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The international expansion of a company must be a choice, not simply an opportunity.
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International and strategic marketing
for SMEsCairo, Egypt
May 21st, 2014
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• These slides support front lessons and are part of a wider teaching program. Without teacher explanation, arguments can be partial and drive to incorrect conclusions. !
• For any further needs or clarifications, please send an email to: [email protected]
Before we start…
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• In the text terms such as client and consumer are considered synonymous, even if the first refers to a B-2-B (Business to Business) relationship and the second to a B-2-C (Business to Consumer) one. !
• Either terms like product and service can be considered synonymous.
Notes
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Acronyms: •Foreign Direct Investments: FDI •Human resources: HR •Joint venture: JV •Marketing: Mktg, mktg •Market: Mkt, mkt •Multi National Companies: MNCs •Research and development: R&D •Small Medium Enterprises: SMEs •Wholly Foreign Owned Enterprises: WFOE
Notes
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Pay attention!!!!
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Internationalization is a strategic choice, not an
opportunity
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What does it mean going international or
global?
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It means you need…
A new business mentality
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It means you need…
To understand the importance of strategy
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It means you need…
To prepare, fix, organize your company
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It means you need…
To deliver a value - not only products - to markets
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It means you need…
To discover what’s new in the world
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Export Readiness
Export Management
Doing business techniques S
T R A T E G Y
Marketing Mix
EXPORT
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What’s new in the World?
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• Events that changed face to the international commerce in the last 15 years:
• Economical and political union within Countries
• New big players (China, India) • New aggressive emerging markets:
– BRICS: Brasile, Russia, India, Cina, Sud Africa – MIST: Messico, Indonesia, South Korea, Turchia
A new World
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• Internet’s diffusion • Globalization of markets, both for selling and
sourcing • €uro zone birth • 2008/2009 global economical and financial
crisis and mkt recession
A new World
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• More information • Increased visibility for companies and products • Search engine • New communication systems (Email, Skype,
WeTransfer, YouTube, etc.) • Social Networks (Facebook, Twitter, Google+,
Linkedin, Pinterest, Instagram, etc.) • Online sales
A new World: the WWW
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• More competition > require the switch from company product oriented to market oriented
• More opportunities > the World is seen a unique potential mkt
• Foreign mkts used for sourcing • More transparency • Impossible to compete without strategies
Mkt globalization
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• Companies are required to become market oriented, instead of being product oriented
• Strategies definition and execution • HR with dedicated skills to drive the
international business
A new World: challenges
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About strategy
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What is your company’s marketing strategy? Do you have a strategy for pricing and distribution? Do you plan to reach customers in a foreign country? Are you scheduling an advertising campaign for a soon-to-be-released new product? !These are important questions because every business needs a marketing strategy
Marketing and strategy
Clients
Prices
Markets
Promotion (& advertising)
ProductsPlace (distribution)
ProcessesHuman Resources
Marketing
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Marketing? Is everything
Strategic MKTG: Analysis and forecast of market needs !
•Needs analysis •Market segmentation and
segment choice •Attractiveness Analysis •Competitiveness Analysis •New products strategy •New markets access strategy !!
Operative MKTG: Ensemble of sale instruments !•MKTG plans •MKTG budget •Plans application & control •Sales tools (catalogs, price
lists) •Web site •Advertising •Promotion •Trade shows
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Marketing
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If you’re mkt oriented you can answer the following questions
(according to P. Drucker)
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•What is our business? •Who is our client? •What is valuable for our client? •How should be our company? •How will be our business in the future? •Who are our competitors?
Are you mkt oriented?
CLIENTS
Distributors Competitors
CompanySocial and Economical
Environment
Access path Knowledge path
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Market structure
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What do you need to write a strategy?
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• Data and market info to build up your Marketing Information System
• Marketing research • Marketing/Business Planning
You need…
Information (M.I.S.)
Clients - Expectations - Purchase intentions - Purchase behaviors - Behaviors after purchase
Competitors - Positioning - Strengths /weaknesses - Mktg strategies & politics
Demand - sector/market - type of client
Market external context - Social elements - Technological elements - Cultural aspects
Company internal environment - Marketing activity - Marketing vs. other activities - Revenues / mark ups - Market share
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Marketing Information System
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• Define the characteristics of a market • Measure the attractiveness of a market • Analyze sector developments • Analyze competitors products/brands • Study the acceptance of new products • Study the price the market wish to pay • Analyze clients/consumers behavior
Marketing research: why?
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• Is the document containing the company’s marketing strategy. It is based on a clear company mission, objectives and goals other than effective controls.
• The marketing plan has to be coherent with segmentation, positioning and marketing mix politics.
