Export Marketing Strategy: Tactics and Skills That Work

vii

Contents

Chapter 1: Introduction: Export Marketing Strategy . . . . . . . . . . . . . 1

Chapter 2: Assessing Company Readiness to Export . . . . . . . . . . . . . . 9

Chapter 3: Researching and Selecting Export Markets . . . . . . . . . . . 31

Chapter 4: Exploring International Entry Modes . . . . . . . . . . . . . . . 57

Chapter 5: Partnering Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Chapter 6: Developing an Export Marketing Plan . . . . . . . . . . . . . . 95

Chapter 7: Working With Facilitating and Support Firms . . . . . . . 113

Chapter 8: Budgeting for Exporting . . . . . . . . . . . . . . . . . . . . . . . . 143

Chapter 9: Analyzing the Legal Environment of Exporting . . . . . . 153

Chapter 10: Managing Logistics and Supply Chain in Exporting . . . 181

Chapter 11: Understanding Foreign Cultures . . . . . . . . . . . . . . . . . 189

Chapter 12: Product Adaptation . . . . . . . . . . . . . . . . . . . . . . . . . . 207

Chapter 13: Advertising and Promotion in Export . . . . . . . . . . . . . 217

Chapter 14: Export Costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231

Chapter 15: Pricing for Export Markets . . . . . . . . . . . . . . . . . . . . . 253

Chapter 16: Financial Aspects and Payments in Exporting . . . . . . . 279

Chapter 17: Managing Export Operations . . . . . . . . . . . . . . . . . . . 303

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

ibe-cavusgil-00fm.indd 7 6/29/09 11:34 AM

ibe-cavusgil-00fm.indd 8 6/29/09 11:34 AM

1

Chapter 1

Introduction: export Marketing Strategy

Upon completing this chapter, you should be able to

• understandtheimportanceofexportingtoyourfirm’sbusinessperformance;

• understandthedeterminantsofexportperformance,especiallytheimportanceofexportmarketingstrategy;

• follow an export marketing strategy framework to develop suitable marketing strategies for your export venture in a foreignmarket.

Importance of exporting

In a globalized market, exporting plays an important role in a firm’sgrowth and profitability.With trade barriers coming down, advancesin telecommunication, transportation, and data processing technolo-gies,andincreasingglobaltravel,exportingisnolongertheprivilegeoflargemultinational corporations. In fact, a large number of small andmedium-size firms have become active and dynamic exporters in theglobalmarketinthelastfewdecades(Katsikeas,Bell,&Morgan,1998).Increasingly,exportingisbecomingaveryimportantstrategicinitiativein the growthofmany small andmedium-sizefirms.Formanyfirms,exportingisavitalpartoftheirbusinessoperations.Withoutsuccessinexporting,manyfirmsmaynotsurviveinthesaturateddomesticmarket.

Determinants of export performance

Yet success in export marketing is by no means easy for small andmedium-sizefirms.Whilemanyfirmshavesucceededin international-ization,examplesoffailureinexportmarketingareeasytofind(Cavusgil,Knight,&Riesenberger,2008).Tobesuccessfulininternationalizationandinexportmarketing,firmsneedtoconductacarefulassessmentof

ibe-cavusgil-01.indd 1 4/10/09 12:45 PM

2 Export MarkEting StratEgy

theirreadinesstoexport,gothroughthelearningprocessofinternation-alization,developeffectiveexportmarketingstrategiesthatsuitthefor-eignmarkets,andimplementthestrategieseffectively.Past research inexportmarketinghas identifiedanumberofdeter-

minants of export performance.These include internal organizationalfactors such asmanagement’s commitment to exporting, internationalexperience, human and financial resources, research and development(R&D) capabilities, product uniqueness, and organizational structure,andexternalenvironmentalfactorssuchascompetitiveintensity,culturaldifferences, market structure and turbulence, and government restric-tions/regulations (Katsikeas, Piercy, & Ioannidis, 1996; Zou & Stan,1998).However,themostimportantdeterminantofexportperformancehasbeenfoundtobeafirm’sexportmarketingstrategy(Cavusgil&Zou,1994;Zou&Stan,1998).Ithasbeenestablishedthatthefitbetweenafirm’sexportmarketingstrategyanditsinternalorganizationalcharacter-istics and externalmarket characteristics iswhat ultimately determinesitsexportperformance(Cavusgil&Zou,1994).Thisframeworkissum-marizedinFigure1.1.

export Marketing Strategy and export performance

According to the above framework of determinants of export perfor-mance, external market/industry characteristics and internal firm and

Figure 1.1. A framework of determinants of export performance.

