Chapter 6 Global Information Systems and Market Research SUMMARY A. Information is one of the most basic ingredients of a successful marketing strategy. A company's management information system (MIS) and intranet provides decision makers with a continuous flow of information. Information technology is profoundly affecting global marketing activities by allowing managers to access and manipulate data to assist in decision-making. Electronic data interchange (EDI), electronic point of sale data (EPOS), efficient consumer response (ECR), customer relationship management (CRM), and data warehouses are some of the new tools and techniques available. The global marketer must scan the world for information about opportunities and threats and make information available via a management information system B. Formal market research – the project-specific, systematic gathering of data-is often required before marketers make key decisions. Global market research links customers and marketers through information gathered on a global scale. The research process begins when marketers define the problem and set research objectives; this step may entail assessing whether a particular market should be classified as latent or incipient. A research plan specifies the relative amounts of qualitative and quantitative information desired. Information is collected using either primary or secondary data sources. In today’s wired world, the Internet has taken its place alongside more traditional channels as an important secondary information source. In some instances, the cost of collecting primary data may outweigh the potential benefits. Secondary sources are especially useful for researching a market that is too small to justify a large commitment of time and money. C. If collection of primary data can be justified on a cost-benefit basis, research can be conducted via survey research, personal interviews, consumer panels, observation, and focus groups. Before collecting data, researchers must determine whether a probability sample is required. In global marketing, careful attention must be paid to issues such as eliminating cultural bias in research, accurately translating surveys, and ensuring data comparability in different markets. A number of techniques are available for analyzing survey data, including factor analysis, cluster analysis, multidimensional scaling (MDS), and conjoint analysis. Research findings and recommendations must be presented clearly. A final issue is how much control headquarters will have over research and the overall management of the organization's information system. To ensure comparability of data, the researcher should utilize both emic and etic approaches. LEARNING OBJECTIVES 1 Discuss the role of information technology in a global company’s decision-making processes 2 Understand the importance of direct perception in the global marketing research process 3 Explain some of the ways global marketers adapt the individual steps in the traditional market research process 4 Compare the way a multinational firm organizes the marketing research effort with the way a global or transnational firm approaches the organizing issue 5 Explain how information’s role as a strategic asset affects the structure of global corporations DISCUSSION QUESTIONS 6-4. Explain how information technology puts powerful tools in the hands of global marketers. Answer: Electronic data interchange (EDI), electronic point of sale (EPOS), efficient consumer response, and data warehouses are some of the new tools and techniques available. Speed, innovation, and efficiency are some of the imperatives driving global marketing today. The gains from responding to these imperatives are clearly seen in Wal-Mart’s success in the retailing industry. 6-5. Assume that you have been asked by the president of your organization to devise a systematic approach to scanning. The president does not want to be surprised by major market or competitive developments. What would you recommend? Answer: As described in the chapter, a systematic approach would begin with an audit of reading activity. Presumably, many executives would spend some time with The Wall Street Journal (or the Journal’s Asian or European editions) and, if appropriate, the Financial Times, as well as specific industry or trade publications. Beyond these “basics,” an audit should reveal whether there is excessive overlap and duplication and whether there are coverage gaps. Responsibility for a wide range of reading material can be spread among several people as long as a mechanism for disseminating the information is available. Since 1995, a wealth of company, industry, product, and country information has become available on the Internet. The audit should determine who is engaged in regular viewing on the Net and track relevant new websites as they are developed and uploaded. 6-6. Outline the basic steps of the market research process. Answer: The process of collecting data and converting it into useful information includes basic 8 steps: 1. information requirement, 2. problem definition, 3. choosing unit of analysis, 4. examining data availability, 5. assessing the value of research, 6. research design, 7. data analysis, and 8. presenting the research findings. Step 1: Identify the Information Requirement The first two questions a marketer should ask are: • “What information do I need?” • “Why do I need this information?” Step 2: Problem Definition A well-defined problem is truly a half-solved problem. The tendency is to not spend adequate time on problem definition, with the result being a defined problem that is to vague to solve. Step 3: Choose Unit of Analysis The unit of analysis may be a single country; it may be a region such as Europe or South America, or it may be global. Step 4: Examine Data Availability Secondary data are data that were not gathered for the specific project at hand. Personal files, company or public libraries, online databases, government census records, and trade associations are all potential sources of secondary data. Data from these sources already exist. However, it is cheaper than primary data and should always be examined first. Step 5: Assess Value of Research Research requires investment of both money and managerial time, and it is necessary to perform a cost-benefit analysis before proceeding further. Step 6: Research Design Primary data are gathered through original research pertaining to a specific problem when data are not available through published statistics or studies. Points to keep in mind: • Use multiple indicators rather than a single measure. • Individual companies should develop customized indicators specific to the industry, product market, or business model. • Always conduct comparative assessments in multiple markets. • Observation of purchasing patterns and other behavior should be weighted more heavily than reports or opinion regarding purchase intention or price sensitivity. Research Methodologies Survey research utilizes questionnaires designed to elicit quantitative data (“How much would you buy?”), qualitative responses ("Why would you buy?"), or both. Personal interviews allow researchers to ask “why?” and then explore answers with the respondent on a face-to-face basis. When observation is used as a data collection method, one or more trained observers (or a mechanical device such as a video camera) watch and record the behavior of actual or prospective buyers. Step 7: Analyzing Data First, the data must be prepared – the term “cleaned” is sometimes used – before further analysis is possible. Questionnaires must be coded, and some data adjustment may be required. Step 8: Presenting the Findings It is advisable for major findings to be summarized concisely in a memo that indicates the answer or answers to the problem first proposed in Step 1. Results should be clearly stated and provide a basis for managerial action. 