Analysis and Evaluation of Market Entry Modes into the Asia-Pacific Region

PREFACE

PREFACE

To the subject. The apparent consequences of the rapidly proceeding economic globalisation are the tremendous rise of global - transnational business activities and the skyrocketing number of companies operating on an international or even global scale. This development, earmarked by a steadily increasing dynamism, leads to a rising pressure particularly to those firms, which have so far not taken an international expansion into consideration. Parallel to the general trend towards internationalisation, the marketing term has expanded with the term of internationality. In fact, the international marketing perspective has already been integrated as the state-of-the-art managerial thinking in a business world which equals more a worldwide market place than ever before. The fundamental topic of this thesis, and the probably most complex topic in the process of international marketing, is the question of the appropriate foreign market entry strategy. The compromised complexity arises mostly from both the wide range of alternative market entry modes and the complexity of the market entry mode decision as a whole - in the view of the situational context of the individual firm - for which no universal formula exists. Above all, the chosen market entry mode must ensure future sustainable competitive advantage, while transnational market penetration shows in- creased complexity and dissimilarity throughout geographical distances, cultural barriers and complexity of operations.

This thesis recognises that not only multinational companies are involved in the process of internationalisation, but also the so called SMEs - micro, small and medium-sized enterprises, which accumulate for the large ma- jority of businesses in Europe and North America. Furthermore, this thesis considers the tremendous economic growth of many countries in the Asia- Pacific region, which are partly characterised by significant cultural differ- ences and often restricting market regulations, which add additional diffi- culties to the market entry mode decision. Despite the broad range of publications to international market entry strategies, the attempt to sys- tematically transfer the theory to an actual situational context of a com- pany has been little practised until today. Therefore, the present thesis at hand aims in particular to establish a guideline for the answer of the ques- tion of how to incrementally - with the help of a feasibility study and a

PREFACE

scoring model - move from the analysis of the general theory to the evaluation of a situational influenced case study, with a steadily increasing degree of focus.

In particular, this thesis is targeted for managers of SMEs who are actively pursuing international market opportunities and who are facing the diffi- cult question of the appropriate market entry mode into countries of the Asia-Pacific region, hosting some of today’s most attractive economic ar- eas. The primary theme is the need for managers to design and execute international market entry strategies with the highest possible degree of suitability to their individual situation. Concluding, this thesis demon- strates an alternative approach for SMEs, particularly in the industrial goods business, to deal with the difficulties to enter the Asia-Pacific re- gion. It shows how to be able to gradually add several focused perspec- tives to finally succeed in the evaluation of an existing strategy. In doing so, this thesis aims to provide a guideline and motivation.

Acknowledgments. I would like to thank all those who have contributed to the development of this thesis. I am particularly indebted to Dr. Kai K.O. Baer and Dr. Rainer Gaus, the founders of the AdPhos Plc. in Ger- many as well as DI Wolfgang Nickl, the Managing Director of Serwik Co., Ltd. in Thailand for generously providing the necessary corporate informa- tion as the sole basis of this thesis. Moreover, I would like to thank Mag. Christian Stadlmann, my tutor at the University of Applied Sciences in Steyr, Austria, for the ongoing professional support and productive com- ments and feedback. I also would like to thank the University of Applied Sciences Steyr as an open-minded and inspiring education centre, which always provided me the necessary flexibility in the first place, in order to being able to make extraordinary international experiences. I would also like to thank Mr. Pascal Orzech for the countless productive discussions about stylistic questions. Above all I would like to thank my parents and brothers, who always supported and encouraged me on my way.

Bangkok, in August 2006

Thomas Andexer

  BRIEF CONTENTS  III

  BRIEF CONTENTS  

  Part 1: General Introduction and Theoretical Context  1

Chapter I:  The Discussed Topic  1

Chapter II:  The Framework of the Thesis  3

Chapter III:  The AdPhos Plc and the Writer s Motivation  7

  Part 2: International Marketing An Introduction  9

Chapter IV:  The Trend Towards Internationalisation  10

Chapter V:  The Definition of International Marketing  16

Chapter VI:  The Process of International Marketing  20

  Part 3: International Strategy - Market Entry Modes  24

Chapter VII:  Incentives to Go Global  25

Chapter VIII:  International Corporate-Level Strategy and its Correlation  

  to Market Entry Strategy  29

Chapter IX:  International Market Entry An Overview  32

Chapter X:  Three Chosen Focuses  48

  Part 4: Feasibility Study of the Market Entry Modes  58

Chapter XI:  Introduction to the Feasibility Study  58

Chapter XII:  Feasibility Study of the Market Entry Modes in Consideration  

  of the Three Chosen Focuses  61

Chapter XIII:  The Result of the Feasibility Study and Resume  92

  Part 5: The Asia-Pacific Market Entry of a German SME  99

Chapter XIV:  The AdPhos Plc  99

Chapter XV:  The Asian Coil-Coating Market A Short Digression  109

Chapter XVI:  AdPhos Market Entry into the Asia-Pacific Region  114

Chapter XVII:  The AdPhos Plc and Serwik Co Ltd in Bangkok Thailand  

  A Strategic Alliance  122

  Part 6: Outlook Evaluation Resume  127

Chapter XVIII:  Outlook  127

Chapter XIX:  Evaluation of AdPhos Market Entry into the Asia-Pacific Region  129

