Marketing

Question 1

Final strategies to choose right positioning

Accepted Answer

firms can position themselves with looking about concetration versus diversification in country and market/target group (Ansoff-Matrix) 1: few customer groups/segments in few countries 2:many customer groups/segments in few countries 3:few customer groups/segments in many countries 4:many customer groups/segments in many countries

Question 2

Relevant Segmentation Criteria B2B vs. B2C markets

Accepted Answer

B2C markets • Demographic: age, income, occupation • Geographic: Countries, regions • Psychographic: lifestyle, preference etc. • Behavioral: heavy, medium, light users B2B markets • Demographic: size of company, type of industry • Geographic: regions (West Europe, East Europe, Far East, North America etc.) • Economic: buying power of customers • Customer type: end-consumer, middlemen, Global accounts etc.

Question 3

Market Attractiveness

Accepted Answer

Market share Marketing ability and capacity (country-specific know-how) Product´s fit to market demands Price Contribution margin Image Technology position Product quality Market support Quality of distributors and service Financial resources, access to distribution channels

Question 4

Market size

Accepted Answer

Production + import – export = theoretical market size +/- changes in stock size = effective market size

Question 5

Market Attractiveness Competitive Strength Matrix

Accepted Answer

A countries: primary markets (key markets) with best opportunities for long-term strategic development. ( invest/grow ) B countries: secondary markets, where opportunities are identified but political or economic risk is perceived as being to high. ( Dominate/divest joint venture ) ( Selectivity / strategies ) C countries: there are the tertiary or ‚catch what you can‘ market; will be perceived as high risk and so the allocation of resources will be minimal. (Harvest / divest/ combine / license )

Question 6

Marketing Objectives After choosing the market and the positioning, the objectives should be taken to plan

Accepted Answer

S Specific M Measurable A Achievable R Realistic T Timeable

Question 7

Relevant Segmentation Criteria Macro vs. Micro Screening

Accepted Answer

PESTEL approach: Segmentation criteria: •Political •Demography •Economic •Psychographic/lifestyle •Socio-cultural •Attitudes •Technological •Usage of product •Environment •Buying behaviour •Legal •Brand loyalty

Question 8

What is a market entry?

Accepted Answer

An international market entry mode is • “an institutional arrangement necessary • for the entry of a company‘s products, technology and human capital • into a foreign country/market” You can analyze and structure it with the help of the value chain concept:e.g. production is put into another country.

Question 9

Importance of Entry Mode Decisions

Accepted Answer

• There is no ideal market entry strategy • Companies often combines modes to enter / develop a specific foreign market • Ill-judged market entry selection in the initial stage will threaten the future market entryand expansion activity • For most small and medium-sized enterprises the market entry represents a critical first step. • For established companies the problem is how to exploit opportunities more effectively within the context of their existing network of international operations.

Question 10

Classification of market entry modes

Accepted Answer

Export Modes 100% externalizing (low control, low risk, high flexibility) Intermediate Modes Contractual Modes (shared control and risk, split ownerhsip) Hierarchical Modes 100% internalizing (investment Modes) (high control, high risk, low flexibility)

Question 11

1. Export Mode Overview

Accepted Answer

Different types: • Indirect • Direct • Cooperative export Major concepts: • choice of intermediates (performance of partner), • contract details. Advantages / disadvantages of different types

Question 12

Export Modes ( indirect )

Accepted Answer

Indirect A manufacturer uses independent export organizations located in its own country. 1. Export Buying Agent = Representative of foreign buyers, acts in their interest, exporting manager is not directly involved. 2. Piggyback = The export-inexperienced (rider) deals with a larger company (carrier) and acts on behalf of the rider to export in the foreign markets.

Question 13

Export Modes ( Direct )

Accepted Answer

Direct The manufacturer sells directly to an importer, agent or distributor located in the foreign market. 1. Distributor/Importer Independent company that stock the manufacturers product. They will have substantial freedom to choose their own customers and price. 2. Agent An independent company that sells onto customers on behalf of the manufacturer. They do not stock products, profit from a commission (5-10%, pre-agreed)

Question 14

Export Modes ( Cooperative )

Accepted Answer

Cooperativ This involves collaborative agreements with other companies (export marketing groups) concerning the performance of exporting function (typical for traditional, mature, highly fragmented industries, e.g. furniture) Major Functions: • Exporting in the name of the association • Setting prices for export • Performing market research • Consolidating freight, nego rates etc. • Allowing uniform contracts and terms of sale

Question 15

Market entry strategies first decision leven in the vertical chain

Accepted Answer

Export mode (e.g. agent, distributor) Intermediate mode (e.g. licensing, joint venture, strategic alliances) Hierarchical mode (e.g. own subsidiary)

Question 16

Indirect Export Pros Cons

Accepted Answer

Advantages Limited commitment and investment required. High degree of market diversification is possible as the company utilizes the internationalization of an experienced exporter Minimal risk No Export experience require Disadvantages No control over marketing mix elements other than the product An additional domestic member in the distribution chain may add costs, leaving smaller profit to the producer. Lack of contact with the market (no market knowledge acquired) Limited product experience (based on commercial selling)

Question 17

Direct Export pros cons

Accepted Answer

Advantages Access to local market experience and contacts with potential customers Shorter distribution chain (vs. indirect exporting) Market knowledge acquired More control over marketing mix (esp. with agents) Local selling support & services available Disadvantages Little control over market price because of tariffs Lack of distribution control (esp. with distributors) Some investments in sales organizationrequired (contact from home base with distributors or agents) Cultural differences providing comm. Problemsand information filtering (transaction costs occur) Possible trade restriction

