nf1208: we talk about marketing exchange and we start off with the fact that 
you can trade products or services for money or some other kind of exchange so 
not all marketing is about commercial things there are for example marketing 
initiatives of various charities the marketing of various religions the 
marketing of other institutions and what happens in that case if it's a charity 
marketing to you the exchange that they are doing is that basically they're 
receiving money from you for charitable purposes what you get back in that kind 
of exchange is something different it's a feel-good factor it's feeling that 
you've supported your your nominated charity or whatever so it's not always 
just products and services for money although quite often what we're talking 
about is commercial exchange but when you look at a marketing textbook you 
quite often see a diagram that looks like that and it's got those kind 
of arrows but it almost infers that this is a one-off kind of exchange yeah 
what i've just been talking in market analysis to various people about is the 
fact that there are very few businesses where we're actually talking about 
something which can happen only once in fact i don't know if anybody's just 
been in the the last lecture has anybody think of any example of a business 
where it only needs to happen once right you haven't come up with the one that 
we we normally get sommit-, somebody's just given me the the classic which is 
funerals which is you know you sell it once and it doesn't matter if the person 
comes back to you of course the the answer to this is who's the customer you 
know the the family of of the person who died and hopefully you're not 
unfortunate enough to loove more lose more than one member of your family but i-
, but if somebody else dies in the future you've been happy with the funeral 
director you may go back to them and er 
and if not you'd go to somebody else so there's virtually no business when 
we're talking about one-off exchange almost always we're talking about dealing 
with somebody repeat business so the firms want to build up an ongoing 
relationship with you that's what all of branding is about so when we say that 
you're building up identifiable brands with a set of values that you associate 
with them and so on it's all about people being able to identify with a set of 
brand values hopefully that they will become loyal to and will go back to time 
and time again the reason for that is obviously that the the costs involved in 
communicating with somebody and persuading them to buy your product the first 
time are much higher than for repeat business so if you go back to buyer 
behaviour h-, how many of you have done buyer behaviour no oh well you don't go 
back to buyer behaviour then how many have done market analysis okay you'll 
have done some buyer 
behaviour in there you've done enough for our purposes in buyer behaviour if 
you remember you've got various types of buying decision you've got habitual 
ones you've got complex decisions in industrial buying behaviour and this is 
where a lot of the the marketing relationship stuff comes from you have complex 
new purchase decisions and you have rebuys you remember you have a straight 
rebuy and you have a modified rebuy the straight rebuy i-, is the simplest of 
all because once you'd you've got the purchasing in place you've gone through 
this process of deciding what to buy you've looked at the specifications you've 
got the purchasing in place the likelihood is that you just go through the 
process over and over again then to buy it so it becomes much simpler it 
becomes less expensive for the firm involved to communicate what the benefits 
of the product are why you should buy it and so on because you've already gone 
through that process you're just turning the handle 
on it again so the repeat part of marketing the continued exchange the 
continued purchase is actually the one where the firms start to gain back some 
of the profits some of the benefits of having you persuaded persuaded you to 
buy their product or service a one-off sale is good to create trial to get you 
interested to to make you aware of the benefits but actually doesn't deliver as 
much of the return to the firm but that's how it tends to be depicted in the in 
the marketing textbooks it looks like we're s-, talking about a one-off static 
exchange and we're not we're largely talking about relationships if you take 
that a stage further and say let's think about international marketing 
relationships what does it do for our view of the environment and of those 
other things that we were talking about last week we find that it all starts to 
look somewhat different in any marketing or 
strategy textbook you're going to find a diagram that looks something like this 
Kotler has come up with this split into macroenvironment proximate environment 
that's the the middle circle and the inside circle which is the firm and the 
channel intermediaries that's called the the micro environment Porter's done 
something similar looking at all the various stakeholders out there in the 
market who have an influence on the firm typically we use this kind of diagram 
to say those external things in the outer ring or or square or whatever it is 
political physical economic legal technological sociocultural the basis of pest 
analysis which you have you should have come across anybody looking recognizing 
at this stage yes so you you you monitor the political economic legal 
technological social changes in the en-, in the environment what influences 
there are those things create the opportunities and threats for the business so 
those external things create the 
opportunities and threats which depending on the microenvironment the firm and 
its channels and what strengths and weaknesses it has there it may or may not 
be able to exploit so it may or may not be able to capitalize on an opportunity 
depending on what the capabilities of the firm are so we start off with the 
outer ring the the the pest analysis the macro level and quite often in a 
stakeholder analysis of the firm we tend to view that as being uncontrollable 
so those are just things out there in the environment which change and which 
the firm has relatively little control over the middle level according to 
classic industrial economics Porter's type view the competitors there's some 
kind of relationship with so a firm may be reacting to what its competitors 
have done or it may be trying to pre-empt its competitors we spoke last week 
about firms going into places like Eastern Europe and we looked at Nestlé who 
were prepared to cut the prices on Nescafé so that 
they could actually get into the market faster and gain the best distribution 
channels get their brand known all of those kind of moves were done to pre-empt 
their competitors so they wanted to get the first mover advantage you talk of 
