties, or there may be one political power
- How does nationalism present itself?
o Will people in that country always choose to buy from their own country, is there any
negativity towards your home country?
- How are trade disputes handled?
- Relates to HOME government and HOST Government

Types of Governments
• Three basic types of government in use today:
o rule by one (monarchy or dictatorship)
o rule by few (aristocracy or oligarchy)
o rule by many (democracy)
• The form of government shapes the economy as they propose, introduce, adjust and implement
various types of policies to secure economic and social goals
• Consideration of how much rights people in that country have? Do people have economic and
political freedom?

Role of Government
• Parliamentary Governments = “consults with citizens at periodic intervals to ascertain their wishes”.

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 o Most industrialised countries are parliamentary democracies.
o Australia & New Zealand
• Absolutist Governments = “dictate policy without considering citizens’ needs or opinions”
o Former military regimes in Myanmar (can be one dictator or a group) or North Korea
o Dictate policy and there is not a lot of interaction from the citizens
• Monarchies with elections (Saudi Arabia)
o (Fletcher et al, 2017, p36)
o Father to son/brother

Role of Government in the Economy

• Government involvement can have an effect on international marketing for companies.
o Participator: actively involved in trade,
o Facilitator: actively want to help trade and try to encourage trade, exporting marketing
development grants, give assistance to companies, Australia has offices in different parts of
the world to ease companies
o Regulator: Indonesia will have 5-year plans to promote certain industries. If government has
done that with an industry it could be quite beneficial.

Government as a Regulator
• Governments can promote or restrict trade:
o Embargoes ... stops dealing with specific country or countries on specific goods
 Embargo on the trade of live sheep
o Taxes
 Taxes on certain goods, services and industries to make it more or less attractive
o Boycotts
 We don’t like that government regime we don’t want our businesses trading with that
part of the world
o Import Controls
 Limit on number of products or services allowed
o Restrictions on Foreign Direct Investment
 Australia has restrictions on wealthy Chinese people coming in and buying expensive
properties
o Imposition of duties can be controversial

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Government Interference (Protectionism)
(Mascitelli and Tinney (2012 p13) cited in Fletcher et al 2017, p40)
REASONS FOR REASONS AGAINST
Infant industry: grow expertise in a certain industry, Concentrate on competitive sectors: if they
make it harder for foreign business to come in aren’t good at a particular industry they
shouldn’t try to be artificially good at it
National Security: don’t want foreign entities coming Tariffs are poor to achieve development: are
and having access to this information counter productive
Avoid job losses: intrude protectionism to stop Recovery from Depression or Recession
unemployment and job losses
Human, plant or animal health risks: government
doesn’t want some things imported
Need to ensure foreign investment does not take over
key industries: foreign investment doesn’t overtake
expertise in the country
Redress inequalities: sees inequality or subsidiaries in
foreign markets so will make it harder for them in this
country
Compete on level playing field

Why Government Matters in IM

• So the type of government in power can:
o Relate to how much freedom either people have in the country or what freedom you have as a
company to operate in that country;
 Are unions important to keep employment in that part of the world?
o Can link to who holds power;
o Can link to human rights and freedom;
o Can link to your HOME country’s relationship with that country.

Political Stability and Risk

• Indicators of political instability:
o Degree of social unrest (internal dissention, racial tension, religious differences)
 Changes of power, of regime in a small time frame
o Frequency of changes in regime
o Is the country divided culturally or ethnically (as was former Yugoslavia)
 Cause for unrest
o Religious divisions such as in Lebanon
o Linguistic diversity (Tamil and Singhalese in Sri Lanka)
 Can lead to instability
 The internet has meant countries cannot control information any more = witness the ‘Arab Spring’
- Everyday people used the internet to communicate with others which lead to democratic uprising
- Some governements don’t allow the use of social media etc. to control everyones communication
with the world

Sources of Political Instability

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 • Political Sovereignty
o Nation trying to exert control over another nation can lead to military build up
• Political Conflict
o Not a lot of opportunity for trade
• Political Intervention (Next page) (Fletcher and Crawford, 2017, p43)

Political Risks
• Confiscation (seizing of company assets by government without payment)
o Government seizes the company assets and doesn’t give any payments
• Expropriation (government seizure of assets but some payment is made)
o Government seizes some assets but gives some payments
• Domestication (Host country takes steps to transfer to national control through a series of
government decrees)
o Some parts of Vietnam do this; overseas company negotiated a handover of the entity
overseas???

Getting some Perspective – Chartsbin Maps

• Freedom in the world
http://chartsbin.com/view/1250
• Ease of Doing Business
http://chartsbin.com/view/3647
• Global Violence Index
http://chartsbin.com/view/35152

Australia’s Current Sanctions

• (DFAT, 2018) Australia currently has sanctions against:
o North Korea
o Libya
o Yemen
 Can be in relation to certain goods: military advice, armaments.
 Can be as Australia is a signatory to UN agreements.

Major Risks
• General Instability Risk – revolution, invasion
o Fear of kidnapping and loss of life
• Ownership Risk – risk to property and lives of expatriates
• Operating Risk – interference in ongoing operations of the company overseas
• Transfer Risk – when the firm is prevented from moving funds between countries
o Transfer of funds, government can impose restrictions on money being transferred between
different parts of the world
• Tax control
• Price control
• Foreign investment
• Labour issues and status of unions
Other issues
• Sanctions
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 • Political and Social Activism
• Violence
• Terrorism
• Cyber terrorism and cyber crime EFIC World Risk Developments 2018

Assessing Risks
• Political Risk Assessment is important for companies.
• (Jain cited in Fletcher and Crawford, 2014, p44) suggests:
o Tour the country, view information first hand
o Use a consultant or export
o Delphi technique – use a group of experts to share their opinions
o Quantitative methods, analysis via risk. Can relate to elements such as political risk insurance
for companies

Some Considerations
• Company factors such as : Is the company a good corporate citizen? What extent has the operations
been localised? Does the company have a history of benefiting the country.
o Are they a contributor to society? Yes, government will be far more open to that company
• External factors: What are the relations between the HOME and HOST governments? What is the
company size? Is it highly visible as a foreign company?
o Is it something that domestic companies aren’t doing?
• Product factors: Is the product critical for other industries or the country? Is the product politically
sensitive? Does it have national significance?

Reducing Risk
• Through Joint Ventures
o Partnership with a company from overseas, overseas company has local knowledge
• Expanding the Investment Base
• Licensing
o Product or service is produced by a foreign entity
• Planned Domestication and localisation of ownership
• Take out political risk insurance
• The company’s own behaviour (Avoiding offence, positive CSR)
o Does it have well trained staff? Do people speak the language?

Legal Systems
• Common and Code Law
o UK, Australia
o Based on tradition
o Code law = Germany, France, Japan
• Islamic Law
• Marxist and Socialist Tenets
• Indigenous or tribal laws (Maori, Aboriginal law)

Some Implications (Fletcher and Crawford, 2017, p53)

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 - Easier to do business in a part of the world with a similar legal system
o Less disputes etc.
- Different legal system
o More research
o Employ legal person from that part of the world

International Law
• Grows out of agreements of two or more nations.
• Looks at minimising differences in law between countries.
o United Nations Commission on International Trade Law (relates to carriage of goods by sea,
convention on use of electronic communications, law on commercial arbitration)
• Issues can relate in determining which country’s laws apply in the event of a dispute.
o South China Sea Dispute (CNCB via You Tube, April 2018)

Legal Disputes
• International Court of Justice - judicial organ of the UN.
o Between Governments
o Between a company and a Government
o Between two companies

Legal Implications
• Product – laws relating to standards for purity, safety and performance;
o Different parts of the world will have different definitions of ‘organic’ etc.
• Price – may have laws to protect consumers, ACCC, may relate to taxes on specific products;
o Different laws to protect consumers right and what you can say about competitors
• Distribution – may relate to use of agents, laws relating to transport ;
o Differences of packaging and labelling,
o Appoint a representative in that part of the world that will handle that product

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 o Different legal commissions and rights
• Promotion – trade descriptions, advertising, use of words, packaging and labelling;
o What is legal to say in advertising, conservative cultures don’t allow certain imagery,
depiction of certain goods (Australia can’t advertise alcohol at certain times of the day),
banning of some words (can’t call something champagne)
• Human Resources management;
o Labour rates, working hours, need to give people prayer time
• Treatment of the environment. (Fletcher and Crawford, 2017, p56)
o Strict legislation about packaging, pollution

Intellectual Property
• Counterfeit and pirated goods.
• Very important company maintains its IP
• Major competitive advantage
• Can have collusion between contract manufacturer and sellers
• International Conventions try to protect companies’ IP across borders
• IP relates to: Patents, Copyright and Trademarks

IP Australia
• IP Australia
o (IP for Business, IP Australia, 2018)

Why IP and Trade Marks are important

• Reflects on brand (poor imitations can downgrade the brand)
o Recognise brand from look of your label etc.
• Obviously relates to company investing in innovation but another company just lifting off the idea,
competitive loss
o Don’t want a competitive idea stolen
• If there is computer piracy, criminal hacking of computers or data or lack of protection, it is far too
risky to do business.
• Some part of the world have higher ‘piracy’ rates and hacking: Zimbabwe, Moldova, Yemen.

Impact of law on International Operations

• Environment – many issues cross boundaries (forest fires, toxic spills)
• Human resources – training, employment, safety
o Keep to Australian safety standards or go to the minimum standards of the host country?
• IP
• Anti Trust – against monopolies
o Companies are fixing a price to make it hard for open competition
• Marketing, Advertising restrictions, privacy of data
o Australia has strict privacy of their data, different parts of the world not so much
• Transfer Pricing
• Counter trade
• Dumping

Dispute Resolution
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 • Conciliation = Non binding agreement between parties resulting from a third party mediating
differences;
• Arbitration = Next step, third party acts as ‘referee’ to make a determination which both parties agree
to;
• Litigation = Used as a last resort. Costly, can have difficulty to collect information, closes door on
future business.

Technology and Its Implications

• Early Mechanisation (1770s-1840s)
• Steam Power and rail (1830s to 1890s)
o Opened up industries and trade
• Electrical and Heavy Engineering (1880s to 1940s)
• Mass Production (Ford) (1930s to 1990s)
o Made everyday items much cheaper
• Information and Communication (1980s –
o Oversupply of information, what is significant?
• Information Omnipresence (2010 -

So, what will this mean in YOUR lifetime?

• Emergence of new industries and technology
• New approaches to international regulation
• New services
• Innovation entrepreneurs
• Shifts in population density
• Increasing difficulty to control across borders (information, privacy, data, legal elements)

Marketing Implications
• E Commerce – global networks. Need to be careful across legal elements of borders. Need for care in
supply chains.
• E Learning – eliminates barriers of time and distance. Easier to contact staff around the world. No
‘on’ or ‘off’ time for employees.
• Customer Support – how do you regulate this across countries?
• Power shift from companies to consumers.
• Can be positive (to access markets) but has risks.

The New Technology Environment

• Political and Legal Issues (surveillance of internet; restrictions on use)
• Economic Development (some countries may not have full coverage, security with credit card use)
• Socio cultural (language, literacy, acceptable content)
• Technology (infrastructure in country, PC use, reliable electricity).
• Globally 48% of people have access to the internet, grown 750% since 2000 (InternetWorldStats
2015)

Diffusion
• Diffusion is the adoption of technologies by consumers.
• Major time lags in diffusion impact on business viability
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 • Propensity of consumers in different markets to adopt can be different – can have cultural, education
and other reasons for this.
• People will adopt based on:
o Relative Advantage; Compatibility;
o Complexity; Ability to Trial; Observability.
• Is innovation better than the status quo? Is it difficult to understand?

Adopter Categories (Image: Static Flickr, 2018)

- Some parts of the world will have higher diffusion or lower diffusion

How Consumers Use the Internet

• Men more than women in percentages around the world.
• Women spend 8% more time online.
• Educational level and occupation influence access to the internet and online activities
• Rural less than urban
• Internet users have a positive attitude towards technology
• Online shoppers are more goal oriented
• Online shoppers seek either convenience or price as their orientation

E Commerce Implications for the Marketing Mix

• Price – transparency (shoppers can see competing offers)
o Can have constant changes
o Can offer dynamic pricing with differences
o Segmented pricing
 Different pricing in different regions
o Easy for customers to compare you to other countries/companies
• Promotion – Need to consider level of internet access and literacy
o Importance of ‘search’ marketing
 Not every country has the same emphasis on search engines
o Personal selling can be important for answering queries
• Place – Trust is needed for consumers to buy online.
o Emergence of payment systems such as Paypal
o There have been data issues (just recently LinkedIn)
o Can dispense with middlemen – selling directly to customer
o Increasing self service aspect
• Physical Evidence – largely intangible, reputation is important, credibility issues
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 • Product – freight, delivery issues. Need to conform to local laws.

PCT Global Case Study – EFIC

• Here’s an insight into one Australian exporter’s story.
• From time to time I will run videos or give links to show you an idea of what is happening in
business generally in world or international markets.

