Building the Knowledge Base

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Chapter 10

• Building the Knowledge Base

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Learning Objectives

• To gain an understanding of the need for
  research.
• To explore the differences between domestic
  and international research.
• To learn where to find and how to use sources of
  secondary information.
• To gain insight into the gathering of primary
  data.
• To examine the need for international management
  information systems.

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International and Domestic Research

• The tools and techniques of international
  research are the same as those of domestic
  research.
• The difference is in the environment to which the
  tools are applied.

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International and Domestic Research (cont.)

• The four primary reasons for the differences
  between international and domestic research are

New Parameters
New Environmental Factors
An Increase in the Number of Factors Involved
A Broader Definition of Competition
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New Parameters

• In crossing international borders, a firm
  encounters parameters not found in domestic
  business.
• Examples include
• Duties
• Foreign currencies and changes in their value
• Different modes of transportation
• International documentation
• Differing modes of operating internationally

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New Environmental Factors

• Many of the domestic assumptions on which the
  firm and its activities were founded may not hold
  true internationally.
• Management needs to
• Learn the culture of the host country
• Understand its political systems and level of
  stability
• Comprehend the existing differences in societal
  structures and language
• Understand pertinent legal issues

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The Number of Factors Involved

• When a firm enters a new international market,
  the number of changing dimensions increases.
• Coordination of the interaction among the
  dimensions is crucial to the international
  success of the firm for two reasons
• In order to exercise some central control over
  international operations, a firm must be able to
  compare results and activities across countries.
• The firm must be able to learn from its
  international operations and must find new ways
  to apply the new lessons learned to different
  markets.

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Broader Definition of Competition

• The international market exposes the firm to much
  greater variety of competition than that found in
  the home market.
• Firms must
• Determine the breadth of the competition,
• Track competitive activities,
• Evaluate their actual and potential impact on
  company operations on an ongoing basis.

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Lack of International Research

• International research is often less rigorous,
  less formal, and less quantitative than domestic
  research.
• The four reasons why managers are reluctant to
  engage in international research are
• Their lack of sensitivity to differences in
  culture, consumer tastes, and market demands.
• Limited appreciation for different environments
  abroad.
• Lack of familiarity with national and
  international data sources.
• Firms build international business activities
  gradually, frequently based on unsolicited
  orders.

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The Importance of International Research

• Firms must learn where the opportunities are,
  what customers want, why they want it, and how
  they satisfy their needs and wants.
• Research allows management to identify and
  develop international strategies.
• Firms must identify, evaluate, and compare
  potential foreign business opportunities and the
  subsequent target market selection.
• Research is necessary for the development of a
  business plan.

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Determining Research Objectives

• As a starting point, research objectives must be
  determined for a firm.
• These objectives will depend on the views of
  management, the corporate mission of the firm,
  the firms level of internationalization, and its
  competitive situation.

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Going International-Exporting

• A frequent objective of international research is
  that of foreign market opportunity analysis. The
  aim is to utilize a broad-brush approach.
• Steps to this approach include
• A cursory analysis of general variables of a
  country.
• A preliminary evaluation of each individual
  country.
• Selection of appropriate markets for in-depth
  evaluation.
• Finally, a competitive assessment must be made.

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Process of Researching Foreign Market Potentials
Stage One Preliminary Screening for Attractive
Country Markets Key Question to be
answered Which foreign markets warrant detailed
information?
Stage Two Assessment of Industry Market
Potential Key Question to be answered What is
the aggregate demand in each of the selected
markets?
Stage Three Company Sales and Promotion
Analysis Key Question to be answered How
attractive is the potential demand for our
products and services?
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Going International-Importing

• When importing, the major focus shifts from
  supplying to sourcing.
• Management must identify markets that produce
  suppliers or materials desired.
• The importer needs to know
• The reliability of a foreign supplier,
• The consistency of its product or service
  quality,
• The length of delivery time,
• Government rules and restrictions of the
  exporting country

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Secondary Data

• Secondary data is information that already has
  been collected by some other organization.
• This data should be evaluated regarding the
  quality of the source, how recent the data is,
  and the relevance to the task at hand.
• Because secondary data were originally collected
  to serve another purpose, they can often only be
  used as proxy information.
• Precautions should be taken due to increasing
  sensitivity to data privacy. Firms must inform
  their customers of privacy policies.

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Sources of Secondary Data
Other Firms
Directories
Governments
International Institutions
Service Organizations
Trade Associations
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Conducting Primary Research

• Primary data are obtained by a firm to fill
  specific information needs.
• The researcher must decide whether research is to
  be conducted in the consumer or the industrial
  product area.

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Determining the Research Technique

• Selection of the research technique depends on a
  variety of factors
• The objectivity of the data sought must be
  determined. Unstructured data will require more
  open-ended questions and more time than
  structured data.
• Whether the data should be collected in the real
  world or in a controlled environment.
• Whether to collect historical facts or
  information about future developments.

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Research Techniques
Interviews
Focus Groups
Observation
Use of Web Technology
Surveys
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The International Information System

• An information system is the systematic and
  continuous gathering, analysis, and reporting of
  data for decision-making purposes.
• To be useful, the information system must be
• Relevant
• Timely
• Flexible
• Accurate
• Exhaustive
• Consistent
• Convenient

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Export Complaint Systems

• An export complaint system allows customers to
  contact the original supplier of a product in
  order to inquire about products, make
  suggestions, or to present complaints.
• A firm must be able to aggregate and analyze
  complaints and to make use of them internally.
• Increasingly, the Internet enables customers to
  provide feedback on their experiences with a firm.

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The Mechanisms of Export Complaint Systems
Environmental Scanning
Delphi Studies
Scenario Building
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Environmental Scanning

• Environmental scanning activities provide
  continuous information on
• Political, social, and economic affairs
  internationally
• Changes of attitudes of public institutions and
  private citizens
• Possible upcoming alterations
• Two significant methods of environmental scanning
  are obtaining factual input and content analysis.

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Delphi Studies

• Delphi studies are a means for aggregating the
  judgements of a number of experts who cannot come
  together physically.
• The Delphi technique is particularly valuable
  because it uses mail, fax, or electronic
  communication to bridge large distances and
  therefore makes experts accessible at a
  reasonable cost.

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Scenario Building

• Scenario building involves the identification of
  crucial variables and the degree of variation.
• The possibility of joint occurrences must be
  recognized.
• For scenarios to be useful, managers must analyze
  and respond to them by formulating contingency
  plans.
• Through the anticipation of possible problems,
  managers hone their response capability and in
  turn shorten response times to actual problems.