Multinational Marketing Information Systems - Term Paper Example

Multinational Marketing Information Systems PART A Multinational marketing information systems (MMIS) and marketing management. Multinational marketing may be viewed as “marketing across national boundaries, often by companies whose manufacturing companies are also multinational.” (Harvey, 2009) Changing market conditions in the international arena require the formation of market strategy responsive to varying countries, cultures, tastes, and lifestyles, not to mention economic, political and geographical conditions. According to Alimiene and Kuvykaite, in the process of a company’s internationalisation, it eventually arrives at its market strategy through an evolutionary process. The strategy usually involves a choice – to either standardize, or adapt. Most of the time, the company chooses a strategy that is a combination of both standardization and adaptation. Standardisation refers to the application of a marketing mix to the whole global market – the same solution applied in the company’s home (North American) market, for instance, is used likewise employed in its newly opened Southeast Asian operations, for instance. This obviously has its drawbacks at first glance. Total standardisation seldom works across different countries because of differences of language, consumer preferences, culture, laws, marketing infrastructure and competition structure. (Alimiene et al, 2008) On the other hand, seldom does total adaptation of marketing solutions work for a multinational enterprise, either. In such situations, the company could not take advantage of the economies of scale, marketing expertise and information acquired in the other markets where the company maintains its presence. The ideal marketing strategy is one that exploits the advantages of being able to address the cultural differences of foreign markets and separate products that comes with adaptation, while at the same time employing the economies of scale and global market knowledge gained through standardization. The diagram below is presented in order to better highlight the complications involved in multinational marketing strategy formulation. During product development, a stage of the business cycle wherein marketing information plays a determinative factor, the multinational company employs a variety of internal strengths that may emanate from different locations around the globe. For instance, in the example given the product concept is hatched in Singapore, approved in Houston, and designed in Singapore and Taiwan. The final assembly involves production plants in various regions of the world, for local markets. Management Information Systems by Prentice-Hall www.santarosa.edu/~ssarkar/cs66sp07/ch16notes.htm The example above illustrates, without need for further elaboration, the requisite for timely, accurate, and meaningful information delivered by company-wide information systems. It is apparent that reliability is key consideration for the system to be effective. The framework that follows on the table below shows the various categories of information and their scope and coverage, in the context of a global marketing information system. Subject Agenda Categories For a Global Marketing Information System Category Coverage Market Potential Demand estimates, consumer behaviour, review of products, channels, communication media availability and cost Competitor information Corporate, business, and functional strategies. Resources and intentions. Capabilities Foreign Exchange Balance of payments, interest rates, attractiveness of country currency, expectations of analysts Prescriptive Information Laws, regulations, rulings concerning taxes, earnings, dividends in both host and home countries Resource Information Availability of human, financial, physical, and information resources General Conditions Overall review of sociocultural, political, technological environments (Sourced from: Keegan, 1999. p. 173) The advantage of using the above framework by Keegan is that it is exhaustive as far as the needs of the multinational enterprise is concerned. The marketing function is necessarily affected by consideration in each of these categories, because consumer taste and preferences are shaped by them. Additional discussion will concentrate, however, in the market potential category as considerations covered by this aspect directly pertains to marketing management. Demand estimates. Oftentimes, the estimation of demand is perceived in terms of monetary value. In a domestic, relatively bounded, market, this is acceptable. In the diversity and openness of a global market, however, this is not acceptable. Mere evaluation of a foreign market concerning the magnitude (in US dollars) of the import market, or the expansion of the import market alone, is not sufficient (Green & Allaway, 1985). Generally, the use of shift-share