Marketing Management of
International Trade
Session 1
What is marketing?
The process by which companies create
value for customers and build strong
customer relationships in order to capture
value from customers in return.
--Kotler and Armstrong (2010).
Marketing is the management process for
identifying, anticipating and satisfying
customer requirements profitably.
--The Chartered Institute of Marketing. Accessed 2012.
In other words…
‘There will always be need for
some selling. But the aim of marketing is to
make selling superfluous. The aim of
marketing is to know and understand the
customer so well that the product or service
fits him and sells itself. Ideally, marketing
should result in a customer who is ready to
buy. All that should be needed is to make
the product or service available’.
Peter Drucker
What is marketing management?
Marketing management is the
art and science
of choosing target markets
and getting, keeping and growing
customers through
creating, delivering and communicating
superior customer value.
Motivations for Internationalization

Efficiency
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Economies of scale – access to a large number of new customers/markets
Exploit another country’s resources – labor raw materials, etc.
Extend the product life cycle
Operational flexibility – shift production to other countries as costs, exchange
rates, etc., change over time
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Strategic
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First mover in a product – favorable access to customers
Cross-subsidization – use position in one country to subsidize position in
another country

Leverage ownership advantages
Motivations for Internationalization

Risk

Diversify macroeconomic risks – economic growth and recessions vary across
countries
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Learning
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Diversify operational risk – labor problems, earthquakes, wars
Acquire new capabilities in diverse competitive environments
Reputation

Crossover customers from one market to another
International vs. Domestic
RISKS
1.
2.
3.
4.
Cross-cultural risk: a situation or event where a
cultural miscommunication puts some human value at
stake
Country risk: potentially adverse effects on company
operations and profitability holes by developments in
the political, legal, and economic environment in a
foreign country
Currency risk: risk of adverse unexpected fluctuations
in exchange rates
Commercial risk: firms potential loss or failure from
poorly developed or executed business strategies,
tactics, or procedures
The marketing environment
Task environment
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Company
Suppliers
Distributors
Dealers
Target customers
Broad environment
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Demographic
Economic
Physical
Technological
Political-legal
Social-cultural
The 7Ps of the marketing mix
Figure 1.4
The 7Ps components of the marketing mix
Sources of Growth
Ansoff’s Matrix
Current Products
New Products
Current Markets
Market penetration
strategy
Product development
strategy
New Markets
Market development
strategy
Diversification strategy
Pressures for Global Efficiencies
International Strategy Forms
High
Global
Strategy
Home
Replication
Transnational
Strategy
Multidomestic
Strategy
Low
Low
High
Pressures for Local Responsiveness
Pressures for Global Integration
13
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Economies of Scale. Concentrating manufacturing in a few select locations
to achieve economies of mass production.
Capitalize on converging consumer trends and universal needs. Companies
such as Nike, Dell, ING, and Coca-Cola offer products that appeal to
customers everywhere.
Uniform service to global customers. Services are easiest to standardize
when firms can centralize their creation and delivery.
Global sourcing of raw materials, components, energy, and labor. Sourcing of
inputs from large-scale, centralized suppliers provides benefits from
economies of scale and consistent performance.
Global competitors. Global coordination is necessary to monitor and
respond to competitive threats in foreign and domestic markets.
Availability of media that reaches customers in multiple markets. Firms now
take advantage of the Internet and cross-national television to advertise
their offerings in numerous countries simultaneously.
International Business: Strategy, Management, and the New
Realities
Pressures for Local Responsiveness
14
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Unique resources and capabilities available to the firm. Each country has
national endowments that the foreign firm should access.
Diversity of local customer needs. Businesses, such as clothing and food,
require significant adaptation to local customer needs.
Differences in distribution channels. Small retailers in Japan understand local
customs and needs, so locally responsive MNEs use them.
Local competition. When competing against numerous local rivals,
centrally-controlled MNEs will have difficulty gaining market share with
global products that are not adapted to local needs.
Cultural differences. For those products where cultural differences are
important, such as clothing and furniture, local managers require
considerable freedom from HQ to adapt the product and marketing.
Host government requirements and regulations. When governments impose
trade barriers or complex business regulations, it can halt or reverse the
competitive threat of foreign firms.
International Business: Strategy, Management, and the New
Realities
GMOA (Global Market Opportunity
Assessment) Six Steps
Understanding and Analyzing Markets