International Marketing III

Lecture THREE
Economic and Financial Trade Implications

Overview of Lecture Session

• Readings this week Chapter 3. Learning objectives:
o Importance of Economic Environment
o Global Trading Environment and key groups
o Financing international trade
o Implications for International Marketing Managers

World Trade and SMEs

(WTO World Trade Report, 2016)
• With the rise of e commerce and the internet, SMEs have more opportunities
o Can be in one part of the world and communicate with suppliers and customers elsewhere
• Global Value Chains have the potential to help SMEs reach wider audiences of customers.
o International value chains will help to reach different geographic located customers
• SMEs can also get business from their participation in a value chain
o Not responsible for end product but are specialist for certain area (b2b)
• Exporting can improve SME productivity
o More efficient because they have to because they need to compete
• Obstacles though can relate to: management skills in the SME; workforce capacity; capability to
handle new technology and innovation.
o People don’t have experience, can’t handle the new technology

Recent trends in the Global Economic Scene

(Keegan and Green cited in Fletcher and Crawford, 2017, p81) note these profound changes:
 Emergence of global markets and global competitors in the last 50 years;
 Production is no longer directly linked to employment – more use of robotics;
 The world economy has more impact on economic outcomes within a country than the nation
state;
 E commerce diminishes the importance of national barriers.
 More production but less employment

Economic Structures Globally

• Countries can be classified according to their economic structure:
• AGRICULTURE
o Crop growing, fishing and hunting
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 o Dependant on agriculture
o Importance of agriculture has decrease
o Doesn’t always follow that way
• INDUSTRY
o Industrial economic entities
o Companies and countries that emphasise mining, manufacturing etc.
o Developing markets will have low manufacturing
• SERVICES
o The more wealthy a country gets the more employment in services as people have money to
pay for these services
• However there can be some issues. Australia is a developed economy but has many high level
exports in agriculture, some differences from ‘agricultural pursuits’ in developing markets

Economic System Classifications

• Since World War II, countries have been classified by their economic systems:
 Market Allocation system: relies on consumers to allocate resources. What they chose to buy
those areas will do well.
 Command Allocation system: government planning and allocation. Consumer can spend money
on what they want but government will direct the buying.
 Mixed system

Other Classifications
• High Income (Gross National Income per capita of > $US 12,746) Heavily dependent on services.
Involved in information processing. May have a premium on knowledge. US, Japan, Sweden
o Innovation is important and orientation to the future
• Upper Middle Income (GNI >$4126 but <$12,746) ‘tigers’ of South Korea, Taiwan, Singapore.
o Rising literary rates and rising wage rates
o Emphasis on exports
• Lower Middle Income (GNI >$US1046 but <$US4125) Vietnam, Philippines
o Early stage of industrialisation
• Low Income (GNI <$US1045) dependence on agriculture, basic manufacturing
o (2015 figures above cited from Fletcher and Crawford, 2017, p83)
o Political unrest
o Emphasis on agriculture

Reality of modern world – intertwined

• In reality, many companies even SMEs are dependent on services or products or suppliers across a
range of countries.
• View this World Trade Organisation video on ‘made in the world’

World Economic Forum

• Global Competitiveness
o As a company becomes wealthier it has more opportunity for innovation, infrastructure etc.
Institutions Infrastructure Labour Market Efficiency
Macroeconomic environment Financial market Technological readiness
Business sophistication Primary education Market size
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 Higher education and training Health services Innovation

Why is this important ?

• Companies today compete not just against their own local companies but in fact compete on the
world stage. Must look at what you can do better on the WORLD stage.
• Examples:
o You are running a small motel in Port Lincoln. In recent years you are competing against US
company Air BNB. Inflict damage on local business – look at competitors coming into your
market
o You are running an electronics business or even have an ecommerce business – you may be
competing against Australian exporter Kogan

In Australia – where are most people employed?

• Employment by Industry Statistics (February 2016) Australian Parliament, 2018
• Come up now with how many people in Australia are employed in what industries. You may be
surprised....
• (This is NOT in order) .. Work out a percentage..
o Agriculture
o Retail trade
o Manufacturing
o Education 8.7%
o Construction 8.5%
o Mining 1.7%
o Health care/social assistance
o Food and Accommodation 6.9%
o Professional/scientific/tech 7.3%

Why this matters?

• Any government will consider employment as important – where there is job growth in industry
governments may tend to favour those industries.
• In a global sense, technology has changed occupations – there are new opportunities in IT and Data
Analytics.
o Small SME can be wise and fill a niche in the market overseas
• An ageing population and better health has lead to the need for more health care providers

International Marketing
• International marketing is not just about the marketing mix to attract a target market.
o Where to go to minimise your risk
• It relates to access – you want to keep accessing your CURRENT customers and potentially access
NEW customers who may be in different country markets.
• You may wish to reduce your risk in the domestic market by going offshore.
• Remember the earlier models in week 1 – you may rely on suppliers from a range of countries, you
may rely on a manufacturer in another country.

Assessing Markets to go International

• Companies may assess the attractiveness of a market based on:
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 o Income (Annual gross national income per head)
 Populations ability to purchase: does it need to be simipler to be cheaper?
o Population
 Only need a small fraction of them to increase volumes
 Growing population lead to more purchase?
 Need a specific age target?
 Is population evenly dispersed or concentrated to the city?
o Debt
 What parts of the world have poort financial systems?
o Physical Quality of Life
 Level of welfare in the country? Death rate? Life expectancy? Are they healthy and
supported by the government?
o Geography
 Natural barriers? Seasonal elements?
o Infrastructure
 May be too difficult to try and get products and services in there
o Resources
 Tap into natural resources? Do you have resources in home country that they don’t
have?

Types of International Trade Entities

• Multinational trade such as the World Trade Organisation.
• Regional Trade Grouping (RTGs) such as ASEAN.
• Bilateral Trading Arrangements Generally between two sovereign nations, may have a joint trade
committee. Can be a Free Trade Agreement.

Advantages to dealing with these entities

• If your country is a member of a regional trade group, there can be advantages:
o Access to wider consumer or business markets
 Opportunity to make more sales
o May assist production in a nearby regional country
o May assist with standardising products or services across the region
 Reach a certain standard in a region you can sell to multiple countries
o MAY need though to adjust positioning of brand, product, pricing considerations.

Free Trade Benefits – the Pros

• FTAs foster freer trade flows
• Eliminate tariffs and address barriers
• Promote regional integration
• Can deliver enhanced trading opportunities
• Some opponents suggest there are negative consequences such as loss of some domestic work,
employment, industries. Also exploitation of the environment.
• View now: Burch Family Wines (Austrade via You Tube, 2018)
o Need for education in China regarding wine

By Contrast: Protectionism
• Tariffs – tax imposed by the government on goods entering its borders.

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 o Cheaper to get that product into the market
• Non tariff barriers:
o Import Licences – controls volume of imports
 Will only grant so many licences
o Quotas – limit quantity which can be imported after which a higher tariff applies
 Once a certain unit or financial quota has been met that’s it
o Quarantine inspections – can protect against disease but also can be used as a control measure
o Standards – this can be a barrier for intending importers as there can be costs and complexity
issues.
 Some governments change standards to make it more difficult for some imports to
come into the country
History of key groups
• GATT – General Agreement on Tariffs and Trade
o Created after WW2
o 23 countries signed GATT
This provided a forum for negotiating trade related issues (advisory) and a process to reduce
tariffs.
o It created a watchdog over world trade
o The agreement covered three elements:
 Trade conducted on a non-discriminatory basis
 Protection shall be afforded domestic industries
 Consultation will be the primary method used to solve global trade problems.

• World Trade Organisation

o Successor to GATT
o Began 1995
o Currently 164 countries are members (as at July 2017)
o Offers guidelines for the conduct of international trade
o Provides a forum for negotiations on trade and to settle disputes
o Members account for more than 80% of world trade
o Can cover a range of elements:
 Negotiation for international tariff and non tariff barriers
 Intellectual property (Trade Related Aspects of Intellectual Property Rights)
 Trade related investment measures

Economic Integration of Countries

• Since WWII some move towards economic integration of countries
o Preferential trading arrangements
o Free trade agreements
• Entities such as Customs Unions (common tariff and quota area), Common Markets or Economic
Unions. Make some countries easy to do business with
• These have varying degrees of integration.

Newly Industrialised Countries

• Some countries in Asia and Latin America have grown and become Newly Industrialised Countries
(NICs).
• Why?

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 o Incentives to foster growth in domestic savings
o Targeting industry sectors for growth by government
o A politically stable government
o A conscious policy of catering for foreign markets as well as domestic
o A willingness to import factors of product where the country is deficient such as raw
materials, skills, know how and investment capital.
 Willing to import to areas that are weak. Government wants to improve its industry
and so Australia will provide scientific services etc.

Some other key groups: International Monetary Fund

• “The International Monetary Fund (IMF) is an organization of 189 countries, working to foster
global monetary cooperation, secure financial stability, facilitate international trade, promote high
employment and sustainable economic growth, and reduce poverty around the world.
• Created in 1945, the IMF is governed by and accountable to the 189 countries that make up its near-
global membership.” (IMF, 2017)

International Monetary Fund

• Services:
o Lends money to developing countries’ governments;
o Provides assistance for government developmental projects in poor countries;
o Lends to private sector;
o Promotes increased flows of international investment and provides investors with guarantees
against ‘non commercial risk’.

The World Bank

• Owned by 189 member countries established 1944.
• Operated as a development bank channelling technical assistance and finance to developing
countries. Offers project financing for economic and social infrastructure.
• The World Bank Group has set two goals for the world to achieve by 2030:
o End extreme poverty by decreasing the percentage of people living on less than $1.90 a day
to no more than 3%
o Promote shared prosperity by fostering the income growth of the bottom 40% for every
country.(World Bank, 2017)

The G20
• The Group of Twenty (G20) is the premier forum for international economic co-operation and
decision making. G20 members account for 85% of the global GDP and 75% of global trade.
• Australia is a founding member.
• First G20 meeting took place in US in 2008. Summits held in UK, US, Canada, South Korea, France,
Mexico and Russia each year.
• Looks at food security, employment, trade, development.
o Guess what countries are members now?

Financial Considerations

Purchasing Power Parity

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 • “PPP (Purchasing Power Parity) shows how many units of currency are needed to buy in Country A
what one unit of currency will buy in Country B. Looks at purchasing power of different currencies
in a basket of goods” (Fletcher and Crawford, 2011, p47)
• Purchasing Power Parity (PPP) (Bloomsberg, 2018)
• UBS Prices and Earnings Study. (Kotabe et al, 2014, p63) 1kg of rice 1 Big Mac

Financial Factors
• International Marketing must consider currency.
• Risk that between the time a sale is agreed upon and the time payment is received, the exchange rate
may have changed.
• Forward Contracts – a financial instrument to buy/sell a currency at an agreed rate at the start of the
contract and this relate will apply when future settlement takes place.
• Futures Contracts – Agreement to buy/sell a currency in exchange for another currency at a pre
specified date and pre specified rate.

Financial Factors
• Currency Option – contract which gives the right but not obligation to purchase a specified amount
of foreign currency at a set exchange rate within a nominated timeframe.
• Currency Swap – Agreement to exchange one currency for another according to a predetermined
schedule so that each party evens out their exposure to fluctuations.

Financial Environment
• Are the currencies ‘convertible’ or ‘non convertible’?
• How does your currency compare to the currency in the proposed country for export?
• Interest rates in that country? How does your interest rate compare to the world average?
• Commercial risk – will there be default payments, is there a risk of a company you work with being
bought up by another investor?
• Political risk with finance – is it likely the government may delay the remit of funds, OR can there
be political events intruding on payment such as civil unrest, cancellation of projects.

Financing the International Operation

• Global Financial Crisis showed the speed of change.
• Also showed how cross linked countries are in the global economy.
• Need for funds increases with a company’s growth in the international arena.
• Why do companies need more money going overseas? Come up with some reasons now....
• Sources of funds can be banks, government ...
o EFIC New Lending Facility

Financing Example by Australian Company

• Ocean and Earth Case study

Types of Costs in International Marketing – Australian wine company tapping into Singapore
• Market Entry Costs
o Research
• Inventory
o Warehousing, having wine stored
• Market Development Costs
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 o Promotion, trying to create networks
• Capital Investment
o Up your production need to spend more money on bottles and more staff
• Additional costs
o Legal research, trips to Singapore, employ a consultant, distribution, train personnel,

Market Development Costs

• Integrated marketing communication
• Incentives to be included in distribution channel
o People may be more or less important, language changes
• Credit Terms
• Strength, bargaining power of channel member

Capital Investment and Fund Sources

• May require to invest large amounts in joint production, some governments require certain local
content of products or services.
• This is a way of protecting local industries.