Chapter XX:  Resume Final Statement  142

TABLE OF CONTENTS IV

CONTENTS

  PREFACE............................................................................I  

  BRIEF CONTENTS III  

CONTENTS .......................................................................IV

LIST OF FIGURES .......................................................... VII

LIST OF TABLES............................................................VIII

  ABSTRACT  IX

  ZUSAMMENFASSUNG  X

1  PART 1: GENERAL INTRODUCTION AND THEORETICAL  

  CONTEXT  1

1.1  Chapter I: The Discussed Topic  1

1.2  Chapter II: The Framework of the Thesis  3

1.2.1  Methodical Approach  3

1.2.2  Content Structure  4

1.2.3  The Boundaries of this Discourse  6

1.3  Chapter III: Introduction to the Case Study and the Writer s  

  Motivation  7

2  PART 2: INTRODUCTION TO  INTERNATIONAL

  MARKETING  9

2.1  Chapter IV: The Trend Towards Internationalisation  10

2.1.1  Internationalisation of SMEs Key Players in a Global Economy  14

2.2  Chapter V: The Definition of International Marketing  16

2.3  Chapter VI: The Process of International Marketing  20

2.3.1  Market Entry Strategies - The Focus of this Thesis  22

2.3.2  International Marketing and its Link to International Strategy  22

3  PART 3: INTERNATIONAL STRATEGY - MARKET ENTRY  

  MODES  24

3.1  Chapter VII: Incentives to Go Global  25

3.1.1  Company Internal Factors  25

3.1.2  Company External Factors  27

3.2  Chapter VIII: International Corporate-Level Strategy and  its

  Correlation to Market Entry Strategy  29

3.2.1  Multidomestic Strategy  30

TABLE OF CONTENTS V

3.2.2  Global Strategy  30

3.2.3  Transnational Strategy  31

3.3  Chapter IX: International Market Entry Overview  32

3.3.1  Key Decision 1: Where Country Choice  32

3.3.2  Key Decision 2: When Timing Strategy  36

3.3.3  Key Decision 3: How Market Entry Mode  38

3.4  Chapter X: Three Chosen Focuses  48

3.4.1  Geographical Focus: The Asia-Pacific Region  48

3.4.2  Focus on Company Characteristics: SMEs  53

3.4.3  Focus on the Business Type: Industrial Goods Business  55

4  PART 4: FEASIBILITY STUDY OF THE MARKET ENTRY  

  MODES  58

4.1  Chapter XI: Introduction to the Feasibility Study  58

4.2  Chapter XII: Feasibility Study of the Market Entry Modes  in

  Consideration of the Three Chosen Focuses  61

4.2.1  Exporting  61

4.2.2  Licensing  67

4.2.3  Franchising  70

4.2.4  Foreign Contract Manufacturing Agreements  73

4.2.5  Strategic Alliances  75

4.2.6  Joint Ventures  79

4.2.7  Acquisitions  84

4.2.8  Greenfield Operations  88

4.3  Chapter XIII: The Result of the Feasibility Study  92

4.3.1  The Answer to Sub-Question 1 of the Research Problem  95

4.3.2  Additional Interpretation and Conclusion of the Feasibility Study  96

5  PART 5: THE ASIA-PACIFIC MARKET ENTRY OF A  

  GERMAN SME  99

5.1  Chapter XIV: The AdPhos Plc  99

5.1.1  Corporate History  99

5.1.2  Company Profile 102  

5.2  Chapter XV: The Asian Coil-Coating Market A Short Digression  109

5.2.1  Introduction to the Coil-Coating Industry 109  

5.2.2  Comparison of the Global Coil Coating Markets 109  

5.2.3  Conclusion 113  

5.3  Chapter XVI: AdPhos Market Entry Into the Asia-Pacific Region  114

5.3.1  Incentives to Enter the Asia-Pacific Region 114  

5.3.2  Chronology of the Asia-Pacific Market Entry 114  

5.3.3  Analysis of AdPhos Market Entry Strategy 117  

5.4  Chapter XVII: The AdPhos Plc and Serwik Co Ltd in Bangkok  

  Thailand A Strategic Alliance  122

5.4.1  Introduction 122  Introduction.......................................................................122

TABLE OF CONTENTS VI

5.4.2  Characteristics of the Strategic Alliance 123  

6  PART 6: OUTLOOK EVALUATION AND RESUME  127

6.1  Chapter XVIII: Outlook  127

6.1.1  Future Market Trends in the Asia-Pacific 127  

6.1.2  Future Developments of the Strategic Alliance 128  

6.2  Chapter XIX: Evaluation of AdPhos Market Entry Mode Decision  129

6.2.1  Introduction to the Evaluation Model 129  

6.2.2  The Result of the Scoring Model Quantified Evaluation 132  

6.2.3  The Answer to Sub-Question 2 of the Research Problem 134  

6.2.4  Additional  Interpretation......................................................134

6.2.5  Derived Recommendations 137  

6.3  Chapter XX: Resume Final Statement  142

  BIBLIOGRAPHY  145

LIST OF ACRONYMS...................................................... 147

APPENDIX ....................................................................  149  149

LIST OF FIGURES VII

LIST OF FIGURES

  Figure 1: Content structure: Theoretical analysis (Part 1-4)  4

  Figure 2: Content structure: Case-based evaluation (Part 5-6)  5

  Figure 3: Share of companies involved in exporting based on different  

  magnitudes  15

  Figure 4: The environmental influences on international marketing  

  (SLEPT approach)  17

  Figure 5: The International marketing (strategy) process  21

  Figure 6: The market entry strategy decision as the focus of this thesis  22

  Figure 7: Geographically dispersed vs geographically concentrated strategy35  

  Figure 8: The waterfall-strategy  37

  Figure 9: The sprinkler-strategy  38

  Figure 10: Market entry modes in a categorised overview  39

  Figure 11: Example of the evolution of a manufacturer s entry mode  

  decision  46

  Figure 12: Countries of the Asia-Pacific region  50

  Figure 13: Three criteria defining SMEs  53

  Figure 14: The new thresholds for SMEs  54

  Figure 15: Cross-border mergers and acquisitions in selected crisis  

  countries 1995-2000 (in billion U S )  85

  Figure 16: The AdPhos Plc a medium-sized company 103  

  Figure 17: AdPhos - group of consolidated companies 104  

  Figure 18: Relative contribution of AdPhos business segments to total  

  sales  106

  Figure 19: Shift in regional market shares of the coil coating production  

  for end-user markets steel and aluminium -  2001-2004..........111

  Figure 20: Coil coating production output for end-user markets  in

  000 tonnes steel and aluminium 1999-2004 111  

  Figure 21: Indices of the coil coating production output of selected  

  Asia-Pacific countries  1999-2004.........................................112

  Figure 22: Footprints in the Asia-Pacific region: Thailand China  

  South Korea and Japan 118  

  Figure 23: AdPhos worldwide footprints a geographical dispersed  

  strategy  120

  Figure 24: Entering the Asia-Pacific region with the NIR technology:  

  AdPhos waterfall strategy 121  

  Figure 25: Serwik s territorial exclusivity: The ASEAN member countries 124  

  Figure 26: Scoring scale for the suitability of the entry mode to the current  

  objective...........................................................................131  

LIST OF TABLES VIII

LIST OF TABLES

Table 1:  The top 15 transnational companies by foreign assets  12

Table 2:  Linkages between the global corporate- and the global marketing  

  strategy  23

Table 3:  Initial systematisation of the market entry modes based on the  

  chosen criteria  45

Table 4:  Key Economic Figures of the Asia-Pacific Region  52

Table 5:  Definition of the compatibility indices  60

Table 6:  Regional correlation of manufacturing strategic alliances  

1990-1999............................................................................  77  77