Export Marketing performance*Strategic*Financial

FirmCharacteristics

Foreign MarketCharacteristics

industryCharacteristics

productCharacteristics

Internal Characteristics

external CharacteristicsExport

MarketingStrategy


introduCtion: Export MarkEting StratEgy 3

productcharacteristicsimposepressureforafirmtorespondinitsexport

venture.Afirmthatcanrespondwitheffectiveexportmarketingstrategy

thatfitstheinternalandexternalenvironmentswillexperienceimproved

exportperformance.

Exportperformancecanbeassessedalongtwodifferentdimensions:

strategicandfinancial (Zou,Taylor,&Osland,1998).Strategicexport

performance can be viewed as the extent to which a firm’s strategic

objectivesofexportingareachievedintheforeignmarket.Whenafirm

decidestoexport,itmaysetsomestrategicobjectivessuchassettingupa

strategicfootholdintheimportantforeignmarkets,gainingcompetitive

advantages throughmarket diversification, exploiting the product and

technological strengths in the foreignmarket, increasingmarket share,

preemptingcompetition,gaininginternationalexperience,andbuilding

brandawarenessandbrandequityinforeignmarkets(Cavusgil&Zou,

1994).Achievementof suchobjectiveswillenhance thefirm’s strategic

market position and increase its competitiveness, leading to long-term

businesssuccess.

A firmmay also set financial objectiveswhen it decides to export.

Thesemayincludeincreasingsalesofexistingproducts,makingprofits

throughexportingtoforeignmarkets,andreducingthecostviaincreas-

ingthescale.Accomplishingtheseobjectiveswillleadtoimprovedfinan-

cial performance of thefirm.Dependingon the situationof thefirm,

strategicexportperformanceorfinancialexportperformancemaybethe

focusofthefirm’sexportventures.

The framework suggests thatwhen afirm’s exportmarketing strat-

egyfitsits internalenvironmentandexternalenvironment,itsstrategic

exportperformanceandfinancialexportperformancewillbeimproved.

To achieve a goodfit of exportmarketing strategy to the internal and

externalenvironments,afirmcanengageinaconsciousefforttoadapt

itsmarketingstrategies to theseenvironments. Inotherwords,adapta-

tionisacentralmeanstoachieveafitbetweenexportmarketingstrat-

egyandthefirm’sinternalandexternalenvironments(Cavusgil,Zou,&

Naidu,1993).Theadaptationmay involvevarious componentsof the

firm’smarketingstrategy,includingmarkettargeting,brandpositioning,

productpromotion,distribution,andpricing.



Productadaptationisakeyexportmarketingstrategythatinfluences

afirm’sexportperformance(Cavusgil&Zou,1994).Inaforeignmarket,

political/regulatory, cultural, and economic environments can be very

different. Product standards, safety standards, and technical specifica-

tionsinforeignmarketscanbequitedifferentfromthoseinthedomestic

market.Inordertomarketaproductsuccessfullyintheforeignmarket,

anexporterneedstoproperlyadapt itsproducttotheforeignmarket’s

requirements.Sometimestheproductmaybeculturespecificorunique

todomesticmarketdemand.Tomarketitsuccessfullyintheforeignmar-

ket,theproductalsoneedstobeadaptedtomakeitmoreappealingto

foreignmarketdemand.Therearetwotypesofproductadaptationthat

can be pursued by exporters:mandatory adaptation and discretionary

adaptation(Czinkota&Ronkainen,2002).Mandatoryproductadapta-

tionistheminimumlevelofadaptationofaproductinordertomake

theproductacceptableintheexportmarket.Itmaybepromptedbythe

localregulatoryenvironmentorphysicalandeducationalcharacteristics.

Discretionaryproductadaptation,ontheotherhand,ispursuedatthe

exporter’sdiscretiontomaketheproductmoreappealingtocustomersin

theexportmarket.Itisusuallydonebytheexportertogainacompetitive

advantageoveritsrivalsintheexportmarket.

