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Exporting International niche marketing Domestically delivered or developed niche services Direct marketing including electronic commerce Participation in the international supply chain. ch6_2. STRATEGIES FOR SME INTERNATIONALISATION. Reactive stimuli: adverse domestic market conditions

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strategies for sme internationalisation
Exporting

International niche marketing

Domestically delivered or developed niche services

Direct marketing including electronic commerce

Participation in the international supply chain

ch6_2

STRATEGIES FOR SME INTERNATIONALISATION
key motivators to international marketing
Reactive stimuli:

adverse domestic market conditions

opportunity to reduce inventories

availability of production capacity

favourable currency movements

opportunity to increase the number of country markets and reduce market related risk

unsolicited orders from overseas customers

Proactive stimuli:

attractive profit and growth opportunities

ability to easily modify products for export markets

public policy programmes for export promotion

foreign country regulations

possession of unique products

economies resulting from additional orders

Managerial elements:

presence of export minded manager

opportunity to better utilise management talent and skills

management believes about the value of exporting

ch6_3

KEY MOTIVATORS TO INTERNATIONAL MARKETING

Source: Katsikeas (1996)

the difference between exporting international niche marketing

ch6_6

THE DIFFERENCE BETWEEN EXPORTING & INTERNATIONAL NICHE MARKETING

Exporting

International Marketing

Marketing strategy

Financial objective

Segmentation

Pricing

Management focus

Distribution

Market information

Customer

relationship

Selling production capacity

To amortise overheads

Usually by country and customer characteristics

Cost based

Efficiency in operations

Using existing agents or distributors

Relying on agent or distributor feedback

Working through intermediary

Meeting customer needs

To add value

By identifying common international customer benefit

Market or customer based

Meeting market requirements

Managing the supply chain

Analysing the market situation and customer needs

Building multiple level relationships

factors affecting sme internationalisation

ch6_7

FACTORS AFFECTING SME INTERNATIONALISATION

Generic

Strategy

Segmentation, Targeting, Positioning

Industry

Competitive

Structure

Stage of

Internationalisation

SME

Internationalisation

Strategy

Motivations

Barriers

Support Network

Market

Factors

Company

Factors

Country

Selection

Owner’s ambition,

capabilities and

attitude to risk

Customer

Segment

geographic development of smes

ch6_11

GEOGRAPHIC DEVELOPMENT OF SMEs

Birth

Domestic

High tech firms,

born globals,

direct marketing,

eCommerce

Home market

is trading bloc

Piggybacking on OEM

internationalisation

Global

Regional

Supply

Chain

Contracts through

family, friends,

business &

supply chains

Concentration

Expansion

Network

outsourcing for smes
Advantages

opportunities for learning from OEM (Original Equipment Manufacturer)

security of reliable and predictable ordering

able to focus on production and technical issues

Disadvantages

need for dependence on one/two major customers

internationalisation driven by demands of OEM

continual pressure to improve product and operations

weakening external marketing

ch6_14

OUTSOURCING FOR SMES
meaning of globalisation
Market access

Market opportunities

Industry standards

Sourcing

Products & services

Technology

Customer requirements

Competition

Co-operation

Distribution

Communication

The company’s strategy, business programmes & processes

ch7_2

MEANING OF ‘GLOBALISATION’
wide strategies

ch7_7

WIDE STRATEGIES

Multi-Domestic

Regional

Global

Individual

Country

Strategy

Region is One

Market

One Global

Segment

Transnational

Strategy

Standardised Identity & Values

With Composite Strategies

continuum of standardisation

ch7_8

CONTINUUM OF STANDARDISATION

Differentiation

Pricing

Distribution

Sales Force

Sales Promotion

Product

Image

Objectives

Strategy

Standardisation

globalisation push pull factors

ch7_9

GLOBALISATION PUSH & PULL FACTORS

‘Globalisation Pull’

Globalisation of Markets

Homogenisation of demand

Global market segments

Globally active customers

Source: Meffet and Bolz (1993) in Hallibuton and Hunerberg (eds) European Marketing Readings and Cases Addison Wesley 1993