Table 7:  Typical contribution in East-West partnerships in the early 1990s  80

Table 8:  Explanation scheme: Quantification of the feasibility study s  

  findings  93

Table 9:  Quantified result of the feasibility study: Feasible market entry  

  modes in the focused perspective  94

Table 10:  Overview of the worldwide number and locations of coil-coating  

  lines 2004 2005 110  

Table 11:  Selected market entry and development objectives 130  

Table 12:  Scoring model: quantified evaluation of the feasible market  

  entry modes 133  

ABSTRACT

ABSTRACT

The business world at the beginning of the 21 st century is characterised by a steadily increasing globalisation and the resulting growth of international business operations. The proceeding dynamism of the global markets creates new chances not only for multinational enterprises but also for small- and medium sized companies (SMEs) of all sizes. Particularly, the above-average economic potential of emerging markets, especially in many of the countries of the Asia-Pacific region, is amongst others the leading incentive for the in- creasing number of cross-border expansions. In this context, the decision for the appropriate market entry strategy is already one of the most difficult ones within the broad topic of international marketing, whereas the choice of target countries with tremendous cultural differences and the specifics of the indus- trial goods business respectively, lead to an even higher degree of complexity in the decision for the most suitable form of organisation for the international market entry.

The main task of this thesis was to break down the untargeted theory of the market entry modes to the evaluation of a situational context of a genuine company with the help of abstract focus areas in a step-by-step approach. Starting with a general theoretical overview to the topic area of international marketing and further the alternative market entry modes, the thesis intro- duces three focus areas with an anticipatory relation to the case study: ‘The Asia-Pacific region, small- and medium sized enterprises and the industrial goods business’ stand henceforth in the centre of the examination. The core of this thesis represents a feasibility study related to the focused perspective, in which every market entry mode is investigated in its compatibility with the three focus areas. The result of the study, in other words the identification of all feasible entry mode alternatives regarding the focus areas, establishes the basis for the implementation of the case study of the German AdPhos Plc., a medium sized company in the industrial goods business and its penetration of new markets in Asia. As the second core part of this thesis follows the quanti- fied evaluation of AdPhos’ market entry decision with means of a scoring model, whereas AdPhos’ decision for a strategic alliance is confronted with all other – after the feasibility study remaining – market entry alternatives. The hereby extracted results deliver information to the suitability of the chosen organisation form regarding the individual situation of the company and finally enable the derivation of appropriate and useful recommendations.

ZUSAMMENFASSUNG

ZUSAMMENFASSUNG

Die Wirtschaftswelt zu Beginn des 21. Jahrhunderts ist geprägt durch die ständig zunehmende Globalisierung und den daraus resultierenden Zuwachs der internationalen Geschäftstätigkeit. Die voranschreitende Dynamisierung der globalen Märkte schafft nicht nur für multinationale Konzerne, sondern auch für klein– und mittlere Unternehmen (KMUs) aller Größenordnungen neue Chancen. Besonders das überdurchschnittliche wirtschaftliche Potential heranwachsender Märkte, allen voran in vielen der Länder der Asien-Pazifik Region, schafft Anreiz für die steigende Zahl grenzüberschreitender Expansio- nen. In diesem Zusammenhang ist die Entscheidung für die geeignete Markteintrittsstrategie schon grundlegend eine der schwierigsten im internati- onalen Marketing, wobei die Auswahl von Zielländern mit erheblichen kulturel- len Unterschieden respektive die Charakteristika des Industriegütergeschäfts hierbei zu einem noch höheren Grad an Komplexität der Fragestellung nach der passenden Organisationsform für den internationalen Markteintritt führen.

Zentrale Aufgabe dieser Arbeit war es, mittels abstrahierter Fokusbereiche, die ungezielte Theorie zu den Markteintrittsformen schrittweise an die Evaluie- rung eines situativen Kontexts einer realen Unternehmung heranzuführen. Zu Beginn wird der Themenbereich des internationalen Marketings und im weite- ren Verlauf die alternativen Markteintrittsformen allgemeintheoretischen un- tersucht, um im Anschluss die Fokusbereiche mit vorgreifenden Bezug auf die Fallstudie einzuführen: „Die Asien-Pazifik Region, KMUs und das Industriegü- tergeschäft“ stehen daher fortan im Mittelpunkt der Betrachtung. Herzstück der Arbeit stellt die darauf basierende Machbarkeitsstudie, in welcher jeder Markteintrittsmodus auf die Kompatibilität mit den drei genannten Fokusbe- reichen untersucht wird, dar. Das Resultat der Studie, sprich die Eruierung aller praktikablen Eintrittsalternativen im Sinne der Fokussierung, bildet die Basis für die Implementierung der Fallstudie der Deutschen AdPhos AG, einer mittelständischen Firma im Industriegütergeschäft und deren Erschließung neuer Märkte in Asien. Den zweiten Kernteil der Arbeit bildet die quantifizierte Evaluierung der Markteintrittsentscheidung der AdPhos AG mit Hilfe eines Scoring-Modells, wobei die Wahl der AdPhos AG für eine strategische Allianz den übrigen - nach der Machbarkeitsstudie verbleibenden - Eintrittsalternati- ven gegenübergestellt wird. Die gewonnenen Ergebnisse geben Aufschluss über die Eignung der gewählten Organisationsform in Bezug auf die individu- elle Situation des Unternehmens und lassen schlussendlich die Ableitung ge- eigneter und hilfreicher Empfehlungen zu.

PART 1: GENERAL INTRODUCTION AND THEORETICAL CONTENT

1 PART 1: GENERAL INTRODUCTION AND

THEORETICAL CONTEXT

Part 1 of this thesis embraces a general introduction divided into three chapters. In Chapter I the topic of this document is introduced. In Chapter II the implemented approach, containing the definition of the research problem, the detailed content structure as well as the boundaries of the discourse, are explained. Chapter III finally provides a short overview of the company involved, for the purpose of establishing a sufficient starting basis for the implementation of the case study, followed by a brief closing of the writer’s motivation.

