Instructor's Solution Manual for Global Marketing Eighth Edition. Svend Hollensen

Contents

Parts

Pages Preface

4

1.

Some teaching guidelines

6

2.

Teaching notes for chapter cases

24

3.

Teaching notes for part cases

112

4.

Teaching notes for ‘Questions for discussion’ (end-of-chapter)

160

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PREFACE

Introductory comments The textbook Global Marketing has been written for instructors teaching courses or executive education programmes in International or Global Marketing.

The book is structured according to five main decision phases that companies face in the global marketing process.

The schematic outline of the book in Figure 1 shows how the different parts fit together.

Figure 1: Structure of the book

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This Instructor’s Manual (IM) has been especially prepared for adopters of the textbook.

The principal objective of the IM is to help instructors create an exciting, informative and successful classroom experience for their students. The material has been written to allow you the flexibility to design a course tailored to your own objectives, methods and conceptual framework.

This IM helps busy marketing lecturers in their job of teaching the subject. It is not intended to suggest that there is only ‘one way’ of using the textbook, ‘one way’ of analysing the case studies and discussion questions and ‘one way’ of teaching global marketing. In short, it is intended to supplement your creative skills in teaching marketing. Together with the textbook and the PowerPoint slides (with figures and tables from the textbook) that are provided free of charge if you have adopted the textbook, the IM forms a package of materials designed to facilitate course development and execution.

The IM is divided into three sections: Part 1: Some teaching guidelines •

Different levels of learning

•

Teaching objectives

•

Teaching methods

•

Case study as teaching/learning method

•

Case summaries

•

Sample syllabus

Parts 2 and 3: Teaching notes on cases Teaching notes on the 38 chapter cases (two for each chapter) and 20 part cases (four for each part) included in the book. These case notes are not intended to be exhaustive, but are rather starting points for the instructor’s own preparation.

Part 4: Brief answers to ‘Questions for discussion’ Brief guides to answering the ‘Questions for discussion’ at the end of each chapter.

The ‘Questions for discussion’ can be used in a variety of ways. They can be used as essay questions to test students’ knowledge and understanding of the subject matter. Some of them may form the focus of a tutorial discussion. Also, you may wish to encourage students to use them as self-administered tests of knowledge and understanding of each chapter as they read the textbook.

I hope that you will find this material helpful, and that it will assist you in developing a course that meets your needs and the objectives of your students.

I look forward to receiving your comments on the textbook itself and also on the Instructor’s Manual.

Svend Hollensen Email: svend@sam.sdu.dk 5 © Pearson Education Limited 2020

PART 1

Some teaching guidelines Different levels of learning Learning concerns change behaviour through a permanent change in knowledge, skills or attitudes.

The lecturer in international marketing may have different sets of teaching objectives, including the development of the following: •

Knowledge: Understanding the basic material. The lecturer may encourage the understanding of the many, often conflicting, schools of thought and facilitate the gaining of insight into the assumptions, possibilities and limitations of each theory or model.

•

Skills: A higher level of learning: Learn how to simultaneously perform a number of elements requiring understanding of the entirety rather than the individual component.

•

Attitude: Ability to: •

evaluate the usefulness of some specific practice

•

instill a critical, analytical, flexible and creative mindset

Hence, a learning situation must encourage students to be critical, challenge them to be analytical, force them to be mentally flexible and demand creativity and unconventional thinking. In short, students cannot be instructed, but must learn the art of strategy by thinking and acting for themselves.

The role of the lecturer is to create the circumstances for this learning. We therefore refer to this type of teaching as facilitative.

Teaching objectives When translating the teaching objectives, approach and format into a course set-up, the lecturer must consider a large number of ‘design variables’. In other words, international, global marketing course structures can significantly differ from one another on quite a few dimensions. Some design variables can be determined by the lecturer, while others must be taken as given. Some of the most important ones are: •

Course scope. Professors/lecturers must decide whether to cover all chapters in the book and whether to skip, or even add, particular articles.

•

Class session sequence. The order in which topics will be covered must also be determined.

Following the chapters in their numerical sequence is a logical choice. So, it is probably ideal for most students to study the text in the order in which it is presented. As a general suggestion, instructors who assign chapters in an order that differs from the text order should consider explaining to students briefly but explicitly the logic for the selected structure. The instructor who 6 © Pearson Education Limited 2020

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sees the ‘big picture’ can have very good reasons for selecting a particular order, but students going through the material for the first time may wonder what the special value of the structure might be.

•

Class session length. The length of class sessions can vary from 45 minutes to more hours, although this is usually not determined by the lecturer.

•

Class session frequency. The number of class sessions can vary (typically 10–20 sessions two hours each) but is usually also difficult to influence.

•

Class session density. Class sessions can be clustered into a compact module of 2–5 days (intensive courses for management) or can be spread, so that teaching takes place intermittently – 1–3 times a week – over a longer period of time (typically a semester).

•

Class session preparation. Some lecturers request students to perform activities prior to a class session, for instance to prepare readings, a case and/or an assignment. Other lecturers integrate these activities into the class sessions.

•

Class session structure. Each class session can be a mix of activities ranging from listening and discussions to ‘role playing’ and assignments. All of these activities can be plenary, in small groups or individual. Each can involve different levels of student–lecturer interaction.

•

Course cases. Lecturers also need to determine which specific end-of-part cases will be used.

•

Course assignments. Besides class session related work, lecturers can also assign other duties, such as the writing of a seminar, desk research on the internet or field research. These assignments can be carried out in groups or individually.

•

Course examination. It must also be determined how the students’ progress will be evaluated.

Exams can be written or oral, open or closed book, individual or group work and can vary in number, length, weight and level.

Teaching methods There are many different teaching methods in use. The most popular are: lecturing, case studies, internet exercises, research projects and class discussions. Other more specialised approaches, such as ‘role playing’, are also used. The principal factor on which they differ is the extent to which they allow involvement by the participant. In selecting a teaching method, you must attempt to connect the method with the objectives of the course. The selected teaching method must also respect the background (educational, social and cultural) of the students.

Lecturing, where theories and models are presented, is suitable for large audiences where participation is not possible because of the numbers.

My suggestion for a course design based on the textbook (sample syllabus) is primarily based on a combination of lectures (theory) and case studies. In this connection, there are four types of teaching from which lecturers can choose: 7 © Pearson Education Limited 2020

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•

Theory only. A classical university course is one that revolves around the theory, whereby no use is made of cases. It is used if case teaching is too difficult – for example, if one professor must teach a group of more than 100 students.

•

Theory first, then case. Many lecturers prefer to supplement a discussion of the theory with a case analysis. Commonly, they will spend a class session or the beginning of a class session with a presentation and/or class discussion based on the theory. After this initial exploration, the lecturer will turn to the case as an exercise for gaining a deeper understanding. This teaching format is usually employed if professors prefer to have a well-structured, theory-driven case discussion.

The key questions are how the theories can be applied and what their limitations are?

•

Case first, then theory. The opposite teaching format is to start with a practical strategic management issue, in the form of a case or otherwise. The class discussion will then focus on understanding the strategic issue and seeking a course of action. Only after the students have finished the case and have developed a ‘feel’ for the issue does the lecturer place it in a broader theoretical context. In other words, the theoretical discussion is grounded in the class’s practical case analysis. This teaching format is usually employed if lecturers prefer an exploratory, theoryseeking case discussion. The key questions are what can be learnt from this specific situation and can these lessons be generalised and transferred to other situations?

•

Theory and case simultaneously. Finally, some lecturers try to combine the theory-driven and case-driven teaching formats by intertwining the two. They will often start with a short theoretical introduction to the topic and then launch into the case. The case discussion will often require a short theoretical intermezzo for clarification and conclusion, after which the case discussion is resumed. At the end of the case discussion, the theoretical insights are consolidated by means of a final overview. This teaching format is usually employed if lecturers place much emphasis on students’ ability to move skillfully from general principle to practical situations and vice versa.

As stated earlier, there is no best way to teach ‘marketing management’ – no teaching format that is best under all circumstances. The most appropriate format will depend on such variables as the number of students, their level and abilities, the skills of the lecturer and the time available. The most important thing is to make a choice that fits with the circumstances and to follow this choice through, in a consistent manner.

Case study as a teaching/learning method A case study is normally a description of a situation, which may be factually based or fictional, that the student has to analyse in order to make recommendations and answer some specific questions.

The cases in the textbook can vary from a very short and simple case to lengthy and complex ones.

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The reasons for including case study material in this text are twofold. I hope that it will help develop analytic ‘Global Marketing’ skills and decision-making and action-learning skills among students while illustrating how marketing models can be applied to ‘real-life’ situations. The students also learn to create and defend recommendations for marketing action.

Participants may, however, get the wrong impression of the ‘real-life’ situation. They may fail to realise that decisions taken in the classroom are different from those that have to be made in a live situation where the circumstances and the information available are different. What does matter, however, is that students know what they would do if faced with similar circumstances. Case studies emphasise diagnostic skills and develop confidence in understanding the problems to be solved.

The following case summaries contain weblinks to nearly all the case companies in the book. With these links, the students may be able to go into details about the international marketing function (and other important functions) in a case company. Some of the case companies also provide links to their industry organisations, where students might gain further knowledge about the industry in which the company operates.

The actual organisation in the case study part of the course is based on personal experience. I certainly do not intend to suggest a ‘best’ method. From my experience, based on talks with colleagues, four methods of using case studies appear to be common: 1. Students prepare an individual written analysis, which is evaluated by the teacher.

2. Small groups discuss the case situation (with or without set questions).

3. A group of students presents a case analysis and a recommended course of action to the class, and its merits are debated.

4. The tutor leads the discussion from the beginning of the teaching session, perhaps starting by asking one student to give his/her views on a key issue of the case. If the students know beforehand that this will happen, it may give an added spur for them to prepare the case adequately.

I would like to emphasise that these are not the only approaches to organising a case study session, nor are they necessarily the best; each person should experiment to find out which method works for them in which situation.

It is always a good idea to let a group update the information in the case, by going to the website of the company. In this way, the tutor and the rest of the class can get a clear picture of what happened in the case company, after its case was written.

Students’ learning objectives of case studies •

Awareness of/acquaintance with...?

•

Knowledge of...? To what depth and breadth?

•

Ability to identify and bring together relevant data?

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•

Judgement skills in the face of inadequate data?

•

Ability to analyse that data?

•

Competence in the use of specific methods or techniques of analysis?

•

Perception and ability to draw inferences?

•

Creativity in formulating recommendations for actions?

•

Recognition of the problems that might arise in implementing the recommendations?

•

Presentation and communication skills?

Seen from the tutor’s (lecturer’s) perspective, there are the following possible case discussion strategies: The tasks of the tutor

Possible case discussion strategies

Ask questions

Tutors need to develop their questioning skills so that the session is marked by a high level of student participation Goes into depth (why?)

Other aspects (what else?)

Limitations (what if?)

On facts, values and concepts Committing/non-committing Open ended/narrow Easing/frustrating

Make comments

Subject-oriented/process-oriented

Use chalkboard

Tutor (yes/no) Students (yes/no) Everything/selectively Random/ordered Pre-prepared

Use other teaching aids

Before/during/after (what happened?)

Invite managers of case–companies as guest lecturers

Use other techniques

Role–playing, voting

Add resources

Case data, knowledge and concepts New company/industry data from the internet

Conclude

Yes/no to the main questions Summarises/Synthesises

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Procedure for case analysis (for students) The following framework can be used for case analysis: Step 1: Read the case thoroughly with a view to understanding the key international marketing issue illustrated by the case.

•

Discriminate between information which is relevant and that which is superfluous and/or ambiguous.

•

Select and apply relevant theoretical marketing models.

Step 2: Define clearly and concisely the basic problems in the case (some of the questions in this textbook’s cases are already formulated, but these questions are only guiding and do not necessarily cover all basic problems). Identify main issues, for example, increased international competition, changes in underlying consumer tastes. Do not be confused with ‘symptoms’ – for example, declining market share and lower profitability. Identify the key decision to be made, for example, how to expand internationally, how to position the product, how to increase international competitiveness, etc.

Step 3: Use the information and facts provided in the case to analyse the situation: •

The market, demand (buyer) competition, etc.

•

Company strengths and weaknesses, external opportunities and threats (SWOT-analysis).

Step 4: Based on the analysis in Step 3, identify possible alternative strategy solutions to cope with the problem defined in Step 2. State the assumptions, which are made in order for the strategies to work. Evaluate the pros and cons of each alternative. This should form the main focus of your attention.

Step 5: Recommend a course of action selecting the alternative proposed in Step 3. Which would you consider most appropriate to solve the problem identified in Step 2 taking into consideration the analysis made in Step 3? Include some specifics regarding how the recommendations may be implemented by the marketing team.

Step 6: Edit your recommendations based on the latest web information that you can access by going to the company’s website.

If the case study is made as a written report: write clear, well-structured and convincing reports.

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Case summaries Description of Chapter cases and Part cases in ‘Global Marketing’:

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Table 1 Continued

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Table 1 Continued

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Table 1 Continued

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Table 1 Continued

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Table 1 Continued

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Table 2 Part case studies: overview

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Table 2 Continued

Possible schedule for a course in ‘International Marketing’ (It is possible to download the video cases at www.pearsoned.co.uk/hollensen or through provided videos clips) Structuring for case-based learning: Text: The lecturer presents the key point from the different chapters Class case: Chapter cases in ‘Global Marketing’ to be discussed in class. The tutor leads the discussion.

Video case: Show the video in class – afterwards discuss the questions in class. The tutor leads the discussion.

Group case: End-of-Part Case study number in ‘Global Marketing’. A group (typically two persons) makes a 20-minute presentation in class with subsequent discussions in class. The group is more than welcome to update the case through the given weblinks, or other public online sources

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Week

Session topics

Text:

(date)

(Two or three class hours per week session)

S. Hollensen, Global Marketing, 8e, 2020

1

Introduction

Text: Preface, especially the section: p. xxii: Outline and Chapter 1

– Structure of the book – The different meanings of ‘global marketing’ (globalisation and glocalisation)

Cases: Nivea (Case 1.3) and Uber (Case 1.4)

– The meaning of the value chain in international marketing 2

Motives for firms going international

Text: Chapter 2 and 3

– Triggers of export initiation

Class case: Hunter Boot Ltd (Case 1.2) and Elvis Presley Enterprises (Case 2.2)

– Export barriers Three theories explaining firms’ internationalisation process

Group case: Electrolux (Case I.1) – Group no. 1

• Uppsala model • Transaction cost theory • The network model – ‘Born Globals’ 3

International competitiveness

Text: Chapter 4

• National competitiveness (the Porter diamond)

Class case: William Demant hearing Aids (Case 4.1)

• Competition in an industry (Porter’s five forces)

Group case: Nintendo Switch (Case I.2) – Group no. 2

• Value chain analysis (the competitive triangle and competitive benchmarking) 4

Global Marketing Research

Text: Chapter 5

• Relevant data types for assessment of Class case: Teepack Spezialmaschinen GmbH (Case 5.1) market potential in a country • Secondary research • Primary research

Group case: DJI Technology Co (Case 4.2) – Group no. 3

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Week

Session topics

Text:

(date)

(Two or three class hours per week session)

S. Hollensen, Global Marketing, 8e, 2020

5

Political, economic and sociocultural environment

Text: Chapters 6 and 7

• Political risk analysis • Trade barriers

Class case: Sauer-Danfoss (Case 6.2) Group case: Cereal Partners Worldwide (Case I.4) – Group no. 4

• Major trading blocks • High- and low-context cultures • National cultures (Hofstede) 6

International market selection • Screening of potential markets • Market expansion strategies • The global product/market portfolio

7

Classification of market entry modes • Different approaches to the choice of entry mode Export modes

Text: Chapter 8 Class case: Waymo – self-driving cars (Case 8.1) Group case: SodaStream (Case II.1) – Group no. 5 Text: Chapters 9 and 10 Class case: Jarlsberg (Case 9.1) Group case: Ferrari (Case II.3) – Group no. 6

• Indirect exporting • Direct exporting (agents, distributors etc.)

• Cooperative export 8

Intermediate entry modes

Text: Chapter 11

• Contract manufacturing

Class case: KABOOKI (Case 11.2)

• Licensing

Group case: Tinder dating app (Case III.1) – Group no. 7

• Franchising • Joint ventures/strategic alliances • Joint venture formation 9

Text: Chapters 12 and 13

Hierarchical modes

• Domestic-based sales representatives Class case: Polo Ralph Lauren (Case 12.1) • Foreign sales subsidiary Group case: Spotify (Case III.2) – • Sales and production subsidiary Group no. 8 • Region centres • Transnational organisation

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Week

Session topics

Text:

(date)

(Two or three class hours per week session)

S. Hollensen, Global Marketing, 8e, 2020

• Acquisition or green field • Foreign divestment International sourcing • Subcontractor internationalisation • Development of a relationship • Project export (turnkey contracts) 10

Text: Chapter 14

Product decisions • Standardisation or adaptation of products

Class case: Zippo Manufacturing Company (Case 14.2)

• International service strategies

Group case: Autoliv (Case III.3) – Group no. 9

• PLC and IPLC • Product communication alternatives • Branding decisions (sensory branding) • Environmental strategies • ‘Long tail’ strategies 11

Pricing decisions and terms of doing business • Factors influencing international pricing • Price escalation

Text: Chapter 15 Class case: Harley-Davidson (Case 15.1) Group case: Swarovski (Case IV.1) – Group no. 10

• Experience-curve pricing • Transfer pricing • Price quotations • Terms of payment 12

Text: Chapter 16

Distribution decision • Structure of the channel (intensive, selective and exclusive) • Managing and controlling distribution channels

Class case: De Beers LV (Case 16.1) Group case: Levi Strauss (Case IV.2) – Group no. 11

• Disintermediation and reintermediation • Managing logistics • Most common export documents

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Week

Session topics

Text:

(date)

(Two or three class hours per week session)

S. Hollensen, Global Marketing, 8e, 2020

• Internationalisation of retailing • Grey markets 13

Communication decisions

Text: Chapter 17

• The communication process

Class case: Helly Hansen (Case 17.1),

• Communication tools:

Group case: Guinness beer (Case IV.3): – Group no. 12

-

Advertising

-

Public relations

-

Sales promotion

-

Direct marketing

-

Personal selling

-

Viral marketing

-

Use of social media

-

Influencer marketing

• Standardisation versus adaptation strategies (examples) 14

International sales negotiations • Cross-cultural negotiations (implications of Hofstede’s work) • Intercultural preparation

Text: Chapter 18 Class case: ZamZam Cola (Case 18.1) Group case: Tencent (Case V.1) – Group no. 13

• International business ethics • Transnational bribery • Sales negotiations in China 15

Organisation and control of the global marketing programmes • Different organisation structures for different international activities

Text: Chapter 19 Class case: Henkel (Case 19.2) Group case: Huawei smartphones (Case V.2) – Group no. 14

• Global Account Management • Controlling the global marketing programme. Design of a control system. Annual plan.

If more than 15 sessions are available, Chapter 13 (‘International sourcing decisions and the role of the sub-supplier’) could be taken out as separate sessions.

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PART 2

Teaching notes for chapter cases Case 1.1: Green Toys Inc. -

A manufacturer of eco-friendly toys is going international

www.greentoys.com Proposed answers to questions 1. What are the key success factors in the world toy industry?

The main Key Success Factors include: •

fulfilling the children’s desires for entertainment;

•

fulfilling the parents’ desires for developing the children’s educational status;

•

durability (lifetime) of the products;

•

ability of innovating new products that could be of value for the customers;

•

good reputation among customers and

•

developing long-lasting relationships.

Special for Green Toys: •

Consumers have preference of buying recycled plastics

•

Following new trends of toys for boys

2. What are Green Toys’ key competitive advantages in the international toy market?

The use of recycled milk jugs provided a unique marketing angle. Von Goeben and Hyman recognised that they could educate both children and adults about ‘closing the loop’ and make visible the tangible life cycle benefits of recycling.

Green Toys Inc. avoids additives that can leach out of plastic and harm the users of its products and also avoids painted coatings that may contain toxic chemicals. Thus Green Toys Inc. products are safe in use.

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3. Should Green Toys Inc. consider a higher degree of international expansion of their products?

As 90 per cent of the sales are generated in the US market, it is relevant to generate further growth abroad.

Green Toys Inc. has created a model of local production, but there is nothing wrong with international expansion of the concept. It requires that they find local sourcing of the recycled plastic. The potential global market for eco-friendly toys is huge, so therefore, it makes sense to expand internationally.

4.

If yes, which countries/regions should they target and how?

The screening criteria for selecting the most attractive markets (countries) could be: •

GDP (total);

•

GDP per cap. (important as the products are a little more expensive than traditionally produced toys);

•

percentage of average spending (in average for a family) used for toys per country;

•

number of children in the end-user group (e.g. age two to eight years) per country;

•

number of decision-makers (primarily females, age 25–40, with kids in the end-user group) per country and

•

awareness of eco-friendly toys per country.

Possible target markets based on these criteria include Germany and China.

Case 1.2: Hunter Boot Ltd -

The iconic British brand is moving into exclusive fashion

www.hunter-boot.com 1. What are the main reasons for the recent international marketing success of the Hunter Boot?

-

Ability of moving the ‘wellies’ into the fashion world

-

Collaboration with top designers, such as Jimmy Choo

-

Their effective marketing campaigns, using celebrity endorsement to make their boots appear to be the must have item

-

Ability of identifying celebrities wearing Hunter Boots at festivals rock concerts and other events.

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2. Recently Hunter has added outerwear (leather footwear and handbags) to its international product range. What are the pros and cons of extending the product range in this way?

Should Hunter Boots Ltd include further products like eyewear and watches?

Difference between ‘Brand extensions’ and ‘Line Extensions’ (see also figure below): Brand Extension is a marketing strategy according to which, a well-known brand uses the same brand name to enter into a totally unrelated product category. It is done primarily to leverage on the existing brand equity. Some marketers argue that since building a brand is costly affair, once you have built a brand, you should leverage its value by using the same brand name to other new categories as well. For example, Virgin, which was initially a record label, entered into other line of business like aviation, game stores, video stores, telecom, etc.

Line Extension is a marketing strategy according to which the scope of the product a brand represents is increased, that is, when you are adding varieties or variations or flavours of the same branded product, you are basically doing line extension. Like brand extension, line extension is also done to leverage on the brand equity by targeting a bigger chunk of the user base. When Coke introduced Diet Coke to target the diet conscious people, they did line extension.

While there are some benefits to both line and brand extensions, marketers today believe that both strategies dilute the brand positioning widening their focus. Experts like Jack Trout and Al Ries have argued against both the strategies saying that in an age when brands are becoming more and more niche and specific, it is not a very good idea to dilute the brand by trying to be ‘something to everyone, instead of being everything to someone’.

A company introduces a line extension (also referred to as product line extension) by using an established product’s brand name (Hunter) to launch new or slightly different products, which may or may not be in the same product category.

As their boots are not only used by practical users they are also seen and worn as a fashion item, this then has given them the option to make ‘Brand line extension’ into other luxury fashion clothing products (such as handbags) or practical walking items of clothing (such as leather footwear).

Pros: -

In case of product diversification, a strong brand name like ‘Hunter’ can help in leveraging the new products belong to that brand.

-

Reducing the financial risk associated with new product development by leveraging the parent brand name (Hunter) to enhance consumers’ perception as a result of its core brand equity.

-

It can help Hunter in spreading their customer base.

-

It also helps in enhancing the product portfolio of Hunter by introducing complimentary products in the market.

-

It may expand the Hunter shelf space presence at the retailers.

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Cons: -

If the new line extension fails, consumers’ attitudes towards the core brand name (Hunter) and the core products (wellies) may be damaged.

-

Hunter should make sure that the people at managerial level are well versed in the process to be followed in launching new products under the Hunter brand. The lack of market knowledge about the new brand line extensions could turn against Hunter.

In general, there is a potential for intra-firm competition between the parent product (Hunter) and the line extension or between two or more line extensions. The key to avoiding intra-firm competition is to clearly differentiate between products. Although similar, the products must be different enough that they will not compete with one another as much as they will with the brands of rival companies.

Source: Own creation This issue will not be a danger when Hunter would launch line extensions like eyewear and watches.

What may be a concern here is actually the opposite: that products like eyewear and watches are too far away the original product, wellies (see Figure above). It may be too expensive for Hunter to capture market shares in markets for eyewear and watches. Instead, they should concentrate on getting more market shares in already done line extensions, like other types of footwear.

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Case 1.3: Nivea Nivea (www.nivea.com) is a brand owned by Beiersdorf AG (www.beiersdorf.com), which majority shareholder is Tchibo (owns 30 per cent of the Beiersdorf shares).

2018 key figures: Net sales:

€7,233 million

EBIT:

€1,097 million

Number of employees:

App. 20,000

In 1911, Nivea launched its first line of body care products, capitalising on an innovation that created a new type of skin crème. Today the mass-market cosmetics and toiletries brand, Nivea, is Beiersdorf ’s largest brand in terms of sales, product and geographical reach. It represents over 70 per cent of the company’s consumer division sales. It is present across all cosmetics and toiletries, except oral hygiene, through its different lines: Nivea Visage, Nivea Beauté, Nivea Hair Care, Nivea Creme, Nivea Soft, Nivea Body, Nivea Sun, Nivea For Men, Nivea Hand, Nivea Deodorant, Nivea Vital, Nivea Bath Care, Nivea Lip Care, Nivea Baby and Nivea Intimate Care.

Nivea developed from a €545 million brand in 1990 to one with sales of €2.7 billion in 2005. The brand became leader in a number of areas, including skin care and sun care. Beiersdorf often uses the brand to expand into new products or regions. This allows the company to use the brand’s global appeal for its new products, while optimising its investment in brand support.

Nivea’s geographical strength is in Western Europe. It is still relatively marginal in the North American cosmetic and toiletries market.

Lately, Beiersdorf launched Nivea Vital, a range of skin care targeted at ageing consumers. This enables the company to benefit from the growth of anti-ageing products, while preserving Nivea Visage’s reputation as a caring, purifying brand for younger skins. Nivea Beauté and more recently Nivea Hair were both launched in an attempt to tap into areas different from Nivea’s traditional skin care, colour cosmetics and hair care. Whereas Nivea Beauté is still struggling to establish itself in highly competitive colour cosmetics, Nivea Hair’s recent performance bodes well for its future.

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Questions: 1. Which degree of market responsiveness and global coordination/integration does Nivea represent?

Nivea is an example of a glocal company, being global and local at the same time, or with another words: Nivea represents both a high degree of ‘market responsiveness’ and ‘global coordination/integration’.

A range of factors that favour global integration include: universal desire for personal care and beauty; the rise of global fashion; simple products.

Also, global spanning networks let Nivea centrally manage marketing and provide brand-consistent media for use by local partners, such as ad agencies and retailers.

2. Which marketing problems does Nivea anticipate when penetrating the US market?

•

Lower brand awareness

•

Need for new products more frequently because of the intensive competition

Case 1.4: Uber 1. What are the basic principles in the ‘sharing economy’?

-

Customer behaviour for many goods and services changes from owning to sharing

-

Online social networks and electronic markets more easily link consumers with suppliers of products and services

-

Mobile devices and electronic services make the use of shared goods and services more convenient (e.g. a smartphone app instead of a physical key).

Actually, rather than ‘sharing’ consumers are paying to access someone else’s goods or services for a particular period of time. It is an economic exchange, and consumers are after utilitarian and fulfilling their intermediate needs.

2. Explain the competitive advantage of Uber.

Consumers simply want to make savvy purchases, and access economy companies (like Uber) allow them to achieve this, by offering more convenience at a lower price. Companies that emphasise convenience and price over the ability to foster connections will have a competitive advantage. Startups that have tried to facilitate direct connections between consumers have found low levels of trust between strangers when there is no market mediation.

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Uber positions itself squarely around its pricing, reliability and convenience. This is encapsulated in its tagline, ‘Better, faster and cheaper than a taxi’. In comparison, Lyft, which offers an almost identical service, positions itself as friendly (‘We’re your friend with a car’), and as a community (‘Greet your driver with a fist bump’). Lyft has not seen nearly the same amount of growth as Uber, and a contributing reason is because they are putting too much emphasis on consumers’ desire to ‘share’ with each other.

It is important to highlight the benefits that ‘access’ provides in contrast to the disadvantages of ownership. For Uber, this competitive advantage is about convenient, flexible and cost-effective access to valued resources (transporting).

Fundamentally, competitiveness is about two things: -

Offering more value for customers (compared to existing offerings – like a taxi) – values creation

-

Delivering value at lower costs – value capture

More value for customers – value creation: -

App to summon service versus having to hail or be rejected by cabs

-

Quality service assured because Uber drivers are ranked on a rating system ★★★★★ and fired if below a certain threshold

-

Tip included (ease of mind) versus having to debate whether to tip a taxi driver, even though the taxi driver was possibly unhelpful and rude

-

Luxury to wait for Uber indoors (with estimated time countdown) versus having to wait outside

-

Uber’s immense collection of data allows it to introduce offerings to its customers

Less costs for Uber (in the long run) – value capture: -

Uber drivers do not need to drive around looking for customers to hail it, which saves fuel and time (Uber – inbound vs taxis – outbound)

-

Uber drivers are not stuck driving for 8–12 hours a day; they can turn their availability on or off

-

Uber does not have vehicular equipment to purchase, maintain and depreciate as Capital Expenditure, making the company more agile

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3. Why is it so important for Uber to get into so many countries so fast?

Uber has fixed costs by employing technology and developing apps etc. In order to achieve economies of scope and scale and pool risks, Uber tries to cover the high development costs over a number of markets. However, each new market also needs some adaptation, which also adds to the overall costs.

Furthermore, in emerging economies, people are generally more price-sensitive and in addition, they have many cheap private alternatives, such as taxis, mini-buses, or even auto rickshaw equivalents.

Importantly, many of these local competitors, like Uber, operate in a grey zone, which makes it very difficult for Uber to compete with them on price in these markets.

All these issues have resulted in negative ‘bottom-line’ Uber figures until now.

Case 3.1: Bumble -

The ‘Feminist Tinder’ is expanding fast

1. Which of the internationalisation models presented in this chapter best fits the internationalisation of Bumble?

According to Forbes (Goto www.forbes.com and search for ‘Bumble new initiative’) in May 2019 Bumble has grown to more than 55 million users in 150 countries and that almost 1 billion women have made the first move by messaging other users.

The principle behind the smart phone app, Bumble, is fitting is fitting perfectly with the ‘Born Global’ concept, where Bumble can build up a global consumer base very fast.

2. Why is Bumble’s global business model so successful?

In May 2019, Forbes (Goto www.forbes.com and search for ‘Bumble new initiative’) estimated that the company was valued at $1 billion.

In heterosexual matches, only female users can make the first contact with matched male users, while in same-sex matches either person can send a message first. Consequently, Bumble is a kind of Tinder for women, as it is a dating app for women who want to play it safe in the dating jungle.

Case 3.2: BYD electrical cars -

The Chinese electric car manufacturer is considering sales worldwide

BYD Auto Co., Ltd. is a Chinese privately owned automobile manufacturer and a wholly owned subsidiary of BYD Company. It was founded in January 2003, following BYD Company’s acquisition of Tsinchuan Automobile Company in 2003. Its principal activity is the design, development, manufacture and distribution of automobiles, buses, forklifts, rechargeable batteries and trucks sold under the BYD brand. In 2008, BYD Auto began selling its first mass-produced PHEV. It also has a 50:50 joint venture with Daimler AG, Shenzhen BYD Daimler New Technology Co., Ltd., which develops and manufactures luxury electric cars sold under the Denza brand.

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BYD claims that the company name stands for ‘Build Your Dream’. The manufacturer is also one of the key manufacturers of battery cells and has been the most aggressive among all Chinese EV makers in its push into cars that charge from the grid electricity.

BYD was the China’s top EV manufacturer in 2018 with 160,000 units delivered, out of a total sale of 600,000 cars. The split between EVs and PHEVs was 50:50. In 2017, the Chinese competitor BAIC took over the leadership in selling EVs to the Chinese market, but BYD took the leadership back in 2018. On the global market, BYD is the no. 2 in EVs with a sale of around 230,000 cars, after no. 1, Tesla, which sold 245,000 cars.

In 2018, the total revenue of BYD was USD 18 billion.

Key players in BYD’s relevant environment include the following: •

EV (electric vehicle) drivers

•

Utilities and energy providers

•

Charging point operators

•

EV manufacturers

•

Service providers

•

Municipalities and governments

Each of them can leverage the following advantages: • EV drivers: Charging their vehicle Europe-wide, regardless of their energy provider; locating charging points with detailed information, such as available plugs, forms of payment and consumption cost • Utilities and energy providers: One communication channel, standardised bilateral contracts and payment support, reducing potential management issues with financial settlement and international conversion, improving overall utilisation of charging infrastructure using analytics services, less administrative bureaucracy • Charging point operators: One communication channel, interoperable standards and payment support, reducing potential management issues with financial settlement and international conversion, improving overall utilisation of charging infrastructure using analytics services, less administrative bureaucracy • EV manufacturers: Scalable open-standards cloud environment to link various services, interoperable standards and payment support; ability to get insights from analytics services; less administrative bureaucracy • Service providers: Scalable open-standards cloud environment to link various services, interoperable standards and payment support; development of new and improved services including analytics services; less administrative bureaucracy

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• Municipalities and governments: Improved air quality and reduced CO2 emissions with an increasing number of EVs on the streets, less administrative bureaucracy 1. What are BYD’s competitive advantages in the electric car business?

For EVs, the key is in the battery technology, which is also BYD’s great competitive advantage.

When BYD was founded in 1995, it started out as a rechargeable-battery factory, competing in the Chinese market against Japanese imports. Within 10 years, BYD captured half of the world’s mobilephone battery market and became the largest Chinese manufacturer of all types of rechargeable batteries. BYD Auto was formed in 2003. Here, BYD build on its battery expertise to produce some of China’s most innovative EVs. Summing up the competitive advantages of BYD: •

BYD’s key competitive advantage comes from its battery business, where it is one of the key suppliers to other EV OEMs. Then around 2010, BYD made a forward vertical integration, by using its battery as the first step to make a complete EV.

•

BYD is developing its EVs after the Chinese local taste.

•

Low cost – highly skilled labour in R&D and Production in China

2. List the criteria that you should use for choosing new international markets for BYD electrical cars.

-

Access to electrical power

-

Number of EV Charging Stations per country

-

Government subsidies for buying EVs

3. If you were to advise BYD, would you recommend them to use the ‘organic’ or ‘born global’ pathway for the internationalisation of its EVs? Improved air quality and reduced CO2 emissions with an increasing number of EVs on the streets is a standardised need all over the world, across all countries and from that perspective, it would mostly make sense to follow the ‘born global’ pathway.

4. Will the use of Leonardo DiCaprio help with penetration of the US EV market?

Yes, probably a good idea, as Leonardo DiCaprio has celebrity status in China.

Case 3.3: Reebok 1. Which of the internationalisation theories best explains Adidas’s acquisition of Reebok?

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internationalisation model. In this case, the market, which would contribute to more market commitment for Adidas by acquiring Reebok, could be the US market.

2. What could be the motives behind Adidas’s acquisition of Reebok?

•

The acquisition helps Adidas to take on top sporting goods brand Nike as it gives Adidas a stronger presence in North America, which accounts for nearly half of the world market for all sports footwear and apparel.

•

It gives Reebok a stronger presence on the global stage, where it currently ‘only’ has a strong presence in the United Kingdom.

•

It provides a broader product and price range: Adidas is concentrating on upper-end performance shoes, while Reebok covers the middle-priced market.

•

Adidas is grounded in sports performance with such products as running shoes and endorsement deals with such superstars as British soccer player David Beckham. Meanwhile, Reebok plays heavily to the combination of sports and entertainment with endorsement deals and products by Nelly, Jay-Z and 50 Cent.

3. Which of the three internationalisation theories is best for explaining whether Reebok follows the establishment of its retailers, for example Foot Locker, in international markets?

The network model.

Foot Locker is the world’s leading retailers of athletic footwear and apparel. It operates in 20 countries in North America, Europe and Australia. Most of the stores are still in the US market. It was first introduced to the retail marketplace in 1974, and since then, its stores have become destination locations for its core customer group, the 12 to 20-year-old.

If Foot Locker expands to new international markets, it would be relevant for Reebok to follow, also illustrated by Figure 3.5 in the textbook.

4. Is Reebok able to adopt its US marketing approach (connecting to the youth segment through famous rappers, like 50 Cent) in other international markets?

The question is, if 50 Cent or Jay-Z will have the same impact in other international markets, for example, in the European market. If not, it would be relevant for Reebok to choose European rap-singers.

Case 4.1: William Demant hearing aids -

Different threats appear on the horizon

1. Explain consumer buying behaviour in connection with the purchase of hearing aids Chapter 4 explains a consumer buying behaviour model with the following steps:

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1.

2.

3.

4.

5.