Promotionadaptationisanothermajorexportmarketingstrategythat

isimportanttoexportperformance.Lawsandregulationsaboutadver-

tising, cultural values andnorms, and advertising infrastructure in the

foreignmarketcanbeverydifferentfromthoseinthedomesticmarket

(Cavusgiletal.,2008).Asaresult,effectiveadvertisinginthedomestic

marketmaynotworkwell in the foreignmarket, leading to the need

toadapttheadvertising’stheme,message,media,andevaluationinthe

foreignmarket.Salespromotionmayalsoneedtobeadaptedtofitthe

foreignenvironment.Inmanycountries,theretailingstructureisdomi-

natedbysmallandindependentstores,makingithardforexportersto

usecouponstopromotesales.Insomecountries,facesavingisanimpor-

tantvalueintheculture,makingpricediscounts,coupons,andrebates

ineffective for promoting sales because consumersmay shy away from

thesetoolsintheirefforttoprojectapositiveaffluentimage.Language

differencealsomakesitnecessarytoadaptthefirm’sadvertisingandpro-

motion(Czinkota&Ronkainen,2002).



Adaptationstochannelsofdistributionmaybenecessaryinsomefor-

eigncountriesduetouniquelocaldistributionstructures.Indeed,most

countriesintheworldstilllackthemodernAmericantypeoflarge-scale

distributionchannelsinwhichmega-retailersandchainstoresdominate

retailsales.Inthesecountries,longandinefficientdistributionchannels

withmultiple levels ofwholesaling and small-scale retailing are preva-

lent(Czinkota&Ronkainen,2002).Inaddition,culturaldifferencesalso

leadconsumerstoshopindifferenttypesofoutlets.Tosucceedinsuch

markets,exportersmustadapttheirdistributionstrategytofitthecharac-

teristicsoftheexportmarket.

Priceadaptationmaybenecessaryinordertomarketaproducteffec-

tively in foreignmarkets.Thereare several factors thatmaynecessitate

priceadaptation.First,theaddedcostsofexporting,suchasinternational

freight charges, insurance, tariffs and duties, and exporting specialists,

havetobecoveredinorderforexportventurestobeprofitable,leading

topossiblepriceincreases.Second,thelongandlessefficientdistribution

channelsinmanyforeignmarketsmayincreasethepriceofexportedprod-

uctstoforeignconsumersduetodistributors’marginsandhighercostsof

transportationandstorage.Tocontrolsuchpriceincreases,exportersmay

have to reduce their quoted price to foreign importers/distributors to

remaincompetitive.Third,productadaptationandpromotionadapta-

tionthatarenecessarytomarkettheproductintheexportmarketrequire

investmentthatneedtoberecoveredthroughpriceadaptation.Exporters

mayconsiderchargingahigherpricetocoversuchinvestments.Finally,

incomelevelsinmanyexportmarketsmayberelativelyloworcompeti-

tionmaybeintense.Consumersmaynotbeabletoaffordtheregularly

pricedproductsorhavecompetingproductstochoosefrom.Asaresult,

thepriceoftheexportedproductmayhavetobereducedtomakethe

productviableinforeignmarkets(Cavusgil,1988).

In addition to export marketing strategy, a firm’s internal organi-

zational resources and capabilitiesmay also have a direct effect on its

export performance. Top management commitment, international

experience,organizationalandfinancialresources,andcompetenciesin

productandprocess technologiescanalldirectly influenceexportper-

formance (Zou& Stan, 1998). In fact, successful exporters are those

that have considerable top management commitment, international



experience,andorganizationalandfinancialresources,andsuperiorcom-petencies in product and process technologies. Exporting represents asignificantcommitmentbyafirmtoenter the internationalmarket.Afirmwith high-levelmanagement commitment to exporting, adequatestaffwith international experience, and sufficient financial resources ismorelikelytomeetthedemandofexportmarketdevelopmentandavoidprematurelyabortingexportoperationsinthefaceoftemporarymarketturmoil(Aaby&Slater,1989).Inthelongrun,successfulexportersmustdevelop and sustain distinctive competencies in product developmentandprocessimprovement,astheexportmarketwillbecomematureandcompetitionwillcatchup.Moreover,exportersmustcapitalizeontheirgainedexperienceinanexportmarketbyexpandingtheiroperationsandestablishingthemselvesasdominantcompetitorsintheexportmarket.