Coping with recession in an export market

• Companies need to consider what they will do:
o Pull out?
o Emphasise the product’s value?
o Change the product mix to offer less expensive versions?
o Repackage the products such as smaller sizes
o Increase advertising
o Increase local procurement of supply materials
o Reduce unnecessary inventory

Lecture FOUR
Social and Cultural Environment Contemporary Variables

Overview of Lecture Session

• Readings this week Chapters 4 and 6. Learning objectives:
o Definition of Culture
o Cultural impacts within international marketing
o What it can mean to marketers
o Ethics and other contemporary issues facing marketers internationally

Culture

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 • What is culture? Can you come up with a few ideas now?
• Discuss...
• Defined as “society’s accepted basis for responding to external and internal events” (Cateora et al,
2012, p 62)
• Kroeber and Kluckhohn cited in Fletcher et al, 2017 found culture has many definitions:
o Prescribes forms of behaviour viewed as acceptable
o Is learned, people are not ‘born’ with culture
o Is dynamic
o Is subjective
o Culture is ‘learned’ and ‘shared’

Cultural Definitions
• “That complex whole which includes knowledge, belief, art, rite, custom and any other capabilities
and habits acquired by members of society” (Tylor, 1871 in Jain, International Marketing, 1990)

Culture within or outside borders

• Some countries have many different cultures WITHIN the one country – Heterophilous (China,
India): different dialects, religions etc.
• Some areas are Homophilous cultures, they share similar beliefs, languages and religions across
borders (Scandinavia)
• The implications – you cannot standardise the marketing mix within Heterophilous cultures.

Culture
• “Culture is the total way of life of a society” (Fletcher 1979 cited in Fletcher et al, 2014, p112)
• “Culture is the collective programming of the mind” (Hofstede 1980 cited in Fletcher et al, 2014,
p112)
• So, we must be wary of presuming our beliefs are ‘better’ than others. We must be wary of believing
‘our way of doing this’ is right all the time

Elements of Culture
• Material Culture
o Skills, what the company and country see as important, technological orientation, what
people think they need
• Social Institutions
o How that family is view, how important is education, political parties, social organisations
• Relations with the Universe
o What is symbolic and shared, belief systems, superstition, birth and rebirth
• Aesthetic
o What people believe is attractive is different in different countries, designer packaging,
female beauty
• Language
o Verbal and non-verbal languages in high context and low context cultures, expression of
cultures (greetings etc.)

Social Institutions
• Family (its role, importance, extended family)
• Religion
29
 o Is there a range of religions, do people conform to religious requirements?
• School
o Do people see education as important?
• Media
o Freedom of expression, what is appropriate
• Government
o Use of propaganda, try to uphold human right? Favour some parts of the population?
• Corporations
o What is the attitude toward big businesses and innovation?
View This Now ....
https://www.youtube.com/watch?v=GOHvMz7dl2A

Culture and How We Live

• Considerations:
o Different cultures may consume goods and services differently.
o High consumption of wine per capita in Australia, New Zealand, UK and low in Indonesia.
o Why would that be? Discuss now
 Not as much religious restriction and history of wine regions
o High consumption of seafood and fish per capita in Hong Kong
 Surrounded by water, traditional

Impacts of Culture on International Marketing – readiness to export

• Knowledge
o Interpretive knowledge – has any of your staff members lived in that country or have
• Sensitivity
o Being empathetic – don’t make errors before going into that country, don’t make cultural
assumptions
• Social Conventions
o How people eat, when they eat, siestas, differences of special occasions, how people receive
risk, are they weary and suspicious if you are coming from different country?
• Cognitive Styles
o Are people loyal to brands, how do they think about their purchase,

Other Cultural Elements and Implications

• Rituals “Patterns of behaviour and interaction that are learned and repeated” (Cateora et al, 2012,
p85)
• Marriage ceremonies, funerals, opening gifts, appropriate gifts.
o Impact on potential sales of consumable goods into particular countries

Cultural Universals Explained

• Cultural Universals (Theory proposed by Kluckhohn and Strodbeck 1961 cited in Fletcher and
Crawford, 2017, p123)
o Human Nature Orientation: some cultures see people as inherently good or suspicious

30
 o Man Nature Orientation: does the culture wish to dominate culture or do they want to live in
harmony with nature (indigenous cultures)
o Time Orientation: do people make a decision based on past, present or future?
o Relational Orientation: are groups important or individuals?
o Activity Orientation: are people passive and accepting of change or are they architects of
their own destiny?

Culture Operates at Numerous Levels

• Global: global networks which adopt cross national rules. Examples – values based on free market
economy and democracy.
o Dominance of large western companies, rise of Chinese companies
• National: reflects the national values on laws and institutions. Some country’s insist on use of the
national language. In some instances close relationship with government and business.
o Some majorities within a country – the emphasis of Malay as a language and dominance to
keep it alive
• Industry: Reflected in norms of the industry in another country or globally – may be risky,
aggressive.
o Different industries empahises different qualities: stock market values assertive and risk
taking
• Organisational: patterns of assumption of a firm, code of ethics.
o Relationship with organisation and employees and code of ethics etc.
• Individual: Influenced by a person’s family, religion, social units, political.
o Own culture and that needs to impact with some of these things. Does the industry have
things that are acceptable/not – some industries pay more attention to the law, some are more
globally connected

Let’s look at how culture can be formed

• Think about how communities may decide what is valid or not valid?
• Think about whether a community is isolated?
o If you are landlocked with neighbouring countries you will likely be impacted by other
cultures (different trade routes)
• Does the weather dictate its survival?
o
• Does the community rely on nature?
o Will have more respect on nature

Geography and Climate

• Geography – uncontrollable element in the international marketing environment.
o Climate
 Will you need to be careful about preserving food items? Is it open to climatic
differences?
o Altitude
o Temperature
o Seasonal elements
 Parts of the year where it is impossible to get into that part of the world?

31
 • Huon Aquaculture – what is Australia’s advantage?
http://www.youtube.com/watch?v=BuIVyeVYXxw&list=PL4D75 A170839FA814&index=12
o Ideal combination of water – southern ocean and river water

History
• The impact of history can relate to trade policy and culture.
o Tradition: tradition in dealing with business and use with product and service
o Who is the majority ethnic group:
o Majority religion or religious groups
o A history of conflict or peace
o Tribal loyalties: will it be difficult to break into that market because there are long standing
loyalties

Sunsilk – same product, two markets

• Sunsilk in Malaysia
• http://www.youtube.com/watch?v=excxIZ4wUvg
• Sunsilk in Norway
• http://www.youtube.com/watch?v=En3vJ5IB9zs&feat ure=related

Ageing Population or Young Population

• Many industrialised countries face an ageing population – Australia, US, Japan even China
o Certain products will be in demand
o Indonesia has more young people = more demand for things with family and babies
• Global life expectancy grown – UN projects three fold increase in people aged 65 to 84 years by
2050.
• Other countries have very ‘young’ populations with many people aged under 25 years such as
Indonesia

Luck, Superstition
• So, in some countries some numbers or years are good luck.
• Decrease in fertility rates in Japan during Year of the Fire Horse (1966) as it is believed women born
in that year lead unhappy lives.
• Avoidance of certain numbers, floors in buildings, words which have superstitious connotations.

Let’s look at some influences on Australia

• Isolated so many inventions
o Free from plant and animal diseases
o Lead to a lot of inventions per person
• A country which is bountiful but also vast, has been a challenge – evolution of the overhead
telegraph system
• A country which has extremes of climate
o Solar energy, water preservation,
• Modern Australia uses British inherited political systems
o Adopted British political and legal system
32
 • Waves of migration
o Australia is multicultural, lots of people speak different languages
• Compulsory education and voting

Cultural Theory Concepts

• Maslow’s Model - Hierarchy of Needs
o Does culture follow the logical progression?
• Self Reference Criterion Theory by Lee 1996
o Tendency that we evaluate other cultures through our eyes
o If there is a problem in foreign market look at what that is in your terms and then their terms
– see what you are using that might be bias, can you readjust to view it from viewpoint of
other culture
• Psychic Distance
o How close a foreign market might be to your market in a cultural context
• Brewer and Sheriff 2007 have questioned this in light of Australia’s close trading partners who have
a high psychic distance.
• High and Low context cultures

High and Low Context Cultures

• Ideas of theorist E T Hall
• https://www.youtube.com/watch?v=8tIUilYX56E&fea ture=related

Hofstede and Cultural Values

• Geert Hofstede studied 90000 people in 66 countries. Cultures differed along primary dimensions:
o Individualism vs Collectivism
o Power Distance Index
o Uncertainty Avoidance Index
o Masculinity and Femininity Index
o Long vs Short Term Orientation

Hofstede Continued
• New elements:

33
 o Pragmatic vs Normative
o Indulgence vs Restraint

Hofstede Organisational Culture

• Means vs Goal oriented
• Internally driven vs externally driven
• Easy going work discipline vs strict
• Local vs professional
• Open vs closed system
• Employee oriented vs work oriented
• Degree of acceptance of leadership style
• Degree of identification with your organisation

Hofstede’s Results (Cateora et al, 2011)

Geert Hofstede
• Let’s look at some country comparisons now
• https://www.hofstede- insights.com/product/compare-countries/

Trompenaars
• Theorist Trompenaars tried to research cultural differences on a global scale.
• Researched 30 companies with 75% interviews with management and 25% interviews with general
staff.
o Universalism vs particularism
o Individualism vs Communitarianism
o Neutral vs Affective
o Specific vs Diffuse
o Achievement vs Ascription
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Key Cultural Differences
• Language
• Concepts of space - physical and abstract
• Familiarity
• Consumption patterns
• Gender
• Business Customs

Beliefs and Thought Processes

• While some beliefs have origin in spiritual elements, some relate to secular elements.
• Feng Shui
• Astrology
• Fortune telling
• Auspicious times, places, dates
• Thought Processes

Differences in Time
• M Time .. Monochronic (Western cultures, concentrate on one thing at a time, promptness, time
divided into units).
• P Time .. Polychronic (High context cultures, simultaneous occurrence of many things, less
punctual).
• Speed and accuracy
• Also peak and low season times may differ with differing holiday periods
• Some countries work longer hours

Greeting Etiquette (Graebel Relocation, 2018)

• Greeting Etiquette from around the World
• https://www.youtube.com/watch?v=D_hBK8Ni4yQ&li
st=PLGP94vlrqxUtM4cq2v3AsiAQsBMkbAqDQ&index= 2

Cultural insensitivity can stall negotations

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Cultural Sensitivity
• Need to be sensitive to other cultures.
• Ensure no offence
• Differences in views of what ‘politeness’ may involve.
• Let’s view this:
• http://www.austrade.gov.au/Australian/Export/Expor t-markets/Countries/Ghana/Doing-business

Cultural Adaptation
• Adaptation may be necessary for doing business in the global sphere. Needs:
o Open Tolerance Flexibility
o Humility
o Justice and fairness
o Adjustment to different tempos
o Curiosity and interest
o Ability to command respect
o Knowledge of country
o Integration to environment
o Liking for others

Culture and Conduct of Negotiations

• Self Esteem and ‘face’
• Value systems
• Appropriate degree of formality
• Harmony and Emotion
• Change

Cultural Borrowing
• An effort to learn from others’ cultural ways in a quest for better solutions to society’s problems.
• A common language does not guarantee the same culture
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E Bay what went wrong
• View this now http://www.youtube.com/watch?v=L2I2ZwDJksM

Chapter 6 - Contemporary Issues Facing Modern Companies

• Ethics
• Environmentalism
• Geography and Climate
• Health Related Issues
• Consumerism
• Infrastructure Endowment
• Population Trends

Ethics in International Marketing

• Ethics and social responsibility relate to these types of issues:
• Your employment practices including employment in overseas country/ies. Do you exploit workers?
• Consumer protection
• Environmental protection
• Political payments, involvement in political affairs of country, corruption and power for advantage
• Basic human rights and fundamental freedoms
• Giving gifts and bestowing favours
• Predatory pricing against competition

Read this from Choice Magazine

• https://www.choice.com.au/health-and-body/diet- and-fitness/sportswear-and-shoes/articles/shoe-
factory-working-conditions

Ethical Theory Viewpoints

• Relativist view says what is ethical is determined by the host culture. (Bribery is OK in THAT
country as that is the way business is done).
• Utilitarian view – what is ethical delivers the greatest good to the greatest number of people.
(Bribery is OK as it will lead to high employment of locals).
• Universalist view – Acceptable set of behaviour should be applied wherever business is done.
(Bribery would therefore never be acceptable)

Environmentalism
• Activist groups are becoming global in their approach.
• The impact of business in one country can infringe on another – acid rain, global warming,
deforestation.
• Some countries have a strong consumer ‘green’ focus

Infrastructure Endowment
• As infrastructure develops may give more opportunity to trade.
• However there is then pressure on resources, the environment.

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 • Rise of China as a manufacturing powerhouse has led to pollution and concerns on environmental
implications.
• Technology can change the social dynamics – women may have less housework, can pursue careers

US Energy Information Administration 2013 predictions on world energy consumption

Some ethical considerations: Population

• Concerns on rising numbers in planet
• Decrease of numbers in developed vs developing world
• Global shift with human migration
• Not just immigration but passage of those running from war
• Urbanisation
These also have marketing
• Implications

Climate and Geographic Impact

• Sheth (2002 cited in Fletcher and Crawford 2017, p219) suggests weather can influence punctuality.
• In colder climates there is a smaller window of opportunity so less time to conduct business.
• Trade patterns flow from colder to warmer climates.
• Major food eaten near equator is cereal crops. More animal fats eaten away from equator.
• More animals used for clothing away from equator (wool and leather). Vegetation used closer to
equator (cotton, linen).

