International Marketing

1
International Marketing

• Tim Beal
• Lecture 4
• 23 March 2004

2
Today

• Housekeeping
• Impact of Technology
• transportation
• internet
• Korea
• Wine industry and SWOT

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Housekeeping

• Wine assignment handed out last week
• THURSDAY 8 April
• Last day of teaching before Easter break
• Assignment box tba
• penalties 2 per weekday
• Hand in to Mrs Jessie Johnston, SMIB office,
  Rutherford House 11th fl

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Course so far

• Information and IM
• Aspects of the international business environment
• the environment in which IM takes place

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international business environment

• Economics of globalisation
• Politics of globalisation
• Read in textbook, notes from last week AND
  newspapers/TV
• 3 Social trends
• Prof David
• Thanks so much for that wonderful chance to speak
  to your very responsive
• class. I am sure you enjoy teaching that class.
  The topics and issues you
• tackle seem fascinating and cutting edge.

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Coming next

• 4 Technology
• Next week- culture
• Following week week Marketing of education
  services services marketing
• after breakgtgt4Ps in IM

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Textbook chapters

• Chapters for the next 2 weeks wrong way round
• Lecture 7 add chapter 10
• amended schedule on web

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Technology Overview

• Distribution
• transportation
• Internet

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Internet

• History
• Structure and characteristics
• Global data growth, distribution of internet
  markets
• Types of websites
• Globalisation
• Internet no longer American
• Internet and marketing

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Technology

• Technology affects every aspect of marketing/IM
• every good/service is produced, promoted and
  distributed by technology
• even price and payment affected
• Here concentrate on some key elements
• distribution
• internet
• two are closely connected

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Distribution

• distribution tends to be more important in IM
  than in M
• distances tend to be greater
• distance from NY to Toronto less than NY to SF
• Costs of distribution are substantial
• Falling transportations costs key driver of
  international marketing

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Transportation costs

• Silk route an example
• only very high value (expensive), non-perishable
  items feasible
• transportation revolution made global economy
  possible
• Ships gtgtgtrailways gtgtInternal combustion
  engine/roadsgtgtships (tankers/containers) gtgtair

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Example

• The cost of moving farm produce and manufactured
  goods over long distances fell 95 percent between
  1815 and 1860. With that drop, farmers could grow
  wheat in Indiana and sell it at a profit in New
  York City, while New England manufacturers could
  make work shoes and sell them to the farmers of
  Indiana

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Other technological impacts on transportation

• Can create new IM possibilities
• refrigeration
• transformed 19th century NZ
• now chilled, gas-packed meats can fetch high
  prices in affluent markets
• also happening with fruits and vegetables
• much sent by plane

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Combination

• Combination of
• cheaper
• faster
• improved storage
• greatly increases range of products that can be
  marketed internationally
• distance
• market segments

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Investment

• Development of new planes, airports, container
  terminals etc. extremely costly
• Nevertheless, new airports have been built
  recently in
• Korea (Incheon)
• Kuala Lumpur
• Hong Kong
• Japan (Kansai)
• airports around the world being upgraded
• proximity to airport important for IM business
• goods, tourism

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Globalisation of production

• Because of cheaper transport, production can be
  moved away from target markets
• US, Japan, KoreaTaiwan gtgtgtproduction shifting to
  cheaper places
• labour
• land
• environmental standards
• increases role of IM
• domestic productiongtgtgtmove offshoregtgtgtimported
  back

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Geography is history

• Internet takes this process to its limits
• Distance has little effect on
• cost
• time

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What is the internet?

• global network of computers
• origins in US defense
• gtgtuniversities
• business use very recent
• IBM survey in US
• 1994 - less 50 aware of internet
• 1999 - intricate part
• How do we conceptualise the structure of the
  Internet?

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Structure of Internet
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Internet

• Two main technological components
• Email
• World Wide Web
• different characteristics
• two main types
• b2c and b2b

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Characteristics of email

• proactive goes from sender to recipient
• need to have recipients address
• SPAM junk email
• simple to buy large number of email addresses and
  send junk
• Is it effective?
• Currently mainly text-based but increasing use
  of graphics

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Characteristics of the Web

• reactive customer has to come to website
• task 1 attracting hits
• task 2 converting hits to sales
• multimedia
• use of media should be tailored to purpose of
  website
• content is king should be driven by customer
  needs not technology

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Customer

• B2B is main use of Internet
• cuts costs
• makes communication with suppliers, distribution
  channels, etc faster and cheaper
• 1/3 of all US B2B via Internet
• ordering stationery at VUW
• B2C has higher profile
• big names Amazon, yahoo
• dot coms have had a bad time over 4 years

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Growth of the Internet

• number of people/businesses online has grown
  markedly
• Internet has spread from US to Europe, NZ,
  India, ChinaNK
• Data on consumer base
• growth
• uneven spread
• Look at some recent data

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Internet use wealth?