6-7. Describe some of the analytical techniques used by global marketers. When is it appropriate to use each technique? Answer: There are several industries in which demand pattern analysis can be useful for companies targeting developing countries. For example, demand for telecommunications services and equipment is exploding around the world, thanks in part to privatization of industry and the reform of telecommunications regulations. Observation of the demand pattern for communication- and information-related products may provide companies in other industry sectors with important cues about economic development. It is reasonable to expect that the advent of good telephone service in a particular country will be followed by economic growth and demand in other industries. In China, for example, demand pattern analysis in the automobile industry could yield important insights about an economic ripple effect that could have wide impact. Each vehicle-assembly job creates ten additional jobs in parts manufacturing, distribution, sales and servicing. To paraphrase the old saying about GM, one might say, “What’s good for China’s auto industry is good for China.” Income elasticity measurements can provide insights into market potential for specific regions or countries. Dominick Salvatore has pointed out that, in developed nations, income elasticity for the food and agricultural exports of developing nations is less than 1. This means that demand in developed nations the agricultural exports of developing nations increases proportionately less than the increase in income. Analogy is a technique for making market estimates based on partial resemblances. For example, Volkswagen executives have noted that Nigeria has the same per capita income as China. However, if China had the same ratio of cars to people as Nigeria, there would be 10 million cares in China today, instead of 1.2 million. Cluster analysis is based on statistical techniques described in the academic literature in the 1960s and 1970s. The objective is to group individuals, countries, etc. into clusters that are more similar to each other than to individuals or countries in another cluster. Cluster analysis can be used to group countries in terms of income levels, imports, and exports; the technique would be used to group countries by marketing environments. 6-8. Coach has been described as “a textbook lesson on how to revitalize a brand” (see Case 6-1). The same could be said for Burberry, the British fashion-goods company discussed in Chapter 1. Locate some articles about Burberry and read about the research its management has conducted and the formula it used to polish the brand. Are the approaches evident at the Burberry and Coach similar? Are they competitors? Answer: Student answers will vary, but better students will note that both Burberry and Coach are extensively using consumer-marketing research to tighten inventory controls at store level. Both of these retailers are also investing heavily in inventory control procedures. These changes allow both retailers to have the right mix of product in the right stores at the right time. Burberry and Coach both undertook brand revitalization by focusing on modernizing their images while maintaining their core heritage. Burberry emphasized digital innovation, luxury branding, and a reinvigorated focus on high fashion, while Coach revamped its product lines, updated its marketing, and expanded its appeal. Despite these similarities, they cater to slightly different segments within the luxury fashion market, with Burberry positioned more in high fashion and Coach focusing on accessible luxury. They are indeed competitors in the broader luxury goods sector. 6-9. Below is a table similar to Table 6-4 that contains eight sports sedan nameplates. You can perform a rudimentary analysis along the lines of multidimensional scaling by ranking them by similarity. Do some research on the different models and see which pair you find to be the most similar. Which pair is the most different? Answer: Each student’s answer will vary due to the many, many features of automobiles. The most similar is a three-way tie between the BMW and the Audi and the Volvo and the Acura and the Infiniti. The most different are the Volvo and the Mercedes. To analyze sports sedan nameplates, consider models such as the BMW 3 Series and Audi A4, which are quite similar due to their comparable luxury features, performance, and target market. On the other hand, a comparison between a BMW M3 and a Toyota Camry XSE would show the most difference, as the M3 is a high-performance luxury sports sedan, while the Camry XSE is a more mainstream, less performance-focused vehicle. MDS Study Inputs: Similarity Judgment Scales for Pairs of Sport Sedans OVERVIEW Information about buyer behavior and the overall business environment is vital to effective managerial decision making. When researching any market, marketers must know where to go to obtain information, what subject areas to investigate and information to look for, the different ways information can be acquired, and the various analysis approaches that will yield important insights and understanding. It is the marketer’s good fortune that a veritable cornucopia of market information is available on the Internet. A few keystrokes can yield literally hundreds of articles, research findings, and Web sites that offer a wealth of information about particular country markets. Even so, marketers must do their homework if they are make the most of modern technology. First, they need to understand the importance of information technology and marketing information systems as strategic assets. Second, they should have a general understanding of the formal market research process. Finally, they should know how to manage the marketing information collection system and the marketing research effort. ANNOTATED LECTURE/OUTLINE INFORMATION TECHNOLOGY FOR GLOBAL MARKETING The phrase information technology (IT) refers to an organization’s processes for creating, storing, exchanging, using, and managing information. A management information system (MIS) provides managers and other decision makers with a continuous flow of information about company operations. MIS is a general term that can be used in reference to a system of hardware and software that a company uses to manage information. • (Learning Objective #1) An MIS should provide a means for gathering, analyzing, classifying, storing, retrieving, and reporting relevant data. The MIS should also cover