Foreign market analysis

Foreign market analysis
Foreign Market Analysis Ahmad Thanin
What is Foreign Market Analysis A market analysis studies the attractiveness and the dynamics of a special market within a special industry. It is part of the industry analysis and thus in turn of the global environmental analysis. Market research is any organized effort to gather information about target markets or customers. • It is a very important component of business strategy
Marketing: A Universal Discipline Marketing is the process of focusing the resources & objectives of an organization on environmental opportunities and needs Marketing is also a set of concepts, tools, theories, practices, procedures and experiences • Although marketing is a universal discipline, marketing practice varies from country to country
The Marketing Concept The concept has changed dramatically over the years The old concept: • Focus on products The new concept (around 1960): • Focus was a customer orientation Development of the marketing mix (4P’s): • Product. • Price. • Place. • Promotion The Strategic Concept (1990s): • Focus on customer in the context of the broader external environment Competition, government policy and regulation Economic, social and technological macro forces • Focus on stakeholder value employees, customers, shareholders, society
• Marketing principles were extended to 7Ps in 1981: • Therefore, some companies use 7Ps of marketing instead of basic 4Ps. • People • Process • physical evidence.
Product The product can be either a good or a service you provide to customers. • One important thing that often marketers ignore is to see the appeal of your product and market for it before deciding what you want to offer. If you want to sell a profitable product, then you need to do thorough • planning and look at your product from customers’ eyes • consider all the essential factors in your plan. These factors may include questions such as • costumers’ needs, the quality of your product, • how is it different from others and • what is its selling point, as well as • how safe it is for your customers. You not only need a quality product but also be able to successfully define the quality of your product to your prospective consumers and turn them into consumers.
Price The price is the money the customer has to pay for the product or services they receive. There are two types of pricing • cost-oriented prices • market-oriented prices. In market-oriented prices, there is more to price than the contribution price, and it needs thorough market research. Some things to look into are: • What your customers are willing to pay. • The price of the same type of products offered by your competitors. • And the goals your company has set to reach. Moreover, the price is selected after determining the market value. Or on the value, you offer through your product or service. If you ask for a higher price than market value, customers will have more expectations from your product, and you should live up their expectations if you want a successful business. The price can also be adjusted with time to make sure it is right for your current market
Place Place refers to the process of bringing your products and services to the customers. The place is wherever your product or services are available for purchase and customers can buy them. • It could be a brick-and-mortar store, an online website, or you can use multiple channels to reach a broader audience. It is essential for a business to choose the right place that is convenient for customers, and reach out to the potential customers to increase the sale of the product. Therefore, careful planning of the placement or distribution of your product is important for a successful business. • For instance, knowing where your prospective customers are, where your location should be, and how to connect your potential customers to your location is an essential part of your business growth. Additionally, in today's digital age, no matter where your store or services are located, a digital presence can make a huge difference in reaching out to your potential customers. As more and more people tend to search online for their needs.
Promotion Promotion is creating awareness for your products, services, company, and brand. • All the ways a company use to build awareness for their product and services are known as promotion. Promotion should give customers a reason to choose your product or service, as well as show the prospective customers the benefits of using your product. Promotion is the backbone of marketing and as crucial for businesses as the quality of the products they produce. • It refers to communicating with the target audience through different channels and creating awareness for your product and services. There are different methods used to let the market know about your product or services.
Some of the most popular ways marketers use to reach out to their prospective customers. Email marketing: • Email marketing refers to reaching out to your target audience through emails. Advertisement: • Advertisement is a paid promotional tool marketers use to promote their products or services. It includes social media ads, tv, magazine advertisements, and local marketing tricks like supporting events with branded clothing for staff and/or attendees. Search Marketing: • Search marketing is generating leads from search engines like Google & Bing through SEO & SEM. • It includes techniques like rank blog content or landing page on product/service relevant queries to drive website traffic. Sales promotions: • Sales promotion is temporary incentives, such as deals, or trail offered for a short period of time. • These promotions are used to encourage prospective customers to try out the product and services before buying.
Some of the most popular ways marketers use to reach out to their prospective customers. Direct marketing: • Direct marketing is when you directly reach out to your target audience and build relationships through two-way communication. Public Relations: • Public relations are presenting a favorable image of your products and services. Event Marketing: • Event marketing refers to reaching your potential customers through trade shows, webinars, virtual events, conferences, and so on. Product-led growth: • PLG is a user-focused growth model in which user acquisition, expansion, conversion, and retention are all product-driven.
People People are also an important part of any business organization. • From team members to branch manager to customer service representatives, all play a vital role in the progress of a business organization. Hiring the right people who are trained and able to do the right job is essential for a business organization. • Additionally, excellent customer service that listens to customers' concerns and needs and satisfies them is necessary for business growth. The people who have the ability as well as are driven and trained to do their work can make a massive difference in creating and implementing the marketing plan in the right way.
