Chapter 13

Planning and Strategy for International Marketing

Learning objectives
o o o o o Describe the strategic marketing planning process and the role of scenario planning; Explain the steps involved in the international marketing planning process; Develop an international marketing plan; Illustrate the challenges to effective international marketing planning; and Discuss the requirements for practical international marketing planning.

Introduction
The old adage of failing to plan means planning to fail could not be truer in international marketing. With different competitive environments, differ consumer needs, different opportunities to embrace or business problems to solve, the role of marketing planning takes on a different dimension. This chapter explores those dimensions with a view of preparing a feasible plan that guides the firm through the difficult waters of international trade.

Lecture Outline
1. The context of international strategic marketing planning. 1. Historic Drivers o Product focused; o Rigid and reactive; o Top-down planning; o Internally driven. 2. Current Focus o External drivers; o Proactive; o Flexible and adaptive; o Market focus. 3. Future Focus o Core competency building; o Balanced drivers; o Business and customer value creation; o Dynamic, competitive position management

The Evolution of Strategic Planning

Instructors should encourage students to discuss the changes that a firm would need to undergo to move from a historic to a future focus in strategic planning. Steps in Scenario Planning
o Familiarisation; o Scenario building; o Action and integration.

Steps in the Classic Strategic Planning Sequence

1. 2. 3. 4. 5. 6. 2. Mission; Vision; Strategic Analysis; Strategy; Implementation; Performance monitoring and evaluation

Steps in the international marketing planning process. 1. Background o Company history; o Situation analysis; 2. Business Environment o Social and cultural factors; o Technological factors; o Political and Legal factors; o Demographic trends; o Seasonal and climatic factors; o Economic factors. 3. Market Analysis o The product market; o Market characteristics; o Distribution and pricing trends; o Import positioning; o Market segments and target market behaviour. 4. Competitor Analysis o Competitors strengths; o Competitors weaknesses o Competitors strategies; o Competitors market positioning. 5. Organisational Resources and Capabilities o Financial capabilities; o Research capabilities; o Production capabilities; o Management skills; o Domestic distribution and suppliers; o Promotional materials; o SWOT analysis 6. Foreign market Entry Strategy 7. Target Market and Segmentation Strategy 8. Positioning Strategy 9. Marketing Mix Strategy o Product; o Price; o Promotion; o Placement

3. Evaluation of alternative marketing strategies Segmenting International Markets. o Firms segment international markets by using one or a combination of segmentation bases; These include -: o Geographic segmentation; o Economic factors; o Political and Legal factors; o Cultural factors.

Emerging bases of global segmentation

o Global market segmentation can be defined as country groups, individual consumer groups, or potential customers with homogeneous attributes; o Countries can be segmented by diffusion patterns, that is, the speed with which consumers in that country adopt a new product or technology; o Local differences in each country could also be the basis of segmentation.

Market Positioning for International Markets

o Positioning refers to the way a products important attributes are defined by the consumers, that is, the place the product occupies in the mind of the consumers relative to competing products; o Positioning takes place in the minds of consumers so because consumers cannot reevaluate products every time they make a buying decision; o There are a number of positioning strategies firms can pursue: 1. Positioning products on specific product attributes (e.g. quality, price); 2. Positioning products according to usage occasions; 3. Positioning a product for certain classes of users; 4. Positioning a product directly against a competitor; 5. Positioning a product for different product classes. o In choosing the ways that a firm positions itself and its products in an overseas market may be similar to or different from that in the home market; o The challenge facing the international marketer is how to differentiate the product from competing products in the same segment (or position in the market). Instructors should encourage students to discuss the factors that influence which positioning strategy is chosen by the international marketing firm in one or more of its international markets. 4. Corporate Objectives o Usually include a mission statement; o Often reflect new markets, new business, and financial growth. Marketing Objectives and Strategy. o May focus on one or a few priority markets; o May involve all international markets that the firm is currently marketing in.

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6. o o o o o 7. o o o o o

Economic Evaluation. Market/industry growth; Economic growth; Inflation, interest rates; Sales and costs forecasts; Breakeven analysis. Implementation and Control. What will be done? When will it be done by? Who will do it? How will it be done? How will performance be measured?