analysis is used, which views changes in the rate of change of a country’s import market against the rate of change in global imports. Another approach for estimating demand is that of identifying emerging markets for US exports per product (Williamson, 1998), which reveals developing patterns of realized US sales of a certain product without resorting to evaluating the global import market potential of a country. Consumer Behavior. This aspect is incorporated into what are known as “Market Research Reports” which are comprised of two principal kinds of reports – the “Industry Sector Analysis” (ISAs) and “International Market Insights” (IMIs). The former gives a thorough and detailed assessment of particular foreign product markets, such as the Mexican demand for porcelain products. The latter are reports that do not specify products but address instead the conditions and opportunities in the foreign market, such as a description of the distribution channels in Japan. Channels. This deals with information concerning selection of sales channels and distribution issues. It describes existing channel profiles, which of these channels are the most extensively used by exporters, and the criteria employed in choosing a channel partner. It also informs on the strategies of finding trading contacts. Communication media availability and cost. This deals with matters concerning advertising. It describes the appropriate media, print or electronic, which are within the disposal of the exporter, with a cost comparison of the various alternatives against one another and against home country (e.g. U.S.) counterparts. Key business publications in the local industry and the contact person, corporate telephone and FAX numbers, and other such in information are vital inclusions in this section. The diagram that follows shows the evolution of marketing strategy and the role played by information interchange among the various elements of the system. Figure: Evolution of marketing strategy (Alimiene & Kuvykaite, 2008, p. 39) The diagram depicts the interplay of information interchange among countries, organizational units, and progressing from the pre-international to the global stages. It traces the development of approaches to market orientation, product planning, and marketing solutions. The role of a responsive multinational marketing information system is indispensable herein. The diagrams that follow graphically illustrate the organic functions of the multinational business and the synergies created by the peculiar strengths of internationalization. Marketing information systems are crucial in R&D, sourcing, and production aspects insofar as they affect the product design and execution. Likewise, after-sales service is included in information systems considerations, since technical support is provided by R&D and production to this aspect of marketing. Figure: Synergy of international operations (Alimiene & Kuvykaite, 2008, p. 40) Finally, on the following page is a diagram illustrating the interrelationship among the various scopes of business activity and their supporting information systems. Information systems should not generate one kind of data for all, nor data for just one level of activity. They are graduated as to local, regional and global core systems to support local, regional and global core business processes. Information for each level should likewise correspond and complement information generated for the other levels, to facilitate coordination and ease of communication in a timely manner. In summary, multinational marketing information systems are critical in developing local to global marketing strategies and enhance coordination among marketing management units. Management Information Systems by Prentice-Hall www.santarosa.edu/~ssarkar/cs66sp07/ch16notes.htm Business Format Franchising PART B :Business format franchising and its use as an international market entry strategy. Franchise is “a form of business organization in which a firm which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor’s trade name and usually with the franchisor’s guidance, in exchange for a fee.” (InvestorWords.com, 2009) Business format franchising, on the other hand, is defined as “an arrangement where a franchisee receives (in addition to the right to sell goods or services) the franchisor’s designs, quality control and accounting systems, operating procedures, group advertising and promotions, training, and (in case of hotels and travel agencies) worldwide reservation system.” (BusinessDictionary.com, 2009). In short, franchising the business format allows small and medium scale franchisees to enjoy economies of scale, brand recognition and loyalty, and strategic support from a large and established franchisor. In return, the franchisor receives a fee for the use of its tradename, trademarks and expertise. More than that, however, the franchisor is able to