Process Some businesses often use one more marketing principle that is called process. The process refers to the whole experience of product or services; from start to finish. It also applies to help provided after the product is delivered. It includes how long it takes to deliver the product or service and how you handle the customers. After the whole process, if your customers are happy and satisfied, that makes a huge difference in how fast your business grows
Physical Evidence It includes the things customers see when interacting with a business. • Make sure the environment where product or services are provided are user-friendly and attractive; the packaging you use is appealing to the customers and represent your brand. Physical Evidence also includes the customers' experience with the product or service. • It gives some solid knowledge of your product or service for the first-time costumers. • Wherein, a customer can read or see the result of your product and develops some level of trust that encourages them to choose it. Physical Evidence is any physical interaction the business has with the costumers in stores or digital; • it also includes the case studies and testimonies from satisfied customers. • Companies build brand awareness with all these interactions and increase their sales.
Packaging Packaging is another principle of marketing. The right package makes a big difference in making a good initial impression. Packaging refers to the way your product or services are represented to the people. Good packaging is the best way for your product to get noticed and stand out so that people choose your product instead of your rivals. The packaging is the opportunity for you to make your product more attractive and different from others. It creates a powerful first impression that makes people choose your product among other competitors.
The 3 Principles of Marketing Customer Value Competitive Advantage Focus
Customer Value • create customer value that is greater than the value created by competitors Goal: • Expand or improve product and/or service benefits • Reduce the price • Combine these two elements Strategy:
Competitive Advantage Goal: • Create competitive advantage through differentiation Advantage can exist in any element of a company’s offer One way to penetrate a new national market is to offer a superior product at a lower price.
Focus Focus is the concentration of attention and resources Requirement to create customer value at a competitive advantage A clear focus on customer needs and wants
What is Global Marketing? Global marketing is an internationalization strategy. The company conceptualizes a product or service such that it suits the global consumer requirements. The company frames a universal tactic for planning, production, placement and promotion of these products or services across the globe.
Advantages of Global Marketing Global marketing is a beneficial strategy when it comes to the internationalization of business operations if the product or service offered has a universal demand.
Disadvantages of Global Marketing Global marketing is a narrow concept since it is not suitable for every business organization.
Example OF Global Marketing • The case of Apple the brand maintains a uniformity in handset’s design and features while targeting the consumers in various countries. • Walmart is another example of global marketing.
What is International Marketing? International marketing refers to the process of business expansion across the domestic geographical boundaries by setting up subsidiaries in the target markets of different countries. These subsidiaries design and adopt the marketing principles and strategies according to the needs of the target local market.
Advantages of International Marketing • International marketing has provided an opportunity for domestic companies to meet the requirements of customers existing in vast and varied geographical market segments
Disadvantages of International Marketing • International marketing provides an edge over the other internationalization strategies when it comes to creating footprints worldwide.
Example oF International Marketing: Dunkin’ Donuts adopted international marketing strategy by selling the products according to the consumer’s liking and preference across the worldwide target markets. It sold Grapefruit Coolatta Donuts in South Korea, while Seaweed Donuts in China.
Other Examples of Global Marketing Strategies Product Design Apple/Google/McDonalds/Toyota Brand Name Coca-Cola/Apple/BMW Product Positioning Unilever/Harley Davidson/Apple/Samsung Packaging Gillette/Apple Sourcing Toyota/Honda/Nike/Wal-Mart/Apple Innovation Apple/Google/Samsung/Tata/Foxconn Distribution IKEA/Apple/H&M Customer Service Caterpiller/Dell/Apple/Lexus
Global Marketing Vs International Marketing • refers to carrying out marketing operations from the company’s headquarter while selling products or services worldwide in different countries. Global marketing • can be understood as going global by establishing subsidiaries in the prospective local market of different countries, to execute suitable marketing strategies. international marketing
Difference Between Global Marketing and International Marketing BASIS GLOBAL MARKETING INTERNATIONAL MARKETING Meaning Global marketing is the application of a single marketing strategy in the worldwide market, for a product or service. International marketing refers to the company's penetration into the prospective markets of different countries by directly engaging in the local marketing environment. Product or Service Offerings Standard product or service Customized product or service Marketing People Cross-cultural marketing personnel employed at the company’s head office Native marketing employees placed in the target foreign markets Marketing Research and Development It requires intense market research due to the company's physical absence in the prospective global market. It comparatively needs less research and development since the company has a physical existence in the international market and can analyze the market.