Action Program

Budgets
o Revenue forecasts/budgets; o Cost budgets; o Projected profit.

Marketing Implementation
o A process that turns marketing strategies into marketing actions; o Successful strategy implementation depends on several key elements. These are: 1. An action program that pulls people and activities together; 2. The firms formal organisational structure plays a role in implementing marketing strategy; 3. The firms decision and reward systems; 4. The firms marketing strategies and must fit with the firms organisational culture.

Monitoring the Action Plan

o This involves evaluating the results of the marketing strategies and plans and taking corrective action to ensure that objectives are attained. 8. Challenges to International Marketing Planning Plans must be realistic! Plans must be integrated into the business or corporate hierarchy; There should be financial integration with international marketing at the business strategy level; Too much emphasis is given to the plan document rather than the international marketing planning process; Team involvement is crucial; The role of external relationships must be acknowledged and factored into the marketing plan. Practical International Marketing Planning The approach a firm takes towards international marketing planning is often a reflection of: o The firms competitive position in the local market;

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o The history of the firm; o The relative importance of the international markets; 10. Market Based and Product Based Planning Starts with an understanding of consumer needs; Products are then modified or adapted to suit those consumer needs; Service strategies to accompany the physical good may also need to be adapted for some international markets.

Market based approach

Product/Service based approach

Firms who undertake this approach take existing products and look towards international markets where the product can be sold in the same or similar functional format as that of the domestic market; This is the most common approach of the two; This approach should be considered as a possible short-term planning approach with a view of moving towards a market based approach as experience in the international arena is gained. Incorporating Creative Insight The international marketer is faced with the challenge of incorporating creative insight into the planning process and identifying new ways of conducting international business; There are a number of ways of encouraging creativity. These include: 1. Question all key assertions and recommendations; 2. Discuss the areas of planning with people who have a different perspective; 3. Allow enough time when writing the marketing plan to reflect the findings and conclusions; 4. The idea or insight must be capable of being implemented. The importance of Managerial Aspirations. The personal aspirations, attitudes and expectations of the firms Managing Direct or chief Executive directly influences the direction, objectives and activities of the organisation; It is important for the marketing planner to acknowledge and understand the thoughts and strategic directions proposed by the firms leaders; Key decision makers within the organisation and their aspirations need to be identified by the marketing planner who must then undertake his/her marketing planning activity that conforms to these aspirations;

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Summary
Planning and strategy are a series of steps aimed at guiding the direction of the organisations business activity (at a macros level) and the firms marketing activity (at a micro level). All marketing activity planned for the international operations of the firms must be consistent with the organisations corporate strategic plan. The international marketer should adhere to the series of steps associated with international marketing planning rigidly. Shortcuts in the planning

process are recipes for disaster. Finally, an organisation without a carefully considered, carefully prepared international marketing plan severely minimises their likelihood of maximising their success in international markets.

Chapter 14
Gaining Competitive Advantage Overseas
Lecture Outline
1. National Competitive Advantage A firms international competitive advantage is conditioned by the overseas nations competitive advantage; Michael Porter (1990) suggests that determinants of national advantage for an industry are four fold: Factor conditions; Demand conditions; Related and supporting industries; Firm strategy, structure, and rivalry. Porters theory includes government influences and chance events. Influences on factor creation stimulants. A cluster of domestic rivals; Perceived national challenges; Home demand influences; Related and supporting industries. Influences on home demand conditions. Intense rivalry increases home demand; Sophisticated factor-creating mechanisms attract foreign experts and participation by foreign firms; A group of rivals builds a national image and recognition; Influences on development and related supporting industries. Specialised factor pools are transferable to related and supporting industries; A group of domestic rivals encourages the formation of more specialised suppliers as well as related industries; Influences on firm strategy, structure and domestic rivalry. Factor abundance or specialised factor-creating mechanisms spawn new entrants; Early product penetration feeds entry; New entrants emerge from related and supporting industries; World class users enter supplying industries.