expand its reach and name recognition with use of the capital investment of the franchisee. International market entry strategy A business format franchise, from its very definition, is designed to replicate the totality of the franchisor’s business concept in different location; if the franchise is multinational, then the different locations may well be situated in different countries. More than just the trademarks and product design, the business format franchise makes use of the franchisor’s marketing strategy and plan, operating manuals and standards, and quality control. (Preble and Hoffman, 1995, p. 80) Growth in this area has been so predominant that it is forecasted to be the main (if not nearly exclusive) form of franchising internationally in the 21st century. Business format franchising has become the main vehicle by which multinational business have been able to take advantage of the unprecedented growth of international opportunities. (Preble and Hoffman, 1995, p. 80) There are, according to Preble and Hoffman (2006) three generic approaches or experiences in global franchising strategies: the first mover, platform, and conversion approaches. The first- and early-mover strategies are those strategies which suggest that early entrants into the industry, or “pioneers”, attain market dominance (i.e., traditionally enjoy larger market shares) over their competitors who arrive later. For this strategy, the timing of market entry is of utmost importance to the success of the franchise. Preble and Hoffman cite Makadok (1998) as a study that such advantages in pricing and share advantage indeed materialize, and are of surprisingly longstanding (or sustainable) duration. First movers exhibit a greater aggressiveness in pursuing strategic investments in research and development, advertising, promotion and distribution. It was determined that “Franchisors facing domestic market saturation and rapidly growing markets abroad are more likely to utilize first-mover strategies for international expansion.” (Preble & Hoffman, 2006, p. 36). The second category of global franchising strategies is that of platform strategies. This involves selecting the most ideal (or at least most advantageous, usually the most “business-friendly”) country in a region and establishing its “platform” in that country first, and then eventually expanding into neighboring nations. It is also called an “incremental phased approach” (Gupta & Govindarajan, 2000). This is ideal for expansion into regions wherein the countries comprising the region differ in their levels of organizational development, political stability and cultural traits (Preble & Hoffman, 2006, p.39) Situating in a business-friendly country helps to minimize the risk of entry into a region which may either not be open to the company’s presence there, or that do not possess the infrastructure and facilities needed for business to flourish. It is recommended that entry into dissimilar markets should be attempted or undertaken only by experienced franchisors. The last classification of strategies for business format franchising is known as conversion strategies. This involves the franchisor adding new franchisees to the network through the acquisition of independent businesses, business chains, or franchisees from other franchise systems - in short, it is a process similar to “reverse franchising”. The business is already existing; the business format franchisor merely converts these existing establishments to include them in the franchisor’s own system. Conversion franchising is best suited to the penetration of mature and already crowded and costly markets, by acquiring existing locations, sometimes in prime, expensive, real estate, eliminating competitors, and benefit from the franchisees’ existing business network and connections. The franchisor could also take advantage of the franchisee’s critical resources and skills from which can be developed sources of competitive advantages. The acquired firm, on the other hand, benefits from a source of managerial acumen from the franchisor, aside from the acquisition of a known brand, new technology, logistical support and training. In summarizing these strategies, it is readily apparent that conversion strategies provides the greatest opportunity for not only experienced but also inexperienced franchisors to penetrate international markets and expand operations even in saturated and highly competitive business environments. The diagram on the page following illustrates the three generic strategies just described. A Contingency Model for Global Franchising Strategies (Source: Preble & Hoffman, 2006, p. 45) Issues surrounding international Business Format Franchising An issue that grips most business format franchisors is, like discussed in the first part of this paper, the degree to which the firm must standardise (achieve uniformity) on one hand, and allow