Difference Between Global Marketing and International Marketing BASIS GLOBAL MARKETING INTERNATIONAL MARKETING Customer Engagement Less customer engagement due to the distant presence and low customer interactions. Customer engagement is quite high due to the local presence and multiple communication channels. Marketing Budget All the budgeting activities for global marketing are performed at the company's headquarters The international subsidiaries perform budgeting activities at the local level. Social Media Marketing Company has a unanimous social media page for its global operations. Here, there are multiple social media pages of the company, on Twitter, Instagram or Facebook segregated according to the country. Advertising Here, a single commercial runs throughout the world in various regional languages of different countries. Advertisements in the international market are tailored exclusively for the local market and vary drastically from country to country.
Difference Between Global Marketing and International Marketing GLOBAL MARKETING INTERNATIONAL MARKETING Promotion Strategy Promotion tactics are adopted keeping in mind the global audience perspective The promotional strategies are designed individually for every local market Marketing Autonomy Limited to the company's headquarters. Spread across the subsidiaries located in different countries.
Driving Forces Affecting Global Marketing Technology Culture Market Needs Cost Free Markets Peace Management Vision Strategic Intent
The World Economy - Overview Since WWII, we have seen: • Emergence of global markets • Integration of world economy Capital movements are the driving force Production is “uncoupled” from employment Macroeconomics of individual countries no longer control economic outcomes
The World Economy: Important Trends Economic activity will shift from West to East Aging worldwide population will demand increasing levels of productivity and efficiency Shifts and growth in consumer segments will result in changes in the global consumer marketplace Changing industry structures and emerging new models of corporate organization will be characteristic of growing global competition The demand for natural resources will continue to grow Scrutiny of global firms’ worldwide practices will increase as the reach and sale of global firms expand The economics of information will be transformed as the ubiquitous nature of information expands Talent pools have become global in nature
Richest Countries in the World 2021 Rank Country GDP-PPP ($) 1 United States 18.62 Tn 2 China 11.22 Tn 3 Japan 4.94 Tn 4 Germany 3.48 Tn 5 United Kingdom 2.65 Tn 6 France 2.47 Tn 7 India 2.26 Tn 8 Italy 1.86 Tn 9 Brazil 1.80 Tn 10 Canada 1.53 Tn
Global Trade Environment Free trade • refers to a situation where a government does not attempt to restrict what its citizens can buy from another country or what they can sell to another country. National Sovereignty • is the supreme right of nations to determine national policies; freedom from external control. Domestic Policy. • Public policy concerned with national issues but that may have direct or indirect bearing on foreign trade and investment. Foreign Policy • The area of public policy concerned with relationships with other countries.
Changes in the Global Trade Environment
General Agreement on Tariffs and Trade - GATT Treaty among nations to promote trade among members established in 1947 Handled trade disputes Lacked enforcement power Replaced by World Trade Organization in 1995
The World Trade Organization - WTO • Forum for trade-related negotiations among 153 members • Based in Geneva • Serves as dispute mediator through DSB(The Dispute Settlement Body) • Has enforcement power and can impose sanctions
North America— NAFTA Canada, United States, Mexico • All three nations pledge to promote economic growth through tariff reductions and expanded trade and investment • No common external tariffs • Restrictions on labor and other movements remain NAFTA established a free trade area in 1994
Preferential Trade Agreements Many countries seek to lower barriers to trade within their regions • Free Trade Areas • Customs Unions • Common Market • Economic Unions PTAs give partners special treatment and may discriminate against others Over 300 PTAs have been notified to the WTO
Hierarchy of PFTs
Free Trade Area Two or more countries agree to abolish tariffs and other barriers to trade amongst themselves Countries continue independent trade policies with countries outside agreement Rules of origin requirements restrict transshipment of goods from the country with the lowest tariff to another
Customs Union Evolution of Free Trade Area Includes the elimination of internal barriers to trade (as in FTA) AND establishes common external barriers to trade Examples: • The EU and Turkey • the Andean Community • Mercosur (Argentina, Brazil, Paraguay, and Uruguay) • CARICOM (Caribbean Community) • Central American Integration System (SICA)
Common Market Includes the elimination of internal barriers to trade • (as in free trade area) AND establishes common external barriers to trade • (as in customs union) AND allows for the free movement of factors of production, such as • Labor • capital, and • information
Economic Union Includes the elimination of internal barriers to trade • (as in free trade area) AND establishes common external barriers to trade • (as in customs union) AND allows for the free movement of factors of production, such as labor, capital, and information • (as in common market) AND coordinates and harmonizes economic and social policy within the union
Economic Union Full evolution of economic union • creation of unified central bank • use of single currency • common policies on issues such as agriculture, social policy, transport, competition, mergers, taxation • requires extensive political unity • would lead to a central government in time
The European Union (EU) Initially began with the 1958 Treaty of Rome Objective is to harmonize national laws and regulations so that goods, services, people, and money could flow freely across national boundaries 26 countries, UK left the union 2021 500 million people $15 trillion GNI Euro currency, 1999 Harmonization of laws and regulations Price transparency No customs at national borders