1.1 CHAPTER I: THE DISCUSSED TOPIC

In times of ever growing internationalisation of business activities around the globe, the flow of goods, investments and financial assets are getting more boundless than ever before. The so often cited ‘global village’ is lit- erally becoming a global marketplace. Economic globalisation has pro- ceeded substantially and in fact still takes place to an enormous degree in both the macroeconomic environment as well as on the level of the indi- vidual company. Therefore, almost every corporate sector is expanding with an international perspective – which includes the marketing opera- tions as well. For many companies, especially large scale enterprises, an international marketing perspective has already become the state-of-the- art managerial thinking with the purpose of being able to penetrate new emerging or old evolving markets with – at times - enormous potentials, such as the markets in the Asia-Pacific region. Similar to the domestic marketing theory, the international marketing process presents a complex structure which consists of a wide range of process steps and sub- activities. It is here that we find the fundamental topic of the initial mar- ket entry.

The choice of the appropriate market entry mode into an emerging and promising market is a critical key decision in the process of international marketing and is thus crucial for the success of a company in markets be- yond its domestic borders. In other words, the chosen market entry mode must ensure future sustainable competitive advantage to the company. Transnational market penetration shows increased complexity and dissimi-

PART 1: GENERAL INTRODUCTION AND THEORETICAL CONTENT

larity through geographical distances, cultural barriers and complexity of operations and therefore uncertainty and risks are much higher than usual. The accurate decision preparation is therefore all the more impor- tant for choosing the right market entry mode and thus the need for a broad knowledge basis is of paramount importance.

Just as difficult as the choice of the adequate market entry mode is the analysis and evaluation of an existing solution a company has decided on. After realising the initial market entry, multiple company-, product- and market related factors, which are directly influencing the company’s for- eign performance, can change at any time. That is to say that only the decision of the initial market entry mode is of a static character, whereas the future market penetration and its connected decisions show increased dynamics and it is therefore of fundamental importance to perform the right adaptations to an existing strategy at the right point of time. It is a fact that a minority of the smaller European ‘micro, small and medium- sized enterprises’ (SME), which are already involved in international busi- ness activities, follow a clearly defined international strategy and continu- ally analyse and evaluate their foreign mode of operations in order to be able to implement the appropriate adaptations. This thesis analysis the essential part of the market entry mode theory in the context of the inter- national marketing process. Furthermore it applies a practical example of a German SME entering one of the currently most prosperous but also culturally challenging business environments, the Asia-Pacific region. Both a sufficiently focused analysis of the possible market entry modes and the principles of the situational theory will be taken into account to ensure a case-based evaluation and resume.

The present thesis shows in particular how a focused analysis of the broad range of market entry modes can be performed and how the international strategy, based on the choice of the initial market entry mode, can be evaluated for an existing company. Moreover it should count as a guide, especially for SMEs, on how to critically review their foreign operations, in addition to finding out the necessary adaptations which need to be imple- mented.

PART 1: GENERAL INTRODUCTION AND THEORETICAL CONTENT

1.2 CHAPTER II: THE FRAMEWORK OF THE THESIS

The present thesis delivers an answer to the following research question:

‘Which market entry modes, especially into the Asia-Pacific region, are feasible and how are they evaluated for a German SME in the industrial goods business?’

With the answering of this question and the provision of the corresponding explanations, this document seeks to present a scientific contribution and leads us to the following attempt to find a consolidated answer.

1.2.1 METHODICAL APPROACH

The raised research question is divided into two main parts; concurrently reflecting the logical divide of the whole thesis. In reference to the abovementioned definition of the research attempt, two sub-questions are defined:

Sub-question 1: ‘Which market entry modes, especially for SMEs in the industrial goods business, entering the Asia-Pacific region, are feasible?’

Sub-question 2: ‘How are these market entry modes evaluated for a Ger- man SME in the industrial goods business entering the Asia-Pacific region?’

In order to answer these questions clearly and sequentially, the document is divided into six main parts, each incorporating three to four chapters dealing with individual subject areas. Parts 1 to 4 are assigned to answer sub-question 1, whereas Part 5 and Part 6 are assigned to answer sub- question 2. Each part is based on the previous one. To ensure a clear un- derstanding of the structure and methodology of this paper and to answer the research problem, an alternative listing of contents follows subse- quently. In an integrated question-answer framework each chapter is indi- vidually legitimised, as shown in following Figure 1 and 2.

PART 1: GENERAL INTRODUCTION AND THEORETICAL CONTENT

1.2.2 CONTENT STRUCTURE

PART 1: GENERAL INTRODUCTION AND THEORETICAL CONTEXT

PART 2: INTRODUCTION TO INTERNATIONAL MARKETING

PART 3: INTERNATIONAL STRATEGY - MARKET ENTRY MODES

PART 4: FEASIBILITY STUDY OF THE MARKET ENTRY MODES

Figure 1: Content structure: Theoretical analysis (Part 1-4)

PART 1: GENERAL INTRODUCTION AND THEORETICAL CONTENT

PART 5: THE ASIA-PACIFIC MARKET ENTRY OF A GERMAN SME

PART 6: OUTLOOK, EVALUATION AND RESUME

Figure 2: Content structure: Case-based evaluation (Part 5-6)

PART 1: GENERAL INTRODUCTION AND THEORETICAL CONTENT

1.2.3 THE BOUNDARIES OF THIS DISCOURSE

The primary endeavour of the following research is to analyse and evalu- ate a company’s choice for the appropriate market entry strategy into a foreign target country, rather than conducting a close up view on the en- tire topic of international marketing. Due to this chosen focus the thesis discusses neither other aspects of the international marketing process in detail, nor the so often and broadly discussed topic of the international marketing research and opportunity analysis. Nevertheless, a general and compact introduction to the overall topic of international marketing will prove necessary, as it is essential to understand the broad framework of which this thesis and its connected problem are an integral part of. Fur- thermore, a compact look at timing strategies and the country market choice will be implemented, in order to achieve the aimed target of an effectual analysis of the implemented case study as well as to ensure the referential integrity of the entire paper at hand. Above all, the decision for the most suitable market entry mode will be emphasised as the core focus throughout the entire document, with the intention to answer the given research problem to a satisfactory degree.