various other firms er i was talking to Rothmans Tobacco about their approach 
to Eastern Europe and they said well look we've got to accept that we're not as 
big as some of the players in this market we've got people like Philip Morris 
we've got er British American Tobacco we've got R-J Reynolds with Camel and 
Marlboro and so on er those firms are much bigger than us and so whilst they 
were going into the markets very early on being first movers trying to 
establish manufacturing joint ventures something like Rothmans much smaller was 
saying well we're interested we'd like to go into the market but we're not 
we're not leaders normally we're more cautious than that our approach is 
normally to react to what our competitors 
have done and so we're looking at what they're doing and part of what makes 
that market attractive to us part of the market research we're taking into 
account is the fact that if our competitors have found opportunities there if 
they've decided it's worth manufacturing there that almost increases its 
attractiveness to us because we add that to the information we've got about the 
market and we say it's obviously somewhere that's attractive to go because our 
larger rivals who we know are more inclined to take risks have already done it 
so it makes it attractive to us so they in a sense were reacting to the 
competitors but there's some kind of relationship there and according to Porter 
and Kotler the only thing that the firm can really control is itself is the 
firm within the firm although Kotler has actually put channels in there as well 
because he believes the relationship with the channels should be so cooperative 
that it should be in the the 
central part of it so that if you like is the traditional or the classic 
marketing strategy view of the environment and the stakeholders in it but there 
are different views which come from different origins because that view is one 
that's based on the economics perspective which says that we're operating in 
this very competitive environment and it's what we call a zero-sum environment 
how many people have have come across zero-sum before no zero-sum is basically 
the view that says you can only gain at somebody's expense so if our firm is 
going to gain an advantage in a market say we call that plus-one so firm A say 
firm A is is Nestlé we've just been talking about them and firm A decides to 
go into Poland and it gains er a first mover advantage over its competitors say 
firm B is i don't 
know Procter and Gamble or or one of its rival firms it can only do that at the 
expense of of firm B that's a zero f-, sum view because plus-one-minus-one 
equals zero so zero-sum one firm can only gain at the expense of the other the 
opposite view to that and that's zero-sum is win-win win-win says that both 
firm A and firm B can gain they can both benefit at the same time under certain 
circumstances the circumstances in which both firms could gain would be if they 
have complementary capabilities of some sort so for example in international 
marketing terms if one of the firms has got access to some kind of scarce 
resource that the other one hasn't and the scarce resource which as the 
economists call scarce resource in international marketing quite often is local 
market knowledge and information so you imagine you're going into Poland or 
you're going into China or you're going into India and it's a market 
which is not your home market you have a number of problems that you're going 
to overcome just knowing where to locate yourself knowing what the customers 
want knowing what kind of environmental issues there are that you ought to be 
taking into account what kind of threats there are for you what kind of 
opportunities exist then the firm going into the market for the first time is 
relatively unlikely for example to understand the culture to speak the language 
to have enough people who it could send out to the market to to set up its 
operation how does it go about doing market research is it going to use a local 
agency and if so which one er what kind of questions are you going to be asking 
in the market you may not even have enough information to know where to start 
if you talk to some of the firms back to Rothmans again about going into 
Eastern Europe they said when they very first started looking at Eastern Europe 
they knew that 
there was potential because basically they'd started receiving orders so they 
were being very reactive they got unsolicited orders from Poland for large 
quantities of cigarettes and they realized that those markets were actually 
amongst the few remaining attractive markets in the world for tobacco 
manufacturers because smoking is declining in in most countries but in Eastern 
Europe not only was there a lot of potential because there weren't that many 
Western brands there but peop-, there were more people smoking as time went on 
so that for them was was a major opportunity but they didn't know anything 
about it they had to even go out and buy maps to work out where the new 
boundary i mean there m-, i know that sounds crazy but we're we're talking 
about nineteen-ninety and in nineteen-ninety nineteen-eighty-nine ninety the 
geographic map of Eastern and central Europe was changing fairly rapidly in 
fact i remember that i was trying to print off a 
map of where the boundaries were and look at which markets firms were investing 
in and looking at the opportunities and i couldn't find in any graphics package 
a map which had the right borders on because most of them had got to the stage 
by about nineteen-ninety-one if you got Harvard Graphics or Freelance or 
whatever of having central Europe right so they largely had well they had 
Hungary and Poland right they quite often had Czechoslovakia which since then 
had split up into Czech and and Slovak Republics they didn't have all of former 
Soviet Union right if they had it split down at all from from Soviet Union they 
had it named Commonwealth of Independent States which it was for a brief period 
of time but they hadn't then broken it down to Ukraine Belarus and all the 
other states which had come out of of the former Soviet empire so it's very 
difficult to get any kind of accurate market information firms like Rothmans 
were looking at the factors in the 
environment looking at that macroenvironment and saying we don't really know 
where to start in fact what they did was having identi-, i mean they they did 
something quite straightforward which is to look at location of the countries 
how far east they were and say well you know if we're going to progress even 
further east which ones are the stepping stones and which ones are the ultimate 
targets and let's look at the level of opportunity versus risk in each of the 
markets and what they did was they said that in terms of how far through the 