The Middle East Afghanistan, Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Yemen Primarily Arab, some Persian and Jews 95% Muslim, 5% Christian and Jewish Oil prices drive commerce 25% of world’s oil in Saudi Arabia Arab Spring 2011
Africa • Republic of South Africa • North Africa • Black Africa or sub-Saharan Africa 54 nations over three distinct areas • Viewed as a regional entity Mena: Middle East and North Africa • Economic Community of West African States • East African Cooperation • South African Development Community Regional agreements
Russia One of the biggest, most promising markets in the world Consumer confidence and spending have been steadily rising 142 million people
Asia-Pacific • China • Japan • South Korea • Taiwan • Singapore The five economic “tigers” are • Thailand • Malaysia • Indonesia Below them are three countries poised to become the next “tigers”
Trading Environment of International Trade The environment of International trade is regarded as the sum total of all the external forces working upon the firm as it goes about its affairs in foreign and domestic markets. The environment can be classified in terms of •domestic, •foreign and •international spheres of impact. The domestic environment is •familiar to managers and consists of those uncontrollable external forces that affect the firm in its home market. •However, it may be underlined that some of these forces(e.g., the cost of capital and export restrictions) •can also have significant effect on global operations of a firm. The foreign environment •Can be taken as those factors, which operate in those other countries within which the MNC operates. Generally, the factors are the same, but they can have widely differing impacts from the home country situation.
The various Environmental Forces are as follows: Political-Legal Environment Economic Cultural Technological
Political-Legal Environment Political environment refers to the influence of the system of government and judiciary in a nation on international business. •The system of government in a nation wields considerable impact on its business. •The type and structure of government prevailing in a country decides ,promotes, fosters, encourages, shelters, directs and controls the business of that country. •A political environment that is stable, honest, efficient and dynamic and which ensures political participation to the people, and assures personal security to the citizen, is primary factor for economic development. •The developed economies of the today owe their success to a large extent to the political system they richly enjoyed. Legal Environment refers to the legal system obtaining in a country. •The legal system then refers to the rules and laws that regulate behavior of individuals and organizations. •Failure to comply with the laws means that penalties will be inflicted by the courts depending on the seriousness of the offence. •The legal system of a country is of immense importance to international trade. •A country’s laws regulate business practice, define the manner in which business transactions are to be carried out and set down the rights and obligations of those involved in business deals.
Economic Environment Economic Environment refers to those economic factors, which have impact on the international trade. • It includes economic conditions, economic policies, economic system, phases of business cycle, foreign investment, international organizations (IMF, World Bank, WTO etc.), international trade agreements etc. There are various international organizations, which issue various guidelines, make different rules and regulations for regulating international trade. • Among these important organizations are international Monetary Fund, World Bank, World Trade Organization etc.
Cultural Environment In global business activities such as leading, motivating, decision-making, problem solving and exchanging information and ideas depend on the ability of managers and employees from one culture to communicate successfully with colleagues, clients and suppliers from other cultures. Mistakes in cross cultural communication often go unnoticed by the communicators, but these mistakes have potential to cause damage to international relationships and negotiations.
Technological Environment Technological Environment like its counterparts political and legal has a considerable influence on international business. Technology has facilitated international business in at least six ways: • E-Commerce • Telecommunications • Transportation • Globalization of production of Production • Globalization of Markets • Technology Transfer
E-Commerce • The internet allows both small and big companies to expand their global presence at a lower cost than ever before. • The internet makes it much easier for buyers and seller to find each other, wherever they may be located, and whatever their size. Telecommunications • Technology such as 3G,4G,MMS etc. • have fostered closely knit global business. Transportation • In addition to developments in computers and telecommunications, several major innovations in transportation. • In economic terms, the most important are probably the development of commercial jet aircraft and super freighters and the introduction of containerization, which simplifies trans-shipment from one mode of transport to another.
Globalization of production of Production • Technological breakthroughs have facilitated globalization of production. • A worldwide communications network has become essential for any MNC. • Factors influencing the location of manufacturing facilities vary from country to country. • They may be more favorable in foreign countries rather than in home country. Globalization of Markets • refers to the process of integrating and merging of the distinct world markets into a single market. This process involves the identification of some common norm, value, taste, preference and convenience and slowly enables the cultural shift towards the use of common product or service.