Consumerism
• Increased globalisation can lead to rapid spread of both animal and human health problems.
• Avian flu
• Zika virus
• SARS
• Emergence of Malaria with antibiotic resistence
• Consumerism – citizens organising themselves for better rights and power. Rise of consumer
protection groups. Pressure of consumers on companies.
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 • So this reinforces the need for companies to be honourable in their actions.

Lecture FIVE
International Marketing Research Segmenting and Positioning

Overview of Lecture Session

 Readings this week Chapters 7 and 12
 Chapter 9 ONLY pages 335-337
 Learning objectives:
o Learning about Marketing Research and challenges within the international environment
o Key points in market segmentation and positioning
o Planning for effective marketing

Market Research
 “Systematic gathering, recording and analysing of data to provide information useful in marketing
decision making.” (Cateora et al, 2012, p206).
 Some steps are similar to domestic market:
1. The research problem
2. Determining the sources of information
3. Addressing costs and benefits
4. Gathering data
5. Interpreting the results

International Differences with research

 Craig and Douglas (cited in Fletcher and Crawford, 2017, p222) suggest information needs will vary
based on:
o The company’s experience; more experienced companies (executive with another cultural
background) is very beneficial
o The company’s prior degree of involvement in international marketing: have they been in the
region before? Far bigger learning curve if first venture overseas

When Venturing Overseas

 Research can be divided into three types based on information needs:
o Information for initial market entry; what would be an opportunity? Sales potential, market
growth? Competition there?
o Information how to approach the foreign market; what’s the best approach in that market?
Adapt product, standardised product, invent a product?
o Information for determining activities across international markets: how to build awareness,
points of difference etc.

Breakdown of Specifics
 Economic: data on growth in the economy, inflation, business cycles, specific industry economic
studies, key indicators.

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  Cultural, sociological and political: safety, leisure time use and expenditure, lifestyle elements. Risk
factors, who holds power.
 Market conditions: specifics to that country or region, is there growth, changes?
 Technological environment: is there electricity, what is the infrastructure like?
 Competitive situation – will be different from domestic market

How to Assess Some Markets

Global Edge http://globaledge.msu.edu/mpi

International Research Decisions

 The obvious starting point is whether to go international?
 Which international markets to enter?
 Whether to enter, leave or expand activities?
 Whether to add, delete or modify products or services?
 How to determine the market mix elements of price, media selection
 How to determine pricing, demand, profitability How to ascertain distribution channels

Major Decisions in International Marketing

 Phase one: looking at companies competency levels, what is the companies expertise and resources
to go into the market?
 Two: competition in that company, how competitive is your company in global terms?
 Three: d
 Five: maintaining success and presence in that market

Common International Mistakes in Research

40
  The text uses the examples of common company errors when going offshore (Starbucks):
 The need for research was ignored
 The research was inadequate – misunderstand what will be significant in that market
 The market research was misdirected
 There was a failure to appreciate cultural differences

The Creature Technology Company

 (The Creature Technology Company via You Tube 2018)
 The company produces technologically sophisticated, creatively inspired and life-like animatronics
for arena spectaculars, theme parks, exhibitions, stage shows and events in the world.
 Founded in Melbourne Australia in 2006.
 Employs: designers, technicians, engineers and artisans.
 Created the animatronics for Global Creatures who produced the arena shows Walking with
Dinosaurs and How to Train Your Dragon and the stage show King Kong.
 What is that company’s expertise in a global sense?
o They have done business at the Olympics so would be doing large events
o Look at what parts of the world have vibrant entertainment industries with stage shows
(London, where there might be theme parks developed)
o What do you offer that other countries don’t offer?
o Capacity to afford it

So let’s do this now ....

 Byron Bay Cookie Company
 What criteria may you use in your research to potential markets?
o Look at cultural aspects: interest in western cookie treats? Some parts might value it a lot
more
o Look at data and facts
o Visit some countries and networking with industry bodies to see where there are unmet
demands
o Specialist advice

Costs of Market Research Internationally

 Costs may be higher than anticipated: More numerous areas to research
 Some communication issues:
o Language: get things translated – do they have the same meaning?
o Information misinterpretation – high context v low context culture
o Information credibility – secondary, is credible and enough to base and expense on
o Sampling – how big should they be? How are you going to access them?

Some issues in International Research

 Primary data – you will remember is first-hand research, commissioned. Who do you commission?
How do you ensure the sample is representative? What about differences of culture?
 Secondary data – already in existence.
 Sources may include government and private agencies, the internet, country data, trade
organisations, UN and OECD.

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Complexity of International research

 Geography and distance issues to get information that is far away

 Measurement equivalence: can you compare
 Is there respondent bias because some people don’t want to respond because of their culture

Secondary Research
 Availability of data.
 Reliability of data.
 Comparability of data.
 Validating secondary data.
 Age of data – some countries do a census more often than others
 How sophisticated is the technology to undertake the research

Let’s View a Few Sources

Ibis World
http://www.ibisworld.com/
Euromonitor
http://www.euromonitor.com
China’s wages set to Rise in Future – example of research KPMG
http://www.kpmg.com
PWC
http://www.pwc.com

Qualitative vs Quantitative Data

 Primary data – fresh research.

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  Quantitative – large number surveyed, verbal or written. Structured survey. Scientific collection of
data.
 Qualitative – open ended questions, in depth, unstructured responses.

Quantitative vs Qualitative Research

Research Design
 Construct Equivalence
 Measurement Equivalence
o Translation, scales, use 5 point scales
 Scale Equivalence
 Data Collection Equivalence
 Do you interview the household owner of the servant who does the shopping?

Common Issues
 The ability to communicate opinions
 Language and comprehension
 Respondent bias – people won’t want to disagree or reveal details of their wealth
 Interaction bias

Some differences on research

 Some countries have more professional research agencies available
 Some countries view research as more important than other countries in project planning
 It may be easier to do ‘test marketing’ in some countries as they may have more sophisticated and a
wider range of expert agencies available.
o Might be expensive
o Other parts of the world is not as easy to do testing so a lot riskier
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So key questions for you
 When was the data collected?
 Over what time frame?
 How was it collected?
 Have the variables been redefined over time?
 Who collected the data?
 Why was the data gathered?

New Market Technologies

 The internet Data analytics
 Omnibus Surveys
 POS Scanner data
 Consumer panel data
 Single source data

More complex getting information and research overseas than in Australia

International market segmentation

Chapter 12 and Chapter 9 (pp 335-337) (ID Scan, 2018)

International Market Segmentation

 Why segment markets?
o Find common purchase motives – might find that some countries have similar groups of
people interested in similar products
o Build global segments which offer economies of scale -
 Screen markets or countries based on:
o Macro data – the economy, political
o Criteria based on future possibilities
o Niche planners may screen on low competitive pressure – a small company may not have the
capacity to compete with big competitors so look for a small community with less
competitive pressure

Segmenting Markets
 Psychographic (lifestyle, personality, attitudes, core values)
 Behavioural (brand and supplier loyalty,
 Demographic (shared similarities of age, gender, income, occupation, family size, education)

International Considerations for Segments

 Ethnicity based (may target a specific ethnic group WITHIN a country) – find it has special clothing
or food requirements
 Linguistic based (may need to adjust to languages WITHIN a community) – target French speaking
Canadians in the entertainment industry

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  Emerging or developed market (may have different diffusion patterns) – how quick a product is
taken up; look at places with a similar take up rate (developed countries)
 Geographic proximity (may link various countries if they are close to a manufacturing or distribution
hub or shared climate or seasonality) – neighbouring country to an already exported country could
have an opportunity
 Legal or political similarity

Segmentation
 Market Research – sell the same thing? Adapt in 4 P’s?
 Entry Decisions
 Positioning Strategy – what is important to people in different parts of the world? Risk adverse =
show you are reliable
 Resource Allocation – Australian and New Zealand goods are seen as ‘clean’
 Marketing Mix – adjust the price? Tiered prices if different polarity of income? Different range than
in Australia? Tweak what you are selling to meet those needs

Criteria Need for Any Good Segmentation

 Responsive
 Identifiable
 Sizeable
 Accessible
 Stable
 Actionable

Countries and ‘national’ profiles

 Countries also become known over time for expertise in particular markets or product categories.
 Do this now....
 Perfume = France
 Ship building = South Korea or developed countries to emphasise expertise

Positioning Elements (Rangan et al 1992 cited in Fletcher and Crawford, 2017, p434)
 Can be positioned on specific product attributes
 The benefits of performance or the needs they fill
 Usage occasions – special treat? Everyday use? Some Australian wine companies position
themselves as a gift so they spend more money.
 Class of user – frequent, sometimes, everyday use?
 Against a competitor – how do you say that you are differentiated?
 Against different product classes – hand soap

Segmentation Scenarios – IM CONCEPT

 Universal or Global segments – common needs around the world where you present yourself the
same around the world
o Disney presents itself as a global entertainment giant
 Regional segments – see linkage in some parts of Asia and present yourself in a certain way to that
part of the world than in a different part of the world
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  Unique segments – marketing mix fine-tuned just for specific market

 Market Structure
 Emerging vs Developed economies
o Premium product and an economic product
o Developed is more segmented with more niches
o Services more prominent in developed countries

See the differences

 Proctor and Gamble Laundry Detergent
 High Income Populations Emerging in Booming Economies (Euromonitor, 2018)

Positioning
 This is the act of ‘differentiating a brand in the customer’s mind in comparison with competitive
offerings’ (Fletcher and Crawford, 2014, p321)
 When positioning in an international market a company needs to consider:
 What is the competitive frame?
 What are customer perceptions about this type of product or service? What’s important to
emphasise?
 What could be positioning themes? Across different countries?
 How is this achieved through the marketing mix? Promotion, packaging etc.

Positioning (Keegan and Green, 2013 pp240-243 cited in Fletcher and Crawford 2014, p321) THEORY

 Global Consumer Culture Positioning (GCCP)
o Brand is a symbol of a given global culture – Nike it doesn’t change symbol across countries
 Foreign Consumer Culture Positioning (FCCP)
o possessing something specific to a particular county – e.g. BMW emphasise linkage with
Germany
 Local Consumer Culture Positioning (LCCP) – American chevrolet emphasise American origin

Market Based and Product Based Planning

 Market Based Planning:
1. Analyse customer needs
2. Design service or product FOR those needs
3. Develop marketing mix
 Appropriate for either a new product or modified product for international market. Longer term.
 Product Based Planning:
o Identify target market for existing product Shorter term planning.

Lecture SIX
International Market Selection and Entry

Overview of Lecture Session

 Readings this week Chapter 8.
 Learning objectives:

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  Market Selection Criteria for companies going international
 Methods of Entry into international markets
 Journal article in readings on online retailing

Selection of Markets – Decisions

 What is the company’s strategic orientation?
 What markets have the most potential?
 What is the structure of the global industry in which the company operates?
 Who are the current and potential global or international competitors?

Types of Entry Models

 Incremental
o Enables firm to gain experience at a measured pace
o Less risk of exposure
o Requires fewer resources
o Negative: greater competitor risk as competitors may leapfrog the firm – see what you are
doing and then do R&D to copy
o Expand to NZ then 3 years later go to Singapore then 1 year later China etc.
 Simultaneous
o Enables firm to acquire experience quickly
o Positive: Achieves economies of scale
o Likely to pre-empt competitors
o High operating risk and resource intensive.
 Concentrated
o Concentrates resources in limited markets: one ethnic group, one buyer etc.
o More focussed effort and reduced operating risks and costs – more focus on one or two
markets and not looking at other potential countries of interest
o Economies of scale, acquires information and experience
o Does not see other opportunities in different parts of the world  Exposes firm to risk with
‘eggs in one basket’
 Diversified
o Spreads exposure and risk: less risk in terms of political and economic
o Broadens knowledge of opportunities
o Can result in firm being spread too thinly, affects ability to have economies of scale. May
need greater management: different laws and cultures you have to deal with so need a lot of
management to deal with those complexities

Analysing the Attractiveness of Markets

1. Rate the External Factors
- Characteristics of the market: is there customer concentration in cities or regions?
- Competitive Conditions: domestic, how locked in are the distribution systems? Hard
to get in because of the? Technology attributes?
- Financial and Economic Conditions: pricing, tariffs, exchange rates
- Legal, socio political conditions
- Growth of imports and welcomes to set up business in another country
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 - Are there substitutes? Direct and indirect competitors
- Consumer law, environmental law
- IP: a promising market may be discarded if there is no IP protection
2. Rate the Internal Factors
- Management Characteristics: how much support does the investors or upper
management provide for going overseas?
- Marketing Characteristics: management viewpoint of expansion, highly supported,
aggressive, tentative?
- Technology Attributes: investment in technology, will people copy? How much R&D
required?
- Production related competencies: are they physically able to serve international
market?

Hollensen Theorist’s Two Step Approach

 Stage One
o Preliminary screening to cut out countries in terms of risk
o Discard those where it is too risky to operate in
 Stage Two
o Fine grained scrutiny looking at attractiveness of the market and competitiveness of the firm.
o How attractive is the market?

Screening – Quicker Way to Filter

 One:
o The whole world
o Get rid of those parts of the world that have no opportunities
o Too much regulation or government issues
 Two:
o Unattractive because of the size of the population, consumer behaviour, education etc.