Development of export Marketing Strategy

Giventheimportanceofexportmarketingstrategyindeterminingafirm’sexportperformance,itisveryimportantthatasystematicprocessbefol-lowedtodevelopanexportmarketingstrategythatisproperlyadaptedtothefirm’sinternalandexternalenvironments.Tobeeffective,anexportershouldconduct a thoroughStrengths,Weaknesses,Opportunities, andThreats(SWOT)analysisbeforedecidingonthedegreeofadaptationofitsmarketing strategy for theexportmarket.Specifically, the followingareexamplesofafirm’sstrengths,weaknesses,opportunities,andthreatsintheforeignmarket(Czinkota&Ronkainen,2002):

Strengths

• Astronglydifferentiatedproduct • Distinctivecompetenciesintheindustry • Strongbrandnameandreputation • Anattractivecustomerbase • Superiorintellectualcapitalandinternationalexperience • Innovativemarketingcapabilities • Qualitymanagement • Technologicalandfinancialresources • Cross-culturalcompetencies • Strongallianceswithforeignpartners



Weaknesses

• Lackofdistinctivecompetencies

• Highercostsorweakdifferentiation

• Weakbrandandcustomerbase

• Weakdistributionnetwork

• Lackofintellectualcapitalandinternationalexperience

• Limitedfinancialresources

• Lackofcross-culturallycompetentpersonnel

• Lackofstrategicvision

Opportunities

• Risingdemand,especiallyfromtheexportmarket

• Existenceofunderservedmarketsegmentsintheexportmarket

• Opportunitytoutilizeexistingskillsandresourcesintheexport

market

• Fallingtradebarriersandattractiveforeignmarkets

• Opportunitytoincreasescalefromforeignoperations

• Possibility of exploiting a relationship with foreign business

partnerorgovernmentofficials

Threats

• Intensecompetitionintheforeignmarket

• Slowingmarketgrowth

• Growingbargainingpowerofforeignbusinessesorgovernments

• Shiftincustomerdemand

• Costlynewgovernmentregulations

• Likelyentrybyformidablecompetitorsintotheforeignmarket

• Technologychangesfastintheindustry

AfteracarefulSWOTanalysis,thefirmshouldseektoadaptitsmar-

ketingstrategiesinsuchawayastocapitalizeonitsstrengths,overcome

itsweaknesses,exploitopportunities,andavoidthreats.Inotherwords,a

firmshouldalignitsstrengthswithmarketopportunitieswhenadapting

itsmarketingstrategiestotheexportmarket.Onceaclosefitisachieved



betweenitsexportmarketingstrategyanditsinternalandexternalenviron-ments,itsexportperformancewillbeimproved(Cavusgil&Zou,1994).

the Objectives of this Book

Inthisbookweseektopresentacomprehensiveguideforfirmsinterestedin participating and succeeding in exportmarketing.Drawing on theauthors’ sustainedresearchstreaminexportmarketingandourknowl-edgeof the exportmarketing literature,wewill introduce a systematicprocessforafirmtoassessitsreadinesstoexport,identifyandselectviableexportmarkets,exploresuitableformstoenterforeignmarkets,developaneffectiveexportmarketingplan,workwithexport facilitatingfirms,setanexportbudget,managethesupplychainand logistics inexport-ing, analyze foreign cultures, adapt theproduct, adapt thepromotion,setexportprices,getpaidinexporting,andmanageexporttransactions.We attempt to cover various aspects of a successful export marketingprogram,discussthedetailedtasksandconsiderationsinvolvedineachaspect,andpresentasetofpracticalguidelinesforfirmstofollowwhenmakingexportmarketingdecisions.Byreadingthisbook,businessmanagerswillmastertheartandsci-

enceof successfulexportingandunderstandthecompleteprocessanddecision-makingtasksinvolvedinexportmarketing.Moreimportantly,theywilllearnastrategicapproachtohelpingtheirfirmsparticipateinexporting,developproperlyadaptedexportmarketingstrategies,man-ageexportoperations,andimproveexportperformance.Eventuallytheywill help their firms survive and prosper in the ever-changing globalmarketenvironment.Throughoutthisbookweattempttobalancestrategicconsiderations

withoperationalissuesinexportmarketing.Wealsobalancethetheoreti-calrationaleswithpracticalapplicationsofexportmarketingknowledge.Readerswithdifferentlevelsofknowledgeandpreparationinexportmar-ketingshouldbenefitfromthisbookbyfocusingmoreorlessoncertainchapters.Toourknowledgethisisthefirstcomprehensivebookfocusedspecifically on exportmarketing strategy andoperations.Webelieve itwillbeaninvaluableadditiontotheexportmarketingliterature.


Documents

Export Marketing Strategy: Tactics and Skills That Work