Technology Transfer • Technology transfer and globalization are interconnected with each other. • They are highly interdependent as well. • The onset of globalization has brought up free passage of goods and services across the globe. • The role of technology has also changed from time to time. • It is currently considered as one of the important factors in the propagation of globalization. • Technology transfer consists not only of various scientific researches and discoveries, but also the transformation of such researches and discoveries into practical and feasible applications or products. • Technology transfer is one of the major aspects of globalization.
Current
Decision Criteria for International Business Political Risk Market Access Factor Costs and Conditions Country Infrastructure Foreign Exchange
Global Market Segmentation The process of dividing the world market into distinct subsets of customers that have similar needs (for example, country groups or individual interest groups).
Criteria for Global Market Segmentation Geographic segmentation Demographic segmentation Psychographic segmentation Behavior segmentation
Geographic Segmentation Dividing the world into geographic subgroups The advantage of geography is proximity However, just because people are in proximity does not mean they are similar
Demographic Segmentation Based on measurable population characteristics • Age • Income • Gender • Education Generally, national income is the most important variable
Psychographic Segmentation • Based on attitudes, values and lifestyle • Measured through extensive item batteries which cover activities, interests and opinions (AIO-studies) • Lifestyle surveys, • the Values and Lifestyles (VALS)
Behavior and Benefit Segmentation • Focus on whether and how much people buy or use a product • usage rates: heavy, medium, light, nonusers • user status: potential users, nonusers, ex-users, regulars, first timers, users of competitors’ products Behavior segmentation • Focus on the numerator of the value equation – the B in V=B/P Benefit segmentation
Global Targeting • Targeting is the act of evaluating and comparing the identified groups and selecting one or more as the prospect with the highest potential
Criteria for Targeting Current size of the segment and growth potential Potential competition Compatibility and feasibility
Marketing Research • The planning, collection, and analysis of data relevant to market decision making and communication of the results of this analysis to management.
Importance of Market Research Identify Problem Areas in Business Minimize Business Risks Well-informed Business Decisions New Areas for Expansion Market Trends
Methods of Market Research • Interviews • Online Surveys • Focus Groups • Observation Primary Market Research Methods • Data available on the Internet • Government & Non-government agencies • Commercial information Secondary Market Research Methods
Types of Market Research Primary Research Secondary Research Quantitative Research Qualitative Research Descriptive Research Exploratory Research Causal Research
• Primary research means that the researcher is in direct contact with the targeted customer. • Companies usually hire third parties to conduct primary market research for them. • Data collected from primary research could be quantitative (numerical) or qualitative (non-numerical) depending on the planning and question prepared by the researcher. Primary Research • Secondary research is comprised of outside sources like the chamber of commerce, government, media, agencies, etc. • Information from such sources is usually published on websites, newspapers, journals, TV channels, radio, etc. • We can categories the secondary sources into three main domains; public source, educational institutions, and commercial sources. Secondary Research
• Quantitative market research is a type and method like surveys, focus groups, observation, interviews, poles, online questioners and phone surveys. • As the name implies that the data collected from the quantitative research is in the form of figures and numbers. Quantitative Research • Qualitative market research is also like quantitative type and methods like surveys, focus groups, observation, interviews, poles, online questioners and phone surveys. • But in the qualitative market research, data is collected in the exploratory and open-ended which can be interpreted later on. Qualitative Research
• In the descriptive type of market research, the focus is to find the accurate and correct answer about the market problems. • The following types of questions are focused, for instance, how is the consumption of our product? What type of people buying our product? What exactly are the targeted buyers of our product? Descriptive Research • In the exploratory type of market research, researchers usually have basic and clear knowledge about the issue, but research is conducted to get a better insight into the problem. • The researcher must be clear about his ideas; irrelevant and impractical ideas should be avoided. Exploratory Research • In the causal type of market research, the relation between cause and effect and variable is established to observe the changes. • If the packaging is changed of a certain product; then how it will affect the product sale and its durability. Causal Research
Market Research Process Define the problem First of all, the main focus is to find out the exact problem. Finding the exact problem is the key to the success of market research. Develop Market Research Plan Once the problem is identified, the next step is to develop a plan that how you’re going to conduct market research. Data Collection Once the plan is laid out for the market research, collect relevant data that is helping the market research plan and answer the problem defined earlier. Analyze the Data When you have sufficient data collection to answer questions; now analyze the data to see if any pattern is being formed. If it does, then what it means to research. Present the Data If you see any patterns being developed, now put on the paper to see it clearly, or draw a graph or chart to find some relevancy. Take Action At this stage, you know the answers based on the information available to you. If your answers address the questions of the stage, then take action and apply the plan.