Marketing Standardisation

Programme standardisation

Process standardisation

Globalisation of Industries

R&D expenses

Reduced pay back cycles

Experience curve effects

Globalisation of Competitors

Market interdependence

Global competitors

Cross subsidisation

‘Globalisation Push’

forces driving a multi domestic approach
Industry standards remain diverse

Customers continue to demand locally

Being an insider remains critically important

Global organisations are difficult to manage

Management myopia

ch7_10

FORCES DRIVINGA MULTI-DOMESTIC APPROACH
demand for customised solutions
customers cannot be classified into simple, stable segments

the customer in not monodimensional

desires guide consumption

functional and techonolgoical attributes of products or services are balanced by its aesthetics and cultural attributes

quality is now more subjective

a wide permanent variety of products is required

the quest for authenticity orientates consumption

ch7_13

DEMAND FOR CUSTOMISED SOLUTIONS

Source: Halliburton (1994)

market entry methods the levels of involvement in international markets

ch8_2

MARKET ENTRY METHODS & THE LEVELS OF INVOLVEMENT IN INTERNATIONAL MARKETS

Wholly-owned subsidiary

Company acquisition

Assembly operations

Joint venture

Strategic alliance

Licensing

Contract manufacture

Direct marketing

Franchising

Distributors and agents

Sales force

Trading companies

Export management companies

Piggyback operations

Domestic purchasing

Levels

of

involvement

successful market entry 1
Criteria for Selecting Appropriate Market Entry Method

The company objectives and expectations relating to the size and value of anticipated business

The size and financial resources of the company

Existing foreign market involvement

The skills, abilities and attitudes of the company management towards international marketing

The nature and power of the competition with the market

ch8_3

SUCCESSFUL MARKET ENTRY #1
successful market entry 2
Criteria for Selecting Appropriate Market Entry Method

The nature of existing and anticipated tariff and non-tariff barriers

The nature of the product itself, particularly any areas of competitive advantage, such as trademark or patent protection

The timing of the move in relation to the market and competitive situation

ch8_4

SUCCESSFUL MARKET ENTRY #2
indirect exporting 1
Domestic Purchasing

Foreign organisation purchases the product for export to another country

Gives access to and limited knowledge of the international market

Little control over choice of markets entered

For longer term, need a more proactive approach

Export Management Companies (EMCs)

Specialist companies act as the export department for a range of companies

Help SMEs to initiate/develop/maintain international sales

Deal with documentation, government regulation

ch8_6

INDIRECT EXPORTING #1
indirect exporting 2
Trading Houses

Their extensive operations and controls enable operation in more difficult trading areas

Manage countertrade activities

Piggy Backing

An established international distribution network of one manufacturer used to carry products of a second

Particularly good for firms from developing countries

Often poorly considered terms and conditions

ch8_7

INDIRECT EXPORTING #2
important factors for successful exporting
commitment of the firm’s management

exporting approach reliant on strong skills base

good marketing and information communication system

production capacity & capability, product superiority, competitive pricing

effective market research

effective national export policy

ch8_10

IMPORTANT FACTORS FOR SUCCESSFUL EXPORTING

Source: Katsikeas et al (1996)

agents 1
Selection Criteria for Finding a Suitable Agent

Financial strength of the agent

Their contacts with potential customers

The nature and extent of their responsibilities to other organisations

Their premises, equipment and resources (including sales representatives)

ch8_11

AGENTS #1
agents 2
Achieving Satisfactory Manufacturer-agent Relationship

Allocate time and resources to find a suitable agent

Ensure that both understand what each expects of the other

Ensure that the agent is motivated to improve performance

Provide adequate support on a continuing basis

Ensure that there is sufficient advice and information transfer in both directions

ch8_12

AGENTS # 2
reasons for setting up overseas manufacture
Nature of product e.g. perishable

Costs of transporting and warehousing

Barriers to trade e.g. tariffs and quotas

Government regulations e.g. local investment

Local manufacture viewed favourable by market

Contributions to local economy

Market information feedback

International culture in firm

Faster response and just-in-time delivery

Lower labour cost

ch8_13

REASONS FOR SETTING UP OVERSEAS MANUFACTURE
foreign manufacturing strategies with direct investment
Reasons for investment in local operations

To gain new business: local production demonstrates strong commitment

To defend existing business

To move with an established customer

To save costs: e.g. labour, raw materials and transport

To avoid government restrictions

ch8_16

FOREIGN MANUFACTURING STRATEGIES WITH DIRECT INVESTMENT
driving forces for the formation operation of strategic alliances
Insufficient resources

Pace of innovation and market diffusion

High research and development costs

Concentration of firms in mature industries

Government co-operation

Self protection

Market access

ch8_18

DRIVING FORCES FOR THE FORMATION & OPERATION OF STRATEGIC ALLIANCES