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Political
- includes (L)egal, (E)nvironmental
law/policy
Economic
- includes (E)nvironmental climate and
weather
Social/Cultural
- includes (D)emographic, (E)thical,
(E)ducational, (E)nvironmental attitudes
Technological
P
E
S
T
And many variants…
PEEST
PESTEL
PESTLE
SLEPT
STEEPLED
PEST LIED
Where PEST fits in
Environmental Scan
/
\
External Analysis
/
Internal Analysis
\
Macroenvironment Microenvironment
|
PEST
Political - Legal
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Tax policy
Employment laws
Environmental regulations
Consumer protection
Special interest groups
Government trade restriction and support
Licensing requirements
Political Stability
Economic
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Income levels and PPP
Economic growth rates and Business cycles
Inflation rate
Price levels
Consumer confidence
Savings rate
Debt and credit availability
Exchange rates
Sociocultural
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Social values (Others, Environment, Health)
Trends and Fads
Demographics
Education
Class structure and mobility
Household patterns
Religion
Technological
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Rate of technological adoption and change
Infrastructure
ICT level
Cost of energy
R&D activity
Supply chain efficiency
Automation
Where 5 Forces fits in
Environmental Scan
/
\
External Analysis
/
Internal Analysis
\
Macroenvironment Microenvironment
|
PEST
|
Five Forces
Industry Analysis
Threat of New Entrants
Barriers to entry
1.
Supply-side economies of scale (Intel)
2.
Demand-side economies of scale (ebay)
3.
Customer Switching costs (SAP software)
4.
Capital requirements
5.
Incumbency advantages regardless of size
6.
Unequal access to distribution channels
7.
Restrictive government policies
Power of Suppliers
Power increases if:
 Is more concentrated than the industry it sells to
(Microsoft)
 Supplier group does not depend heavily on the
industry for its profits
 Switching costs are high (Bloomberg terminals)
 Suppliers offer differentiated products (Drugs)
 Suppliers can threaten to forward integrate
Power of Buyers
Power increases if:
 Few buyers and larger purchase volumes
 Industry products are standardized
 Buyers face few switching costs
 Buyers can threaten to integrate backward
Power of Buyers (2)
Price sensitivity is found when:
 Purchased product is a significant percentage of
procurement
 Buyers earn low profits
 Quality of buyers product isn’t influenced by
industries product
 Industry product has little effect on buyer’s other
costs
Threat of Substitutes


It offers an attractive price-performance trade-off
Cost of switching is low
Rivalry Among Competitors
Rivalry is greatest when:
 Competitors are numersous or are roughly the same
size
 Industry growth is slow
 Exit barriers are high
 Rivals are highly committed to business and have
leadership aspirations
 Firms cannot read each others signals
Rivalry Among Competitors (2)
Price competition most likely if:
 Products or services are nearly identical and there
are few switching costs
 Fixed costs are high and marginal costs low
 Capacity must be expanded in large increments to
be efficient
 Product is perishable
Industry Analysis (1)
• What products
• Which are also in
another
• Geographic scope
Define the relevant
industry
Identify the
participants and
group them
•
•
•
•
•
Buyers
Suppliers
Competitors
Substitutes
Potential entrants
• Which forces are
strong / weak
• Why
Assess the
underlying drivers
Industry Analysis (2)
• Why is level of
profit what it is
• Which forces
control profit
• Are moreprofitable players
better positioned
Determine overall
industry structure
Analyze recent and
likely changes in
each force
• Positive and
Negative
• By competitors
• By new entrants
• By your company
Identify aspects
of industry
structure that
might be
influenced
Pitfalls
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Defining the industry too broadly or narrowly
Making lists instead of rigorous analysis
Paying equal attention to all forces
Confusing cyclical changes with structural changes
Using the analysis to declare an industry attractive
or unattractive rather than to guide strategic choices
Where SWOT fits in
OT
Environmental Scan
/
\
External Analysis
/
Internal Analysis
\
Macroenvironment Microenvironment
|
PEST
SW
|
Five Forces
SWOT
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

Summary for strategic purpose
Clearly focused on a business objective
Specific, unique, and detailed
Complete ideas = multiple sentences
 NOT



single words
Limited = two or three points in each area
Organized = most important first (can be weighted)
SW = internal / OT = External
Perform a SWOT analysis on Highly Brill Leisure Center, based upon the following issues:
1.
2.
The Center is located within a two-minute walk of the main bus station, and is a fifteen-minute
ride away from the local railway station.
There is a competition standard swimming pool; although it has no wave machines or whirlpool
equipment as do competing local facilities.
3.
It is located next to one of the largest shopping centers in Britain.
4.
It is one of the oldest centers in the area and needs some cosmetic attention.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Due to an increase in disposable income over the last six years, local residents have more money
to spend on leisure activities.
There has been a substantial decrease in the birth rate over the last ten years.
In general people are living longer and there are more local residents aged over fifty-five now
than ever before.
After a heated argument with the manager of a competing leisure center, the leader of a
respected local scuba club is looking for a new venue.
The local authority is considering privatizing all local leisure centers by the year 2000.
Press releases have just been issued to confirm that Highly Brill Leisure Center is the first center in
the area to be awarded quality assurance standard BS EN ISO 9002.
A private joke between staff states that if you want a day-off from work that you should order a
curry from the Center's canteen, which has never made a profit.
The Center has been offered the latest sporting craze.
Highly Brill Leisure Center has received a grant to fit special ramps and changing rooms to
accommodate the local disabled.
It is widely acknowledged that Highly Brill has the best-trained and most respected staff of all of
the centres in the locality.
Dada Sky
Background

Vijay Shivalingu is the Marketing Director for Dada Sky Inc, based in Western
India. He is beginning his marketing plan which will form the basis of a new
and exciting satellite based digital TV and Internet experience.
Personal experience.