Problem identification Information search Evaluation of alternatives Decision and purchase Post-purchase evaluation

Re. Step 1–5: Despite the large numbers with hearing loss, only a small share – for example, in USA roughly 20 per cent – actually use a hearing aid.

Many factors are responsible for this large gap, including the lack of routine hearing screenings for older adults and social stigma that discourages people with hearing loss from seeking treatment.

The penetration rate in some countries is high because hearing aids are fully (in countries like Denmark, Norway and Switzerland) or primarily (i.e. in the United Kingdom) government subsidised.

In such countries, people with hearing loss will get help from professional audiologists to get through the buying behaviour steps.

In many non-government subsidised countries, Over-The-Counter (OTC) hearing aids are playing a more important role. OTC hearing aids are defined as products that are safe and effective for use by the general public without seeking treatment by a health professional. By definition, this ‘classification’ assumes that consumers can self-diagnose, self-treat and self-manage without professional guidance. In such a case, the people with hearing loss will handle most of the buying behaviour steps themselves, or with help from nearest family.

2. Prepare a SWOT analysis for William Demant.

Strengths: -

Strong R&D

-

Stable cash flow

-

Strong brand (Oticon)

-

Represented on many international markets

-

Strong relations to professional audiologists

Weaknesses: -

Relatively weak in the In-The-Ear market segment

-

Relatively weak in the OTC market

Opportunities:

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-

Low penetration of hearing aids in many countries provides a big potential market

-

Increasing government subsidies in some countries

Threats: -

New distribution channels (e.g. OTC, internet) win market shares

-

Other treatments of hearing problems than hearing aids

-

Increasing competition among hearing aid producers

3. How should William Demant utilise the partnership with Philips in a ‘value net’ perspective?

William Demant could utilise the strength of the ‘Philips’ brand in a ‘complementor/partner horizontal relationship. Philips could complement the traditional ‘William Demant’ distribution chain through audiologists by letting Philips sell lower-priced hearing aids though its ‘high volume’ sales channels.

However, William Demant should still continue to invest in the Oticon brand building (long-term investments in R&D and communication), and aggressively communicating the differentiating benefits by the use audiologists as the higher-priced intermediaries with the highest knowledge about how to fit hearing aids to persons with a hearing loss.

4. Which of the threats are most serious for William Demant and how should they react to them?

Bose’s realistic future plan to sell OTC hearing aids seems to be the most serious threat for William Demant. Bose’s idea is to launch hearing aids that allow users to control the settings through a smartphone app, rather than having an audiologist to set them.

As an answer to this threat, maybe William Demant could enhance the partnership with Philips in the way that they together could create a joint venture that would have the purpose to develop lowerpriced self-fitting hearing aids, which could be sold OTC in Philips’ mass volume distribution channels.

Case 4.2: DJI Technology Co. Ltd. 1. What are the main differences in the customers’ needs and values in the consumer (retail) and commercial (professional) drone market?

The global commercial/professional drone market will take shape around the following applications in these industries: agriculture, energy, utilities, mining, construction, real estate, news media and film production. The following functions are the most obvious uses of the drones: Cinematography and photography, inspection and maintenance, as well as geographic information systems (GIS).

Furthermore, Amazon and DHL have already begun testing drone delivery, and so has Switzerland’s postal service.

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The consumer/retail market is very different from the commercial market. This segment mainly consists of the Toy Drones – Millions of these machines are sold, and they are somewhat disposable.

They are used as pilot trainers and for fun, indoor flying and in the garden. In general, the prices run from $50 to $200. Nothing innovative or new has come out of this segment. These models are fun and very capable – but disposable, unless the consumer has a ready source of spare parts and the capability to troubleshoot and repair them.

2. What are the main reasons for Chinese manufacturers’ and especially DJI’s competitiveness in the drone market?

Chinese manufacturers are innovating faster than Western-based companies, which have failed to compete with the low cost of hardware and software design, manufacturing and logistic chain that define the broader Chinese economy.

The main reason for DJI’s competitiveness is that DJI has achieved ‘first-mover’ advantages in the drone industry. DJI innovates quicker than any other drone company and integrates their competitors’ capabilities quickly, while also developing capabilities needed for safe flight faster than most; enabling better aerial data acquisition, video sharing and user experience. Furthermore, DJI’s competitiveness is mainly based on product-related features: -

DJI drones are easy to set up. DJI was the first to put together a ‘package’ that doesn’t require any special knowledge to use.

DJI’s drones are priced competitively. The best-selling Phantom sells for less than US$ 1,000 DJI drones are able to shoot professional-quality footage.

3. How should the combined DJI M600 Pro and Hasselblad H6D-100c product (with a minimum price of $30,000) be marketed worldwide?

With such a price tag, this product should not be distributed online. Instead, the product should be sold through direct contact to the professional filmmakers in Hollywood etc.

The communication should concentrate on e-word-of-mouth storytelling (on social media) around the iconic Hasselblad camera maker.

Case study 4.3 – Nike NIKE (www.nike.com) is the largest seller of athletic footwear and athletic apparel in the world. Nike sells their products to retail accounts, through NIKE-owned retail stores, and through a mix of independent distributors and licensees, in over 160 countries around the world. Nearly all the production of Nike’s products (especially footwear) is outsourced to foreign independent contractors.

In footwear, most of the production is outsourced to China, Vietnam, Indonesia and Thailand. Most of this apparel production occurred in Bangladesh, China, Honduras, India, Indonesia, Malaysia, Mexico, Pakistan, Sri Lanka, Taiwan, Thailand, Turkey and Vietnam.

In fiscal year 2012, Nike recorded revenues of $24.1 billion. The net profit was $2.2 billion. At the end of fiscal year 2012, the number of employees was about 30,000.

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Forty years of effort and hard work has created a symbol that is recognised across the globe – the Swoosh. To be the biggest global sports brand, Nike focused on creating an innovative corporate culture, producing the best athletic shoes and conveying its deep beliefs and values to consumers. The company has created a culture that is based on its mission statement. The mission statement focuses on innovation and everyone is charged with being innovative. This focus has become razor sharp as Nike realises everything a company does, communicates something about the brand. A brand is the conglomeration of all activities a company and its employees take. Nike has built up substantial brand equity that has taken time and resources, but must be maintained and strengthened in order to stay on top in this highly competitive marketplace.

Producing a superior product means the difference between winning and losing by one second for athletes. That is Nike’s main focus for product development. Partnerships with athletes are not just because of their status but also because they are integral in the product development process. Every little difference in performance makes a difference for Nike because the company puts as much emphasis on the customer as on the product. Athletic endorsements also do help the brand because of the association and another dimension to the company. To increase market share in Europe, Nike needed to produce a strong soccer product, which it did with the help of star global soccer athletes.

The last element adding to Nike’s growth is greater reach into diverse market segments. The three main segments are (1) performance athletes, (2) participant athletes and (3) those that influence the world and the culture of sport. A different promotional strategy is executed for each segment with many advertisements focusing on lifestyle first and the product second. Additionally, market research helped the company to develop the pyramid of influence, which showed that top athletes influence the majority of the market. Consequently, the company spent millions on celebrity sports endorsements. All of Nike’s advertising, sponsorships, endorsements and other communication channels are integrated to tell a story about the Nike brand.

Questions: 1. Discuss how Nike’s growth can be attributed to its targeting of diverse market global segments.

The three main segments are (1) performance athletes, (2) participant athletes and (3) those that influence the world and the culture of sport. A different promotional strategy is executed for each segment with many advertisements focusing on lifestyle first and the product second. Additionally, market research helped the company to develop the pyramid of influence, which showed that top athletes influence the majority of the market. Consequently, the company spends millions on celebrity sports endorsements.

2. Why and how did Nike penetrate the European soccer footwear market?

The Nike Swoosh is one of the most recognised product symbols in the world, but that does not make the company’s products automatically successful outside the United States.

After more than one failure abroad, Nike determined that market research is a crucial element of its global operations. For example, to increase market share in Europe, Nike needed to produce a strong soccer product. The company achieved that goal by soliciting the input of star global soccer athletes

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first, then producing a product that met their needs. The product then translated to the broader marketplace. Also sponsoring of major European soccer players played a big role.

3. What are the key driving forces behind Nike’s international competitiveness (versus Adidas) in soccer footwear? i.

The brand and its values

ii. Ability to outsource and coordinate the total supply chain iii. Being innovative as a company iv. Innovative Nike employees v. Internalising the brand values among all Nike employees

Case 5.1: Teepack Spezialmaschinen GmbH -

Organising a global survey of customer satisfaction

www.teepack.com 1. How would you forecast worldwide demand for tea bag machines?

Determinants for the demand of tea bag machines: World demand for the end product, tea bags (demand for the tea bag machines is derived demand) Exchange rate from loose tea to tea bags Number of existing tea bag machines around the world Age distribution of existing tea bag machines (the assumption is, that the older a machine is, the more ‘ripe’ it is for replacement) 2. How can Teepack and Teekanne use their relationship to each other with regard to collecting relevant market research data for both companies?

As Teepack is one step further back in the value chain (as a supplier for the tea bag manufacturers, like Teekanne), Teepack can use the relationship to Teekanne to collect data about tea consumers’ preferences (especially regarding the double chamber system) that they can use in their R&D for designing the best possible tea bag machines.

On the other hand, Teekanne can use the relationship to Teepack for gathering information about new tea bag packaging trends, as Teepack is visiting many different tea bag manufacturers to hear about their future needs for tea bag machines.

3. Argue the case for the market analysis method you would choose if you had to evaluate the competitiveness of Teepack Spezialmaschinen on the global tea bag packaging machine market.

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The market analysis method that you could choose to evaluate the competitiveness of Teepack Spezialmaschinen is in-depth interviewing of the major global tea bag manufacturers (e.g.

Unilever/Lipton) because they are the potential customers of Teepack Spezialmaschinen. Many of these customers would also have experience of some of Teepack’s competitors, and therefore, the customers might be able to evaluate Teepack versus one of the competitors (kind of competitive benchmarking – see Chapter 4) 4. In order to achieve better customer feedback, the top management of Teepack is interested in learning how to measure customer satisfaction. Propose a questionnaire design that contains some of the themes it would be relevant to include in the questionnaire.

The questionnaire design should capture the customers’ satisfaction with the different aspects of Teepack’s product and service package, like the following items: Production capacity of the tea bag machine Reliability of the tea bag machine (few breakdowns) Quality of the finished product Installation of the tea bag machine Price level as compared to the performance After-sales service Availability of spare parts Personal visits by Teepack’s representatives etc.

These dimensions can be measured on the following five-point scale: Very satisfied, Satisfied, Neither satisfied nor dissatisfied, Dissatisfied and Very dissatisfied Of course, you could consider a seven-point scale.

The survey could be done once a year, maybe by email or online, by clicking on a homepage where the questionnaire could be filled out.

The customers’ responses should be kept centrally at the HQ in Germany because the biggest customers are global customers with operations around the world.

By storing the data by customer, Teepack could follow each customer’s satisfaction over time and see if it changes for worse or better.

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Case 5.2: LEGO Friends -

One of the world’s largest toy manufacturers moves into the girls’ domain

www.lego.com 1. Emerging markets like China, India and Indonesia offer long-term opportunities for organic growth. However, LEGO still has a small share in developing economies. What kind of market data would you collect in order to increase market shares in the three countries?

Using Figure 5.1 as a starting point for collection of data about the following: -

Who are the main decision-maker about buying of toys: Parents (Mother?/Father?) or the kids? How is the buying decision taken?

-

To which degree are toys bought at special events (birthday, Christmas, Chinese New Year etc.)?

-

What are LEGO’s key competence against main toy manufacturers’ product lines (interviewing end-customers and toy store personnel, who sell both LEGO and competitor products)?

-

What are the key trends in the Toy industry?

-

Which types of toys will be more popular in future? What are the boys’/girls’ preferences for new toys?

-

How big percentage of total toys sales is taken place online?

2. Was it a good idea to launch LEGO friends? Why/Why not?

Yes, until now LEGO sales of toys have primarily been to boys, so LEGO has somehow missed half of the toys market.

3. LEGO Friends has been introduced as a supplement to the current product range. How would you recommend that LEGO Management measures the degree of market success for LEGO Friends By the use of traditional communication measures – among girls (end users) and their parents (actual buyers – primarily mothers) – like: -

Awareness (non-aided/aided) of the LEGO Friends brand

-

If awareness: where have they seen the brand (in the toy store, on TV advertising, online – social media etc.)

-

Actual sales of LEGO Friends through different distribution channels, off-line and online

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-

Development of market share among girls’ toys: Actual sales of LEGO Friends, compared to main competitors, like Barbie etc.

Case 5.3: e-Bikes in China 1. Which market research method would you use to estimate the yearly demand for batteries regarding e-bikes in China? What would be your estimate?

We know that there are approximately 140 million e-bikes in China. The total sales of batteries per year consist of the sum of batteries sold for new e-bikes and the renovation market.

Goto www.insg.org, then select ‘Insights and Newsletter’ from Download menu. Then select ‘Issue No. 23, September 2014 The Global E-bike Market’ to view the paper. we know that the new sale of e-bikes for the Chinese market is around 30 million (each one needs one battery): New sale of batteries:

30 million batteries

+ Replacement market (as battery technology is developing very fast, lifetime of batteries is estimated to be only three years): 140/3

46 million batteries

Total number of sold batteries per year

76 million batteries

2. Which market research method would you use to estimate the e-bike market in India? What would be your estimate?

Estimation by Analogy is used: Based of the population sizes (India: 1.35 billion, China: 1.42 billion) the total e-bike market is estimated at: 1.35/1.42 × 30 = 28.5 million sold e-bikes per year in India

Case 5.4: Hondajets -

Honda enters the small-sized business jet market

1. Which demand factors will influence future sales of business jets in general?

-

Economic and business activity around the world (world GDP growth)

-

Wealth creation: For example, Morgan Stanley Capital International Index (MSCI) is an aggregate stock market index, based on representative securities listed in major financial exchanges around the world. The MSCI World Index is a good estimate of wealth creation.

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-

Number of billionaires: In 2015, there were 1,826 in the world, of which 526 were in the United States.

-

Penetration rates of business jets in different regions of the world: The USA is the highest here – China has a relative low number of business jets relative to the size of the economy.

-

Business Jet utilisation: Number of take-off and landings worldwide

-

Tendency of fractional ownership: Here several users acquire a portion of the same aircraft.

This normally accounts for 10–15 per cent of industry yearly deliveries. The biggest operator in the fractional ownership industry is NetJets.

2. How could Honda Aircraft Company estimate the future total market for these small-sized business jets (total number of small business jets sold per year)?

On 1 January 2016, the worldwide fleet of business jets was approximately 21,000 business jets.

The total sale per year is consisting of: New sale + Exchange sale (of business jets going out of the fleet).

New sale (increasing the worldwide fleet) is always hard to predict, but if we assume a commercial lifetime of a business jet of 20 years, then 5 per cent of the fleet will be changed each year: Alone for the exchange sale that would mean: 21,000 × 0.05 = 1,050 business jets.

If we assume that around 10 per cent of this number belongs to the ‘small-sized business jets’ segment, we can conclude that the sales in this segment would be: 1,050 × 0.10 = 105 business jets per year 3. Which screening criteria would you recommend Honda Aircraft Company to use in order to find the most attractive markets (countries) for their small business Jets in the International Market Selection (IMS) process? a. Macro (‘hard’) screening criteria: GDP (total), GDP per capita, Growth in GDP per year, number of billionaires, per cent of exports out of the country (indicating high level of foreign trade) b. Macro (‘soft’) screening criteria: Cultural distance to the country c. Micro screening criteria: Market share of Honda Aircraft in other aircraft types in specific countries, preparedness of Honda Aircraft to starting up new sale to a specific country, availability and quality of Honda Aircraft sales and service organisation in the country

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4. What kind of market research (primary and/or secondary) would you recommend Honda Aircraft Company to do, in order to use this input for its decision about IMS? Information types (in 3.a – see under 3) can be found by secondary data collection (online information search).

For information types in 3.a and 3.b, it is also necessary to integrate primary data collection.

For information types in 3.a., it can be necessary to interview some industry specialists.

For 3.b., it might be relevant to interview internal managers, who can evaluate the Honda Aircraft key competences compared with the main competitors, like Cessna.

Case 6.1: G-20 and the economic and financial crises -

What on earth is globalisation about? Protests during a meeting in Buenos Aires, Argentina, November 2018 www.g20.org

The G-20 was established in 1999, in the wake of the 1997 Asian Financial Crisis, to bring together major advanced and emerging economies to stabilise the global financial market.

1. What were the key arguments of the anti-globalisation groups?

With the G-20 growing in stature since the 2008 Washington summit, its leaders announced on 25 September 2009, that the group would replace the G8 as the main economic council of wealthy nations.

The predecessor of G8, the Group of Seven (G7) was an unofficial forum that brought together the heads of the richest industrialised countries: France, Germany, Italy, Japan, the United Kingdom, the United States and Canada, starting in 1976. The G8, meeting for the first time in 1997, was formed with the addition of Russia. While this summit was not meant to be linked formally with wider international institutions, it seems that the demise of the Soviet Union and end of the Cold War had brought major changes to the agenda of this financial union. Indeed, the G8 summits during the 21st century have inspired widespread debates, protests and demonstrations; and the two- or three-day event becomes more than the sum of its parts, elevating the participants, the issues and the venue as focal points for activist pressure.

It is often argued that the G-20, although it provides broader representation than the G8, is not entitled to make decisions that affect the whole world because its member states are selected arbitrarily. The G-20 does not have a charter and its debates are not public, making it an ‘undemocratic institution’.

The most widespread criticisms centre on the assertion that members of G8, and later G20, are responsible for global problems such as poverty in Africa and developing countries – through debt and trade policy, global warming – due to carbon dioxide emissions and the AIDS problem – due to a strict medicine patent policy and other issues related to globalisation.

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The demonstrators’ main argument is that the poor countries will be the losers in this set-up.

Furthermore, they claim that a few large multinational companies will be able to control more and more of the world trade-flows, especially between the poor and the rich countries.

2. How could these protests affect the operations of multinational companies?

It could actually hurt the companies in the countries where they are operating. Many companies might fear to make investments in countries where this discussion is ‘alive’.

3. How could the G-20 do a better marketing job in communicating its views to the global audience?

The best thing is to go into a dialogue with the people, against globalism. First thing to accept is that some people can have different values than others.

The World Trade Organization and its predecessor, the GATT, have played an important role in creating a more open and prosperous world. Since the GATT was set up in 1948, world trade has soared 15-fold.

Even in poor countries, people live longer, eat better and have more access to clean water than they did 50 years ago. GDP per head in less developed countries has trebled since 1950, life expectancy has risen by over 20 years and adult literacy rates have increased by over 30 percentage points.

Openness does bring with it new challenges. Our lives are more closely linked with those of others across the globe. When the financial system broke down in the United States in late 2008, the financial aftershocks meant that European homeowners saw the price of their houses fall dramatically. Also, unemployment in other parts of the world rose as the financial crises spread out very quickly.

Case 6.2: Danfoss Power Solutions -

Which political/economic factors would affect a manufacturer of hydraulic components?

www.powersolutions.danfoss.com 1. Which political and economic factors in the global environment would have the biggest effect on the future global sales of Danfoss Power Solutions’ hydraulic components/systems to: (a) manufacturers of construction and mining equipment (e.g. Caterpillar)?

•

General macroeconomic indicators (Sauer-Danfoss was seriously hit by the financial crises in 2008–09, but now things are better)

•

General construction activity: World/different regions and countries

•

Builders’ financial situation

•

The building situation is generally dependent of the interest rates

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(b) manufacturers of agricultural machinery (e.g. John Deere)?

•

The number of farmers/especially the big ones

•

The farmers’ financial situation (dependent on the world market prices for meat, milk and other agricultural end products)

•

The level of government subsidies for the farmers (in Europe/EU this is a constant area for discussion, but also in the US)

2. What are the biggest problems in forecasting future demand for a subsupplier such as Danfoss Power Solutions?

As Sauer-Danfoss is a subsupplier of mobile hydraulic solutions, its sales are dependent on, for example, the tractor sales of its main customers like John Deere. Keeping in close contact with these main customers is the main challenge for Sauer-Danfoss. These customers’ sales forecasts of their final products are a direct input to the sales forecasts of Sauer-Danfoss. However, the final sales forecast should be revised according to the customers’ stock levels of Sauer-Danfoss products.

Case 6.3: Debate on globalisation Though global business has been growing rapidly in recent decades and globalisation seems inevitable, it is not without controversy, and the critics offer a few key arguments.

1. Some people lose while others gain, both in absolute and relative terms.

2. Countries diminish their sovereignty.

3. National cultures change and become diluted.

4. Governments have fewer ways to monitor companies and hold them accountable.

The debate on globalisation will continue as people try to make sure that the benefits of global trade outweigh the costs for all countries, not just a select few. Through the process, global organisations like the WTO and UN will work to provide a framework to level the playing field for all countries, promote and protect the rights of workers and basic human values everywhere, and encourage companies to be responsible global citizens.

Every day, we hear people talk about how the world is shrinking. Advancements in transportation and communications are bringing people from all over the world in closer contact with each other, making them more aware of what is available, and what they might sell to people abroad. They may argue about borders, religions and politics. But, take a look around and you will see many people are demanding goods and services from the same countries that they may have felt so uncomfortable coming into close contact with. They are sipping Cokes, paying for meals with American Express cards, driving Toyotas and Mercedes’s and wearing shoes made in Italy, Vietnam or Brazil.

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Global business has been growing rapidly in recent decades because of technological expansion, liberalisation of governmental policies on international trade and resource movements, development of institutions needed to support and facilitate international transactions and increased global competition. Because of all these factors, companies increasingly use foreign countries as a source of both production and sales.

Globalisation has become inevitable. All countries permit some level of foreign trade, although some permit more than others. Most governments have conclusively decided that global trade and investment can benefit their countries and their people. Private companies have also realised that the best opportunities for growth and profits often come from outside their home countries.

Despite the pervasive influence of globalisation, it is hard to pin down one definition that will suit everybody. For our purposes, globalisation refers to an interdependent world economy in which people in one part of the world interact with people in another part as buyers, sellers or intermediaries.

Re. 1. Some gain some lose Despite the growth of global trade and investment, there’s very little consensus on whether globalisation has benefitted the majority of people it has impacted. Advocates of global trade and investment, who often come from developed areas like the United States, Canada and Western Europe, argue that globalisation, by giving consumers more choices and forcing companies to compete, has created economic growth and millions of jobs. This growth has provided investment for building roads, airports, factories and basic infrastructure in less developed countries. During the 1990s, foreign investors poured over $1 trillion into developing countries like India, China, Brazil and Mexico, raising the standard of living faster than most thought possible in a single decade.

Despite this progress, critics argue that increased globalisation has contributed to income inequalities–both between and within countries. Critics also argue that when companies move production from a developed to a developing country to take advantage of cheaper labour supply, they barely improve the economic well-being of their new workers while causing immeasurable hardship to the workers they displaced. Although this displacement is similar to what occurs from technological changes, workers react differently. In developed areas like the United States or Europe, frustration from workers displaced by globalisation has led to increased support for protectionism rather than job retraining. Critics also claim that the cost savings from using cheaper labour go mainly to shareholders in developed countries rather than to consumers or to stakeholders in developing countries.

When buying from companies in developing countries, many western firms try to address this labour issue by stipulating in their contracts that working conditions must be of certain acceptable standards – like not using child-labour or protection from hazardous materials. However, in practice, it’s difficult for the companies to monitor compliance with these kinds of contract stipulations especially when the manufacturing facilities are far away.

Although some developing countries have grown rapidly while opening their economies to world trade and investment, some of the poorest countries have not. Simply stated, they lack the basic infrastructure and education to participate fully in globalisation and, as a result, have become poorer in relation to the richer countries.

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The near-term reality is that while globalisation may be good for the world as a whole, not everyone wins in the process. Human nature is such that we often fear change, even if it can improve overall conditions for the majority of people. Over the long run, most agree that globalisation will help improve conditions for the broadest segment of the world.

Re. 2 National sovereignty For many people, particularly those in developing regions, such as in Asia, Latin America and Africa, globalisation is often viewed with suspicion, not only because they fear that big foreign companies will benefit themselves at the expense of their local population, but also because they fear that these companies will be instruments of their home countries’ political interests. Bear in mind that many developing countries have a short history of independence and their citizens remember when colonial powers controlled them. Thus, they often restrict foreign trade and investment to benefit their national interests.

Critics of globalisation argue that countries cannot enforce policies that they think are in the better interests of their citizens. They argue that global governing bodies like the World Trade Organization (WTO), the International Monetary Fund (IMF) and regional trading groups such as the European Union dictate policy to countries rather than let them come up with their own policies. Many labour and environmental groups are concerned that these organisations are spinning out of control, that they are overly powerful global organisations that are accountable only to wealthy corporate interests intent on increasing their coffers at the expense of local governments and people. These opponents of supranational organisations believe their national governments should have the sovereign right to enact and implement domestic legislation.

Many people are concerned about the perceived loss of national sovereignty caused by these supranational organisations. However, globalists argue that economic interdependence helps keep a balance among governments. A country may be less prone to take economic or political actions against a country with which it is mutually interdependent. Further, they argue that governments will be encouraged to provide a base level of social standards for workers to maintain their standing in this global organisation. For example, some activists see the United Nations, particularly some of its subgroups such as the International Labour Organization (ILO), as the missing link in the international system that can help control the excesses of globalisation and spread the gains more evenly.

Re. 3 Diluting local culture It’s clear from what we see around the world that more contact among countries brings about cultural change. Depending on one’s viewpoint, this may be for better or worse. Currently, the culture of the United States, which is the strongest international trading and investing nation, has permeated many cultures around the world. As a result, many fear an Americanisation of their culture and people, sometimes referred to as a ‘Coca-Colonisation’.

Travel further east and you will find that Asian countries have fretted over the influx of US pop culture through programmes like MTV and fast-food eateries like McDonalds, Kentucky Fried Chicken and Pizza Hut, which have penetrated overseas markets and gained widespread acceptance.

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At the same time, Americans are gravitating to foreign products and concepts – French wines, Thai food and Indian mysticism – which are changing the essence of US culture.

Re. 4 Corporate accountability The debate on globalisation often ends up focussing on the ability to control international companies.

In summary, the impact of globalisation is not always black or white. Take as an example, India. Until the early 1990s, India chose to keep out most foreign investment for a variety of political and economic reasons. By the early 1990s, its leaders concluded that the Asian miracle of economic growth might bypass the country unless they opened up their markets. Thus, the government began to liberalise its policies and welcome foreign companies and investment.

If you ask most Indians, they will tell you that liberalisation and global trade have been good for the country by creating a larger and richer middle class than existed a decade before. Indian software engineers now provide a significant portion of technology services for global firms ranging from hitech giants like IBM and Microsoft to banks, insurance companies and conglomerates like Hyundai, Citibank, Hong Kong Shanghai Bank, Ford and Philips. Even the plight of some of the poorest has been lifted as the national standard of living has increased.

Questions: 1. What are the dimensions that go into the concept of ‘globalisation’?

The answer of this question can be based on the popular PESTEL analysis: P (Political): Include elements like tax policies, changes in trade restrictions and tariffs and stability of governments in different parts of the world E (Economic): Include elements such as interest rates, inflation rates, gross domestic product, unemployment rates, general growth or decline of economies S (sociocultural): Include overall trends in demographics (population size, age and ethnic mix) as well as cultural trends such as attitudes towards consumer activism T (Technological): Include rate of new product development, development of new internet solutions and advances in service industry delivery E (Environmental): Include factors like weather patterns, pollution, CO2/climate issues and ‘green’ strategy L (Legal): Include dimensions like health and safety issues, discrimination and antitrust 2. In your opinion, is globalisation inevitable? Are the overall benefits of globalisation positive? What are the gains and losses from globalisation?

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Globalisation has become inevitable. All countries permit some level of foreign trade, although some permit more than others. Most governments have conclusively decided that global trade and investment can benefit their countries and their people. Private companies have also realised that the best opportunities for growth and profits often come from outside their home countries. Globalisation is not without controversy, and the critics offer a few key arguments: - Some people lose while others gain, both in absolute and relative terms.

- Countries diminish their sovereignty.

- National cultures change and become diluted.

- Governments have fewer ways to monitor companies and hold them accountable.

3. What external influences does a company encounter when determining how and where to conduct business globally?

Companies encounter a number of influences and factors including the following: -

Physical and societal factors

-

Competitive environment

-

Regulatory factors

-

Social factors

-

Economic factors

4. What are the motives behind for example Nike’s globalisation strategy? What are the pros and cons behind the sourcing of products from developing countries?

The PESTEL framework will help us to analyse the macroenvironmental factors affecting Nike’s international marketing strategies and its business performance. Firstly, the government action certainly will have a great influence. Being a sportswear industry, Nike is highly labour intensive and majority of manufacturing is held in low wage countries. As Nike is operating in different continents, the government legislations will be different for different countries. Nike should strictly follow the rules such as minimum wage and child labour; it will make Nike a more socially responsible organisation. A great impact on market strategy will be done by environmental factors. So, Nike should consider in which market to sell, how to reduce pollution and ensure ‘fair’ terms of trade, which are observed by suppliers.

A key to implement international strategy could be the demographics and sociocultural influences. In the western economies, a great issue of ageing affected the buyer’s choice as it could lead to change the demand from sportswear to comfort wear shoes. Now-a-days, growing health awareness will result in the demand of sports and fitness commodities. Another factor affecting marketing strategy could be the technology, which is improving every day and never predictable. For marketing and selling, Nike is already using an online (internet) strategy, any future marketing

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strategy should consider information technology advancements as they can go on Twitter, Facebook as these websites are mostly accessed by youngsters, which could be the fan of Nike.

Finally, if Nike wants to think about some acquisitions or merger, it should take into account the investigation by Competition Commission, which could block its activities taking into consideration the government policies. Because such kind of business acquisition will be against interest of consumers and can lead to monopoly. Nike should not forget suppliers of raw materials like rubber, leather and cotton etc. because shortage of supply can play a big role in setting the pricing policies and applying the market strategies. Nike should establish good relations with suppliers because they can affect business strategies. As Nike operates its business globally, any strategy can have different implication on different culture, so it should consider the adaptability, feasibility and suitability by the local people of that country.

Pros and cons of sourcing products from developing countries: Pros: (i)

Low cost manufacturing

(ii)

Tapping skills and resources that are not available in the home nation

(iii)

Seeking the benefit of alternate suppliers

(iv)

Learning global business skills

(v)

Meeting competition prudently and efficiently

Cons: (i)

No exposure of international culture, traditions and beliefs

(ii)

Hidden costs related to different time zones, cultures and languages

(iii)

Financial and political risks associated with emerging economies

(iv)

Risk of losing intellectual properties, patents and copyrights

(v)

Long lead times

(vi)

Labour problems and labour-related issues

(vii) Unnecessary shutdowns and supply interruptions (viii) Difficulty in supervision (ix)

Difficulty of monitoring goods and services quality

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Case 7.1: Cirque du Soleil Inc. -

The show that revolutionised the circus arts is expanding its global scope

www.cirquedusoleil.com 1. Which sociocultural factors influence the sales of tickets for ‘Cirque du Soleil’ shows around the world?

As product and services are getting more standardised over time, customer experiences that create memorable events, are getting more important. Experimental marketing (see also Section 1.9 in the textbook) is a growing trend worldwide. ‘Cirque de Soleil’ provides high aesthetic customer value, but with little active participation.

One of the most important criteria for ticket sales is GDP per person. According to the sociocultural criteria, probably members of middle class and higher income and higher education groups are more frequent customers at Cirque shows.

2. What makes the business model of ‘Cirque du Soleil’ globally so successful?

Although it uses the word ‘circus’ in its name, the concept of ‘Cirque du Soleil’ is far away from the traditional traveling circus with its ringmaster and clowns. ‘Cirque du Soleil’ shows feature the same types of performers as traditional circuses, but it combines them in innovative, off-the-wall acts with New Age music, surreal costumes, and dazzling staging to create some of the most memorable and entertaining shows on the planet.

Cirque du Soleil’s strategy incorporates five key components that enable it to hold a unique position in the entertainment market: 1. Brand management: Cirque du Soleil is loaded with creativity, and managers guard the brand carefully. Shows have a long development period (about three years) to ensure quality and distinctiveness.

2. Acquisition of world-class talent: At the heart of every show are the performers, and Cirque constantly patrols the world in search of the best. The company has 12 full-time talent scouts who travel the globe searching out performers whom they add to the company’s database (the largest of its kind in the world) of 20,000 potential recruits. The scouts have recruited performers from such far-flung places as the Olympic games, the Moscow Circus school and a Mongolian elementary school.

3. Strong cost control: Top managers meet with creative directors to set a budget and an opening date for each new show and then step back and let the directors work their creative magic. The directors can spend the budget—typically $10 to $25 million—in any way they choose, and company top management has ever come back to ask for more money.

4. Investment in research and development (R&D): To make certain that its shows are different from those of other entertainment companies and stimulating to its target audience (which is very upscale, college-educated and heavily populated by women). Cirque invests

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heavily in R&D. As a percentage of sales, the company spends on R&D twice what the average US corporation spends.

5. Opportunity recognition and transferring entertainment know-how into new areas: Cirque managers intentionally have kept the company growing at a controlled pace. Building on the company’s ability to transform itself in each of its unique shows, managers are considering expanding Cirque’s circle of influence into new industries, such as television, hotels, restaurants, and nightclubs. Whether you are a hotel owner or a restaurateur, you are entertaining at some level.

3. What should be the criteria for selection of a theme for Cirque du Soleil’s next world tour after Messi10?

Choice of theme should not provoke political or religious feelings (typical for secular societies). For example, Messi is popular all over the world as a football player. Probably a future theme could be taken from one of the most successful musicals.

Case 7.2: The Ikea catalogue -

Are there any cultural differences?

www.ikea.com The catalogue serves as a preshopping advertisement, an in-store sales aid and an interior decorating guide. Many consumers shop with the catalogue in hand. Since the catalogue is such an important marketing tool, it is crucial for it to accurately reflect the colour and appearance of IKEA products, also in local cultural circumstances.

The globalisation strategy developed by IKEA is a home-based strategy built around a Swedish concept calling for furniture that is clean, modern, efficient, functional, sustainable and competitively priced. The product is not adapted to local markets during the globalisation process. Nevertheless, geographic expansion has brought more flexibility to the initial stringent rule concerning the standardisation of products and marketing, in particular during the establishment of stores, for example, in the United States and China (as we see it in this case).

1. Discuss the advantages and disadvantages of having the same product range shown in all IKEA catalogues around the world?

Advantages: -

The IKEA concept (the consumer as producer, i.e. prosumer) reflects standardisation on a world basis in all parts of the marketing mix

-

‘Scale of economies’ in production and marketing of the products worldwide

-

‘Scale of economies’ in the printing of the catalogue

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Disadvantage: -

The concept cannot reflect cultural diversity

2. The catalogue is the most important element in IKEA’s global marketing planning. Discuss whether there could be some cultural differences in the effectiveness of the catalogue as a marketing tool.

The IKEA concept is that the catalogue should be used as a preshopping tool, an in-store sales aid and an interior decorating guide. When the furniture is bought, the consumer functions as an assembler (prosumer) of the furniture. In some cultures, there is no tradition for the consumer to play this active role in decorating the home. Maybe, most would prefer architects to play this role. In such cultures, the effectiveness of the catalogue as a marketing tool would be less.

3. Explain some cultural differences which are illustrated by the two sets of different illustrations of the same product.

The IKEA illustrations from the catalogue from Europe (Denmark) and China (Shanghai) shows the following fundamental differences between Danish and Chinese homes and families: The Chinese illustration reflects the Chinese one-child policy (two children are shown in the Danish illustration) The apartment in the Danish illustration seems to be larger, whereas the Chinese illustration shows a smaller room, indicating a smaller apartment, which is normal in many parts of Asia.

Case 7.3: Allergan – the maker of Botox and breast implants First of all, it should be mentioned that around 50 per cent of Allergan’s Botox sales is used for therapeutic purposes, like migraine and depression. When we concentrate on the cosmetic purposes in general (and also include competitor products, like Dysport, Xeomin and other types of fillers), far the most common procedure done around the world is botulinum toxin injection (Botox), which is done over 3 million times around the world every year (see below).

Questions: 1. Cultural differences need to be considered when communicating across borders. What characteristics of a country’s culture need to be researched to ensure business success across borders in the case of Allergan’s Botox and breast implants?

Women are by far the biggest consumers in the cosmetic surgery market, making nearly 90 per cent of all procedures in the world – approximately 20 million.

The famous saying ‘beauty lies in the eyes of the beholder’ does seem to reflect the enriched human culture, nature and perceptions of what beautiful is.

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Botox is mainly used in cultures where it is preferable for (primarily women) to look younger because it is smoothing out the wrinkles. In an effort to morph lips into a sexy and sensual pout, many women also consider Botox injections in lips to be an effective solution.