transition to market economy they were it was clear that Czech Republic Hungary 
and Poland were in the first tier of markets which were transforming that they 
were privatizing that their inflation rates were coming down and so on that the 
further east you went if you then went into Ukraine it was a stage further 
behind and if you then went into Russia it was a stage further behind again not 
just in terms of the 
transformation process but in terms of how much risk there was that that 
process would ever take place the other side of the coin if you said that it 
got more uncertain as you went further east i think i've got a map here to show 
you show you what the market looked like so if you're going to look at a map of 
Eastern Europe they started off by saying Czech Republic Poland and Hungary on 
this side here were the the the first markets that they may wish to get into 
because they were in a sense nearer geographically because they were further 
through the transformation process to market economy the further east you got 
through Ukraine Belarus and into we we've got it split here into European 
Russia and Asian Russia because there's some parts of Russia that actually fall 
in Europe there are some parts like Kazakhstan Azerbaijan which formally form 
into Asia it's another complication 
it was getting less certain but what's the other obvious thing you could say 
about those countries just looking at that map in terms of the opportuni-, 
opportunity for a consumer firm like a tobacco firm so the risks go up as you 
get further east what about the size of the markets getting smaller getting 
bigger 
sm1209: bigger 
nf1208: bigger a lot bigger massively much bigger so when you start off saying 
that as a gateway if you're trying to get experience into Eastern Europe you'd 
start off looking at Hungary and Czechoslovakia which were at the time the most 
advanced they've got a a population of something like ten-million each Poland 
with a population of i think thirty-three-million was getting more interesting 
for the consumer goods firms and for the tobacco firms because we're talking 
about how many people out of each of those markets would be able to afford 
their brands anyhow so we're only talking about a proportion of the market 
Ukraine i think fifty-six 
fifty-seven-million if i if i remember rightly Russia three-billion-plus so a 
lot more so for all the consumer good firms it was Russia that was the eventual 
target that's where they wanted to be but the level of uncertainty was higher 
so what they wanted to do was to gain some experience in the markets that were 
nearer at hand which were further through the process and use that to get into 
the Ukrainian market and then into the Russian market later under this zero-sum 
view of the world assessing the attractiveness of those markets was going to be 
about looking at what was happening politically so we've said that the pest 
analysis they'd be saying er in those cases very high political risk so is this 
transformation to market economy going to continue or not i mean it looked very 
likely at various stages that the the the communists might get back into 
Russia and still looks possible that that they may do so at one point i'm 
trying to remember the sequence of years now there was a leftist government 
voted back into Poland so whilst Poland had been going through the the process 
very well they actually voted in a government who looked like they were going 
back more towards communism so there were some question mark against how far 
through the process Poland were going in d-, under physical you'd be looking at 
things like we've said there the geography of it er where are the main centres 
of population if you were a consumer goods firm are you going to be aining only 
for the cities or are you going to en-, aim for one region of somewhere like 
Russia i mean trying to get distribution of all of Russia at once is going to 
be a major task probably you need to start off with some of the main centres of 
population unless you can get things listed under the state distribution system 
where 
they will then take control of getting it all out to the market because if 
you're trying to do it physically that's a major thing economic risks threats 
that we've we've mentioned are for example the inflation rates hyperinflation 
Ukraine in nineteen-ninety-three to nineteen-ninety-four had an inflation rate 
of seven-thousand-eight-hundred per cent per annum which meant if you were 
dealing in a local economy you had to change the prices of your products from 
one day to the next which also meant that the value of of wages for people in 
that market were going down in terms of what it actually meant in real terms to 
the point where a week's wages wouldn't buy you a loaf of bread it certainly 
wouldn't buy you sort of Western coffee brands or or packets of Western 
cigarettes legally the laws were changing so rapidly so frequently that they 
didn't actually formally put out notices o-, to businesses any more they just 
published the new decreases they called them in in the 
n-, the newspapers and you just had to monitor what was happening in the press 
oh the law on VAT has changed again today the law on on repatriating profits 
has changed again today we're no longer allowed to export agricultural produce 
one of the earliest entrants into Ukraine was I-C-I because of its interest in 
agrochemicals and it had been very proactive in setting up a joint venture with 
local pe-, Ukraine is very strong on agriculture it was the centre of 
agricultural production for most of the Soviet Union because it's very fertile 
er firms like I-C-I had been in fast thinking well agrochemicals and and and 
Ukraine have got to go together and then the law changed to prevent them from 
exporting any of the produce out of Ukraine which really reduced the 
attractiveness of the market but they'd already invested technologically we've 
talked about that v-, very poor development or or expenditure in infrastructure 
over a period of time meant significant lags but 
those are being caught up very fast because the knowledge is there it was just 
the capital that wasn't socioculturally very ethnically split in a lot of those 
markets hence some of the problems we've seen with ethnic conflicts once the 
process of of taking away totalitarian control and breaking up to smaller units 
has has started it's sort of tempting for each subgroup w-, and each religious 
group to say well actually we don't feel that we're even and this is what 
happened to Czechoslovakia we don't even feel that we're necessarily one 
country maybe we feel that we're a Czech republic and a Slovakian republic 
separately now in that case it was done without any major conflicts but in 
other markets you say well if you're assessing opportunities and threats has it 
all finished are we at the end point or are we still somewhere in the process 