important aspects of a company's external environment, including customers and competitors. One component of a firm’s MIS is a business intelligence (BI) network that helps management make decisions. Global competition intensifies the need for an effective MIS and BI that is accessible throughout the company. Unlike the public Internet, an intranet is a private network that allows authorized company personnel or outsiders to share information electronically in a secure fashion. Intranets allow a company’s information system to serve as a 24-hour nerve center, enabling Amazon.com, Dell, and other companies to operate as real time enterprises (RTEs). The RTE model is expected to grow in popularity as wireless Internet access becomes more widely available. An electronic data interchange (EDI) system allows a company’s business units to submit orders, issue invoices, and conduct business electronically with other company units as well as outside companies. THE CULTURAL CONTEXT Tesco’s Clubcard As the UK’s number-one supermarket chain, Tesco is “the one to beat.” Tesco’s management team faces the constant challenge of staying ahead of fast-growing competitors. These include local chains such as Sainsbury as well as Asda, which is owned by retail giant Walmart. One of the keys to Tesco’s success is a loyalty program tied to its Clubcard. Signing up for the program is easy: Shoppers fill out applications (either at the store or online) that include questions regarding family demographics and dietary preferences. The 15 million households with Club cards represent 80 percent of Tesco’s customer base. Shoppers present their cards at checkout and are awarded two points for every £1 spent. For every 100 points accumulated, shoppers receive a £1 voucher that can be redeemed for future grocery purchases or used with airline frequent-flyer programs. Tesco can also offer different incentives to different segments; for example, high spenders can be offered vouchers that are worth triple points when redeemed on certain categories of merchandise. But the Clubcard program does more than allow Tesco to reward its customers. It also provides Tesco’s IT team with a clear picture of what is selling, what isn’t selling, and where the gaps are in its product assortment. Tesco groups customers into various clusters based on the similarity of the contents of their shopping cart. For example, analysts have dubbed one segment “Finer Foods”; it is comprised of time-deprived, affluent customers who choose upscale products. When the data indicated that these shoppers weren’t buying fine wine or cheese at Tesco, the company upgraded its offerings and introduced a house brand bearing the “Tesco’s Finest” label. By contrast, traditional shoppers are “makers” who buy ingredients preparing home-cooked meals. They gravitate towards Tesco’s lower-priced “Tesco Value” products such as beer, baked beans, canned tomatoes, and noodles. By combining household information with weekly purchase behavior data, Tesco is able to tailor promotions to specific customer segments. Did a shopper buy diapers for the first time? Tesco sends that shopper’s household coupons for baby wipes and beer. Why? New dads, who are staying home with baby, can’t get out to the local pub as often as they once did. So, they stock up on beer to consume at home. Clubcard also gives Tesco a tactical advantage over Walmart’s Asda stores. Walmart’s value proposition is very clear: Low prices. To prevent the most value-conscious shoppers from defecting, Tesco mined its database to identify Clubcard users who buy the lowest-priced grocery items. Managers identified several hundred items that the value hunters buy regularly; prices on those items were then lowered. The result: The shoppers stayed with Tesco instead of shopping at Asda. Tesco currently leads Asda in share of U.K. grocery sales by a margin of two to one. One of the key features of EDI is that its transaction formats are universal; thus, allowing computer systems at different companies to speak the same language. Poor operating results can often be traced to insufficient data and information about events both inside and outside the company. Retailers are using efficient consumer response (ECR) to work more closely with vendors on stock replenishment. ECR can be defined as a joint initiative by members of a supply chain to work towards improving and optimizing aspects of the supply chain to benefit customers. ECR systems utilize electronic point of sale (EPOS) data gathered by checkout scanners. EPOS, ECR, and other IT tools are also helping businesses improve their ability to target consumers and increase loyalty. The trend among retailers is to develop customer-focused strategies that will personalize and differentiate the business. A new business model that helps companies collect, store, and analyze customer data. is customer relationship management (CRM). CRM is a philosophy that values two-way communication between company and customer. A company’s use of CRM can manifest itself in various ways. Some are visible to consumers, others are not; some make extensive use of leading-edge information technology, others do not. One challenge of using CRM is integrating data into a complete picture of the customer and his or her relationship to the company and its products or services. This is sometimes referred to as a “360-degree view of the customer”. The challenge is compounded for global marketers. Subsidiaries in different parts of the world may use different customer data formats, and commercial CRM products may not support all the target languages. Sales force automation (SFA) refers to a software system that automates routine aspects of sales and marketing functions such as lead assignment, contact follow-up, and opportunity reporting. An SFA system can also analyze the cost of sales and the effectiveness of marketing campaigns. Privacy issues vary widely from country to country. In the European Union, a Directive on Data Collection has been in effect since 1998. There are restrictions about sharing information across national borders. In 2000, the U.S. Department of Commerce and the EU concluded a Safe Harbor agreement that establishes principles for privacy protection for companies that wish to transfer data to the U.S. from Europe. The principles include: • The purposes for which information is collected and used and the means by which individuals can direct inquiries to the company • An “opt out” option to prevent the disclosure of personal information to third parties • An agreement that information can only be transferred to third parties which are in compliance with Safe Harbor Principles • Individuals must have access to information collected about them and must be able to correct or delete inaccurate information. Databases called data warehouses are frequently an integral part of a CRM system. Behind the familiar interfaces, however, is specialized software capable of performing multidimensional analysis by using sophisticated techniques such as linear programming and regression analysis. EDI, ECR, EPOS, SFA, CRM, and other aspects of IT do not simply represent marketing issues; they are organizational imperatives. The tasks of