For example, the American culture is quite intercultural in terms of ethnicity, race and of course the recent wave of migrants from across the world. Nailing down one single beauty attribute would be generalising only a few percentages of people in the whole continent. Hence, the best way to summarise the trending beauty standards in that country is to focus on the media, and how women are mostly represented in them. You can call Nicki Minaj the sponsor of big butts after her Anaconda music video that basically just talks about how big her butt is and how skinny girls are not sexy.

Celebrities such as Jennifer Lopez, Kim Kardashian and even Kylie Jenner have turned towards focusing on having bigger ‘assets’ (also including breast implants). This could be in a way a healthy message, which degrades the good old days of anorexic and bulimia beauty, but could also pressurise young girls into transforming their assets to the ones they see on screen.

2. In which cultures and countries would there be the best and worst chances of selling Allergan’s Botox and breast implants?

There is a definite economic angle to plastic surgery. As these procedures are not medically necessary in most cases, it is uncommon for national healthcare systems or traditional private healthcare insurers to pay for them. Certainly different countries have different standards for ‘necessary’ procedures, and there are countries such as Brazil that actually allow for tax deductions for elective plastic surgeries.

The following table is showing the number (in %) of Botox treatments and breast enlargements in the main countries of the world: Table 1: Where are most Botox treatments and Breast enlargements taking place Country

Botox treatments (%)

Breast enlargements operations (%)

USA

45

37

Brazil

12

23

Germany

4

6

Mexico

6

6

France

3

6

Columbia

2

6

South Korea

9

3

Japan

7

2

Other countries

12

11

Total number

100% = 3,000,000

100% = 800,000

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Because plastic surgery can be expensive, it has created a thriving business in ‘medical tourism’.

Simply defined, medical tourism is when a resident of one country travels across national borders to take advantage of lower costs for a particular medical procedure. While it has always been somewhat common for wealthy and powerful individuals from less developed countries to travel abroad for medical care, it has now spread to a more mainstream customer base.

Medical tourism likely explains the surprisingly high position of many countries on the procedure lists, as surveys tend to look only at raw procedure counts and not the identities or nationalities of the patients. South Korea, Brazil and Colombia, for instance, are all famous as destinations where patients can receive quality care at substantially lower prices – while a surgeon in the US might charge $2,400 for an eyelid procedure or $3,600 for a breast augmentation, those fees drop to about $1,800 and $2,900 in Brazil and are even lower in Thailand and Colombia. Not only can patients save money this way but also they can recuperate in pretty pleasant surroundings (and many stars reported doing so to avoid media attention).

Case 8.1: Waymo -

The Driverless Google car is finding future growth markets

1. Which criteria would you recommend Waymo uses in the selection of future markets (countries) for its self-driving car and the supplement services?

Criteria for choosing countries for Waymo self-driving cars (AV Autonomous Vehicles) – the most important criteria are mentioned first: -

Availability of high performing mobile internet (4G and 5G)

-

Consumer adaptation of latest technology

-

Consumer opinion about self-driving cars

-

Road infrastructure quality

-

Market share of electrical cars as per cent of total number of person cars (as most of self-driving cars are electrical based)

-

Number of electrical car charging stations per 100 km road

-

Consumer adoption of online ride hailing apps

-

GNI per capita

-

Total number of road deaths

-

Number of traffic deaths per 1,000 persons

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2. Based on the data in the case and the Appendix 1 and 2: Which three countries would you suggest for rank 1, 2 and 3 – seen from the Waymo perspective?

Based also on the KPMG 2019 Autonomous Vehicles Readiness Index (Goto www.kpmg.com and search for ‘2019 autonomous vehicles readiness index’) the following ranking of international markets (besides the USA) is suggested: 1. The Netherlands 2. Singapore 3. Norway Of course, also China (home of several manufactures of electrical cars and also a tech – apporiented society) should be considered as a future attractive market for self-driving cars.

3. Which car manufacturers would be most attractive for Waymo to cooperate with regarding development of future technologies, services and markets? Please suggest a ranking of three car manufacturers.

The criteria for suggesting car manufacturers to cooperate with are: -

R&D & Technology level in electrical cars (EVs)

-

Sales of electrical cars (EVs)

-

Not direct competitor in self-driving cars

Resulting ranking list: 1. Tesla (USA) 2. BYD (China) 3. Renault – Nissan Group

Case 8.2: Philips Lighting •

Screening markets in the Middle East

www.philips.com 1. Discuss the appropriateness of the screening model used in this case.

For such developing countries in the Middle East, the model seems to be appropriate because lighting (demand for lamps and bulbs) is a basic need for a country as soon as the country starts developing.

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For most Western European countries, the model could probably be used for the more advanced form of lighting.

The two main screening variables to be used in Table 1 in Case 8.2 are population size and GNP per capita. Using these two variables, the following markets could be selected: -

Based on a relative high GNP per capita: UAE (Dubai), Qatar, Israel and Kuwait

-

Based on a huge population: Egypt and Iran

Saudi Arabia has a little bit of both One would expect a higher concentration of potential customers in countries with GNP per capita.

Therefore, my recommendation would be to start there, but highly populated countries have of course more potential.

I find it positive that the screening model was used as a starting point for a discussion with the agent or distributor in the particular country. As it says in the case: ‘If the Philips sales in large lighting markets were very low, this would indicate a low Philips market share (unless the market size was also low). This would lead to a discussion with the local agents and distributors about how to increase the local Philips market shares in a cooperation with the local distributor’ 2. Suggest another screening model that could be relevant for Philips Lighting to use in the Middle East.

The chapter suggests a more fine-grained screening model, the so-called market attractiveness /competitive strength matrix.

Case study 8.3 – Oreo (Mondolēz) 1. What are the foundations of Oreo’s global success?

Until the mid-1990s, Oreo largely focused on the US market – as reflected in one of its popular advertising slogans from the 1980s, ‘America’s Best Loved Cookie’. But the dominant position in the US limited growth opportunities and spurred Kraft (now Mondolēz) to turn to international markets. The following shows how Oreo was successfully launched in the two now huge markets.

About the penetration into the Chinese market The China launch was based on the implicit assumption that what made it successful in its home market would be a winning formula in any other market. However, after almost a decade in China, Oreo cookies were not a hit as anticipated. The Oreo management team even considered pulling Oreo out of the Chinese market altogether.

In 2005, Kraft decided to research the Chinese market to understand why the Oreo cookie that was so successful in most countries had failed to resonate with the Chinese. Research showed that the Chinese were not historically big cookie eaters.

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Chinese consumers liked the contrast of sweet and bitter but ‘they said it was a little bit too sweet and a little bit too bitter’. In addition, 72 cents for a pack of 14 Oreos was too expensive for the valueconscious Chinese.

Kraft’s Chinese division used this information to formulate a modified recipe, making the cookie more chocolatey and the cream less cloying. They also introduced different packages, including smaller packets for just 29 cents to cater to Chinese buying habits.

The changes had a positive impact on sales and prompted the company to ask some basic questions challenging the core attributes of the traditional Oreo cookie. Why does an Oreo have to be black and white? And why should an Oreo be round? This line of questioning and an ambition to capture a greater share of the Chinese biscuit market led Kraft to remake the product in 2006 and introduce an Oreo that looked almost nothing like the original. The new Chinese Oreo consisted of four layers of crispy wafers filled with vanilla and chocolate cream, coated in chocolate. The local innovations continued and Oreo products in China today include Oreo green tea ice cream and Oreo Double-Fruit.

Another challenge for Kraft in China was introducing the typical twist, lick and dunk ritual used by American consumers to enjoy their Oreos. Americans traditionally twist open their Oreo cookies, lick the cream inside and then dunk it in milk. Such behaviour was considered a ‘strangely American habit’, according to Davis. But the team noticed China’s growing thirst for milk, which Kraft tapped with a grassroots marketing campaign to tell Chinese consumers about the American tradition of pairing milk with cookies. A product tailored for the Chinese market and a campaign to market the American style of pairing Oreos with milk paid off and Oreos became the bestselling cookies of that country.

About the penetration into the Indian market The lessons from the Chinese market have shaped the way Kraft has approached Oreo’s launch in India. Oreo developed a launch strategy around taking on existing market leaders in the cream segment – Britannia, Parle and ITC. Internally, they even have an acronym for this strategy – TLD (Take Leaders Down).

The focus was to target the top 10 million households, which account for 70 per cent of cream biscuit consumption. Oreo launched in India in March 2011. It entered the market as Cadbury Oreos because Cadbury is a stronger brand name than Kraft, and initially focused on generating awareness and rapid trials. The product was sweetened to suit the Indian palate and Kraft exploited Cadbury’s network of 1.2 million stores.

The Made in India tag meant using locally sourced ingredients, modification of the recipe to suit Indian tastes and possibly cheaper ingredients, a smaller size and competitive prices. Oreo launched its traditional chocolate cookie with vanilla cream at Rs 5 for a pack of three to drive impulse purchases and trials. With a strategy focused on rapid brand awareness and extensive distribution, the Oreo India launch story has been a success so far. Its market share has grown from a little over one per cent after its debut to a massive 30 per cent of the cream biscuit market. As awareness of the Oreo brand grows in India, Kraft is looking to shift from the Cadbury distribution network to a wider wholesale channel.

Today, Oreo is more than just an American brand. It is present in more than 100 countries, with China occupying the No. 2 slot. Seven years ago, this was highly improbable.

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Summing up: Two of the most important success criteria for Oreo’s global success has been: -

To suit the brand to local tastes and preferences

-

Another key success factor behind Oreo’s triumph in the global biscuit scene is its pricing.

Mondelēz employs multiple pricing strategies in order to target different products for different occasions and consumer groups. In the US, Oreo is positioned as a mass brand, while in Japan, the biscuit brand is one of the cheapest available brands in the country. In the majority of emerging markets, Oreo is positioned as a premium brand, its price being particularly high in China, where Oreo costs three times as much as the average biscuit brand.

2. What demographic changes and cultural issues might influence the future global market for Oreo?

There are some factors that work for the future prospects of Oreo: -

Consumers tend to return to brand that are well-known and familiar to them – even for adults, there is a tendency to return to brands that remind them about their childhood – Oreo could be such an example.

-

Using the notion of family togetherness (especially in times where families are ‘spread’ all over) and telling people about the ‘Twist, Lick and Dunk’ ritual, the company has successfully created emotional connections between the brand and the consumers.

There are some factors that work against the future prospects of Oreo: -

The heavy users of Oreo are 3–12 years old kids, and as the world generally continues to age, this works against the future sales of Oreo.

-

The food industry regularly faces bad publicity about the unhealthy nature of foods aimed at children. Companies are under pressure to reduce levels of sugar and offer healthier options for children. Many have announced healthy food initiatives in recent years.

3. What should be important screening criteria for Oreo (Mondelēz) in the IMS? Important screening criteria: -

Population size

-

GDP in total/GDP per capita

-

Consumption of biscuits (in total and per capita)

-

Acceptance of the Oreo taste compared to other biscuit brands

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Case 9.1: Jarlsberg -

The King of Norwegian cheeses is deciding on entry modes into new markets

www.jarlsberg.com 1. Which kind of market entry mode would you generally suggest for Jarlsberg® (a) in Scandinavia? (b) in Asia?

Figure 9.1 (p. 334) in the main book could be used for this evaluation: Re. (a) The sociocultural distance from Norway is low – favours own sales force Re. (b) The sociocultural distance from Norway is relatively high – favours importer/agent solution 2. What are the general motives for choosing a hierarchical mode (own subsidiary) in the US? Own subsidiary provides higher control, which may be important in the case of a branded ‘special’ cheese with some snob appeal.

Case 9.2: Jissbon -

is acquisition the right way to gain market shares in the Chinese condom market?

http://en.humanwell.com.cn/index.aspx 1. What are the differences between the global strategies of Humanwell & CITIC and the other three competitors?

Humanwell & CITIC (Ansell)

Rekitt Benckiser (Durex etc.)

Church & Dwight Co. (Trojan)

Okamoto Industries

Humanwell & CITIC markets branded condoms worldwide, each with its own unique marketing strategy that has been tailored to the particular country or region:

A true global brand with strong positions in all main markets, except the USA.

Market leader in the US market (with the Trojan brand), minor position in the UK.

Home-market oriented: 60 per cent MS of the Japanese market, but with little exports, mainly to the US.

Durex condoms are manufactured in 17 factories worldwide.

- Lifestyle (US market)

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- Jissbon (China market) - Mates (UK) - KamaSutra (India) Strong positions in the US, the UK, Chinese and Australian/New Zealand markets

2. Which entry mode would you recommend for Humanwell & CITIC’s global sourcing of condoms?

There are various reasons for a company to go in for foreign purchasing or manufacturing. Some of them are: -

Lower production costs due to availability of cheaper/plentiful factor(s) of productions

-

High cost of shipping of product to the export market

-

Tariffs and non-tariff restrictions in the importing country

-

Nationalist feelings in the country concerned, not favouring import products

-

Large size of the country, particularly regional groupings justifying establishment of manufacturing facilities in that country/region

-

Greater scope to be in constant touch with the changing requirements of the foreign customer, which is particularly true of fashion goods

-

Advantages of acquiring an existing foreign product with all his facilities

and

Generally, the sourcing entry modes can be divided into two categories, depending on where and how the activity is performed: Where?: Is the sourcing activity taking place in the home base (domestic) or abroad (foreign)?

How?: Is the sourcing activity taking place internally in the organisation or externally (by an external partner)?

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Depending on these two dimensions, there are four different options as illustrated in the following Figure B: Where?

Where?

Domestic

Foreign

Insourcing

Off-shoring

Outsourcing

Outsourcing

How? Internal (hierarchical – owned by the company) How? External

Foreign manufacturing can take one or more of the following ‘entry mode’ forms. These forms also indicate that there can be some overlap between ‘Off-shoring’ and ‘Offshore outsourcing’: -

Assembly,

-

Contract manufacture,

-

Licensing,

-

Joint Venture and

-

Wholly owned foreign production (100% ownership)

Assembly: Under assembly, most of the components or ingredients are domestically produced and finished products are assembled abroad. All exports on CKD (Completely Knocked Down) condition are examples of assembly. For assembly, the firm may have its own arrangements abroad or leave it to a local party to assemble the product. A company may go for this sort of arrangement either to avoid high transportation cost of the final product or to take advantage of the cheap labour available in the export market or to get over the high tariff and non-tariff restriction.

Contract Manufacture: In this method of market entry, the manufacturer permits the production of his product abroad by a local party under contract with him, but he reserves to himself the right of marketing that product in that market. It is obvious that this type of arrangement is possible if only there is a producer with the necessary capability to manufacture the product and maintain its quality. Normally, firms with comparative advantage in marketing and service, rather than production, resort to contract manufacturing. This method is advisable particularly in politically unstable countries where one would always like to pull out at short notice in case of trouble.

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Licensing: As compared to contract manufacturing, licensing is for a longer term and involves much greater responsibilities on the part of the national party. Licensing is an arrangement wherein the licensor gives something of value to the licensee in return for certain performance and payments from the licensee. The licensor may agree to give one or more of the following: Patent Right, Trade Mark Rights, Copy Rights or Know-how.

In return, the licensee usually promises (a) to produce the licensor’s products covered by the rights; (b) to market these products in the assigned territory and (c) to pay the licenser some amount related to the sales volume of such products. It may be noted that the licensee markets the products of the licensor in addition to producing it, whereas contract manufacturing covers only manufacturing.

Joint Ventures: Joint Ventures are very much like licensing arrangements, but in the former, the international firm has, normally, equity participation and management voice in the local firm. As compared to 100 per cent ownership, joint ventures: (a) require fewer capital and management resources and thus this arrangement is open to smaller companies, (b) a given amount of capital can be spread over many countries and (c) the danger of appropriation is less, since a national partner is involved in a joint venture. On the other hand, there is a possibility of conflict of interests with the national partner.

Wholly Owned Foreign Production: Wholly owned foreign production involves greatest commitment to a foreign market. More than complete ownership, it gives complete control over all the activities of the firm. There are two ways in which one can acquire 100 per cent ownership in a foreign country. They are: (a) acquiring an existing foreign production unit and (b) developing one’s own facilities from scratch (green field investment).

3. Which entry mode would you recommend for Humanwell & CITIC regarding the Chinese market?

1. Priority: Own Sales Subsidiary, as Humanwell & CITIC already has a lot of knowledge about the Chinese condom market. It is also a relatively big company, so they should be able to finance the ‘entry’ themselves.

2. Priority: Joint Venture is a way for Humanwell & CITIC to reduce the risks of entering the market. For Humanwell & CITIC, it would also be a way to find a partner with special knowledge about the Chinese condom market.

4. What are the pros and cons of Humanwell & CITIC acquiring a European competitor? In your opinion, is it a good idea?

Pros: -

Quick access to distribution channels in European condom retailing

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-

Contact to local market knowledge

-

Using the reputation of local European brands

Cons: -

Acquisition is a very expensive option

-

High risk

-

Lack of integration with the acquired company

-

As Ansell lacks a strong European market position, acquisition would be a good way of achieving this.

Case 9.3: Understanding Entry modes into the Chinese market China became a member of the WTO on 11 December 2001, and is currently in the process of completing a seven-year transitional period. Overall, the Chinese economy has shown exceptional economic growth over the last five years, closely associated with China’s increased integration with the global economy.

With a population exceeding 1.3 billion, continued economic growth and a large supply of inexpensive and productive labour, China lures businesses from around the world. China’s population is approximately 23 per cent of the world’s total. China’s integration into the global economy is fueling accelerated change in many markets and global economic growth. It is likely that China will continue to grow at a rapid pace for some time. China’s economy increases by nearly 10 per cent each year. Despite tremendous progress, China remains a developing country, albeit one with vast potential. At the same time, the Chinese government estimates that several million Chinese are very poor with per capita income of USD 300 or less.

Corruption remains widespread in China. Although the government continues to emphasise anticorruption campaigns, these efforts are hampered by the lack of truly independent investigative bodies. Despite these criticisms of its unwieldy bureaucracy or lack of disclosure of corporate accounting practices and governance, most global companies agree that companies cannot be globally successful if they ignore this huge emerging market.

Companies considering doing business with China has first to determine the best way to enter the market. Most foreign firms utilise some form of collaborative arrangement with local firms when entering China.

In this segment, we will discuss about how companies can enter the Chinese market; the various factors they need to consider if they enter into a collaborative arrangement and some of the tactical steps they need to take in the early stages of their Chinese operations.

There are four key ways to enter the Chinese market:

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•

Exporting to China (externalisation)

•

Licensing, including franchising (intermediate modes)

•

Equity joint ventures (intermediate modes)

•

Wholly owned foreign enterprises (WOFEs or Woofies) (internalisation)

These are not mutually exclusive ways to enter.

Independently, whichever entry model you choose, personal relationships (‘guanxi’ in Chinese) in business are critical. Guanxi is deeply rooted in Chinese culture and is basically ‘a tool to get business’ and ‘a way of getting things done’. It often takes months, perhaps even a year or more, to establish guanxi. It is important for exporters, importers and investors to establish and maintain close relationships with their Chinese counterparts and relevant government agencies. It is equally important that exporters encourage strong guanxi between their Chinese agents or distributors and the buyers and end users. A web of strong personal relationships can often help ensure expedited governmental procedures and the smoother development of business in China.

Though Chinese customers welcome products in general and especially in high-tech-related areas, they still prefer to have localised customer support from a manufacturer, such as on-site training, service centres in China, local representatives, as well as catalogues and user manuals in Chinese, etc.

It is clear for those experienced in dealing with China that there is not one best way to enter China.

Companies have to consider a number of financial, operational and resource factors. For example, some companies start by considering how much control they wish to retain while for others, the primary concern is how much of their own resources they are willing to commit. As companies develop more experience doing business with China, they are likely to reassess the way they do business in the country, particularly in terms of collaborative arrangements. Companies that aim to have a stronger and more profitable presence in the Chinese market need to increase their commitment of resources.

Regardless of which entry strategy a company chooses, several factors are always important: •

Cultural and linguistic differences – these affect all relationships and interactions inside the company, with customers and with the government. Understanding the local business culture is critical to success

•

Quality and training of local contacts and/or employees – evaluating the skill sets and determining if the local staff is qualified is a key factor for success

•

Political and economic issues – policy can change frequently and companies need to determine what level of investment they are willing to make, what is required to make this investment, and how much of earnings they can repatriate

•

Experience of the partner company – assessing the experience of the Chinese company in the market, with the product and in dealing with foreign companies is essential in selecting the right local partner

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Selecting an entry strategy for China is easier said than done. Overall, foreign companies need to do the following: •

Research the Chinese market thoroughly and learn about the country and its culture

•

Understand the unique business and regulatory relationships that impact their industry, whether it’s consumer products, mining or forestry

•

Use the internet to identify and communicate with appropriate foreign trade corporations in China or their own government’s embassy in China

•

Each embassy has its own trade and commercial desk. These resources are best for smaller companies. Larger companies who have more money and resources usually hire top consultants to do this for them. They are also able to have a dedicated team assigned to China who can travel there frequently in the beginning of the relationship, to meet with government representatives

Once a company has decided to enter the Chinese market, it needs to spend some time to understand the local business culture, and how to operate within it.

Questions: 1. What factors should companies consider when determining the best form of operation to use when entering the Chinese market?

There are four key ways to enter the Chinese market: -

Exporting to China (export modes – externalisation)

-

Licensing, including franchising (intermediate modes)

-

Equity joint ventures (intermediate modes)

-

Wholly owned foreign enterprises (WOFEs or Woofies) (hierarchical modes – internalisation)

These are not mutually exclusive ways to enter.

Companies have to consider a number of financial, operational and resource factors. Some of the key factors that companies consider when determining the best way to enter a market include: -

how much control they wish to retain.

-

the extent of resources, financial and other, that they are willing to commit to the new market.

-

physical and social factors.

-

market nuances.

-

prior experience in foreign collaborations.

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2. What can be the challenges and opportunities for foreign companies in establishing collaborative arrangements, like joint ventures, in China?

Opportunities: -

Large domestic market of consumers for products and services

-

Cheap labour pool for manufacturing collaborations

Challenges: -

Language and culture

-

Need for Guanxi (connections)

-

Previous government restrictions on ownership and repatriation of gains

-

Previous lack of convertibility of currency

-

Unwieldy bureaucracy

-

Lack of disclosure of corporate accounting practices and governance

-

Protection of intellectual property

The role of the Chinese partner in the success or failure of a collaborative arrangement (e.g. a joint venture) cannot be over emphasised. A good Chinese partner will have the connections to help smooth over red tape and obstructive bureaucrats; a bad partner, on the other hand, can make even the most promising venture fail. Common investor complaints concern conflict of interests (e.g. the partner setting up competing businesses), bureaucracy and violations of confidentiality. The protection of intellectual property, no matter the form of cooperation, is one of the most pressing matters for firms doing business in China. Companies should bear in mind that joint ventures are time-consuming and resource demanding, and will involve constant and prudent monitoring of critical areas such as finance, personnel and basic operations to be successful.

Technology transfer is another initial market entry approach used by many companies. It offers shortterm profits, but runs the risk of creating long-term competitors. Due to this concern, as well as intellectual property considerations and the lower technical level prevailing in the Chinese market, some firms attempt to license older technology, promising higher-level access at some future date or in the context of a future joint venture arrangement.

Case 9.4: Müller Yogurts -

Entering the US market by Müller Quaker Joint Venture and exit again two years later

1. What could be the reason why Müller is using distributors (export mode) in markets outside Germany?

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-

Yogurts are relatively uncomplicated products, which means that it is relatively easy to transfer the Müller values and know-how to export intermediaries

-

In foreign markets, Müller is mainly known for their yogurts, so it is expensive for them to go and sell ‘only’ yogurts to the big grocery retailers. It is cheaper for them to let a distributor take care of selling a whole range of dairy products to the grocery retailers.

-

Export mode is less risky for Müller, compared to wholly owned subsidiaries.

2. What are the main reasons why Müller was using a joint venture solution with PepsiCo (Quaker) for the US market?

A few facts about the US yogurt market: the per capita yogurt consumption is 3 kg. per year, compared to 17 kg. per year in Germany.

The US market is new to Müller. Also, yogurts are not that high on the menu in the USA. As the USA is PepsiCo’s domestic market it is natural to let PepsiCo take care of the down-stream functions (marketing and selling to the grocery retailers on the East Coast), whereas Müller is taking care of the upstream functions (production and good product quality).

3. What were the main reasons for Müller’s withdrawal from the US market? Was it a wise decision?

The Müller didn’t get the expected sales results with their joint venture. Part of the explanation was that the Müller brand identity and the brand personality were not there. The Müller did not stand out on the shelves, and as the price point was the same as the key competitor, Chobani, this brand turned out to be the clear winner in the competitive US yogurt market.

Case 10.1: Lysholm Linie Aquavit •

International marketing of the Norwegian Aquavit brand

www.linie-aquavit.com 1. What are the main advantages and disadvantages for Arcus of using export modes, compared with other entry modes, for its Linie Aquavit?

Advantages: -

Flexible mode

-

Low-risk mode

-

‘Low investment’ mode

Disadvantages: -

Low control

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-

The question is, if the foreign distributor can communicate the brand values of Lysholm Linie Aquavit

An alternative could be a wholly owned subsidiary: Advantages: -

More control with the brand values

Disadvantages: -

More investment

-

Not a flexible mode

2. What should be Arcus’s main criteria for selecting new distributors or cooperation partners for Linie Aquavit in new markets?

Main criteria: -

Good coverage of the country

-

Well-established sales and distribution system

-

Good sales people

-

Financially well consolidated

-

No direct competing products

3. Would it be possible to pursue an international branding strategy for Linie Aquavit?

Yes, their brand development strategy is clearly based on a classic ‘Story telling’ and their brand values are global.

4. Which brand should be the major brand for the US market: Linie Aquavit or Vikingfjord Vodka?

The case says: Vikingfjord Vodka has – despite the fact that the US market is usually described as the toughest vodka market in the world – become one of the eight-largest imported vodka brands in the space of a few years with a volume growth of approximately 30 per cent in the period 2008–2011. (p. 364) Compared to aquavit (which is mainly known in Scandinavian countries), vodka is a much more wellknown type of alcoholic drink, especially in the United States. Consequently, the Vikingfjord Vodka should be the major brand, which Arcus should rely on for further growth in the United States.

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Case 10.2: Parle Products -

An Indian biscuit manufacturer is seeking agents and cooperation partners in new export markets

www.parleproducts.com 1. Which region of the world would you recommend Parle Products to penetrate as its first choice?

- Asia (because of relatively low ‘psychic distance’) - The United Kingdom (due to a large biscuit market and historical ties between India and the United Kingdom – many Indian people in the United Kingdom) 2. What kind of export mode would be most relevant for Parle Products?

The products are relatively simple and standardised – therefore, the best solution would be an export mode, for example, distributors or agents in the different countries.

3. How could Parle Products conduct a systematic screening of potential distributors or agents in foreign markets?

Parle could start setting up some criteria, which the distributors should fulfill. Then, Parle could visit two to three distributors in each country and try to measure the capabilities of the distributors against the criteria. The distributor with the best match between capabilities and the criteria could be selected.

4. What would be the most important issues for Parle Products to discuss with a potential distributor/agent before final preparation of a contract?

- The distributor’s capabilities with selling to retailers, - How big the distributor’s sales force is, - What the percentage of the country’s distribution channels being covered by the distributor is, - How Parle’s product range fit into the distributor’s product range. To what degree are the products complementary and - The distributor’s past financial result, etc.

Case 10.3 – Honest Tea Honest Tea is a tea company based in Maryland, USA. Honest Tea was founded in 1998 by Seth Goldman (now President and CEO, or as he calls it, ‘Tea-EO’) and Barry Nalebuff, to sell ‘bottled iced tea that tastes like tea’; a less-sweetened alternative to sugary soft drinks and low-quality bottled

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tea. They are best known for their line of bottled organic tea products, but they also produce tea bags and other bottled drinks.

Although organic foods and beverages account for just two per cent of the $460 billion in US food sales each year, they have become the market’s fastest-growing segment: This growth is caused by a movement towards specified farming concept based on the traditional farming philosophy, which is popularly known as organic farming, with slogans like ‘back to nature’. People and groups committed to this ‘organic’ concept began to spread this message all over the world. In addition, there was growing health consciousness in the population of the world, especially among those of the Western world, due to the growing realisation that the highly toxic chemical residues could accumulate in human beings through the food chain.

What does it take to go organic? In the USA, the ‘organic’ term is regulated under federal law by the US Department of Agriculture. Under those rules, 95 per cent of the ingredients of a product by weight, excluding water and salt, must be organic in order to use the word on the label. The remaining five per cent may come from a limited number of approved non-organic ingredients, such as citric acid, which helps prevent the growth of bacteria. (Although some of Honest Tea’s flavours are 100 per cent organic, others range from 96 to 99 per cent.)

After its first stab at a fully organic tea, Honest Tea decided to convert the rest of the Honest Tea line; each flavour required separate certification by the central authorities to ensure that it met the organic requirements. Although a ton of organic tea can cost $5,000, compared with $3,500 for a conventional shipment, cost was never the major issue because tea leaves make up less than four cents of a bottle’s total cost of $1.30. The biggest expense, at 18 cents, is the cost of the 16-ounce plastic bottle.

Unlike the market trend for tea in general, demand for organic tea like other food items has also been growing rapidly since it was introduced to the world market in the late 1980s. Over the past decade, organic tea consumption has grown by about 10 per cent globally in most western countries.

Reflecting this strong demand, organically grown teas command a premium of 20–30 per cent over conventionally produced tea.

Today, even big players such as Kraft, Heinz (with a line of organic ketchup) and Kellogg (with its Kashi cereals) offer organic products. Nearly 60 per cent of Americans say they take health into account when buying food and about 30 per cent of Americans say they buy organic food regularly.

Another aspect of Honest Tea is its focus on social responsibility. Honest Tea has become a role model of philanthropic business practices. Although the company is barely at break even, it has already donated several thousand dollars to low-income communities. Seth has partnered with South African farmers and the Crow nation, both areas with high unemployment, to farm and sell crops for tea production. Not only does the purchase of the crops benefit the farmers, Honest Tea donates one per cent of all sales in royalty fees for community development. Seth believes a social mission is not only socially responsible but also financially sustainable because it enhances customer loyalty. The hope is for Honest Tea to become a well-known national brand and have impact around the world.

The founder of Honest Tea started off by meeting his own desire to have an organic soft drink. Armed with a simple product sample, Seth Goldman pitched his new tea to a buyer of Whole Foods. The buyer signed his first order and Honest Tea was founded. Now, there are 11 varieties sold in thousands

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of retail outlets around the country. The company recently hit break even and expects to continue growing, at current rates.

On 5 February 2008, the Coca-Cola Company announced its purchase of a 40 per cent stake of the company at $43 million.

Honest Tea got an unpaid endorsement when The New York Times revealed in 2009 that the White House is now stocking Honest Tea as it is Barack Obama’s preferred beverage – specifically, the ‘Black Forest Berry’ and ‘Green Dragon’ flavours.

At the end of 2009, there were 125 employees in Honest Tea.

Questions: 1. Discuss how its policies regarding social responsibility help Honest Tea in its exporting efforts.

Their social responsibility business is an integral part of their mission statement and a defining feature of their brand image. These activities actually differentiate the brand and engender a meaningful preference to many consumer segments in export markets.

Within Europe, Germany is the largest market for organic products with sales value of around €3.0 billion ($3.5 billion). On an average, the per capita spending on organic produces in Europe was €35 (2009). In the mid-1990s, media reports about pesticides in tea started appearing in Europe, particularly Germany. Although producers argued that the pesticide levels were not harmful, German tea consumption fell by a fifth, as younger consumers switched to soft drinks. Unlike the market trend for tea in general, demand for organic tea like other food items has also been growing rapidly since it was introduced to the world market in the late 1980s. Over the past decade, organic tea consumption has grown by about 10 per cent globally. Reflecting this strong demand, organically grown teas command a premium of 20–30 per cent over conventionally produced tea. In Germany, the bulk of organic tea is sold through organic shops or health food stores, and the sales in conventional retail stores is also increasing.

Now, Honest Tea finds the German market so attractive that it wants to start exporting its bottled organic tea products to this country.

2. What research method would you recommend for selecting the most suitable agent in a new export market?

Honest Tea could start setting up some criteria, which the agent should fulfill.

Main criteria: -

Quality and sophistication of product line (breadth and depth of organic food programme)

-

Familiarity of the product (organic bottled tea)

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-

No direct competing products

-

Good coverage of the country (Germany)

-

Well-established marketing, sales and distribution system

-

Good sales people

-

Connection with influential people in the organic food business

-

Financially well consolidated

Then, Honest Tea could visit 2–3 agents in Germany and try to measure the capabilities of the distributors against the criteria. The distributor with the best match between capabilities and the criteria could be elected.

Case 11.1: Hello Kitty •

Can the cartoon cat survive the buzz across the world?

www.sanrio.com 1. Do you think that Hello Kitty will continue to rule the world? What are the pros and cons?

Pros: In a world of incredibly harsh and ugly realities, such as wars, terrorism and a recession, cuteness is becoming a powerful brand attribute for Hello Kitty. As an ‘independent’ figure, Hello Kitty only relies purely on its partners’ marketing and word-of-mouth. Hello Kitty doesn’t rely on animations, films or film shows for promotion. It is probably one of the only brands in the world that relies solely on the partners’ advertising and word-of-mouth. If this word-of-mouth and buzz can be kept going, there are still lots of licensing agreements waiting for ‘Hello Kitty’.

For most licensed brands, there is a moment when success turns into over exposure. One example is designer label Pierre Cardin, which lost its cachet when, at one point, the brand had more than 900 licenses. It may make money in the short term, but it has lost long-term luxury appeal. This does not seem to have been an issue for Hello Kitty, however. Starting out 35 years ago as a cartoon cat on a purse, it has appeared on everything from mainstream school notebooks to edgy, pricey, Fender Stratocaster guitars.

Cons: With the emergence of electronic gadgets, games and the internet, children and teens are more lured by the visuals and sounds of these new channels than the simplicity and purity of a mouthless cat. It would a great challenge for Sanrio to maintain the brand popularity of Hello Kitty.

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History shows that all such types of characters have a certain lifetime, which however, seems to be ‘stretchable’ indefinitely in the case of Hello Kitty with continuous ‘product recycles’ through marketing programmes.

2. What are the reasons that Hello Kitty is licensed to so many different product manufacturers?

Hello Kitty is a simple cartoon with very minimal characteristics; the brand actually acts as a canvas upon which people can decorate with their own embellishments, thereby personalising the cartoon, giving it a special personality and internalising the cartoon into their lives. Minimising the personal characteristics of Hello Kitty then means that it may be used in all possible product connections.

3. Suggest a future licensing strategy for Hello Kitty.

The personality of Hello Kitty has been created purely through its merchandise appearances.

Hello Kitty attracts its own celebrity customers. One of the brand’s biggest celebrity promoters is singer Mariah Carey. The diva has been associated with the marque for a decade, when she started using Hello Kitty as a fashion statement. She opened concerts holding a Kitty doll.

However, until now, Sanrio has not developed any official endorsement strategies.

Sanrio is very much involved in the creative side of the licensing strategies. When Sanrio (licensor) and the licensee have formed a partnership and signed a contract, the cooperation between the two partners should mostly be about the ability to create Hello Kitty products, which appeal to the licensee’s loyal consumer and protect what the brand stands for. Approaching licensing by understanding the brand and its relevance in society is always a good strategy.

Case 11.2: KABOOKI -

Licensing in the LEGO brand

www.kabooki.com In 1993, the Danish textile firm, KABOOKI, was given the rights to use the LEGO brand (licensingin) in connection with production and sales of children’s clothes. LEGO children’s clothes have the following features: functional, clear and strong colours, high quality and a high price. Mostly, the clothes are sold through a shop-in-shop concept.

Strengths: -

Strong brand, high-image power

-

Strong connection between the product (children’s clothes) and the brand (LEGO)

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Weaknesses: -

Very high price. Is KABOOKI (as an SME) able to finance the sales growth of the clothes?

Opportunities: -

Transfer of the positive image that the LEGO brand represents, to children’s clothes

Threats: - Very sensitive in case of bad news for the LEGO brand 1. What are the most important factors determining future market demand for LEGO children’s clothes from KABOOKI? - Image power: How well will the LEGO brand do in future, regarding image power - Quality: How developed are the quality preferences in buying children’s clothes - Macroeconomic indicators: GNP per capita (can the consumers afford to buy the clothes?)

2. Which other products could be considered for licensing out the LEGO brand?

The products, which have actually been used for licensing out the LEGO brand, during 1997, are as follows: - LEGO Watch System: watches for kids - Bed linen for kids Furthermore, the following products could be candidates for licensing out: -

Tools used for school: school bag, timetable, pencil case, etc.

It is important that the products have something to do with kids.

