International marketing

The Definition of Attractiveness

Every firm defines attractiveness in different ways. Each company has its own definition of attractiveness for its specific purposes.

Foreign markets can be attractive if:

• Profitability: check data about sales and relative sales in that industry
• The possibility of entering a market without any obstacle → no entry barriers: the company checks if in that foreign country there are or not entry barriers
• Low competition in that market → in some situations, big dimensions do not mean an attractive market
• Actual or potential demand is high
• No political, commercial, financial risks, etc.: they are impossible to avoid; companies cannot choose countries with no risks at all.

Political risk: the political decision may directly affect the probability of the company.

Financial risk: there are many types of risks to keep in mind if a company exports.

Commercial risk: related to the fact that the company can trust the partners.

that should be reliable

• Market potential: is the best criteria to apply. It is the estimated maximum total sales revenue of all suppliers of production in a market during a certain period. We prefer defining foreign markets' attractiveness as market potential.
• The Double Screening Process (at least two screenings)
• Initial Screening → you will be going in search of information that are useful to eliminates the superficial series of markets, so you are able to analyze a few numbers of markets which are interesting for the firm.
• Second screening -> classification of countries based on attractiveness criteria
• First screening variable:
1. market size (import export, value of industry, distribution of the population)
2. market potential (price, segment trend, growth of the population)
3. accessibility risk (country risk financial, commercial; import duties)
4. Willingness to pay.
• Second screening variable: interest in the offer, population interest in having shops

distributors,features between county and my offer.Marketing expansion strategy Exporting 1. Export Intermediaries (indirect): bring firms or their products to the global market -> one more actor Cover the international firm's marketing knowledge and performance gap and provide contacts with buyers abroad. An example are the Trading Companies or the Export Management Companies. 2. Direct Exporting: need a great level of control. It can be direct market representation (via wholesalers or directly to the consumer) or independent representation (independent distributor) Entry modes should be decided looking at attractiveness of the market and the pressure for local production or for local cultural nearness (how much you have to adapt the product to a different culture). If the market is attractive it's often suggested to delocalize to be more effectively competitive and successful, otherwise exporting is safer. There are survey results to add to the theory of entry modes: decision

Criteria for the entry modes can depend on:

• Potential sales revenues
• Costs
• Risk exposure
• Control: managing the market, manage the marketing plan

EXPORTING (DIRECT/INDIRECT): Send the product from home production to the foreign market. No need to delocalize activities. (via wholesalers, retailers or directly to final consumer).

• Direct: sell products directly to local distribution system or final customer. The advantage is that you have the control on the marketing plan and distribution.
• Indirect: if there is a company that is in charge for the exportation process. (import/export societies). The advantages of this is that all the effort is made by the other company, you don't have to manage the exports and distribution.

Export intermediaries are specialized in bringing firms to the global market and cover their marketing knowledge and performance gaps. They also provide contacts with buyers abroad and handle deliveries. (Ex trading companies or export management)

There can be many different types of agreements, documents written by two parties, so they can be very different.

Contractual agreements: the parties agree to carry out activities which are complementary and not competitive.

Marketing clause in the contract: define who is in charge and responsible for marketing issues. It avoids conflicts between parties. Local regulations define the type of contracts.

Typical agreements are protected by law. (Ex contract manufacturing or management contracting).

• Licenses: the licensor permits the licensee to use its intellectual property (an intangible) in exchange for a royalty payment. (ex Vespa, luxury companies ex Gucci).

Advantages:

• No capital investment, knowledge, or marketing strength
• Huge profit potential, recovered costs
• Minimal risk of government intervention and avoid barriers to entry
• A stage in internationalization
• Preempt market entry before competition

Increasing intellectual property rights protection can have disadvantages. One disadvantage is the risk that the partner is not reliable and needs to be monitored. This can lead to conflicts and the company may lose some control. One way to expand business while reducing risk is through franchising. Franchising is a licensing arrangement where the licensor (franchisor) grants the licensee the right to do business in a prescribed manner. Examples of franchising include Hilton and McDonald's. The franchisee benefits from the reduced risk of implementing a proven concept. However, there are concerns such as the need for standardization, government intervention, protection of the system, and control of the franchisee. Selecting and training franchisees is also important. McDonald's, for example, has a Master Franchisee and Hamburger University. Another option is a joint venture, which is an agreement between companies, even from different countries, to carry out a specific project within a limited time frame, with a division of risks and profits. A joint venture is a company run by two or more partner firms. These agreements can be equity-based, meaning that both parties own the company.