designing, organizing, and implementing systems for business intelligence and information must be coordinated in a coherent manner that contributes to the overall strategic direction of the organization. Overall, the, the global organization has the following needs: • An efficient, effective system that will scan and digest published sources and technical journals in the headquarters country as well as all countries in which the company has operations or customers • Daily scanning, translating, digesting, abstracting, and electronic input of information into a market intelligence system • Expanding information coverage to other regions of the world SOURCES OF MARKET INFORMATION Although environmental scanning is a vital source of information, research has shown that headquarters executives of global companies obtain as much as two-thirds of the information they need from personal sources. A great deal of external information comes from executives based abroad in company subsidiaries, affiliates, and branches. These executives are likely to have established communication with distributors, consumers, customers, suppliers, and government officials. The information issue exposes one of the key weaknesses of a domestic company: although more attractive opportunities may be present outside existing areas of operation, they are likely to go unnoticed by inside sources in a domestic company because the scanning horizon tends to end at the home-country border. A company with limited geographical operations may be at risk because internal sources abroad tend to scan only information about their own countries or regions. Direct sensory perception provides a vital background for the information that comes from human and documentary sources. Direct perception gets all the senses involved. gets all the senses involved. It means seeing, felling, hearing, smelling, or tasting for oneself to find out what is going on in a particular country. • (Learning Objective #2) Some information may be available from other sources but requires sensory experience to sink in. For example, Wal-Mart’s first stores in China stocked a number of products— extension ladders and giant bottles of soy sauce, for example—that were inappropriate for local customers. Joe Hatfield, Wal-Mart’s top executive for Asia, began roaming the streets of Shenzhen in search of ideas. His observations paid off; when Wal-Mart’s giant store in Dalian opened in April 2000, a million shoppers passed through its doors in the first week. They snapped up products ranging from lunch boxes to pizza topped with corn and pineapple. Direct perception can also be important when a global player dominates a company’s domestic market, case in point Microsoft’s Xbox video game system, when Microsoft took the system “on the road” in the US. FORMAL MARKET RESEARCH • (Learning Objective #3) Information is a critical ingredient in formulating and implementing a successful marketing strategy. Market research is the project-specific, systematic gathering of data. Marketing Research is defined as “the activity that links the consumer, customer, and public to the marketer through information.” Global market research is the marketing research activity carried out on a global scale. The challenge of global marketing research is to recognize and respond to the important national differences that influence the way information can be obtained. These challenges include: cultural, linguistic, economic, political, religious, historical, and market differences. Michael Czinkota and Illka Ronkainen have identified four specific environmental factors that require international research to be conducted differently than domestic research. • New parameters of doing business – different requirements, new ways rules are applied. • “Cultural megashock” may occur as company personnel com to grips with a new set of culture-based assumptions about conducting business. • Many markets lead to interacting factors – research prevents psychological overload. • Researchers may have to broaden their definition of competitors in international markets to include competitive pressures not present in the domestic market. Marketing research can be conducted in two ways. One is to design and implement a study with in-house staff; the other is to use an outside market research firm (Figure 6-1). The process of collecting data and converting it into useful information includes basic 8 steps: 1. information requirement 2. problem definition 3. choose unit of analysis 4. examine data availability 5. assess value of research 6. research design 7. data analysis 8. interpretation and presentation Step 1: Information Requirement Formal research is often undertaken after a problem or opportunity has been identified. A truism of market research that a problem well defined is a problem half-solved. The first two questions a marketer should ask are: • “What information do I need?” • “Why do I need this information?” Step 2: Problem Definition Marketers must be aware of the impact that SRC and other cross-cultural assumptions can have. Such awareness can have positive effects: • It can enhance management’s willingness to conduct market research in the first place. • An awareness of SRC can help ensure that the research effort is designed with minimal home-country or second-country bias. • It can enhance management’s receptiveness to accepting research findings. Step 3: Choose Unit of Analysis The next step involves the need to identify what part(s) of the world the company should be doing business and finding out as much as possible about the business environment in the area(s) identified. The unit of analysis may be a single country; it may be a region such as Europe or South America, or it may be global. Countrywide data are not required for all market entry decisions. Rather, a specific city, state, or province may be the relevant unit of analysis. Step 4: Examine Data Availability The first task at this stage is to answer several questions regarding the availability of data. What type of data should be gathered? Can secondary data – for example data available in company files, a library, industry or trade journals, or online databases be used? Using data that are readily available saves both money and time. A low-cost approach to market research and data collection begins with desk research. Secondary sources are a good place to start. Clipping services, company or public libraries, online databases, government census records, and trade associations are just a few of the data sources that can be tapped with minimal effort and cost. THE CULTURAL CONTEXT Bikers Go “Hog” Wild In 2013, Harley-Davidson (H-D) celebrates its 110th anniversary. The company has grown impressively during its first 100-plus years of operation; as the second decade of the twenty-first century got underway, H-D posted revenues of $4.1 billion. Savvy export marketing enabled H-D to dramatically increase worldwide sales of its heavyweight motorcycles. From Australia to Germany to Mexico City, H-D enthusiasts were paying the equivalent of up to $25,000 to own an American-built classic. In many countries, dealers put would-be buyers on a 6-month waiting list because of high demand. H-D’s