Chapter 10
Building the Knowledge Base
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Learning Objectives
To gain an understanding of the need for
research.
To explore the differences between
domestic and international research.
To learn where to find and how to use sources
of secondary information.
To gain insight into the gathering of primary
data.
To examine the need for international
management information systems.
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International and
Domestic Research
The tools and techniques
of international research
are the same as those of
domestic research.
The difference is in the
environment to which
the tools are applied.
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International and Domestic
Research (cont.)
The four primary reasons for the differences
between international and domestic research
are:
New Parameters
New Environmental
Factors
A Broader Definition
of Competition
An Increase in the
Number
of Factors Involved
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New Parameters
In crossing international borders, a firm
encounters parameters not found in
domestic business.
Examples include:
Duties
Foreign currencies and changes in their value
Different modes of transportation
International documentation
Differing modes of operating internationally
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New Environmental Factors
Many of the domestic assumptions on
which the firm and its activities were
founded may not hold true
internationally.
Management needs to:
Learn the culture of the host country
Understand its political systems and level of
stability
Comprehend the existing differences in societal
structures and language
Understand pertinent legal issues
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The Number of Factors
Involved
When a firm enters a new international
market, the number of changing
dimensions increases.
Coordination of the interaction among the
dimensions is crucial to the international
success of the firm for two reasons:
In order to exercise some central control over
international operations, a firm must be able to
compare results and activities across countries.
The firm must be able to learn from its international
operations and must find new ways to apply the new
lessons learned to different markets.
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Broader Definition of
Competition
The international market
exposes the firm to much
greater variety of competition
than that found in the home
market.
Firms must:
Determine the breadth of the competition,
Track competitive activities,
Evaluate their actual and potential impact
on company operations on an ongoing
basis.
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Lack of International
Research
International research is often less rigorous,
less formal, and less quantitative than
domestic research.
The four reasons why managers are reluctant
to engage in international research are:
Their lack of sensitivity to differences in culture,
consumer tastes, and market demands.
Limited appreciation for different environments abroad.
Lack of familiarity with national and international data
sources.
Firms build international business activities gradually,
frequently based on unsolicited orders.
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The Importance of
International Research
Firms must learn where the opportunities are,
what customers want, why they want it, and
how they satisfy their needs and wants.
Research allows management to identify and
develop international strategies.
Firms must identify, evaluate, and compare
potential foreign business opportunities and
the subsequent target market selection.
Research is necessary for the development of a
business plan.
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Determining Research
Objectives
As a starting point,
research objectives must
be determined for a firm.
These objectives will
depend on the views of
management, the
corporate mission of the
firm, the firm’s level of
internationalization, and
its competitive situation.
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Going InternationalExporting
A frequent objective of international
research is that of foreign market
opportunity analysis. The aim is to utilize a
broad-brush approach.
Steps to this approach include:
A cursory analysis of general variables of a country.
A preliminary evaluation of each individual country.
Selection of appropriate markets for in-depth
evaluation.
Finally, a competitive assessment must be made.
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Process of Researching Foreign
Market Potentials
Stage One
Preliminary Screening for Attractive Country Markets
Key Question to be answered:
Which foreign markets warrant detailed information?
Stage Two
Assessment of Industry Market Potential
Key Question to be answered:
What is the aggregate demand in each of the selected markets?
Stage Three
Company Sales and Promotion Analysis
Key Question to be answered:
How attractive is the potential demand for our products and services?
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Going InternationalImporting
When importing, the major focus shifts
from supplying to sourcing.
Management must identify markets that
produce suppliers or materials desired.
The importer needs to know:
The reliability of a foreign supplier,
The consistency of its product or service quality,
The length of delivery time,
Government rules and restrictions of the exporting
country
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Secondary Data
Secondary data is information that already has
been collected by some other organization.
This data should be evaluated regarding the
quality of the source, how recent the data is,
and the relevance to the task at hand.
Because secondary data were originally
collected to serve another purpose, they can
often only be used as proxy information.
Precautions should be taken due to increasing
sensitivity to data privacy. Firms must inform
their customers of privacy policies.
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Sources of Secondary Data
Other Firms
Directories
Governments
International
Institutions
Trade Associations
Service
Organizations
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Conducting Primary Research
Primary data are obtained
by a firm to fill specific
information needs.
The researcher must decide
whether research is to be
conducted in the consumer
or the industrial product
area.
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Determining the Research
Technique
Selection of the research technique
depends on a variety of factors:
The objectivity of the data sought must be
determined. Unstructured data will require more
open-ended questions and more time than
structured data.
Whether the data should be collected in the real
world or in a controlled environment.
Whether to collect historical facts or information
about future developments.
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Research Techniques
Interviews
Focus Groups
Surveys
Observation
Use of Web
Technology
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The International
Information System
An information system is the systematic and
continuous gathering, analysis, and reporting
of data for decision-making purposes.
To be useful, the information system must be:
Relevant
Timely
Flexible
Accurate
Exhaustive
Consistent
Convenient
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Export Complaint Systems
An export complaint system allows
customers to contact the original
supplier of a product in order to inquire
about products, make suggestions, or to
present complaints.
A firm must be able to aggregate and
analyze complaints and to make use of
them internally.
Increasingly, the Internet enables
customers to provide feedback on their
experiences with a firm.
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The Mechanisms of Export
Complaint Systems
Environmental
Scanning
Delphi Studies
Scenario Building
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Environmental Scanning
Environmental scanning activities
provide continuous information on:
Political, social, and economic affairs
internationally
Changes of attitudes of public institutions and
private citizens
Possible upcoming alterations
Two significant methods of
environmental scanning are obtaining
factual input and content analysis.
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Delphi Studies
Delphi studies are a means for
aggregating the judgements of a
number of experts who cannot
come together physically.
The Delphi technique is particularly
valuable because it uses mail, fax,
or electronic communication to
bridge large distances and therefore
makes experts accessible at a
reasonable cost.
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Scenario Building
Scenario building involves the identification of
crucial variables and the degree of variation.
The possibility of joint occurrences must be
recognized.
For scenarios to be useful, managers must
analyze and respond to them by formulating
contingency plans.
Through the anticipation of possible problems,
managers hone their response capability and
in turn shorten response times to actual
problems.
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