3. List some criteria for choosing suitable licensees and future products for the LEGO brand (licensing out).

A possible licensee should ideally have the following characteristics: -

Not a direct competitor to LEGO

-

The product programme of the licensee should have something to do with children

-

Be ready to commit resources to learn the mission and product concepts of LEGO. To learn what the ‘inner’ values of the LEGO trademark are

-

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A possible licensee should have a certain production capacity, but the licensee should not be as large as LEGO because, in that case, the consequence could be that the licensee would dominate the relationship between the two companies. That was not what LEGO meant by licensing out

-

Competences within international marketing: With a high degree of international sales, more people around the world would be exposed to the LEGO trademark and its value

4. What values/benefits can LEGO transfer to the licensee (e.g. KABOOKI) apart from the use of the LEGO brand?

- Positive values of the LEGO trademark, which the licensee can use in his international marketing - A positive image when products are marketed to children - A know-how about marketing in several countries with different cultures 5. What values/benefits can the licensee transfer to the licensor?

A better exposure of the LEGO trademark, maybe in places where the LEGO trademark is usually not shown some extra profits

Video case 11.3: Marriott Marriott (www.marriott.com) is a worldwide operator and franchisor of 3,800 hotels and related facilities in 74 countries.

Marriott is a diversified service and hospitality company with operations in five business segments: •

Full-Service, which includes following brands: Marriott Hotels & Resorts, The Ritz-Carlton, Renaissance Hotels & Resorts and Bulgari Hotels & Resorts (65 per cent to total 2012 sales);

•

Select-Service, which includes following brands: Courtyard, Fairfield Inn and SpringHill Suites (11 per cent to total 2012 sales);

•

Extended-Stay, which includes following brands: Residence Inn, TownePlace Suites, Marriott ExecuStay and Marriott Executive Apartments (5 per cent to total 2012 sales);

•

Timeshare, which includes the development, marketing, operation and sale of timeshare, fractional and whole ownership properties under the following brands: Marriott Vacation Club International, The Ritz-Carlton Club and Grand Residences (15 per cent to total 2012 sales) and

•

Synthetic Fuel, which includes the operation of coal-based synthetic fuel production facilities (4 per cent of total 2012 sales).

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Marriott earns base, incentive and franchise fees based upon the terms of their management and franchise agreements. Revenues are also generated from the following sources associated with their timeshare segment: (1) selling timeshare intervals and personal residences, (2) operating the resorts and (3) financing customer purchases of timesharing intervals. In addition, they earn revenues from the limited number of hotels they own and lease to others.

Marriott has franchising programmes that permits the use of certain of the brand names and the Marriott lodging systems by other hotel owners and operators. Under these programmes, Marriott generally receives an initial application fee and continuing royalty fees, which typically range from 4 to 6 per cent of room revenues for all brands, plus 2–3 per cent of food and beverage revenues for certain full-service hotels. In addition, franchisees contribute to the national marketing and advertising programmes, and pay fees for use of the Marriott centralised reservation systems.

Quality and consistent service is Marriott’s main focus and keeps the company in the top position in its industry. The company is responsible for pioneering segmentation in the hospitality industry. With a wide array of hotels, Marriott meets the needs of various customer segments. Before developing any additional hotel chains and their respective brands, the company always tests properties first.

Marriott is active in soliciting feedback from its customer base and focusses on really understanding its customer targets.

A few of Marriott’s brand extensions are the Fairfield Courtyard for the business traveller, Residence Inn and Townplace Suitor for extended-stay and the Renaissance line overseas. Marriott’s newest line is SpringHill Suites, which was developed based on feedback from extended-stay clients. In business for 75 years and with over 3000 properties worldwide, Marriott carefully manages the different communication messages about each brand. By focussing on differentiating each property, Marriott feels it does not create confusion in the customer’s mind. Each brand has its own loyal following, with some crossover. What is most important to Marriott is to meet the customer’s travel needs, which may vary over time.

Questions: 1. What could be the main motives for Marriott in using franchising, compared to other entry modes and operation forms?

- Greater degree of control compared to other entry modes, for example, licensing - Low-risk, low-cost entry mode. The franchisees – the hotel operators – are the ones investing in the necessary buildings (hotels), equipment and know-how. Marriott will make the Marriott brands and the hotel management systems available for the franchisees for a royalty of 5–10 per cent of the local hotel revenues - Marriott is in contact with highly motivated business partners with money, local market knowledge and hotel operation experience (service/hospitality) - Ability to develop new and distant international markets, relatively quickly and on a larger scale than otherwise possible

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- Generating economies of scale in marketing to international customers. Marriott (franchisor) can specialise in developing the hotel management systems and let the local partner (franchisee) take care of daily business - Precursor to possible future direct investment in hotels in foreign markets (risk minimising strategy) 2. Identify several major categories of segmentation used by Marriott. For each, relate specific examples of hotel services tailored to various target markets. www.marriott.com offers a brief description of at least 20 brands of various Marriott hotels catering to different types of customers.

Behavioural Segmentation: Residence Inn – Targeting the extended-stay market (six months to one year) Demographics Segmentation: Fairfield Inns – Affordable business and family markets are the target audience Psychographics Segmentation: JW Marriott – Luxury hotels catering to upper class consumers who value exquisite architectural detail.

Geographic Segmentation: Ritz-Carlton – Globally, Marriott reflects the culture and landscape of its host countries 3. How should Marriott react to ‘shared economy’ internet-based services like Airbnb?

Mariott has already reacted: On 16 November 2015, it was announced that Marriott International has agreed to buy Starwood Hotels & Resorts Worldwide for US$12.2 billion. This acquisition makes Marriott the uncontested number one hotel player in the world.

Combining the two companies should offer opportunities for cost savings, as well as shaping a stronger front to combat the rapidly increasing power of online travel agencies such as Expedia and The Priceline Group, and peer-to-peer platforms such as Airbnb.

Else Mariott could also consider investing in one of the peer-to-peer platforms.

Case 12.1: Polo Ralph Lauren (PRL) •

Polo moved distribution for South-East Asia in-house

www.ralphlauren.com

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1. What are the likely main motives for Polo Ralph Lauren to shift the entry mode from licensing to the hierarchical mode in South-East Asia?

The short answer is that PRL wants to get more control over its products and branding in Asia.

In the following, this explanation will be put into a broader context: While proving a lifestyle powerhouse in the States, Polo Ralph Lauren wanted to continue market expansion overseas. Like many consumer goods companies, the method of foreign expansion used

by PRL was basically to find quality manufacturers and distributors in key markets, and form licensing agreements with them. This practice would give the company a foot in the door of foreign markets, using local experts. When opportunity struck, PRL would buy back the licenses or acquire the licensee companies to bring control in-house.

‘As part of our growth strategy, we seek to extend our brands, expand our geographic coverage and increase direct management of our brands by opening more of our own stores, strategically acquiring or integrating select licenses previously held by our licensees and enhancing our operations’ Source: PRL Annual Report, 2009 Beginning in 1998, PRL began buying back many of its European licensing rights while continuing to open flagship stores (London, Paris and Milan) in addition to outlets in France, the UK and Austria.

In 2005, PRL’s business in Europe counted for 16 per cent of worldwide wholesale net sales (up 150% from 2000). At that time, the company announced its goal to move the European market from a $700 million business to a business worth $1 billion by 2010. This goal was achieved in March 2009 when the net revenue for Europe totalled more than 20 per cent of worldwide sales at just over $1 billion.

PRL worked hard to achieve this goal of growth in Europe, not only by building flagship stores in key cities, but also by increasing their focus in wholesale (selling through external retailers including key boutiques and department stores). Today, about 2,100 stores carry PRL lines through wholesale in the US, compared with about 3,900 stores in Europe. Much of this difference is due to the fact that, in Europe, there are many different department store chains and other retail avenues that are unique among individual countries.

According to the company’s annual report, PRL’s latest goal is to repeat this growth strategy in SouthEast Asia, which is comprised of China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan and Thailand (bringing the Asia-Pacific market to 1/3 of total company revenues). Sales in Japan alone has increased by more than 500 per cent since 2007 (to $393 million), and PRL anticipates even greater results in China. The company plans to transition the retail and wholesale operations in South-East Asia from licensees to internal ownership by 2010, and will continue to integrate the businesses already acquired in Japan into the PRL infrastructure.

Asia is experiencing the growth of a new affluent class. This class has demonstrated an appetite for luxury goods. Companies such as Coach (COH) and LVMH Moet Hennessy L.V. (LVMUY) have already started plans to expand into Asia in order to best access this new market. Ralph Lauren has decided to follow suit by deciding to take direct control of its retail and distribution in Asia, specifically China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan and

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Thailand. Originally, distribution was handled by Dickson Concepts International, which sold Ralph Lauren products through 140 outlets in South-East Asia. However, RL has decided to let the license expire in 2010 in order to have more control over its products and branding in Asia. Given the company’s track record of brand building, this move can result in large profits for Ralph Lauren, especially in a time when North American sales have slumped due to the recession.

2. Would you recommend they take all geographical licences back in-house and turn them into hierarchical modes? If not, why?

No, it all depends on the current market development and growth within the lifestyle product lines.

The more the potential growth for PRL, the more the incentive for taking licenses back in-house.

While PRL owns many branded stores in the US, in Europe and Asia, the business is still supported greatly by third parties who are trusted within the local markets. This has the effect of giving the PRL lines a foot in the door, but it also adds a new level of complication as the company must deal with many different distributors while maintaining the same global image.

The in-house integration of licenses makes sense in Asia because there is a big and growing market for PRL’s lifestyle product programme that PRL wants to get in control of. However, in other places (e.g. Latin America) where PRL has outsourced distribution activities to licensees, the development and growth of the markets is not yet at a point where it is profitable for PRL to take charge of distribution activities and transform these activities to ‘in-house’ activities.

Case 12.2: Durex condoms -

SSL will sell Durex condoms in the Japanese market through its own organisation

www.durex.com Until now, SSL has sold its Durex condoms through Okamoto, the largest supplier of condoms in Japan. Overall SSL’s condom brand, Durex, is the world market leader in condoms.

Proposed answers to questions: 1. What were the main motives for SSL establishing its own distribution channels for condoms in Japan?

To have full control over distribution channels in Japan ‘We saw more prospect of generating value for shareholders by going it alone in Japan’ The SSL management thinks that it is possible to reach five per cent of the Japanese condom market when Durex is the overall world market leader 2. What were the major barriers to SSL reaching a higher market share for condoms in Japan?

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The major barriers are the strong Japanese competitors. By lobbying, the strong condom manufacturers succeeded in excluding the contraceptive pill from the Japanese market until 1999 A very ‘closed’ distribution system in Japan means high barriers for foreign firms

Case 12.3 – Starbucks Starbucks Corporation (www.starbucks.com) is named after the first mate in Herman Melville’s Moby Dick. It was founded in 1971 in Seattle. The original name of the company was Starbucks Coffee, Tea and Spices, later changed to Starbucks Coffee Company.

Starbucks purchases and roasts high-quality whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold-blended beverages, a variety of complementary food items, coffee-related accessories and equipment, a selection of premium teas and a line of compact discs. It sells primarily through company-operated retail stores around the world.

In fiscal year 2009, the total revenues reached $9.8 billion and net profits were $898 million.

Starbucks derives 85 per cent of total revenues from company-owned coffee houses.

Starbucks has more than 129,000 employees or partners, as they call them.

Starbucks sells more than coffee; it sells the Starbucks experience. Leveraging a strong brand, the company is expanding into new markets at home and abroad. The challenge is to grow while maintaining a consistent, high-quality customer experience.

Starbucks is very much dependent on its employees and ‘baristas’ (a person, who typically works behind a counter, serving both hot coffee-based drinks. A ‘barista’ also refers to one who has acquired some level of expertise in the preparation of coffee drinks)

Questions: 1. What could be the main motives for Starbucks in owning most of its coffee houses compared with other entry modes and operation forms?

Starbucks mostly uses the hierarchical mode, and it gives them more control compared to, for example, franchising, which is the preferred option by other fast-food companies, like McDonald’s.

Main motives: Full control of operations around the world, but still keeping the ‘local touch by employing local people’ Eliminates the possibility that a national partner gets a ‘free ride’

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Market access Acquire market knowledge directly – by employing the best baristas for preparing the best coffee drinks 2. How does Starbucks’ entry into the grocery market affect the company’s relationships with its retail customers?

Entering the grocery market has the potential to build relationships with current customers by reaching them in new places and interacting with them more regularly. It also has the potential to begin relationships with new customers who have not yet discovered Starbucks stores. However, for those consumers that associate Starbucks with the café experience, entering into the retail grocery market may dilute or confuse the relationship the company currently maintains. But, in combination with brand building, advertising and the in-store experience, new retail channels can convey the brand experience. However, conveying that experience is still a challenge. Much of the Starbucks experience is tied to the café atmosphere and service provided by the baristas.

3. How did Starbucks make the successful transition from a niche to a mainstream marketer?

What can the company do to maintain its ‘small company feel’ as it expands globally?

Starbucks has become a successful mainstream marketer by offering consistent products and experiences across all of its cafés. By staying locally relevant, regularly connecting with consumers and maintaining the in-store experience (through its baristas, décor and products), Starbucks can continue to grow without losing its small company feel.

Case 13.1: ARM •

Challenging Intel in the world market of computer chips

1. Explain the role of ARM as a supplier in the ‘chip’ value chain This can be explained by the two business models of ARM and Intel

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The ARM business model:

Source: Based on different public data Somehow ARM is a supplier of a R&D platform (design) that partners can use, in order for them to deliver the right chip solution to the OEMs (e.g. Samsung), which then manufactures the chips for their smartphones and tablets.

2. What are the strengths and the weaknesses of ARM’s business model compared with Intel?

The Intel business model looks like this:

ARM’s business model compared to Intel: Pros: -

ARM is paid an up-front license fee + a small royalty on each chip that is being produced based on ARM’s design = steady income

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-

ARM is diversifying the risk more than Intel. Intel relies on a few big customers (HP and Dell), which contribute to a big part of Intel’s revenues. The majority of ARM’s revenues are earned from semiconductor companies based all over the world. These companies then sell their ARM-based chips to OEMs producing consumer electronics to all economies and countries of the world.

-

By designing once and licensing many times, ARM spreads the R&D costs over the whole electronics industry. Every license represents the opportunity for future royalty streams.

Cons: -

Intel produces the chips themselves and keeps more control (than ARM) with the final product quality of the chips, right to the final OEM customer. Intel has a higher profit margin per produced chip than ARM.

-

Intel can develop tighter relationships to their main OEMs than ARM because Intel’s business model represents a vertical integration from initial design concept, through design, to production.

3. In which end-user application market should ARM strengthen its relationships to potential partners and how?

ARM should choose the embedded area (automotive, smart card, microcontrollers etc.) because here ARM does not have a big worldwide market share combined with the fact that there is a high volume in the total market.

Case 13.2: Bosch Indego -

How to build B2B and B2C relationships in a new global product market – robotic lawnmowers

1. As a supplier of the Indego, how should Bosch’s approaches differ in the two types of distribution in Figure 3?

The Figure 3 looks like this:

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Figure 3: Two different distribution systems for Indego Bosch

Smaller lawnmower specialist retailers: -

More focused on delivering high degree of service but also at a higher price

-

This distribution system is more targeted towards the business B2B customers

Big Outdoor Power Equipment (OPE) Retailers: -

More focused on delivering good quality at a ‘good’ (relatively low) price

-

This distribution system is more targeted towards the private B2C customers

2. Which of the two distribution set-ups should Bosch focus on most?

In the beginning, Bosch (with the good image) should focus on the B2B customers, through the specialised lawnmover retailers. This segment is normally less price sensitive. On the longer run, they have to focus more on the B2C private customers, where the price level is more important, which means that this segment can provide higher sales volume for Bosch Indego, but at lower prices and lower profit margins per sold unit.

3. Would you also recommend that Bosch build relationships with the end-customer? If yes, which target group should it focus on?

Yes, Bosch should build up relationships to both the distributors and the end-customers, in order to create awareness and preference for Bosch Indego. In the beginning, Bosch should focus on B2B customers, later on more the B2C customers.

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Case 13.3 – Kone elevators and escalators Questions: 1. Try to describe the complex decision-making process regarding choice of supplier for installation of new elevators and escalators in a building.

Generally, we can divide into two types of decision-making process: -

New installation of new elevator systems in new buildings

-

Modernisation of existing elevator systems

Here, we concentrate on the first option, new installations: Key stakeholders involved with the decision-making process: -

Owner of the building/client

-

Builders/subcontractors

-

Architects (important influencers)

-

Management of the building

-

Users (professionals/employees transporting themselves and equipment in the building, tourist – when it is a hotel, visitors – when it is a public building)

The most important external ‘stakeholders’ are the first four ‘actors’. They interact with potential suppliers of elevator and escalator systems, like KONE. The key departments involved at KONE are Design and Engineering department, together with the top management, who will primarily be involved in case of a huge building project. The potential suppliers of elevator systems would like to be involved at an early planning stage of the building, in order to be able to influence and adapt their solutions to the building needs.

The key criteria in the final selection of a supplier of an elevator system would probably be: -

Functionality (for transport of people and equipment)

-

Safety

-

Aesthetics

-

Low waiting time for transport

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2. What are Kone’s key challenges in establishing long-term relationships with its new global customers?

Hotel chains could be an example An example of an OEM/system supplier could be KONE, which could have a long-term relationship with the Mariott hotels Could be a global system supplier of sensor systems to KONE

An example of a supplier at this level is the supplier of some electrical component for a sensor in the elevator/escalator.

The challenges, which KONE in marketing to B2B customers, are very different from the challenges of marketing to B2C consumers. KONE’s B2B marketing is taking place in a marketing environment with educated customers often playing a big role in product development. Eaton’s marketing to a new potential large building owner (client/customer) requires a deep understanding of the myriad decision makers and influencers involved in the buying decision regarding configuration of a building. These decision makers include engineers, architects, managers, purchasing agents and executives. Each of these decision makers has different needs, which KONE’s marketing must address. At the same time, Eaton sells through several channels, including the aftermarket (i.e. maintenance, distributors and retailers that handle parts and accessories for maintenance of elevators and escalators), its own service, its installation centres and the web. Marketing to all of these channels requires consistent and targeted communication. Regardless of the product sold or the channel used, the KONE brand emphasises reliability, quality and high value.

Because B2B marketing is often more like a long-term partnership rather than a short-term transaction, KONE thinks about how KONE can help its customers win in the customer’s marketplace. Eaton may work with its customers to co-innovate, coming up with variations of its products that will help create a competitive advantage for its customers in the transport of people and goods in a building. KONE may also provide systems and solutions around its products to enhance their overall value to the customer. A key part of longer-term relationships is creating trust. B2B customers need to know that they can rely on KONE and that KONE will respond to any problems that arise.

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Case 14.1: Danish Klassic -

Launch of a cream cheese in Saudi Arabia

www.arla.com (Regarding the Puck brand) 1. What might have been the reasons that Danish Klassic was not able to meet expectations?

Comment on the following: (a) the change of packaging – from glass to plastic brick carton; The idea behind the new brick packaging is excellent as seen from a technical/objective point of view.

The cream cheese will remain healthy for a whole year after production – even if it is not kept under refrigeration because no oxygen will reach the cheese in this packaging. This would also mean lower inventory costs However, the problem for the Danish Klassic management is to change eating habits. The people in Saudi Arabia are used to taking the cheese from glass packaging and suddenly a ‘mysterious’ Danish company comes and changes that the brick packaging can be difficult to open and take cheese from (b) the consumer-oriented advertisement (photo a) – is it targeted at the Saudi Arabian market?

See also plates regarding the advertising According to the family photo, it seems that the product is more targeted towards the modern families in the cities since the clothing of the woman would never be acceptable in a traditional Muslim family 2. What do you think of the brand name Danish Klassic?

It appears to be a risky affair to sell products under a Danish image, as only a minority of Saudi Arabians will associate anything with Denmark. Also, the special spelling of ‘Klassic’ seems to be a little strange because some people might think it was a misspelling (‘Classic’). It is only an attempt to create some kind of ‘brand awareness’.

Case 14.2: Zippo Manufacturing Company -

Has product diversification beyond the lighter gone too far?

www.zippo.com 1. What are the pros and cons of the product diversification strategy that Zippo has been following recently?

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Pros: Zippo has been associated with smoking for many years. But this market is in a downward trend.

Therefore, Zippo has to look for other opportunities for using their lighter.

Cons: The Image of Zippo is, maybe, going to be more diffuse.

2. In a US marketing campaign in the late 1990s, Zippo was repositioned as an essential tool for avid outdoorsmen. Individual tin and sleeve packaging was developed that reflected the ‘tool’ position of the lighter. For continuity, similar packaging and graphics were developed for the cans of Zippo lighter fluid, and the lighters and fluid were delivered to retailers in handy self-shipping counter-top displays. To support the national rollout, the advertising company (Swanson Russell) developed a communications programme that included direct mail to major outdoor product distributors, as well as advertising at both the trade and consumer levels (pictured here). However, the outdoor market was entirely new to the Zippo sales force, who were accustomed to calling on tobacconists and convenience stores.

How would you use the product life cycle (PLC) concept for this case study?

In a way, it is like trying to find a recycle for a product in the declining stage (marketing of new uses of the same product).

3. What obstacles would Zippo Manufacturing Company face if it repeated the outdoor campaign in other countries?

The main obstacles are other traditions regarding outdoor campaigns, different outdoor cultures and different climatic conditions.

However, Zippo is a global brand, so there would be a high awareness of the product in most countries.

Case 14.3: Burberry branding Burberry has positioned its brand in the minds of consumers to be ‘functional luxury’. Burberry maintains a product line with great width and depth consisting of many products. Their products fall into one of two main categories: fashion or continuity. Fashion products are designed to be responsive to fashion trends and are introduced on a collection-by-collection basis. Continuity products have life cycles that are expected to last for a number of years. Burberry also has three primary collections: womenswear, menswear and accessories. With so many different products offered in different collection and the fashion vs continuity of Burberry products the product mix is very great. This contributes to the positioning of the Burberry brand. However, market positioning for Burberry also varies. Burberry can appeal to the hip 25-year-old man or the conservative 65-year-old man.

However, many Burberry ads feature younger models. Recent Burberry ads have featured everything from a British landscape with aristocratic looking models to edger ads with models in bikinis. Taking all of this into account, Burberry is targeted towards many different segments of the population with one common theme, functional luxury. Burberry has gone through many changes, especially in the

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past 10 years, to transform itself into a luxury lifestyle brand that is stylish and innovative, but at the same time traditional.

Questions: 1. What are the main motives behind the product line extension from the original Burberry trench coat into other product areas?

‘Line extensions’ have the following motives: -

Increase sales within the same market segment, by precisely satisfying the needs of people in that segment

-

Increase sales by focusing on a different market segment, than normally being addressed by Burberry

-

Take market shares from competitors

2. Please describe the brand transformation process of Burberry. What were the main reasons why Angela Ahrendts was so successful with this brand transformation?

Burberry had become so associated with a down-market image. Angela Ahrendts did the following in the brand transformation process: -

Ahrendts shut down 35 licensed product categories; many featuring the widely recognisable Burberry check, as part of her efforts to buying back the enterprise as an ‘inviting luxury company’ after years of over-licensing and brand dilution. This involved buying back many licenses Burberry had sold to allow other firms to put its check on everything, including disposable nappies for dogs.

-

Ahrendts initiated the launch of new product lines. She masterminded the company’s retail roll-out into new markets and was an early proponent of the internet, investing heavily in the company’s e-commerce capabilities, digital marketing presence (social media) and in-store technology.

-

Along the way, Ahrendts strived to build what she called a ‘connected culture’ at the company, not least by interacting directly with employees through dedicated instant messaging channel Burberry Chat. Ahrendts even brought in an anthropologist to study the company culture she helped create, so as to better understand and preserve it.

What Angela Ahrendts did was to turn Burberry from a label that had become associated with baseball caps worn in nightclubs to the biggest British high-fashion brand.

She left Burberry in Spring 2014 to take over a vice president position at Apple for retail operations.

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Case 14.4: Tequila Avión 1. Why is a product placement often more effective than a television commercial?

Product placement is a marketing practice in advertising and promotion wherein a brand name, product, package, signage or other trademark merchandise is inserted into and used contextually in a motion picture, television or other media vehicle for commercial purposes.

The main reasons for product placement being more effective than TV commercials: -

In product placement, the involved audience gets exposed to the brands and products during the natural process of the movie, television program or content vehicle. That is, product placement in popular mass media provides exposure to potential target consumers and shows brands being used or consumed in their natural settings.

-

The product or brand is also seen as a quality of the association with characters using and approving of the product placement.

2. What are the target group and the main ‘message’ in the Tequila Avión commercial?

Target group (end users): 21–40 years old men and women. The consumption of Tequila is almost 50/50, male/female. A lot of the consumption is driven by margaritas – it is the number one cocktail in the US. The founder, Ken Austin, call the commercial for ‘disruptive’. The key message is that the usual perception of tequila (‘Pain has its place’) does not fit with Tequila Avión, which has a smoother taste that many women like. Drinking tequila should be fun.

3. Why was it a good idea to hand over the worldwide distribution of Tequila Avión to Pernod Ricard?

The top management of Tequila Avión wisely realised that it was hard for them (as a small company) to get the tequila brand into the global distribution. Tequila Avión has an excellent tequila but how to expand the sales outside the USA. Pernod Ricard turned out to be the perfect partner because they had a solid global portfolio including Jameson, Absolut, Chivas Regal, The Glenlivet, Perrier-Jouët, Malibu Rum and other brands, but they didn’t have an ultra-premium tequila. Pernod Ricard also had a global sales team, which could bring the product to all corners of the world.

Case 15.1: Harley-Davidson -

How should the pricing strategy be affected by the new EU tariffs in 2018?

www.harley-davidson.com 1. Describe Harley-Davidson’s general pricing strategy. What does the company’s positioning have to do with its pricing strategy?

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On average, Harley-Davidson (HD) is approximately 30 per cent more expensive than similar models from its competitor, Honda. The pricing strategy is a combination of customers’ high perceived value and a high price.

The ‘high perceived value’ is a result of the HD positioning as a ‘cool’ quality brand, combined with a high price. HD’s core customer group is the well-established group of men with good education and income. This group is less price-sensitive than the younger male customers.

2. Should Harley-Davidson alter its price, given that there are strong price pressures from rivals?

It would be very dangerous for HD to lower their prices. They might capture some short-term market shares, but in the long run, they would lose.

3. What should Harley-Davidson do to improve its market share in Europe – given the new EU tariffs? Has the HD made the right decision to move production to new international facilities?

Yes, even if President Trump was not happy with the removal of HD production from the US to other production facilities (e.g. Thailand), HD made the right decision because of the increased EU tariffs on US motorcycles from 6 per cent to 31 per cent, with effect from 22 June 2018.

Some general ideas for improving HD market share in Europe: -

Using sponsors like Ferrari (Formula 1) or a football club (soccer)

-

Ally with a partner in the more exclusive ‘American’ car business, resulting in cooperative distribution strategies

Case 15.2: Gillette Co. -

Is price standardisation possible for razor blades?

www.gillette.com Headquartered in Boston, Massachusetts, The Gillette Company (www.gillette.com) is the world leader in male grooming products, including blades, razors and shaving preparations. Gillette also holds the number one position worldwide in selected female grooming products, such as wet shaving products and depilatory devices. The company is the world’s top seller of writing instruments and correction products, toothbrushes and oral care appliances.

On 1 October 2005, Procter & Gamble (P&G) finalised its purchase of The Gillette Company. As a result of this merger, Gillette as a company no longer exists. The merger created the world’s largest personal care and household products company. In addition to Gillette, the company marketed under Braun, Duracell and Oral-B, among others, which have also been maintained by P&G.

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1. Evaluate the price level of Gillette’s Fusion.

The price level of Fusion is above the competitors’ level, but it can be justified by the high brand loyalty of Gillette.

Of course, the ‘buy-in/follow-on’ strategy (see Weigand, 1991) also has to be considered. Normally, you can buy the razor on a bargain, but then the blades are where Gillette is making the profits.

2. Discuss whether it is possible for Gillette to standardise pricing across borders for its new fiveblade Fusion. Which factors would favour price standardisation and which factors would favour price differentiation?

Favours price standardisation: Standard product (not an exclusive product) The product can be bought through the internet The product is sold through retail chains, which are also internationalising more and more Favours price differentiation: Different market conditions in different countries Within a certain country, the price could also vary depending on where it is sold (which retail shop?)

Case 15.3: Vaseline pricing strategy Questions: 1. If you were a representative of the Vaseline (Unilever) management, how would you justify the price difference? What extra customer value do you create by selling the jelly as Lip Therapy in small tubes?

While Vaseline brand petroleum jelly in a 13 ounce plastic jar retails for about $2.99 ($0.23 per ounce of jelly), the same product packaged in a 0.35-ounce tube retails for $1.99 ($5.69 per ounce of jelly).

One way of expanding revenues for Vaseline is through established product categories in which a firm currently does not have a market presence. One example of this was in 1985 when ChesebroughPond’s entered the market for lip care, a product category in which it did not have a market presence, by launching Vaseline brand petroleum jelly packaged in a 0.35-ounce plastic tube, and directly applicable on the lip, under the brand name Vaseline Lip Therapy. Applying Vaseline petroleum jelly on dry or cracked lips, particularly during the winter season, is one of the many uses for which the product has long been promoted.

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What extra value can justify the price premium on Vaseline Lip Therapy: Small handy tin box that fits into all pockets and handbags Basically, the two products are the same, but the consistency is somewhat adapted for the Vaseline Lip Therapy box 2. How would you price the Vaseline Intensive care lotion in the Philippines compared with the UK? All other things being equal, the product should be cheaper in the Philippines because there is a much lower buying power per cap., compared to the UK. However, local conditions (e.g. local competition) may also influence the price setting. Also, if the Vaseline Intensive care lotion is imported, this can also increase the end price because of the tariffs involved.

Case 16.1: De Beers -

Forward integration into the diamond industry value chain

www.debeers.com 1. What could be De Beers’ motives for making this ‘forward integration’ into the retail and consumer market?

Of course, De Beers has looked at the enormous profits in the retailing sector (see also Table 1 in the Case 16.1). They want to capitalise on their well-known brand name to get part of this profit.

2. Is it a wise decision?

Yes, absolutely. In this way, they are in control of the total value chain. Entering into a joint venture with the ‘downstream’ specialist, LVMH Möet Hennessy Louis Vuitton, makes the idea even better.

3. How should De Beers develop its internet strategy following this ‘forward integration’ strategy?

They should try and develop end-consumer contents on their website. Maybe they should also establish a more open-minded information policy, than in the past. The consumers want to know more about the company.

4. Would it be possible for De Beers, with its branded diamonds, to standardise the international marketing strategy across borders?

Marilyn Monroe sang ‘Diamonds are a Girl’s best Friend’ and this tendency is the same all over the world – so yes, it is possible to standardise most elements of the international marketing strategy.

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16.2 Tupperware -

The global direct distribution model is still working

www.tupperware.com 1. How would you characterise Tupperware’s distribution strategy in relation to the theoretical models?

Tupperware does not use traditional retail channels to distribute its products. It is a direct distribution system, where Tupperware sells directly to the end-consumers, by the use of home parties, where the products and usages are demonstrated to the customers. It is a highly vertical integrated distribution system (Figure 16.5), which is based on an exclusive distribution system in many different countries (Figure 16.3).

Tupperware’s distribution network structure has three levels: Distributors, Managers and independent dealers, who organise the ‘home parties’.

2. What are the advantages and disadvantages of Tupperware’s distribution model?

Advantages: -

It is not just about selling the plastic products but it is also about the experience, fun and social interaction among end-customers, that go along with it at the home parties.

-

Women accept this as a possible part-time job

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There are good money motivational factors involved in the whole distribution system: The independent dealers are earning some good money (typically 25% commission on sales to end-customers). Managers made profits on the sales to end-customers, but also on training of dealers. Distributors make profit on sales of the entire distribution team.

Disadvantages: -

The distribution model does not allow for intensive distribution with large volumes

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Some of the dealers may want to have a full-time job

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Party plan requires the hostess to bear the costs connected to the home parties (as compensation the hostess gets some nice Tupperware products)

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The direct selling and party plan does not necessarily attract competent personnel.

3. How would you evaluate the future for this distribution model?

With its long-lasting lifespan and endless chain of sales networking, Tupperware is ready for the next century too. Maybe the model should be supplemented with the social interaction taken place on the internet with Facebook, Twitter etc. Maybe also the webshop should be improved because more women want to be able to buy online, without joining a home party.

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4. In the last five years, Tupperware has witnessed sales decline across most of its markets.

Which criteria would you use in order to find out which of the three countries should have Tupperware’s focus in the next three years?

Possible criteria: -

How big is the middle class in the different countries (the bigger, the more attractive)

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Total GDP

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Annual growth of GDP

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GDP per cap in the ‘middle class’ (target group for Tupperware)

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Annual growth of GDP per cap in the ‘middle class’

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The wish of the woman to have a part-time job

A result of such a screening process would maybe show that India and China would be highly attractive markets.

Case 16.3: DHL DHL International (www.dhl.com) specialises in cross-border express deliveries. DHL is the global market leader in international express, overland transport and airfreight. It is also the world’s number 1 in ocean freight and contract logistics. DHL offers a full range of customised solutions – from express document shipping to supply chain management. The company is 100 per cent owned by Deutsche Post World Net. DHL links about 120,000 destinations in more than 220 countries and territories and operates cargo airlines. The company provides internet tracking and order fulfillment services. Its administrative centre is located in Diegem, Machelen, Belgium.

Key DHL figures: •

Number of Employees: around 476,000

•

Number of Offices: around 6,500

•

Number of Hubs, Warehouses and Terminals: more than 450

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Number of Aircraft: 420 (Own and foreign airlines)

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Number of Vehicles: 76,200

•

Number of Countries and Territories: more than 220

•

Shipments per Year: more than 1.5 billion

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•

Destinations Covered: 120,000

•

For the fiscal year ended December 2009, DHL achieved revenues totalling €46 billion. EBIT (Earnings Before Interests and Taxes) was €231 million

•

DHL is the first letters of the last names of the three company founders, Adrian Dalsey, Larry Hillblom and Robert Lynn

In 1969, the founders began to personally ship papers by aeroplane from San Francisco to Honolulu, beginning customs clearance of the ship’s cargo before the actual arrival of the ship and dramatically reducing waiting time in the harbour.

With this concept, a new industry was born: international air express, the rapid delivery of documents and shipments by aeroplane.

The DHL Network continued to grow at an incredible pace. The company expanded westward from Hawaii into the Far East and Pacific Rim, then the Middle East, Africa and Europe. By 1988, DHL was already present in 170 countries and had 16,000 employees.

By the end of 2002, DHL was 100 per cent acquired by Deutsche Post World Net. In 2003, Deutsche Post World Net consolidated all of its express and logistics activities into one single brand, DHL. The DHL brand was further strengthened by Deutsche Post World Net’s acquisition of Exel in December 2005. The DHL expertise is pooled from a number of companies acquired by Deutsche Post World Net. To name two: Exel: at the time Deutsche Post World Net acquired Exel in December 2005, it had around 111,000 employees in 135 countries. Exel primarily offers transport and logistics solutions for key customers.

Danzas: founded in 1815, based in Basel, Switzerland, acquired by Deutsche Post World Net in 2000, world leader in airfreight and ranked second in ocean freight. Overland transport and supply chain management complete the Danzas service portfolio.

Air Express International: the largest American airfreight provider was integrated into the Danzas group in 2001.

From August 2005, DHL introduced its new corporate wear. Over the next nine months, 110,000 DHL employees in over 200 countries and territories were provided with new uniforms. More than 1.4 million garments will be shipped by DHL. The design has been tested through interviews and extensive trials with 3,600 drivers and couriers.

Questions: 1. What are the macroeconomic drivers for the growth of the logistics business?

Demand for transportation throughout the world is continually increasing, with cross-border trade growing faster than national trade

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Removal of national and regional trade barriers (e.g. to China – See Video Case 9.3: Understanding entry modes into the Chinese market) Common currency in Europe (EU) Deregulation of the large national post organisations: opening up of European mail markets as an opportunity to further expand the mail business internationally 2. What are the most important issues in keeping DHL’s international competitiveness?

Investments in IT logistic systems and transportation technologies Digitisation: new media – above all, the internet – are changing the way information is transmitted.

Logistics processes are also increasingly being digitised – from freight documents to the entire customs clearance process. As a result, the seamless exchange of information between logistic providers and recipients is becoming more and more important Demands are increasing in contract logistics: production chains are becoming more international and, therefore, more complex. In addition, the DHL customers (international production and trading companies) are integrating their suppliers and customers extremely closely into their own logistics processes to shorten production cycles and delivery times, and to reduce stocks of goods and materials. Logistics increasingly provides the competitive edge. Only companies that master this business and at the same time have operational access to their customers’ production processes can deliver the highest quality Extending the Global Customer Solutions (GCS) sales organisation, which DHL already has with 100 of the largest multinational customers (similar to the so-called Global Account Management (GAM) system, see Chapter 19) 3. How can DHL be perceived as a local company in most countries of the world?

It is important that DHL is building a global network that links the most important economic regions.

