Tauno Kekäle Nitra Slovak Agricultural University November, 2009

Tauno KekäleNitra Slovak Agricultural University

November, 2009

WHAT DOES “INTERNATIONAL” MEAN ?=>WHAT IS THE MAIN POINT HERE ?

WHAT DOES “INTERNATIONAL” MEAN ?=>WHAT IS THE MAIN POINT HERE ?

…distances…mental and geographical

Profitability is good for your business……SALES

(minus) PROFITCOSTS

ROI (%)

IN-STOCKEQUIPMENT CAPITALBUILDINGS

ProblemProblemidentificationidentification

InformationInformationsearchsearch

Evaluation ofEvaluation ofalternativesalternatives

PurchasePurchase

PostpurchasePostpurchaseevaluationevaluation

FeedbackFeedback

CONSTRUCTIVE VIEW TO “CULTURE”:Surface-level matters have deeper-level

causes and reasonsThe “culture”, paintings architectures,

habitsetc we observe are products of the deep shared, subconscious beliefs and assumptions on how the world works and how we should live in it

EVENT

EVENT

observation (by many)

discussion

sensemaking

“oh, this is why that thing happened twice - this is how the world works”

forgetting subconscious, shared

BELIEFS (e.g.):RELATIONSHIP TO ENVIRONMENT

(dominant / submissive)NATURE OF REALITY, TIME AND SPACENATURE OF HUMAN BEINGS (X/Y/Z) AND

HUMAN MUTABILITY (yes/no)NATURE OF HUMAN ACTIVITY (doing / being)NATURE OF HUMAN RELATIONSHIPS

(status, power, sex, collective/individual)

FOUR DIMENSIONS(Hofstede):

collectivism vs individualism power distance (high vs low) uncertainty-avoidance (high vs low) “achievement-orientation”

(masculinity vs. femininity)

(later addition, to make “5D” model: time orientation long vs short)

Culture types“Macho” (hit & run)/ ”work-hard-play-

hard” (fun in teams)/ ”bet-your-life” (long-term investment)/ ”process” (bureaucracy)

(Deal and Kennedy)

Management/specialist/worker (Schein)

Academic tribes (Becher)

Deciphering cultureValue questionnaires and other quick tests: help to

compare and typologize cultures, but don’t give an understanding (e.g. Ashkanasy’s measurement tool) - because shared cultural beliefs are subconscious.

Interviews of the people. What are their beliefs ? What do they think the management should be doing ? These give again hints, but are just a way to collect data to a constructive approach.

Construction/ethnographic method: should be able to get to the understanding but only if deep enough studies have been conducted, and if the observer has no blind spots

typically this means an external/internal observer pair

Deciphering culture (2)It may help to understand one’s own culture if one knows what

kind of cultures there generally are !

After that:1) Look around you. Sentences and slogans that are often

repeated, furniture, pictures, books in bookshelves, dress code…..

2) Observe, participate. Parties, meetings, rituals and traditions….

3) Listen. Topics discussed, stories of important events and organizational heroes, remunerations and punishments………

Cultural Factors on Consumer Behavior

Culture: Captured by Values, Beliefs & Customs/Habits, regulates societal behavior.

Subculture: Add/delete some VBC’s, but accept the majority of society’s VBC’s.

Social Class: An ascribed indicator of status.Beliefs that indicate and connect to Wealth,

Power and Prestige. (Marketing Analogies e.g. Income, Occupation, Education….)

Social Factors (2)

Family (and friends): The most influential group(s) in most peoples’ lives relative to consumption behavior.

Roles & Statuses: The hats we wear. This creates expectations that we may comply with.

Personal Factors of Consumer Behavior: “Who We Are”

Age & Lifecycle Stage: Indicates consumption needs.

Occupation: Indicates ambitions /accomplishments and provides insights into consumption wants.

Economic Circumstances and Lifestyle: Indicates ability to consume and levels of consumption.

Psychological Factors of Consumer Behavior

Personality: The Self, that which makes us who we are; distinguishes us from others.

Motivation: That which impels us to act. Tension Drive Response, model.

Unfilled needs create tension, when the tension is sufficiently high it triggers a response that is directed at satisfying the need. The need remains in stasis until the tension again builds, e.g., you get hungry and eat every 5 or 6 hours.

Psychological Factors (2)

Perception: Our point of contact with the environment. Relates to the process of attention. Which

sense do we attend to?Organizes sensory stimuli. What is figure and

what is background?Involves interpretation of sensory stimuli. What

was that sound?

Psychological Factors (3)

Learning: How we gather and store information about our environment. Basis for how we act.

Learning theoriesClassical Conditioning: Pavlov

StimulusResponse method based on conditioned and unconditioned elements.

Behavioral Conditioning: Skinner StimulusResponseReinforcement view based on types of reinforcement and their schedules.

