The four problems in international market if a company might fails in Business due to marketing Research

8/10/2019 The four problems in international market if a company might fails in Business due to marketing Research

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Each of the problems and business approaches highlighted in the previous sections influences

the nature of the firm’s international business activities. The complexities of doing business abroad

necessitate performing international market research and acquiring competitive intelligence.

International market research is the systematic design, collection, analysis, and reporting of findings

relevant to a specific business decision facing the company, and it involves at least one foreign market.

Competitive intelligence refers to collecting and analyzing data and information about a company’s

current and potential competitors and recommending actionable business decisions. Experienced

international firms conduct research to forecast potential problems, understand their implications, and

take proactive steps to minimize the damage that they can do. Firms also conduct research to better

understand foreign customers, competitors, and general environments in foreign target markets.

Research is the foundation of marketing decision making.

Many firms regard research as a key ingredient in gaining an advantage over competitors. For this

reason, sophisticated managers are on a constant quest to acquire large amounts of customer,

competitive, and market information. Information technologies and the Internet greatly assist in the

information gathering process. Internationally, the Internet offers an unparalleled ability to track and

monitor customers. Search engines, tools for conducting online surveys, and access to large databases

containing secondary research are among the various ways in which the Internet facilitates international

market research. In many ways, information and Internet-based technologies have leveled the research

playing field, allowing even small companies to acquire high-quality data on international markets.

Research helps the manager acquire a deeper understanding of foreign markets and develop strategies

and tactics needed for successful international business operations. Consider a company’s need for

objective information about a new market. How much do you know about the geography, culture,

economy, and commercial environment of countries other than your own

In the run-up to internationalization, most managers start out with a limited knowledge of the countries

in which they wish to do business. Yet foreign markets entail very different conditions than those in the

firm’s home market. International business poses substantial problems and uncertainty. To succeed and

avoid blunders, managers must develop a thorough understanding of each target market. Managers

must understand customer and competitor characteristics before committing significant resources. They

must acquire a range of information and insights through formal market research and gathering

competitive intelligence (Lim, Sharkey, & Kim, 1996). Acting in the absence of adequate knowledge can

be costly in terms of resources and reputation. There is no substitute for informed decision making in

international business. Market research investigates both organizations and people using techniques

based in the social sciences, in fields such as economics, sociology, and psychology. Social science

researchers use tried-and-true scientific methods.



The four problems in international market if a company might fails in Business

due to marketing Research.

International

Business

Problems

Cross-Cul tural Prob lems

• Cultural differences

• Language differences

• Lifestyle differences

• Differences based on religion Country Problems

• Political

instability

• Government

intervention• Market access

barriers

• Weak legal system

• Weak intellectual

property rights

• Economic

volatility

• Poor

Commercial Problems

• Market entry

• Timing of entry

• Operational

problems

• Poor strategy

execution

• Competitive

intensity

Financial Prob lems

• Currency exposure • Foreign taxation

• Transfer pricing

• Inflation



Cross Culture Problems:

Initially, foreign markets are subject to cross-cultural problems, which refers to substantial differences

in language, lifestyles, mindsets, customs, and religions of people living abroad. Each country’s historic,

ethnic, geographic, and religious circumstances lead its citizens to consume according to established

patterns. For example, when shopping for food, people may shop daily, instead of weekly, a pattern that

affects product size, package design, pricing, and distribution, among other factors.

Country Problems:

Country problems refers to the potentially adverse effects on company activities caused by

developments in political, legal, and economic environments abroad. Governments frequently intervene

in firms’ marketing activities, for example, by restricting access to markets or imposing bureaucratic

procedures. Countries may have weak legal systems or underdeveloped intellectual property rights.

Economic conditions, such as inflation and government indebtedness, can pose substantial challenges.

Foreign buyers have varying income levels, which may restrict their purchasing power. Infrastructure

needed to market products and services, such as transportation networks and communications systems,may be lacking.

Financial Problems:

Countries are subject to financial problems, which often includes adverse fluctuations in currency

exchange rates. These fluctuations can strongly influence company pricing strategy and consequent

sales. Other potential challenges include the level of taxation. Income, value-added, and sales taxes vary

substantially from country to country. Transfer pricing can be complicated by exchange rates, currency

restrictions, and income repatriation laws. Some countries suffer from high or varying inflation levels,

which complicate the firms pricing activities.

Commercial Problems:

Commercial problems refers to the potential loss or failure that result from business strategies, tactics,

or procedures that are poorly developed or poorly executed. Managers may make poor choices in

market entry, pricing, creation of product features, and promotional themes. Management must

orchestrate the operational dimensions of market entry, such as logistics, customs clearance, and local

distribution. The firm must account for foreign competitors and competitive intensity in the target

market. While such concerns also exist in the domestic market, their occurrence is usually more

pronounced or more complex in foreign markets. The four types of problems are ever present and

usually cannot be avoided. However, with proper international market research, they can be anticipated

and managed.