look at what's happening now with with the Kosovan rebels and and so on and 
Kosovo saying it's separate to Serbia 
and you've got to say that if you're looking at opportunities and threats 
socioculturally there are still quite a lot of issues unresolved in that region 
so the classic view would say that's a stakeholder analysis and you split it 
down into opportunities and threats and say do we or don't we go into that 
market do we want to be in there before our competitors are we prepared to wait 
and see what they do incidentally when we said reacting to your competitors 
going into a market and taking into account the fact that they've got into the 
market and it's obviously viewed as attractive could be part of your market 
research and it also has a name in economic theory so for anybody who wants to 
trace this back that's a classic case of oligopolistic reaction theory i know 
it sounds good you know monopoly is is when you have er it's a game yes 
[laughter] but it's also when you have one firm who dominates a market well 
oligopoly is when there's a few strong firms who dopera-, 
dominate a market so in the food industry for example you've got Unilever 
Procter and Gamble Nestlé in er computing you would have i don't know 
sm1210: 
nf1208: certainly in the ninete-, late nineteen-eighties they've had I-C-I I-C-
L Digital wor-, so you'd have a few strong players in virtually all of the 
mature markets that you want to think about there are some dominant players and 
all of those firms in addition to looking at the opportunities and and threats 
in the market are also looking at each other and so when we say that they're 
they're likely to react you know one firm has gone into a market that makes it 
attractive but it'll also be saying what happens if we don't that's back to one 
of the questions we posed last week what happens with the then big six 
accounting firms now big four if you don't enter the market when everybody else 
does or is it the big four big five 'cause Price Waterhouse Coopers have become 
one 
now that maybe your customers in that market will start trading with somebody 
else maybe if your brand's not in the market you won't build up share in that 
in that country an oligopolistic reaction theory says once the market leader 
once the first firm in any given industry sector with a few strong players in 
has gone in into the market most of the others are likely to follow in very 
quickly so there's likely to be one person one firm who enter fast and then the 
rest come in not long afterwards so there is definitely a clustering effect 
that's happening in all of the markets the different view of all of this the 
win-win view says maybe it's not just about reacting to or monitoring what's 
happening in that outer environment maybe firms can actually strike up 
relationships relationships with their channels with their competitors with 
their publics their stakeholders political relationships legal relationships so 
they can have relationships all around 
that diagram that's why there's an arrow drawn on it because i've i've 
demonstrated this before with the same slide that you could for example and 
this is based on sociological roots not economic roots say that it's not as 
hard and fast as that according to this diagram there's a very firm border a 
solid border round the firm but accord-, according to some sociological 
theories the border round the firm isn't a very definite thing it's a fuzzy 
thing there's a soft boundary between the firm so that people within the firm 
the firm's made up with lots of different people who might have lots of 
different views or lots of different interests that they will strike up 
different relationships so for example you've got somebody in your warehouse 
you've got somebody in your marketing department you've got somebody in your 
production facility who may have very frequent contact with their 
opposite numbers and one of your customers or one of your channel 
intermediaries they f-, then formed relationships which exist across the 
boundary of the firm it might not just be one relationship it could be a whole 
lot of relationships which exist there and at that point it becomes very 
difficult to say where the actual boundary the ou-, the outer rim of the firm 
is what is it that you therefore control according to this diagram you only 
control the firm so what is it you actually control and what is outside 
external to the firm what we're saying is or what the normal view is that you 
only control the ac-, the extent of your resources Pfeffer and Salancik 
nineteen-seventy-eight if you want to go back to it that you have control over 
the resources of the firm but very little control outside of that but you may 
have relationships outside of that not control but relationships relationships 
with your channel i've just been talking today to to the market analysis groups 
about having cooperative relationships with your channels cooperation in 
relationships is one of the key themes of industrial marketing it's one of the 
key themes of services marketing it's one of the key themes of various parts of 
strategy literature so when we talked about win-win there win-win has become 
the major become the major focus for certain areas of marketing in recent years 
relationship marketing industrial marketing services marketing and all of the 
joint ventures strategic alliances literature say that it's not necessarily 
zero-sum you don't necessarily have to gain something at somebody's expense you 
may both be able to cooperate together some some people call it collaborate to 
actually gain access to things that the other player doesn't have so for 
example the growth of strategic alliances we 
pointed to at the end of last week in international markets largely seems to be 
about the fact that when firms go into these uncertain mega markets that they 
need to get access to all of that local knowledge people who speak the language 
people who know how it works people who can help them to understand the market 
and that is a scarce resource so if you look at it from the side of the 
partners in that kind of relationship you're finding that the local firm in the 
market is getting well what are they getting if you've got a Western investing 
firm who is coming into the market what is the local partner likely to gain 
from them assuming they're not operating that internationally themselves 
sm1211: the knowledge and experience 
nf1208: yeah they're going to gain the knowledge of the partner of how to 
operate 
internationally which will benefit them long term if that's their ambition what 
about resources 
sf1212: get er technology is that 
nf1208: yes yes so so they may have i don't know superior production or 
superior technologies in some way superior research and development capability 
anything else 
sm1213: financing 