PART 1: GENERAL INTRODUCTION AND THEORETICAL CONTENT

1.3 CHAPTER III: INTRODUCTION TO THE CASE STUDY AND

THE WRITER’S MOTIVATION

The AdPhos Plc. The Advanced Photonics Technologies Plc., a medium- sized German SME whose headquarters are located near the city of Mu- nich, is a high-tech specialist in the use of light for industrial processes and products. The company was established in 1996 under the name of IndustrieSerVis Co., Ltd. During the following years the company experi- enced a remarkable success story including various technology break- throughs and company expansions, in addition to the establishment of new co-operations. On several occasions the company and its manage- ment have been rewarded with highly repudiated German awards for its successful start-up; including the ‘Entrepreneur of the Year 1998’ award from Ernest & Young and the SAP Plc. in co-operation with the ‘Manager Magazine’. In 2001 the company acquired and integrated the Eltosch GmbH, a renowned company whose headquarters are located in northern Germany, specialised in the field of dryer systems for printing processes. Nowadays, the AdPhos Plc. employs approximately 115 people in 6 com- panies of the group and serves a wide range of industries, from the print- ing- over the steel- and aluminium- to the recently developed business segments of the packaging- and plastics industry.

The former Industrie SerVis GmbH made its first step into the Asia-Pacific region in 1998, with the establishment of the first sales and service part- nership with a South Korean company. In 1999 the maturing firm con- ducted its first pilot projects in Malaysia and India. Over the following years, the company was able to successfully conduct further industrial projects throughout China, India and South Korea, before entering into a strategic alliance with Serwik Co., Ltd. in Bangkok, Thailand in the year 2002. The strategic alliance with Serwik has developed to AdPhos’ most important footprint in the Asia-Pacific region. In 2004, further sales and service agreements were established with partners in China and Japan and the company’s network in the Asia-Pacific region grew steadily. In 2005, The AdPhos Steel Co., Ltd. in alliance with Serwik Co., Ltd. in Bang- kok successfully conducted their biggest industrial project so far with the Australian BlueScope Steel Corporation’s in China. Today, the AdPhos Plc. is directly presented in four countries of the Asia-Pacific region, while con- ducting industrial projects from Japan, China and India, over multiple

PART 1: GENERAL INTRODUCTION AND THEORETICAL CONTENT

countries of the South-East Asia as well as Australia and New Zealand. As a German medium-sized company serving global industrial niche markets, the AdPhos Plc. embodies the typical example of a firm facing the chal- lenges of internationalisation and the difficulties of the first steps into sev- eral Asia-Pacific target countries. It is exactly this situational similarity to countless other small and medium sized companies throughout the Euro- pean and North American continent, which makes the implemented case study multiple applicable and therefore greatly useful.

It should be mentioned beforehand, that all data and information concern- ing the history and company profile of the AdPhos Plc. was collected in several interviews with Dr. Rainer Gaus, CEO of the Advanced Photonics Technologies Plc. and Dr. Kai K.O. Baer, Managing Director of the AdPhos Steel GmbH between April and June 2006 as well as from the annual re- port 2005. All data and information concerning the history and company profile of Serwik Co., Ltd. in Bangkok, Thailand was collected in several interviews with DI Wolfgang Nickl, Managing Director of Serwik Co., Ltd. between May and June 2006. The addresses and further contact data to both companies can be found under Appendix A, page 150.

The writer’s motivation. As an exchange student at the Bangkok Uni- versity International College (BUIC) and further with the first employment within a Thai logistics company in Bangkok, the writer’s interest in the Asian business environment grew steadily. The writer especially turned his eye on the way how European and North American companies conduct their businesses in the South East Asian region. Thus, it was a great chance for the writer to meet the Managing Director of Serwik Co., Ltd., AdPhos’ Technology Centre for South East Asia in Bangkok, and agreeing upon an employment, in which also this discourse at hand was establish. The writer’s main motivation to create this thesis was the fallowed oppor- tunity to pick up a practical example of a company entering the Asia- Pacific region and to, by means of a scientific and critical examination of all involved factors, broadly analyse the complex process of the market entry into several of today’s most attractive markets.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

2 PART 2: INTRODUCTION TO INTERNATIONAL

MARKETING

In Part 2 the focus is on the broad understanding of the evolution of the international marketing perspective and its connected trends towards in- ternationalisation. Further, the differences to the classical marketing defi- nition are examined as well as the process of international marketing, concurrently highlighting the focused topic of this discourse. Part 2 closes in explaining the link between international marketing and international strategy.

In times of ever growing inter-dependencies and inter-connections be- tween nation economies across the globe an increasing necessity to de- velop skills, aptitudes and fundamental knowledge, in order to stay com- petitive in international markets, is arising. Technological innovation nowadays enables information to be omnipresent on all continents around the world and thus traditional borders to marketplaces are diminishing constantly. 1 New competitors are challenging almost every kind of busi-

ness and company throughout the economic world. Additionally, old com- petitors might grow substantially through acquisitions, mergers or alli- ances as the flow of capital and investments is virtually unlimited. With the enormous change of the business world in the 21 st century the need to

adapt traditional theories to an increasingly dynamic environment conse- quently follows. Therefore the marketing theory evolved accordingly and an international marketing orientation has already become an absolutely necessity in nowadays business world. 2 International marketing today is a

critical function-spanning area, in which decisions and their linked actions decisively influence the success or non-success of a company boarding the ship of internationalisation.

1 Cp. Doole/Lowe, 2001, p. 5 f.

2 Cp. Terpstra/Sarathy, 1999, p. vii.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

2.1 CHAPTER IV: THE TREND TOWARDS

INTERNATIONALISATION

The term internationalisation can be subordinated to the term globalisa- tion, which is probably the most common term to describe the forces shaping our present world. In fact, a huge number of different definitions for the term globalisation can be found, thus a selection of three different perspectives is provided subsequently:

“It is a multi-dimensional process; it applies to the whole range of social relations – cultural, economic and political.” 3

“A set of processes leading to the integration of economic, cultural, political, and social systems across geographical boundaries.” 4

“Globalisation refers to the widening, deepening and speeding up of worldwide interconnectedness in all aspects of contemporary life.” 5

Most of the available definitions share the notion that the impacts of glob- alisation take place in multiple spheres such as economy, culture, politics and social life etc. The verb internationalise is defined as the attempt “to make something become international”. 6 Consequently, we can describe a company’s thrust into international markets as the internationalisation of its business activities. The entirety of the worldwide moves of companies into international markets can therefore be described as economic global- isation, in other words, the sum of all internationalisation activities throughout the global business world. The world economic development after World War II is earmarked by a constant ascent of international link- ages and integration between nation economies as well as cross-frontier business activities. The phenomenon of internationalisation therefore con- tains a:

macro economical dimension as well as a 3 Held/The Open University, 2004, p. 15.

