Competing In Foreign Markets: A Global Perspective on National Challenges

1. Competing In Foreign Markets: A Global Perspective on National Challenges By Dr Michael McDermott Northern Kentucky University

2. International Marketing Challengesand The National Dimension Objectives of this presentation • Identify a framework for examining groups of countries with similar Country-of-Origin effect • Examine the international marketing challenges facing these countries • The challenge facing the country has a direct bearing upon the challenge facing individual companies

3. The Domestic Environment • Has a major impact upon the international marketing challenges facing the country and its companies • This is the Country of Orign effect

4. Do we agree? • Like it or not, the CoO dimension imposes considerable restrictions on corporate strategic options?

5. The Country of Origin The Company/Organisation Strategy Internationalisation

6. Developing a Classification of COO • Consider the following: • Extent of natural resources • Level of economic development

7. Country of Origin - Typology • Four main groupings can be identified: • Resource-poor Undeveloped • Resource-rich Undeveloped • Emerging Economies • Developed Economies

8. International Marketing Challenges:The Macro-Micro Relationship

9. World Class Company World Class Manufacturer World Class Marketer Efficient Effective Low-Cost Differentiation

10. World Class Manufacturing Company • Countries that have the lowest costs, often generate world class producers • But such countries generally do not offer a positive CoO effect • Therefore companies in these countries struggle to become world class marketers • They seek to overcome this disadvantage by establishing a presence in lead, developed country markets

11. World Class Marketing Company • Countries that have the highest costs, often generate world class marketers • But such countries generally do not offer a competitive, low cost manufacturing location • Therefore companies in these countries struggle to remain world class producers • They seek to overcome this disadvantage by establishing a presence in lower cost markets

12. The World Class Company • Almost by definition it will be a global company • Seeking out locations offering cost advantages • And those that offer marketing advantages • Compare and contrast companies from Germany and Taiwan • Both need to globalise, albeit often for different reasons

13. The Relationship Between the Country of Origin Effect and Costs Positive Cell 3 Cell 4 CoO Effect Cell 1 Cell 2 Negative Low High Costs

14. The Relationship Between the Country of Origin Effect and Generic Strategy Positive World Class Differentiation CoO Effect Non- competitive Low-Cost Negative Low High Costs

15. Positive Most Competitive The Usual Destination CoO Effect Least Competitive The Starting Point Negative Low High Costs

16. The Impact of Economic Development • Costs will rise with economic development • So companies in Cell 1 find themselves heading for the least competitive situation • Faced with rising costs, and a low CoO effect • What do they do?

17. The Impact of Economic Development • Just consider the changes in international marketing strategy of Asian companies in Japan, South Korea, Taiwan • Consider the speed of their change • Many seek to change their strategy, but others to prolong their strategy • Now consider the nature of change in China and the strategic response of Chinese companies

18. Summary • The Country-of-Origin effect is a significant issue - for companies in emerging developing and emerging economies • It also has implications for companies based in developed country • Yet some companies are much better known than their CoO (eg Nokia and Finland)

19. Summary • A period of transition in choice of generic strategy invariably results in: • A change in nature of entry mode • And also modifications in the four Ps

20. Country of Origin - Typology • Resource-poor Undeveloped • Resource-rich Undeveloped • Big Emerging Economies • Developed Economies

21. Industry CoO Effect Indigenous Company Target Market(s) End-user attitude Cottage Strongly negative Inefficient Domestic No choice Resource-poor Undeveloped Markets

22. Marketing Implications • Attract export-oriented inward investment - acquisition or greenfield • Provides stimuli to local enterprises • Creation of relationships with MNEs • Fosters exports of labour-intensive products

23. Marketing Implications • needs to focus upon selling the country itself, not products • Only through success in the above, are indigenous firms ever likely to succeed in international markets • Key skill requirement - location marketing

24. Industry CoO Effect Indigenous Company Primary sector Often positive Non-competitive Resource-rich Undeveloped Economies

25. Entry Mode Target Market(s) IM Activities Indirect exporting Buyers in developed countries None - other than relationship with buyers Resource-rich Undeveloped Economies

26. Implications • Poor - because limited value added activities undertaken • Positive CoO benefits lost to indigenous interests • Indigenous firms have minimal participation in international marketing • Poor, so often unattractive target market too

27. Marketing Implications • Extend operations along the value chain • Co-operation with local rivals • New terms for existing relationships, or • New set of relationships • Key skills requirement - processing, distribution

28. Industry CoO Effect Company Strategy Target Market(s) Entry Mode Secondary Negative Low cost Developed & open Subcontracting Emerging Economies - Phase 1

29. Industry CoO Effect Company Strategy Target Market(s) Entry Mode Secondary Neutral Value for money Global, protected Direct Exporting, fdi Emerging Economies - Phase II

30. Phase I Imitation Lacks brand identity Suspect Quality Minimal R&D Phase II Innovation Create brand Quality Committed to R&D Emerging Economies - Product Policy

31. Distribution Promotion Pricing Minimal Industrial selling Aggressive Dumping Low margin Emerging Economies - Phase 1

32. Distribution Promotion Pricing Extensive Advertising Penetration Higher margin Emerging Economies - Phase II

33. PHASE I Production expertise PHASE II Overcome CoO NPD Brand management Distribution management Creativity Key Skills Requirements

34. Industry CoO Effect Company Strategy Target Market(s) Entry Mode All three Related to product Value driven Regional/Global All - M&A prominent Developed Country Economies

35. Product Branding issues NPD Adaptation vs standardisation Customisation Developed Country Economies

36. Promotion Distribution Pricing One-to-one Buyer power - own labels Build in emerging economies Avoid grey imports Skimming often in BEMs Developed Country Economies

37. CoO and Impact upon International Marketing Challenges • Considerable diversity in charac-teristics of countries • But all share desire/need to increase exports • All face hurdles - some more severe than other

38. Meeting the Challenge • Are some economies/companies doomed to become/remain commodity exporters? • Can emerging economies create global giants? • Can a negative CoO effect be overcome?