But one of DHL’s strengths is the established local networks, which contributes to the local image of DHL. Although the brand is already known, DHL must focus on communicating product messages that were tailored to that particular market.

Exhibit 17.5 (p. 611): Jarlsberg® Cheese •

Cross-border Communication

www.jarlsberg.com Until now, Jarlsberg®’s different agents and partners in the different countries have been responsible for the local ads. Please take a look at the different ads.

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Questions: 1. Explain the different cultural characteristics behind the different ads.

The Jarlsberg® cheese is connected with different values and cultures in the four ads: Russia: The brand is connected to very traditional Norwegian cultural values (represented by the stereotyped family) The UK and Australia: Somehow the same message: Jarlsberg® = Masterpiece/Champagne The US: Loose weight from Jarlsberg® Lite 2. Would it be a good idea for Jarlsberg® to standardise the international advertising.

As the brand values behind the brand are communicated so differently by the ads, it would be advisable for the Jarlsberg® management to communicate some more standardised core brand values.

At least, it seems that the product can cross-border without being adapted, so why not the market communication.

Case 17.1: Helly Hansen -

Sponsoring fashion clothes in the US market

www.hellyhansen.com The Norwegian producer of functionalistic clothes, Helly Hansen (HH), has for generations been connected with wind and waterproof leisurewear, and work clothes for the quality-conscious consumer. Now the company (by chance) has become the supplier of street fashion clothes for hiphoppers in the United States of America. The result in 1996 was that the turnover (compared to 1995) doubled in the American market, thus amounting to one-third of HH’s worldwide sales.

Strengths: Before: functionalistic/quality clothes for skiers, fishermen, sea sports people and snow boarders.

Now: street fashion clothes also.

Weaknesses: High price level.

Opportunities: Bigger market shares in the ‘fashion clothes’ market.

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Threats: The fashion trend is only a ‘fad’ (very short life cycle: sharp rise and fall).

1. Would you recommend that HH sponsors Bad Boys? Give reasons for your answer.

As fashion trends are very vulnerable (the trend could disappear in two weeks), I would have a positive attitude towards the idea of sponsoring, because this is a way of keeping the brand alive in the minds of the young people in America. However, the price for the sponsoring seems too high for a company like HH. 2. How can an eventual sponsorship be integrated into the total marketing plan for HH clothes in the US market?

Sponsoring is a part of the communication mix. If HH decides to go into the sponsorship, the other communication decisions concerning the fashion clothes should also be adapted to this decision. For example, the HH fashion clothes should appear in magazines that are popular in the target group. TV commercials should be shown on MTV, etc.

Case 17.2: Morgan Motor Company •

Can the British retro sports car brand still be successful after 100 years?

www.morgan-motor.co.uk 1. How is the Morgan’s international communication strategy different from mainstream mass-produced cars?

The mainstream mass-produced cars are mainly advertised through mass communication channels, like television. Contrary to the mass-produced cars, Morgan’s communication strategy is much more directly targeted at the potential buyer groups. Morgan doesn’t use mass communication. Instead, they try to form communities around the brand, for example, by supporting the Morgan Sports Car Club. Furthermore, the buyer of a Morgan car can visit the factory in U.K. and follow the production of his/her car. This experience (similar to the Build-a-Bear concept) very effectively transfers the fundamental brand values of Morgan Motor Company and also reinforces the brand values and retains buyer loyalty.

These are the main brand values of Morgan Sports cars: -

A British icon in sports cars

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The oldest privately and independent owned sports car manufacturer

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The cars are hand-crafted

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The cars are made of ash wood (the frames), hand-moulded body parts and hand-stitched leathers

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The waiting list for a new Morgan car can be up to an year – normally that is a sign of bad supply chain management, because it has kept up the prices, not only for used Morgan cars but also for new cars.

These brand values give a sense of Retro & British marketing communication: Morgan is probably the only car company that still makes cars the way they were made in early 1900s – by building them on a wooden frame and crafting them mainly by hand.

2. How can Morgan use celebrities in the communication strategy?

By using the celebrity buyers of Morgan cars more in the future communication strategy, but only if these celebrities would like to participate. In the past, Catherine Deneuve, Jean-Paul Belmondo and Mick Jagger were buyers of Morgan Sports cars. In April 2009, Princess Anne officially opened the brand new Morgan Visitor Centre.

3. How can Morgan make use of the social media?

The company’s whole business model is based on longevity, retro marketing and brand reinforcement.

But this retro approach should not prevent Morgan from integrating the new social media like Facebook, Twitter, YouTube, etc. in the total communication strategy. The twist of ‘old’ and ‘new’ communication media is very attractive for the target customer group.

4. Prepare a global communication plan for the new Aero SuperSport.

Starting point could be the Figure 17.3 (p. 638) combined with Figure 17.5 (p. 661) models in the book.

Communication objective: -

Increase brand awareness and sales of Morgan by, for example, 20 per cent within three years in the Morgan target group of Age: 40+, top income people with a preference for retro life style and real hand-crafted products

-

Design and arrange for some more online content (including social media) regarding the car brand

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Create awareness for the Morgan brand and the values behind it by inviting people from the potential customer group to some special events, for example, in the local Morgan Sports Car Club community

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Create a more direct experience with the brand by inviting for a factory visit in UK – this reinforces the brand values and loyalty

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Measure communication impact in the form of brand awareness and sales

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Case 17.3: BMW Motorcycles Bayerische Motoren Werke (BMW) – www.bmw.com – is one of the leading manufacturers of premium passenger cars and motorcycles in Europe. It also offers insurance, reinsurance and information technology consulting services. The company primarily operates in Europe and the Americas. It is headquartered in Munich, Germany.

The motorcycles division (www.bmwmotorcycle.com) develops, manufactures, assembles and sells BMW brand motorcycles as well as spare parts and accessories. This segment also offers motorcycle equipment such as luggage systems, heated grips, windscreens, chrome valve covers, satellite supported navigation systems, special seats and on-board computers. In addition, the company sells helmets, motorcycle suits, boots and gloves through its motorcycle segment. All motorcycles are produced in Berlin.

In 2008, the BMW market share in the heavyweight segment (651+ cc) was 15.1 per cent in Europe, two per cent in North America and 4.4 per cent in Asia-Pacific (source: Case IV.4: Triumph motorcycles).

Although car buyers are extremely familiar with the BMW brand, the brand has much lower awareness among motorcycle buyers. This is a major challenge for BMW Motorcycles, which has been producing high-end motorcycles for more than 80 years. The company’s main promotional goal is to attract serious riders who are looking for an exceptional riding experience. To do this, its marketers carefully coordinate every promotional detail to convey a unified brand message positioning the BMW motorcycle as ‘the ultimate riding machine’, as its advertising slogan states.

Using print and television advertising, personal selling in dealerships, sales promotion and a virtual showroom on the web, BMW is driving its brand message home to motorcycle enthusiasts across the United States (where the video has its starting point) and other countries.

Questions 1. What are the advantages of using more personal advertising copy and encouraging customers to become missionaries for BMW motorcycles?

Customers are generally seen as a more credible source of product information than advertising messages. As a result, potential buyers who hear about BMW from satisfied customers will probably give those comments more weight than the information in an ad. Using more personal advertising copy helps BMW deliver its message in a way that is consistent with what loyal customers might say to their friends and relatives – reinforcing the perception that knowledgeable insiders appreciate what BMW has to offer. The video points out that personal copy avoids the pitfall of sounding like a giant, impersonal corporation in delivering the message.

2. Should BMW use standardisation or adaptation in promoting the motorcycles outside US and Germany?

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reflected in the advertising. Generally, in Asia the motorcycles are much smaller than in the United States. Therefore, in Asia it would be relevant to use a dual strategy (adapting both the product and the promotion – See Chapter 14).

3. Why is BMW using its website as a virtual showroom rather than also selling online directly to consumers?

Few customers are likely to buy an expensive product such as a BMW motorcycle without seeing it in person and asking questions. In addition, motorcycles – like cars – have traditionally been sold through personal selling in the dealer’s showroom, in part because some customers order specific product options when making a purchase. Therefore, BMW encourages site visitors to learn about the different motorcycles in its product line and then go to a local dealership to make the actual purchase.

4. Should BMW develop and promote a new motorcycle brand to differentiate its motorcycles from competing motorcycle brands (i.e. selling to new target groups), as well as differentiating them from BMW cars?

A new motorcycle brand (e.g. Harley-Davidson did this with introduction of the Buell): Pros: -

A new brand may point to the confusion in consumers’ minds between the BMW car brands and the BMW motorcycle brand, as noted in the video

-

Promoting an entirely new brand offers the opportunity to build a strong positioning around specific benefits valued by motorcycle enthusiasts

Cons (Stick to the current brand): -

The brand equity has been built up over many years by promoting the brand to the market

-

It would be very expensive to build up a new motorcycle brand

-

BMW cars have a high-performance positioning that is similar to the high-performance positioning of BMW motorcycles

In this light, BMW should probably stick to the current brand – with the current sales volume, it would be too expensive to create a new brand.

Case 18.1: ZamZam Cola -

Marketing of a ‘Muslim’ cola from Iran to the European market

www.zamzamgroup.com

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1. What were the main reasons for the success of Zam Cola in the Middle East?

The ZamZam Group was started up by local people in the region (headquarters is located in Iran).

These people have an extensive knowledge of the culture and religion in the Arab and Muslim regions. This is the main reason for their success.

2. How should Ahmad-Haddad Moghaddam prepare his sales force culturally for selling ZamZam Cola to European supermarket chains?

He should choose Europeans as salespeople, because they know the ‘low-context’ mentality of western European managers.

As a second priority, he could choose Middle Eastern immigrants as salespeople. They have the advantage that they know the background of ZamZam Cola, and if they have been in Western Europe for some years, they also know about the ‘low-context’ culture.

If some Arab natives are sent to Western Europe for the sales jobs, they have to be ‘culturally prepared’ and they would need a course where the differences between high-context and low-context cultures are explained.

3. Do you think Ahmad-Haddad Moghaddam can repeat the international ZamZam Cola success with a new coffee shop chain and a new energy drink?

There is a good chance that he can diversify successfully into new businesses, like coffee shops and energy drinks, because he can utilise the synergies of the high brand image of ZamZam Cola.

Case 18.2: TOTO -

The Japanese toilet manufacturer seeks export opportunities for its high-tech brands in the US

www.toto.co.jp 1. What cultural barriers would the Japanese managers from Toto meet when negotiating with American managers from building societies about new contracts for toilets in US luxury apartments?

This could be a culture ‘clash’ between a ‘high-context’ culture (Japan) and a ‘low-context’ culture (United States of America). While the Japanese managers would try to create relationships with the partners in the United States of America, the US managers from the building societies would be more concerned about getting the lowest possible prices for the toilets for their luxury apartments.

Traditionally, Americans are more transaction-oriented and the Japanese are more relationshiporiented.

Besides the difference in high–low context, we can also get some inspiration by studying Hofstede’s research – especially the differences in ‘power distance’.

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2. Some analysts argue that tackling cultural toilet norms and barriers is not worth the effort and that Toto would be better off pulling its Washlets and Neorests out of the United States and Europe altogether and concentrating on more receptive Asian markets like China, and of course Japan. Do you agree? Why? Why not?

As one of the world’s leading manufacturers, Toto cannot ignore the world’s toilet market – the United States.

To fully exploit the market possibilities in the United States of America, Toto could consider making a product adaptation by removing the bidet from the package. The Americans are not used to this feature.

If Toto does not want to make any product adaptations, they must consider if the resulting market share is worth all the resources used in the United States of America.

The advice would be: stay in the huge US market, but make the necessary product adaptations in order to fit into the American toilet culture.

Case 18.3: Dunkin’ Donuts Dunkin’ Brands – www.dunkinbrands.com runs a chain of quick service restaurant companies. The company is split into three business segments: Dunkin’ Donuts, Baskin-Robbins and Togo’s. Retail outlets are operated in a franchise format either through operating agreement, license agreement or joint venture.

Dunkin’ Donuts (www.DunkinDonuts.com) claims to be the world’s largest coffee and baked goods chain, serving 2.7 million customers per day at approximately 8,800 stores in 31 countries which includes approximately 6,400 Dunkin’ Donuts locations throughout the USA. This figure compares with the 15,011 stores of coffee chain Starbucks, whose baked goods are usually prepared out of shop.

Most Dunkin’ Donuts stores are franchises. Dunkin’ Donuts’ most significant presence overseas is in the Philippines, Indonesia, South Korea and Thailand. Dunkin’ Donuts international locations are mainly concentrated in Asia-Pacific and Latin America.

Founded in 1950 in Quincy, Massachusetts, by William Rosenberg, Dunkin’ Donuts became famous for their varieties of donuts and the wide range of bakery products – muffins, bagels and donut hole treats. Dunkin’ Donuts is also the place for beverages – from freshly brewed hot coffee in up to nine flavours, to refreshing iced coffee and chocolate beverages.

Dunkin’ Donuts has seen a revival since 2003 as a result of new product innovation, as well as the addition of breakfast sandwiches. While the company is included in the bakery segment, which is more mature, it also competes with the stronger growing coffee specialist segment. As a result, Dunkin’ Donuts has expanded the variety of its menu, including the launch of a new smoothie yoghurt drink, backed by heavy advertising. Dunkin’ Donuts has large expansion plans, expecting to grow by 15,000 outlets by 2015 in an attempt to be more competitive with coffee specialist chain Starbucks by having more conveniently and ubiquitously located outlets.

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In 2006, Dunkin’ Brands, Inc. was purchased by a group of investors: Bain Capital LLC, The Carlyle Group and Thomas H. Lee Partners, L.P. from Pernod Ricard, South Africa, following Pernod’s acquisition of Allied Domecq PLC, Dunkin’ Brands’ former parent company.

Dunkin’ Donuts has many strengths: quality and freshness, flavour and variety, good value, convenient locations and strong brand presence. However, the company has to deal with powerful, new competitors, including Starbucks and Krispy Kreme.

Dunkin’ Donuts continues to be a major brand with $5.5 billion in sales (2008). Success is attributed to extensive market research conducted before a product is launched. Additionally, corporate training enforces the company standards to deliver a consistent product year after year and across all restaurants and franchises. Dunkin’ Donuts does not target one customer segment; rather, it reaches across all demographic strata. Its promotional campaigns and diversity of locations support this strategy. To meet market demand, the company is expanding into the coffee market by offering specialty coffee drinks in addition to its standard drip coffee. But Dunkin’ Donuts will not deviate from its original product offering and continues to offer the consumer quality, convenience and variety.

Questions: 1. Dunkin’ Donuts wants to get a better market position in Europe, and set up a meeting in London with potential franchisees from different European countries in order to negotiate franchising deals that could provide a higher growth in this region. What potential dangers should the US negotiator be aware of in this kind of cross-national negotiation?

International franchise negotiations in Europe have many characteristics that distinguish them from negotiations in the US or Asian setting.

As the customs, perceptions and language are different in different European countries such face-toface negotiations would require some understanding of the different cultures, which are represented by the different potential franchisees.

2. What is Dunkin’ Donuts’ value perception and positioning strategy?

Dunkin’ Donuts offers consistently good quality and a variety of consumer-driven products emphasising freshness in coffee and donuts at a reasonable price.

The company addresses a broad segment of diverse consumers seeking an alternative to breakfast at home, and to travellers.

3. How has Dunkin’ Donuts responded to competitive changes in the global marketplace?

New product lines, lattés, cappuccinos, ice coffee, sandwiches and new smoothie yogurt drinks are being promoted. Their campaign theme of ‘Bring Yourself Back’ uses a simple, uncomplicated message of quality, freshness, new products and fun.

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Case 18.4: Stella & Dot 1. Describe the business and distribution model that Stella & Dot build on.

To a certain degree, the Stella & Dot business model is similar to the Tupperware direct distribution model (see Case 16.2.). However, there are also differences: Stella & Dot was meant to provide busy mothers with a unique direct sales opportunity. Herrin (see a picture of her in the case) created a direct sales business that features well-made jewellery pieces.

Herrin also created a business model that employs and utilises e-marketing and social networking (different from the Tupperware business model), giving busy mothers the marketing tools and support they need to grow their home-based business. Stella & Dot stylists will sell the jewellery line at trunk shows, and mentor and train other stylists. There are opportunities for people looking to earn a little extra cash and those looking for a full-time income.

2. What are the opportunities and challenges in globalising the Stella & Dot’s business model?

Opportunities: Like the Tupperware, this business also has globalisation potential – somehow ‘jewellery’ is desired by most women of the world.

Challenges: The business model has to be adjusted to local conditions. For example, it would be too much for most women (stylists) in, for example, BRIC-countries to pay $199 for the start-up package.

Also, the jewellery has to be adapted to local market need. Different cultures = different preferences for design of jewellery.

3. When Stella & Dot globalise their business, how should they incorporate all the ‘stylists’ operations into a consolidated international marketing budget?

There has to be a Stella & Dot manager in all major countries – a manager, with financial flair who can consolidate the financials from all the ‘stylists’ in each country. This local financial manager should then report the consolidated figures back to the HQ in USA, where the worldwide consolidated marketing budget should then be made, and afterwards communicated to the different countries.

Case 19.1: Mars Inc. -

Merger of the European food, pet care and confectionary divisions

www.mars.com 1. Discuss the two views of organising Mars’ European activities.

The two views are as follows: It is OK to merge because Mars can achieve ‘economies of scale’ in distribution to the retailers.

The merged products are too different (food for animals and people).

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2. Did Mars Inc. do the right thing in your opinion?

It is very difficult to judge, but my direct opinion is that it is not appropriate to mix human and animal food in the same organisation. The direct customers (retail chain) are the same, but the competitors are not: Nestlé and Unilever are only rivals in human food and confectionery.

Case 19.2: Henkel •

Should Henkel shift to a more customer-centric organisation?

1. Was it a good idea to shift the Henkel organisation from a more product- to a more customer-centric approach?

Henkel generated a high turnover in 2007 from their three main product categories (Laundry & Home Care, Cosmetics & Toiletries, Adhesives Technologies), however, most revenues and profits were realised in the B2B business, where Henkel concentrated on the relationship with its biggest global accounts. Henkel’s strategic customers, international retail chains, are changing their marketing strategy and increasing their bargaining power, for example, by heavily investing in branding activities and internationalising. So, knowing about the own product marketing strategy does not suffice any more. Worldwide delivery of excellent products will not be enough to prosper in the future. Henkel will have to align at least their branding strategy to Walmart’s.

2. What are the challenges of being a customer-driven multinational that serves both B2B and B2C customers?

The major challenge of the B2B relationship is that the supplier is rarely the proactive partner. But, in order to maintain the close relationship to the strategic multinational customer, the supplying company has to develop tailor-made solutions, for example, by entering and serving on new markets.

On B2C markets, Henkel faces more intense and diverse competition and the product margins are lower. Serving both B2B and B2C customers on a local and global plan requires excellent coordination skills as well as true global servicing capabilities.

3. How can Henkel further intensify the B2B relation with its key global customers?

Henkel has to increase the knowledge transfer among and the coordination between its business units and manage customer information centrally. Introducing systematic international sales programmes, for example, key or global account management (GAM) will lead to a better performance of both Henkel and Walmart. In order to intensify the relationship with Walmart, Henkel should identify co-operation projects that go beyond product-related activities. Linking corresponding departments, for example, marketing, R&D and production from both organisations will increase the switching costs for the customer. Additionally this might create unique co-operation opportunities, for example, co-branding or new product co-development. A central coordination of all strategic customer activities is the first step towards sustainable global customer management.

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Case 19.3: McDonald’s McDonald’s Corporation (McDonald’s) – www.mcdonalds.com – is the world’s largest food service retailing chain. The company is known for its burgers and fries, which it sells through 32,000 fastfood restaurants in over 120 countries. Franchisees operated 81 per cent of the restaurants at year-end 2009. McDonald’s is headquartered in Oak Brook, Illinois, and employs app. 400,000 people.

The company recorded revenues of $22,745 million during the fiscal year ended December 2009. The net income was $4,310 million.

The history of McDonald’s dates back to a hamburger stand in California, owned by two brothers Dick and Mac McDonald. Ray Kroc, a distributor of milk shake mixers, impressed by the operation of the McDonald brothers, persuaded them to allow him to open a similar restaurant in Des Plaines, Illinois. The first McDonald’s restaurant was established in Des Plaines, Illinois in 1955. Soon the number of McDonald’s restaurants increased to 100 by 1959 and 500 by 1963.

Under the franchise arrangement, the franchisees invest in the equipment, indoor- and outdoor-signs, seating and decoration, while the mother company owns or leases the land and building.

Franchisees pay the company service fees and rent for premises. Service fees are set as a percentage of sales, while rent and other terms of occupancy are stipulated in the franchise agreement, which is drawn for a period of 20 years.

The video case is about the challenges, which McDonald’s may face in consolidating revenues and other financial information from operations in multiple countries. It is also about recognising how differing laws and monetary systems can affect the accounting activities of a global corporation.

Collecting, analysing and reporting financial data from all the restaurants in 120 countries is no easy task, as the accounting experts at McDonald’s are well aware. Every month, the individual restaurants send their sales figures to be consolidated with data from other restaurants at the local or country level. From there, the figures are sent to country-group offices and then to one of three major regional offices before going to their final destination at the McDonald’s headquarters in Oak Brook, Illinois.

In the past, financial information arrived in Illinois in bits and pieces, sent by courier, mail or fax.

Today, local and regional offices log onto a special secure website and enter their month-end figures, enabling the corporate controller to quickly produce financial statements and projections for internal and external use.

Questions: 1. What could be the reason why McDonald’s have both franchised and own restaurants?

McDonald’s own some restaurants because here they may want to test new concepts and or keep control over some strategic located restaurants. With the franchised restaurants, they want to ‘outsource’ the risk of doing business in far distant markets, where the cultural distance to United States is very high.

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2. Which financial measures should McDonald’s use to control the global marketing programme in the single countries and in single restaurants?

Financial measures for single countries: - Total sales per year in the country and in different regions/cities - Total Contribution 1 per year in the country and in different regions/cities - Total Contribution 2 (marketing contribution) per year in the country and in different regions/cities - Total sales per McDonald employee in the country - Total sales per square meter restaurant floor in the whole country - Return on assets (ROA) in the country Financial measures for single restaurants: - Total sales/profit increase from one month to next and year over year - Turnover/profit for different types of meals - Turnover/profit per square meter in the restaurant - Average order per customer per month - Average order per employee (front personnel) per day - Inventory turnover – show how fast the restaurant is selling the goods. It is calculated as total sales for the year divided by average inventory - Repeat/loyal customer – How high is the percentage of total sales from repeat customers 3. What problems might arise if individual McDonald’s restaurants were required to enter sales data directly onto the company’s centralised accounting website at the HQ in USA, instead of following the current procedure of sending it through country (subsidiaries) and through regional channels?

Having individual restaurants send sales data directly to headquarters would probably create confusion and additional problems, in part because of the high number of restaurants reporting (approximately 32,000) and because of the need to convert raw sales data using a multitude of foreign exchange rates. The current system, which allows local, country and regional controllers to collect and review restaurant sales, make any necessary adjustments and conversions, and then send it to the next level for consolidation, might be further automated to speed up the process.

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PART 3

Teaching notes for part cases A short description of the case studies is provided in Part 1 of this IM. As earlier indicated, the questions at the end of each case are only meant for guidance, so that the instructor may add to the existing list of questions. The teaching notes for the case studies follow a common structure: I. Synopsis: This provides a short résumé of the case, to give you a greater insight into the nature of the case than that provided in the case summaries.

II. Situational analysis: The approach is a simple SWOT analysis, which is easily adapted by the students.

S:

Strengths

W: Weaknesses O: Opportunities T:

Threats

III. Proposed answers to questions: The sample answers are summary presentations (keywords). The instructor may wish to develop longer and more detailed responses.

Part 1 cases Case I.1: Electrolux -

A white goods manufacturer is considering growth opportunities worldwide

www.electrolux.com

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I. Synopsis Electrolux is a Swedish global appliances manufacturer, offering comprehensive coverage of both major and small appliances. It sells more than 60 million products to customers in more than 150 countries every year. Its core categories by volume sales are refrigeration, home laundry, and large cooking appliances in major appliances, as well as vacuum cleaners in small appliances. Within consumer appliances, Electrolux holds a broad brand portfolio covering premium brands such as AEG, mid-upper brands such as Electrolux, as well as mass-market brands such as Zanussi and Westinghouse. In addition to consumer appliances, Electrolux is also strong in professional appliances and holds a continuous dialogue with world-leading chefs in Michelin-starred restaurants on the usage of luxury brands Electrolux Grand Cuisine Professional and Molteni.

By region, Electrolux places Western Europe, North America and Australasia as its core markets, as well as Latin America, Asia Pacific and Middle East and Africa (MEA) as growth markets in its corporate strategy.

II. Situational analysis (SWOT analysis of Electrolux)

Strengths: -

Broad coverage: With sales branches in every region, Electrolux holds strong presence in most regions and covers most major and small appliances categories to provide complete solutions in all channels especially. Electrolux can also target different segments from luxury to mass market.

-

Strong regional market positions: It sells more than 60 million products to customers in more than 150 countries every year, across various regions, including EMEA, North America, Asia Pacific and Latin America. These strong regional market positions have mainly been achieved through acquisitions of regional brand.

-

Strong in cooking appliances for up-scale restaurants (Michelin restaurants): In general the company has a strong position among professional customers.

-

Good financial performance: Improvement in financial performance in 2017 and 2018 enables the company to provide higher returns to its shareholders.

Weaknesses: -

Relative weak positions in Asia Pacific, Middle East and Africa: Despite global coverage, Electrolux’s positions in these regions are a bit behind.

-

Lack of number ones: Electrolux lacks global number one categories to strengthen its branding, but they work hard to achieve no. 1 position in certain niche categories.

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Opportunities: -

Growing global household appliances market: Electrolux can leverage its strong portfolio to tap into the growth trend to further increase its sales.

-

Connected appliances: Connected IoT based appliances give the chance for value growth for Electrolux, which is very active in this area.

-

Strategic acquisitions: This would strengthen the company’s product portfolio and also support its geographic expansion, thus enhancing its financial position.

Threats: -

Stronger competition: Electrolux faces fierce competition from companies Whirlpool, LG, Samsung, Haier, Bosch-Siemens and Miele & Cie. The major appliance market is consolidation, so tougher competition is expected with stronger rivals. Many of these rivals (especially the Asian ones) enjoy low-cost sources of supply, which allow them to lower prices in order to increase their market share. This would lead to pricing pressures, thereby decreasing the profitability of Electrolux.

-

‘Made in America’ policy: President Trump threatens many manufacturing firms with higher import taxes if they do not produce in the US.

III. Proposed answers to questions 1. Discuss and evaluate Electrolux’s key competitive advantages in the world market for ‘major appliances’.

Competitive advantage can be achieved either by providing comparable customer value more efficiently than competitors (lower cost), and/or performing activities in unique ways that create more customer value than the competitors are able to offer.

Electrolux’s competitive advantage can mainly be explained by its more differentiated offer for the customers worldwide, than its competitors like Samsung, Haier, Bosch-Siemens and Whirlpool.

Regionally, Electrolux has been better able to adapt its product range across regions than its competitors.

The disadvantage of this strategy is that Electrolux does not get the same degree of ‘scale economies’ as their main competitors, like Samsung and Haier.

2. Explain and discuss customer behaviour in the major appliances market (B2B, B2C).

B2B customer behaviour: Here Electrolux must consider the behaviour of the retailers or the e-commerce website owners, where Electrolux would have to present its products, in order to sell them to the final end users.

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rational buying with high involvement, where the price is often of the deciding factor for the choice of major appliance supplier.

B2C customer behaviour: Here Electrolux and the retailer develop solutions to create contact with and engage consumers throughout the purchase and usage process. The aim is to establish an intimate dialogue with consumers and strengthen the overall experience of the Electrolux offering. The ‘360 degree consumer experience’ process focuses on consumers and on creating the best customer experience of Electrolux at different stages, from exploring various alternatives, visiting websites and choosing products at retailers to installing and using the products.

3. How would you recommend that Electrolux should position itself on the ‘glocalisation’ framework scale, from ‘100 per cent globalisation’ to ‘100 per cent localisation’ (Figure 1.7), compared to its major competitors (Bosh-Siemens, Samsung, Whirlpool and Haier)?

Electrolux should position itself in the ‘glocal’ area, somewhat right to the major Asian competitors (like Samsung and Haier), which are more to the left, in the ‘globalisation’ (standardisation) part.

The key Electrolux competence is its ability to offer different product solutions to different customer needs, across the geographical regions. In order to turn this competence into growth, the company has to get the different employees aligned in regional projects, regarding satisfying local customer needs. So there can be a decentralised strategy from the Electrolux HQ to the regional HQs, and a more centralised strategy from regional HQs to the country subsidiaries in the region.

Case I.2: Nintendo Switch - Is this the ‘Blue Ocean’ comeback I. Synopsis Nintendo is a technology company that manufactures home leisure equipment. It manufactures and markets hardware and software for its home video systems. Nintendo provides software games on various platforms such as Nintendo Switch, Nintendo 3DS, Wii, and iOS and Android.

II. Situational analysis (SWOT analysis) Strengths: -

Global presence: Nintendo operates in Asia, the Americas and Europe. Wide geographic presence provides Nintendo with ‘economies also of scale’ and ‘economies of scope’. It increases its revenues and reduces business risk.

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-

Long record of innovation: Nintendo has been successful at releasing new technologies, such as the joy stick of the Nintendo 64 and Wii controllers. The Nintendo Switch is its latest, which allows gamers to play on the go.

-

Ownership of popular games: Its most popular games are Pokémon, Super Smash Bros and Mario Kart.

Weaknesses: -

Reliance on outside manufacturers: Nintendo depends on outside manufacturers for supply of key components and assembling of finished products. The lack of integration in producing certain key components puts the company at a competitive disadvantage.

Opportunities: -

Growth of the global gaming software market: Nintendo could benefit from this growth

-

Increasing market for smartphone games: Nintendo could benefit from positive outlook for smartphone game market, for example, in Asia. This development is also triggered by the rapid deployment of 4/5G technology.

Threats: -

Piracy and unauthorised copying could impact business: The increasing availability of broadband availability of broadband access to the internet and the proliferation of technology designed to circumvent the protection measures used in the devices, have contributed to an expansion in (internet) piracy.

III. Proposed answers to questions 1. What were Microsoft’s motives in entering the games console market with Xbox?

Until now Microsoft has dominated the workplace in the office. Now they want to dominate the home.

There has also been a shift from PC to video games.

Microsoft hopes to leverage the billions it has spent in developing a software environment for the personal computer to develop a gaming platform, allowing game developers who have created the games for the PC to be able to easily convert those games to the Xbox (use of technology synergies across SBUs).

The Xbox uses much of the same underlying software code that games use on the Windows PC platform.

The chip that is going to be in this console (Xbox) is many times faster than the chip in the PCs, so users are going to get a better game on the console than on the PC.

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Also, families make more use of PCs at home and parents will not want children filling the hard drive with games, so they will buy them a console. Furthermore, the parents do not want the children to occupy the home PCs all the day.

2. What are the competitive advantages of Microsoft’s Xbox One and Sony’s PlayStation 4?

Until 2005, the battle seemed to be fought between Sony and Microsoft. But the third player in the industry, Nintendo, got a comeback with their Wii, which has been very well received by the market and it is now world market leader.

However, the two competitors (Sony and Microsoft) managed to imitate Nintendo’s excellent idea about the motion controls and come up with even better solutions: -

Sony launched the ‘Move’ in September 2010

-

Microsoft launched the ‘Kinect’ in November 2010

With the PlayStation Move, Sony claimed to have a controller which offers more accurate motion control than the Wii, and Microsoft’s Kinect removed the need for a controller completely. Notably, what these devices offer is motion control combined with more graphical power than Nintendo’s Wii. Today, Microsoft’s Xbox One and Sony’s Playstation 4 are competing desperately against each other.

3. What are the competitive advantages of the original Wii and the new Nintendo Switch?

According to the BOS framework, the ‘competitive advantage’ can be reduced to two simple strategies in order to create ‘value innovation’: -

Increasing customer value

-

Reducing costs

When both strategies are being realised at the same time, the ‘overlapping’ area in the following Figure will be higher = Increasing ‘Value Innovation’.

Figure 4.15 (from the textbook): Creating ‘Value Innovation’ in the Blue Ocean Strategy framework.

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Source: p. 133 in the Hollensen (2020) textbook The original Nintendo was competing on completely different terms than Sony and Microsoft. The two competitive tools were: 1. Increase value for many new customers – gaming experience (motion stick etc.)

Nintendo used the conventional wisdom, ‘differentiation’ and product innovation, and focus on the gaming experience instead of technological obstacles.

2. Cost reduction by eliminating features (no HD, no DVD, no Dolby 5.1, low processor speed) The advantages to Nintendo are firstly that it makes their console cheaper to manufacture. This means that they can sell the base console at a profit whilst their competitors have to subsidise the retail price.

It also gives Nintendo far more room to manoeuvre when it comes to using the price mechanism to take on that competition.

However, the two competitors did not stand still. They developed even better motion controls.

Nintendo’s answer to these two competitive moves came in November 2012 when Nintendo launched the ‘Wii U’ which is an attempt to integrate the tablet PC concept (known from e.g. the Ipad) in the console gaming.

The GamePad represents Nintendo’s attempt to differentiate its new console in the same way that it did with its Wii back in 2006. The implementation of a touchscreen allows for what Nintendo terms ‘Asymmetric Gaming’, whereby the TV and GamePad touchscreen can simultaneously offer different perspectives on the game at hand, effectively allowing for dual screen gaming. Additionally, the Wii 118 © Pearson Education Limited 2020

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U also has the ability to stream the TV image to the GamePad’s screen, allowing gameplay to occur without the need for the TV. This is a feature that is geared towards families, as it allows for the Wii U to be in use even if another family member wishes to use the TV for another purpose.

However, if the original Wii represented a shift away from the hard-core gamer market, the Wii U signalled a movement back towards the hard-core market space. The GamePad, although innovative, actually resembled a traditional controller in more ways than the original Wii motion controls.

Nintendo has placed a large amount of emphasis on the entertainment features of the Wii U. The Nintendo TVii service, launched by the end of 2012, is a service that combines TV streaming services, social media, and movie streaming services such as Netflix and Amazon Instant Video.

The Wii U was introduced at so low prices that Nintendo would make a loss on selling the hardware, but as soon as Nintendo could get the consumer to buy one piece of software, then that entire customer relationship became positive, in terms of profits for Nintendo. The purpose of this business model is to drive the install base of hardware, and then to drive a strong tie-in ratio with all the software (games) for the consumer.

The main USP of the new Switch is the flexibility of gaming – it combines a home console with handheld gaming. It is possible to switch from a home console to a portable gaming system in a few seconds. Transitioning from one style of gaming to another let you continue playing where you left off. A likely use-case is people who want to keep playing when their spouse/ parent/roommate wants to watch something on the TV. The Switch is priced at $300, so the Switch has also a relatively low barrier to entry regarding its price, compared to the two competitor products.

3. What do you think Nintendo’s chances are of creating a new ‘Blue Ocean’ comeback with their Switch?

The launch of the ‘Wii U’ was representing Nintendo’s attempt to re-establish its Blue Ocean in game consoles. The sales development in 2013 and forward did not indicate that Nintendo was able reach out for a new Blue Ocean, on the contrary.

Nintendo Switch has really good chances of creating a real new ‘Blue Ocean Strategy’, a marketing idea that is based on finding large areas of a market that you can own without having to fight competitors. Right now, Nintendo has no real competition in the portable gaming space, which lets it make interesting moves without fear. The Switch is not battling against the Xbox One or PlayStation 4 — at least, not directly. Also, the Switch is equipped with attractive, new games that can be played only on the Switch: Super Mario Odyssey, Mario Kart 8 Deluxe and Zelda.

Case I.3: Cereal Partners Worldwide (CPW) -

The No. 2 world player is challenging the No. 1 – Kellogg

www.cerealpartners.co.uk

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I. Synopsis Although Kellogg commands the market leader position globally in breakfast cereals, it faces a new and more formidable international competitor starting 1989. General Mills and the Swiss food titan Nestlé, South Africa, established a joint venture called Cereal Partners Worldwide (CPW), which essentially combined General Mills’ cereal brands and cereal-making equipment with Nestlé’s name recognition and branding in numerous markets and its vast experience with retailers there. By 1994, CPW was already beginning to eat into Kellogg’s market share in various countries.

All CPW’s breakfast cereals are marketed under the Nestlé brand name. They include Shredded Wheat, Shreddies, Cheerios, Golden Grahams, Clusters, Sporties, Golden Nuggets and Nesquik.

CPW is headquartered in Lausanne, Switzerland.

In fiscal year 2014, the company generated revenues of approximately USD 3 billion.

II. Situational analysis (SWOT analysis) Strengths: -

The combination of competences (General Mills and Nestlé) along the total value chain

-

CPW offers its products under a large portfolio of well-recognised Nestle brands

-

CPW can utilise ‘economies of scale’ (large scale of production), therefore sustaining its margins against rising raw materials.

