Slides International Marketing WS 2022 23

Prof. Dr.
Ralf Terlutter
Department of Marketing and
International Management
Alpen-Adria-Universitaet Klagenfurt
Universitaetsstrasse 65-67
9020 Klagenfurt
Austria
+43 (0)463 2700 –4041/-4004

ralf.terlutter@aau.at
www.aau.at/mim
www.aau.at/im
LV 604.100
International Marketing
WS 2022/23
1
Course information
! Up to 6 extra points can be earned
for active class participation during
the sessions
• 3 ECTS
• Exam methodology: Written Exam (60 pts./60 min.), SPU Campus
• Degree program: Master International Management
• Exam-relevant content: Lecture + Textbook = Exam content
Textbook:
Hollensen, S. (2017): Global marketing, A
decision-oriented approach (7thEd.), Pearson Education
Hollensen, S. (2020): Global marketing, A
decision-oriented approach (8thEd.), Pearson Education
2
Contact
Univ.-Prof. Dr. Ralf Terlutter

Department of Marketing and International
Management
Room S.2.25
Tel.: 0043 (0)463/2700-4041
E-Mail: ralf.terlutter@aau.at
3
Overview of the lecture
Part I The Decision Whether to Internationalize

1. Global Marketing in the Firm
2. Initiation of Internationalization
3. Internationalization Theories
4. Development of the Firm’s International Competitiveness
Part II Deciding which Markets to Enter

5. Global Marketing Research
6. The Political and Economic Environment
7. The Sociocultural Environment
8. The International Market Selection Process
Part III Market Entry Strategies

9. Some Approaches to the Choice of Entry Mode
10. Export Modes
11. Intermediate Entry Modes
12. Hierarchical Modes
Part IV Designing the Global Marketing Programme

14. Product Decisions
15. Pricing Decisions
16. Distribution Decisions
17. Communication Decisions (Promotion Strategies)
4
Chapter 1: Global Marketing in the Firm



10. Export Modes

5
Introductory terminology
• Globalization: Reflects the trend of firms buying,

developing, producing and selling products
and services in most countries and regions
of the world
• Internationalization: Doing business in many countries of the

world, but often limited to a certain region
• Global Industries: Industry is dominated by a few large,

powerful players
• Local Industries: Multi-domestic market environment where

markets exist independently of one another
6 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Development of the global marketing concept
Global Marketing: The firm’s commitment to coordinate

its marketing activities across national
boundaries in order to find and satisfy
global customer needs better than the
competition
This implies that the firm is able to:

• Develop a global marketing strategy, based on similarities and
differences between markets;
• Exploit the knowledge of the headquarters (home organization)
through worldwide diffusion (learning) and adaptations;
• Transfer knowledge and ‘best practices’ from any of its markets and
use them in other international markets.

Development of the global marketing plan
The purpose of the global

marketing plan is to create
sustainable competitive
advantages in the global
marketplace
Figure 1.1 The five-stage decision model in global marketing

The decision whether to internationalize
Solberg’s (1997) analytical framework offers strategic options
for companies in globalizing markets
Figure 1.2 The nine strategic windows. Source: Solberg (1997, p. 11). Reprinted with kind permission. In the original article
Solberg has used the concept ‘globality’ rather than ‘globalism’.

The EPRG Framework (Perlmutter, 1969; Chakravarthy & Perlmutter, 1985)
EPRG Framework: Classifies four different international

management orientations
Ethnocentric: The home country is superior and the needs of the

home country are most relevant. Business in a foreign
country will be done (largely) the same way as in the
home country
Polycentric: Each country is unique and should therefore be
targeted in a different way
Regiocentric: The world consists of regions. The company tries to
integrate and coordinate its marketing programme
within regions
Geocentric: The firm may offer global product concepts with
different local adaptations (glocalization)

The glocalization framework
Glocalization: The development and selling of products or services intended
for the global market, but adapted to suit local culture
Standardization and
differentiation are two
extremes in global
marketing
Figure 1.3 The glocalization framework

Exhibit 1.5 Persil Black & Persil abaya = glocalization (same product, but
different packaging and market communication)
Source: Henkel AG & Co KGaA.

Figure 1.8 The principle of transferring knowledge and learning across borders

Exhibit 1.3 Ford Focus global marketing plan
Source: GoBOb/Shutterstock.com.
Exhibit 1.3: Ford Focus Global Marketing Plan I
Hollensen S. (2017) Global Marketing. 7th Edition. Pearson. UK. pp 18 – 19.

Exhibit 1.3: Ford Focus Global Marketing Plan II

Exhibit 1.3: Ford Focus Global Marketing Plan III

The integration-responsiveness framework
(Bartlett & Ghoshal, 1987, 1989; Prahalad & Doz, 1987)
Global integration: Recognizing the similarities between

international markets and integrating them into
the overall global strategy
Forces for global integration à removal of trade barriers

à global accounts/ customers
à standardized technology
à worldwide markets
à global cost drivers
Market responsiveness: Responding to each market’s needs and wants
Forces for market responsiveness à cultural differences

à protectionism
à deglobalization trend
18
The integration-responsiveness framework
(Bartlett & Ghoshal, 1987, 1989; Prahalad & Doz, 1987)
The global integration/market responsiveness grid: the future orientation of LSEs and SMEs
Exhibit 1.6: McDonald´s is moving towards a higher degree of market responsiveness I

Exhibit 1.6: McDonald´s is moving towards a higher degree of market responsiveness II

Value chain (Porter, 1986)
Value chain: A categorization of the firm’s

activities providing value for
the customers and profit Figure 1.4 Porter’s value chain
for the company
à Can be used as a framework to identify international competitive advantage

