International Marketing Strategy Chapter 5 – International Niche Marketing Strategies for Small- and Medium-Sized Enterprises Doole, Lowe and Kenyon International Marketing Strategy

Learning Objectives Appreciate the nature and types of international marketing undertaken in the SME sector Compare the different strategic approaches and mindsets of SMEs in international marketing Understand the factors affecting SME international strategic management Identify the characteristics of the different stages of international development of SMEs Be able to evaluate the factors for success and failure in SME international marketing

The nature of SME international marketing strategies Exporting (less risk and less control) International niche marketing (target a special market segment, the market may be small or large market) Domestically delivered or developed niche services (e.g. In travel industry domestic firms such as hotels, tour operators generate foreign earning for the country by attracting visitors) Direct marketing including electronic commerce (e.g. via electronic commerce) Participation in the international supply chain (e.g. to participate part of Multinational Enterprises’ operation or production (e.g. iPhone)

The nature of SME international marketing strategies (cont.) Barriers to internationalization Shortage of working capital to finance exports Inadequate knowledge of overseas markets Inability to contact overseas customers including finding the right partner Lack of managerial time, skills and knowledge You should mention barriers that you will face when marketing your drink or food in the UK market. The barriers may influence the selection of entry mode.

The nature of SME international marketing strategies (cont.) Barriers to internationalization Risk factors for SMEs: SME’s have little influence over environmental change and recession Can extend themselves financially by growing too quickly In general, even Multinational Enterprises have to face the unexpected or expected changes Marco-environments e.g. changes in PESTEL .

The nature of SME international marketing strategies (cont.) Nice marketing The firm must: have good information about the segment needs have clear understanding of the important segmentation criteria understand the value of the product niche to the targeted segment provide high levels of service carry out small scale innovations seek cost efficiency in the supply chain maintain a separate focus E.g. by being content to remain relatively small concentrate on profit rather than market share evaluate and apply appropriate market entry and marketing mix strategies to build market share in each country they wish to become involved in Are the above issues relevant to the drink or food that you want to target UK market?

The nature of SME international marketing strategies (cont.) Direct marketing and electronic commerce Benefits − Creating new opportunities − Erecting barriers to entry − Making cost savings − Providing inter-firm collaboration − Company website − Fast transmission of data Can you mention in your assignment how you can make use of electronic commerce (e.g. internet and mobile technologies) to improve efficiency (e.g. low cost, high benefits) to sell your drink or food in the UK?

The nature of SME international marketing strategies (cont.) Direct marketing and electronic commerce Impact of electronic commerce: Disadvantages − Flooded with ‘spam’ ... and orders! − Feast and famine may be a problem where production is inflexible (e.g. when certain products and services where production volume can easily be increased or decreased) − May require sophisticated (expensive) technology to compete (e.g. to use search engine to make sure that the firm’s offer is listed on the first page of serach results for key words.)

The nature of international development The internationalization process of a company is more aptly visualized as a series of multilateral cycles rather than a linear process.

The nature of international development (cont.) Where the SME is “born global” Increasing role of niche markets Need for small firms to specialize to compete with MNE’s Growing demand for specialized / customized products technology permits economical low scale production Communication technology advances Allowing management across borders Quick response time, increased flexibility and adaptability Accessibility of knowledge, tools and assistance E.g. funding, joint research programmes, technology transfer Growth of international partnerships It is important to work with the individuals or companies you know. International development through using existing networks of contacts is more typical of Asian firms (e.g. Chinese firms) than SMEs from western countries.

The nature of international development (cont.) Supply chain internationalization Reasons for outsourcing reducing capital requirements of business Managing difficulty of developing quickly improving flexibility firms reluctant to take risks in non-core areas economies of scale of suppliers expertise of business support service providers downsizing may leave management resources stretched and unfocused Disadvantages of outsourcing loss of know-how costs of managing outsourced supplies

The nature of international development (cont.) Supply chain internationalization Advantages opportunities for learning from MNE security through reliable and predictable ordering able to focus on production and technical issues Disadvantages need for dependence on one/two major customers internationalization driven by demands of MNE continual pressure to improve product and operations weakening of external marketing You should consider to outsource some (or all) marketing activities (Public Relationship) to another firm if the firm can create extra value to your firm (e.g. value may mean to increase your existing and potential customers’ satisfaction and loyalty).

International marketing strategic management in SMEs Think of how MacDonald’s manage the 7S framework across international markets Strategy, structure and systems are considered to be hardware of successful management and as such can be implemented across international markets without the need for significant adaptation. Management style, staff and skills and shared values are the software, and are affected by cultural differences.

International marketing strategic management in SMEs (cont.) What is the strategy that you use to sell you drink or food in the UK market? Market Development?

International marketing strategic management in SMEs (cont.)

International marketing strategic management in SMEs (cont.) The reasons for failure Failure to effectively scan the international environment Over dependence on one product Ease with which larger, more powerful competitors or a number of smaller local competitors can copy the idea Failure to respond to worldwide changes in customer needs Failure to plan financial resources Failure to plan for fluctuation in currency values Failure to manage and resource both market and operations expansion Prohibitive cost of enforcing patents and trademarks in foreign courts which may favour local firms How can you solve the above problems in order to ensure the success of selling your drink or food in the UK market?