Weaknesses: -

Hard to communicate CPW’s competences towards the customers who may be confused that CPW is the real seller, but the cereal packaging indicates that Nestlé is the seller

-

Limited product innovation for the Far East markets, and India, where Kellogg has already generated considerable brand loyalty.

Opportunities: -

Over the past few years, there has been a newfound emphasis on healthier eating. With a change in lifestyle, people are becoming more aware of the negative effects of unhealthy eating habits.

Consumers are showing increased preference for fat-free and healthy food products. Food items containing trans-fat are losing market share as they are linked to cardiovascular diseases.

-

In a huge market like India, consumers adopt more Western breakfast habits.

Threats: -

CPW faces intense competition in both domestic and international markets. Principal factors of competition include new product introductions, product quality, taste, nutritional value, price and

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promotion. The company’s products compete with branded products and private label products, which are typically distributed at lower prices.

-

The US breakfast cereals market has been shrinking in terms of both value and volume.

III. Proposed answers to questions Carol has heard that you are the new global marketing specialist so you are called in as a last-minute consultant before the presentation to the board of directors. You are confronted with the following questions, which you are supposed to answer as best you can.

1. How can General Mills and Nestlé create international competitiveness by joining forces in CPW? Illustrated by this figure: Figure 1 The CPW joint venture

+

General Mills

Nestlé

50%

50%

Cereal Partners Worldwide (CPW)

R&D

Production Marketing

Sales and services

General Mills

Nestle

Upstream

Downstream

each partner specialises in each end of the value chain. General Mills has its competences in the upstream part and Nestlé has its competences in the downstream part.

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2. Evaluate the international competitiveness of CPW compared with the Kellogg Company.

Kellogg products are largely concentrated towards breakfast cereals. The company specialises in ready-to-eat cereal and grain-based snack. CPW provides a range of products including other packaged foods.

3. Suggest how CPW can create a blue ocean strategy.

CPW may bypass the head-on competition with Kellogg’s (‘Red Ocean’) and move to other businesses, like the healthy snacks business or healthy energy drinks, which could be consumed in the morning.

Some students may also propose a complete ready-to-go package (total solution) consisting of a bowl, spoon, cereals and milk.

4. Where and how can CPW create further international sales growth?

Scandinavia is a place where a lot of breakfast cereals are consumed. In new growth regions like Latin America (with Mexico as the dominant market) and India, the cereal category is growing 5–10 per cent annually, especially in Latin America.

How should CPW penetrate these markets?

This can be done by establishing customer relationships with leading food retailers in these regions using personal selling as the main marketing tool.

Part 2 cases Case II.1: Sodastream -

Managing profitable growth in an increasingly competitive global environment

www.sodastream.com

I. Synopsis Sodastream International Ltd is the leading manufacturer and distributor of home soda maker systems, with products available in 60,000 stores in 45 countries. The firm offers carbonation machines, as well as a line of beverage mixers and syrups. The system allows consumers to make carbonated soft drinks at home.

Although Sodastream offers a variety of products and flavours, it places strong emphasis on marketing campaigns for cola carbonates. This sometimes causes controversy, leading to bans from airing advertisements in countries like the UK and the US. In the US, the company was not allowed to air its advertisement during the Super Bowl as it featured exploding Coca-Cola and Pepsi bottles.

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Coca-Cola and PepsiCo were key sponsors of the NFL final. In late 2014, the company initiated a re-branding effort to position itself as a sparkling water machine provider from the previous images of being an alternative to Coke and Pepsi, catering to health-conscious consumers. It remains to be seen how effective and successful it will be.

Update of financial info. (2015 included): Table 1 shows the SodaStream’s financial results.

Table 1: SodaStream’s financial development from 2010 to 2015 Million USD

2010

2011

2012

2013

2014

2015

Revenues

208.4

288.9

436.3

562.7

511.8

413.1

Profits (before tax)

14.9

30.9

44.6

46.7

16.2

15.1

Source: Based on Sodastream Financial Report 2017

II. Situational analysis (SWOT analysis) Strengths:

-

‘World leader in home carbonation’

-

Sodastream machine are marketed as being good value for money, more environmental-friendly and healthier, compared with packaged beverages of the same type (based on per serving and sugar and calorie content)

-

Innovative product – delivers customers unique benefit

-

Use of the Gillette business model (Razor – blade pricing strategy = Sell-in + add-on)

Weaknesses:

-

Controversy surrounding employment practices in Israel (presence is considered ‘a violation of human rights and international law and complicity with the Israeli occupation of the occupied Palestinian territories’)

-

Controversy surrounding Scarlett Johansson’s involvement as an endorser of the brand

-

Inconvenience/change of lifestyle

-

Actual taste & essence of product (can be discussed??)

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Opportunities:

-

Increase unaided brand awareness

-

Open additional manufacturing facilities around the world to meet demand

-

Expansion in the US market, which is still a huge potential market

-

Untapped demand in the multibillion-dollar carbonated beverage industry

-

Increase environmental awareness – use of SodaStream means less packaging (bottles)

-

Selling at higher-end shopping areas

Threats:

-

Leading beverage companies would introduce similar product, for example, in 2015 Coca-Cola and Green Mountain Coffee (Keurig) announced their partnership for the creation of the new ‘Keurig Cold Machine’.

-

Sodastream could end up as being a ‘fad’. Critics would claim that people one day will just be tired of their Sodastream machines and that these soda-makers will be doomed to collect dust on kitchen shelves or worse in garages & basements. Critics like to point out that there is a long history of kitchen appliances, which were the hottest new thing only to quickly go out of fashion a few years later. That happened first time to SodaStream back in the 1970s.

III. Proposed answers to questions 1. Discuss and evaluate SodaStream’s key competitive advantages in the home carbonated beverage market.

There are two key competitive advantages:

-

Sodastream machine are marketed as being good value for money, more environmental-friendly and healthier, compared with packaged beverages of the same type (based on per serving and sugar and calorie content).

-

Use of the Gillette business model: Razor – blade pricing strategy = Sell-in + add-on: The razor is the soda maker (which is offered at a relative low price) and then they have three blades: the CO2 refills, the flavour syrups, and the bottles (where they have ‘good’ profit margins). So it is not a one-time sale – the blades are Sodastream’s future revenue stream. Sodastream acquire users, build their installed base, and retain & cultivate those users for in order to establish long-term relationships.

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2. Was it a good idea for SodaStream (Daniel Birnbaum) to choose Scarlett Johansson as the Global Brand Ambassador?

It actually makes sense, because besides having a Danish father she Scarlett Johansson has a mother (Melanie Sloan) who comes from a Jewish family in Bronx (New York), and Scarlett is actually Jewish.

During all the controversy, Scarlett Johansson defended her decision to endorse SodaStream by publishing a statement: ‘SodaStream is a company that is not only committed to the environment, but to building a bridge to peace between Israel and Palestine, supporting neighbors working alongside each other, receiving equal pay, equal benefits and equal rights’ (Published 25 January 2014) Yes, it was a good idea to choose Scarlett Johansson because she made no regrets and defended her and SodaStream’s position. As a celebrity star, her opinion matters, and her statement was published all around the world.

3. Evaluate the importance of political factors in SodaStream’s selection of new markets.

SodaStream has been criticised for operating its primary manufacturing plant in the part of the Israeli occupied land on the ‘West Bank’ (Israel has occupied the ‘West Bank’ since the war in 1967). A number of political groups have called for consumer boycotts of products originating in this disputed territory, including SodaStream products.

This means that SodaStream should probably not select new market in ‘anti-Israel’ regions.

According to ‘Times of Israel’ (13 May 2014), the most ‘Anti-Israel’ countries are located in Middle East.

4. Do you think that Scarlett Johansson made the right decision in leaving Oxfam?

When Scarlett Johansson was invited to become a celebrity spokeswoman for Israel’s SodaStream, she believed the company’s practices were compatible with Oxfam’s mission of fighting poverty that she had been helping to promote around the world. When Oxfam was forcing her to choose sides, leaving Oxfam was just a logical step, and also a right decision for Scarlett Johansson.

5. Discuss and evaluate the screening criteria that you would use for SodaStream’s IMS (International Market Selection). Please end up with a ranking list of the three most attractive countries. You are allowed to suggest countries where SodaStream is already active, but where you think they can get a higher sales.

In general, the following criteria could be used:

-

Penetration of SodaStream machines in households (the less penetration = the more potential for growth and more attractiveness for selecting that particular country)

-

Consumption of sparkling mineral water (total / per capita) – this is the new USP of Sodastream

-

Consumption of carbonated soft drinks (total / per capita) – the traditional market for SodaStream

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GDP (total / per capita) – indicates the financial ability to buy the system

-

Environmental consciousness

-

Least ‘anti-Israel’ opinions

If we use Table 2 as a starting point (including the abovementioned criteria), the following ranking list is suggested: 1. USA (huge potential, only 1% penetration) 2. UK 3. Germany (more SodaStream brand awareness, but still market growth potential with 3 per cent penetration)

Case II.2: Female Health Company (FHC) •

The female condom is seeking a foothold in the world market for contraceptive products

www.femalehealth.com

I. Synopsis The female condom was invented by a Danish physician who obtained a US patent for the product in 1988. The physician subsequently sold certain rights to the female condom to an American company.

The first female condom became available in 1992. The female condom is marketed under the name FC female condom in the United States, Femidom in the United Kingdom and Myfemy in other markets, like Japan.

The firm’s condoms are sold in more than 115 countries worldwide (under the FC and FC2 names), including South Africa, Brazil, the US, the UK and Zimbabwe. Outside the US, many of its products bear the Femidom name, among others. FHC also provides low-cost female condoms in Africa through an agreement with the Joint United Nations Programme on HIV/AIDS (UNAIDS).

FHC provides dual protection against unintended pregnancy and sexually transmitted infections (‘STIs’), including HIV/AIDS. In October 2009, the Company completed the transition from its first generation product, FC1, to its second-generation product, FC2, made of a nitrile polymer. The production of FC1 ceased. From its introduction, till 31 March 2010, approximately 62 million FC2 Female Condoms have been distributed in 107 countries. The FDA approval permitted the company to transition from FC1 to FC2.

FC2 offers an alternative to latex sensitive users (7% to 20% of the population) who are unable to use male condoms without irritation.

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On 10 March 2009, FC2 received FDA approval as a Class III medical device. FC2’s FDA approval also enabled the United States Agency for International Development (USAID) to procure it for distribution for global HIV/AIDS prevention programmes.

With the product’s primary market currently being the international public sector, FHC can minimise sales and marketing expense. Thus, as the demand for the female condom continues to grow in the public sector, the FHC’s operating expenses are likely to grow at a much lower rate than that of volume.

II. Situational analysis (SWOT analysis) Strengths:

•

The product protects both against unwanted pregnancy and AIDS

•

A quality product, which (in sexual matters) empowers women in developing countries. She does not need to rely on the man to use his condom. She can do something herself

Weaknesses:

•

More expensive than male condoms

•

As a preparation to the sexual act, the product is more difficult to ‘install’ than a male condom

Opportunities: Higher share of the total condom market. The global male condom market (public and private sector) is estimated to be $3 billion annually. The global public sector market for male condoms is estimated to be greater than 10 billion units annually. Given the rapid spread of HIV/AIDS in India and China, UNAIDS estimates that the annual public sector demand for condoms, both male and female, will reach 19 billion units within the next 10 years.

Threats:

•

It is possible that other parties (competitors) may develop a female condom. Medtech Products Ltd. (MP), a male latex condom company with a manufacturing facility in Chennai, India, has developed a natural latex female condom

•

Many women may not use the product because it is too difficult to use – or the man does not like it

III. Proposed answers to questions 1. How would you explain FHC’s internationalisation process up to now?

Unlike other companies FHC is having a relatively high share of its sales in developing countries, for example, in Africa. So it is not based on the traditional Uppsala model, so FHC can be better

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characterised by a Born Global, with elements of the Network model, as several of FHC’s customers (e.g. U.N. organisations) have a global organisation.

In most cases, the internationalisation has been dependent on the funding from an UN-organisation or a local government.

2. What are the main cultural barriers for expanding global sales of the female condom?

The main issue about this product is the empowerment of women. In the cultures of many developing countries, it is difficult for women to take control because it used to be the man who was the dominant partner.

3. What screening criteria would you use if FHC had plans to expand into new developing markets?

The selection criteria would be: A high use of male condoms in the country A country where the AIDS problem is an important issue 4. Besides having distribution to the public sector particularly in Africa, Latin America and recently India, FHC is also trying to commercialise the female condom in consumer markets around the world. Where and how should FHC attack consumer markets?

Until now, FHC has primarily been selling the female condoms to the global public sectors in the different countries (the so-called B2G Business-to-Government or Public market). Relationship building with key decision-makers and stakeholders in international organisations and institutions is essential in this type of marketing planning.

Although the process of developing marketing programmes for B2G and B2C is the same (events, direct marketing, internet marketing, advertising, public relations, word of mouth and alliances), how they are executed, what they say and the outcome of the marketing activities differ.

The first step in developing a marketing strategy for B2G is similar to the first step in a B2C strategy.

Identify who the customer is and why they need to hear your message. From there, the marketing activities diverge.

The following table summarises the differences between B2G marketing and B2C marketing for FHC. FHC

FHC

B2G / B2B

B2C

Relationship driven

Product driven

Maximise the value of the relationships to governmental institutions

Maximise the value of the transaction

Small, focused target market

Large target market

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Multi-step buying process, longer sales cycle

Single step buying process, shorter sales cycle

Brand identity created on personal relationship

Brand identity created through repetition and imagery

Educational and awareness building activities

Merchandising and point of purchase activities

Rational buying decision based on business value

Emotional buying decision based on status, desire or price

Source: The author The marketing plan needs to take into account the above differences so as to ensure that the right types of activities are developed for the local market.

The ultimate goal of B2C marketing is to convert shoppers into buyers as aggressively and consistently as possible. B2C companies employ more merchandising activities like displays, storefronts (both real and internet) and offers to entice the target customers to buy. B2C marketing campaigns are concerned with the transaction, are shorter in duration and need to capture the customer’s interest immediately. These campaigns often offer special deals or discounts that can be used both online and in the store. For example, the goal of an email campaign for a B2C company is to get consumers to buy the product immediately. The email will take the consumer to a landing page on the website that is designed to sell the product and make purchasing very easy by integrating the shopping cart and checkout page into the flow of the transaction. Any more than a couple of clicks and the customer is likely to abandon the shopping cart.

One interesting aspect of B2C marketing, however, is that many companies have realised the importance of loyalty. For example, Amazon combines merchandising and education to keep customers coming back. By adding good customer service, FHC can get a winning combination.

Facts: FHC has now distribution agreements and other arrangements with commercial partners (typical agents) which market directly to retailers and consumers in 15 countries, including the United States, Brazil, Canada, Mexico, Spain, France, Japan and India. These agreements are generally exclusive for a single country. Under these agreements, the company manufactures and sells the FC2 female condom to the distributor partners, who in turn market and distribute the product to consumers in the established territory. FC2 is being marketed to consumers in eight countries, including India, France and Brazil.

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Case II.3 Rolex I. Synopsis Rolex SA is the leading luxury watch manufacturer in the world producing over 2,000 watches per day that generate sales of over €6 billion each year. The Swiss-based Company manufactures, services and distributes wristwatches under the Rolex and Tudor brand through authorised dealers. It was founded in 1905 by Hans Wilsdorf and Alfred Davis in London, England. The original name of the company was Wilsdorf and Davis, and in 1919, operations were relocated to Geneva, Switzerland.

The brand today produces industry icons such as the Rolex Submariner, Daytona, and GMT-Master, and competes with other leading luxury watch companies like Patek Philippe, Omega and Panerai: Rolex sponsors many major sports events in tennis, golf, yachting and racing. The brand is also associated with a lot of sports personalities, like Federer (tennis).

II. Situational analysis (SWOT analysis) See answers for Question 1

III. Proposed answers to questions 1. Make a SWOT analysis for Rolex.

Strengths: -

Global presence – Rolex is sold in most countries around the world and their prime markets

-

Superb Performance in New Markets – Rolex has built expertise at entering new markets and making success of them. The expansion has helped the organisation to build new revenue stream and diversify the economic cycle risk in the markets it operates in.

-

Successful track record of integrating complimentary firms through mergers & acquisition.

It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.

-

Rolex is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.

-

Successful track record of developing new products – product innovation.

-

Strong distribution network – Over the years, Rolex has built a reliable distribution network that can reach majority of its potential market.

-

Strong Brand Portfolio – Over the years, Rolex has invested in building a strong brand portfolio. The SWOT analysis of Rolex just underlines this fact. This brand portfolio can be extremely useful if the organisation wants to expand into new product categories.

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-

Strong Free Cash Flow – Rolex has strong free cash flows that provide resources in the hand of the company to expand into new projects.

Weaknesses: -

The high price level limits the market volume.

-

Limited success outside core business – Even though Rolex is one of the leading organisations in its industry, it has faced challenges in moving to other product segments with its present culture. Organisation structure is only compatible with present business model thus limiting expansion in adjacent product segments.

-

The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.

-

Investment in Research and Development is below the fastest growing players in the industry.

Even though Rolex is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation.

It has come across as a mature firm looking forward to bring out products based on tested features in the market.

-

Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Rolex needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.

-

Not highly successful at integrating firms with different work culture. As mentioned earlier, even though Rolex is successful at integrating small companies it has its share of failure to merge firms that have different work culture.

Opportunities: -

Growing interest for luxury products – Customers have more and more buying power to spend since most families have become dual income. In addition, many customers prefer to invest in premium brands to portray themselves in a higher social ‘league’.

-

‘Educate’ young customers through the social media – So they will buy a Rolex watch when they are older and earn more money.

-

New customers from the online channel – Over the past few years, the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Rolex. In the next few years, the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.

-

Low inflation rate brings more stability in the market, enable credit at lower interest rate to the customers of Rolex.

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Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Rolex’s products, thus providing an opportunity to the company – either to boost its profitability or pass on the benefits to the customers to gain market share.

-

Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Rolex in other product categories.

Threats: -

Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.

-

The younger generation may view watches as a commodity, not a status symbol, due to the smartphones.

-

Counterfeit (& low quality) products is a threat to Rolex’s brand, especially in the emerging markets and low-income markets.

-

Increasing trend towards isolationism in the American economy can lead to similar reaction from other governments thus negatively impacting the international sales of Rolex.

-

As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.

2. Which screening criteria would you recommend Rolex to use in their future IMS (International Market Selection) process?

Screening criteria: -

Total population

-

GNP per capita (as Rolex is approaching people with higher income)

-

Number of $ millionaires (the most expensive Rolex watches requires that you are a millionaire)

-

Total retail value of watches (Tables 1 and 2)

-

Number of sold luxury watches in percentage of total number of sold watches

-

Percentage of watches sold in up-scale department stores

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3. What would be your suggestion for ranking of the four presented markets (China, USA, Germany and UK), regarding use of future Rolex marketing resources?

Besides the screening criteria discussed in Question 2, I will also consider the current Rolex market share, in order to estimate where the best growth opportunities are. With this in mind I end up with the following ranking: 1. China 2. US 3. Germany 4. UK 4. Is the future for Rolex the online or offline business model? Discuss the two strategies and make your conclusion.

Possibilities: New online distribution channels – save distribution costs by selling directly to end-customers.

Problems:

•

Online channel can come in conflict with existing distribution channels, by use of exclusive Rolex stores.

•

Hard to coordinate pricing and other parts of the marketing mix when several distribution systems are used.

Conclusion: In future, Rolex must combine the online and offline business models. Even if most of Rolex watches are still sold in special Rolex stores, the future business model should also integrate the online/ e-commerce part, as it is also a way to learn more about the customers’ buying behaviour. Today potential Rolex customers tend to use online information about the Rolex watches, before they may go to a specific store to buy it.

Part 3 cases Case III.1: Tinder dating app -

The famous dating app brand is facing increasing competition from, for example, Badoo

www.mtch.com

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I. Synopsis Tinder is a location-based dating mobile app and Web application most often used as a dating service that allows users to use a swiping motion to like (swipe right) or dislike (swipe left) other users and allows users to chat if both parties like each other (a ‘match’). Tinder was launched in 2012 within start-up incubator Hatch Labs. Today the dating app is a part of the Match Group (operates several online dating websites including OkCupid, PlentyOfFish, Tinder, Hinge and Match.com), which is ultimately owned by IAC. IAC (InterActiveCorp) is an American holding company that owns brands across 100 countries, mostly in media and internet.

II. Situational analysis (SWOT analysis) Strengths: -

The dating app with the largest user base

-

Available worldwide

-

Tinder can track the information about users from social networks, such as Facebook to collect the information and to make the perfect match for users, who choose Tinder.

-

Contains product features that re-engage users

Weaknesses: -

Vulnerability of the information. Even though Tinder attempts to maintain the anonymity of users, there is still the problem of the possible revelation of the information concerning the application users.

-

The company also faces the problem of collecting information about users to help them to make better matches but sometimes the company experiences difficulties with collecting that information because other social networks as well as users tend to protect their information from the access of the third parties, such as Tinder.

Opportunities: -

Worldwide there is growing interest for using dating apps, which could mean further international expansion for Tinder

-

Tinder may enhance its position in other services and markets due to the diversification of its services and products.

-

Increasing use of new technologies, like Artificial Intelligence

Threats: -

Increasing competition which tends to grow stronger

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The fast progress of technology may raise the threat of the appearance of new rivals and substitutes that may replace or push Tinder out of the market.

-

Tinder may confront the problem of legislative changes, which may interfere into its operations, such as the ban of tracking users’ information.

III. Proposed answers to questions 1. Why is Tinder such a successful brand?

Tinder did not take out ads on Facebook and they did not use the mass email lists of college students that people offered them. They understood that there is a huge difference between someone who downloads the app because they found it on an ad and then never used it again, versus someone who downloaded the app because their friend had a great experience on it and told them about it. This helped them get the ‘right’ people using Tinder.

Instead of simply pushing mass marketing Tinder to everyone with access to the internet, they instead focused on targeting small societies and launched with the goal of reaching a critical mass within that society. In order to reach this critical mass, they targeted key influencers – or people that have a lot of connections and influence in their respective communities. In Tinder’s case, they initially targeted college students, who hold a lot of influence into the social scenes and student bodies of their respective schools. Once Tinder showed traction in certain markets, they would then go on to start targeting famous people and celebrities in order to copy the growth at college campuses except on a larger scale. This strategy of targeting key influencers helped them grow quickly and allowed them to create self-sustaining networks before it gradually was introduced naturally to other demographics.

The final thing that helped Tinder with their growth is that the signup process for Tinder is extremely simple and quick. Most dating services would require users to fill out a whole bunch of surveys and personal questions to fill out a profile. They noticed that a lot of people wouldn’t even get past this initial stage to use the service. To fix this they simply require you to hit a ‘signup with Facebook’ button and you can start using the app exactly how it was meant to be used. A lot of people are not willing to take 15 minutes analysing themselves and answering questions to use another dating website. However, most people are willing to try out an app that takes 30 seconds to download and immediately begin using.

Furthermore, there are two further product reasons: 1. The Tinder app is functional – it does what is intended to do: Unlike many online dating platforms, there are no profiles or questionnaires to fill out. Instead, users sign up through Facebook, select a couple pictures, and enter their gender, location and sexual preference. The app then serves up photos of other nearby users. They can swipe left if they’re not interested or right if they are. When two people both ‘like’ each other, only then can they send each other messages. On Tinder, you anonymously say if you’re interested in somebody, and if that person happens to be interested in you, you can have a conversation. If they’re not interested, they never know you liked them anyway, so you don’t feel embarrassed. And for the person who’s being hunted, we take away that overwhelming experience.

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2. It is intuitive and easy to use.

The learning curve to use the product fairly minimal. At the heart of the Tinder product is a very unique interaction pattern, the swiping paradigm. Tinder was a pioneer in mobile user experience with its swiping interface, which reduced previously complicated dating websites to a simple binary choice; swipe right for yes, swipe left for no.

2. What are the key competitive advantages of Tinder versus Badoo?

Tinder undoubtedly dominates in the US and Canada as the most popular dating app, but the more south we go, the more odds change to Badoo’s favour. Single app users in the biggest online markets in Latin America: Mexico, Columbia, Brazil, Chile and Argentina favour Badoo over Tinder.

A similarly interesting phenomenon is present in Europe and it looks as climate or national temperament might have something to do with it. In European countries located in the north and west Tinder dominates, but if you go south or east people will more likely use Badoo for free online dating.

Obvious exceptions from this rule are the mid-central Germanic countries: Switzerland, Austria and Germany, where Lavoo takes first place due to its well-devised target marketing.

Badoo was launched in 2006, while Tinder has been on the market only since 2012. From this point of view, Badoo has the advantage of being present and studying the online dating game longer than Tinder.

Badoo can be used in 44 languages, while Tinder connects its users in 30 languages. A wider language pool enables Badoo to attract more people from different countries. Eighty per cent of Tinder users are under the age of 34, while only 5 per cent are between the ages of 45 and 64. Badoo’s user age distribution is more spread out with 70 per cent of users being under 34 years old and 15 per cent being 44 years old and above. This shows that app users consider Badoo to be more demographically universal than Tinder.

Language is an important factor when filtering dating match searches. Going back to the map, it’s clear that Badoo is the number one dating app in all the Spanish and both Portuguese speaking countries. This indicates there is greater fluctuation between people from Latin America and the Iberian Peninsula when looking for possible dating matches.

The dominance of language above geographical factors is evident in North America, where there is a clear switch between Tinder ruling in the majority English speaking Canada and USA and between the Spanish speaking Mexico. Though countries from Eastern Europe are mostly Slavic, the language differences are still too vast to ensure fluent communication. At the same time all these countries prefer Badoo, which indicates to a connection other than language and that is cultural background.

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3. What implications would Facebook’s entry into the dating app market have for Tinder’s future strategy?

Facebook enters the dating-service market years after competitors like Tinder and Bumble, but it starts with a huge advantage: Most people already have Facebook accounts. And while dating works only on mobile right now, it doesn’t require downloading an additional application to your phone.

But in the US at least, younger – and more likely to be single – people say they’re using Facebook less. It’s not yet clear whether Facebook Dating would be enough to lure them back to the social site preferred by their parents.

Users of Facebook dating will create separate profiles just for the Dating service. The only information ported over is your age and first name; you will need to manually fill out additional required information including your verified location, gender, and the gender(s) of the people you’re interested in matching with. You can also specify your height, religion, job title, where you work, where you went to school, and whether you have children.

Once your profile is set, Facebook will use a unique algorithm to match you with potential dates, based on factors like things you have in common and mutual friends. You won’t see anyone you’re already friends with on Facebook, nor will you see people you’ve blocked. Facebook restricts potential matches to people located less than 100 kilometres away.

As part of that mentality, Facebook Dating doesn’t have a right-or-left swiping mechanism. To sort through potential matches, you’ll need to tap ‘Not Interested’. Facebook Dating users won’t be able to start a conversation by simply saying ‘Hey’. Just like the dating app Hinge, users will instead need to respond directly to one of a potential date’s nine photos or questions.

Facebook Dating will be able to hook into other features on the platform. For example, you can choose to match with people who attend the same events or who are a part of the same Facebook groups. To do so, you’ll need to ‘unlock’ each event or group manually.

It is these features that really stand to differentiate Facebook Dating from competitors, like Tinder.

By utilising the big amount of data that Facebook already has about users, Facebook has the ability to become a powerful player in the online dating space. While Tinder has relied on Facebook data for years—like to login – Tinder has never been able to leverage everything. This dependence may also make Tinder vulnerable as the social giant enters their territory.

What should Tinder do about this threat?

While Facebook tries to foster meaningful relationships, Tinder should differentiate and try to make swiping and chatting on Tinder to be fun in itself, even if users aren’t meeting their future partners.

A lot of the gratification itself is from just using the Tinder app and playing with it.

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4. Which ‘Entry mode’ strategy would you recommend for Match Group’s future internationalisation strategy?

As market leader in the worldwide dating app market, Match Group should try to have as much control as possible, but this should not take place with a sales subsidiary in each country. That would be a far too expensive set-up, with such an app-service that is born on the worldwide internet. Instead, it would be relevant to set up some regional headquarters, that would seek the right cooperation partners for marketing and selling the app.

Case III.2: Spotify I. Synopsis Spotify is an international media service provider of Swedish origin. Founded in 2006, the company’s primary business is providing an audio streaming platform, the ‘Spotify’ platform. As a freemium service, basic features are free with advertisements or automatic music videos, while additional features, such as improved streaming quality and commercial-free listening, are offered via paid subscriptions.

Launched on 7 October 2008, the Spotify platform provides access to over 50 million tracks. Users can browse by parameters such as artist, album or genre, and can create, edit and share playlists.

Spotify is available in most of Europe and the Americas, Australia, New Zealand and parts of Africa and Asia, and on most modern devices, including Windows, macOS and Linux computers, and iOS, and Android smartphones and tablets. As of October 2019, the company had 248 million monthly active users, including 113 million paying subscribers.

Unlike physical or download sales, which pay artists a fixed price per song or album sold, Spotify pays royalties based on the number of artists streams as a proportion of total songs streamed. It distributes approximately 70 per cent of its total revenue to rights holders, who then pay artists based on their individual agreements. Spotify has faced criticism from artists and producers including Taylor Swift, who have argued that it does not fairly compensate musicians.

Spotify makes its money in two ways: -

About 10 per cent of its revenues are generated by selling advertising against its free listening service, which offers limited, on-demand access to its audio catalogue.

-

The remaining about 90 per cent of its revenue comes from its paid subscription service, which offers unlimited access to its catalogue, online and offline.

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II. Situational analysis (SWOT analysis) Strengths: -

Large music catalogue

-

Available in more countries

-

Solid revenue growth

Weaknesses: -

Operating losses

-

Unfavourable contracts with music labels

Opportunities: -

Large potential market

-

Strategic partnerships (Spotify already partnered up with Facebook)

-

Higher conversion of free users to paid subscribers

Threats: -

New competitors are coming up, like Amazon

III. Proposed answers to questions 1. What are the main elements of the Spotify’s competitive advantage? Do you think that Spotify has real core competences that are more powerful than competitors’ competences?

There are currently many music streaming competitors like (de. 2019) Apple Music, Amazon Music, Pandora, Tencent Music Entertainment, YouTube Music and Tidal. Here Spotify’s competitive advantage is mainly seen in comparison with its main competitor, Pandora.

Spotify is a commercial music streaming service that launched in October 2008 and entered the US market in 2011. Each song is accompanied by a link, which allows users to purchase via partner retailers. Spotify differentiated itself from Pandora by encompassing social sharing into their product.

Users can create playlists and share them with Facebook friends and Twitter. Whereas Pandora recommends music based on a user’s interaction with the platform, Spotify does that, but also layers on music recommendations from the user’s friends. Additionally, Spotify bridges users and artists together by creating artist profiles and follow features to create a more intimate artist-fan relationship.

As of December 2019, Spotify had 110 million paid users and 40 million tracks in its library.

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Pandora is a company whose main market value is derived from the information it contains and the algorithms that drive its recommendations. The selection the user receives is solely based on the positive or negative feedback they provide for the previous songs chosen by the service. Pandora’s original network size has no direct effect on the value individuals receive from the product. Instead, Pandora creates an indirect, cross-side network effects to its current users. A larger customer base increases Pandora’s value to labels that in turn, are incentivised to release their music to Pandora.

This ultimately adds value to Pandora users because they receive a wider variety of music selections.

Spotify’s strategy to create network efficacy substantially adds value to the product as the network size grows. One of its most popular features is the ability to create and share playlists with others.

Spotify creates positive same-side network effects as it allows users to more easily discover new music and rediscover old favourites by accessing their friend’s playlists. It allows users to be more independent and be their own DJ. In contrast to Pandora, they are not solely limited to selections chosen by the service.

Spotify has added features, which will allow users to not only follow their Facebook friends, but also musical artists and celebrities. The intimate fan-artist relationship allows artists to send new music directly to subscribers’ devices and directly communicate with their fans. With the added features, Spotify is transforming into a two-sided network platform by serving both the music industry and consumers.

When it comes to product differentiation, alliances with music labels define the number of songs in their libraries and the negotiations on terms define revenue share. Both Pandora and Spotify have partnerships with the three corporate labels that control the majority of the market in the United States: Universal Music Group, Warner Music, and Sony Music. Spotify’s revenue share is roughly 70 per cent to music labels and 30 per cent to artists. Pandora’s revenue share is far less for artists, but revenue to artists is offset by the larger audience of listeners on Pandora.

Metallica, a long time hold out to streaming radio services, signed exclusively with Spotify. Metallica has been skeptical of digital services, in the past suing Napster and leading the charge against digital sharing of music. Metallica has a good reputation amongst artists and this alliance is particularly important to Spotify because it marks Spotify as a friend to music artists. With this leverage, Spotify has the potential to build partnerships with other music labels and artists to further increase the number of songs in its library.

In conclusion, Pandora has the advantage of having a larger user base than Spotify, however Spotify is overall more competitive when it comes to establishing good relationships to the music industry.

Furthermore, Spotify has a much larger music library (40 million vs 5 million). The competitive advantages that Spotify has achieved are probably not sustainable. The entry barriers are quite low, if you have money enough. All the music streaming providers have access to the same basic catalogue of music content. Eventually, the winner in the industry will be the company that can spend the most on customer acquisition and afford to wait until the rivals die and then make good deals with the content owners (record labels).

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2. Discuss the three strategic initiatives regarding Spotify’s financial imbalance. Which of the three strategic initiatives would you recommend the Spotify Management to put highest on the priority list?

1. Strategic partnership with Hulu In April 2017, Spotify announced a partnership with video streaming specialist Hulu.

Advantage: Spotify is broadening its product range, and fulfil a broader range of customer needs.

Disadvantage: By broadening its product range, Spotify is also partly erasing its core competence in streaming of music.

2. Spotify is dealing directly with artists Advantage: Spotify can make a higher profit by dealing directly with artists instead of paying the record companies to coordinate the payments to the artists.

Disadvantage: Potential ‘war’ with the record companies.

3. Penetrating new market - India Advantage: Possibility of entering a gigantic market Disadvantage: Many competitors are there (offering low-price alternatives), expensive to get a high market share Conclusion: As it can be very dangerous for Spotify to have a hostile relationship to the record companies (which have a lot of negotiation power), it is recommended to focus on the partnership with Hulu or going into India. As the third option offers the highest growth potential it is recommended to focus resources here.

3. Which ‘entry mode’ strategy would you suggest Spotify to use when penetrating the Indian music streaming market?

The typical Indian consumer will start up with the ‘Freemium’ model where they accept advertising in-between the music. Then some of the consumers will switch over to a subscription model (with no ads), where they will pay a small amount per month. However, it is assumed that the conversion rate in India is lower than in other countries.

As the India venture is very risky for Spotify, it is recommended that the risks are being minimised by outsourcing most of the risks to some local Indian partner. Consequently, it is recommended that Spotify use some kind of Export mode for India, maybe combined with a joint venture with a local Indian partner (intermediate mode).

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Case III.3: Autoliv Air Bags -

Transforming Autoliv into a global company

www.autoliv.com

I. Synopsis Autoliv is a systems supplier and the development partner to the car producers that satisfy all the needs in the area of personal safety. The company has two product lines: seat belts and air bags. The American company TRW is the biggest supplier of air bags with a market share of about 25 per cent of the world market while Autoliv together with two other suppliers have 10–20 per cent of the world market. Autoliv has a strong market position on air bags in Europe (40% market share), whereas the market position in USA and Asia is weak.

II. Situational analysis (SWOT analysis) Strengths:

•

Especially strong in the European market

Weaknesses:

•

Weak positions in USA and Asia

Opportunities:

•

Increasing percentage of cars equipped with air bags

•

Increasing market acceptance of side air bags – or compulsory air bag systems in passenger cars

•

Improve positions in USA and Asia

Threats:

•

Force of air bag inflation may occasionally cause injuries

III. Proposed answers to questions 1. Describe Autoliv’s role as a subsupplier for large car manufacturers in a market that is characterised by consolidation.

Tight relationship (‘partnership-based subcontracting’ in Figure 13.4). In the development of a new car-model (a long-term process), Autoliv functions as a development partner. Being a very critical safety system of the car, the air bag has to be adapted to each car-model though the basic product is the same (e.g. a Eurobag system).

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2. Which car manufacturer should Autoliv target to strengthen its global competitive position?

Toyota, because it is under represented in Autoliv’s sales (5 per cent) as compared to Toyota’s share (12 per cent) of the global vehicle production.

3. Which strategic alternative does Autoliv have to strengthen its competitive position outside Europe?

Outside Europe the competition is very fierce, because there are strong competitors in both USA and Asia.