nf1208: yeah that's going to be one of the major ones because quite often the 
ability to expand internationally is constrained by not having the money 
upfront to be able to do it so if you've got a partner who comes in who's got 
money then that's opens up your opportunities anything else 
sm1214: reputation 
nf1208: yes so you can you could gain strong brands which may help you in the 
market what about the side of the investing firm the firm who's going into the 
market we've mentioned language 
cultural things what else might they gain by linking up with a local partner 
sf1215: distribution abroad 
nf1208: yes so we we said that the the main problem may be distribution but if 
the local partner already knows that or already has that established certainly 
going to cut down the the time that it takes you get into get into the market 
may improve your effectiveness anything else things like workforce so they may 
have a set of production facilities already and people who work there and an 
understanding of what the H-R policies are in the market and whether or not 
those are and we we talked about technology and brand reputation in there maybe 
you may need to change some of those things a bit to make sure that you're 
working to the level that you want to to protect your brand reputation maybe 
not maybe it's ahead of of where you are er but already those 
facilities exist and that's likely to cut down the time of getting into the 
market so we've sort of got our head around interorganizational relationships 
as we call them cooperation between two firms who maybe otherwise would be 
competing but who have complementary capabilities and therefore can work 
together as i say there's a lot of joint ventures alliances literature around 
that area and one of the best articles if you want something to to read in that 
area is Gary Hamel er Hamel Prahalad and Doz nineteen-eighty-nine it's in 
Harvard Business Review i think it's on your reading list and it's called 
Collaborate with Your Competitors and Win and it's all about in circumstances 
where two firms have complementary capabilities then they could work together 
fairly productively and you can think of all kinds of examples where that might 
happen you've got a small firm with technological ideas but no money and a 
larger investing firm may link up with them to get the 
ideas er and put money in in return obviously all kinds of issues but there are 
complementary capabilities we've talked about channel intermediaries and we've 
talked about being cooperative with your intermediaries it's in both your best 
interests to get things effectively to the market to sell them effectively to 
er understand each other's products and to work together well industrial 
marketing works along similar lines by saying well let well let's go back those 
of you who've done market analysis what are the characteristics of industrial 
buyers compared to consumer ones 
sm1216: 
sf1217: 
nf1208: bigger sorry 
sf1217: more than one decision maker 
nf1208: yeah more than one decision maker larger how many of them 
sm1218: fewer 
nf1208: so fewer customers likely if you're talking about final consumers 
you're talking 
about a very large number of customers industrial you tend to be talking about 
fewer you tend to be talking about more professional in that they might often 
go through a a formal process of specifications and so on as you say more 
people involved in the decision making unit er quite often more stages involved 
in the process therefore it's another one of the markets where we actually 
stress the benefits of long term relationships and we've long said that you 
could work together quite closely with your industrial customers and develop 
cooperative relationships i also mentioned relationship marketing how many 
people have come across relationship marketing no it's one of the latest sort 
of themes and and and topics that's coming out of the the marketing research 
and also very much er in interest of of firms because until recently the only 
way in which you could have relationships that were that close were with for 
example channels or with 
industrial customers where there weren't many of them because the amount of 
time and the amount of contact it took meant that it wasn't possible to do that 
for example with the consumer market because there were just too many customers 
but advances in technology database marketing for example knowing more about 
your customers through loyalty schemes knowing who they are where they are what 
their interests are has opened up a whole set of possibilities in terms of 
relationships which didn't previously exist so relationship marketing means 
that those benefits of cooperation and building up long term loyalty have 
actually transferred across from industrial markets and channels to consumer 
markets via technology and the roots of relationship marketing are also in 
services marketing which i mentioned because services marketing if you remember 
the fact that services tend to be well okay that's er that's another blast from 
the past characteristics of services 
marketing compared to products services are 
sm1219: you can't store them 
nf1208: you can't store them 
sm1219: intangible 
nf1208: intangible yeah what were the other two [laugh] 
sm1219: er er 
nf1208: heterogeneous yeah 
sm1219: 
nf1208: var-, variable 
sm1219: 
nf1208: that's right that's that's that's the key one really so the [sniff] 
we've got the fact that they're variable so depending on whether the waiter in 
your restaurant has had a bad day or not m-, the service may be different we've 
got er perishable if you don't use your service now if you don't sell a seat on 
your airline today you can't keep it in your warehouse and sell it next week 
it's a one-off opportunity and it may be gone that's why you get variable 
pricing of services 
we've got er inseparable and inseparable is the one that we're actually trying 
to get to here inseparable is the fact that the service deliverer is the person 
who you're going to come into contact with quite often so you can't sort of 
separate out the good and sell it down through a channel the service is 
delivered face to face quite often so what your perception of the service is in 
a restaurant is going to be very much down to er the quality of the waiters 
waiter or waitresses in that restaurant that becomes relevant when you talk 
about relationship marketing because a lot of this relationship quality is 
about delivering value delivering value in services is going to be sort of 
quite challenging because it is so variable because it is face to face and 
you've got to come up with ways of delivering the best quality in that 
relationship in order to develop it long term so the sorts of issues that come 
out there are well okay er how do you build up long-standing 
relationships do you have to prioritize some parts of the service offer if you 