Value chain (Porter, 1986)
Value chain: A categorization of the firm’s

activities providing value for
the customers and profit Figure 1.4 Porter’s value chain
for the company
à Can be used as a framework to identify international competitive advantage
Porter’s original value chain concept focuses on the firm’s internal value
chain. However, in understanding how value is created, it is not enough to
look at the firm’s internal value chain alone.
External linkages à in most industries, a single organization rarely

undertakes all value activities from product
design to distribution to the final consumer
à much of the value creation will occur in the
supply and distribution chains

ple
xam
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Share of value creation of automotive suppliers in global automotive
construction from 1985 to 2015
90%
82%
78%
Share of value creation in the automotive
80% 74%
69%
70% 66%
61%
60% 56%
50%
industry
40%
30%
20%
10%
0%
1985 1990 1995 2000 2005 2010* 2015*
2
Note: World
Source: Statista based on Thomson Reuters; ID 162996, published 2010
Internationalizing the value chain
• All internationally oriented firms must consider an eventual
internationalization of the value chain’s functions
• Value chain function should be carried out where there is the highest
competence and the most cost-effectiveness
production-oriented
marketing-oriented
Figure 1.5 Centralizing the upstream activities and decentralizing the marketing-oriented
downstream activities

Service value chain
Figure 1.6 The service value chain

A supplement to the traditional value chain
• Service value chain (‘value shop’) model:

A model for solving problems in a service environment, similar
to workshops. Value is created by mobilizing resources and
deploying them to solve a specific customer problem
• Value shops are organized around making and executing

decisions in the specific service interaction situation with a
customer
• As competitive pressures increasingly commoditize product

markets, services are becoming the main differentiator of value
creation

Combination of the product and service value chain
A combination is mainly
valid for soft services,
however, in more and
more industries physical
products and services are
combined
Combining the product

and service value chain
is a first step but the
right combination is not
a sufficient competitive
differentiator
à The firm needs to add
customer experiences !
Figure 1.7 Combining the product and service value chain

HILTI Tool Fleet Management

Global experiential marketing
Experiential marketing: Marketing initiatives that give customers in-

depth, tangible experiences in order to
provide them with sufficient information to
make a purchasing decision
Upgrading the offerings to a higher stage of

value creation: Customer experience
Customer experience: The use of products in combination with

services to engage the individual customer in
a way that creates a memorable event
à applies to both B2C and B2B businesses

Global experiential marketing (B2C)
Four categories of experience according to the level of involvement/
participation and level of intensity/connection (Pine & Gilmore, 1998):
Entertainment (e.g. fashion show) | Educational (e.g. driving experience)
Aesthetic (e.g. interior design) | Escapism (e.g. lifestyle experiences)
Figure 1.8 Categories of experience

Global experiential marketing (B2B)
• B2B businesses like B2C businesses need to continuously

innovate how they attract, engage and excite customers by finding
new possibilities for creating value
• Mass customization: Collaborative efforts between

customers and manufacturers to
jointly search for solutions that best
match customers’ needs with
manufacturers’ capabilities
à combining the low unit costs of mass

production with the flexibility of
individual customization

Global experiential marketing (B2B)
Case Construction Equipment
lets its customers „test ride“ the
heavy construction machines at
the Tomahawk Customer Center
in Northern Wisconsin

Relationship of the concepts
Figure 1.9 Providing customer value

The virtual value chain (Rayport & Sviokla, 1996)
One way of understanding the strategic opportunities and threats of
information is to consider the virtual value chain as a supplement to the
physical value chain
Information are treated
as a supporting
element in the value-
adding process
There are four ways of

using information to
create business value:
- Managing risks
- Reducing costs
- Offering
Figure 1.10 The virtual value chain as a supplement to the physical chain Source: based products/services
on Rayport and Sviokla (1996)
- Inventing new
products
Chapter 2: Initiation of Internationalization



10. Export Modes

35
Internationalization motives
Internationalization occurs when a firm expands its R&D,

production, selling and other business activities into
international markets
àThe fundamental reasons for internationalization!

Source: Sorbis/Shutterstock.com. Exhibit 2.3 Internationalization of Haier – proactive and reactive motives

Exhibit 2.3: Internationalization of Haier – proactive and reactive motives I
Hollensen S. (2017) Global Marketing. 7th Edition. Pearson. UK. p. 64.

Exhibit 2.3: Internationalization of Haier – proactive and reactive motives II

Internationalization triggers
Internal or external events taking place to initiate the process of

internationalization
à It is mostly a combination of factors that initiate internationalization

ple
xam
E
Example: External Triggers: Chamber of Commerce Carinthia
41
Internationalization barriers and risks
Insufficient
Management finances Insufficient
emphasis on
domestic
market
markets knowledge
Lack of Lack of
foreign foreign
channels of Factors hindering market
distribution internationalization connections
initiation
Lack of
Cost
export
escalation
commitment
Lack of
Lack of
productive
capital
capacity

Internationalization barriers and risks
Barriers to the process of internationalization
General market risks: Commercial risks: Political risks:

Comparative market distance Exchange rate Foreign trade restrictions
fluctuations
Adaptation to foreign markets National export policy
Failure of export
Competition in foreign markets Foreign exchange controls
customers to pay
Adapting products and services Lack of government assistance
Delays and/or damage
to new local conditions in overcoming export barriers
during the
Difficulties in finding the right distribution process High value of the domestic
distributor in the foreign market currency relative to those in
Difficulties in
Complexity of shipping services obtaining export export markets
Differences in product financing High foreign tariffs
specifications Political and economical
disruption

ple
xam
E
https://finance.ec.europa.eu/eu-and-world/sanctions-restrictive-
measures/sanctions-adopted-following-russias-military-aggression-against-
44 ukraine_en#background
De-internationalization
Figure 2.1 The inverted U–shaped curve of internationalization Figure 2.2 Global strategy options
De-internationalization is the process through which a multinational company

shifts to a strategic configuration that has a lower international presence. This
can be necessary to find the “optimal level” of internationalization.

https://thesoundingline.com/a-timeline-of-american-
companies-giving-up-on-the-chinese-market/
46
Chapter 3: Internationalization Theories



10. Export Modes

47
Figure 3.6 Two extreme pathways of internationalization: the organic versus born global
Source: adapted from Âijö et al. (2005, p. 6).