4 Global Environmental Management Initiative (GEMI); URL:

http://www.hsewebdepot.org/imstool/GEMI.nsf/WEBDocs/Glossary?OpenDocument [02.03.2006].

5 Ripon College, Wisconsin/USA, 2006; URL:

http://www.ripon.edu/academics/global/CONCEPTS.HTML [02.03.2006]. 6 Cambridge Online Dictionary; URL:

http://dictionary.cambridge.org/define.asp?key=41516&dict=CALD [02.03.06].

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

micro economical (individual economic) perspective. 7

The macro economical dimension deals with the increasing economic in- terconnectedness of nation states, whereas the micro economical perspec- tive focuses on individual companies, which will be examined closer. The degree of internationalisation of companies can be verified through simple financial or non-financial ratios such as: 8

The proportion of foreign assets to total assets.

The proportion of foreign sales to total sales.

The proportion of foreign turnover/profit to total turnover/profit. The proportion of employees working in a foreign country to the total number of employees.

The proportion of production sites in foreign countries to the total number of production sites.

Should an increase of these (or similar) ratios be ascertainable within a company, an increased state of internationality is the result, meaning that the degree of internationalisation of the company is rising. 9 To provide an example for the partially advanced state of internationalisation in today’s business world, it is worth having a look at the top 15 transnational com- panies, as shown in Table 1.

7 Cp. Backhaus/Bueschken/Voeth, 2003, p. 25.

8 Cp. in the same place, 2003, p. 30.

9 Cp. Backhaus/Bueschken/Voeth, 2003, p. 31.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

Table 1: The top 15 transnational companies by foreign assets 10

Looking back into the past the current trend towards economic globalisa-

tion and the emergence of global markets for goods and services can be

attributed to four major developments, each spanning one of the last four

decades of the 20 th century: 11

1) 1960s - The movement of U.S. companies abroad: In the early

and mid 1960s, U.S. companies began their movement into over-

seas markets due to stagnating growth rates in domestic markets.

During this decade, U.S. direct investment abroad more than dou-

bled from 31 to 70 billion U.S. dollar.

2) 1970s - The Japanese Challenge: The 1970s can be described as

the growth of the Japanese challenge. In response to the major

shift of U.S. companies into world markets, Japanese companies

became the main competitors to the U.S. dominance in multiple in-

dustries by double the world exports of manufactured goods from

6.5 percent in 1960 to 13 percent in 1973.

3) 1980s – The emergence of third world multinationals: In the

following decade, multinationals from industrialising and developing

10 Source: modified adopted from Doole/Lowe, 2001, p. 215; Figure: The Economist –

‘At a location near you’, November 22 nd 1997.

11 Cp. Douglas/Craig, 1995, p. 4 f.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

countries became the third major player in the world market. With the main advantage of a better adapted business culture and tech- nology fit, these companies often began operations in host coun- tries with a comparable development to their home country. The main challenge arose from multinationals from Taiwan, South Ko- rea, Singapore, Hong Kong etc. as well as from growing economies in Latin America.

4) 1990s – The global restructuring: In the ‘90s many of the big players which started moving into global markets over the past three decades faced loosely linked international operations resulting in minor global efficiencies. Therefore the ‘90s were characterised by most of the multinational companies reshaping their worldwide operations in order to remain competitive. Another characteristic of the last decade of the 20 th century was the augmented appearance

of regional trading blocks, such as the Association of South East Asian Nations (ASEAN) or the North American Free Trade Agree- ment (NAFTA), in addition to the formal integration of markets, es- pecially the European Union. Further essential developments were the fragmentation of markets (specifically in countries of the former Soviet Union) and the emergence of new major forces in global markets, such as China or India. 12

The beginning of the 21 st century – Future tendencies: The global

business world in the upcoming decade will be distinguished by an un- precedented level and depth of worldwide interaction. The wave of merg- ers and acquisitions (M&A) is cresting peaks reached only at the turn of the century, at enormous height - and it will continue. The overall value of European companies acquired in the first three month of 2006 was almost 130 percent higher than the value in the same period in 2005; likewise applicable for the United States. 13 The SME sector will become more and

more important as a creator of wealth and employment as well. Further- more, the economies of the Asia-Pacific region have come a very long way in a much shorter time than their European and North American counter- parts and it is quite possible that the economic potential will be further released and converted in ways that will affect the business world glob-

12 Cp. Douglas/Craig, 1995, p. 6.

13 Cp. The Economist – ‚Mergers and acquisitions: Riding a wave’, April 8 th 2006, p. 16.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

ally. 14 The current overall development is still difficult to summarise, as

we stand just at the beginning of the 21 st century; but one development

can be foreseen almost with certainty – the global internationalisation of

both nation states and businesses will further proceed and entire conti-

nents will stronger grow together than ever before.

2.1.1 INTERNATIONALISATION OF SMES – KEY PLAYERS IN A GLOBAL

ECONOMY?

Not only multinational combines are involved in the process of interna-

tionalisation, so too are the so called SMEs - Micro, small and medium-

sized enterprises. In fact, SMEs make a major contribution to national

economies; for example, the European Commission hereby declares:

“Micro, small and medium-sized enterprises (SMEs) play a central role in the European economy. They are a major source of entrepreneurial skills, innovation and employment. In the enlarged European Union of

25 countries, some 23 million SMEs provide around 75 million jobs and

represent 99 percent of all enterprises.” 15

But not only in Europe is the importance of SMEs beyond doubt. In Tai-

wan, for instance, SMEs make up 98.5 percent of the total number of

companies, 75-80 percent of all employment and 47 percent of the total

economy. 16 Furthermore, in countries as diverse as Australia and South

Korea, SMEs are responsible for a significant and growing share of export

activities, which is also true in the US and Japan. 17 Many observers expect

that much of the global growth in business activities will be the result of

small, innovative and flexible enterprises, which are formed and reformed

by highly skilled people. 18 The future of SME internationalisation will be

highly influenced by a new technology environment and new ways of do-

ing business offering tremendous opportunities for innovative and ambi-

tious SMEs. Hereby, Doole and Lowe (2001) postulate:

“SMEs have always been involved in international marketing but the opportunities for international development and the expectation of them to create wealth and employment have never been greater that

14 Cp. Thompson, 2000, p. 382.

15 European Commission, The new SME definition, 2004, p. 5. Note: More detailed information to the new SME definition of the European Commission is provided under Chapter X - 3.4.2, p. 54.