international success came after years of neglecting overseas markets. The company was also slow to react to a growing threat from Japanese manufacturers. Early on, the company used an export-selling approach, symbolized by its underdeveloped dealer network. By the late 1980s, after recruiting dealers in the important Japanese and European markets, company executives discovered a basic principle of global marketing. “As the saying goes, we needed to think global but act local,” said Jerry G. Wilke, vice president for worldwide marketing during that time. Managers began to adapt the company’s international marketing to make it more responsive to local conditions. In Japan, for example, H -D’s rugged image and high quality helped make it the best-selling imported motorcycle. After learning that riders in Tokyo consider fashion and customized bikes to be essential, H-D opened stores specializing in clothing and bike accessories. Recently H-D has begun catering to Japanese women who enjoy riding (see Exhibit 6-3). Today, Japan generates 5.6 percent of company revenues for motorcycles, parts, accessories, and merchandise. In Europe, H-D discovered that an “evening out” means something different than it does in America. The company sponsored a rally in France, where beer and live rock music were available until midnight. Recalls Wilke, “People asked us why we were ending the rally just as the evening was starting. So I had to go persuade the band to keep playing and reopen the bar until 3 or 4 A.M.” Today, the company has a clear picture of its core European customers; as Klaus Stobel, European affairs director for Harley- Davidson Europe, explained, “The people who buy Harleys in Europe are like the people who buy BMWs in the U.S. They are dentists and lawyers.” H-D currently ranks second in overall market share for the European heavyweight motorcycle segment; in 2010, Europe accounted for 16.7 percent of global revenues. The global economic crisis has cut into worldwide sales. The reason is straightforward: Credit is tight and, for many people, a motorcycle is a discretionary purchase, not a necessity. In 2010, the company shipped 210,494 motorcycles, down from about 350,000 units in 2006. Despite the current slump in demand, in some years there are not enough bikes to go around. This situation seems to suit company executives just fine. As former H-D president James H. Paterson once noted, “Enough motorcycles is too many motorcycles.” A single source, The Statistical Yearbook of the United Nations, contains global data on agriculture, mining, manufacturing, construction, energy production and consumption, internal and external trade, railroad and air transport, wages and prices, health, housing, education, communication infrastructure, and availability of mass communication media. The U.S. government’s most comprehensive source of world trade data is the National Trade Data Base (NTDB), an online resource from the Department of Commerce. The Statistical Abstract of the United States is one of the annual publications issued by the U.S. government that contains myriad facts about international markets. Most countries compile estimates of gross national product (GNP), gross domestic product (GDP), consumption, investment, government expenditures, and price levels. Demographic data indicating the population size, distribution of population by age category, and rates of population growth are also available. Many countries have set up Web sites to help small firms find opportunities in world markets. The CIA publishes World Factbook, which is revised yearly. The Economist and Financial Times compile comprehensive surveys of regional and country markets. Trends in manufacturing production indicate potential markets for companies that supply manufacturing inputs. At the early stages of growth in a country, when per capita incomes are low, manufacturing centers on necessities as food and beverages, textiles, and other forms of light industry. As incomes rise, the relative importance of these industries declines as heavy industry begins to develop. A word of caution is in order at this point: Remember that data are compiled from various sources, some of which may not be reputable. Even when the sources are reputable, there is likely to be some variability from source to source. Syndicated studies published by private research companies are another source of secondary data and information. MarketResearch.com (www. marketresearch.com) sells reports on a wide range of global business sectors. Step 5: Assess Value of Research Research requires investment of both money and managerial time, and it is necessary to perform a cost-benefit analysis before proceeding further. The small markets around the world pose a special problem for the researcher. The relatively low profit potential in smaller markets justifies only modest expenditures for marketing research. Therefore, the global researcher must devise techniques and methods that keep expenditures in line with the market’s profit potential. It may also be necessary to use inexpensive survey research that sacrifices some elegance or statistical rigor to achieve results within the constraints of the smaller market research budget. Step 6: Research Design Primary data are gathered through original research pertaining to a specific problem when data are not available through published statistics or studies. Global marketing guru David Arnold offers the following guidelines regarding data gathering: • Use multiple indicators rather than a single measure. • Individual companies should develop customized indicators specific to the industry, product market, or business model. • Always conduct comparative assessments in multiple markets. • Observation of purchasing patterns and other behavior should be weighted more heavily than reports or opinion regarding purchase intention or price sensitivity. Next, the decision must be made to use quantitative techniques (numerical data that can be subjected to statistical analysis) or qualitative techniques (non-numerical data). In global market research, it is advisable for the plan to call for a mix of techniques. For consumer products, qualitative research is especially well suited to accomplish the following tasks: • To provide consumer understanding • To describe the social and cultural context of consumer behavior, including cultural, religious, and political factors that impact decision making • To identify core-brand equity and “get under the skin” of brands • To “mine” the consumer and identify what people really feel Issues in Data Collection The research problem may be more narrowly focused on marketing issues. Existing markets are those in which one or more companies are already serving customer needs. In many countries, data about the size of existing markets—in terms of dollar volume and unit sales—are readily available. In some countries, however, formal market research is relatively new phenomenon and data are scarce. In such situations, market researchers have two initial objectives: 1. To estimate the market size, the level of demand, or the rate of product purchase or consumption 2. To assess the company’s overall competitiveness in terms of