Market Analysis • Through all of these analyses the strengths, weaknesses, opportunities and threats (SWOT) of a company can be identified. • Finally, with the help of a SWOT analysis, adequate business strategies of a company will be defined
SWOT ANALYSIS Strengths and weaknesses Performance Trends Resources and capabilities Opportunities and threats Mission and objectives Environmental scanning
Visiting the Potential Market Essential after assessment and selection of potential market(s) • to confirm (or contradict) assumptions regarding market potential • to gather additional (primary) data • to develop a marketing plan in co-operation with the local agent or distributor Goals:
Industry Analysis Forces Influencing Competition Industry analysis is a critical part of understanding a company’s market position. It should tell you whether a company is faring better or worse than companies that offer similar products and services. At its core, industry analysis is designed to help you figure out how a company operates within an industry Every successful marketing strategy begins with strong industry analysis coupled with a deep dive into the competition. This is how to use Porter’s Five Forces to conduct an industry analysis.
• Porter’s Five Forces, based on Michael Porter’s groundbreaking article for the Harvard Business Review, is a competitive analysis framework that helps you examine the competitive market forces in an industry or segment. What is Porter’s Five Forces? • Intensity of competitive rivalry • Bargaining power of suppliers • Bargaining power of buyers • Threat of substitutes • Threat of new entrants What’s Included in an Industry Analysis Using Porter’s 5 Forces?
Global Competition and National Competitive Advantage • The inevitable consequence of the expansion of global marketing activity is the growth of competition on a global basis
Factor Conditions HUMAN RESOURCES PHYSICAL RESOURCES KNOWLEDGE RESOURCES CAPITAL RESOURCES INFRASTRUCTURE RESOURCES
TYPES OF COMPETITIVE STRATEGIES • Differentiation • Cost Leadership • Focus – Differentiation Focus and Cost Focus Classification according to Michael Porter • Operational Excellence • Product Leadership • Customer Intimacy Classification according to Michael Treacy and Fred Wiersma
Competitive Advantage of Individual Companies • Cost-Leadership Advantage • Differentiation Broad Market Strategies • Focused Differentiation • Cost Focus Narrow Target Strategies
Competitive Advantage of Individual Companies
WHEN IS THE GENERIC COMPETITIVE STRATEGY USEFUL? The GCS is useful when a company is looking to gain an advantage over a competitor. • If a company wants to ‘win’ the advantage over other businesses, it does so by winning sales and taking customers away from competitors. An advantage in business, though, does not come easily. • It must be developed and established firmly within the framework of a company. • Using a business strategy is not a one-off or a weekend exercise; it must become the driving force of the company. In order to do this successfully, a company must implement a Generic Competitive Strategy. • Not confined to a specific industry or company, the methodology can be used in for-profit companies of any kind, as well as not for profit organizations. • No matter what type of business, the principles behind the GCS are universal and can be applied to any company.
GCS is based on three generic strategies: Cost leadership, • A business that wants to achieve an edge through cost leadership will become an expert in lowering costs while maintaining prices. • The goal should always be to reduce the costs associated with doing business, while continuing to charge the same price as its competitors. • This gives the company a greater profit, without having any extra expenses. • Another method of maximizing the Cost Leadership position is by lowering the selling point. • Because the costs associated with the products are already low, the company is still making a healthy profit. • This allows the company to under bid the competitors while still preserving profits.
GCS is based on three generic strategies: differentiation, • The differentiation strategy seeks to set a company apart by creating products that are different than a competitors. • The specific ways that a company differentiates itself from the competition will depend on the industry of the company, but may include features, support and functionality. • The uniqueness of the company – the differentiation – must only be a feature that a customer is willing to pay a premium price for. • A company that focuses on differentiation may be disappointed to realize that their market share is continually changing and comes with a set of risks.
GCS is based on three generic strategies: Focus • The company that uses the Focus strategy is selecting a niche market, and then determining the scope of the focus. • Within the Focus strategy is the option to use either cost leadership or differentiation. • It may be confusing to keep in mind that the Focus strategy is dealing with a specific, niche market. • Focus does not mean a smaller market simply because the company is small – it means that the company has chosen to add value to their products and offer them to a select number of customers. • Because the company who chooses a Focus strategy deals exclusively with their client base, they develop a loyal relationship which can generate sales and profits for the future.
CREATING THE GENERIC COMPETITIVE STRATEGY Before creating a Generic Competitive Strategy, a company must decide which strategy to employ. Taking into account the strengths of the company may give an indication of the best strategy to choose, but should not be rushed simply to move to the next item To determine the best strategy for the company, follow a few NEXT simple steps:
To determine the best strategy for the company, follow a few simple steps: Create a Strengths, Weakness, Opportunities, Threats (SWOT) chart for each of the three strategies. • Once that is completed, it may be clear that a strategy would not be appropriate. • If that is the case, eliminate that strategy, and continue to the next step. Conduct an analysis of the industry the business is in. • Finding out specifics about the business industry can lead to an increased understanding of the market and how to best position the company. Compare the SWOT analysis to the business industry results. • Select the most viable options from the SWOT analysis and compare to the business industry analysis.