The Uppsala internationalization model
(Johanson & Vahlne, 1977)
Figure 3.1 Internationalization of the firm: an incremental (organic) approach. Source: adapted from Forsgren and Johanson (1975, p. 16).

The Uppsala internationalization model
(Johanson & Vahlne, 1977)
Uppsala internationalization model:

Additional market commitments are made in small incremental
steps: choosing additional geographic markets with small psychic
distances, combined with choosing entry modes with few additional
risks
à Sequential pattern of entry into successive foreign markets,

coupled with a progressive deepening of commitment to each
market
à Firms tend to intensify their commitment to foreign markets as
their experience grows

The transaction cost analysis (TCA) model
(Coase, 1937)
Transaction costs emerge when markets fail to operate under

the requirements of perfect competition („friction free“)
à the ‘friction’ between buyer and seller, which is
explained by opportunistic behaviour
The transaction cost analysis framework argues that cost

minimization explains structural decisions. Firms internalize to
reduce transaction costs
Transaction cost = ex ante costs + ex post costs

= (search costs, contracting costs) +
(monitoring costs, enforcement costs)

(Coase, 1937)
Externalization:
Doing business through
an external partner
(importer, agent,
distributor)
Internalization:
Integration of an external
partner into one’s own
organization
Figure 3.2 The principles of the TCA model

(Coase, 1937)
If the transaction costs through

externalization are higher than
the control cost through an
internal hierarchical system, then
the firm should seek
internalization of activties
à If the ‚friction‘ between buyer

and seller is too high then the firm
should internalize instead

(Coase, 1937)
The internationalization perspective is closely related to the

transaction cost theory.
à The paradigmatic question in internationalization theory is:

Upon deciding to enter a foreign market, should a firm do
so through internationalization within its own boundaries (a
subsidiary) or through some form of collaboration with an
external partner (externalization)?
The internationalization and TC perspectives are both concerned

with the minimization of TC and the conditions underlying market
failure.
Intention: Analyse the characteristics of a transaction in order to

decide on the most efficient, i.e. TC minimizing, governance mode

The network model
Business networks
are a mode of
handling activity
interdependences
between several
business actors
The relationships of a
firm in a domestic
network can be used
as bridges to other
networks in other
countries
Figure 3.3 An example of an international network

The network model
Business networks: Actors are autonomous and linked to each

other through relationships, which are
flexible and may alter accordingly to rapid
changes in the environment
à The ‘glue’ that keeps the relationships together is based on

technical, economic, legal and personal ties
The business network is organized by each actor’s willingness to

engage in exchange relationships with some of the other actors in the
network
Business networks can be expected to be more flexible in response to

changing conditions in turbulent business fields
When entering a network, the internationalization process of the firm

will often proceed more quickly

Born globals
Born global: A firm that from its ‘birth’ globalizes rapidly without
any preceding long-term internationalization period
Born global represent an interesting case of firms operating under time

and space compression conditions that have allowed them to assume a
global geographic scope from the moment of their start-up
They are typically characterized as small and medium-sized enterprises

with fewer than 500 employees, with annual sales under US$ 100
million – and with a reliance on cutting-edge technology in the
development of relatively unique product or process innovation
Born regional: A firm that starts international activities early and

with significant international shares, but its
international activities are only in its home country

Chapter 4: Developing International Competitiveness



10. Export Modes

58
International competitiveness
To be able to compete internationally, the company must have

established a competitive basis consisting of resources,
competences and relations to others in the international arena
• Resources: Basic units of analysis – financial,

technological, human and organizational
resources – found in the firm’s different
departments
• Competences: Combination of different resources into
capabilities and later competences – being
something that the firm is really good at
• Core competences: Value chain activities in which the firm is
regarded as better than its competitors

International competitiveness
Factors on the macro, meso and micro level influence how firms
develop their international competitiveness
These factors can be analysed by using the following instruments:
Macro level
Analysis of national competitiveness Porter‘s Diamond
Meso level
Competition analysis in an industry Porter‘s Five Forces
Meso-Micro level
Value chain analysis Competitive triangle; Benchmarking

Figure 4.1 Development of a firm’s international competitiveness

Porter‘s diamond (Porter, 1990)
The analysis of international

competitiveness starts at the
macro level, where Porter’s
diamond indicates that the
characteristics of the home
nation play a central role in
the firm’s international
success
Figure 4.1 Porter’s diamond


Factor conditions: Basic factors - natural resources; advanced

factors – human skills and research capabilities
Demand conditions: Presence of early home demand, market size, its

rate of growth and sophistication
Related and supporting industries: Presence of suppliers and related

industries within a region
Firm strategy, structure and rivalry: The way in which companies are
organized and managed, their
objectives and the nature of
domestic rivalry
Government: Governments can play a powerful role in encouraging
the development of industries within their own borders
Chance: Random events

65
Porter‘s five forces model (Porter, 1980)
Figure 4.2 Porter’s five forces model
The next stage is to move to the competitive arena where the firm is the unit
of analysis. The state of competition and profit potential in an industry
depends on five basic competitive forces.


New entrants: New entrants can serve to increase the degree of

competition in an industry. In turn, the threat of new
entrants is largely a function of the extent to which
barriers to entry exist in the market
Suppliers: The cost of raw materials and components can have a

major bearing on a firm’s profitability. The higher the
bargaining power of suppliers, the higher the costs
Buyers: The bargaining power of buyers is higher e.g. if buyers

are concentrated and/or purchase in large volumes
Substitutes: The presence of substitutes can reduce industry

attractiveness and profitability because they put a
constrain on price levels
Market competitors: The intensity of rivalry between existing

competitors in the market depends on various
factors
Competitive triangle
Competitive triangle: Consists of a customer, the firm and a competitor

(the ‘triangle’). The firm or competitor ‘winning’ the
customer’s favour depends on perceived value
offered to the customer compared with the relative
costs between the firm and the competitor.