product appeal, price, distribution, and promotional coverage and effectiveness In such situations, and in countries, where such data are not available, researchers must first estimate the market size, the level of demand, or the rate of product purchase or consumption. Potential markets are those where no market currently exists and can be subdivided into latent and incipient markets. A latent market is in essence, an undiscovered segment. It is a market in which demand would materialize if an appropriate product were made available. In latent markets, initial success is not based on a company’s competitiveness. Success depends on the prime mover advantage – a company’s ability to uncover the opportunity and launch a marketing program that taps the latent demand. An incipient market is a market that will emerge if a particular economic, demographic, political, or socio-cultural trend continues. A company is not likely to succeed if it offers a product in an incipient market before the trends have taken root. After the trends have had a chance to gain traction, the incipient market will become latent and, later, existing. Research Methodologies Survey research, interviews, consumer panels, observation, and focus groups are some of the tools used to collect primary market data. Survey research utilizes questionnaires designed to elicit quantitative data (“How much would you buy?”), qualitative responses ("Why would you buy?"), or both. Survey research obtains data using a questionnaire distributed by mail, telephone, or in person. In global marketing research, several survey design and administration issues may arise (e.g., telephone directories or lists may not be available). It is important to remember that what is customary in one country may be impossible in others because of infrastructure differences, cultural barriers or other reasons. At a deeper level, culture shapes attitudes and values in a way that directly affects people’s willingness to respond to interviewer questions. SRC bias can originate from the cultural background of those designing the questionnaire A technique known as back translation can help increase comprehension and validity. Back translation requires that, after a questionnaire is translated into a particular target language, it is translated once again into the original language by a different translator. For even greater accuracy, parallel translations—two versions by different translators—can be used as input to the back translation. Personal interviews allow researchers to ask “why?” and then explore answers with the respondent on a face-to-face basis. A consumer panel is a sample of respondents whose behavior is tracked over time. When observation is used as a data collection method, one or more trained observers (or a mechanical device such as a video camera) watch and record the behavior of actual or prospective buyers. EMERGING MARKETS BRIEFING BOOK Market Research in Brazil Emerging markets present a number of challenges to anyone conducting market research. First, the technology infrastructure may be undeveloped. In addition, there are geographic issues; in the BRIC nations, for example, many provincial areas are isolated and difficult to reach. Third, researchers may have to adapt their data-gathering methodologies to suit the country environment. Finally, privacy issues can present challenges. Brazil is a case in point. The technological infrastructure for gathering market data is minimal. Government census reports are a poor source of population data. As a result, it can be difficult to obtain a representative sample; it is expensive to design a national probability sample. Compounding the problem is a lack of telephone penetration. Geographic issues also arise; this is not surprising, given the immensity of Brazil’s territory. Marketers often find that, outside of major metropolitan areas, little EPOS data is available. It is very difficult to track what is selling, at what price, and who the customers are. This necessitates the use of field teams to gather data. L’Oréal, the French cosmetics company, uses observation in Brazil and other emerging markets. Patricia Pineau is in charge of L’Oréal’s consumer insights team. She explains, “It all starts with observation. Observing is necessary to decode exactly what women are trying to get and what they are attracted to. Sometimes it is the gesture that will reveal something that they really want to gain.” Among the insights L’Oréal gained in Brazil: Women change their nail polish daily to coordinate with outfits. Rather than taking care only to apply polish to the nails, they brush it on their fingers and use a cotton swab to clean off the excess. A third problem is encountered when designing face-to-face interviews. If the research design calls for interviewing broad socioeconomic groups, the demographics of interviewers should match those of respondent groups. Street or mall-intercept techniques can be used to good effect. Security issues require the use of teams. Researchers may offer a gift rather than cash as an incentive. Finally, privacy issues are very important, especially to affluent Brazilians. Wealthy respondents are unlikely to answer questions about personal finance. To ensure confidentiality, financial services companies may bring in interviewers based on a developed market. To gain trust, interviewers can ask respondents to recommend others. Companies using observation as a research methodology must be sensitive to public concerns about privacy issues. A second problem with observation is reactivity, which is the tendency of research subjects to behave differently when they know they are under study. In focus group research, a trained moderator facilitates discussion of a product concept, a brand’s image and personality, an advertisement, a social trend, or another topic with a group of 6 to 10 people. The moderator can utilize a number approaches to elicit reactions and responses, including projective techniques, visualization, and role-plays. In the projective technique, the researcher presents open ended or ambiguous stimuli to a subject. Presumably, when verbalizing a response, the subject will “project”—that is, reveal—his or her unconscious attitudes and biases. Focus group research yields qualitative data that do not lend themselves to statistical projection. Such data are extremely valuable in the exploratory phase of a project and are typically used in conjunction with data gathered via observation and other methods. Scale Development Market research requires assigning some type of measure, ranking, or interval to a response. To take a simple example of measurement, a nominal scale is used to establish the identity of a survey element. For example, male respondents could be labeled “1” and female respondents could be labeled “2.” A Likert scale entails placing each response in some kind of continuum, such as “strongly agree” to “strongly disagree.” In a multi-country research project, it is important to have a scalar equivalence, which means two respondents in different countries with the same value for a given variable receive equivalent scores on the same survey item. Even with standard data-gathering techniques, the