• Relationship between wealth and internet use
• but other factors as well
• culture of adopting innovation
• language
• English
• Telecommunications infrastructure and costs

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Future

• Rapid but uneven growth in users
• e-commerce - predictions vary widely

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US e-commerce small but growing

• 1.4 of SB Internet use - e-commerce sales
• Internet sales - lt1 of total US retail sales
• only 5 of WWW visitors become customers
• online retail marketing 200 annual growth
• estimates vary widely
• 25 billion - 300 billion

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Customer characteristics

• Gender originally overwhelmingly male, now more
  balanced
• Age tend to be younger (20-30) growth in
  teenage and senior market
• Income tend to be higher income
• Education tend to be more highly educated
• (role of universities?)

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Types of websites

• Static billboards
• Dynamic billboards
• Database driven
• Storefronts
• 4th type gtgte-commerce

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Static billboards

• brochureware
• put hardcopy on line
• fairly uncommon now

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Dynamic billboards

• Updated
• but how often?
• Relative ease and cheapness of updating great
  advantage over print media
• Corbans

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Database driven

• interactive interface to link customers and
  products/services
• Library databases

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Storefronts

• Database interface
• purchase, pay and sometimes consume online
• Amazon.com

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What is Internet best for?

• Positive
• global niche
• electronic delivery
• high information content
• Negative
• low value physical product
• undifferentiated product
• local market (eg local baker)

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Examples

• Information agency
• specialised field
• with alliances offers 24 hour service
• quick turnaround (all electronic)
• Software developers
• Bangalore
• utilises relatively cheap, skilled labour
• but delivers as fast as Silicon Valley

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E-Commerce and Globalisation

• Internet (WWW) inherently global
• uneven spread of connectivity but does allow
  unprecedented access to global markets
• Still often physical constraints
• distribution
• payment systems (eg lack of credit cards in
  China)
• Global environment is complex - legal, political
  and cultural

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Global cultures and exposure

• Internet exposes companies usually to wider range
  of cultures and languages
• Few, if any, companies - even largest- have yet
  addressed challenge of multicultural, polyglot
  Internet customers
• Internet exposes companies to unprecedented
  global competition
• local bookshop - Amazon.com

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Disintermediation and leveling

• Disintermediation
• removal of intermediaries
• ie channels of distribution
• travel agents
• Leveling
• leveling playing field between big and small
  companies
• brand and resources still count

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Good, bad and the ugly

• dangers of humour
• Sapich's 'Purple Death'
• Illegibility
• Trade Enterprise New Zealand

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Localisation

• websites should reflect needs of customers
• language
• local currency
• local information
• Victoria International - costs calculator

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Globalisation of website airlines

• Singapore bestbut what of the others?
• MARK302 Links

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Conclusions

• Internet will grow but predications vary
  considerably
• Topography of business will change in
  unpredictable ways
• More volatile relationship between companies and
• each other
• customers
• large companies

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Internet no longer American

• Local growth and use will differ from the States
• leapfrogging
• adoption truncation
• local variation

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Leapfrogging

• follower advantage you know whats ahead so can
  cut corners
• leapfrog over old technologies into new
• ie mobile in China..
• Not many landline telephones so great growth in
  mobiles

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Adoption truncation

• in States better off, better educated males took
  lead
• uptake elsewhere more evenly spread

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Local variation

• China credit cards uncommon so payment on
  delivery
• Japan use network of convenience stores
• India Cybercafes
• use of vernacular languages will grow

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basic rule

• as elsewhere in IM
• keep asking questions
• every aspect of marketing strategy needs to be
  re-examined
• customer focus
• what does the customer wanthow do customers vary
  across the world?