16 Cp. McAuley, 2001, p. 111; taken from The Economist, 1998.

17 Cp. McAuley, 2001, p. 108.

18 Cp. McAuley, 2001, p. 130.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

they are at the beginning of the twenty-first century. It is the ability to access information and communicate instantly that has never been possible before that provides the opportunity for SMEs to exploit their inherent strengths of flexibly, adaptability and speed of response.” 19

In contrast to previous perspective, the majority of SMEs still face a con- siderable need for internationalisation. In fact, a strong leverage between the size of a company and its degree of participation in international mar- kets can be observed. The proportion between the amount of turnover and the involvement in export activities is obvious, as shown in Figure 3.

Companies with a

Figure 3: Share of companies involved in exporting based on different magnitudes 20

Another example turning out the necessity for SMEs to take the interna- tional challenge shows a study of 297 European SMEs from Italy, UK, Bel- gium, Denmark, Germany, Ireland and Sweden. It was found, that only three of the entire 297 SMEs (equalling 3 percent) reached world class standards. However, over half of the SMEs had the potential to compete internationally, based on the given growth, improvement and persever- ance. In addition, these SMEs were rated to be customer-orientated, re- sponse focused and concerned with innovation and new products with an overall high competitive edge coming from speed, responsiveness and a close relation to the customers. Hence, it appears that the time is ripe for SMEs to play a more significant role in the global marketplace. 21

19 Doole/Lowe, 2001, p. 212.

20 Source: modified adopted from Backhaus/Bueschken/Voeth, 2003, p. 32; Figure: Mueller/Schmalholz, 2003.

21 Cp. McAuley, 2001, p. 108.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

2.2 CHAPTER V: THE DEFINITION OF INTERNATIONAL

MARKETING

As the international marketing science arose from the existing (national) science, the definition is based on the conventional understanding of mar- keting. As there is still no common understanding of the marketing term, a variety of definitions in today’s marketing literature can be found. How- ever, most of the definitions share the aspect that marketing is a function spanning activity, which is supposed to align all company operations to the demand of the market in a product specific way. In addition, market- ing stands for the integrated coordination of company divisions (business area specific) such as procurement, production, sales and financing. 22 The key activities within the marketing management are thus: 23

Focusing on the needs and wants of the customers.

Identifying the best method to satisfy those needs and wants. Aligning the company operations towards the process of providing a high degree of satisfaction of those needs and wants.

Simultaneously meeting organisational objectives.

All of the above mentioned characteristics apply fully also to the interna- tional marketing process and thus raise the question as to how interna- tional marketing stands out from the basis theory. In citing Professor Steve Carter (2001) from the Chartered Institute of Marketing, a first rough idea to answer the introduced question can be imagined:

“There are a few complex things in life – and one of these is Global Marketing [Writer’s note: synonymously to ‘International Marketing’]. Change is a well-worn word, but never more apt when applied to to- day’s global markets. Change coupled with complexity is a heady com- bination requiring careful analysis, integrative action and appropriate monitoring. Planning and entering global markets or adjusting existing strategies requires up to date knowledge, special management skills and astute implementation, whatever the product or service.” 24

The main difference between international- and domestic marketing is already reflected in this citation: complexity. Most of the known definitions

22 Cp. Backhaus/Bueschken/Voeth, 2003, p. 43.

23 Cp. Doole/Lowe, 2001, p. 7.

24 Doole/Lowe, 2001, Foreword, p. xiv.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

of international marketing have in common the emphasis on transcending country borders. 25 The multi-dimensionality and complexity of many for-

eign country markets, combined with tremendous cultural differences and distinctions in ideologies of their potential customers in parts, together create an enhanced form of the marketing science. The knowledge and awareness of these complexities, and the implications they have for the international marketing management are of paramount importance for today’s marketing managers. 26 The complexity of foreign country markets

can be reflected in the so called SLEPT (Social, Legal, Economic, Political and Technological) approach, a frequently used environmental analysis model. It allows an examination of the international marketing environ- ment, as shown in Figure 4. This approach grants the summary of the critical (and to a certain degree uncontrollable) aspects of international business activities and the many fields the international marketing man- agers of the 21 st century will have to be aware of.

Figure 4: The environmental influences on international marketing (SLEPT approach) 27

A company planning to enter and penetrate markets beyond its domestic borders must consider all of these aspects precisely as they are vital to every activity in international marketing. From Figure 4, the following par- ticularities of the international view in marketing can be derived: 28

Additional information demand.

25 Cp. Backhaus/Bueschken/Voeth, 2003, p. 45.

26 Cp. Doole/Lowe, 2001, p. 9.

27 Source: modified adopted from Doole/Lowe, 2001, p. 10.

28 Cp. Backhaus/Bueschken/Voeth, 2003, p. 50 f.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

Increased corporate risk.

Substantial coordination demand.

Complexity and extended management requirements.

The coverage of new country markets creates a tremendous additional demand for information regarding the environmental factors, influencing every international marketing activity. Closely linked to the increased in- formation demand is the increase of the risk to fail in the market entry strategy, possibly resulting from a lack of appropriate information. As a matter of fact, a company often operates in different country markets which are interdependent to each other. For this reason a stern coordina- tion of all activities, in addition to a well-planned resource allocation are critical. Finally, the increased complexity results in an extended require- ment for the management. International marketing managers have there- fore a dual responsibility: 29

Foreign marketing; standing for the marketing within foreign coun- tries and

Global marketing; standing for the co-ordination of marketing in multiple markets, facing a global competition.

So far, the complexity together with the derived difficulties and the broad- ened management requirements as the key characteristics of international marketing were mentioned. The dual understanding of today’s marketing management listed above provides a lead for another distinguishing fea- ture of international marketing. Doole and Lowe (2001) postulate that:

“International marketing is defined and interpreted depending on the level of involvement of the company in the international market- place.” 30

Following this thought, another key difference of the international market- ing perspective can be identified: there are various approaches, resulting from different levels of internationalisation. A differentiation can be made between export marketing as the simplest form preceding the classical international marketing or even global marketing. In export marketing the focus lies on the marketing of goods across national borders, whereas in- ternational marketing includes marketing activities in more than one coun- 29 Cp. Terpstra/Sarathy, 1999, p. 7.