In a joint venture, risk is shared and different value chain strengths are combined. The degree of influence depends on the ownership percentage, which is never 50% due to conflicts. It provides a good opportunity to build on local know-how.

Advantages of a joint venture include pooling of resources, better relationships with local organizations, knowledge the partner brings of the local market, minimizing exposure risk of long-term capital, and maximizing leverage of invested capital.

Disadvantages of a joint venture include different levels of control, difficulty in maintaining the relationship, disagreements over business decisions, and disagreements over profit accumulation and distribution (profit repatriation).

A joint venture can also be contractual, where a consortium agreement is signed by venturers when they want to join an international tender. They all participate together in the tender.

Foreign direct investment can involve sales, marketing, assembly, or manufacturing. It can also involve the delocalization of production or opening of sales.

on various factors such as the company's industry, target market, and competitive landscape. In some cases, an ethnocentric approach can be successful, especially if the company has a strong brand and unique product offering that resonates with consumers in foreign markets. However, it can also limit the company's ability to adapt to local market preferences and cultural differences. 2. Polycentric (host country orientation) -> these polycentric companies focus on adapting their marketing activities to the specific needs and preferences of each foreign market. They believe that local managers, who have a better understanding of the local market, should have more control over decision-making. This approach allows for greater customization and localization of marketing strategies, but it can also lead to inefficiencies and duplication of efforts across different markets. 3. Geocentric (global orientation) -> geocentric companies take a global approach to their marketing activities. They strive for a balance between standardization and customization, leveraging global brand consistency while also adapting to local market conditions. This approach requires strong coordination and communication between headquarters and local subsidiaries, as well as a deep understanding of cultural nuances and market dynamics in each country. Ultimately, the choice of orientation depends on the company's strategic objectives, resources, and capabilities, as well as the characteristics of the target markets. A company may also adopt a combination of orientations, depending on the specific market and product/service offering.

on multiple factors, on the foreign markets, situations where foreign customer wants the product as it was developed for the local customer.

Consider the home base market more important. Simply export and standard marketing act.

2. Polycentric (host country orientation) - they consider the foreign market as important as the local market. Companies adapt marketing plan to local condition - one market more important than others: is effective if we can adapt.

3. Regio-orgeocentric orientation (global orientation) - companies won't look at the geopolitical boundaries but they'll look at other types or criteria of definition of foreign markets. Don't define marketing plans looking at one country but they find similar customers all over the world (ex. Rich people).

There are different types of international corporations that has delocalized their activities:

COUNTRY OF ORIGIN

Country Image (CI)

All countries have an image either favorable or unfavorable and the perception about country brand

determinebrand marketability.CI can be influenced also by economical information and product promotions, cultural actions.

Image is the set of beliefs, image and impressions that a person holds regarding an objective brand and countryimages are similarly defines as the mental pictures or brands and countries.

CI: is defined as the mental picture of country that is a set of beliefs, images and impression that a person holds.

Country stereotypes.In terms of marketing implications also stereotypes are important. Consumers use them to decide.

Example: can be far from reality, for example France imagined as a sexy and handsome woman, for this reasonthe perfumes have French name soundings, but many people don’t know that France is an importantmanufacturer an exporter of technology.

Country Of Origin effect (COO).Product is considered in different ways depending on the made in label.

The effect can be positive, negative or neutral.If COO effect is positive, firms can leverage a potential

Asset. In one country there can be different COO depending on industries and products: ex Italian textile industry has a positive COO, but other sectors don't have it.

Managing COO effects.

There are strategic alternatives to manage COO:

1. Legitimate COO strategy: use real COO because it is worthwhile leveraging it.
2. Others' COO image strategy: when it is better to leverage another country's COO.
3. Hybrid COO strategy: combination of COO. Something that evokes legitimate COO and some from another COO.

Matches and mismatches can be favorable and unfavorable. They depend on coherence between the CII and product features.

Favorable match. Should occur when important dimension for a product category are associated with a country's image. Ex: Pasta in Italy

Unfavorable match. Occurs when country image regarding that industry is negative but product dimensions are important product features. Ex: vino in Australia

Favorable mismatch. When the image dimension for a country are positive,

bu