Alternatives for Autoliv: Follow the European car manufacturers when they establish car production facilities abroad, for example, in Asia or North America. In this connection, Autoliv may locally establish sales and service subsidiaries so that the local car production managers feel that they have a local service backup from Autoliv Establish regional headquarters (e.g. in Asia, North America) that could support local Autoliv subsidiaries To avoid too much bureaucracy, alternatively following the European car manufacturers is preferred

Part 4 cases Case IV.1: Swarovski -

The jewellery/crystal manufacturer is expanding into e-commerce and social media

I. Synopsis Swarovski is an Austrian producer of ‘glass’ headquartered in Wattens, Austria. Swarovski has been a family-owned business since it was founded in 1895 by Daniel Swarovski. Swarovski is now run by the fifth generation of family members. Today, the Swarovski Crystal Business is the highest revenue creating business units within Swarovski, with a global reach of approximately 3,000 stores in around 170 countries, more than 29,000 employees, and a revenue of about 2.7 billion euros (in 2018).

II. Situational analysis (SWOT analysis) Strengths: -

Large global network of stores

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-

Affordable jewellery with refined brand positioning

-

Strong brand name is creating a loyal customer base

-

Cost of materials is low, but high value products are offered to the market

-

Broad offerings

-

Craftsmanship

-

Omni-channel distribution

Weaknesses: -

Lack of penetration and distribution to emerging markets

Opportunities: -

Expansion into the travel retail market (higher margin, growing tourism)

-

Digital innovation: Electronic display, AR (Augmented Reality) etc.

Threats: -

Counterfeit goods (easily copied by competitors)

-

In the instant delivery of online purchases (impulse buying), there is increasing competition by, for example, Amazon.com

-

Downturn in economy

III. Proposed answers to questions 1. Explain the Customer Value Proposition (CVP) that is connected to the Swarovski versus the Pandora brand.

CVP is explaining why a customer should buy or use a certain brand/service: From a customer point of view: -

Pandora has a higher availability worldwide with more stores than Swarovski

-

Generally, Pandora has a high level of control in the distribution (a higher share of their stores are company-owned)

-

Pandora has a broader product line

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So generally, in the jewellery market, Pandora has several comparative advantages in the consumers’ minds. However, if the customer has already decided that he/she wants to buy something in the crystals market, then the consumer can rely on Swarovski’s second crystal cutting technology, which is among the best in the world.

2. How will you make an International Market Selection (IMS) in order to come up with a country ranking of the five key jewellery markets?

I would like to start with the screening criteria that would be the major decision factors in the IMS: -

GNP in total

-

GNP per capita

-

Total jewellery market

-

Growth of jewellery market

-

Total jewellery market divided in sub-segments

-

Current Swarovski ranking according to market share in the different countries

3. What is your final recommendation for the ranking of the five key markets?

As a consequence of 2, the recommended ranking would be like this: 1. China (Swarovski is ‘only’ no 10, but potential is huge) 2. USA 3. Germany 4. Russia 5. UK (Swarovski is already no. 3) 4. Suggest a global marketing programme for Swarovski, including a suggestion for the priority of the 4Ps: product, price, place and promotion As the ‘crystal cutting technology’ is the core competence of Swarovski, the priority should be like this: 1. Product (based on the ‘core competence’) 2. Promotion (more emphasis on social media marketing) 3. Place (combination of online & offline) 4. Price (still with emphasis on affordable jewellery) 145 © Pearson Education Limited 2020

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5. Make a recommendation for Swarovski’s Social Media Marketing Plan.

One key element of the Social Media Marketing strategy would be to make use of and work systematically with Market Influencers on Social Media. Over the years, very famous people used Swarovski crystals at various events. For example, Marilyn Monroe sang happy birthday to JFK in a dress with 10,000 Swarovski crystals. Today such an event would be a perfect opportunity to make use of a viral campaign on, for example, YouTube.

Case IV.3: Levi Strauss -

I.

Expanding in new international markets

Synopsis

Levi Strauss & Co. is a branded apparel company. The company designs, markets and sells jeans and other casual wear for men, women and children. These include jeans, tops, shorts, skirts, jackets, casual and dress pants, footwear and related accessories. It markets these products under Levi’s, Dockers, Signature by Levi Strauss & Co. and Denizen brands. Levi Strauss distributes its products through various retail formats around the world, including retail chain and department stores, franchise stores and shop-in-shops, company-operated retail network, multi-brand specialty stores, mass channel retailers and both company-operated and retailer websites. It has business presence in the Americas, Europe and Asia. The company is headquartered in San Francisco, California, the US.

II. Situational analysis (SWOT analysis) Strengths: -

Strong brand equity: As one of the pioneers in the denim category, the Levi’s brand is synonymous with jeans globally.

-

Multiple distribution channels enhance the company’s revenue-generating capacity.

Weaknesses: -

Limited product portfolio: The company’s strong focus on jeans limits it growth potential

-

Reliance on contract manufacturers: Levi Strauss sources nearly all their products from independent contract manufacturers. As a consequence, the financial resources and the financial results are totally dependent on the performance of the contract manufacturers.

-

Inconsistencies in pricing across markets: The company has achieved a global positioning, but the local prices vary a lot across the borders. This may result in ‘grey marketing’ activities.

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Opportunities: -

Growth in the global apparel market

-

Increase in global online retail sales: While the company has made considerable investments in e-commerce operations, it could do more to develop its social media presence

-

International expansion: There is still international potential growth in like Asia

Threats: -

Intense competition could erode the company’s market share.

-

Fast fashion brands: Companies like Zara and H&M have jeans offerings, which are often perceived as more fashionable, especially among the young people.

-

Counterfeit goods market: Customers could mistakenly purchase counterfeit jeans, bearing fake labels. Low quality of these products could spoil the brand image of the real ‘Levi Strauss’ brand.

-

Foreign exchange risks

III. Proposed answers to questions 1. What are the general key competitive advantages of Levi Strauss in the global apparel market?

The strong brand heritage of the Levi’s jeans (>165 years history, inventors of the ‘Blue Jean’) is the key competitive advantage in expanding Levi’s to a global lifestyle brand. Few brands are as iconic as Levi’s, and Levi Strauss is one of the oldest companies in United States.

2. Which international markets should be the focus of Levi Strauss’s marketing resources in the coming years (please give a ranking of three countries)?

Based on the following screening criteria: -

Total GNP

-

GNP per capita

-

Size of jeans market

-

Stability (economic, political) of market

-

Levi’s current market share

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The following ranking of markets is suggested: 1. China (currently only 2.8% market share but huge potential) 2. Germany (3.6 % market share, a stable market) 3. Russia (only 2.0% market share, big potential, but also somewhat risky) 3. Which global marketing strategy should Levi Strauss use in order to increase the global market share of jeans?

4 Ps: Product: Build on the profitable core: Men’s jeans and from there also move into women’s jeans.

Price: Establish a more consistent price variation of the jeans price across borders, in order to prevent ‘Grey Marketing’.

Distribution (Place): Build on off-line distribution to department stores, including JCPenney, Sears, Macy’s, Nordstrom, Bloomingdale’s, CA and Kohl’s. At the same time Levi Strauss should also strengthen the online presence, because over time more apparel sales would go online.

Communication (Promotion): Levi Strauss should be more visible on the social media, in order to target the youngest end user (teenagers, millennials). This would involve connecting to the right ‘market influencers’ that can bring the iconic Levi’s story into the core online community (6C model).

Case IV.3: Guinness -

How can the Irish iconic beer brand compensate for the declining sales in the home market?

www.diageo.com

I. Synopsis UK-based company Diageo was formed through the merger of Guinness and Grand Met in 1997.

Since July 2000, the company has increasingly concentrated its focus on its premium drinks business, spinning off food operations such as Pillsbury Co., which was sold to General Mills in 2001, and Burger King, which was sold in 2002. In addition, Diageo bolstered its position in the alcoholic drinks market when it acquired some of Seagram’s wine and spirits brands through a joint venture with Pernod Ricard in 2001.

Diageo is a global company, trading in over 180 markets, and owns a broad range of alcoholic beverage brands across spirits, wine and beer, including Smirnoff vodka and Smirnoff FABs, Johnnie Walker, Guinness, Baileys, J&B, Captain Morgan, Cuervo Tequila, Tanqueray and Gordon’s gins and Beaulieu Vineyard and Sterling Vineyards wines.

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The company has one major beer brand: Guinness, which is the world’s leading stout brand. As a result of this status, Diageo Plc’s beer performance is heavily reliant on the fortunes of the Guinness brand.

The main question in the Guinness case is: Should Diageo continue the ‘milking strategy’ by withdrawing marketing resources (lowering costs) and increasing revenues (by increasing the endconsumer prices)?

II. Situational analysis (SWOT analysis) Strengths: High market shares in the special stout market. The Guinness brand is recognised throughout the world, even by non-consumers. It is one of only a few truly global beer brands, possessing a geographic coverage that spans all international regions.

Weaknesses: Guinness market share of the total beer market is only 0.5 per cent. Relatively low market shares in Eastern Europe, Latin America, Africa and the Middle East.

Opportunities: Higher market shares in Eastern Europe, Latin America and Africa and the Middle East. Bigger sales in the off-trade market (retail).

Threats: Sales in the Pub market is going down because of the smoking ban. New competitors are moving into smaller beer niches in the world market, like stout.

III. Proposed answers to questions As an international marketing consultant, you are asked to give an independent assessment of Guinness’ opportunities in the world beer market. You are specifically asked the following questions: 1. How would you explain the Guinness pricing strategy and the underlying assumptions about consumer behaviour when Diageo reports for 2005 that in the United Kingdom and Ireland the Guinness sales volume fell by 3 per cent, but a value growth of 4 per cent was achieved in both markets, mainly due to price increases?

Guinness volume is decreasing because of lower sales in Pubs and Bars, due to the smoking ban.

Guinness has been able to increase prices, as most consumers are very loyal.

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2. Motivated by the success of this pricing strategy should Diageo continue to increase the price of Guinness?

Of course, there is a limit to how much the price can be lowered. This is illustrated by the so-called ‘Z’ shaped price curve, which is illustrated below: Figure E: Guinness’ ‘Z’ shaped price curve

Price P

2

+10%

P1

’Profit maximising’ price point

Guinness current ‘Price – Quantity’ relationship

+10%

P0

Price floor

Quantity sold Source: The author Figure E shows that Guinness has been able to raise the price (e.g. 10%) from P0 to P1 without much decrease in volume. But, if Guinness does the same again (raising the price 10% from P1 to P2), then there is a big danger that Guinness goes beyond the ‘Profit maximising’ price point into the sensitive part of the price curve, with dramatic decrease in volume as the consequence. If a company would go below the price floor, large gains in market shares would be possible. We often see this with loss leaders or low introductory prices.

3. In Choueke (2006), an anonymous beer retail buyer comments on Guinness’s decreasing sales volume:

Guinness has an older profile of drinker and with an ever-increasing availability of continental lagers and a fast-growing range of alcopops, the younger generation of drinkers simply haven’t bought into it.

Innovation – widgets and gadgets – will keep the brand alive for a while but where else can Diageo go?

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Flavoured Guinness? No thanks. It is in decline and Diageo’s best minds can’t do much about it. The brand may have only a couple of decades worth of life in it and I would milk it for everything before getting rid of it and concentrating on spirits.

Do you agree with this statement? Explain your reasons.

Guinness should not just accept that they have an older age profile. Guinness could create a retromarketing plan and relaunch the brand. Guinness tries to encourage younger consumers to mix Guinness with products to produce various cocktails. Initiative like the Guinness Surger is helping Guinness with capitalising on the trend towards the off-trade.

4. What elements of the Guinness international marketing strategy would you focus on in order to increase both global sales volume, value and profits.

The pricing, distribution and promotion should probably be done differently. For obvious economical reasons, the pricing should be different, for example, in Africa compared to UK. The distribution trend in Europe is towards off-trade, whereas in Asia and Africa the on-trade distribution is still very important. The promotion of Guinness can be standardised to a high degree (because of the high global brand awareness), but still the promotion is different, for example, in Europe and Africa.

5. What do you think about the ‘1759’ marketing idea? Should Guinness introduce more special edition beer brands with a limited lifetime for special occasions or as a gift product?

Very good idea to celebrate this founding year with a limited edition – High perceived quality and high price of the product are often connected to ‘Limited editions’. Such limited editions may not create a lot of sales or profit for Guinness, but it is a good investment in ‘Storytelling’.

Part 5 cases Case V.1: Tencent -

The Chinese online giant is seeking new alliances

www.tencent.com

I. Synopsis Tencent is an investment holding company, which through its subsidiaries is engaged in the provision of internet value-added services, value-added telecommunication service business, online and mobile games, online advertising and other internet and wireless services. The company also offers media advertisements, social and other advertisements, depending on the placement of advertising properties and inventories. It provides internet services such as instant messaging services; online media; wireless internet; interactive entertainment services; ecommerce and online advertising services.

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It provides online trading and payment services, and wireless internet value-added services through its portals. Tencent primarily operates in China. The company is headquartered in Shenzhen, China.

II. Situational analysis (SWOT analysis) Strengths: -

Rubust Business model supported by integrated user experience: For example, Weixin/ WeChat integrates instant messaging and social entertainment through one application (app)

-

Strong market position and extensive reach in China

-

Strong financial performance

Weaknesses: -

Concentrated operations in China: The operations of Tencent are geographically concentrated in China, which makes it vulnerable to risks associated with this region

Opportunities: -

Growth outside China

-

Further partnerships in the games software market in China: For example, in July 2019 Tencent signed a partnership agreement with the Pokemon Company to launch new online games.

Threats: -

Increasing competition: Both Chinese-based and Global IT-companies

-

Strict regulatory environment (China)

-

Hacking and related security issues

III. Proposed answers to questions 1. Explain the global competitive advantage of Tencent versus Alibaba and Facebook.

The basic competitive advantages of Tencent and Alibaba are the following: Both companies are mainly concentrating their resources on the Chinese market. The main ‘competitive advantage’ differences are the following: Tencent owns the leading gaming and messaging platform, while Alibaba rules e-commerce. Both are aggressive investors inside and outside China. Alibaba’s various online marketplaces count 552 million active customers; Tencent’s WeChat messaging service recently surpassed 1 billion accounts.

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Tencent ingeniously appropriated an older technology, the two-dimensional QR code, in empowering WeChat to utilise a smartphone’s camera to scan all manner of information. QR codes are how people in China exchange their contacts or download coupons. Once Tencent added WeChat Pay in 2013, the codes became a convenient way to exchange money too. So Tencent and WeChat have transformed their business model from ‘people-to-people connections’ to ‘people-to-service’ connections.

In contradiction to these ‘competitive advantages’, Facebook is mainly a ‘people-to-people connections’ company, but with a global reach.

2. Should Tencent focus more on the Business customers (B2B market) and follow in the footsteps of Alibaba?

No, not directly. Tencent should mainly build on their core competences in the B2C relationship arena, and not go in direct competition with Alibaba’s B2B core business. Of course, if Tencent wants to pursue a global partner strategy (in order to penetrate key international markets), it would require consideration of a B2B strategy.

3. Focusing on servicing global business customers will require a strategy shift within Tencent.

What organisational changes should take place as a consequence of this change towards domestic and international B2B customers?

If Tencent would follow a global B2B strategy, it could be done in form of a GAM strategy, where one of the global IT companies (Google, Amazon, Microsoft etc.) could see some benefits in allying with Tencent. In that case, Tencent should consider such a global IT company as a ‘Global Account’ (global customer) and set up a GA-team that should service the global customer, so that it could lead Tencent to many interesting global markets. As a compensation, Tencent should let the global IT company get access to some products and/or services in Tencent’s product program or try to pave the way for the global company into the Chinese market.

4. What are the motives of LEGO and Tencent to enter an alliance?

The motives for: LEGO: -

Sharing content in the video games market – in this way LEGO could reach a much larger (Chinese) audience with their relatively few (but relevant and educational) video games

-

Tencent could help LEGO with penetrating the Chinese market

Tencent: -

Tencent would like to be associated with one of the most worldwide famous & creative toys companies (LEGO)

-

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5. Which metrics should Tencent use in order to control the global marketing activities?

-

Number of clicks on the Tencent companies’ websites from different countries

-

Conversion rate: From clicks to new accounts

-

Number of new customers (accounts) in different countries, per month

-

Revenues (online & offline) in different countries

Case V.2: Huawei smartphones -

Expanding into international markets for smartphone

I. Synopsis Huawei Technologies Co Ltd was founded in 1987 by Ren Zhengfei. The company started out as a reseller of phone switches and worked its way up by manufacturing its own products. It is today known as a global information and communications technology (ICT) solution provider. The company was initially focused on its domestic market of China, but has since expanded into over 170 countries, and claims to serve more than one-third of the world’s population.

Huawei’s business is divided into three major segments: enterprise, consumer and carrier. This case will focus on Huawei’s consumer business (smartphones), contributing to more than a third of its revenue. Huawei has gained significant momentum in the smartphone market in recent years, which propelled it to the top three position in the market (after Samsung and Apple).

II. Situational analysis (SWOT analysis) Strengths: -

Strong consumer brand: In contradiction to other Chinese tech companies, Huawei has managed to reach a global brand position

-

Tech leader: The company is now known as a tech leader able to challenge Apple and Samsung. Also, Huawei’s early investment and involvement in 5G has given it a competitive advantage, once the technology is commercially ready.

-

R&D is key: Huawei employs an army of 80,000 researchers/engineers

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Weaknesses: -

Limited success in the US: Because of the US Government’s ongoing security concerns regarding Huawei’s products and services.

-

Low margins on hardware (smartphones): The bulk of Huawei’s consumer business is driven by smartphones, where profitability is relatively low.

Opportunities: -

5G network: Several governments have big plans in this area

-

Personalising the user experience with AI: Huawei can create personalised experience for users by Artificial Intelligence (AI) and thereby increase customer loyalty.

-

Increasing smartphone competition from local Chinese players: For example, Oppo, OnePlus, and Xiaomi

-

Market bans: Huawei is in the middle of a China-US trade war (Dec. 2019), but this situation may also soon change.

III. Proposed answers to questions 1. Discuss and evaluate Huawei’s key competitive advantages in the global smartphone market.

Huawei is offering technically premium smartphones for reasonable prices. On the down side, some smartphone users think that there is some kind of ‘spy’ chip built into the smartphone.

Huawei’s cost base is relatively low, with main production sites in Far East and China.

2. Which type of organisation structure should Huawei use for the global sales of its smartphones?

On the level below the CEO of Huawei, a product/customer structure (enterprise, consumer and carrier) is used.

On the next level (global sales of smartphones) it would make most sense to use a geographic (regional) structure in order to achieve a fast and efficient global distribution of the Huawei smartphones.

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3. How could Huawei make use of the GAM (Global Account Management) principle?

Yes, then Huawei should form some a GAM team for each of the global telecom customers (AT&T, Vodafone Group, Verizon Communications etc.), which should function as the main distributors of the smartphones & together with the subscriptions to their telecom customers in the different countries.

4. Which ‘metrics’ would you recommend to use, when measuring the communication and financial effects of using ‘Helene Christensen’ as a celebrity endorser for Huawei P20 Pro? Among celebrities, there exist two general metrics that quantifies the star power of celebrities: -

Familiarity score: The percentage of the people who are familiar with the celebrity (or know him or her)

-

Q score: The percentage of those who are familiar with the celebrity who consider him or her to be one of their favourite personalities.

More specific, in campaigns we can consider using the following metrics: -

Number of online mentions

-

‘Press coverage’ received

-

Lead referrals

-

Web traffic generated

-

Number of times content is shared

-

Extra revenue generated – as a consequence of using the celebrity (can be hard to measure – because normally many factors would influence the total revenue).

Case V.3: Tetra Pak -

How to create B2B relationships with the food industry on a global level

www.tetrapak.com

I. Synopsis Tetra Pak is a leading manufacturer and supplier of carton packaging for milk, fruit juice and drinks.

The company primarily operates in Europe, Asia and the United States. Tetra Pak delivers packaging products and solutions in more than 170 countries around the world. It operates over 40 production plants and nine machine assembly plants.

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The company offers products in five categories: packages, processing equipment, filling machines, distribution equipment and service products. The packaging products include a range of liquid as well as food packaging products. Tetra Pak offers these products under Tetra Brik, Tetra Classic, Tetra Fino, Tetra Gemina, Tetra Prisma, Tetra Recart, Tetra Rex, Tetra Top and Tetra Wedge brands. In addition, the company also offers different varieties of drinking straws.

Tetra Pak provides packaging solutions for dairy, cheese, ice cream, beverages and prepared food.

The company also develops, produces and markets distribution equipment, such as accumulators, cap applicators, cardboard packers, conveyors, crate packers, film wrappers, line controllers and roll container packers.

The service products portfolio provides automation services, environmental services, improvement services, installation services, maintenance services, parts and logistics services, quality management services, remote services and training services.

II. Situational analysis (SWOT analysis) Strengths: -

World market leader in packaging solutions: The company delivers packaging products and solutions to more than 170 countries around the world.

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Strong portfolio of pioneering innovative products: Tetra Pak has been in the forefront of innovations related to packaging. The company is the pioneer in the area of aseptic processing liquid food packaging. It also developed the world’s first aseptic carton bottle for white milk. It is a bottle-shaped package made from renewable paperboard with an injection-moulded top. The company owns more than 5,100 individual patents for the packaging and processing of liquid and semi-liquid food.

-

Global footprint enabling to reach diverse markets: Tetra Pak’s operations are geographically diversified. The company’s global focus provides exposure to a broader range of growth opportunities and the flexibility to expand operations in fast-growing regions.

Weaknesses: -

Overdependence on packaging solutions segment: Although Tetra Pak offers a range of processing solutions like processing equipment, filling machines, distribution equipment and service products; it depends on the packaging solutions segment for the majority of its revenues.

Opportunities: -

New product launches could help Tetra Pak sustain its world leadership position: For example, in 2012, Tetra Pak launched the next-generation of Cheddar cheese block forming unit. The new Tetra Tebel Block former enables cheese manufacturers to improve environmental performance, reduce costs and minimise product loss. New product launches would help the company to increase its brand image by driving end-market demand and top-line and bottom-line growth.

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Tetra Pak expansion in China and India could tap growth opportunities in booming dairy markets.

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Tetra Pak forecasts a growth of about 30 per cent in global consumption of milk and other dairy liquid products from 2010 to 2020. This provides more sales for Tetra Pak’s packaging filling systems.

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In developing countries, the emergence of middle-class, urbanisation and the expansion of modern shopping habits by busy, health-conscious and well-informed consumers are raising the consumption of packaged milk.

Threats: -

Intense competition could lower Tetra Pak margins: Tetra Pak primarily competes with companies such as, Rexam, International Paper Company, Smurfit-Stone Container Corporation, Bemis Company, Caraustar Industries, Graphic Packaging and others. The company competes on the basis of price, quality, delivery, technology and innovation. Besides, the company competes worldwide with a number of other manufacturers and distributors that produce and sell similar products.

III. Proposed answers to questions 1. Which ‘P’ of the marketing mix should Tetra Pak concentrate on in the development of its global marketing plan?

The ‘P’ – Place (distribution) seems to be most important for Tetra Pak. Of course, the ‘P’ – Product (product innovation and product development) is the basis for Tetra Pak’s core competence in the world market and a precondition to be able to participate in the world market. However, only by providing value to the whole value and distribution chain, Tetra Pak can differentiate itself from the rest of the competitors (see also Figure – below):

Dunkin’ Donuts store

Source: Northfoto/Shutterstock.

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2. Would it be relevant for Tetra Pak to work with Global Account Management (GAM)? If yes, how should it be organised and which organisational set-up should Tetra Pak make use of?

Yes, GAM is absolutely relevant for Tetra Pak to make use of.

The question is here to find the right direct B2B customer, which can turn into a Global Account. Let us look at the Top World Dairy companies (Goto www.dairyinfo.gc.ca, choose language English, select ‘Publications and Bulletins’ menu and search for ‘Organic Dairy Industry in Canada’.).

Hence, the challenge is to find the right customer, which has a global organisation and a global production set-up, where Tetra Pak can join this customer’s globalisation process, and be the most obvious choice as supplier of filling machines & packaging solutions when the customer sets up a new diary in a new part of the world.

The most obvious choice of Global Account would be Nestle and/or Danone, which seems to be the most globalised companies among the Top 10 global diaries.

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PART 4

Teaching notes for ‘Questions for discussion’(end-of-chapter) I think it is of great help to give at least an inkling of what I had in mind when I wrote the questions.

Hence, the answers I suggest for the questions for discussion are very brief. They are certainly not as complete as you may expect from your students, but they contain the essence of what may be expected from them.

As far as possible, I try to refer to the textbook.

Chapter 1 Global marketing in the firm 1. What is the reason for the ‘convergence of orientation’ in LSEs and SMEs? The underlying reason is that many large multinationals have begun downsizing, so that many LSEs act like a confederation of small, entrepreneurial and action-oriented companies. Also, the SMEs are learning from the more strategic orientation of the LSEs. Figure 1.3 illustrates the ‘convergence’.

2. How can an SME compensate for its lack of resources and expertise in global marketing when trying to enter export markets?

Go into alliances with firms representing complementary competences (Figure 1.1) Through more flexibility in entrepreneurial attitude In use of information sources: The SMEs use inexpensive ways (internal sources, face-to-face communication) instead of the LSEs’ use of expensive databases and external consultancy (Table 1.1).

3. What are the main differences between global marketing and marketing in the domestic context?

Despite convergence of global tastes, etc., there are big differences in firms’ knowledge of markets, culture, distribution channels, negotiation behaviour, etc. Global marketing is characterised by greater dynamics, complexity, diversification and competitive requirements at all levels of management than is found in purely domestic markets.

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4. Explain the main advantages of centralising upstream activities and decentralising downstream activities.

Principally, each value chain function should be carried out, where the competence is developed at the highest level: The upstream activities are relatively independent of where the buyer is located. Therefore, they are best carried out at the HQ or some other place (centralisation) – whereas the marketing activities (downstream activities) are more country/buyer specific (decentralisation). Figure 1.9 illustrates this issue.

5. Explain how a combination of the product value chain and the service value chain can create further customer value.

The starting point for answering this question could be Figure 1.14 (in Global Marketing, 7e), which shows the cyclic nature of the service interaction in the combination with the product value chain.

The buyer–seller interaction and post-evaluation of the service value chain (the seller and buyer may discuss how to solve a certain problem) may give input for the possible redesign of the ‘product value chain’. This co-creation of value may provide further customer value.

6. How is the ‘virtual value chain’ different from the ‘conventional value chain’?

The ‘conventional value chain’ takes place in the physical world – in companies where you can meet real people. The ‘virtual value chain’ may be seen in the market space (internet) – the ‘virtual value chain’ is a mirror of activities in the physical world.

Chapter 2 Initiation of internationalisation 1. Export motives can be classified as reactive or proactive. Give examples of each group of export motives. How would you prioritise these motives? Can you think of motives other than those mentioned in the chapter? What are they?

Proactive motives: Profit/growth goals, managerial urge, market opportunities Reactive motives: Competitive pressures, a small/saturated domestic market, unsolicited foreign orders I think that the most important motive comes from ‘inside’ the managers: managerial urge. Without managerial commitment to internationalisation the firm should rather stay in its domestic market.

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2. What is meant by ‘change agents’ in global marketing? Give examples of different types of change agent.

Change agents: Someone or something (within or outside the firm) that initiates the internationalisation (i.e. triggers).

Examples: Internal: perceptive management, special internal events External: market demand, trade associations, outside experts (Table 2.2) 3. Discuss the most critical barriers to the process of exporting.

In the textbook, there is a differentiation between barriers: Hindering export initiation: Insufficient finances, insufficient knowledge about foreign markets, lack of management commitment.

Hindering the process of exporting: Market, commercial and political risks (Figure 2.1 and Section 2.1) 4. What were the most important change agents in the internationalisation of Haier (Exhibit 2.3)?

The newly appointed plant director in 1984, Zhang Ruimin, had an internationalisation mindset from the initial stage of Haier’s development. It began with an ‘inward internationalisation’ by importing technology and equipment from Liebherr, a German company. Later on, the cooperation with Liebherr was expanded with an ‘outward internationalisation’ by which finished refrigerators were sold to Liebherr, as a way of entering the German market.

One of the important external factors for the internationalisation of Haier has been the Chinese government. Being an international player, Haier gained some special conditions that other Chinese companies could not obtain.

5. What were the most important export motives in Japanese firms (Exhibit 2.2)?

By ‘increasing volume’ that would result in ‘economies of scale’, lower cost per unit could be achieved. Typically, market share, not profitability, is the primary concept in Japanese firms.

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Chapter 3 Internationalisation theories 1. Explain why internationalisation is an ongoing process in constant need of evaluation.

The firms going to international markets learn from every step they take into an unknown foreign environment. Therefore, their level of experience is in constant change, and consequently the internationalisation process must be constantly evaluated.

2. Explain the main differences between the three theories of internationalisation: the Uppsala model, the transaction cost theory and the network model.

The differences are summarised in Table 3.1, page 99.

3. What is meant by the concept of ‘psychological’ or ‘psychic distance’?

Psychic distance (perceived by an individual manager) is defined in terms of factors such as differences in language, culture and political systems, which disturb the flow of information between the firm and the market, p. 85.

Chapter 4 Development of the firm’s international competitiveness 1. How can analysis of national competitiveness explain the competitive advantage of the single firm?

Conditions in a nation may create an environment in which firms can attain international competitive advantage, but it is up to the firm to seize the opportunities. The home base shapes a firm’s capacity to innovate rapidly in technology. A firm gains important competitive advantages from the presence in its home nation of world-class buyers, suppliers and related industries. Being part of a cluster of firms within the same industry allows deeper and more open contact between the participants.

2. Identify the major dimensions used to analyse a competitor’s strengths and weaknesses profile. Do local, regional and global competitors need to be analysed separately?

A good way of analysing a competitor is to ask some of the customers (maybe let somebody else ask the customers) what they think of the performance of that competitor. The major dimensions in such a benchmarking appear from Figure 4.6 (page 120) 3. How can a country with high labour costs improve its national competitiveness?

A country can improve its competitiveness by strengthening and supporting the macroenvironmental conditions under which the firms operate: construct and maintain the infrastructure of the country, providing roads, airports, education, health care, etc. The relative labour cost (compared to other countries) is only one element in the concept of ‘national competitiveness’. Every year, IMD in Lausanne, Switzerland publishes a yearbook: ‘The World Competitiveness Yearbook’, where countries are ranked on several criteria in relation to national competitiveness.

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4. As the global marketing manager for Coca-Cola, how would you monitor reactions around the world to a major competitor such as Pepsi?

Reactions can be monitored by asking the following actors in the soft drink industry about the local and worldwide marketing activities of Pepsi: own sales representatives (reporting to the HQ about local marketing activities, e.g. in shops), customers, distributors and other competitors.

Chapter 5 Global marketing research 1. Explore the reasons for using a marketing information system in the international market.

What are the main types of information you would expect to use?

Reasons for using a MIS: to provide managers and other decision makers with a continuous flow of information about company operations; to establish a decision-support system, ensuring that the firm can do better in directing its marketing activities more effectively by fulfilling the requirements of the customers.

2. What are some of the problems that a global marketing manager can expect to encounter when creating a centralised marketing information system? How can these problems be solved?

Some subsidiaries are reluctant to engage in global marketing research because they feel that a centralised marketing information system does not pay regard to local customer tastes/ preferences and local competition.

These problems may be solved in the way that the global marketing manager shows the subsidiary managers how to use the centralised marketing information system in a local environment.

3. What are the dangers of translating questionnaires (which have been designed for one country) for use in a multi-country study? How would you avoid these dangers?

Danger of translating questionnaires: The meaning of words differ from country to country ‘Embarrassing’ topics like sexual activities are regarded very differently from culture to culture How to avoid such dangers: The researcher must be sure that the questions are culturally acceptable Select words to avoid biasing the respondent Make a pretest of the questionnaires in the different countries 164 © Pearson Education Limited 2020

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4. Identify and classify the major groups of factors that must be taken into account when conducting a foreign market assessment.

Figure 5.1 provides a categorisation of factors (data) when conducting a foreign market assessment: External/Secondary data External/Primary data Internal/Secondary data Internal/Primary data 5. A US manufacturer of shoes is interested in estimating the potential attractiveness of China for its products. Identify and discuss the sources and the types of data that the company will need in order to obtain a preliminary estimate.

Types of necessary data are as follows: Demographic data (how many people in different age groups), GNP per capita (in different parts of China), competitors and their strategies, possible access to distribution channels, etc.

6. Identify and discuss the major considerations in deciding whether research should be centralised or decentralised.

If the subsidiaries regard themselves as autonomous, this will limit the influence of the headquarters and will also limit the possibilities of implementing centralised research.

7. Distinguish between internal and external validity. What are the implications of external validity for international marketers?

Internal validity is in question if a measurement method is measuring what it is supposed to.

External validity is concerned with the possible generalisation of research results to other populations.

Implications of external validity: If research results in one country can be transferred to another country, it may be relevant to use the analogy method for estimating market demand in different countries.

8. Would Tokyo be a good test market for a new brand planned to be marketed worldwide?

Why or why not?

It is doubtful if Tokyo would be a good test market, but it depends on the product type to be marketed.

If it was a product to be sold only in big cities around Asia it could be a good test market, but I think that a cosmopolitan city like New York would be better if the product is aimed at the world market.

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9. If you had a contract to conduct marketing research in Saudi Arabia what problems would you expect in obtaining primary data?

It would be very difficult to persuade women to participate in a consumer survey, because in the Middle East the cultural/religious habits prohibit communication with a stranger, in particular for women. So the ‘refusal to respond’ (also among men) would be very high in these areas.

10. Do demographic variables have universal meanings? Is there a chance that they may be interpreted differently in different cultures?

Yes, demographic variables may be interpreted differently in different cultures. For example, in the United States and the northern part of Europe, the concept of ‘family’ generally refers only to parents and children. In the southern part of Europe, the Middle East and many Latin countries, it may also include grandparents, uncles, aunts, cousins and so forth.

11. In forecasting sales in international markets, to what extent can the past be used to predict the future?

It is commonly accepted to use regression models (based on historical facts) to predict future sales development. However, the growing diversity of customer needs in a rapidly changing world has resulted in shorter product life cycles, which have become difficult to predict. Consequently, the regression forecast models only have value in industries, which are characterised by a stable development without sudden changes (certain degree of ‘inertia’).

12. How should the firm decide whether to gather its own intelligence or to buy it from outside?

This decision should be based on a ‘make-or-buy’ analysis: If the firm has developed a certain competence in doing market research, it should probably do it itself. But, if the firm has never tried to gather market research data, then it should probably ‘outsource’ this task to a professional market research firm. However, the firm should be involved in the market research process and learn from it, so that it would be able to do the research independently next time.

Chapter 6 The political and economic environment 1. Identify different types of barriers to the free movement of goods and services.

Tariffs: Import tariffs, duties: Specific, ad valorem, discriminatory.

Non-tariff barriers: Subsidies to exporting from government, customs procedures, product standards, import quotas (quantitative restrictions), exchange control.

In general, during recent years, a reduction in tariffs has taken place. On the other side, there has been an increase in non-tariff barriers.

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2. Explain the importance of a common European currency to firms selling goods to the European market.

The common European currency (EURO as it is called) is intended to overcome the complexities of dealing with many currencies in exporting. In that way, the exchange rate risk is reduced. The EURO is now being implemented in the European Union.

3. How useful is GNP when undertaking a comparative analysis of world markets? What other approaches would you recommend?

GNP is used as a shorthand expression for a country’s level of economic development. However, a number of criticisms can be made of GNP income figures: They do not reflect the income per capita in the country; purchasing power is not reflected; lack of comparability.

Other approaches: for example, structure of consumption.

4. Discuss the limitations of per capita income in evaluating market potential.

See answer to question 3. Also, uneven income distribution, sales are not related to per capita income.

5. Distinguish between: (a) free trade area, (b) customs union, (c) common market, (d) economic and monetary union and (e) political union. (a) Free trade area: Free trade among members. (b) Customs union: (a) plus Common external trade policy. (c) Common market: (b) plus Factor mobility. (d) Economic and monetary union: (c) plus Harmonisation of economic policies. (e) Political union: (d) +Harmonisation of other policies (foreign, social, legal, etc.).

6. Why is the international marketer interested in the age distribution of the population in a market?

If the international marketer is targeting his marketing efforts towards a special age group (e.g. manufacturer of toys), he is interested in knowing the number of potential consumers (= potential market) in that age group.

7. Describe the ways in which foreign exchange fluctuations affect (a) trade, (b) investments, (c) tourism.

In case of a devaluation of a country’s currency this will have the following effects: (a) Trade:

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The country’s export will be stimulated. Imports will be more expensive, and inflation in the country may rise. (b) Investments: If the devaluation reflects some political and economic troubles, the foreign investment in the country will be lower. However, all other things being equal, acquisitions (in local currency) of existing companies in the country can be made at a lower price in, for example, US Dollar. (c) Tourism: All other things being equal, the number of foreign tourists will increase because the goods of the country are cheaper, being measured in the currency of the tourists’ homeland.

8. Why is political stability so important for international marketers? Find some recent examples from the press to underline your points.