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What weve covered on the Internet

• History
• Structure and characteristics
• Global data growth, distribution of internet
  markets
• Types of websites
• Globalisation
• Internet no longer American
• Internet and marketing

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Korea

• Background
• 2 Koreas
• South Korean market
• Glance at video

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Background

• Map Korea between China and Japan
• Heavily influenced by China
• Philosophy, religion, writing system..
• Philosophy, religion
• More Confucian than China
• Buddhism (on top of shamanism)
• But Christianity very important
• 49 of South Koreans classified as Christian

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Language

• Korean is very different language from Chinese
• But used Chinese writing system
• As do Japanese
• But also invented their own Hangul
• KOTRA
• Links page Learning Korean

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Two Koreas

• 1945 Korea divided into two North and South
  gtgtKorean War 1950-53
• Some info on North Korea on my website
• Focus on South Korea (Republic of Korea ROK)
• Korea South Korea

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Korean Market

• Lots of problems but has been extremely fast
  growing
• Vibrant and dynamic
• Nearly caught up with NZ, overtaking stagnant
  Japan

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Korean economy

• World leader in electronics, Internet use,
  shipbuilding, cars
• Imports?
• Skins and hides, beef, logs,..agricultural
  products and raw materials
• And now Education
• Articles of Korea/education on coursepage, etc.

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Korean business environment

• Confucian ..like Japan, Taiwan, China
• But different
• Video Doing business with Koreans
• Available in Library

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Foreign companies in Korea

• Carrefours
• Coca Cola
• Zespri
• ..wine
• Carrefour overtakes Coke

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Wine Industry and Project
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International Marketing of wine

• Wine as case study
• Wine is interesting example of IM
• Product extension to
• New countries
• New consumer segments
• Demonstrates inter-relationship between 4Ps

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Look back at history

• Article What is wine?
• What is Wine?
• Grape wine originated in Mediterranean basin
• Egypt, Greece, Italy
• Now grown, and consumed, around the world
• Many other cases of foods spreading to new places
• Examples?

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Examples

• Americas
• Potatoes, corn, turkey, tobacco
• China
• Rice, noodles, silk to Europe
• Tea to India
• Chinese gooseberrygtgtNZgtgtkiwifruit
• Zespri now planting in Jeju

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Wine consumption and production

• Wine long history of export
• Production
• 19 century virtually exclusive to Western
  Europe
• Carried by migrants to
• North and South America
• Canada?
• 20th century
• Australia
• Later to New Zealand

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Continuing process

• First export
• Then shift of production
• Usually economic reasons (e.g. handphones to
  China)
• Also migration eg wine. kimchi
• Process not complete
• Michel Rod and kimchi
• You and cheese

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Are food products different?

• Analyze IM in various ways
• Environment SLEPT
• Marketing 4 Ps
• In each aspect can ask
• Are food products special?
• Is wine a special food product?

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Yes

• SLEPT
• Economic new imported foods often very
  expensive
• What is the main aspect?
• Social
• Culture, religion gtgtlegal and political
• Islam prohibits what?
• Pork, alcohol

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Inter relationships

• Expensiveness is contingent
• E.g. KFC is not expensive, heroin is
• Price is factor of
• Production costs
• Economies of scale
• Political/legal constraints
• Distribution and communication costs
• Economies of scale
• Pricing policies

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Marketing challenge

• Canadian and NZ winemakers 3 sets of challenges
  in Korea
• Expand market for wine
• Expand market for New World wines
• Expand market for particular brands

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Old World New World

• What do these terms mean?
• Old World
• Traditional wine producing/exporting countries
• France, Italy, Spain
• New World
• Americas, Australia, NZ

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Place of origin and branding

• Country of origin effect
• E.g. French perfumes, Korean IT
• Old World wines identified by place of production
• E.g. Champagne
• New World originally tried to imitate
• E.g. Australian champagne

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Australian champagne

• Legal objections from French
• Methode champagnoise one solution
• Main solution
• Identifying wines by grape variety rather than
  place of production
• Grapes can be moved, places cannot

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Wine and culture

• Wine - High or low involvement product?
• Wine
• Culturally influenced
• Complex product
• Many different varieties each vineyard each
  harvest different
• Problems of customer acceptance
• Symbol of internationalization

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SWOT analysis

• Environment Opportunities and Threats
• Organisation Strengths and Weaknesses
• Simple framework widely applicable

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SWOT requirement and limitations

• To be useful must be
• Comprehensive
• not necessarily detailed
• Rigorous
• Honest
• first step, not solution
• does not rank or quantify

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You can SWOT anything

• Can be used for anything
• pharmacies, banks,country analysis
• MARK302 Links

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No right SWOT

• Whats right today may be wrong tomorrow
• Strength in one market may be weakness in other
• eg being perceived as kiwi may be positive in
  Samoa but negative in Australia
• opportunities can turn into threats
• eg taken up by competitor
• first step in analysis and planning

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SWOT in course

• 1st assignment on wine industry
• utilise SWOT as part of main educational services
  project

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This week

• Technology
• Transportation
• Internet
• Korea
• Wine industry
• SWOT

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Next week

• Janet Carruthers
• Culture
• FB 3