STAGE TWO ANALYSIS
 Political and economic - Some considerations:
o What is the pattern of demand, consumption?
o International Product Life Cycle = is it ahead of behind of the home country? Can it be
predicted? Peak demand at times in the year? Is it behind the home country?

48
 o Connection with infrastructure and other connected elements (electricity access will link to
fridge use).
o What is the industry like in the country – similar or different to the domestic industry?
o What are educational rates? Literacy? Consumer behaviour and cultural elements. Do you
need to adapt the product?

STAGE THREE ANALYSIS

 Only about 30% of the world markets remain
 May focus on more expensive and time-consuming analysis to determine best opportunities.
 What markets should be avoided because of strong competitors?
 What markets have substantial barriers to products from foreign markets (protection, quarantine,
quotas, standards). Quarantine, quotas, protectionism? Warehouse issues, transportation?
 Other barriers can be access to skilled personnel, warehouse space, transportation, power, control
over prices

STAGE FOUR ANALYSIS

 Weighing up expense and return = what markets are not large enough to warrant the marketing
effort? How much adjustment, investment, and research would be needed for this market and what is
the return?
 What markets are unlikely to bring results from marketing efforts?
 What markets have too high costs or are problematical to reach.
 What are the likely product lines that would sell?

LEADS TO Stage 5
 About 5% of global markets.
 Does the company have the resources to commit to this market?
 Does the market fail to meet company objectives or competitive advantages?
 Do we need to outsource to service this market?

Do this now ... consider issues here

 Let’s examine this for this company. What will be important?
 Developed market have more niche products and services
 Capacity to pay
 Retail outlets

Market selection trends

 Use of e marketing tools and cyber marketplaces can mean that national borders are less significant.
 See what those companies found with AliBaba portal.
 Icracked had a direct channel to suppliers and also customers.
 Zhao and Du (2000) cited in Fletcher and Crawford, 2014, p265 found e business firms:
o More likely to enter markets that were culturally distance than conventional firms; more open
to risk and flexibility
o Began their international activities quicker; Entered a large number of foreign markets a year.
o Diversified theory

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Predicting Market Potential – Chain Ratio Method
 Start with a rough base such as the country population
 Systematic refinement - apply a string of ratios to gain a grasp of the Market Potential

 Population: who will buy the product in that country? B2B?

Country Clusters
 Countries can be clustered together on their geographic location; similarity of buyers; economic
conditions; or market size.
 Can look at similarity of customer groups too who may be a sub group within a country market.
 Artizara

Timing of Entry
 Research on international entry timing by large US firms in China showed firms tended to enter
China earlier:
o The higher their level of international experience;
o The larger the firm size;
o The broader the scope of goods and services;
o When competitors had already entered the market; competitive reason to win some business
o The more favourable the risk;
o When non-equity modes of entry such as licensing were chosen: company doesn’t have to
cover the full cost, cheaper entry

International Market Entry Choices

- Look at nature of company
- How much cash they have
- How much expertise they have
- What will suit them best?

1. Export Based
2. Entry Manufacturing Based Entry
3. Relationship Based Entry
4. Born Global Entry mode

1. Export Based Entry

a) Indirect Exporting: use agencies in Australia to help get your product in a different market
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 b) Direct Exporting
c) Establishing a Sales Office
d) Licensing
e) Franchising

a) Export based entry - Indirect Exporting

 Export Agencies
o Can be Brokers
o Export Commission Houses
o Confirming Houses
o Manufacturers’ export agents
o Take your good in australia and export it to the other country
 Export Merchant Operations
o Export merchants handle all aspects of international marketing functions apart from product
modification. Select and use distribution channels, set prices and organise promotion.
o Trading companies engage in importing, investing and financing as well as exporting.
o Buy good from the manufacturer, take ownership and then export it
 Good for a business with not too much expertise or experience to handle the complexities of
international business

… Entry Evaluation – Indirect Exporting

 Advantages
o Low commitment in terms of resources
o Low risk
 Disadvantages
o Lack of control
o Lack of contact with foreign market
o No learning experience
o Potential opportunity cost

b) Export Based Entry - Direct Exporting

 The firm contacts the buyers in the international market and sells direct or arranges for firms in the
target market to act as agents or distributors for their products. Not going through a middle person in
home country. Sell direct to end user (e-commerce site) directly in the host country.
 The firm is responsible for its own international marketing and sales.
 Direct marketing – use of internet directly to buyers.

… Entry Evaluation – Direct Exporting

 Advantages
o More control compared to indirect
o More sales push
 Disadvantages
o Need to build export organisation
o Can be more demanding on resources

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 c) Export Based Entry - Establishing a Sales Office
 Direct exporting can involve appointing a non-employee in the market to represent the firm. Can
relate to an agent in the HOST country (foreign market) or the company arranges distribution in the
foreign market.
 A sales office enables greater control with your own staff over-seas, but it means greater resources.
More expensive but greater control.
 Instead of setting up sales office, you have an agent in the overseas country that represent you and
focuses on a particular commodity or industry

d) Export Based Entry - Licensing

 A licensor provides a combination of intellectual property (patents, designs, copyright and know
how) and supporting products (may be machinery, parts) to the licensee.
o Manufacturing the product in that part of the world and can give insight into getting those
product distributed.
 The licensee makes a lump sum payment or down payment plus royalty linked to the volume
produced or sold.
 Cross licensing: firms exchange intangible assets such as know-how and technology with each other.
o Two companies have complimentary expertise so I’ll produce this for you and you product
this for me to lower costs.

… Entry Evaluation – Licensing

 Advantages
o Appeals to small companies that lack resources
o Faster access into the market
o Rapid penetration of global markets
Disadvantages
o Other entry mode choices may be affected
o Licensee may not be committed
o Lack of enthusiasm by licensee
o Risk of opportunism, needs protection
o Licensee may become a competitor in the future

e) Export Based Entry - Franchising

 Often used in services industry such as hotel and fast food chains.
 “Franchisor gives the franchisee the right to undertake business in a specified manner under the
franchisor’s name. ” (Fletcher et al, 2014, p273) Follow a certain training model.
 Royalty payment is made. Pays money to owner because they are tapping into a successful method
that works.
 Franchisor lays down guidelines and performance standards.

… Entry Evaluation – Franchising

 Advantages
o Overseas expansion with minimum investment
o Franchisees’ profits are tied to their efforts – have an incentive to do well because the more
success the business has the more money they make
o Availability of local Franchisees’ knowledge
 Disadvantages
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 o Revenues may not be adequate
o Availability of master franchisee
o Lack of control over operations
o May have problems with performance standards
o May be cultural differences or issues with physical location

Franchising Example
 Building a Global Brand – Boost Juice

2. Manufacturing Based Entry

 Often referred to as ‘foreign direct investment’ FDI, this can take these forms:
a) Joint Venture
b) Consortia
c) Acquisition
d) Greenfield Operation

a) Joint Venture
 The most common form of manufacturing-based entry into international markets.
 40% Fortune 500 firms have one or more international joint ventures (Cateora et al, 2012, p333)
 Singapore company did joint venture with agribusiness firm
 Often between and international firm and local firm
 If the joint venture is with an international and local firm, the international firm tends to bring the
joint venture technology and product expertise.
 The local partner may have access to a distribution network or familiarity with the local market.
 Joint ventures reduce capital and resource commitments and spread risk.
 In the last example it is a win-win – a designer wants access to high quality supplies.

… Entry Evaluation – Joint Venture

 Advantages
o Higher rate of return and more control over operations and can reduce capital outlay
o Creation of synergy
o Sharing of resources and knowledge
o Access to distribution network
o Contact with local suppliers and government
 Disadvantages
o Partial lack of control: sharing control with another partner so need to make sure each partner
has the same mindset and is clear about their goals
o Problems of communication
o Risk of conflict and can inherit blame from other

b) Consortia
 Similar to joint ventures but have many partners and frequently operate in a country in which NONE
of the participants is active.
 Australian companies with engineering expertise, join with another company and go into China for
example

53
  May relate to building a major infrastructure project.

c) Acquisition
 Acquiring an existing company in that country.
 Buy and own that company to tap into their brand, staff etc.

d) Greenfield Operation
 Firm builds its own manufacturing plant in another country.
 Set up a manufacturing plant in that country

3. Relationship Based Market Entry

a. Strategic alliances
b. Star alliance
c. Contract manufacturing
d. Offshoring
e. Counter trade

a) Strategic Alliances
 Collaborations which share value creating activities. The synergy between members brings
competitive advantage.
 Pool resources to get a competitive advanagte
 “Co-operative linkages of two or more otherwise independent organisations with the aim of
achieving competitive advantage due to the resulting synergies” (Fletcher and Crawford, 2014, p276)
 Explanations:
1. Transaction costs
2. Resource dependence
3. Organisational Learning
4. Relationship Marketing
5. Strategic Behaviour
 There is a drive towards strategic alliances in global business: (advantages)
o It allows companies to move into new markets
o It allows companies to fill their knowledge gaps
o It allows companies to pool their operations and thus save money
o It allows companies to create complementary capabilities
o It speeds up the introduction of new products or services
Strategic Alliances – Internal Drivers
o Vertical alliances: alliances across different levels and designed to improve product offering.
Can relate to distribution or outsourcing arrangements or customer-supplier arrangements.
o Horizontal alliances: alliances within individual elements of the value chain to reduce
investment or access markets. Offering the same level in the supply chain but in a different
market.

b) Star Alliance – just an example lol

 Membership of airlines such as Air Canada, Thai Airways, Singapore Airways, Shared Lounges

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c) Contract Manufacturing
o Restricted form of licensing
o Based only on orders from international firm
 Entry Evaluation - Contract Manufacturing
o Advantages
 Labour cost advantages
 Savings via taxation or raw materials or overheads or energy costs
 Lower political or economic risk and quicker access to markets
o Disadvantages
 Contract manufacturer may become a future competitor
 Lower productivity standards and issue to retain standards and quality
 Risk of backlash from home market employees
d) Offshoring
o Relocation to another country of business processes previously done by the firm itself.
o China is used by many companies for production
o India is used by many companies for services
e) Countertrade
o Motivations
 Access to new or difficult markets
 Can overcome exchange rate controls or lack of
 It can increase sales volume
 It can generate long-term customer goodwill
o BUT .... It can be costly and timely for negotiations and create uncertainty on future prices. It
can also have transaction costs.

4. Born Global
 We have talked previously in an earlier lecture on Born Globals
 These are companies that from inception - or very soon after being formed- cater for international
markets.
 They may even bypass the domestic market
 They usually are created by entrepreneurial mindset and have management or staff with extensive
international experience.
 Can be significant in relation to the type of industry in which they are in.

Types of Market Entry (Fletcher and Crawford, 2017, p296)

55
Dunning’s Theory OLI (diagram Fletcher and Crawford, 2017, p297)

Factors which can affect Entry decisions

 INTERNAL
o The management
o The firm’s characteristics
o Company objectives
o Need for control
o Strategic flexibility
o Assets and capabilities

 EXTERNAL
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 o Nature and attractiveness of product category
o International Market potential
o Government regulations and trade barriers
o Assistance from Government and other groups
o Cultural and socio-cultural distance
o Risk
o Infrastructure in other market Economic considerations

Exit Options
 Companies may choose to withdraw from international markets:
o They have sustained losses;
o The company underestimates the risks of operating in that country;
o The market is under developed or consumers lack buying power;
o There are ethical concerns
o There is too intense competition
o Companies may re arrange their resources for more profitable emerging markets.