Marketing plan
Company’s Mission
Internal environment Analysis
Goals
Strategy
Programs & Schedule
Improvements
Controls
External environment Analysis
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Marketing plan: basic structure
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Do your homework
S !Strengths
W !Weaknesses
O !Opportunities
T !Threats
Internal (the company)
External (the market)
SWOT Analysis
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Do we have to use canvas or business
models to plan?
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Use whatever you prefer, but start planning
asap
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The bases: segmentation and positioning
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• Select product • Select market • Qualify prospective markets • Determine worthwhile target markets • Profile and prioritize segments
Defining Mkt segments
Air
Land
SeaOn wheels
By rail
LocalNational
International
Goods < > People
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Market segmentation: transports
MarketMKTG
Mix
Undifferentiated
MKTG Mix A
MKTG Mix C
MKTG Mix B
Segment A
Segment C
Segment B
Differentiated
MKTG Mix
Segment A
Segment C
Segment B
Concentrated
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Segmentation & Strategies (P. Kotler)
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• States as the product is positioned in consumers’ mind, with reference to all the different choices they feel available to satisfy a need. !
• The company has to offer a product: – Matching the expectations of the target(s) – Different from that of competitors – With a well known and unforgettable brand
Positioning
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What’s the purpose of writing a strategy?
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To reach your customers’ satisfaction, create a
relationship with them and get profits from it
Customer satisfaction
Competitively
Satisfy the clients better and more than the
competitors
Timely
Satisfy the clients when they have a need, not
before (when they don’t feel it), nor after (when the need has been satisfied by a
competitor).
Continuously
Customer satisfaction is a never ending attitude:
Is much better and profitable maintain a client than get
a new one
Knowledge of the Market
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Client satisfaction: the road map
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What about the marketing mix for your international business?
Domestic Market
Global Product
Mercato Straniero 3
Mercato Straniero 2
Foreign Market #1
Domestic Product
Same Product
Adapted Product
Customized Product
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Product to export: strategies
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• Return on sales (ROS) • Return on investments (ROI) • Increase the market share • Maintain the leadership towards other
manufacturers • Sell other products of the range • Survive to possible cash flow crisis
Pricing: objectives
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• To price effectively consider the following issues: – Price should reflect
• Strategic objectives • Customer target • Product positioning
– Price should take costs into account, noting that variable cost is the floor and customer value the ceiling
– Price should take channel considerations into account
Pricing: issues
Internal to the company: - Mktg targets - Mktg strategies - Costs (fixed, variable, manufacturing, packaging, sale, promotion, etc.) - Company organization and structure
External to the company: - Market characteristics (number of clients, purchasing capacity, infrastructures, etc.) - Demand - Competitors - Environmental aspects (custom barriers and duties, exchange rates, economic conditions, restrictive rules and laws, etc.)
Price Decisions
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Export pricing: major elements
cheap poor ripoff
overcharging
superb
average
penetrationpremium
good
Price
Qua
lity
H
M
L
L
M
H
Consumer perceptions of the relationship between product’s quality and its price
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Pricing - quality strategies
Direct Importer Wholesaler Retailer
Product industrial cost 50.000 50.000 50.000 50.000
Mkup (15%) 7.500 7.500 7.500 7.500
EXW price 57.500 57.500 57.500 57.500
40’ container CIF Dubai 1.600 1.600 1.600 1.600
Duties (5%) 2.875 2.875 2.875 2.875
Transport 200 200 200 200
Price @ Importer - 62.175 62.175 62.175
Importer Mkup (50%) - 31.088 31.088 31.088
Transport - 200 200 200
Price @ Wholesaler - - 93.463 93.463
Wholesaler Mkup (20%) - - 18.693 18.693
Transport - - 200 200
Price @ Retailer - - - 112.355
Retailer Mkup (20%) - - - 22.471
Price @ End User 62.175 93.463 112.355 134.826
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Prices & channels
Intensive: Products are
distributed through the highest number
of sale points
Selective: Products are
distributed through selected sale
points (for brand, other products, position
etc.)
Exclusive: Products are
distributed only in selected and qualified sale
points
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Distribution: types
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• Indirect – Big buyers (supermarkets, chain stores, other manufacturers).
Importers. Wholesalers. Trading companies (national & foreign). Commissioned agents (brokers). Cooperatives.
• Direct – Salesmen. Sales Reps. Branch. Subsidiary. Affiliated.
• Integrated – Franchising. Contractual JVs. Piggyback (when a company
allows another one, which has its own export distribution, to sell its products abroad).