2. Governments. Governments can influences the creation and determinants of national competitive advantage through the implementation of policies. Examples of policy issues include; Education and training; Industry-specific regulation;

 Infrastructure industry regulation; Foreign affairs and military policy; Industry investment and assistance. Instructors should encourage students to discuss recent examples of how the Australian government through its national policies has created national competitive advantage. 3. Chance Events. Chance events are occurrences are often beyond the control or influence of national governments. These events are important because they create discontinuities that allow shifts in competitive positions. Examples include: Wars; Political decisions by foreign governments; Surges of world or regional demand; Major technological discontinuities; Acts of pure intervention. Instructors should encourage students to consider and discuss examples of recent chance events that have occurred, and how these events may have created discontinuities to competitive positions of nations (or firms).
4. Competitive Advantages and Generic Strategies.

In 1980 Michael Porter suggested three winning strategies that firms can pursue. These are:

Overall Cost Leadership

The firm aims to be the lowest cost manufacturer and distributor in its industry; This provides the firm with sufficient margin to compete on price and gain market share;

Differentiation
The firm concentrates on creating a distinctive, highly differentiated product and marketing program to appeal to a specific segment or broader mass market. R&D expenditure is focus on product development and differentiation;

Focus
The firm focuses its entire effort on one or a few segments of the overall market, rather than attempting to appeal to the mass market; Effectively, the firm becomes a segment specialist. Instructors should encourage a student to consider and discuss the factors that may influence which of the three winning generic strategies a firm selects to pursue. More recently Treacy and Wiersma (1995) offered a new classification of competitive marketing strategies. These were called value disciplines in that they were strategies for delivering superior customer value. The three strategies are: 1. Operational Excellence The firm leads the industry by providing superior value through price and convenience; The firm serves customer who seek good, reliable quality goods and services but who want them cheaply and conveniently. 2. Customer Intimacy

1. Achieved through precise segmentation of the firms markets; 2. Involves the development of a detailed sophisticated customer database; 3. The firm empowers staff to respond quickly to customer needs; 4. The firm aims to serve customers who seek a premium and are willing top ay for it. 3. Product Leadership The firm provides value by offering a continuous stream of leading edge products that make their own competing products obsolete; The firm serves customer who seek sate-of-the art goods or services regardless of the price or convenience. Instructors should encourage students to identify and discuss the factors that influence or determine which of Treacy and Wiersmas value strategies a firm pursues in one or more of its international markets. 5. Value Chain Analysis A value chain is a tool to disaggregate a business into strategically relevant activities that create value; A value chain examines all activities that a business performs by disaggregating functions into discrete but inter-related activities from which value stems; A value chain allows an understanding of how costs behave in a business; A value chain analysis may uncover existing or potential sources of differentiation; Value activities are distinct technological and/or physical activities that a business performs that creates a competitive advantage; A firms competitive scope is a source of competitive advantage because it affects the value chain. Instructors should encourage students to prepare a brief international value chain for the McDonalds fast food chain. 6. Competitor Analysis To prepare effective competitive marketing strategies, an international firm must first find out all it can about its competitors; Comparison between the firm and its competitors is often based on the marketing mix elements; Key questions associated with knowing your competitors are: 1. Who are our competitors? 2. What are their strengths and weaknesses? 3. What are their objectives (corporate and marketing)? 4. What are their strategies? 5. What are their strengths and weaknesses? 6. What are their reaction patterns?
Identifying a Companys Competitors.

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Firms can identify their competitors as direct competitors, that is, those who firms who compete in the same segment(s); Alternatively firms may face a wider range of competitors, that is all, other firms who compete in the same product class;

Another way of looking at competition is to consider firms who provide the same level of service; Alternatively, firms can identify their competitors from an industry point-of-view, that is, all firms within a broad industry; The international marketing firm must avoid competitor myopia, that is, ignoring the possibility of latent competitors who can have a significant influence on the firms marketing activities in the international marketplace. Industry Structure and Competitive Forces Industries are not static in that they may be experiencing structural convergence with other industries; Hence, the definition of an industry (broad or narrow) is crucial for structural analysis purposes; Porters Five Forces Competitive Model is designed to assist firms in analysing their industry structure. The key components of Porters model are: How easy is it for new firms to enter this market? What are the entry barriers?

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New Entrants Substitutes

To what extent can consumers substitute one brand for another and still experience the same utility from the experience?