Strategic Positions • A limited number of activities related to delivering a product Variety-based • A specific customer segment with a comparatively broad set of needs Needs-based • Uniquely or preferentially reach a specific market Access-based
Competitive Innovation and Strategic Intent Layers of Advantage • Less risks if wide portfolio of advantages exist Changing the Rules • Refuse to play by the rules set by industry leaders Collaborating • Using know-how developed by other companies
Hyper competition Hyper competition’ describes a dynamic, competitive world, in which no action or advantages can be sustained for long The only advantage of a company is to manage dynamic strategic interactions: • Cost-quality, timing and know-how, entry barriers and deep pockets Companies must seek unsustainable advantages
Product Decision and Pricing • are offered in a portion of a national market Local products • are offered in a single national Market National products • are offered in multinational, regional markets International products • are offered in the global market. They are international and multi-regional Global products
The Global Product Launch Introducing the product into countries in three or more regions within a narrow timeframe. Successful launches require: • Involvement of country managers • Pre-launch attention to localization • Increased education and support of the sales channel Benefits of a global launch • Showcases the product • Removes old models at once • Captures new product’s higher margins
Market Expansion Strategies • concentrated markets/concentrated countries Narrow focus: • diverse markets/concentrated countries Country focus: • concentrated markets/diverse countries Country diversification: • diverse markets/diverse countries Global diversification:
Global Brands A symbol about which customer have beliefs and perceptions Same name or same meaning in another language Similar image and position Guided by same strategic principles Marketing mix may vary from country to country
Product Positioning Attribute or Benefit Quality/Price Use/User High-Tech Positioning High-Touch Positioning
Global Product Positioning: Strategic Alternatives Different Same Same Different edlich Product Communications Strategy 2: Product Extension, Communications Adaptation Example: Motorbikes Strategy 1: Dual Expansion Example: Applications Software Strategy 4: Dual Adaptation Example: Greeting Cards Strategy 3: Product Adaptation, Communication Extension Example: Electrical products
Creating a Product-Market Profile Who buys our product? Who does not buy our product? What need does our product serve? What problem does our product solve? What are customers currently buying? What price are they paying? When is our product purchased? Where is our product purchased? Why is our product purchased?
Visiting the Potential Market Essential after assessment and selection of potential market(s) Goals: • to confirm (or contradict) assumptions regarding market potential • to gather additional (primary) data • to develop a marketing plan in co-operation with the local agent or distributor
Global Product Development The heart of the global marketing process that focuses on building adaptability into products to achieve worldwide appeal. The product development process The main goal is to build adaptability into products and product lines for worldwide appeal. • Step 1: Idea generation • Step 2: Screening • Step 3: Product/process development • Step 4: Scale up • Step 5: Commercialization
Basic Pricing Concepts Cost The experience curve Competition Demand
The Setting of Export Prices ASSESSMENT OF PRICING ENVIRONMENTS Pricing Policy Selection Pricing Strategy Determination Setting of Specific Price
ASSESSMENT OF PRICING ENVIRONMENTS EXTERNAL Market-related factors •Nature of demand/target audience characteristics •Government regulations (e.g., duties) •Exchange rate stability Industry-related factors •Competition intensity •Nature of competition INTERNAL Marketing Mix •Product (e.g., old/new; standardized/differentiated •Distribution system (e.g., length) •Promotion needs (e.g., sales efforts) Company characteristics •Extent of internationalization •Countries exported to Management attitudes •Importance of exports •Overall price position of firm
Penetration Pricing Uses price as a competitive weapon to gain market position Means that the product may be sold at a loss for a certain time to gain market share Companies new to exporting cannot absorb such losses
Gray Market Goods Trademarked products that are exported form one country to another where they are sold by unauthorized persons or organizations Bring a product produced in one country into another in competition with authorized importers – parallel importing
DUMPING A company exports a product at a price lower than the price it normally charges in its own home market Dumping is an important global pricing issue, because it is sometimes regarded as unfair competition
Global Marketing Channels and Communication The firm sells to its customers: • directly through its own sales force. • indirectly through independent intermediaries. • indirectly through an outside distribution system with regional or global coverage.