Competitive triangle
Analysis of what creates a competitive advantage
à Competitive advantage is two-

dimensional
à A firm has a competitive
advantage in a market if they
offer products
• with a higher perceived value
to the customers
• with lower relative costs than
competing firms
Figure 4.3 Perceived value, relative costs and competitive advantage

Competitive benchmarking
• A company can find out its competitive advantages or core competences by
using competitive benchmarking
• Competitive benchmarking: A technique for assessing relative

marketplace performance compared with
main competitors
• Customers measure marketplace performance
of the firm against that of a ‘first-class’
competitor
• The measures in the value chain that can be
used include delivery reliability, ease of
ordering, after-sales service and quality of
sales representation
• Market research would typically be employed
to identify what these ‘key success factors’ are

Figure 4.9 Competitive benchmarking (example with only a few criteria)

The value net
Value chain analysis implies a linear

process, …
… however, the reality is that many

firms have an input into the process
at various stages
à the value chain becomes a value
network
Value net: A company’s value
creation in collaboration with
suppliers and customers and
complementors and competitors
Figure 4.4 The value net

The value net
Exhibit 4.3 Value net – cooperation/competition between competitors within

each airline alliance. The three alliances are competing against each other
Source: adapted from Ruff (2012).

Blue Ocean Strategy
Idea: Tomorrow’ leading companies will succeed not by battling competitors, but by
making strategic moves, which they call value innovation (Kim & Mauborgne 2005).
Red Oceans: Tough head-to-head competition in mature industries often results in
nothing but a bloody red ocean of rivals fighting over a shrinking profit pool.
Blue Oceans: The unserved markets, where competitors are not yet structured and the
market is relatively unknown. Avoiding head-to-head competition.
Figure 4.13 Blue ocean strategy framework

Blue Ocean Strategy
Figure 4.13 Blue ocean strategy framework

Exhibit 4.4: HoteI Formule 1 – value innovation in action I
Hollensen S. (2017) Global Marketing. 7th Edition. Pearson. UK. pp. 139-140.
Exhibit 4.4: HoteI Formule 1 – value innovation in action II
Exhibit 4.4: HoteI Formule 1 – value innovation in action IV
Blue Ocean Strategy: Value innovation in action
Figure 4.14 Formule 1’s value curve

Source: adapted from Value innovation: the strategic logic of high growth, Harvard Business Review, Vol. 75(1), pp. 102–112 (W. Chan Kim and Renée Mauborgne 1997), January/February, Copyright ©
1997 by Harvard Business Publishing, all rights reserved, reprinted by permission of Harvard Business Review.
Chapter 5: Global Marketing Research



10. Export Modes

81
Global marketing research
It is important to assess what customer require so that the firm can direct its
marketing activities more effectively by fulfilling the requirements of the
customers
à Marketing research: Gathering, analysing and presenting

information related to a well-defined
problem
The basic objective of global marketing research is to provide management

with relevant information for more accurate decision-making
Marketing research helps to reduce the risk in decision-making caused by

environmental uncertainties and lack of knowledge in international markets
Secondary vs. primary research à An international marketer should initiate

research by searching first for any relevant secondary data

Principle tasks of global marketing research

Principle tasks of global marketing research

Secondary research
• Secondary research: Gathering information that has

already been collected for other
purposes and is readily available
Less expensive Non-availability of data

Less time- Reliability of data
consuming Data classification
Objectivity Comparability of data
à Often used as preliminary stage of a market-screening

process

Primary research
• Primary research: Collecting information first-hand,

generated by original research tailor-
made to answer specific research
questions
Specific, relevant, High costs

up-to-date Often time-consuming
information data collection process
à Conducted if a marketer’s research question are not

addressed by secondary research

Qualitative vs. quantitative research

Qualitative vs. quantitative research

Primary research
Figure 5.1 Primary data collection: Research design

Terminology
• Sampling plan: A scheme outlining the group (or groups) to

be surveyed in a marketing research study,
how many individuals are to be chosen for
the survey, and on what basis this choice is
made.
• Pretesting: Conducting limited trials of a questionnaire
or some other aspect of a study to
determine its suitability for the planned
research project.
• Reliability: If the same phenomenon is measured
repeatedly with the same measurement
device and the results are similar then the
method is reliable.
• Validity: does the measurement method measure
what it is supposed to measure?
Validity and Reliability
Figure 5.5 Illustrations of possible reliability and validity situations in measurement

Source: McDaniel and Gates (2007, p. 321).

Global marketing research
Figure 5.2 Categorization of data for assessment of market potential in a country

Figure 5.8 International marketing information system
Source: Marketing Research: An International Approach, FT/Prentice Hall (Schmidt, M.I. and Hollensen, S. 2006) p. 587, Copyright © Pearson Education Limited.

Video Case Study 5.3: BMW i3 – the electric car

Chapter 6 & 7: The macro environment



10. Export Modes

97
The political/legal environment
The political/legal environment comprises primarily two dimensions:

The home country environment vs. the host country environment
Trade barriers Political risks: Ownership risk

◊ Tariff barriers Operating risk
◊ Non-tariff barriers Transfer risk

The political/legal environment
Figure 6.1 Three-step process of political risk analysis

The economic environment
• Major determinant of market potential and opportunity

• Significant variations in national markets originate in economic
differences
• The income and wealth of a nation’s people are extremely
important because these key figures determine people’s
purchasing power
• Formal methods for measuring economic development include
(a) National production (GNP, GDP)
(b) Purchasing-power parity

The sociocultural environment
It is important to understand customers’ personal values and

accepted norms of behaviour in order to market to them properly
à Identification of the most important factors of influence
from the cultural environment
• Understanding and classifying cultures is necessary to develop

marketing and advertising strategies in the global marketplace
• Culture is a pervasive influence which underlies all facets of social
behaviour and interaction. It is an obvious source of differentiation
between international markets
• Culture: The learned ways in which a society understands,

decides and communicates
• Three characteristics: It is learned, interrelated and shared