Suppliers
The Internet provides a channel for suppliers to end users as well as enabling procurement processes that can standardise products and reduce differentiation.

Buyers
The Internet provides consumer with wider choice (hence bargaining power) and reduces switching costs.

Rivalry of Competitors How intense is the rivalry among the industrys competitors? On what basis does each firm compete (quality? price? availability? convenience?) 9. Determining Competitors Objectives What does each competitor seek in the marketplace? What drives each competitors behaviour? Firms must look beyond competitors profit goals. A competitors objectives may vary from segment to segment, or product to product. Identifying Competitors Strategies. In most industries competitors can be sorted into groups that pursue different strategies; A strategic group is a group of firms in an industry following the same or a similar strategy;

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Although competition is intense within a strategic group, there is also rivalry between groups. Assessing Competitors Strengths and Weaknesses. By conducting a thorough SWOT analysis on each competitor, the international marketer can answer the following important question. What can our competitors do? The ways that firms learn about competitors strengths and weaknesses is through: o Secondary data; o Personal experience; o Hearsay; and o Marketing Intelligence; o Primary research.
Estimating Competitors Reactions.

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Answers the question: what will our competitors do? Knowledge of a competitors strengths and weaknesses, objectives and strategies goes a long way towards explaining competitors actions; Competitors will react in different ways to different market situations. Being able to accurately predict this possible reaction is important; A competitor may react strongly to one market/industry situation and in a weak manner to another situation. Instructors should encourage students to develop a hypothetical matrix that illustrates the firms competitors (assume that the firm has only three) and possible reactions to a marketing action, e.g. a 25% decrease in the firms price of a leading product.
13. Selecting Competitors to Attack and Avoid.

Strong or Weak Competitors

Aiming at competitively weaker firms requires less resources and less time; How do you know whether your competitor is weak or strong? Look at their value chain!

Close or Distant Competitors

Most companies will compete with competitors who resemble them the most. Distant competitors cannot be ignored, as they may become close competitors through their marketing actions over time.

Well Behaved or Disruptive Competitors

Well behaved competitors play by the rules of the industry. They favour stability; Disruptive competitors seek to create disharmony amongst firms in the industry through their continuously aggressive marketing actions. Instructors should encourage students to discuss the factors that influence a firms selection of which competitors to attack.
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Obtaining Competitive Intelligence.

A competitive intelligence system provides a firms management with current, relevant and continuous information from the marketplace from which marketing decisions are made;

Sources of competitive intelligence are: 1. Sales force; 2. Suppliers; 3. Distribution channels; 4. Marketing research firms; and 5. Trade associations. Instructors should encourage students to discuss the advantages and disadvantages of each of the five sources of competitive intelligence. 15. Leveraging Capabilities Based on knowledge of competitors, firms must now design and develop competitive marketing strategies that will best position its offer against competitors offers and give the company the strongest possible competitive advantage; No one strategy is best for all companies. Each firm will assess its own market situation, resources and capabilities before embarking on the selection and implementation of a competitive marketing strategy; International marketers need to determine how the firms capabilities can be leveraged in overseas markets.

Summary
A firms success or failure in its international markets depends to a large extent on how well it competes in those markets. Knowledge of competitors, their strengths and weaknesses, their objectives and strategies is crucial for developing a competitive advantage in one or more overseas markets. Similarly, the international marketing firm should develop a value chain of integrated activities to assist in the development of a viable competitive advantage. Finally, accurate anticipation of competitor reactions is very useful to firms who can then develop a counter-attack strategy to protect profit, market share, market position, etc.

Application Assignment
Prepare a detailed essay that contrasts and compares the strategies for competitive advantage in proposed by Treacy and Wiersma against those proposed by Porter. Who do these authors strategies assist the international firm create a value chain for their business?

Discussions Questions
1. Map out in broad terms either the Australian Dairy industry or the wine industry using Porters model of national competitive advantage.

To assist students in answering this question, consideration should be given to integrating Porters model (Figure 14.1 of the text), as well as using Treacy and Wiersmas model. Students should clearly state what the competitive advantage is for either industry and what the implications if this advantage is for individual firms operating in that industry.
Q2. Clarify the distinction between product leadership, operational excellence, and customer intimacy as a basis for competitive advantage.