can't do everything well do firms necessarily want all of the services or do 
they want to opt into some things or others or do they want to pay for the 
whole lot so you get into variable service offers a-, and all kinds of issues 
around that 
nf1208: the final demonstration of win-win or another demonstration of win-win 
that we're talking about today is international marketing so we've had 
international marketing having i'll come back to explain some of the issues in 
here in a moment but let's just go through the slide we've had the 
interorganizational network we've had relationships with other organizations so 
joint ventures and strategic alliances getting into markets links with other 
businesses and so for example we've talked about business to 
business services so the accounting firms and we've talked about firms going 
into Eastern Europe and saying that some of the multinational organizations who 
went in had very strong links to their accounting firms their business 
suppliers largely because they were so uncertain about what was happening 
legally and what else was happening in the market interorganizational network 
could be other international firms therefore it could be firms in the local 
market so local partners and also from that Porter Kotler diagram we just saw 
it could be with other stakeholders it doesn't need to be with your competitors 
it could be with your suppliers or it could be with your channel intermediaries 
it could be with upstream or downstream firms but relationships between 
organizations from the sociology literature we've just talked about there we 
have what you call the intra organizational 
network so within the organization the last one was between organizations this 
is within and if we've said that the organization is is comprised of a lot of 
people who may have relationships across the borders of it may have 
relationships within the boundaries of the firm you're saying that the firm's 
not just a black box with a firm boundary the firm is made up of lots of people 
with lots of different interests some with ability to communicate well with 
your their counterparts in other organizations some who for whatever reason may 
not match back to industrial marketing again in terms of their personality 
their background their characteristics their experience and so on again 
applying the intraorganizational relationship aspect to it to the Eastern 
European example we had there intraorganizationally within the organization the 
type of relationships that have become important or the type of people who have 
become important are for 
example the diaspora diaspora for for those who haven't come across the word 
are the displaced people so those people who had actually moved out of the 
Eastern European region over the past however many years of its history where 
it that they felt that it's not a a a good place to be are now getting 
opportunities to return there because there's demand of course for people who 
speak various Eastern European languages various Eastern European languages 
which had been in the minority so if the Soviet Union said everybody should 
speak Russian therefore there wasn't a great deal of of demand for example for 
Ukrainian or Polish or whatever but there is now that they're separate markets 
because part of the sociocultural opportunity part of the sociocultural 
difficulty if you like for firms is that those markets are saying you want to 
do business with us speak to us in our language we don't want you to speak 
Russian we want you to speak Polish Serbo-Croat Ukrainian and 
however many other different variants of languages there are within the region 
which are a lot so the diaspora are fulfilling quite an important role 
intraorganizationally and they are forming relationships across the soft 
boundaries of the firms into the networks in those markets because they speak 
the right languages there's other Eastern and central European subsidiaries of 
the firms for example so when we spoke last week of firms looking at east and 
central Europe and saying which of those markets are the most attractive how do 
we go in do we enter lots of the countries rapidly or do we gradually build up 
our expertise in the region you're finding for example that i'll come back to 
this slide in a moment you're finding for example that firms typically this is 
one of the the big six accounting firms in fact it's Arthur Andersen and Arthur 
Andersen were sorry it's not Arthur Andersen it's Ernst and Young 
Ernst and Young were looking at the Eastern European region and in nineteen-
eighty-nine had entered Hungary by nineteen-ninety they'd entered these grees-, 
c-, green regions so Czech and Slovak Republic Poland and European Russia by 
nineteen-ninety-one they were in virtually all of the rest of the region so 
actually their their process of entry into the region was very fast what that 
means is that if you're trying to gain knowledge or understanding of the region 
you've got some subsidiaries in some countries who are gaining the knowledge on 
a day to day basis when you come to make a decision about when you invest or 
whether to invest in the next countries in line you can use the information 
that you're gathering out of your own other subsidiaries within the region 
because basically virtually no firms had relevant up to date marketing 
information about east and central Europe because anybody who did had it under 
the Soviet Union and is as as that system 
broke down the languages may not apply the state distribution didn't apply as 
one of the firms said to me think it was I-C-L said it was difficult to 
understand the rules of the former Soviet Union but once you understood them 
and you knew who to deal with and you knew that you went via Moscow centrally 
and and they took it from there then it was understandable but once that broke 
down it was very difficult to know where to go next and all of the firms were 
suffering from similar problems none of them had much relevant information 
prior to nineteen-eighty-nine and Soviet Union prior to nineteen-ninety-one and 
so all of them at this point were were confronting the same sets of issues so 
if you go back to our slide again so that intraorganizationally diaspora are 
important other east and central European subsidiaries may be important the 
other thing that may be important is the role and 
distance of headquarters so one of the other types of relationships that's 
significant is how much power exists within those subsidiaries how much control 
they can make over the decisions so can they decide there is business potential 
here we want to invest in the market or do they have to go back to headquarters 
to get that decision signed off and at what point do they have to do so do they 
have a certain amount of money they can spend and then have to go back or do 