application of a particular technique may differ from country to country. Sampling When collecting data, researchers generally cannot administer a survey to every possible person in the designated group. A sample is a selected subset of a population that is representative of the entire population. Two types of samples are probability samples and nonprobability samples. A probability sample is generated by following statistical rules that ensure that each member of the population under study has an equal chance of being included in the sample. The results of a probability sample can be projected (with qualifications) to the entire population. The results of a nonprobability sample cannot be projected with statistical reliability. One form of nonprobability sample is a convenience sample – researchers select people who are easy to reach. Although data gathered in this way are not subject to statistical inference, they may be adequate to address the problem. To obtain a quota sample, the researcher divides the population under study into categories; a sample is taken from each category. The term quota refers to the need to make sure that enough people are chosen in each category to reflect the overall makeup of the population. Step 7: Data Analysis The data collected up to this point must be subjected to some form of analysis if it to be useful to decision makers. First, the data must be prepared – the term cleaned is sometimes used – before further analysis is possible. Questionnaires must be coded, and some data adjustment may be required. Data analysis continues with tabulation, that is, the arrangement of data in tabular form. For nominally scaled variables such as “male” and “female,” a simple cross tabulation may be performed. If the researcher is interested in the interaction between variables, interdependence techniques such as factor analysis, cluster analysis, and multidimensional scaling (MDS) can be used. Factor analysis is used to transform large amounts of data into manageable units (see Table 6-3). Factor analysis is useful in psychographic segmentation studies. Cluster analysis allows the researcher to group variables into clusters that maximize within-group similarities and between-group differences. Cluster analysis shares some characteristics of factor analysis: it does not classify variables as dependent or independent, and it can be used in psychographic segmentation. Cluster analysis is well suited to global marketing research because similarities and difference can be established between local, national, and regional markets of the world. Multidimensional scaling (MDS) is a technique for creating perceptual maps. MDS is particularly useful when there are many alternatives from which to choose. Dependence techniques assess the interdependence of two or more dependent variables with one or more independent variables. Conjoint analysis is a tool that researchers can use to gain insights into the combination of features that will be most attractive to consumers; it is assumed that features affect both perception and preferences. Comparative Analysis and Market Estimation by Analogy One of the unique opportunities in global marketing analysis is to conduct comparisons of market potential and marketing performance in different country or regional markets at the same time. A common form of comparative analysis is the intracompany cross-national comparison. For example, general market conditions in two or more countries (as measured by income, stage of industrialization, or some other indicator) may be similar. If there is a significant discrepancy between per capita sales of a given product in the countries, the marketer might reasonably wonder about it and determine what actions need to be taken. Drawing an analogy is simply stating a partial resemblance. David Arnold notes that there are four possible approaches to forecasting by analogy: 1. Data is available on a comparable product in the same country. 2. Data is available on the same product in a comparable country. 3. Data is available on the same product from an independent distributor in a neighboring country. 4. Data is available about a comparable company in the same country. Time-series displacement is an analogy technique based on the assumption that an analogy between markets exists in different time periods. Step 8: Interpretation and Presentation The report based on the market research must be useful to managers as input to the decision-making process. It is advisable for major findings to be summarized concisely in a memo that indicates the answer or answers to the problem first proposed in Step 1. HEADQUARTERS CONTROL OF MARKETING RESEARCH An important issue for the global company is where to locate control of the organization’s research capability. The difference between a multinational, polycentric company and a global, geocentric company on this issue is significant. In the multinational company, responsibility for research is delegated to the operating subsidiary. • (Learning Objective #4) The global company delegates responsibility for research to operating subsidiaries but retains overall responsibility and control of research as a headquarters’ function. A key difference between single-country market research and global market research is the importance of comparability. In practice, this means that the global company must ensure that research is designed and executed to yield comparable data. Simply put, comparability, means that the results can be used to make valid comparisons between the countries covered by the research. To achieve this, the company must inject a level of control and review of marketing research at the global level. The research director must pay particular attention to whether data gathered is based on emic analysis or etic analysis. Emic analysis attempts to study a culture from within, using its own system of meanings and values. Etic analysis is “from the outside”; it is a more detached perspective that is often used in comparative or multi-country studies. THE MARKETING INFORMATION SYSTEM AS A STRATEGIC ASSET • (Learning Objective #5) The advent of the transnational enterprise means that boundaries between the firm and the outside world are dissolving. The boundary between marketing and other functions is also dissolving, and the traditional notion of marketing as a distinct functional area within the firm may be giving way to a new model. Many global firms are creating flattened organizations with less hierarchical, less centralized decision-making structures. Such organizations facilitate the exchange and flow of information between departments that previously have operated as autonomous “silos”. Information intensity in the firm has an impact on perceptions of market attractiveness, competitive position, and organizational structure. The greater a company’s information intensity, the more the traditional product and market boundaries shift. Today, when marketers speak of “value added,” the chances are they are not referring to unique product features. Rather, the emphasis is on the information exchanged as part of customer transactions, much of which cuts across traditional product lines. CASES Case 6-1: Market Research Keeps Coach at the Cutting Edge of Fashion Overview: Each year, Coach spends about $5 million on research. The value of the research was underscored with Coach executives discovered that the company’s cosmetic cases were enjoying surprisingly strong sales. Management understood that the unexpected success of the cosmetics cases represented an opportunity to innovate. 