Lecture SEVEN
International Competition International Relationships

Key Elements this Lecture

 Chapter 9 (excluding pages 335-337 covered earlier) and Chapter 10
 Role of competition and international marketing
 National competitive advantage
 Competitive Strategies
 Networks and relationships in international marketing

International Competition
 Market Drivers towards international trade:
o Increased international travel
o Growth in media
o Establishment of world brands
o Revolution in information and communication technology
o Consumers may have similar spending patterns, education and lifestyles.
o ICT investment: that’s why NBN is so important so we can get ICT investments
o Lack of females in STEM
 International Competition – Cost Drivers
o Global economies of scale and scope (world application).
- Large scale manufacturing requires more than one single country’s markets
- Consumer research, product creation may find new target groups sharing same needs
and wants
- Need to spread out any large research and development costs.
- Global sourcing efficiencies: source some supplies from around the world
- Advances in transportation and freight.
These all lead to more competition

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  Elements Pushing International Competition
o Government and political drivers
- Removal of trade barriers with treaty nations
- Relaxation of immigration controls: Australia needs to get business expertise into the
country and there are certain Visa systems where some preferred locations can come
in with business Visa’s
- Implementation of global or cross-country standards: capacity to kick start into other
countries when there is a global standard
- Deregulation and privatisation of industries
 Competitive Drivers
o Increase in World Trade
o Growth in Emerging Markets and middle class: more money more demand
o spenders in these economies
o Rise of ‘born globals’ and global competitors:
o Growth in global networks such as the inter- relation with industries such as aircraft
manufacture
o International industries

Born Global –international focus

 FCT Flames View this
 Highly technical
 Not enough business in Australia to make money
 Business to industry specialist
 Unique expertise advantage

Porter’s National Competitive Advantage theory (Fletcher and Crawford, 2017, p314)

 Some countries around the world develop a global advantage based on these elements:
o Firm strategy
o Demand conditions
o Related and supporting industries
o Factor conditions
o Chance
o Government

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Theory explained further
 Influences on Factor Creation
o A cluster of domestic rivals stimulates factor creation
o Perceived national challenges stimulate factor creation
o Home demand influences priorities for factor creation
o Related and supporting industries create or stimulate factors that can be transferred
- Things where they can work from each other?
o Infrastructure
o Skilled labour
o If you have a lot of domestic competition you tend to be leaner and more competitive
o Look at areas where Australia has had a lot of innovation – they come from issues within
Australia such as bush fires

Influences on Home Demand conditions

 Intense rivalry increases home demand and makes it more sophisticated
o Build home demand and expertise – get more sophisticated they have to do things better
 A group of rivals builds national image – get a reputation of having excellence in that area
 Foreign experts and foreign firms may be thus attracted to the country
 The image of world class industries will benefit those companies
o Get a reputation of a country as having excellence in that area
o E.g. French wine industry, Australia technology in the wine industry
o More appealing that if people see if comes from this country of origin it will have advantages
 Internationally successful industries produce complementary products
o Around the wine business; wine marketing research – supplementary and additional services
and products

Influences on Related and Supporting Industries

 Specialised factor pools can transfer to related industries
 A group of domestic rivals encourages the formation of more specialised suppliers
o Start getting specialised supplies – tap into further points of competitive advantage
 A large or growing home demand stimulates growth of these companies

Firm strategy and structure, domestic rivalry

 Factor abundance generates new entrants
o Skilled personnel that these industries can tap into?
o Certain industries in Australia have high quality skills as a factor of abundance
o E.g. Medicine in Australia
 Early product penetration feeds entry
 New entrants emerge for supporting industries
 World class users enter supplying industries
 Some ideas: Australia has world class biomedicine, aviation training and services, wine production
and ancillary services.

Theory Model Further Explained (two outside elements)

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  Governments
 Education and training: particular industries are supported by the government – more grants to
foster creating the skilled personnel – people choose courses where they want employment
 Infrastructure industry regulation: high quality regulation on agriculture standards so we don’t get
contamination issues, not exploiting workers etc.
 Industry specific regulation
 Investment and assistance
 Foreign investment guidelines and also policies: Australia has quarter foreign investment – does
the government encourage investment in certain industries?

 Chance
 New inventions and major technological discontinuities: cochlear implants, invention that has
filled a global gap
 Shifts in world market finance: China and India more important
 World shifts in demand
 Terrorism and war: disrupt certain countries that supply that element. E.g. Cotton supply was low
in America that gave the opportunity for Australia to fill that gap
 Political decisions by foreign governments: what a government might do when banning trade in
one country could be an opportunity  ASSIGNMNET: BREXIT 22:17

Let’s Examine Australia

 Australian Industry Capability on the World Stage
 Why these industries do you think? Discuss now
 Australia has a lot of mining resources: gold, zinc, lead, copper
o For many decades mining has been a significant industry so there has been a lot of expertise
in the area, development, training revolving around the mining industry so australia is a
world leader in the mining industry
 Australia is a big continent which is one of the driest parts of the world. Tends
o Tends to have a lot of understanding about water conservation
o Currently have a drought but some parts of Australia has been able to do crops with crops
needing less water

Some criticisms of the model

 Can be suggested it is more suitable to industrialised nations that developing
 Critics such as Moon et al (1998) suggest it ignores issues such as world trade and international
involvement.
o Looks at a country in isolation without looking at the impact of world players. i.e. big world
companies can come in and take some of the advantage from a successful country focusing
on a particular industry
o Doesn’t take into account entrepreneurs and how that can change an industry and
opportunities
o Doesn’t take into account workers
 Emergence of ‘double diamond’ which includes foreign activities such as ability to attract foreign
capital and investment and access to cheap labour resources.
o Looks at the effect of what foreign entities are doing
o Foreign investment can radically push or change some of these conditions
o Neighbouring country where something is boosted can change their national competitors
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Generalised Double Diamond

 Porter says countries have a competitive advantage

 Moon says doesn’t look at companies building up their expertise???? (CHECK TEXTBOOK…)

Techport Australia
 Defence hub in South Australia
 This is in different parts of the world as well
 South Australia government is big on the defence industry because it will bring employment for
those workers who were out of work with the closure of various car manufacturing plants
 Partly state, federal, council and private to work together to create world class industries

Effect of E Business on Porter Model

 E Business firms cannot restrict rivalry to the domestic scene.
 Geographic concentration is also less important.
o E-commerce and e-connection means that companies don’t need to be clustered together
- This goes against the previous slide
o Send confidential data
 Factor conditions can involve many countries with offshore manufacturing or supply.
 Companies can use international supporting industries more easily.
 Firms are closer to both customers and suppliers.
o Accessible and easy for communication purposes

International Competitive Advantage

 (Fletcher and Crawford, 2017, p319) Porter’s Basic Competitive Strategies
 Companies choose a particular strategy to pursue to give them a competitive advantage
o Overall Cost Leadership
o Differentiation
o Focus

International Competition – COST LEADERSHIP

Strategy if a company focuses on being lean and efficient in their operation, saving costs, making profit.
 Advantages
o Focus is on economies of scale
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 o Looking towards ‘similar’ global consumers
o Economies of scope may look at small manufacturing plants across many countries OR a
wide selection of products across global markets
o Experience curve – gets things done more efficiently
- Less wastage
o E.g. Unilever and Nestle
 Negative aspects include:
o No individual appeal, products may appear bland
o Need to adhere to local standards
- Local laws and requirements means you will have to customise
o Not differentiated enough

International Competition - DIFFERENTIATION

Developing something that is unique or different about the particular company
 Key points are the product or service must be difficult to copy or imitate
 May require IP protection
 Innovation is crucial
 Negative:
o Product life cycles are getting shorter but may be able to sell a mature product in a new
location or adapt product to extend its life. Because of the rate of information, technology and
learning is speeding up – you can be out of date very quickly… Might need to find intro
phase in another country
 Must be easily understood

International Competition - FOCUS

 May choose to focus on specific groups in the market or one country or region.
 FCT Flames
 Specialised, not trying to appeal to everyone
 Niche product
 Understand those consumers/business customers need’s

Treacy and Wiersema Model

 Operational Excellence
o Company provides value by leading the industry in their price or convenience compared to
other competitors in that particular industry
 Customer Intimacy
o Company provides superior value by segmenting their markets very well and tailoring
services and product to suit those customers
 Product Leadership
o Superior value by offering a continuous stream of leading products and services

Kim and Mauborgne Value Innovation

 This theory model (cited in Fletcher and Crawford, 2017, p321) involves analysing and capturing
new opportunities. ‘Blue Ocean’ analogy.

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 o Not being bound what companies currently do – looking for possibilities
o Elon Musk
 Companies studied over 100+ years in 30 industries found to be successful when they:
o Reconstruct national boundaries
o Focus on the ‘Big Picture’
- Reach beyond what is currently possible
o Reach beyond current demand
o Get their strategic sequence correct
o Overcome hurdles WITHIN the organisation
o Build a program for execution in their chosen strategy.
o Richard Branson with his space travel

Porter’s Theory of Value Chain Analysis

 Fletcher and Crawford, 2017 p323

 Primary activities: things that are evolved in the physical creation of the product
o Inbound logistics
o Manufacturing
o Outbound logistics: how efficient you are to get the product out to retailers etc.
o Marketing and sales
- More complex in international environment
o After sales service
- How to handle this when selling to a different country? Will you have a team over
there?
 Support Services: ways that a company can get competitive advantages
o Procurement: do they have a monopoly on getting certain supplies to have a competitive
advantage
o Infrastructure: back of house operations, internet,
o Human resource management: might need to bring in consultants or does the current team
have specific knowledge that puts it in an internationally competitive advantages

The Value Chain

 The advantage of a company considering this can relate to understanding costs in the business

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 o Build its competitive advantage in any of those factors
- Hiring in specialised staff
- Having a training system better than competitors
- Having better and smarter marketing team
- Having better infrastructure
 It can also relate to the ‘building blocks’ of the business to look for advantages or issues
 The use of technology is now important as a ‘virtual value chain’

Porter’s Five Forces Analysis theory – good to use when analysing an industry…
 How ready are you to go into this industry in this part of the world…
 Intensity of Rivalry: are there many competing firms in the international market? What is the relative
size of those firms relative to yours? Better expertise/technology? What is the market growth rate?
May be a lot of growth but also a lot of competition? Fixed costs?
 New entrants: in that industry in that country are their high barriers to entry? If there are low barriers
there will be more competitors? Are there legal barriers? Are there economies of scale?
 Buyers: what’s the number and size of firms? Small customers large customers? Retailers to buy
your product? Do you depend on them or you depend on them?
 Substitutes: How easy is it for your customers to switch? Many alternatives or do you have
something that doesn’t have substitutes? E.g. cochlear.
 Suppliers

Competitive Advantage
 Customer-focussed Approach
o Analyse the customer benefits to be delivered
o What benefits will you deliver? Will it be delivered better than competitors?
 Competitor-focussed Approach
o Look at competitors and your advantages in costs, technology, market share or profitability.
o Can you do something faster or cheaper?
o Are they predictable or disruptive?

Other Considerations
 First Mover Advantage
 Your Size – are you the Dominant Player, the Market Leader, Challenger or Follower?
 If you are new into an industry and are the first person with the innovation
o That can be good to give you the opportunity to build market share
 A lot of research for rate of diffusion in a particular country and adoption rate
 Where do you fit?
o Dominant? Are you the largest company with the largest market share and the most money?
o Market leader?
o Follower? Doesn’t with to challenge the other two, just follow with smaller percentage of the
market

DOMINANT PLAYER
 This holds a large market share

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  Strategies:
o Reinforce market perceptions
o Manage the market
o Awareness of social, economic and political obligations
 Can’t be too complacent of challenger will knock them out
Market Leader and Market Challenger
 Market Leader – likely to lead new products, price changes and promotion.
 This company will look to:
o Expand the total market
o Protect its market share
o Expand the market share
 Market Challenger – second or lower in market but still has some power.
o Can attack the leader
o OR be a follower and be content with this position
o Trying to gain market share and may be aggressive in their approach or happy to be a
follower
 Where does your company fit in comparison to other competitors in the market

Niche Specialist
 In the modern world many SMEs can be niche specialists
 Can have: need to know customer very well May have unique product, high differentiation
 May have high price and high benefits OR low price low benefits

Do you Standardise or Adapt?

 We will cover more in modifying products. Some considerations to encourage standardisation
include:
o There is a high cost to adapt
- Should you just avoid some countries?
o Shared tastes between countries
o Economies of scale in manufacture
o Economies of scale in R and D
- More volume you sell more opportunity for profit per unit sold
o Economies in marketing
o Absence of competition
o Economic integration of countries
- Putting a step into one part of the world will make it easier within that trade bloc

Factors to encourage adaptation

 Variation in customer needs and tastes
o Have to adapt what you are doing
 Differing conditions in which the good is produced (levels of skill in product, climatic differences)
 Variations of ability to afford a product
 Influence of government such as regulations
 Influence of law such as tariffs, standards
 Lack of adequate support systems for the product or service in that country.

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Chapter 10 – relationships and networks
 Networks can be the difference between success and failure – what linkages can be made between
existing markets
 Companies can go international in these approaches:
 Sequential
o Stages approach
o Learning approach: go and have success in one part of the world and look for nearby regional
area to learn as the go so they take on board changes
 Non-sequential
o Contingency: see a gap in the market
o Network Approaches: see a benefit of forming long term relationships in that part of the
world

Relationships
 Traditional Marketing Approaches:
o Exchange of views and transactions as one off events.
 Relationship Approaches:
o Exchanges take place with ongoing relationship between parities. Use of collaboration.
o In Asia and Middle East relationships drive performance in business.
o Ongoing relationships and the strategic advantage

 View this now ..

o China Media Strategies

Networks in International Marketing

 These are complex structures involving all elements that direct or indirectly influence a transaction.
 There may be a series of interconnected relationships.
 In the complex modern world, an Australian company may use a range of suppliers from a range of
countries.
 The manufacture may be in Australia or in yet another country.
 Freight, transport, communications will all be important here.