for adaptation (adjust to geographical variations in market conditions and resource availability) on the other hand. (Cox & Mason, 2007, p. 1053) From the very nature of format franchising, a high degree of uniformity and standardisation is desired as a requisite to this strategy. On the other hand, local variations in the business environment create fluctuations in supply and demand that, if not adapted to, may spell a loss of market share to competitors who are able to adapt. The conflict between the need to adjust to local variations and the necessity of maintaining the global standard is the strategic dilemma to which business format franchisors are subjected to. Another issue related to business format franchising has to do with the ethical obligation that exists between the franchisor and the franchisee towards one another. The nature of the franchise contract is such that the terms and conditions are originated by the franchisor. There is therefore an imbalance of persuasive power between the two parties. “An asymmetrical distribution of power often exists, resulting in opportunistic behaviour by the franchisor.” (Storholm & Scheuing, 1994, p. 181). On the other hand, the temptation exists for the franchisee to resort to unethical and questionable practices. Either tendency has the potential to create conflict in the relationship. In summary therefore, there exist three types of strategies in general which are employed in business format franchising – the first-mover, platform, and conversion strategies. These provide methods for global market entry for franchisors, from new markets to markets already saturated. Issues exist which serve to challenge the business format franchise, but these issues are not without recourse in the regular conduct of business. REFERENCES Alexandrides, C G 1972 “Computerization of International Business Research.” Academy of Management Proceedings, p350-352. Alimienė, M & Kuvykaitė, R 2008 “Standardization/Adaptation of Marketing Solutions in Companies Operating in Foreign Markets: An Integrated Approach.” Engineering Economics, Vol. 56 Issue 1, p37-47. Brandt, W K & Hulbert, J M 1977 “Headquarters Guidance in Marketing Strategy in the Multinational Subsidiary” Columbia Journal of World Business, Winter77, Vol. 12 Issue 4. “Business Format Franchising” BusinessDictionary.com, 2009. Accessed 6 August 2009 from “Business-Format Franchisings Significant Lines of Business.” Franchising World, Oct 2004, Vol. 36 Issue 9, p28-30. Chonko, L B, Tanner Jr., J F. & Smith, E R 1991 “Selling and Sales Management in Action: The Sales Forces Role in International Marketing Research and Marketing Information Systems” Journal of Personal Selling & Sales Management, Winter 91, Vol. 11 Issue 1, p 69-79. Cox, J & Mason, C 2007 “Standardisation versus Adaptation: Geographical Pressures to Deviate from Franchise Formats.” Service Industries Journal, Dec 2007, Vol. 27 Issue 8, p1053-1072. Fladmoe-Lindquist, K, Aharoni, Y & Nachum, L 2000 “Part II: Theory: Chapter 9: International franchising.” Globalization of Services, 2000, p197-196. “Franchise” InvestorWords.com, 2009. Accessed 6 August 2009 from “Franchising: more than just a Big Mac.” Businessdate, Jul 2003, Vol. 11 Issue 3, p5. Fulop, C & Foward, J 1997 “Insights into Franchising: A Review of Empirical and Theoretical Perspectives.” Service Industries Journal, Oct 97, Vol. 17 Issue 4, p603-625. Harvey, B 2009 “Multinational Marketing.” Business Ethics, International Management. Accessed 7 August 2009 from Keegan, W J 1999 Global Marketing Management, 6th ed. Upper Saddle River, NJ: Prentice-Hall, p. 173 Kotabe, M & Helsen, K 2004 Global Marketing Management, 3rd ed, John Wiley & Sons, Inc., Lehmann, H 2004 “The Australian Produce Cooperative: A Global Information Systems Project.” Communications of AIS, 2004, Vol. 2004 Issue 13, p220-232. Nanus, B 1969 “The Multinational Computer” Columbia Journal of World Business, Nov/Dec 69, Vol. 4 Issue 6. Pucik, V & Katz, J H 1986 “Information, Control, and Human Resource Management in Multinational Firms”. Human Resource Management, Spring 86, Vol. 25 Issue 1, p121-132. Preble, J F & Hoffman, R C 1995 “Franchising Systems Around the Globe: A Status Report” Journal of Small Business Management, Apr95, Vol. 33 Issue 2, p80-88. Preble, J F & Hoffman, R C 2006 “Strategies for Business Format Franchisors to Expand into Global Markets.” Journal of Marketing Channels, Vol. 13 Issue 3, p29-50. Sen, K C 1993 “The Use of Initial Fees and Royalties in Business-format Franchising.” Managerial & Decision Economics, Mar/Apr93, Vol. 14 Issue 2, p175-190. Sherman, A J 2003 “Growth Via Business-Format Franchising.” Fast-Track Business Growth, p411. Storholm, G & Scheuing, E E 1994 “Ethical Implications of Business Format Franchising.” Journal of Business Ethics, Mar 1994, Vol. 13 Issue 3, p181-188. APPENDIX Sourced from Kotabe & Helsen, 2004 Read More