they have to check everything do they have to promote and and concentrate on a 
a set of blan-, brands globally or do they have reasonable local autonomy to do 
what's appropriate for the market we mentioned Johnson Wax last week who were 
early entrants into east and central Europe and they were reverting to product 
formulations that they hadn't used in in other markets but they still had they 
still had patents on but they weren't using things like liquid starch now that 
would be something that 
was very specific to a country or a number of countries within the region and 
the question is whether they can come up with that idea monitoring the 
environment or whether they need to go back and get that checked and who by and 
whether it's felt that that's something that they want to be associated or with 
or not in some cases there can be different views depending on where you are if 
you're in the market even though it looks very uncertain because if you look at 
a a sort of assessment of the market you look at the facts and figures and you 
say seven-thousand-eight-hundred per cent inflation don't know how quickly 
they're getting through the transformation process seem to be changing the laws 
every day er stopping us from re-exporting products in certain categories what 
if ours is next VAT rates going from nought per cent to two-hundred per cent 
back to n-, to you know a hundred per cent next week maybe this isn't a market 
we ought to be operating 
in we could lose a lot of money we could damage our brand reputation what if we 
have to withdraw from the market that quite often is a view that's taken by the 
headquarters because at headquarters they're talking about brands and strategic 
things quite often the local market once people get themselves there they get 
established into the networks and they begin to understand how things happen 
particularly if they have a local partner who can gain them access and the 
risks start to look less to the people who are actually on the ground who 
understand the market particularly those who have been in other subsidiaries of 
the firm within the region and are gaining knowledge so you can find that there 
are decisions whether something is an opportunity and whether to capitalize on 
it which are viewed very differently by the headquarters and the subsidiary and 
a classic example of one of the telecommunications firms where he'd been out 
prospecting the market for two three years bearing in mind the person 
prospecting had been round Azerbaijan Kazakhstan various parts of Russia 
Ukraine and was assessing opportunities and was saying ah i think there's a a 
great opportunity here for us it will cost i don't know what the amount of 
money was but a relatively small amount of money i think he was saying 
something like fifteen-million to invest in this opportunity then when he went 
back to the organization to er to headquarters to get this sanctioned they 
looked at the market and said forget it there's there's too much corruption we 
don't want to be associated with some of the things that are happening i hear 
that firms are paying bribes er you know we're we're not sure we want to 
operate in the market the potential damage to our brands could be too great we 
think in the short term that we should stop looking at that market we were 
interested longer term in looking at Russia anyhow maybe the 
uncertainty levels in Russia are no higher so you should come out of Ukraine it 
was and go directly to Russia and look at the potential there because really in 
terms of uncertainty of what's happening in terms of bribery it can't be much 
worse and he was actually very disenchanted by that because he'd been l-, asked 
to look at what was happening in the market and he'd come up with this idea 
that he really thought would work so there was actually in that case quite a 
lot of distance between the headquarters and the subsidiary okay we've also 
talked about the pest analysis but we've talked about it as a set of 
unconnected forces in the environment which you monitor but you can't control 
so the next stage of international marketing relationships is work that says 
maybe they're not uncontrollable maybe you can have some kind of relationship 
with those stakeholders as well that influences what 
happens to your firm influences your success some work by Philip Kotler er 
called Mega Marketing and i think the article is nineteen-eighty-three and it's 
also in Harvard Business Review in addition to the traditional four Ps he 
identifies another two that he believes people should take into account those 
are politics and people so if you look i can't spell politics people has also 
been referred to variously as public relations because what he's actually 
saying is that in some markets and he he applies mega marketing to what he 
calls blocked markets blocked markets are those which have not been opened to 
the firm previously for various reasons either because of their political 
systems or because of the level of income of the people in the market that they 
have not been places that it was easy to get into particularly blocked markets 
are ones where there has for 
whatever reason been a government block on investing firms or on foreign 
products and therefore he believes that politics so lobbying appropriate people 
in the governments of the countries and working out how you could deal how you 
might get access what the the barriers are becomes quite important now i know 
it isn't a particularly good example in in le-, in terms of its level of 
success but a few years back you may remember that there was various American 
trade delegations went over to Japan to talk about er some of the barriers that 
they believed were in place by MITI which was stopping American and other 
products from getting into the Japanese market claiming that this was sort of 
unfortunate because Japanese products were actually coming into other markets 
quite successfully but they always felt that there were barriers i say it's an 
unfortunate example because we had people like Chrysler and General Motors 
and so on complaining about not getting access and a large part of why they 
weren't getting access was nothing to do with barriers that were put up it was 
to do with the quality of the products and whether they were seen to be 
offering benefits in the market anyhow but that kind of initiative trade 
delegations and one government having contact with and lobbying another 
government or firms lobbying their own government suggesting that they ought to 
take certain actions are becoming an increasing feature of international 
marketing think of one of the current examples membership of the the single 
European currency and some of the U-K businesses i've spoken to feel very 
strongly that the U-K should be in and that there can only be disadvantages to 
them from not being in that being that if Europe is going to be a region 