Question 18

Cooperative Export pros cons

Accepted Answer

Advantages Shared costs and risks of internationalization Providing of a complete product line or system sales to customers Disadvantages Risk of unbalanced relationships (different objectives) Participating companies are reluctant to give up their complete independence

Question 19

2. Intermediate Modes

Accepted Answer

Different type : • Contract Manufacturing, Licensing, Franchising • Joint Ventures, Strategic Alliances Major concepts: • Licensing agreement, • Stages in joint-venture formation. Advantages / disadvantages of different types

Question 20

Intermediate Modes

Accepted Answer

Y Coalition Each partner in the alliance / joint venture contributes with complementary product lines or services. Each partner takes care of all value chain activities within the product line. X Coalition The partners in the value chain divide the value chain activities between them, e.g. the manufacturer (exporter) specializes in upstream activities, whereas the local partner takes care of the downstream activities

Question 21

Intermediate Modes

Accepted Answer

Contract Manufacturing Manufacturing is outsourced to an external partner, specialized in production and production technology Licensing A licensor gives a right to the licensee against payment, e.g. a right to manufacture a certain product based on a patent against some agreed royalty Franchising The franchisor gives a right to the franchisee against payment, e.g. a right to use a total business concept/ system, incl. trademarks (brands), against some agreed royalty

Question 22

Licensing pros cons

Accepted Answer

Advantages ncrease the income on products already developed as a result of expensive research Permits access into markets which might be otherwise protected Requires little capital investment New products can be exploited rapidly Should provide a higher rate of return on capital employed Disadvantages Licensee may prove less competent than expected; costs might grow faster than income Market might not be fully covered and leaving it open for competitors Licensee might run short of funds Fess are normally a small % of turnover and own production might be cheaper Quality control is difficult Negotiations might be costly

Question 23

Franchising

Accepted Answer

Advantages Greater degree of control (vs. licensing) Low-risk, low-cost entry mode (the franchisees are the ones investing in the necessary equipment etc.) Using highly motivated business contacts with money, local knowledge and experience Relative fast international rollout possible Generating economies of scale in marketing Disadvantages Relative expensive and time consuming search for competent franchisee Lack of full control over the franchisee’s operations which might create problems with communications, quality etc Costs of creating and marketing a unique package of products and services recognized internationally Costs of protecting goodwill and brand Problems with local legislation (transfer of money etc.)

Question 24

Intermediate Modes

Accepted Answer

Joint venture • An equity partnership typically between two partners. It involves two ‘parents’ creating the ‘child’ (the joint venture acting in the market) • Objective: to mitigate the risk • Legal entity: Does exist Strategic Alliance • Non-equity joint venture typically between two part • Objective: to maximise returns • Legal entity: Does not exist

Question 25

Joint Venture Formation

Accepted Answer

1. Joint-venture objectives 2. Cost-benefit analysis 3. Selecting partner(s) 4. Develop business plan 5. Negotiation of joint-venture agreement 6. Contract writing 7. Performance evaluation

Question 26

Joint Ventures pros cons

Accepted Answer

Advantages Access to expertise and contacts in local markets Both contributing with skills and typically funding Reduced market and political risk Less capital and fewer management resources needed (vs. owned subsidiaries) Economies of scale by pooling skills /resources Overcome government restrictions Disadvantages Objectives of the partners might be incompatible Contribution to joint venture might become disproportional Loss of control over foreign operations Completion might overwhelm a company’s staff Partners might become ‘locked’ in an long-term investment Importance of the venture might change

Question 27

3. Hierarchical Mode

Accepted Answer

Different types: • Domestic-based sales rep • Resident sales rep /foreign sales branch / foreign sales subsidiary • Sales and production subsidiary • Region centers • Transnational organization Major concepts • Acquisition vs. greenfield investments • Types of international new ventures. Advantages / disadvantages of different types

Question 28

Hierarchical Modes

Accepted Answer

Domestic-based Sales Rep The sales representative resides in the home country of the manufacturer and travels abroad to perform the sales function Region Centre The regional headquarter (lead country) will usually play the role of coordinating and stimulating sales in the whole region Resident sales rep/ sales subsidiary/ sales branch Foreign branch An extension and legal part of the manufacturer (sales office). Taxation of profits takes place in the manufacturer’s country. Subsidiary A local company owned and operated by a foreign company under the law and taxation of the host country (one option of the hierarchical entry mode)

Question 29

Sales Representative/ Subsidiar pros cons

Accepted Answer

Advantages Better control over sales activities (vs. independent intermediaries) Close contact with large in foreign markets Disadvantages High travel expenses Too expensive in foreign markets far away from home country Advantages Full controll Markets access Reduce transport costs Disadvantages High initiali capital investment Loss of flexibility High risk & taxation problems

Question 30

Acquisition or Greenfield?

Accepted Answer

Acquisition: acquire an existing company Greenfield: build its own operations from scratch Main evaluation criteria • Speed: Acquisition is faster • Cultures: Cultures might (not) fit • Competitors: Market entrance also depends on behavior of competitors

Question 31

Acquisition & Greenfield investment pros cons

Accepted Answer

Acquisition: Advantages Rapid entry to new markets Gaining quick access to: distribution channels, labour force, established brand names Disadvantag Usually an expensive option High risk causing resentment Threat: Lack ofintegration with existing operation Greenfield investmen: Advantages Possible to intergrate state of the art technology Possible to make it fit the firm’s interests Disadvantage High investment cost Slow entry of new markets (time-consuming process)

IMS (Fach) / Marketing (Lektion)