Holistic View of Internationalisation

 So companies may have both inward and outward linkages.
 The company may have suppliers from overseas
 The company may manufacture in yet another country but control marketing from the home base
 A company may import some elements or hire from an international pool

Buttle provides this network model below

 (Cited in Fletcher and Crawford, 2017, p370)

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  Looks at the interdependence of different players
 Actors: interpersonal contacts between partner firms and companies (personal relationships)
 Activity links: financial, commercial and technical links formed between the companies
o In the company’s interest to maintain those things
 Resources
o Need to keep consistent
 Having consistent relationships over time profit the businesses in the long terms

Lecture EIGHT
Modifying Products for international markets
Pricing for international markets

Key Elements this Lecture

 Chapter 13
 Modifying products for international markets
 Considerations of why products may need to be extended, modified or invented for international
markets
 Branding considerations
 Chapter 14
 Pricing considerations
 Price setting

Product Definition
 “A product is a collection of attributes – physical, service or symbolic – which yield satisfaction to
the buyer or end user.” (Fletcher and Crawford, 2014, p426)
 Intangible ‘products’ are a major opportunity for export (ie services) in international marketing.
- Tourism Education
- Financial Services
- Software engineering Architectural design
- Film production

Recap on Product Theory

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 - Spare parts: should there be a warehouse where you are selling or will it all relate back to
Australia

Products in International Markets

 “Local products will have a potential only in one market
 International products have a potential to be extended from the domestic market to a number of
international markets
 Multi-national products may be offered to many international markets but may be adapted to suit the
needs of each market
- Areas of a similar climate, lifestyle or language
 Global products are designed to meet the needs of market segments that are the same around the
world.” (Fletcher and Crawford, 2017, p456)
- Nike products
- Not much difference between countries

Theorists Craig Douglas and Flaherty

 Suggest the internet has lead to a faster discovery of customer needs and greater customisation of
products to meet those needs. Also shorter Product life cycle.
 Physical products – information search can be conducted online, but the customer either needs to go
to a location to purchase or the product is delivered to a given location. Relies on traditional market
infrastructure for physical delivery and storage.
- Wine or cosmetics
- Traditional channels
- Consider delivery and storage in foreign countries
 Transaction-related products – information search is conducted online, consumption is tied to a given
time and location. An organisation’s infrastructure needs to ensure accurate delivery at the time and
place.
- Car hire
- Airport check-in
- Infrastructure of business is important for this element

Continuing with Theorists Craig, Douglas and Flaherty

 Virtual Products – this category has no physical location and consumption is anywhere. There are no
geographic constraints to search, transaction and completion.
- Norton software protection
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 - Don’t get anything tangible but you get the intellectual software

 Is company a virtual product? Etc

Online Global Marketing

 Have you purchased products from an overseas entity online?
 Have you purchased services online?
 How do you find the experience?
 What was the greatest advantage OR disadvantage? Discuss...

Extension, Adaptation or Invention

 Product Extension – can be attractive across borders as there are cost savings, allows a company to
enter market quickly.
- Same product in a different market
- Cost savings but no alterations to fit particular needs
- E.g. The Coffee Club – extended into other tourism areas and didn’t change their model
 Product Adaptation – meets differences in the marketplace.
- Technological or political differences that means you need to change product
- Costs more
 Product Invention – developing a new product specially for an international market.
- Create something specific for that international market
- Cultural or economic need
Product Adaptation Reasons - presentation
 Physical Requirements: changes of electricity voltage, different plugs
 Political or Legal – product standards: different regulation, metric systems,
 Climatic: protecting a product when going into hot or cold climate
- E.g. Gloria Jeans more cold drinks in hot places
 Linguistic
 Economic: some people don’t have capacity to pay so need simpler version and vice versa
 Competitive: emphasise point of difference, change name, change packaging if too similar
 Cultural
 Fiscal
 Measurement, calibration
 Warranty and servicing issues: what people expect in that part of the world

What differences have YOU noticed?

 Have you noticed differences in consumer products from your home country to Australia or in your
travels?
 Discuss this now and share ...

Even Big Companies Can Make Mistakes

 Ikea in the US
- Refused to size furniture to fit US appliances
- Beds were not made to fit US sheet sizes
- Tables were too small to hold a Thanksgiving Turkey
- Glasses were too small, people drank from the ‘vases’ in Ikea

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Not all markets are the same
 Euromonitors views carbonate trends across different geographic markets
 Products can be in different ‘categories’ in different markets.
 USA – soft drink market includes fizzy drinks only (sodas) whereas in South East Asia can
encompass fresh fruit juices; in Europe - fruit concentrates and cordials. .
 Some countries might have shared characteristics, there are differences in demand for certain
products

Compare this Now ....

 Nestle South Africa
 Nestle Australia
 Nestle Singapore

McDonalds
 Menu items from McDonalds Hong Kong

Ideas, developments across markets

 A study by Nielsen found of the 60,000 new products introduced in Europe in recent years, only 55%
survived on shelves for six months.
 Ambler and styles (2000) suggest the majority of innovations are ‘incremental’. They suggest the
international marketer can be:
- Passive
- Pace-making
- Participative

Three Strategies for Innovation

 Ambler and Styles (2000) suggest an international manager can adopt three strategies for cross
fertilising innovation:
- Passive: Encourage national units in the organisation to learn from each other;
- Pace-making: Create a portfolio of the best innovations and use incentives such as research
funding to persuade other company divisions to accept them;
- Participative: Become actively involved in forming and leading a task force to come up with
a designed global innovation.

Product Diffusion
 Diffusion is the movement of new products or ideas to and within international markets.
 The adoption process moves from:
1. Awareness
2. Interest
3. Evaluation

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 4. Trial
5. Adoption
Diffusion
 Factors
- Homogenous Population (faster adoption of new product): share similar language and culture
it will have a faster take off
- How mobile is the market: do they travel? Are they open to new ideas?
- How sophisticated and cosmopolitan
- Hofstede Dimensions
• Individualism
• Collectivism
- Workforce – does it have an income to afford time saving devices. Do people value time?

Some Considerations for New Products

 Customer segments – may have different competitors to product features may be emphasised or used
differently;
- Emphasise different features in different countries for what is important to them
 Customer benefits – consumers may have different needs and may perceive products as satisfying
those needs. Some products may offer different benefits to different customers;
 Technology – what is the available infrastructure and technology? Does the product need changing
for specific market needs?
 Value Chain – consideration of acquisition of raw materials, processing, after sales service;
- Can you source some of the materials close to where you are selling it?
 Product Life Cycle.
 Are they educated? Will it take time to train them to use the product?

Where do New Ideas come from?

 Sales personnel
 Customer feedback – if people aren’t happy it can lead to improvements
 Competitors
 Commissioned market research – accurate, easy to understand
 Innovation centres – Unilever has set up these centres

THEORY: Product Introduction – Waterfall Model (Kalish, Mahajan and Muller, 1994)

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 - Most new products start is developed markets and filter down to undeveloped markets
- Industraliased: they have money to spend they want to see a benefit of time and cots
- Emerging: what will consumers think of the product?
- Lower: if there is a long product cycle it can filter down but if short that wont be they way to go

Product Innovation Sprinkler Model

 Simultaneous World Wide Entry
 Growing of universal segments
 Opportunity to take on competition
 Innovation

Considerations for Developing a Product

 Especially in less developed countries:
- Level of technical skills - does it need simplification?
• Is the technology too advanced or do people have access to computers?
- Level of labour costs – will it need to be automatic or manually operated?
• Where labour is expensive you want to automate to save
- Level of literacy and education
• How important will it be for peoples lives?
- Level of maintenance and isolation of market
• Is it easy to get the product sent back for repair? Train people?
- Level of income
- Are there differences of product standards and regulations across markets
• Do you keep to those low standards or keep them high for reputation?
- There may need to be modification of trademarks or brand names
• Could be too similar to other competitors

Industrial Products

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  Industrial products are purchased for re-use or used in creating other products. Sold to other
businesses not consumers.
 Industrial buyers value:
 Service
 Performance
 Reliability
 Cost

Features of International Industrial Markets

 Different characteristics of buyers
 Different levels of industrialisation and economic development
- Is your product suitable for the industry in that area?
 Who is the decision maker in the country or market
 Government control
- How much the government is involved?
 Service support
 Terms of sale
- Deposit? Periodic payments?

Products and Services for Business

 Adaptation may be less required in industrial markets compared to consumer markets;
 Level of industrialisation can be significant – are people trained, can the understand the selling,
maintenance and repair requirements;
 Quality and global standards – ISO certification;
- Ways to get products across markets more quickly because they have the standards
 Business services are rising – consultancy services, specialist services, education;
 Trade Shows – important avenues.
- Get B2B buyers

Marine Industry
 METS Amsterdam
 IFBSO – international affiliations Government support by many countries

Brands and Global Brands

 Global Brand “the worldwide use of a name, sign, symbol, design or combination ...intended to
identify goods or services of one seller and to differentiate them from those of competitors. A truly
global brand is one that has a consistent identity with consumers across the world.” (Cateora et al,
2012, p381)
- What do you want to emphasise as being significant with your brand?
 Brand Image
 Brand Equity

Strong Brands offer these advantages

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  Improved perceptions of product performance
 Greater loyalty
 Less vulnerable to competitive marketing actions
 Less vulnerable to marketing crises
 Larger financial margins
 More inelastic consumer response to price changes
 Greater trade co-operation
 Possible licensing arrangements
 Increased marketing communication effectiveness

Millward Brown
 Millward Brown consulting company
 Can you pick the top 10 world brands?
 The annual survey looks at 3 million consumers across 100,000 brands. Looks also at financial data.
Strong brands generally reflect well in profit and shareholder dealings.
 Have a try now....
- If you have a strong brand it makes it easier to go across to different markets

Country of Origin - THEORY

 Country of Origin effect ... the influence that the country of manufacture, assembly or design has on
consumer’s perception of the product. (Cateora et al, 2012, p 386)
 Consumer stereotypes
- Tea – China & India
- Silk – China & Thailand
- Electronics -
- Wine – France
- Red Wine - Shiraz – Australia
 Emphasises country of origin as a competitive advantage

Linkages of where made ....

 Fashion houses in the US must show label of where cloth is made or altered
 Ferragama scarf depicting ‘Made in China’
 Ethnocentrism .. People may prefer to buy from their own country
 See the emphasis in Hyundai marketing in Australia on the use of Australian steel
 Positive: favourable if brand and Country of Origin have similar values; favourable to link in
promoting and packaging.
 Negative aspects: One company may bring elements into disrepute, importance of good matching.

Country Brand Index – FutureBrand

 View this now
- Can look at perception by consumers
- Can give point of difference or competitive differentiation
- Is a commercial asset
- How easy it is to do business with

Brand Name Strategies

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  When going global or international:
 The company can use the same brand worldwide
 OR modify the brand name in each market – if it doesn’t translate well, or too similar to
competitor
 OR use different brand names in different markets
 OR use the company name
 Why change?
- Language – slang, inappropriate
- Nuance
- Competitors – too close

Packaging and Labelling

 Considerations can relate to:
- Legal obligations to list information on the package
- Country of origin, imported or local ingredients: advantageous to emphasise local elements
- Environmental concerns on use of materials or wastage
- Protection of product over freight Promotion of product
- Size elements: shipping, air freight? How to protect with packaging for longer term transport
- Convenience for any entities such as retailers distributors: neatest way to store your products

INTERNATIONAL PRICING

International Pricing
 International Pricing is more complex than domestic pricing.
 The Role of Price
 Reference Prices: what people perceive that category should have, if you fall outside that would be
negative – modified by experience
 Perceived Value: linkage between price and perception and where does it fit in comparison to
competitors in the market
 The FIRM’s FACTORS:
- The Nature of the Pricing Decision
- Location of production facilities: further away they are the more costs
- Ownership structure? Do they need to report to a board of directors?

International Pricing Considerations

 Customer factors
 Market Environmental factors such as:
- Culture:
• Attitude toward bargaining
• Extra fees to get a preferred placement in a retailers
- Location and environment of foreign market
• Affect costs
• How far do you have to travel with these goods
• Infrastructure?
- Government regulations
• Export inspections and duties? Good if FTA
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 - Technology factors
• Can people access the internet for something cheaper?
• Can people view the prices of other competitors?
- Distribution channel factors
- Competitive Forces
- Purchasing power

Developing of Pricing strategies (Fletcher and Crawford, 2017, p493)

 Customer:
o Ability to pay
o What is their perception of your company? High quality? Do they think you have
something unique so are willing to pay more?
 Firm:
o Product assortment?
o Different price range through different products?
 Environment:
o Currency issues
o Economy may be different to home economy
 Distribution:
o If you are using an agent will have different costs than if using a distributer
 Competitors
o Where are you pitched against competitors?

Purchasing Power
 Different countries have a different capacity to purchase. This may relate to:
- Customer demand
- Variance with emerging and developing markets
- Labour time to purchase the product or service
• Is it something that is perceived to be expensive given their discretionary income?

Some considerations internationally

 Inflation
- Devalue or inflate the price in another country
 Taxes, tariffs, administration costs
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  Costs of exporting – middlemen margins
 Exchange rate fluctuations and varying currency values
 Transport, warehouse, freight costs
 Terms of payment and terms of sale
- Different countries you may have to wait longer to get paid

Terms of Sale
 Terms of sale codified to be uniform across markets. International Chamber of Commerce uses these
common terms:
 When an Australian company is selling a good overseas these are what they can do:
 Ex-works (EXW) price at the point of origin (factory) and all other charges are borne by the buyer.
 Free Alongside Ship (FAS) The price of the goods is delivered to and unloaded at the wharf of the
port from which they will be exported. The buyer is responsible for the cost of loading, freight,
insurance
 Free On Board (FOB) The price delivered and loaded onto the international vessel. The buyer is
responsible for freight and insurance.
 Cost and Freight (C & F) The price of the goods delivered to the port of destination including
insurance. Can include port charges, unloading, wharfage and storage.
 Delivered Duty Paid (DDP) The price delivered to the premises of the international customers
which includes inland transportation.
 So obviously the costs change according to the negotiated terms.