Product leadership focuses on having a product that is sufficiently differentiated in the eyes of the consumer from competing products. The firm attempts to distinguish the product by price, distribution channels, promotional activities or the actual benefits and features. With operational excellence the firm attempts to streamline its operating procedures to reduce costs and maximise efficiencies wherever possible so that it can create a sufficient margin between cost and price to

provide low costs products to consumers who seek them. Customer intimacy is achieved through careful, precise segmentation of the overall market to produce a premium product that meets the consumers needs and for which consumers are prepared to pay a premium price for.
Q3. Describe three companies in overseas markets that appear to conform with each of these three distinctive advantages outlines in question 2.

Product Leadership
Apple Computers; McDonalds; Panasonic.

Operational Excellence
Qantas; Dell computers; K-Mart stores.

Customer Intimacy
Amazon.com American Express; Barnes and Noble.

Q4. Select an Australian company doing business overseas and explain how its generic strategy has changed over time with reference to Porters framework.

An example of an Australian company doing business overseas is the Australian Tourism Commission. This organisation attempts to (amongst other things) increase the number of inbound tourists into Australia through promotional campaigns that differentiate Australia from other countries on the basis of culture, weather, the cost of living whilst in Australia etc. Since the terrorist attacks in the Unites States on 11th September 2001, the scaled back promotional campaign has narrowed the focus of which potential overseas nations to target.
Q5. Explain the concept of a value chain and indicate how it applies in an international market.

A value chain aims to eliminate activities that firms do that do not create value for the customer. That is, each activity or process must add value to the one that preceded it. Value is determined by what consumers look for in a product or service offering from the firm. In an international context, firms attempt to leverage their value creating activities and processes by attempting to duplicate or emulate them in overseas markets. For some international firms, the value chain may commence in the domestic market and stop in an international market, that is, part of the value adding activity happens domestically whilst other parts of it happen internationally.
Q6. Describe how the value chain is designed for an international hotel company like the Sheraton.

In answering this question, students should consider how the following activities could be included into the value chain for Sheraton; Check in procedures; Check out facilities; Loyalty program for frequent stayers; Co-branded loyalty programs with other firms (e.g. airlines, car rental companies); Room maintenance;

In room entertainment facilities; Dining, bar, leisure, sporting facilities; Concierge facilities.

Q7. What are the steps involved in systematically conducting competitive analysis? The steps involved in systematically conducting competitive analysis are -: 1. Identifying the firms competitors 2. Determining competitors objectives 3. Identifying competitors strategies 4. Assessing competitors strengths and weaknesses 5. Estimating competitors reactions 6. Selecting competitors to attack or avoid
Q8. Conduct a competitive analysis of Singapore Airlines and suggest how Qantas should position itself on the Kangaroo (Sydney to London) route.

In answering this question students should look at such factors as: Ticketing; Stopover options; Travel classes (business, economy, first class); Valet parking options; Frequent flier points redemption; Qantas Club membership.

Chapter 15
International Competitive Marketing Strategies and Competitive Position
Learning objectives
Assess the competitive position of a firm: Identify the characteristics of a dominant competitive position and strategies used by international firms to consider dominance; Examine alternative offensive and defensive marketing strategies adopted in overseas markets; and Evaluate strategies of market leaders, challengers, followers and niche specialists in overseas markets.

Lecture Outline
1. Competitive position model Completive position is viewed as factors that effect overseas market performance in relation to company. It incorporates factors such as sales revenue, market share, image, profit and overall performance. A companys global performance in these areas provides an indication of the overseas competitive position. Figure 15.1 provides a dimension model by which a competitive position can be assessed. Following are the elements of each dimension: a. Structural position: is an evaluation of industry structure, market share structure, and share position b. Strategic position: involves a response to market pressures in order to create an advantage, through having a competitive stance and advantage and through effective market coverage. c. Market position: where the company lies in the market through recognition and perception. These can be measured and compared to other companies on the market. The superior market force has the correct combination of benefits and price in relation to its market. d. Resources position: incorporates the profitability and resources that a company has internally in relation to their competitors, allowing them to stay in a competitive position. 2. The dominant leader in overseas markets The dominant leader holds a significantly higher market share than any of its close competitors, other firms are unable to match these high levels, giving the dominant firm the ability to strongly influence the market. It can often be difficult for firms to sustain dominance in all of their overseas markets. 3. The dominant firm profile Exists within the elements of competitive position: Significantly higher market share than any competitors Competitive advantage in terms of cost and differentiation dimensions