Figure 7.1 The visible and invisible parts of culture
Figure 7.2 The different layers of culture
Table 7.1 General comparative characteristics of cultures
Figure 7.3 The contextual continuum of differing cultures
Source: Marketing Across Cultures, 3rd ed., Pearson Education Ltd. (Usunier, J-C. and Lee, J.A. 1999) Copyright © Pearson Education Ltd.
Hofstede‘s Framework
Source: https://www.hofstede-insights.com/product/compare-countries/
GLOBE‘s Framework
Source: https://globeproject.com
GLOBE‘s Framework
GLOBE‘s Framework
Chapter 8: International Market Selection Process



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112
International Market Selection
Identifying the ‘right’ market(s) to enter is important because …

… it can be a major determinant of success or failure
… this decision influences the nature of foreign marketing
programmes in the selected countries
… the geographic location of selected markets affects the
firm’s ability to coordinate foreign operations

International Market Selection
Potential determinants of firms’ choice of foreign markets
Figure 8.1 Potential determinants of the firm’s choice of foreign markets

Systematic approach to market selection
Figure 8.2 International market segmentation

Step 3: Screening criteria

Figure 8.4 The market attractiveness/competitive strength matrix
Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Figure 8.5 Underlying questionnaire for locating countries on a market attractiveness/competitive strength matrix

Figure 8.6 Transnational clustering of the western European market
Source: adapted from European Business: An issue-based approach , Pearson Education Ltd. (Welford, R. and Prescott, K. 1996) Copyright © Pearson Education Ltd.

Figure 8.7 Micromarket segmentation

Figure 8.8 The international market segmentation/screening process: an
example of the proactive and systematic approach

Exhibit 8.1 Bosch Security Systems: IMS in the Middle East for fire
detection systems
Figure 8.9 International market segmentation for Bosch Security System: Fire Detection Systems in the Middle East
Exhibit 8.1 Bosch Security Systems: IMS in the Middle East for fire detection
systems (Continued)
Table 8.3 Classification variables in the MACS model

systems (Continued)
Table 8.4 Measurement/evaluation of screening variables

systems (Continued)
Table 8.4 Measurement/evaluation of screening variables (Continued)

systems (Continued)
Figure 8.10 Bosch Fire Detection Systems MACS matrix

Chapter 9: Choice of entry mode



10. Export Modes

127
Choice of entry mode
• Entry mode: An institutional arrangement for the entry of a
company’s products and services into a new
foreign market
• Market entry modes can be classified into three groups:
Export modes Low control, low risk, high flexibility
Intermediate modes Shared control and risk, split owenderhip
Hierarchical modes High control, high risk, low flexbility

Factors affecting the market entry mode decision
Figure 9.1 Factors affecting the foreign market entry mode decision

Figure III.3 Examples of the different market entry modes in the consumer market

Chapter 10: Export modes



10. Export Modes

131
Export modes
Export is the most common mode for initial entry into international markets
and can be organized in a variety of ways, depending on the number and
type of intermediaries
• Direct export: Producing firm takes care of exporting activities and is in

direct contact with the first intermediary in the foreign target market
• Indirect export: Another domestic company, such as an export house or

trading company, performs the export activities

Export modes
• Cooperative export: Involves collaborative agreements with other firms

(export marketing groups) concerning the performance of exporting
functions

Export modes

Chapter 11: Intermediate Entry Modes



10. Export Modes

135
Intermediate entry modes
Intermediate entry modes are primarily vehicles for the transfer of
knowledge and skills between partners, in order to create foreign sales
à ownership and control can be shared between the parent firm and
a local partner
• Contract manufacturing: Manufacturing is outsourced to an external
partner
• Licensing: The licensor gives a right to the licensee against payment, e.g.
a right to manufacture a product

Apple Contract Manufacturing
137
Lego and Kabooki: Licensing

Lego Licensing

Prof. Dr. Ralf Terlutter
9020 Klagenfurt
Austria
+43 (0)463 2700 –4041/-4004

www.aau.at/mim
www.aau.at/im
LV 604.100
WS 2021/22
!
Due to the Covid-19 pandemic the course is a hybrid course. If parts are offered
on campus, it will be possible to attend them online, too (e.g. via stream) or
access them later (e.g. recorded course).
Important: This course will be recorded and made available in Moodle to all
students registered to this course for the rest of the semester.
141
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142
Intermediate entry modes
• Franchising: The franchisor gives a right to the franchisee against
payment, e.g. a right to use a total business concept
• Joint venture: An equity partnership typically between two

partners
• Strategic alliance: Non-equity joint venture

Challenges to Doing Business in China
144
Joint Venture Risks in China

Chapter 12: Hierarchical Modes



10. Export Modes

147
Hierarchical modes
Hierachical mode: The firm completely owns and controls the foreign entry
mode/ organization
• Domestic-based sales representative: The sales representative resides

in the home country of the manufacturer and travels abroad to perform the
sales function
• Resident sales representative/ foreign sales branch/ sales subsidiary

Hierarchical modes
• Sales and production subsidiary: A local company owned and operated
by a foreign company under laws and taxation of the host country
• Region centres (regional HQ): The regional HQ will usually play the role
of coordinating and stimulating sales in the whole region

Hierarchical modes
• Transnational organization: Integration and coordination of operations

across national boundaries in order to achieve synergies on a global scale

Starbucks: Coffee experience

Starbucks

Chapter 14: Product Decisions



10. Export Modes

153
Dimensions of the international product offer
The product decision is among the first decisions that a marketing

manager makes in order to develop a global marketing mix
It is important
to decide what
product levels
should be
standardized
and what
levels should
be adapted to
the local
environment
Figure 14.1 The three levels of a product

The product life cycle
Figure 14.2 The product life cycle and time to market

The PLC concerns the life of a product in the market with respect to
business/ commercial costs and sales measures. Simply explained,
it is a theory in which products and brands follow a sequence of
stages, including introduction, growth, maturity and sales decline.
Time to market: The time it takes from the conception of an

idea until it is available for sale. TTM is
important in those industries where
products become quickly outmoded.