The four types of problems are ever present and usually cannot be avoided. However, with proper

international market research, they can be anticipated and managed. Companies enter foreign markets

via various entry modes:

• Exporting refers to sales of products or services to customers located abroad from a base in the home

country or from a third country.

• Foreign direct investment refers to the securing of ownership of assets located abroad, such as a

factory or a marketing subsidiary.

• Collaborative ventures include joint ventures in which the firm also obtains ownership of foreign assets

abroad, but in partnership with one or more other firms.

• Licensing occurs when the firm allows a foreign partner to use its intellectual property in return for

royalties or other compensation.

• Franchising is an advanced form of licensing in which the fi rm allows a foreign partner to use an entire

business system, in exchange for royalties and other compensation.

Each foreign market entry mode has advantages and disadvantages, and each places specific demands

on the firm’s managerial and financial resources. Each entails a distinctive approach to marketing

activities. Managers usually consider six major variables when selecting an entry mode:

1. the goals and objectives of the firm, such as desired profitability, market share, or competitive

positioning.

2. the financial, organizational, and technological resources and capabilities available to the firm.

3. unique conditions in the target country, such as legal, cultural, and economic circumstances, as well asthe nature of business infrastructure, such as distribution and transportation systems.

4. problems inherent in each proposed foreign venture in relation to the firm’s goals and objectives in

pursuing internationalization.

5. the nature and extent of competition from existing rivals and from companies that may enter the

market later.

6. the characteristics of the product or service to be offered to customers in the market.

A real life case study shows that, Toyota has had tremendous success with both the Toyota and Lexus

brands of cars. The Lexus brand was created to sell cars more luxurious than those previously offered by

Toyota and to cater to the older, more affluent crowd. However, the company noticed an opportunity in

the younger, “Generation Y” crowd (those born between 1977 and 1995, where Toyota had a relatively

smaller market share. More than 65 million Americans fall into this demographic category. Cars brought

by this group are less expensive and more youth-oriented. Chief rivals within this competitive landscape

include Hond. Volkswagen, BMW, Mazda, Ford and Chevrolet.



Focus groups and surveys by Toyota targeted at the teen through thirties age group suggested that

Toyota had the image of being “my parents’ car.” Needless to say, sales to this diverse and elusive age

group were small. Toyota then began a secret project, code-named “Geniesis,” to research the under-30

market to find out what features they wanted in their cars and to determine their buying habits. The

members of the study looked at existing Toyota models such as the Echo, the Celica, and the MR2

Spyder and found that the Generation Y crowd perceived these cars as having no cohesive theme and

carrying Toyota’s older image. Several cars were brougth to the United States that were being used in

Japan to see what kind of reaction they would elicit. The cars that created the most buzz ultimately were

modified for American preferences and resulted in a third line of cars for Toyota, aptly named “Scion”

(www.scion.com). The scion name means “offspring of an illustrous family” and illustrates the fact they

are a spin-off from Toyota.

Now that Toyota had the cars and the strategy, they had to build their brand and market the new cars to

this new audience. Toyota hired marketing firm ATTIK (www.attik.com) to help with this task. They

conducted qualitative market research through traditional focus groups and clinics as well as

quantitative research through Internet surveys and youth panels. They also implemented case studies by

asking people to study their younger friends preferences and to report their findings. The results of this

market research revealed the Generation Y crowd values individuality and expression, diversity, and

style. Because they are more prone to disdan commercialism and can be swayed more effectively by

word of mouth communications. Scion chose to advertise through traditional channel such as network

television or magazines. Rather, they decided to market the Scion through guerrilla tactics such as live

concerts and events with a music or arts focus catered toward this younger crowd.

Scion took the results of their market research and applied them to their business strategy. In 2003, the

first Scions were available for sale. Three different models were designed to attract a wide spectrum of

younger buyers, such as the Scion Xb, which is a boxy, compact sports utility vehicle. All Scions came

loaded with options that were desirable to the target buyer, such as 160 watt stereos, cell phone

holders, plush seats and plenty of customization options. They implemented a no-highline, easy to

understand pricing structure to make the buying process more enjoyable for many of these first time

buyers.

More than 90 percent of Scion owners have never owned a Toyota car before, and the median age of

Scion owners is 34, much lower than the average ages of Toyota and Lexus owners (49 and 54,

respectively). Since 2006, Schion has been partnering with Nielsen Online’s BuzzMetrics service

(www.nielsen-online.com) to use information from consumer generated media (CGM) in formulating

their market strategies. CGM is important to Scion because that’s where their customer are and where

they are most likely to see and engage in the brand. There are many blogs, Web sites and social

networking sites for discussions for customers to get more information and see how other customers

like the product. All the three models (tC, xB, and xD) continued to do well through 2008, until the

recession hit.

Although Toyota appears to have figured out through market research the secret to attracting younger

buyers they cannot simply be content. The tricky younger generation is fickle. Therefore, Scion and

Toyota must continually rely on market research to meet the ever changing demands of younger buyers.

http://www.scion.com/



http://www.attik.com/



http://www.nielsen-online.com/








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The four problems in international market if a company might fails in Business due to marketing Research