trading in this and the U-K is still going to be subject to exchange rates so 
it therefore is taking more risk on exchange rates its business is 
going to be complicated because it's going to have to start trea-, trading in 
euros anyhow because everybody else within Europe is going to be it's going to 
have the pressure to do that so it's going to be operating two systems instead 
of one system you know virtually everybody i speak to in a U-K business says 
well what's the downside explain to me again why we didn't want to be in this 
er well some kind of nationalism and and we want to still have pounds and 
things we're a bit concerned whether the Queen's head's on there or not but i 
mean economically business sense the euro think i'm getting into my er holding 
forth on the euro the euro makes a lot of sense and a lot of businesses are 
concerned at what will happen as a consequence of not being into the euro early 
therefore are lobbying the British government saying you know can you tell us 
what policy is when we're going to get into this er what the objections are 
similarly with the the GATT the General 
Agreement on Trade and Tariff the last round in Uruguay there was a big letter 
to the press from the the C-E-Os of i think it was the the top hundred er 
multinational firms saying can we press for a favourable outcome to getting rid 
of some of the trades and tariffs for those who who weren't aware of this the 
the General Agreement on Trades and Tariffs is to allow free trade between 
nations and at the seventh round the Uruguay round was the first time that 
services were included as well as products and there were certain categories 
which were real stumbling blocks agriculture always has been 'cause every 
country is protective of its agriculture and its rights to export and to 
protect people from coming into its market funnily enough films became one of 
the major ones there was a big concern about in the film industry about having 
free trade and particularly some of the European countries like France being 
concerned that Hollywood having free access into 
their market and it looked like the whole thing was going to come apart but a 
lot of the the C-E-Os were very concerned that this shouldn't happen so they 
started lobbying their governments collectively and if you think of what all 
the different nationalities of the top hundred multinational firms that's a lot 
of governments to try and encourage them to press for a favourable outcome to 
the GATT round which was favourable in the end if we now go back to our pest 
analysis slide that we had that explains the arrow between political and firm 
concerns because we're not then saying well politics is just something that's 
out there and we monitor it we're saying that under certain circumstances firms 
may actually be able to have some kind of influence some kind of relationship 
with political stakeholders they can lobby they can represent a set of 
interests they they can 
lobby their governments who have relationships with other governments likewise 
economically some players are big enough to have an influence on economic 
policy likewise technologically you've got some firms like Microsoft who are 
clearly at the forefront of what's happening in technology and standards are 
being set around them so maybe it's not this uncontrollable set of factors in 
the environment maybe there are even patterns of relationships which exist not 
just inter and intraorganizationally but in the macroenvironment as well and so 
the top box on this slide represents that view and says let's understand that 
the host market country that you're going into's network of relationships too 
and so basically it's an application of pest analysis to a specific market and 
say what type of relationships or what issues in relationships in the 
macroenvironment will be significant talking 
about Eastern Europe again because that's just happens to be the example i've 
applied it to what kind of issues would be important it would be very important 
that the relationships are turbulent so if you were trying to work out who 
politically you ought to form relationships with in Ukraine part of the problem 
would be that it's changing all the time because every time the economic policy 
doesn't work they elect somebody different or it's very difficult to know who's 
the figurehead and who really controls the power so it'll be turbulent it'll 
also be turbulent if you're trying to work out which other firms in that market 
you ought to collaborate with because sometimes the scarce resources the 
knowledge that you wish to get out of your intraorganizational par-, 
interorganizational partners may not be as valuable as you would like it to be 
so if you're going in because you think they understand the market if the whole 
system is is falling 
apart and it's all turbulent they may not understand it much better than you do 
and that's been one of the classic problems firms going in thinking well the 
Ukrainian local partner will understand what's happening Ukrainian local 
partners didn't necessarily know who their customers were sounds hard to 
explain but i'll just explain a little further why in a free market exchange 
and in a marketing channel kind of relationship you have a producer you have a 
customer you may have intermediaries in the middle as we've said and the 
government in a pest analysis has been shown to be sort of somewhere in that 
outer rim it's somewhere in the pest analysis it's an uncontrollable variable 
now what we're saying is there may be some possibility of having a two-way 
relationship so there may be some ability to lobby that government so we've got 
a dotted arrow there we've said 
yes maybe there is a relationship it's not a direct one like you have with your 
customers but there's some kind of relationship which exists but under the 
centrally planned economies that we were talking about in this example the 
government played a very controlling role in the previous system the government 
had direct relationships both with the producer and with the customer they 
dictated what should be made in what quantity where it was going to go what the 
firms did was produce it to schedule largely they sounds good doesn't it they 
er [laughter] it's the heating system er high-tech the government and the 
producer had direct relationships and the customer who got this all through a 
state system so if it was food stores they were called gastronome and they all 
stocked exactly the same things in the same location for the same price so the 
relationship between the producer and the customer wasn't even necessarily a 
direct one the firms just produced it to schedule it was picked up on lorries 
taken away delivered to the state outlets and there may not have been in fact 
there quite often wasn't any direct contact between those two at all