Wide coverage of main market segments Superior customer values, through benefits or low cost Large resource base with high levels of profit Strong associations with overseas markets

4. Strategies for the international dominant firm There are two ways to achieve dominance in overseas markets: a. Focus on one overseas market; b. Identify a specialised market with global potential and dominate it; A dominant firm must focus on maintaining and strengthening its position of dominance in its core market(s); It can do so in one or more of the following ways: 1. Reinforce market perceptions; 2. Manage the market; 3. Market and competitive obligations. Instructors should encourage students to discuss the factors that would influence a dominant firms decision as to which of the two strategies mentioned above they would select. 5. Offensive and Defensive Strategies. The character of the dominant firm may be either defensive or offensive; Offensive moves are those that are initiated by the market leader; Offensive strategies include: o Product, packaging and service innovations; o Development of new market segments; o International expansion to reduce the impact of global competitors. Defensive strategies include: o Blocking competitors by brand-for-brand matching, distribution coverage, and price strategies to reduce their market share and profit potential; o Pre-empting a competitors action by being first in the market with a new product or distribution system; o Use of tariffs, government regulations, or court actions to increase a competitors cost and deny them a market base. Built to Last. Research conducted by Collins and Porras (1994) identified two key principles as internal drivers of those firms that are built to last; 1. The firm must protect at all times it core ideology that goes beyond making money; 2. There is a relentless drive for progress that involves continual change, innovation and improvement in the firms international operations. Strategies for International Market Leadership Industries have an acknowledged market leader; The market leader is usually the firm that has the largest market share or the firm that leads the way in terms of product innovations, price changes, distribution coverage, and creative promotional techniques;

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Market leadership requires action from the firm on three fronts; 1. The firm must find ways to expand total demand; 2. The firm must protect its current market share through good defensive and offensive marketing strategies; this can be achieved by the following strategies Position defence; Flanking defence; Pre-emptive defence; Counter-offensive defence; Mobile defence; Contraction defence 3. The firm may try to expand its market share further, even if the size of the market remains constant. Instructors should encourage students to discuss arguments for and against each of the above six strategies. Under what circumstances is each suitable? 8. Strategies for the International Challenger. Challengers are firms that are second, third or smaller in size than the leader in an international market; Challengers can adopt one of two competitive strategies: 1. They can attack the leader directly in a bid to increase market share (challengers); 2. They can play along with competitors and not rock the boat (followers). Challengers can choose one of the following attack strategies; Frontal attack; Flanking attack; Encirclement attack; Bypass attack; Guerrilla attack.

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Strategies for the International Follower Not all follower companies choose to challenge the market leader; The leader firm usually has more staying power in an all out market battle; The follower company is a major target of attack by challengers, hence the follower must ensure that its manufacturing costs are low and services high; The market follower company can fall into one of three types: 1. The cloner; 2. The imitator; 3. The adaptor. Instructors should encourage students to discuss examples of firms that pursue each of the above three follower strategies. 10. Strategies for the Niche Firm.

Instead of competing head on with many other firms by pursuing the whole or large part of the entire market, some firms may choose to target segments within segments (known as niches); These niche segments are typically small but very profitable for the company that pursues them; Often involves developing a highly customised product to suit the specific needs of the segment; Niche strategies are profitable because the niching firm knows their customers so well that it meets and exceeds those needs better than most other firms; The key idea behind being a niche marketer internationally is specialisation; There are several specialist roles open to a market nicher. These are: 1. End use specialist; 2. Vertical level specialist; 3. Customer size specialist; 4. Specific customer specialist; 5. Geographical specialist; 6. Product or feature specialist; 7. Quality-price specialist; 8. Service specialist. One danger with an international niche strategy is that the segment may dry up (in terms of market potential) or get attacked by the market leader of challenger firms.