Distribution channels
Advantages: ☺ Direct market control ☺ Own people more efficient ☺ Immediate changes on
mktg mix ☺ More info from the market ☺ Sale actions more efficient
and lasting ☺ Presence on markets
without intermediaries ☺ Brand diffusion ☺ Intermediaries mark ups
retention
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Disadvantages: " Very expensive initial
investment and high yearly costs
" Need of highly skilled H.R. " Need of a large market
share to absorb investments and yearly costs
Direct distribution channels
Advantages: ☺ No costs and risks entering
the market ☺ No need to know market
characteristics ☺ No need to know
customers requirements and behaviors
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Disadvantages: " No control on the market " Lack of direct info from the
market " No contact with the
endusers " Risk of substitution from
intermediaries
Indirect distribution channels
ShortManufacturer End user
MediumEnd userRetailerWholesalerManufacturer
Manufacturer Import Wholesaler Retailer End user Long
Consumer goods
Industrial goods
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Distribution channels: types
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Ready for take off?
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• Preparing the company to international trade seeking people speaking foreign languages and possibly experienced of export sales
• Learning transport and logistic techniques in relation with distance, infrastructures and product to ship
• Preparing sales dox (e.g. proforma and/or commercial invoice, packing list, certificate of origin, export license) and defining sales and distribution contracts
Things to do
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• Acquiring info on payment terms used to settle exchanges and guarantees used to protect export sales
• Studying the export strategy and analyzing the most attractive markets
• Studying the product to export, eventually adapting it to markets needs
• Preparing sales tools (catalogues & price lists) in foreign language(s) and measurements
Things to do
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• Training sales reps and seeking locally the intermediaries according to the company strategic plan
• Monitoring the market constantly for a real time control of happenings that could affect the commercial expansion
• Evaluating partnerships/alliances with local partners or the opening of a corporate branch for production and distribution
Things to do
• Claim on goods shipped – Different type – Different size/color – Damage
• Payment – Delayed – Not cashable – Not executed
• Country • Exchange rate
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• Manufacturing • Changes in components
– Type – Price
• Client mistake posting the order
• Transport • Goods uncollected
– From customs – From manufact. whouse
The risks of intl business
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Some tips and tricks about Country analysis
Company Strategy
Market characteristics
Company Size &dimensions
Competitors Strategies
Market selection decisions:
Simultaneously or One-by-One
Concentrate or Diversify
Competitors markets selection
Market 1
Market 2
Market 3
Market 4
Market n
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Country entry strategy
# Custom duties # Government
regulations # Infrastructure and
transports # Financial benefits for
foreign investors # Being part of political
and/or monetary unions
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# GDP # HDI # Unemployment # Inflation # Economic growth # Economic and political
stability # Financial rating # Families and singles
expenditure
Intl marketing: Country Analysis (some factors)
# Tendence to import market/sector
# Number of competitors
# Competitors market share
# Mark ups # Structure of distribution
channels
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# Market size # Market growth # Number of potential
customers (prospects) # Level of development
market/sector # Import volume market/
sector
Intl marketing: Country Analysis (some factors)
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Doing business with Italians
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• Good and polite manners • Formal relationship (at the beginning) • Shake the hands when meet each other • When persons have a friendly relationship they
hug and kiss • When people speak tend to reduce physical
distance (a wider distance means a cold relationship)
Business negotiation
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• Titles count! Use “Signor” (Mr) and “Signora” (Mrs), followed by the second name when speaking to men and women. Use “Dottor” and “Dottoressa” when address to people with a degree.
• Dress to impress! Italians pay attention the way you dress
Business negotiation
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• Establish a meeting writing day and hour you’d like to meet your counterpart.
• Try to be punctual; a delay for is accepted for traffic jam or other reason. In such a case, give a phone call.
• Avoid to arrive late without informing. • Avoid to continuously postpone a meeting.
Business negotiation
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• General meeting business hours: in the morning later that 9.30 am. In the afternoon later than 3.00 pm. Try to avoid setting a meeting on Monday morning and in August.
• Business talks can be long, cause Italians will get as much info they can; sometimes before focusing on the topics of the meeting speeches can be various also on arguments not strictly related.
Business negotiation
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• Exchange business cards right after formal greetings and introduction and before starting talks. Italians pay attention to what is written on biz cards.
• During the negotiation Italians ask for info about the counterpart’s company, turnover and purchasing intentions. Usually they do not ask for plans and strategies: they are mainly interested in sales.
Business negotiation
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• For first orders a guaranteed or in advance payment is often required.
• To avoid misunderstandings write together the main points of the talks at the end of the negotiation.
• Italians love to host people: be prepared to continue the business talks at the restaurant.
Business negotiation
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• The best way to handle a business with Italians is to have an office locally or at least a representative that can be the representative on behalf of the foreign partner.
!• Pay attention to:
– Delivery date – Post sale service – Business planning – Sales literature
Business negotiation