Information Processing Models: Environmental info is received through the senses and processed. Learning occurs during conscious interaction with the environment and is stored in long-term memory. Computer analogy.

How We Learn

Psychological Factors (4)Attitudes: Learned predispositions to

respond in a consistently favorable or unfavorable way toward a given object

Simplify decision makingGood indicators of behavior..but:

Why don’t people always act in accord with their attitudes?Personal considerations, Impression

management.Unexpected circumstances.Social considerations.

Attitudes: Single ComponentThe simplest conceptualization is that Attitude = Affect, where affect reflects an individual’s feelings about an object.

Attitudes: Tri- ComponentThe Tri-component attitude model Belief Component: Attitudes are

based on Beliefs (that also reflect Knowledge)

Affect Component: Attitudes are built on Feelings (which reflect Value judgments)

Connative Component: Attitudes predict intended actions

Attitudes: Multi-attribute

The Attitude Toward Object Model (Fishbein & Azjen):

n

iii ebObjectAttitude

1

w here:

i ' s are attributes of the object. b' s are beliefs that the object has that attribute. e' s are the value of that attribute to me.

Theory of Reasoned ActionDeveloped to account for social influences.  

.

k

jjj

n

iii msWebWBehaviorIntended

12

11

where: W's are relative weights summing to 1. i's are anticipated behavioral outcomes. b's are beliefs that I can obtain that outcome. e's are the importance of that outcome to me. 

j's are the people who will judge my behavior. s's are the judgment standards they will apply. m's are my motivation to comply with their wishes

INTERNATIONAL PRODUCT POLICY: ANOTHER CULTURE IS A RISK FOR OUR BUSINESS

What if we do not sell ?What if it is difficult ?What if we make the wrong statement ?

The risk increases the more unknown worlds we are trying to explore……

(both concerning beliefs – religions, worldviews, history etc – and artifacts such as language, consumption habits, etc.)

THINKING CUSTOMER VALUE1. CUSTOMER SHOULD FEEL THE VALUE-the goal cannot be to sell once as expensively as

possible, but that the customer feels he gets something that is difficult to measure in monetary terms(and that nobody else gives)

2. THE PRODUCT IS NOT A “PRODUCT”-our product is the knowledge we sell to the

customer to improve value for them - or for their customers (physical product or service)

THINKING CUSTOMER VALUE (2)3. CUSTOMER SATISFACTION IS NOT THE FINAL

GOAL, REALLY-as producers we have a duty to serve the customer

throughout the life cycle of the product (or the customer’s process) and to improve the offering continuously

-despite the duty, this is also makes business sense: instead of selling/pushing we “open a connection” to the customer spending

VALUE (Melnyk & Denzler 1996)Value defined as

PERFORMANCECOST

Value thus involves four main elements:Speed / lead timeQualityFlexibilityCost

Levels of Problem SolvingRoutine: Evaluative criteria and

brand preference are known, effort is devoted to finding the item to purchase.

Limited: Evaluative criteria are known, but brand preference is not formed.

Extensive: Evaluative criteria are not known and brand preference is not formed.

The Role of Involvement

Involvement reflects the importance of making the best/right choice or decision.

It spans all levels of problem solving.

HELPING THE CUSTOMER TO HELP YOU: what do the people REALLY want/need ?

-Don't ask directly for requirements, ask for use cases

-Review together the typical use of existing products

-Let the customer review your documentation so that you speak same language and understand the product uses

-If you see opportunities to improve their processes, include them in sufficient detail so that you can see if they are really improvements

So, what to sell ?The international marketer needs to

determine what the market offering should be in a foreign market :

Defining the product offering Products versus Services? Cultural factors

What is a product ?Product: A bundle of attributesThe Total Product

Tangible attributes: materials, size, weight, design, packaging, performance, comfort

Intangibles: brand image, styling, other benefits (installation, delivery, credit, warranty, after-sale service, return policy)

Global Product Strategies

Local and International Environment

Competitive Situation

Firm’s Internal

Situation

Customer Needs &Price

Elasticity

ProductStrategies

Goods versus Services/Rights

Instead of marketing a product abroad, the company may also sell the rights to a product/brand or services in a foreign market:- rights : brand / trademark / patent- services :management skills (hotel chain)

often through concept franchising

Sales of Rights - Examples

Franchising business :

- Coca-Cola : use of its name to licensed bottlers around the world.

- Pilkington: licensing of the process of float glass.

- Other : Manpower, McDonald's, etc.

Sales of Rights - Examples

Management Contracts :- Sheraton Hotels :

Management contract for hotels abroad, sale of consulting and management contracts

Little equity invested : Sheraton manages almost 400 hotels worldwide but has equity in only 40 of them.

Advantages : minimum risk & strong competitive position.