Comparison of product life cycles (PLCs) for product forms (TLCs – here operating systems for smartphones) and single
Figure 14.3
product models, like iPhone, Samsung galaxy and Huawei

Product life cycles in different countries
When expanding the concept of PLC to international markets, two

different approaches appear:
• International product life cycle • PLCs across countries – a
(IPLC) – a macroeconomic microeconomic approach
approach (originally Vernon, 1966)
Figure 14.4 International product life cycle (IPLC) curves Product life cycles (PLCs) of different countries
Figure 14.5
Source: Onkvisit and Shaw (1993, p. 483).
for a specific product

Product life cycle and main marketing
policies
Figure 14.4 The product life cycle and its strategic marketing implications
Source: Marketing Management: A relationship approach, 2nd ed., Financial Times/Prentice Hall (Hollensen, S. 2010) Figure 11.7,
Copyright © Pearson Education Limited.
New products for the international market
As a consequence of increasing international competition, time is becoming

a key success factor for an increasing number of companies that
manufacture technologically sophisticated products
à This time competition and the level of technological development

mean that product life cycles are getting shorter and shorter
A new product can have several degrees of newness: It may be an entirely
new invention or it may be a slight modification of an existing product
Newness has two dimensions:
- Newness to the market and
- newness to the company
The greater the newness of the product, the greater the need for a thorough
internal company and external environment analysis, in order to reduce the
risk involved

The product communication mix
Having decided upon the optimum standardization/adaptation route and
the newness of the product, the next most important factor to be
considered is that of international promotion
Product and
promotion go
hand in hand in
foreign markets
and together are
able to create or
destroy markets in
very short order
à Five alternative
approaches to
product policy
Figure 14.6 Product/communication mode Source: based on Keegan (1995), pp. 489–94, p. 498, Table 13–1.

Product positioning
Product positioning: Activity by which a desirable ‘position’ in the

mind of the customer is created for the
product
Achieving a credible market position in international markets is a
key element in the successful marketing of any organization
How?
1. Describing specific products as comprising different attributes
that are capable of generating a flow of benefits to buyers and
users
2. Putting these attributes into bundles so that the benefits
generated match the requirements of specific market segments

Product positioning

Product positioning

Brand positioning: TOMs

Branding
Brand equity: A set of brand assets and liabilities that can be
clustered into five categories: brand loyalty, brand
awareness, perceived quality, brand associations
and other proprietary brand assets
Closely linked to product positioning is the question of branding
Functions of branding:
To dinstinguish a company‘s offering and differentiate one particular product
from its competitors
To create identification and brand awareness
To guarantee a certain level of quality and satisfaction
To help with promotion of the product

Branding decisions
Figure 14.7 Branding decisions Source: adapted from Onkvisit and Shaw (1993, p. 534).

Branding
Private label: Retailer’s own brand
Co-branding: Form of cooperation between two or more brands,

which can create synergies that create value for
both participants, above the value they would
expect to generate on their own

Branding
Ingredient branding: The supplier delivers an important key
component to the final OEM product
Sensory branding: Normally brand communication involves just

two senses – sight and hearing. Sensory
branding involves all five senses: sight,
hearing (sound), smell, touch and taste

Sensory Branding: Marriott Hotels

Umbrella/Family Branding

P&G: Multiple Brands
Unilever: Multiple Brands

Chapter 15: Pricing decisions



10. Export Modes

173
Pricing decisions
Price is the only area of the global marketing mix where policy can
be changed rapidly without large direct cost implications
Pricing policy is one of the most important yet often least recognized
of all the elements of the marketing mix
The only source of profit to the firm comes from revenue, which in
turn is dictated by pricing policy
In international markets, pricing decisions – compared to domestic

pricing decisions – are much more complex as they are affected by
a number of additional external factors

Pricing decisions
Figure 15.1 International pricing framework

International pricing strategies
à Unique product
à Some market segments
must be willing to pay the
high price
à Product is similar to other

products in the target market
à Product for the mass market

à Price-sensitive customers
à Reduction in unit costs
Alternative strategies: Experience curve pricing, product line pricing,

freemium, product-service bundle pricing

Pricing across countries
Figure 15.2 Structural factors of standardized versus differentiated pricing in European consumer goods markets
Source: reprinted from European Management Journal, vol. 12, no. 2, Diller, H. and Bukhari, I. (1994) ‘Pricing conditions in the European Common Market’,
p. 168, Copyright 1994, with permission from Elsevier.

An international pricing taxonomy
Figure 15.3 A taxonomy of international pricing practices Source: adapted from Solberg et al. (2006, p. 31). In the original
article Solberg has used the concept ‘globality’ rather than ‘globalism’.

Global-pricing contracts
The most attractive global-pricing opportunities are those that

involve suppliers and customers working together to identify and
eliminate inefficiencies that harm both
Global-pricing contracts: A customer requiring one global price

(per product) from the supplier for all
its foreign strategic business units
and subsidiaries
Suppliers and customers have different advantages and

disadvantages with GPCs

Table 15.4 Global pricing contracts: advantages and disadvantages Source: based on Narayandas et al. (2000, pp. 61–70).

Table 15.4 Global pricing contracts: advantages and disadvantages Source: based on Narayandas et al. (2000, pp. 61–70).

Transfer pricing
Prices charged for intra-company movement of goods and services. While

transfer prices are internal to the company, they are important externally for
cross-border taxation purposes
There are three basic approaches to transfer pricing:
• Transfer at cost: The transfer price is set at the level of production

cost and the international division is credited with
the entire profit that the firm makes
• Transfer at arm’s length: A price that the subsidiary has to pay for
the delivery of goods, services or
intangibles under conditions of perfect
competition
• Transfer at cost plus: This is the usual compromise, where profits are
split between the production and international
divisions.