Vijay has many years experience in the motor industry, and in fact began his
career at Dada Motors Inc after graduating from university with a degree in
engineering. He has no formal marketing qualifications, but has lots of valuable
real-world experience.
Strengths.
 Dada has one of three new 25 -year government licenses to supply
satellite services across India.
 Dada will be the first to launch its new services in the summer. Dada is a
well-known brand in India for cars. It is not renowned for its technology
brands.
Weaknesses.
 The company is 3 months behind schedule with its launch programme.
Opportunities.
 Huge expansion of TV and Internet access in India. The expansion is
growing by 100% per annum. The potential value of such a business could
be huge.
 Education will soon be delivered to remote Indian villages via the Internet
and laptops. This is a government funded programme worth $1 billion US.
Threats.
 A large European competitor brand has also entered the market.
 A large Australian competitor brand has announced a joint-venture with a
national terrestrial TV Indian brand.
Strengths.
 Dada has one of three new 25 -year government licenses to supply
satellite services across India.
 Dada will be the first to launch its new services in the summer. Dada is a
well-known brand in India for cars. It is not renowned for its technology
brands.
Strengths. REV
 Dada will be the first to launch its new services in the summer. Being first to
market will help it to land grab early customers. Competitors will need to
work hard to get them to swap brands especially if they are satisfied with
Dada's offering. 75%
 Dada has one of three new 25 -year government licenses to supply
satellite service across India. It is the only Indian national company to win
this prestigious contract and this fact will undoubtedly help the company
attract important early adopters keen to support their flag carrier brand.
25%
Weaknesses.
 The company is 3 months behind schedule with its launch programme.
Weaknesses. REV
 Dada is a well-known brand in India for cars. It is not renowned for its
technology brands. A rebranding exercise needs to be undertaken. It
should emphasize the innovative nature of the brand. A large investment
must be considered here. 60%
 Dada is a well-known brand in India for industrial products. The company is
3 months behind schedule with its launch programme. This could mean that
a competitor could launch before Dada. 40%
Opportunities.
 Huge expansion of TV and Internet access in India. The expansion is
growing by 100% per annum. The potential value of such a business could
be huge.
 Education will soon be delivered to remote Indian villages via the Internet
and laptops. This is a government funded programme worth $1 billion US.
Opportunities. REV
 Huge expansion of TV and Internet access in India. The expansion is
growing by 100% per annum. The potential value of such a business could
be huge. Services will include telephone, mobile devices, pay-per-view TV,
all sorts of channels supplying services such as Bollywood movies to Test
Cricket. 80%
 Education will soon be delivered to remote Indian villages via the Internet
and laptops. This is a government funded programme worth $1 billion US.
This opportunity will see regular income from the winning provider. As the
national brand, this is vital business for Dada. 20%
Threats.
 A large European competitor brand has also entered the market.
 A large Australian competitor brand has announced a joint-venture with a
national terrestrial TV Indian brand.
Threats. REV
 A large Australian competitor brand has announced a joint-venture with a
national terrestrial TV Indian brand. The Indian TV brand is the most
popular independent TV company in the country. This will help the
consortium to seamlessly enter the market. 60%
 A large European competitor brand has also entered the market. The
company has years of international satellite experience and can build upon
the synergy with its expanding British business. 40%
Corollary Approach
CEO
Director Sales and
Marketing
Export
Operations
Director Finance
and Administration
Director
Manufacturing and
Operations
Export Department
CEO
Director Sales and
Marketing
Director Finance
and Administration
Director
Manufacturing and
Operations
Director Export
Operations
International Division
CEO
Industrial
Automotive
Aerospace
Diesel
Company
(France)
International
Electronics
company
(France)
Brake
Company
(Mexico)
Figure 14.1 Shougang Corp.’s Global Product
Design
Chief Executive Officer
Real
Estate
Steel
Products
Financial
Services
Banking
Insurance
New
Ventures
Semiconductors
Mining
Figure 14.2 Cadbury Schweppes PLC’s Global
Area Design
Chairman and
Chief Executive Officer
Executive VP,
United Kingdom
Executive VP,
Europe
Executive VP,
North and South
America
Executive VP,
Pacific Rim
Executive VP,
Other Countries
Figure 14.3 British Airways’
Global Functional Design
Figure 14.4 Eastman Kodak’s Global Customer
Design
Figure 14.5
A Global
Matrix Design
Figure 14.6 Nissan USA’s Hybrid Design