Sales of Rights - ExamplesTurn-Key operations :

The firm is selling technical and engineering skills.

The firm is training foreign nationals to run a plant.

The firm is supplying material and equipment. (e.g. Wärtsilä Diesel; KWH Pipe)

Product Related Global Drivers

Demand DriversHigher expectationsMore informationHigher switching costsFull-service expectations

Product Related Global Drivers

Supply DriversFast-paced innovationsFrequent product modificationsManufacturing rationalizationOutsourcing coordinationStrategic Alliances

StraightExtension

Product ProductAdaptation Innovation

The firm adopts the same policy used in its home market.

The company caters to the needs and wants of its foreign customers.

The firm designs aproduct from scratchfor foreign customers.

Source: W.J. Keegan, Multinational Product Planning: Strategic Alternatives, Journal of Marketing, 33, 1969, pp.58-62

InternationalProduct Strategy

ProductExample

Consumer NeedSatisfied

Product Strategy Communication Strategy

Strategy 1 Product and

CommunicationExtension

GilletteRazor

Disposable, easy to useproduct

Extension Extension

Strategy 2 Product ExtensionCommunication

Adaptation

WrigleyChewing Gum

USA: Substitute forSmoking

Europe: Dental benefits

Extension Adaptation

Strategy 3 Product Adaptation

CommunicationExtension

McDonalds Fast-Food Adaptation:Adding local products to

range

Extension:Using global campaign

Strategy 4 Product and

CommunicationAdaptation

Slim Fast Identical:Lose Weight

Adaptation:Consumer preferences

for different flavors

Adaptation:Celebrity in Germany,

Teacher in UKStrategy 5

Product Invention Buckler Beer Non-alcoholic beer Invention Develop newcommunication

Source: W.J. Keegan

Global Product DecisionsExisting Products

Product phase-out Product modificationProduct introduction into new marketsProduct performance management

New ProductProduct developmentProduct introductionProduct performance management

Timing of Foreign EntryTo be the pioneer, or to follow ???Waterfall Strategy:

Brand Time Span US => Foreign LaunchMarlboro: 35 yearsMc Donald’s: 22 yearsCoca-Cola: 20 years

Sprinkler Strategy:Microsoft Windows 95 - Global roll out:

4-6 million customers worldwide bought the operating system in the first three weeks after the launch

RISKY BUSINESSNew markets: “always” s-curve, but how

steep ? starts to grow when ? how long can we afford to wait ?=> lead users=> customer clinics, Delphi=> observer strategy, scenarios=> product overlap strategy (BCG zoo)

RPV MODEL(Christensen et al. 2004)

WHO will be the incumbent to take up the competition with us upon entry:

Who has the RESOURCESWhose PROCESSES would be most flexibleWhose VALUES would support it

(Think Nokia. Should they be studying Apple… Samsung….Microsoft…Google ?)

Managing International Product LinesDeciding on the right individual product for

world markets is only one aspect of product policy.

The next step is to decide what family of products should be offered

International Product Line PlanningThe foreign product line is frequently

smaller than the domestic line because of financial and market limitations.

By introducing a limited product line into foreign markets the firm can test the market before taking a bigger plunge.

Reasons for Product Standardization

Economies of scale : Production, R&D, MarketingCommon Consumer

needs : Drinking patterns, car sizes

Consumer Mobility : Customer retention & Loyalty

American Express, Kodak, ...

Home Country Image : US jeans, French Perfumes,...

Impact of technology : B to B Markets

POSTPONEMENTSaves “bound capital”, diminishes stocks,

increases flexibility:

differentiating elements of the product must reside in relatively few “chunks”

product, as well as supply process, must be designed so that the differentiating elements can be added to the product near to the end of the chain

Mandatory product adaptationsGovernmental regulationsTechnological considerations (e.g., voltage,

infrastructure)Cultural imperatives - is it acceptable to

consumersMeasurement standards: volume, length,

weight, quantity

Brand PositioningPerceived fit between a particular product offering and the needs of target market

Positioning is defined relative to:competitive offerings

consumer needs

Positioning StrategyAttribute or BenefitQuality and PriceUse or User

Brand EquityBMW Best engineeredCoke Fun and excitementCartier Quality

Corporate Branding

CONCLUSION:All the products and markets that CAN be

developed should not necessarily be developed;

Strategic view is required to avoid mixing the fun of developing products and markets with the money-bringing response to real needs (means and ends)

In business companies, new products and markets should always make BETTER business sense than the old ones ! (ROI)

SOURCES:

E.Schein (1984) Organizational culture and leadershipG.Hofstede (1994) Cultures and organizations: Software of the mindC.Geertz: (1977) Interpretation of culturesLecture on Consumer Behavior, Dr. David ForlaniLecture on International Product Policy, Dr. Wolfgang UlagaProduct Detail Design lecture, Tauno Kekäle