30 Doole/Lowe, 2001, p. 8.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

try. Finally, global marketing focuses on, literally, global marketing oppor- tunities by obtaining global synergies and efficiencies through the coordi- nation and combination of operations in multiple foreign countries under one strategic scope. The superior aim in global marketing is to achieve global competitive advantage. 31 In the course of this thesis, however, the

emphasis lies on the process of international marketing, which will be ex- amined closer in upcoming Chapter VI.

Finally, Terpstra and Sarathy (1999) found that international marketing:

“… consists of finding and satisfying global customer needs better than the competition, both domestic and international, and of coordinating marketing activities within the constraints of the global environ- ment.” 32

Accordingly international marketing covers the identification of global cus- tomer needs by carrying out international marketing research and the sat- isfaction of these needs by adapting the company’s products and its mar- keting mix to each individual country or country segment. Moreover inter- national operations require close monitoring of the global competition to- gether with the appropriate responses, in addition to a sophisticated coor- dination of all activities as mentioned above. Ultimately, the constraints of the global environment 33 must be recognised in order to be successful in the international arena. 34 31 Cp. Doole/Lowe, 2001, p. 8 f.

32 Terpstra/Sarathy, 1999, p. 4.

33 Cp. SLEPT approach, Figure 4, p 18.

34 Cp. in the same place, p. 4 f.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

2.3 CHAPTER VI: THE PROCESS OF INTERNATIONAL

MARKETING

So far this thesis has discussed the general trend towards internationalisa- tion and its impact on today’s business world, in addition to providing an overview of international marketing and its differences to the conventional marketing definition. Hence, it is now time to have a closer look at the process creating an international marketing strategy, in order to further narrowing down the document’s focused area.

Firms competing on the international marketplace show a common range of management skills and capabilities, which together create the basis of the international marketing process. Three fundamental issues can be dif- ferentiated: 35

1) The identification, analysis and evaluation of global opportunities.

2) The continuous establishment of strategic perspectives and the de- velopment of an international marketing strategy based on those perspectives.

3) The creation of added-values through international marketing mix strategies.

These three statements circumscribe the aims of the international market- ing process in its simplest form. Based on these elements, five consecu- tive steps can be differentiated. Together they build a simplified frame- work of the complex process. Each of these steps, shown in Figure 5, is briefly explained in the following paragraph.

In the first place stands the necessity of the broad understanding of the environmental influences on the company’s (potential) international mar- kets. All aspects of the SLEPT approach must be carefully considered and every further effort must incorporate the existing restrictions and specific parameters of the target market(s). In second place the actual strategic marketing assignment is initiated with (often fairly intensive) international marketing research following the segmentation of the target market(s). In 35 Cp. Doole/Lowe, 2001, p. 29.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

this step it is moreover critical to filter out the gained information of the research in order to be able to both identify and analyse valuable market opportunities.

Feedback and

Figure 5: The International marketing (strategy) process 36

Based on the gained market knowledge (including market characteristics such as accessibility or profitability; individual customer segments to- gether with their sizes as well as the opportunities and their potentials etc.) the development of appropriate strategies which are adapted to both the analysed environmental influences and the gained market knowledge follows subsequently. Besides, as for every kind of strategic frame work- ing, it is essential to establish the appropriate planning and control proc- esses. The outcome of this third step is the international marketing plan, adapted organisational structures and specified control processes. The decision for the most fitting market entry mode and market entry strategy respectively, follows as the fourth fundamental step. Once a foreign mar- ket has been entered, the fundamental ‘4 P’s’ 37 of the marketing science

are applied on an international level. International product management, 36 Source: modified adopted from Doole/Lowe, 2001, p. 29. 37 Note: Product-, Place- (Distribution), Price- and Promotion Management.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

the management of international distribution and logistics, the pricing for international markets and international communication and internet mar- keting are the four fundamental corner stones building the international marketing mix, which should altogether promise a high level of added- value for the customers. Finally, it is necessary to assure continuous feed- back from the final three process steps up to the initial effort of segmen- tation and marketing research to facilitate a continuous reassessment of existing and potential opportunities.

2.3.1 MARKET ENTRY STRATEGIES - THE FOCUS OF THIS THESIS

As demonstrated above, the international marketing process is a complex structure, combining multiple activities under one common guideline. However, this thesis concentrates on one specific step in the entire proc- ess: The analysis and evaluation of varying known market entry strate- gies. To clearly evince the focus area of the discourse at hand, it is worth having a second look at the already presented process graph.

Feedback and

Figure 6: The market entry strategy decision as the focus of this thesis 38

2.3.2 INTERNATIONAL MARKETING AND ITS LINK TO INTERNATIONAL

STRATEGY

To ensure a coherent link to the upcoming Part 3, the link between inter- national marketing and the international strategy of any company should be clarified. Terpstra and Sarathy (1999) hypothesise that: 38 Source: Cp. Figure 5, p. 22.

PART 2: INTERNATIONAL MARKETING – AN INTRODUCTION

“Marketing does not take place in isolation but is inextricably linked to a firm’s overall strategy. International marketing is likewise linked to its global strategy.” 39

The same perception is also valid for the international- or global level.

Thus, the same linkage between marketing and a firm’s overall strategy

can be applied on an international- or even global level. That is to say that

international marketing shows a strong linkage to a company’s overall

international and global strategy respectively and vice versa. In Table 2 a

choice of five examples of the aforementioned linkages (at this on a global

basis) are provided.

Technology Worldwide patents allow foreign marketing from a protected position; the firm does not have to fear price-based competition.

Manufacturing Multiple, geographically dispersed manufacturing sites allow the firm to effect least-cost sourcing and to cut prices in order to gain market share.

Global Logistics Developing a worldwide logistics network allows the firm to promise speedy delivery, attracting clients with just-in-time inventory systems.

Organization A decentralized or matrix organization supervised by headquarters Structure executives with extensive international line experience allows for balancing or local responsiveness and global integration.

Personnel Transfer of experienced personnel into new markets permits transfer of know-how and helps achieve standardization and expertise in implementation.

Table 2: Linkages between the global corporate- and the global marketing strategy 40

It is the aim of this thesis to follow the characteristic of the previous ex-

plained linkages - ergo this last note of Part 2 links from the introduction

of international marketing to the next main part, covering the topic inter-

national strategy. Due to the interdependence of marketing and strategy

aspects, a frequent overlapping of both topics will be obvious in the fur-

ther development of this thesis.

39 Terpstra/Sarathy, 1999, p. 154.

40 Source: modified adopted from Terpstra/Sarathy, 1999, p. 155.