Political stability or instability influences the perceived risk of investors in the country. Political instability, even if it is welcome for other reasons, makes the business environment less predictable – and predictability is a key to long-term business success.

9. How can the change of major political goals in a country have an impact on the potential for success of an international marketer?

A good example is PepsiCo, which operated profitably in the Soviet Union under one of the most extreme political systems. PepsiCo established a very profitable business with the USSR by exchanging Pepsi Syrup for Russian vodka. After the wall broke down, the market opened up for Coca-Cola, Pepsi’s competitor, and thereafter PepsiCo was less profitable in this area.

10. A country’s natural environment influences its attractiveness to an international marketer of industrial products. Discuss.

The natural environment influences attractiveness to an international marketer in several ways. Some examples are as follows: Geological characteristics: The presence of critical minerals or energy resources may be attractive for a supplier of these valuable products.

For a supplier of equipment to the oil-industry and offshore industry, Norway would be an attractive place to locate a business because of the country’s high level of technological expertise in this area.

The aircraft manufacturing industry is often developed largely in warmer, drier areas, where conditions for test and delivery flights are more beneficial throughout the year.

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11. Explain why a country’s balance of trade may be of interest to an international marketer.

In the short run, a country’s trade deficit indicates that the market is open to imports. In the longer run, the market may become less attractive because of decreasing economic wealth.

Chapter 7 The sociocultural environment 1. As English is the world language of business, is it necessary for UK managers to learn a foreign language?

English is the world’s most spoken business language. However, if the UK manager is committed to do business in Latin America, it is necessary to learn the Spanish language too.

2. According to Hofstede and Hall, Asians are (a) more group-oriented, (b) more familyoriented and (c) more concerned with social status. How might such orientations affect the way you market your product to Asian consumers?

The implications of being more group-oriented, family-oriented and concerned with social status in negotiating with an Asian manager are: Regarding ‘more group-oriented’ and ‘more family-oriented’ people: it is essential to get to know your counterpart before starting to discuss business. Socialising over drinks and dinners is a good way of building relationships.

Regarding ‘more concerned with social status’: younger, subordinate individuals should show proper respect to people of high status, including the elderly and high-ranking company executives. Few women have reached positions of authority in Asian countries. In general, young foreigners – especially women – are likely to face significant cultural obstacles when trying to sell to Asian customers.

3. Do you think that cultural differences between nations are more or less important than cultural variations within nations? Under what circumstances is each important?

The cultural variations within nations may be huge. Sometimes it would be easier (lower psychic distance) to export to a nearby country with a similar culture than to another part of the home country (with a different lifestyle). These factors should be considered if the product (to be marketed) is very culture sensitive.

4. Identify some constraints in marketing to a traditional Muslim society. Use some of the examples in the chapter.

In Muslim countries, women may be restricted in their capacity as consumers, as workers or as respondents in a marketing study. These differences can require major adjustments in the marketing approach. When, for example, using women in advertising, they have to be dressed in such a way that their arms, legs and torsos are concealed. Also, read Exhibit 7.3 of the textbook.

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5. What layers of culture have the strongest influence on business people’s behaviour?

We can consider different layers as follows: National culture, industry cultures, firm culture, professional culture, personal values In a specific situation, where a person is negotiating, the last mentioned layers are those with the strongest influence.

6. The focus of this chapter has mainly been the influence of culture on international marketing strategies. Try also to discuss the potential influences of marketing on cultures.

US-based multinationals have sometimes been accused of ‘Cultural imperialism’. Taking advantage of the attractiveness of the ‘American way of Life’ to many customers around the world, some companies, such as McDonald’s have been very successful.

7. What role does the self-reference criterion play in international business ethics?

There is always the danger that the international marketer falls into the trap of one’s own cultural experience and values in marketing to other cultures. What is acceptable in other cultures may vary dramatically, for example, regarding the use of sex in advertising.

8. Compare the role of women in your country with their role in other cultures. How do the different roles affect women’s behaviour as consumers and as business people?

A very good example of the different roles is the plate in the book regarding advertising of ‘Guy Laroche’ in Western Europe and Saudi Arabia.

Chapter 8 The international market selection process 1. Why is screening of foreign markets important? Outline the reasons why many firms do not systematically screen countries/markets.

Screening is important because: It can be a major determinant of success or failure, especially in early stages of internationalisation It influences the nature and coordination of foreign marketing programmes Many SMEs do not systematically screen markets because of: Lack of market analysis resources As sub-suppliers for much larger firms, the SMEs are often ‘pulled out’ to certain markets by their large customers and their international network

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2. Explore the factors which influence the IMS process.

Firm factors: Present internationalisation degree, amount of resources, internationalisation goals, etc.

External factors: Market potential, internationalisation of the market and psychic distance.

3. Discuss the advantages and disadvantages of using only secondary data as screening criteria in the IMS process.

Advantages: Easy and inexpensive.

Disadvantages: Only suitable for the preliminary screening – part of the total IMS process.

4. What are the advantages and disadvantages of an opportunistic selection of international markets?

Here, the opportunistic selection is understood as the pragmatic selection described in the book: Advantages: The firm does not have to use a lot of resources in the IMS process.

Often the firm is not able to segment from own criteria, but must expect to be evaluated and chosen (as sub-supplier) by much larger firms.

Disadvantages: The firm may overlook attractive markets by choosing the first satisfying alternative.

It is difficult to deal with the diversity that exists in international markets when selection of markets is done in such a haphazard way.

The costs of unsuccessful bidding for opportunistic business (new markets) may be very high.

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5. What are the differences between a global market segment and a national market segment?

What are the marketing implications of these differences for a firm serving segments on a worldwide basis?

Global market segments: If the firm is able to find the same segment (with similar customer reaction) in all countries, it can offer nearly the same marketing mix to this special customer segment across borders (one example could be Bang & Olufsen, which is serving the same design-oriented hi-fi consumer segment across national borders).

National market segments: The target segment of the firm in one country is very different from the target segment of the firm in another country.

A global market segment may offer the opportunity of standardising the global marketing process, whereas several national market segments result in many differentiated marketing plans.

6. Discuss the possible implications that the firm’s choice of geographic expansion strategy may have on the ability of a local marketing manager of a foreign subsidiary to develop and implement marketing programmes.

Waterfall approach: In case of entering markets incrementally, the local marketing manager (if it is not the first market in which to introduce a new product) may use some of the experience that other local marketing managers have gained.

Shower approach: In case of entering markets simultaneously, the local marketing manager should coordinate the local marketing plan with the HQ.

Chapter 9 Some approaches to the choice of entry mode 1. Why is choosing the most appropriate market entry and development strategy one of the most difficult decisions for the international marketer?

Because of the complexity of international markets, there is a need to deal with different sets of customers, competition, intermediaries and governments. The extra dimension of dealing with different cultural and competitive situations adds to the difficulty of coping with the entry issue.

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2. Do you agree with the view that LSEs use a rational analytic approach (strategy rule) to the entry mode decision, while SMEs use a more pragmatic/opportunistic approach?

Generally speaking, yes. However, as earlier indicated, many LSEs are beginning to act like a confederation of small, autonomous, entrepreneurial companies, which use the pragmatic/ opportunistic approach.

3. Use Figure 9.1 to identify the most important factors affecting the choice of foreign entry mode. Prioritise the factors.

It is very difficult to prioritise, but generally, I think that the internal factors/product factors are very important, because they say something about the special competences of the company. Then these internal competences have to be matched with the external barriers and opportunities, in order to make the best possible choice of ‘entry mode’.

Chapter 10 Export modes 1. Why is exporting frequently considered the simplest way of entering foreign markets and thus favoured by SMEs? Because by exporting, the level of risk, financial investment and commitment are minimised.

2. What procedures should a firm follow in selecting a distributor?

The following procedure may help a firm to find potential distributors/intermediaries: asking potential customers, recommendations from trade associations/commercial agencies and advertising in trade papers.

After that, the screening of potential distributors can be made, by setting up some criteria for selecting a suitable distributor: marketing management expertise, financial soundness, technical know-how, services support, etc.

3. Why is it difficult – financially and legally – to terminate a relationship with overseas intermediaries? What should be done to prevent or minimise such difficulties?

In case of termination, the intermediates are protected by legislation. In EU-countries, one year’s average commission is typical for termination without justification. A notice of termination has to be given three to six months in advance. Hence, the penalties for the international marketer may be substantial.

To minimise such difficulties, the termination conditions in the contract should be carefully studied.

It is especially important to find out what local laws say about termination.

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4. Identify the ways to reach foreign markets by making a domestic sale.

In indirect exporting, sale is like domestic sale. If the company’s resources are too limited to open up a large number of export markets, the indirect exporting methods allow the company to utilise the marketing resources of other experienced exporters.

The five main entry modes in indirect exporting are: Export buying agent, broker, export management company, trading company and piggyback.

5. What is the difference between direct and indirect exporting?

Indirect exporting: The exporting manufacturer sells to an independent organisation located in the manufacturer’s home country (domestic sale).

Direct exporting: The exporting manufacturer sells directly to an importer or a distributor or buyer located in the foreign market.

6. Discuss the financial and pricing techniques for motivating foreign distributors.

It seems reasonable to differentiate between a distributor and an agent: Agent: He/she represents an exporting company in another country. He/she is paid on commission basis (certain percentage of the sales/turnover). Therefore, he/she will try to maximise sales without considering if the price is too low. Hence, the exporting manufacturer may be selling at prices that are too low. The agent is motivated by a low price to the end-customer, because that will allow him/her to sell more and have a larger turnover in a specific market.

Distributor: Distributors take title to the goods and live by the margin between the buying price (ex works price from the exporting manufacturer) and the selling price. To maximise profit, the distributor is interested in a low ex works price.

7. Which marketing tasks should be handled by the exporter and which ones by its intermediaries in foreign markets?

Exporting manufacturer: Technical support, prices in the market (in case of an agent), trademarks/patents, delivery of goods, information to the distributor and advertising/promotion.

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Intermediary: Personal selling/other kinds of communication, delivery (distributor), inventory (distributor), payment arrangement (distributor), financing, observance of conditions of sale, information supplied to the manufacturer and after-sales-service.

8. How can the carrier and the rider both benefit from a piggyback arrangement?

Advantages for carrier: Piggyback may be relevant if the firm has a gap in its product line. Then it can fill up this gap in the product range without having to develop extra products Advantages for rider: Exporting without having to establish own distribution systems abroad 9. When a firm begins direct exporting, what tasks must it perform?

It must perform communication/promotion towards end-customers, pricing, handling documentation and physical delivery 10. Discuss the various ways of communicating with foreign distributors.

Email, sales conferences, personal visits to the market 11. ‘When exporting to a market, you’re only as good as your intermediary there’. Discuss.

‘No system is stronger than the weakest link of the system’. In case of an agent, he/she is the representative of the company.

12. The international marketer and the intermediary will have different expectations concerning the relationship. Why should these expectations be spelled out and clarified in the contract?

It should be spelled out and clarified because, otherwise, different expectations may cause conflicts between the two parties.

Chapter 11 Intermediate entry modes 1. Why are joint ventures preferred by host countries as an entry strategy for foreign firms?

Many of the developing countries try to restrict foreign ownership (avoid 100% foreign ownership).

These countries prefer to get access to new technology and know-how by participating with local capital in joint ventures.

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2. Why are strategic alliances used in new product development?

Today, product development is so expensive that one company (especially an SME) can hardly afford it. Sharing resources is therefore a way of limiting the total development cost for a company.

3. Under what circumstances should franchising be considered? How do these circumstances vary from those leading to licensing?

Franchising should be considered when the marketer (franchiser) is offering a whole package to the buyer (franchisee) containing, for example, trademarks, copyright, designs, patents, business knowhow, geographic exclusivity.

These circumstances are different from licensing where the physical product, or even a single component, is the common element.

4. Do you believe that licensing in represents a feasible long-term product development strategy for a company? Discuss in relation to in-house product development.

Licensing-in can improve the net cash flow position of the licensee (shorter payback time), but means lower profits in the longer term, compared to in-house product development, where there are no royalty costs.

5. Why would a firm consider forming partnerships with competitors?

A horizontal partnership between competitors may be a relevant idea to consider, if complementary technology or management skills provided by each partner can lead to new opportunities (e.g. contemporary global partnering arrangements among car manufacturers).

6. Apart from the management fees involved, what benefits might a firm derive from entering into management contracts overseas?

Beside the management fees, the contractor also has the opportunity to maintain market involvement as he is in a better position to take any opportunity that may arise. If the company (the contractor) is in its early development stages of internationalisation, a management contract may offer an efficient way of learning about foreign markets and international business without investing a lot of money.

Chapter 12 Hierarchical modes 1. By what criteria would you judge a particular foreign direct investment activity to have succeeded or failed?

The investment should meet certain goals for economic performance (e.g. ability to produce a net contribution), a certain market share, knowledge of the foreign market, etc.

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2. What are the firm’s major motives in the decision to establish manufacturing facilities in a foreign country?

Elimination of duties, reduction of transport costs, access to raw materials and cheap labour, demonstration of strong commitment to a local market and avoidance of restrictions on imports are the firm’s major motives.

3. Is the establishment of wholly owned subsidiaries abroad an appropriate international market development mode for SMEs? Yes, if the SMEs want to be in full control of the operation, want to acquire market knowledge directly and have the necessary capital resources.

4. What is the idea behind appointing a ‘lead country’ in a region?

The regional headquarters (RHQ) in a lead country plays the roles of a coordinator and stimulator of activities in a certain region (e.g. Singapore as lead country in the South East Asian region).

5. Why is acquisition often the preferred way to establish wholly owned operations abroad?

What are the limitations of acquisition as an entry method?

For advantages and disadvantages of acquisitions, see Table 12.1 in the chapter.

6. What are the key problems associated with profit repatriation from subsidiaries?

The key problems are local government restrictions on profit repatriation, especially from developing countries.

Chapter 13 International sourcing decisions and the role of the subsupplier 1. What are the reasons for the increasing level of outsourcing to international subcontractors?

They are concentration on in-house core competences, lower production costs, general costefficiency, increased potential for innovation and fluctuating demand.

2. Describe the typology of subcontractors based on the differences in the contractor/ subcontractor relationship.

The typology of subcontractors ranges from standard contracting (standardised products with a minimum of contractor/subcontractor relationship) to partnership-based subcontracting (strong relationship between contractor and subcontractor with common R&D activities).

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3. Explain the shift from seller to buyer initiative in subcontracting.

The traditional marketing situation, where the seller takes the initiative by offering a product, is increasingly being replaced by one in which the buyer actively searches for a supplier who is able to fulfil his needs. There are several reasons for that.

4. Explain the main differences between the US and the Japanese subsupplier systems.

US system: Traditionally, the American subsupplier system has been based on ‘arm’s-length’-relation with many subsuppliers, indicating that the contractor chooses a subsupplier with the lowest price for a specific component.

Japanese system: More emphasis is placed on partner-based subcontracting with system suppliers and another layer of subcontractors (second-tier subcontractors). Read also Exhibit 13.1 regarding Mazda seat-sourcing case as an example of so-called network sourcing.

5. How are project exports/turnkey projects different from general subcontracting in the industrial market?

Turnkey projects/project exports are different (from general subcontracting to the industrial market) in the following ways: Turnkey projects/project exports are characterised by: Long and often bureaucratic selection of suppliers to a project Complex international activity involving a lot of market players Ad hoc supplies The subsupplier market in project export is very internationalised (e.g. London is a centre for building contracting businesses all over the former British Empire) Always a combination of ‘hardware’ and ‘software’ 6. Project export is often characterised by a complex and time-consuming decision-making process. What are the marketing implications of this for the potential subcontractor?

Because of the complex decision processes in national and international development organisations, a large number of people are involved. The potential subcontractor has to identify the key-decision makers Because of the heavy resource demands (total marketing costs may be very high) over a long period of time, use of external financing sources is recommended

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The product is designed and developed during the negotiation process, where the requirements are put forward. Therefore, the subcontractor has to be flexible during this process

Chapter 14 Product decisions 1. How would you distinguish between services and products? What are the main implications of this difference for the global marketing of services?

In contrast to ‘physical’ products, services are characterised by intangibility, perishability, heterogeneity and inseparability.

Implications: Above mentioned differences imply problems in marketing services internationally. The international marketer has to consider the following difficulties: Achieving uniformity of the products in remote locations Pricing is different, because fixed costs can be a large part of the total service costs The perception of the services offered varies considerably between markets, which results in different prices 2. What implications does the product life cycle (PCL) theory have for international product development strategy?

The firm has to continuously develop new products, so that the firm avoids the situation of British Leyland in the left side of Figure 14.5 in the chapter. As soon as a product reaches the saturation stage the firm has to start the development of a new product.

3. To what degree should international markets be offered standardised service and warranty policies that do not differ significantly from market to market?

It depends on how differently the consumers, in various countries, perceive the service and warranty policies.

4. Why is the international product policy likely to be given higher priority in most firms than other elements of the global marketing mix?

This phenomenon is especially distinct in SMEs where the owner has created and developed most of the products of the firm. As he/she feels like the ‘owner’ of the firm’s products, he/she will be especially committed to this part of the international marketing mix.

5. Describe briefly the international PLC (IPLC) theory and its marketing implications.

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less developed countries (LDCs). However, finally, advanced countries – no longer cost-effective – will end up importing the same product from LDCs. 6. What are the requirements that must be met so that a commodity can effectively be transformed into a branded product?

Requirements are as follows: To distinguish and differentiate a firm’s product from its competitors To create brand awareness To guarantee a certain level of quality To promote the product to the customers 7. Discuss the factors that need to be taken into account when making packaging decisions for international product lines.

Requirements for effective packaging are as follows: Functioning as protection of its contents Efficient in home use Visually distinguished from competition (creating favourable impressions in the mind of the consumer) Communicating the nature of its contents 8. When is it appropriate to use multiple brands in: (a) a single market; (b) several markets/countries?

Circumstances: (a) Single market/multiple brands: It is possible to segment the market for varying needs The marketer wants to gain more retail shelf space (b) Several markets/multiple brands: It is a ‘culture-free’ product The marketer wants to reduce advertising costs The marketer wants to establish a uniform worldwide image

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9. What is the importance of ‘country of origin’ in international product marketing?

‘Country of origin’ has a considerable influence on the quality perception of the product. Some countries (e.g. Japan and Germany in car manufacturing) have a good reputation. Other countries have a bad reputation (certain Eastern European countries).

10. What are the distinguishing characteristics of services? Explain why these characteristics make it difficult to sell services in foreign markets.

See also the answer to question no. 1 in this chapter.

Let us look at the inseparability: Producing the service is simultaneous to the time of consumption The service cannot be separated from its providers As the service is provided at a specific point of sale, the training and motivation of the international sales force are crucial issues.

11. Identify the major barriers to developing international brands.

Legal constraints, meaning that it is illegal to sell the same brand everywhere.

The meaning of a brand name is not the same in all countries (e.g. EXXON tried with the name ENCO in Japan, but it meant ‘stalled car’) 12. Discuss the decision to add or drop products to or from the product line in international markets.

There is a need for a systematic review of existing and potential new products on a product line.

Criteria for screening new product ideas could be: Future market potential Possible gain by modification of product Its contribution to the sale of other products of the firm The same procedure (establishing criteria, rating values/weights) can be used to guide the decision about dropping a product from a product line.

13. Why should customer-service levels differ internationally? Is it, for example, ethical to offer a lower customer-service level in developing countries than in industrialised countries?

The customer-service levels should differ according to the expectations of the customers. If the expectations of the customers are lower in a country, it is OK to offer a lower service level. But the price should also be lower.

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14. What are the characteristics of a good international brand name?

That the international brand name is perceived in the same way by the customers, regardless of the country in which they live.

Chapter 15 Pricing decisions and terms of doing business 1. What are the major causes of international price escalation? Suggest possible courses of action to deal with this problem.

Major causes: Channel length, margins of the intermediaries, possible tariffs/duties and logistical costs.

How to deal with price escalation: Rationalising the distribution process (reducing the channel length), lowering the ex-factory price (reducing the multiplier effect of all the markups), establishing local production (to eliminate some of the costs) and pressing intermediaries to accept lower profit margins.

2. Explain how exchange rates and inflation affect the way you price your product.

High inflation in a local country and high exchange risk (of the local currency) may result in a higher price in the local currency. Alternatively, the price should be quoted in a stronger currency (e.g. USD).

3. In order to protect themselves, how should marketers price their product in a country with high inflation?

Transfer the exchange risks of local currencies (high inflation may result in a weaker local currency) to the buyer The prices should be quoted in the currency of the exporter’s country (domestic currency) or the currency of a third country (USD) 4. International buyers and sellers of technology frequently disagree on the appropriate price for knowledge. Why? It is very hard to set ‘correct’ prices of knowledge, because it may always be discussed how much know-how is necessary, and generally there is no real ‘market price’. It is much easier to set a price on a standardised, ‘physical’ product.

5. What methods can be used to compute a transfer price (for transactions between affiliated companies)?

They are transfer at cost, transfer at arm’s length and transfer at cost plus.

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6. What relevance has the international product life cycle theory for pricing strategy in international firms?

The firms in the innovating country may use a skimming price at the beginning of the IPLC. Gradually the price will be lowered, concurrently, with LDC’s take-over of the production and sales of the product.

7. Why is it often difficult to compute fair arm’s length transfer prices?

If the company is organised into profit centres, the manufacturing division would like to set a high transfer price (to keep as much profit in the manufacturing division as possible), and the foreign subsidiary would like to have a low transfer price. These different goals may cause conflicts between the manufacturing division and the subsidiary.

8. Explain these terms of sale: EXW, FAS, FOB, CFR, CIF, DEQ and DDP. Which factors will determine the terms of sale?

Explanation of the different terms: see Section 15.6, page 537.

Terms of sale are determined by the negotiation power of buyer and seller. The sellers favour a quote that gives them the least liability and responsibility and vice versa. Sellers’ commitment to the market may also strongly influence the terms of sale. A pricing policy based on CIF indicates a strong commitment to the market, whereas by quoting EXW the seller does not take any steps to build relations with the market.

9. Explain these types of letter of credit: revocable/irrevocable, confirmed/unconfirmed.

Under what sets of circumstances would exporters use the following methods of payment: (a) revocable letter of credit; (b) confirmed letter of credit; (c) confirmed irrevocable letter of credit; (d) time draft (i.e. a bill of exchange)?

Explanation of the different types of letters of credit is shown in Section 15.7, page 538.

Revocable/irrevocable: A revocable L/C gives the buyer the maximum flexibility as it can be cancelled without notice to the seller, and vice versa.

Confirmed/unconfirmed: Confirmed L/C means that a bank in the seller’s country has added its own undertaking to that of the issuing bank. It gives the seller maximum security for actual payment.

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If the international marketer sells to an unknown buyer in a political/economic unstable market, he/she (the seller) would normally require a confirmed irrevocable L/C, because it gives the seller maximum security.

If the buyer is well known to the seller, one of the other possibilities could be used. Of the alternatives (a) – (d), the time draft has the least security for the seller.

10. Name some of the financing sources for exporters.

The sources are commercial banks, export credit insurance, factoring, forfeiting, bonding, leasing, countertrade, etc.

11. How does inflation affect a country’s currency value? Is it a good idea to borrow or obtain finance in a country with high inflation?

The inflation reflects some imbalances in the economy of a country. All other things being equal, this would weaken the currency value in the long term.

All other things being equal it would be a good idea to borrow money in such a country.

12. How and why are export credit financing terms and conditions relevant to international pricing?

Export credit financing terms are important to international pricing because buyers will often demand terms that allow them to defer payment.

13. What is counter-trade? Why should firms be willing to consider counter-trade arrangements in their global marketing efforts?

Countertrade: It is a trade agreement in which a seller provides a buyer with products and agrees to a reciprocal purchasing obligation with the buyer in terms of an agreed percentage (full or partial) of the original sales value.

In countries with shortages of both foreign exchange and international lines of credit (e.g. in some Eastern European countries), a countertrade is the only possibility of doing business.

Chapter 16 Distribution decisions 1. Discuss current distribution trends in world markets.

There is an increasing vertical integration with a lower number of intermediaries. An increasing part of retailing activity crosses national boundaries too. A large number of retail chains expand internationally and create international retailing organisations operating in many countries. A mounting concentration in the retail sector also results in still more negotiating power to the large international retail chains, compared with the manufacturers of consumer goods.

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2. What are the factors that affect the length, width and number of marketing channels?

Factors affecting channel length (number of levels and different types of intermediaries): Product type (longer channels are associated with convenience goods and mass distribution), culture/history (Japan has longer channels than, e.g. USA) and price-sensitivity of products (more price escalation for longer channels).

Factors affecting channel width: Product type, PLC-stage, price, etc.

Factors affecting number of (different) marketing channels: Breadth of a product programme 3. In attempting to optimise global marketing channel performance, which of the following should an international marketer emphasise: training, motivation or compensation? Why? Not just one of them, but all three methods should be used in an appropriate mixture: By training and motivating the intermediaries, the manufacturer forms the basis for selling his/her products on the local market. But, motivating can be very difficult because the intermediaries are not owned by the company. The compensation is the reward for achieving the sales goals: for example, financial compensation, two weeks holiday in the Caribbean, promotional allowances, etc. However, the international marketer may offer both monetary and psychological rewards.

4. When would it be feasible and advisable for a global company to centralise the coordination of its foreign market distribution systems? When would decentralisation be more appropriate?

If the distribution systems are similar in many countries, centralisation/coordination of the international distribution activities would be relevant, and vice versa.

5. Do grey marketers serve useful marketing functions – for consumers and manufacturers?

For the consumers, the grey market means that they can (maybe) get the same products cheaper through grey channels than through the ‘authorised’ channels, for example, pharmaceutical products and cosmetic products.

Generally, the manufacturers are not happy about ‘grey marketing’. It occurs when manufacturers use significantly different market prices for the same product in different countries. Hence, the grey marketers may force the manufacturers to standardise their global (or at least European) price policy, so that the price differences between the markets are minimised.

6. Why is physical distribution important to the success of global marketing?

The success of a global marketer depends highly on his/her ability to deliver products in a good condition and at the correct time.

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7. What are the main advantages and disadvantages of following a Multiple Distribution channel strategy?

Advantages:

•

Access to a broader & wider market through channels that attract different types of customers

•

If suppliers can avoid direct price comparison across channels (through slightly differentiated products/services) they can charge higher prices through some channels

Disadvantages:

•

Coordination of prices across channels costs extra resources

•

Coordination of products offered to different channel members (with different needs and requirements) costs extra resources

8. Discuss the implications for the international marketer of the trend towards cross-border retailing.

One of the consequences of this development is that there has been a worldwide shift from manufacturer to retailer dominance. The power has become concentrated in the hands of fewer and fewer international retailers. The advantage for an individual member of a cross-border alliance lies primarily in central purchasing from suppliers, where price advantages flow to all members. The implications for manufacturers of this cross-border central buying are the following: A starting point for the manufacturer to move towards an international supply network Implementation of a trade marketing concept The advantage of cross-border buying is fewer buyers to negotiate with (central buying process) The disadvantage is that the manufacturer cannot maintain the differentiated prices across borders 9. Many markets have relatively large numbers of small retailers. How does this constrain the international marketer?

There are more retailers to negotiate with. This can be more resource demanding for the manufacturer.

10. How is retailing know-how transferred internationally?

Cross-border mergers between retailers in different countries (common ownership) Cross-border alliances between retailers (central buying, but no common ownership) Retailers are establishing their own foreign subsidiaries

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11. What services would the manufacturer like to receive from the retailer?

Use of promotional material from the manufacturer: In-store, magazines Payment in time Information about: Development of market shares of the manufacturer’s brands in the retail chain Speed of stock-turn Prices for the consumers, etc.

12. What are the advantages and disadvantages of global online distribution compared to the physical distribution?

The issue is here seen from the manufacturer’s point of view: Advantages: -

Lower costs, direct contact to the end-buyers and end-consumers, which also enables direct feed-back from these actors. This would mean that it is more efficient and faster to revise the total offering to the end-customers, depending on their demand and requirements.

-

Furthermore, online distribution also enables the manufacturer to utilise the advantages of the ‘Long tail’ strategies (see Section 14.13, p. 546).

Disadvantages: -

Possible channel conflict with other resellers of the product.

Chapter 17 Communication decisions (promotion strategies) 1. Identify and discuss problems associated with assessing advertising effectiveness in foreign markets.

Differences in measuring advertising effectiveness across countries Differences in media effectiveness across countries (differences in relative importance of media alternatives across countries)

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2. Compare domestic communication with international communication. Explain why ‘noise’ is more likely to occur in the case of international communication processes.

It is likely to occur because of language differences, economic differences, sociocultural differences, legal differences and competitive differences.

3. Why don’t more companies standardise advertising messages worldwide? Identify the environmental constraints that act as barriers to the development and implementation of standardised global advertising campaigns.

An advertising message that is effective in one language may mean something different in another language. Dimensions of culture (religion, attitudes, social conditions and education) also affect how individuals perceive and interpret signals and symbols in advertising messages.

4. Explain how personal selling may differ between overseas and home markets.

Personal selling often has to be especially localised to fit conditions of individual markets. Local distribution channel members are normally located firmly within a country and they hold on to the local cultural behaviour. Consequently, decisions concerning recruitment, training, motivation and evaluation of sales persons have to be made at the local level.

5. What is meant by saying that advertising regulations vary around the world?

Television, for example, is one of the most regulated communications media. Many western countries have prohibited advertising of cigarettes and alcohol (except beer). However, in many countries of Eastern Europe and the Far East, it is still allowed to show television advertising of cigarettes and alcohol.

In some countries (e.g. in Scandinavian countries) it is also prohibited to make commercial breaks in TV programmes.

6. Evaluate the ‘percentage of sales’ approach to setting advertising budgets in foreign markets.

Advantages: Simple method Easy to use ‘Each market seems to get the advertising it deserves’ Disadvantages: It uses historical performances Encourages maximisation of sales by using the easiest marketing tool: Price

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7. Explain how multinational firms may have an advantage over local firms in training the salesforce and evaluating its performance.

Multinational firms have more experience in adapting decisions regarding sales persons to local cultural conditions. Decisions concerning recruitment, training, motivation and evaluation of sales persons have to be made at the local level.

8. Identify and discuss problems associated with allocating the company’s promotion budget across several foreign markets.

The sizes of the promotion budgets across the foreign markets depend on, for example, the sales objectives in the different countries/markets Furthermore, the company has to adapt the promotion mix in the different countries to the relative importance of different media in the single countries 9. How can a company increase its communication effectiveness through the use of social media?

A good model to use in this connection is the 6C model (company, contents, control, community, consumers, conversation):

Source: Hollensen, Global Marketing (2020), Figure 17.9, p. 618 (Credited to: Parent, M., Plangger, K. and Bal, A. (2011) ‘The new WTP: willingness to participate’, Business Horizons, 54, pp. 219– 229) The 6C model defines six distinct, interrelated elements that explain the creation and retention of consumer engagement, seen from a company perspective; however, the user-generated contents still play an important role in the model.

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Chapter 18 Cross-cultural sales negotiations 1. Explain why the negotiation process abroad may differ from country to country.

The cultural background of the negotiating parties is different from country to country.

2. You are a European preparing to negotiate with a Japanese firm for the first time. How would you prepare for the assignment if it is taking place: (a) in the Japanese headquarters; (b) in one of its European subsidiaries?

I would adapt more to the Japanese culture and negotiation style in their Japanese headquarters than in one of its European subsidiaries. The reason for that is, in one of its European subsidiaries, the Japanese company culture and the individual behaviour have already to some extent been adapted to the European culture and lifestyle. Therefore, the need for adaptation is not so distinct in one of its European subsidiaries.

3. Should expatriate personnel be used? What are some of the difficulties they may encounter overseas? What can be done to minimise these problems?

The decision on whether the use of home country expatriates is the best choice for entering and serving foreign markets should be based on past experience with culture shock, that is, sales representatives’ adjustment to other cultures. Inexperienced firms would rather use foreign agents and distributors instead of home country expatriates.

Possible problems: Culture shock, adjustment problems: feelings of frustration, stress and anxiety. The chances of culture shock increase with greater cultural distance.

Reduction of the problems: Select the right people, training, support and repatriation (prevent reverse culture shock).

4. Compare and contrast the negotiating styles of Europeans and Asians. What are the similarities? What are the differences?

Not many similarities, but a lot of differences: Europeans (low-context): Individualistic, deal oriented (quickly getting down to business), confrontation is OK Asian: Collectivistic, relationship oriented/‘guanxi’ (first you make a friend, then you make a deal), a central goal is to maintain social harmony (not lose ‘face’)

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5. What are your views on lobbying efforts by foreign firms?

If a firm wants to influence the legislation in different countries, lobbying efforts are necessary. Also, in large international projects/turnkey projects lobbying may help the firm to identify key decisionmakers and to modify, for example, technical specifications in the direction of the firm’s needs.

6. Why is it so difficult for an international marketer to deal with bribery?

On first consideration, bribery is both unethical and illegal, but it is really not a straight-forward issue.

It is difficult for the international marketer because the definition of bribery is very broad and may range from the relative small payment (or nice gift) to a large sum of money. The process is further complicated by legal codes that vary from country to country: what is illegal in one country is winked at in another and legal in a third.

Chapter 19 Organisation and control of the global marketing programme 1. This chapter suggests that the development of a firm’s international organisation can be divided into different stages. Identify these stages and discuss their relationship with the international competitiveness of the firm.

Ad hoc exporting, functional structure, international division structure, geographical structure, product structure and matrix structure are the various stages.

The threats and opportunities facing an organisation change over time, and the organisational structure must change similarly over time if the company is to remain competitive internationally.

2. Identify appropriate organisational structures for managing international product development. Discuss key features of the structure(s) suggested.

In general, the product division structure is suitable for companies with extensive R&D activities.

Furthermore, the product division structure is relevant where the products have potential for worldwide standardisation. One of the benefits of this approach is improved cost-efficiency through centralisation of manufacturing facilities for each product line.

3. What key internal/external factors influence the organisational structure? Can you think of additional factors? Explain.

The choice of organisational structure is affected by factors like the degree of internationalisation of the firm, the strategic importance of the firm’s international operations, the complexity of its international business and availability of qualified managers.

Internal factors: Firm strategy, goals, key functions, diversity and size, etc.

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External factors: Technological change, competition, customers, etc.

4. Discuss the pros and cons of standardising the marketing management process. Is a standardised process of more benefit to the company pursuing a national market strategy or a global market strategy?

Pros: Mainly concerned with a standardisation of the decision-making process and standardised crosscountry marketing planning By a standardisation of these activities, a rationalisation of the international marketing process is sought Cons: The decision-making processes are so different from country to country that standardisation is not possible The standardisation of the marketing management process is therefore most beneficial for the firm pursuing a global market strategy 5. Discuss to what degree the choice of organisational structure is essentially a choice between headquarters centralisation and local autonomy.

There is more in this choice than that because the choice of an appropriate structure is the question of combining one or more of the following competences on a worldwide basis: geographic knowledge, product knowledge, functional competence or the knowledge of the customer.

6. Discuss how the international organisation of a firm may affect its planning process.

The planning process in a company has to be done in the relevant divisions: a product division, a geographic division, etc. Therefore, the choice of structure has an impact on the planning process of the firm.

7. Discuss why firms need global marketing controls.

Firms need global marketing control to evaluate how the firm has performed as compared to its goals.

It completes the circle of planning by providing the feedback necessary for the start of the next planning cycle. To meet the goals of the firm, a set of instruments and processes is needed to influence the behaviour and performance of organisation members.

8. What is meant by performance indicators? Why does a firm need them?

Performance indicators are used to help an organisation define and evaluate how successful it is, typically in terms of making progress towards its long-term organisational goals. On short term, a

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performance indicator can be formulated like this, as an example: ‘Increase Average Revenue per Customer from €150 to €200 from 2011 to 2012’. After deciding on objectives and strategies, the firm should try to establish some performance indicators, because they provide a review of how well the objectives have been achieved.

9. Performance reviews of subsidiary managers and personnel are required rarely, if at all, by headquarters. Why? In many companies, a tradition of subsidiary autonomy and self-sufficiency limits the influence of the headquarters, and also the possibilities of implementing control systems (subsidiary managers are regarded as local ‘kings’).

10. Identify the major weaknesses inherent in the international division structure.

This structure is only a transitory stage for those firms that strongly increase the scale and scope of their international operations. However, its separation from the domestic products divisions and from corporate staff may have the consequence that the international division may not be able to fully support its foreign units (its distributors, sales and/or production subsidiaries).

11. Discuss the benefits gained by adopting a matrix organisational structure.

This structure seeks to combine two of the following competences on a worldwide basis: geographic knowledge, product knowledge, functional competence or the knowledge of the customer. The international matrix structures typically consist of two organisational structures intersecting with each other. The typical matrix structure is the two-dimensional structure that emphasises product and geography. This structure creates a dual focus to ensure that conflicts between a product and geographical area are identified and analysed. The structure is useful for companies that are both product diversified and geographically spread.

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