Terms of Payment
 Can relate to the degree of risk the exporter is willing to assume.
 Important in negotiation of terms and costs of payments.
- Local consultant?
 Can range from cash in advance or shipment on consignment (the seller retains ownership but the
funds transfer is not made until the buyer receives the goods).
 This links in why port delays and freight delays can be costly for an exporter.

Transfer Pricing
 Transfer Pricing is the process of goods transferred from a company’s operations in one country to
elsewhere.
- It may lower duty costs by shipping into high- tariff countries at minimal transfer prices so
the duty base and thus duty stays low.
- It may reduce income taxes in high tax countries by overpricing goods transferred to units in
such countries. Profits are reduced or eliminated and shifted to lower taxed countries
- It may assist dividend repatriation.
- Governments can resist this from companies.

Price Dumping
 Price dumping is selling the price below the production cost.
 It can be done in times of economic downturn.
 It can be done to drive out competition and to gain market share.
 It can be done at times of excess inventory.
 Free Trade Agreements are against dumping.
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Pricing Choices in the Global Market
 Standard World Prices: one price structure that you apply across all markets - difficult
 Market Differentiated Prices: different price in different market to reflect costs in those countries
 Modified Pricing Policy: doesn’t set one price, they wan
 Different price structure in every country you sell in?

Lecture 9
International Promotion, Distribution Channels and Physical Distribution

Course Topics
 This week readings are Chapters 15 and 16
 Factors to consider with communication and promotion
 Channels of Distribution
 Managing International Distribution
 Reading on public relations and paid content

Marketing Communication Tools

 A recap – key tools are:
o Advertising
o Sales Promotion
o Direct Marketing
o Personal Selling
o Public Relations

The Role of ‘Publics’

 Companies need to consider as well how their messages will be received with both home market and
host market ‘publics’
 Examples can be:
o Governments in both countries
o Suppliers
o Employees – potentially in both countries
o Stockholders
o Media potentially in both countries
o Key industry groups

Steps in Choosing a Campaign

 Perform Market Research: need to work out the best way to communicate with those consumers
o Different mediums can relate to different target groups
o Important to link up connection between type of target market and why particular campaign
will reach that target market…
 Specific the Goals of the Communication
 Develop the most Effective Messages
 Select Effective Media
 Compose and Secure a Budget
 Executive the Campaign
 Evaluate the campaign
o Are you just trying to say that the company exists if you are new to the market? What you
stand for as a company?
o What can you afford?
o What mediums can be used?
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 o Did it lead to increased awareness etc.?
(Cateora et al, 2012, p490)

Integrated Marketing Communications

 Messages must be clear
 Messages must be consistent:
 Reinforce key messages
 Communications can:
o Inform: new market, that we exist, why we are different
o Persuade: trial product
o Remind: remind them that you exist

Communication’s Purpose
 Generate Awareness
 Generate Recognition
 Build Sales
 Build Brand

Communication Objective
 Stages
o Start with awareness
o Then go to knowledge
 For
o Get consumer to like
o Then have a preference for your brand
 Comms
o Convince them you offer better products
o Then purchase

Communications
 Define the Target Audience
 Choose key messages: country of origin?
 HOW best to reach the target audience
o Advertising? Trade events (personal selling)? Business to business?
 WHERE best to reach them
 WHEN best to reach them
o Seasonal times to get maximum exposure?
 HOW to evaluate campaign
o Do you look at website hits? Sales? Research after campaign? Increase awareness?

Corporate Social Responsibility

 Companies now have to be viewed as operating in a socially responsible light
 Appropriate Staffing – avoid exploitation
 Appropriate Suppliers – avoid exploitation
 Tangible Benefits to the Community
 Tangible Benefits to Stakeholders
 Operating in an ethical manner

Let’s Look at Global Players’ Campaigns

 Banyan Tree Corporate Social Responsibility
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  Coca Cola CSR program

Applying this to the International Market

 When a company goes offshore it needs to make some considerations on its communications plans:
o What communication channels are available within the country?
 Some media channels won’t be available in that part of the world
o How do people engage with their world? Are they literate? Do they have access to the
internet?
 More visuals?
o Do messages need to be changed for specific cultural groups?
 Change the message or depiction?
o How do people buy goods or services in the country?
 Not presuming that there are supermarkets everywhere? China has high internet
purchasing so more emphasis on that

Constraints in International Communications

 Language differences
o Colloquialism’s & slangs
 Marketing acceptability
o How open are people to information?
 Media availability
o Billboard opportunity? Sales promotion opportunity?
 Intermediary availability
o PR agencies, advertising agencies or is it a part of the world that doesn’t have that kind of
resources?
 Activities of competitors
o A lot of promotion? Do you need to match it? Probably to need match promotion in the
beginning
 Product acceptability
o Can’t advertise tobacco in Australia etc.
 Government controls
o Some parts of the world have government owned media, if you offend the government you
will lose an opportunity

Cultural Considerations
 May relate to symbols, signals, use of folk lore
 Use of colour in advertising or messages
 What is valued, what is respected
 High Context vs Low Context Cultures
 Social hierarchies

Other International Considerations

 Educational levels
o Some parts of the world have high print readership, lots of people download magazines
 Economic Development
 Media Infrastructure
o Are there a lot of television stations? Can rural people have internet or watch television if you
are going beyond the capital cities?
 Government regulation
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 o When advertisements can be run,
 Communication sophistication
o Does the message need to be standardised or customised in this country?
 Business priorities
o The company itself, is it trying to establish itself, are there certain groups they need to
influences?
 Status of marketing
o High status of marketing? Well established?

Message Differences in Markets

 Some products are more sensitive to cultural differences in some markets.
 Some products have different uses – so outboard marine engines may be more used and promoted for
pleasure craft in Australia and commercial use in Indonesia.

PULL STRATEGIES vs PUSH STRATEGIES

 Pull strategies .. Directed towards foreign customers. Get them to demand the product and show
interest in the product
o Advertising
o Direct Marketing
o Public Relations
 Push strategies ... Directed towards retailers and business to get them to stock product or service.
Business to business environment
o Trade shows for this industry to get retailers to introduce your product
o Sales Promotion
o Personal Selling

Advertising in International Markets

 Need care to select the best media choice IN THAT COUNTRY to reach the target market
 Need to consider messages to be used
 Some other considerations:
 Language to be used in print media or in narration
 What imagery to be used
 How do you drive ‘traffic’ through a website or social media
 Is outdoor advertising a better choice (posters, billboards) – just want the brand known that could be
good
 Television what is the ownership, what is the legal
 advertising restrictions?

Global or Local Media

 Do you use global media options?
 Might be useful to reach multiple markets around the world
 Can look at media which covers numerous countries. Can offer broader coverage but may get
wastage.
 Examples: Reader’s Digest, US News, International Herald Tribute. Sky Channel or CNN
international.
 Online subscription based news services
 Do you customise for specific local media?

Direct Marketing
 Use of the internet in the modern world
 Some considerations include the prevalence of spam, unwanted email messages.
 For postal elements in overseas country may have issue with different envelope sizes, postal times.
 Use of interactive marketing .. SMS messaging.
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  Use of agencies in the country such as media buying agencies – the intermediary will know the
environment better.
 Do people have smart phones, is interactive marketing done in that country?

International Public Relations

 Important to create good relations with local media.
 May have different media structures – more government controlled or owned, may be less options.
 PR is useful in a crisis, creates goodwill towards brand.
 May be important with product recalls. Can you think of some recalls recently from large
companies?
 Look at the reading on ‘paid content’ .. Is this ethical?

International Public Relations

 Can link to sponsorships and ‘partnerships’
 View this on the FIFA World Cup
 Social media ... what do you use? Have you ever bought something using social media. In some
countries some social media is banned. You can consider also the Customer to Customer comments.
o Some parts of the world social media is banned
 Internet portals such as AliBaba can be important to make contacts and connections

Sales Promotions
 Can be used in bottom of pyramid or poor countries.
 Product Sampling – when expanding in a new market, many companies are trying to encourage
TRIAL and AWARENESS
 Can be used for consumers or trade (B2B)
 Collectivist environment will be more important when trying to get someone to try the product

Personal Selling
 Trade Missions can be ways to meet valuable business or consumer buyers.
 Trade Show attendance:
 Opportunities not just to meet potential buyers (can be industry trade shows or consumer) but also
view competitors, meet suppliers,
 Salesforce activities in the country.

Universal vs Regional Segmentation

 Companies can (universal):
o Use a standardised campaign with some local adaptation.
o Use a campaign targeted at regional segments.
o OR a company can have a localised campaign (regional)
 Standardised – obviously better economies of scale
 Localised – may be required for cultural, religious or legal reasons
 Do you emphasise Country of Origin in communications?

Some Considerations
 Different countries have different laws over communications.
 Australia requires use of Australian actors or ‘voiceovers’ for internationally sourced advertisements.
 Germany – illegal to use ‘comparative’ advertising.
 Some products cannot be advertised (pharmaceuticals, tobacco, alcohol)
 Censorship laws (dress, kissing, need for ‘family values’)

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  Legal: what’s allowed?

Some further Media Planning Considerations

 Availability
 Cost
 Coverage
 Lack of market data
 What media is used, read by whom
 Media penetration: how much you can reach customers with those elements

Differences of B2C and B2B

Consumer Markets
Use of mass media
Greater use of emotional appeals
Consumers may avoid message
Communications may be quickly forgotten
Communication aimed at individuals
Copy may be short and punchy
Business to Business
Little use for mass media
A more rational approach is needed
Businesses may seek out information
Communications may be stored for future use
Communication aimed at multiple decision makers
Copy may be longer with more information

Tourism Australia
 Let’s have a look at Tourism Australia which has a global target market of ‘experience seekers’ as
one international visitor target group.

International Promotion
 Think about this now. What would be the implications for a company such as Nestle to advertise
Maggi noodles in:
o Malaysia
o Australia
o US
 Come up with five considerations for these campaigns.

International Distribution
 Channel Distribution: An organised network of agencies that combine to link producers with users
and customers.
 Physical Distribution: A physical flow of goods through channels.
 A number of market entry options were covered in Lecture 6.

Some Further Considerations for Marketers

 Length – how many levels are there in the distribution structure or channel in that foreign market.
 Width – How wide is the channel ... how much of the category do they cover? Are there many
intermediaries within the channel?
 Density – what are the number of sales outlets required to cover the market?
 Alignment – Is there co ordination between channel members, can you get a uniformed approach?
 Logistics – the physical transfer of goods. Is it sophisticated in the country or slow?

Retail Considerations

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Some Differences in Markets
 Government regulated trading hours
 Government controlled monopolies in some goods or services
 Legal elements may cover intermediary and dealer rights; restrictions on territory for selling; liability
legislation; turnover taxes; retail pricing.
 May be differences with number of retailers per capita
 May be differences with nature of what can be sold where.

Distribution Channel Costs

 Inventory – even e businesses need to have some extra stock stored. Land and storage pricing may be
more or less expensive in different countries.
o Where are you going to keep the stock?
 Order Handling Costs – even for e commerce businesses, there will be costs in taking and processing
orders. Where are the customers located? Where is the stock stored or manufactured?
 Transportation costs – both WITHIN the foreign country to get to various retailers as well as from
the manufacturing or storage areas to the distribution points.
o Very large countries with big distances will be more expensive than a compact country

Weighing Up – Pros and Cons

 Companies need to weigh up the loss of their control over goods by using intermediaries and
channels and minimising commitment of resources
o How much control do you need?
 By choosing one major distribution partner you limit confusion and make it easier to operate but may
miss some customers
 Is the product standardised? Does it need specialist transport or service? Is it perishable?
o Will someone harm your brand if they have an incomplete understanding?

Distribution Channel Players (Austrade, 2017)

Distributors Agents
Buys the goods so takes title of the goods Do not take ownership of the
goods
Resells to local end users Act as a representative for the
supplier. Represents exporter in
market.
May carry complementary lines May carry complementary lines
May offer after-sales service

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 Paid fees by adding a margin to products. Fees are higher than Paid by the exporter based on
agents as distributors DO more ... carry inventory, extend commission of sales value
credit, may take responsibility for marketing. generated

Wholesalers and Retailers

 Wholesalers buy goods in quantities and sell to retailers.
 However patterns of distribution are changing in countries so some of the intermediaries between a
manufacturer to a retailer may disappear.
 Some countries have large wholesalers (Sweden) and some have many smaller ones (Japan).
 Wholesalers get their income from the discount in buying in large volumes and then selling on to the
retailer .

Retailing in the Future

 (Deutsche Post, DHL group ‘Global E’Tailing 2025)

Physical Distribution
 Nature of shipment – size, overall volume and perishability can affect what type of transport is used
(sea freight, air, road and rail - for land connected countries)
 Customer service – can be a challenge for a company to maintain across borders
 Packaging and protection – considerations can relate to climate, distance travelled, perishability of
the good.

Other complications going over distance

 Warehousing and storage
 Desired inventory levels (Wikipedia, 2017) – too little and there are missed sales
 Documentation (export declarations, bill of landing, commercial invoice, certificate of origin)
 Tracking consignments
Freight forwarders important for smaller firms

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