Channel Structure How to structure the distribution channels is the most important long-term marketing mix decision a firm may make. Channel structures are designed to manage multidirectional (horizontal and vertical) connections in: physical movement of goods and services transactional title flows information communications flows
Channel Design Considerations • What do they need, why, when, and how? Customer characteristics • The structural linkages and functional characteristics of existing channels. Distribution culture • What channels does the competition use? Competition • Determined by company objectives for market share and profitability. Company objectives
Major categories of channel utility are: • Place • Time • Form • Information Channel Control • Inventory financing • Cumulative rebates • Merchandise returns • Promotional support
Different Types of Global Organizations • A firm which maintains operations in multiple countries but manages the operations from a base in the home country. Multinational Corporation (MNC) • A firm that maintains operations in several countries but decentralizes management to the local country. Transnational Corporation (TNC) • A firm that has eliminated structural divisions that impose artificial geographic barriers and is organized along business lines. Borderless Organization
Networked Global Organization Decentralized Federation Model Networked Global Model
Roles for Country Organizations • A competent national subsidiary that may be serving as a partner in developing and implementing strategy. Strategic Leader • Country organization with a distinctive competence. Contributor • Most entities hold this role. It provides critical mass for the global effort. Implementor • The international company has a low competence country organization, or none at all. Black Hole
Selling Versus Marketing Starting point Focus Means Ends Selling Factor Products Selling and promoting Profits through sales volume Marketing Target market Customer needs Integrated marketing Profits through customer satisfaction
Designing the Sales Force Decisions must be made regarding the numbers, characteristics, and assignments of sales personnel Different market requirements regarding direct sales and customer approach Territory allocation Customer call plans
Recruiting Marketing and Sales Personnel The largest personnel requirement abroad for most companies is the sales force Expatriates • Numbers are declining • Important for highly technical or involved products • High cost • Cultural and legal barriers • Limited number of high-caliber personnel willing to live abroad
Motivating Sales Personnel National differences must always be considered when motivating the marketing force Individual incentives that work effectively can fail completely in other cultures Communications are important in maintaining high levels of motivation A company needs to make clear the opportunities for growth within the firm
Sales Promotions in International Markets Sales promotions • Marketing activities that stimulate consumer purchases and improve retailer or middlemen effectiveness and cooperation • Short-term efforts directed to the consumer or retailer to achieve specific objectives In markets with media limitations the percentage of the promotional budget allocated to sales promotions may have to be increased
International Advertising Perform marketing research. Specify the goals of the communication. Develop the most effective message(s) for the market segments selected. Select effective media. Compose and secure a budget. Execute the campaign. Evaluate the campaign relative to the goals specified.
Growing Popularity of Global Advertising Spur short-term sales Build long-term product identities Significant savings in production costs Growth of pan-European or pan- Asian brands
Types of Advertising Strategies Seasonal advertising Area specific advertising Complexity reduction advertising Social Media Handles and Campaigns Defining a Target market
Agency Selection Criteria: Company organization National responsiveness Area coverage Buyer perception
Global Integrated Marketing Communications Reasons for Developing an Effective Global Campaign: •Helps determine the global market for a product •Acts as a cornerstone for coherent global strategy
Factors Influencing International Marketing Strategy
Global Integrated Marketing Communications • Any sponsored paid message placed in a mass medium Advertising: • is the global use of the same advertising appeals and messages Global Advertising
International Advertising Perform marketing research. Specify the goals of the communication. Develop the most effective message(s) for the market segments selected. Select effective media. Compose and secure a budget. Execute the campaign. Evaluate the campaign relative to the goals specified.
Growing Popularity of Global Advertising Spur short-term sales Build long-term product identities Significant savings in production costs Growth of pan-European or pan-Asian brands
Negotiation Business negotiations are perhaps the most fundamental business rituals. The basic elements of business negotiations are the same in any country. They relate to the product, its price and terms, services associated with the product, and finally, friendship between vendors and customers. One standard rule in negotiating is “know thyself” first, and second, “know your counterpart.”
Customer Engagement The future of marketing is about relevance and engagement The web is all about value exchange We are witnessing a consumptive shift from mass consumption to individualized consumption
Encouraging Social Engagement Traditional consumption of media is not engaging To foster engagement, action on the part of the consumer is required • “Curation” is the act of rating, reviewing and otherwise passing judgment on content available in a social setting
Using Data to Drive Business Value Customer Experience Dashboard: • Web analytics • Customer experience • Voice-of-the-customer programs • User testing • Experience research • Social listening
Management and promoting Internal cooperation Moving human capital within the organization Teaching about what a person knows and believes about what it takes to succeed. Developing a “boundary-less” organizational perspective.
The Future of Foreign Market Analysis and global marketing • source of high profits • cushion slack in domestic markets International markets • vulnerability • outrage • collaboration • politics • connection Common sense for a new global age as emerged characterized by:

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