Chapter 16: Distribution decisions



10. Export Modes

183
Distribution decisions
Access to international markets is a key decision area for

internationally operating businesses
After the firm has chosen a strategy to get its products into foreign
markets, the next challenge is the distribution of the products within
those markets
At the beginning of a market entry, partnerships with local

distributors make good sense as distributors know the distinctive
characteristics of their market and most customers prefer to do
business with local partners
International marketers have a broad range of alternatives for

selecting and developing an economical, efficient and high-
volume international distribution channel

Determinants of channel decisions
Table 16.1 Channel decisions

Structure of the distribution channel
Market coverage: Coverage can relate to geographical

areas or number of retail outlets.
Three approaches are available:
Intensive coverage, selective
coverage, exclusive coverage
Channel coverage (width): Identifiable along a continuum from

wide channels (intensive distribution)
to narrow channels (exclusive dis.)
Channel length: Number of levels (middlemen) in the

distribution channel

Structure of the distribution channel
Table 16.2 Three strategies for market coverage

Multiple channel strategy
A product/service is
available to the market
through two or more
channels of distribution.
Multiple channels may

include the internet, sales
force, distributors, call
centres, retail stores and
direct mail.
Table 16.3 Multi-channel distribution

Multiple channel marketing: TESCO
189
Managing and controlling distribution
channels
1. Screening and
selecting
intermediaries
à most important
criteria for
selecting foreign
distributors
Table 16.4 Criteria for evaluating foreign distributors Source: adapted from Cavusgil et al. (1995)

channels
2. Contracting (distributor agreements)
When the international marketer has found a suitable intermediary, a

foreign sales agreement is drawn up.
The final contractual agreements should essentially contain:
• Contract duration
• Geographic boundaries
• Payment section
• Product and conditions of sale
• Means of communication

channels
3. Motivating
Geographic distance and cultural distance make the process of

motivating channel members difficult.
Motivating is also difficult because intermediaries are not owned by

the company à since intermediaries are independent firms, they will
seek to achieve their own objectives, which will not always match
the objectives of the manufacturer
Monetary and psychological rewards

channels
4. Controlling
Control problems are reduced substantially if intermediaries are

selected carefully. However, control should be sought through the
common development of written performance objectives
Control should be exercised through personal meetings and evaluation

of performance has to be done against the changing environment
5. Termination
Typical reasons for termination of a channel relationship are:

• The international marketer has established a sales subsidiary in the
country
• The international marketer is unsatisfied with the performance of the
intermediary
Implications of the Internet for distribution
decisions
The internet has the power to change drastically the balance of

power among consumers, retailers, distributors, manufacturers and
service providers
Some participants in the Others will experience

distribution chain may the reverse; some may
experience an increase even find that they have
in their power and been bypassed and have
profitability lost their market share

decisions
Disintermediation: The elimination of a layer of intermediaries

from a marketing channel or the
displacement of traditional resellers by
radically new types of intermediaries
This disintermediation process, with increasing direct sales through

the internet, leads manufacturers to compete with their resellers,
which may also result in channel conflict.
Channel conflict: Disagreement among marketing channel

members on goals and roles – who should
do what and for what rewards

decisions
Table 16.5 Disintermediation and reintermediation

Online retail sales
Online retailing is one of the fastest-growing market sectors in

Europe, the US and Asia
Key drivers of this growth include increased use of smartphones and

tablet computers, greater merchandise selection online and new
business models
Omnichannel retailing: The use of a variety of channels in a

customer’s shopping experience,
including research before a purchase

Chapter 17: Communication decisions



10. Export Modes

198
The international communication process
Elements of the
Figure 17.1
international communication
process

Communication decisions
Communication is the fourth and final decision to be made about the

global marketing programme
The purpose is to provide information of interest to the customers and to

persuade the customer to buy a product - at present or in the future
Six main communication tools are available:

Advertising Public Sales Direct Personal Social media
relations promotion marketing selling marketing
Crucial decision for international marketers: Standardize the different

communication elements worldwide or localize?
The trend is towards greater harmonization of strategy, at the same time
allowing for flexibility at the local level and early incorporation of local needs
into communication plans

Advertising
à One of the most visible
forms of
communication
à Often the most

important part of the
communications mix for
consumer goods
à Limitations as a one-
way method of
communication
The major
Figure 17.2
international advertising
decisions

Objective setting
Advertising objective: A specific communication task to be
accomplished with a specific target
audience during a specific period of
time
Major advertising objectives
Increasing sales from existing customers by encouraging them to
increase the frequency of their purchases
Maintaining brand loyalty via strategy that reminds customers of the
key advantages of the product
Stimulating impulse purchases
Obtaining new customers by increasing consumer awareness of the

firm’s products
Improving the firm’s corporate image among a new target customer group

Budget decisions
Affordable approach: Setting the promotion budget at

the level management thinks
the company can afford
Competitive parity approach: Setting the promotion budget
to match competitors’
outlays
Objective and task approach: Developing the promotion
budget by defining specific
objectives, determining the
tasks that must be performed to
achieve these objectives, and
estimating the costs of
performing these tasks. The
sum is the proposed promotion
budget

Media decisions
Reach: The number of people exposed to an advertisement
carried by a given medium
Frequency: Average number of times within a given timeframe
that each potential customer is exposed to the same ad
Impact: Depends on the compatibility between the medium
used and the message (the ‘impact’ on the consumer’s
brain)
A media’s gross rating points (GRPs) are the result of multiplying its reach
by the frequency with which an advertisement appears within the media
over a certain period
Traditionally, media planning is based on a single measure, such as cost
per thousand (CPM) GRPs
When dealing with two or more national markets, the selection of media
also needs to take into account differences in:
• The firm’s market objectives across countries
• Media effectiveness across countries
International advertising strategies in
practice
Advertising is mostly influenced by the sociocultural behaviour of

consumers in different countries
An internationally oriented firm needs to decide on the degree of

standardization/localization
The global/local marketing challenge can be divided into two parts:

Creative challenge: Creating a global campaign concept that
meets the global brand aims and is
adaptable to local market needs
Implementation challenge: Planning and managing the project from
inception, through the key localization
stages all the way to launch
à A focus on implementation right from the start is key to
global marketing success

Public relations
Public relations (PR) seeks to enhance corporate image building

and influence favourable media treatment
PR is the marketing communications function that carries out

programmes which are designed to earn public understanding and
acceptance à integral part of the global marketing effort
In a very market-oriented sense, the PR activity is directed towards

an influential target audience of editors and journalists or towards
broadcasting
Other strategies include: Sponsorship, celebrity endorsement,

product placement

Public relations

Public relations – Press conference
Source:
https://www.google.de/search?q=press+conference+cook+apple+2018&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiHgauQjqHeAhXsKcAKHQDWA2gQ_AUIDigB&biw=1440&bih=802#imgrc=8SPXh
kwkiu7hbM:
208
Public relations
Source:
https://www.google.de/search?q=press+conference+cook+apple+2018&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiHgauQjqHeAhXsKcAKHQDWA2gQ_AUIDigB&biw=1440&bih=802#imgrc=8SPXh
kwkiu7hbM:
209
Sales promotion
Sales promotion: Short-term effort directed primarily to

the consumer and/or retailer, in order
to achieve specific objectives
Selling activities that do not fall directly into the advertising or

personal selling category à below-the-line activities: e.g. point-of-
sale displays, demonstrations, leaflets, free trials, competitions
In markets where the consumer is hard to reach because of media

limitations, the percentage of the total communication budget
allocated to sales promotions is relatively high

Sales promotion

Sales promotion
Source: www.worldpress.com
212
Implications of the Internet for communication
decisions
On the Internet, it is easier to communicate a message to large numbers of
people. However, in many cases, it is much harder for the message to be
heard above the noise by your target audience.
Figure 17.3 The role of internet communication in the customers’ buying process

Social media marketing
Social media:
A group of Internet-
based applications
that allow the
creation and
exchange of user-
generated content
Figure 17.4 The bowling to pinball model: transition of market communication from
‘bowling’ to ‘pinball’ Note: C = consumer. Source: images from Imagemore Co.,
Ltd (left) and 5AM Images/Alamy Images (right).

à Four different
communication styles
à Type 4: The company

proactively choses to be a co-
player in the discussion and
blogging on different relevant
social media sites
The extended interactive market

Figure 17.4
communication model Note: C = consumer.

Six distinct,
interrelated
elements
(Cs) that
explain the
creation and
retention of
consumer
engagement
Figure 17.5 The 6C model (company, content, control, community, consumers, conversations)
Source: based on Parent et al. (2011).
.

https://datareportal.com/reports/digital-2022-july-global-statshot
217
218
219
220
221
Coca Cola Happiness Social Media
Campaing
222
https://youtube/4dJ16WcfclY
Sept. 2021
https://influencermarketinghub.com/highest
-earning-instagrammers/
223
Prof. Dr. Ralf Terlutter
9020 Klagenfurt
Austria
+43 (0)463 2700 –4041/-4004

www.aau.at/mim
www.aau.at/im
LV 604.100
WS 2022/23
224

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Univ.-Prof. Dr. Ralf Terlutter

Part I The Decision Whether to Internationalize

Part II Deciding which Markets to Enter

Part III Market Entry Strategies

Part IV Designing the Global Marketing Programme

Part I The Decision Whether to Internationalize

Part II Deciding which Markets to Enter

Part III Market Entry Strategies

Part IV Designing the Global Marketing Programme

• Globalization: Reflects the trend of firms buying,

• Internationalization: Doing business in many countries of the

• Global Industries: Industry is dominated by a few large,

• Local Industries: Multi-domestic market environment where

6 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Global Marketing: The firm’s commitment to coordinate

This implies that the firm is able to:

7 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

The purpose of the global

8 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

9 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

EPRG Framework: Classifies four different international

Ethnocentric: The home country is superior and the needs of the

10 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Figure 1.3 The glocalization framework

11 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Source: Henkel AG & Co KGaA.

12 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

13 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Hollensen S. (2017) Global Marketing. 7th Edition. Pearson. UK. pp 18 – 19.

Hollensen S. (2017) Global Marketing. 7th Edition. Pearson. UK. pp 18 – 19.

Hollensen S. (2017) Global Marketing. 7th Edition. Pearson. UK. pp 18 – 19.

Global integration: Recognizing the similarities between

Forces for global integration à removal of trade barriers

Forces for market responsiveness à cultural differences

Hollensen S. (2017) Global Marketing. 7th Edition. Pearson. UK. pp 27 – 28.

Hollensen S. (2017) Global Marketing. 7th Edition. Pearson. UK. pp 27 – 28.

Value chain: A categorization of the firm’s

à Can be used as a framework to identify international competitive advantage

22 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Value chain: A categorization of the firm’s

à Can be used as a framework to identify international competitive advantage

External linkages à in most industries, a single organization rarely

23 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

25 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Figure 1.6 The service value chain

• Service value chain (‘value shop’) model:

• Value shops are organized around making and executing

• As competitive pressures increasingly commoditize product

26 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Combining the product

Figure 1.7 Combining the product and service value chain

27 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

28 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Experiential marketing: Marketing initiatives that give customers in-

Upgrading the offerings to a higher stage of

Customer experience: The use of products in combination with

à applies to both B2C and B2B businesses

29 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

Figure 1.8 Categories of experience

30 Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

• B2B businesses like B2C businesses need to continuously

• Mass customization: Collaborative efforts between