6-10. Coach’s brand positioning can be described as “accessible luxury”. What do you think this term means? Answer: The middle-class conservative woman around the world can be considered one of Coach’s key target markets. For example, every year Coach spends about $5 million on research. The company conducts personal interviews with more than 10,000 women worldwide. This knowledge identifies new and emerging market segments for the Coach line. Take for example, the success of the Signature collection suggested, and subsequent marketing surveys confirmed that women want bags that feature materials other than leather. Coach managers, and staff set to work developing a new line of fabric and leather bags that are thinner, softer and lighter than the company’s usual offerings. Coach’s market research also indicated that women appreciated the conservative styling of the signature Coach bag. The company has become particularly adept at creating and marketing new types of handbags for various occasions. Coach is still perceived as a “serious” brand. Coach’s primary target in China consists of university-educated professional women in the emerging middle class whose annual earnings are increasing substantially. 6-11. Assess Lew Frankfort’s decision to give the go-ahead to the Poppy line. Answer: Coach used marketing research extensively before they “went ahead” with the product launch. Examples of some of the research they did was: the company extensively tested the line first by using small group of consumers, then they test marketed the product in their stores and in key department stores. 6-12. Discuss how Coach’s strategy in using the Internet as a marketing tool for the Poppy launch. Answer: Coach provided a Poppy link on the Coach website so that consumers could register for prizes and a shopping spree. They were also asked to “grab your friends” for a local party. And Coach then created marketing “buzz’ through the power of social networking sites. Coach’s Facebook fans register some 209,000 and counting, and they all had the opportunity to buy the Poppy line at a “presale” event. Case 6-2: Research Helps Whirlpool Keep Its Cool at Home, Act Local in the Emerging Market Overview: Whirlpool, an American company selling home appliances, is using extensive research methodologies to adjust to new markets around the globe. The market entry strategy of purchasing local established companies combined with adjusting to the needs of local market seems to be successful for Whirlpool. 6-13. Describe Whirlpool’s global marketing strategy. Does Whirlpool use an extension product strategy or an adaptation product strategy? Answer: Whirlpool’s basic market entry strategy was purchasing local established appliance companies, merging with already existing markets. In Europe, Whirlpool invested $3 billion total to the local market. Whirlpool became number three on the European continent, but didn’t move beyond it to Japan, Asia, and Latin America as was projected. To cope with resulting appliance problems in Europe, Whirlpool used global part-sourcing strategy that helped the company to trim down the number of suppliers by replacing sales organizations in 17 separate countries with four regional sales offices and by reducing the number of warehouses. Whirlpool uses a product adaption strategy by emphasizing product platforms as a means to product localized versions of its products. 6-14. What is the primary reason people buy and own major appliances such as a washing machine? Is there a secondary reason as well? Answer: Owning a washing machine is second only to a cell phone as a “aspirational” product. Consumer research shows that consumers in different countries prefer different types of features based on culture and lifestyle. 6-15. What are the key lessons to be learned from Whirlpool’s experience in emerging markets? Answer: Whirlpool jumped into the Chinese market without using extensive consumer research methodologies such as surveys and interviews. The company’s success was the “T-4” strategy (offering different home appliances, not just washing machines) and emphasize on the middle-class consumers. The key lesson is that in a country with a high rate of low-price competition it is necessary to use a strategy aiming at quality and uniqueness, not price. When entering Brazil, they did extensive research, but again, not consumer research. TEACHING TOOLS AND EXERCISES Additional Cases: “SAP: Establishing a Research Centre in China”. Kuldeep Kumar, Maya Kumar, Markus Alsleben. HBS HKU 817. “International Marketing Research: A Global Project Management Perspective”. Rb Young; Robert B. Young, Rajshekhar G. Javalgi. HBS BH225. Activity: Students should be preparing or presenting their Cultural-Economic Analysis and Marketing Plan for their country and product as outlined in Chapter 1. Out-Of-Class Reading: Davis, Tim R. V., and Robert B. Young, “International Marketing Research: A Management Briefing.” Business Horizons 45, no. 2 (March-April 2002), pp. 31-38. Secondary Research: Using secondary data sources have students compile a listing of the top 20 foreign companies doing business in Russia, China, and India. How many of these businesses are U.S. owned? Class Project: Send students to interview personnel in nearby companies that do business outside the home country market. (Some students may be able to interview relatives or acquaintances). The point of the interview is to determine what sources of information company personnel rely on and how information is disseminated to others in the organization. Students can share their findings during class discussion. Internet Exercise: Have students take a look at Zoomerang (www.zoomerang.com). Zoomerang is a company that is becoming well known for conducting reasonably priced market research using the Web. SUGGESTED READINGS Books Baker, Donald I. and Carol D. Terry. Internet Research, 2nd ed. Tempe, AZ: Facts on Demand Press, 2004. Churchill, Gilbert A. and Dawn Iacobucci. Marketing Research: Methodological Foundations, 9th ed. Mason, OH: South-Western, 2005. Craig, C. Samuel and Susan P. Douglas. International Marketing Research, 3rd ed. New York: John Wiley and Sons, 2006. Crossen, Cynthia. Tainted Truth: The Manipulation of Fact in America. Englewood Cliffs, New Jersey: Simon & Schuster, 1994. Douglas, Susan P. and C. Samuel Craig. International Marketing Research. Englewood Cliffs, New Jersey: Prentice-Hall, 1983. Keyes, Jessica. Info trends: The Competitive Use of Information. New York: McGraw-Hill, 1993. Krugman, Paul R. The Age of Diminished Expectations: U.S. Economic Policy in the 1990s. Cambridge, Mass: MIT Press, 1990. Kumar, V. International Marketing Research, Upper Saddle River, New Jersey: Prentice Hall, 1999. Lavin, Michael. International Business Information: How to Find It, How to Use It, Westport, CT: Oryx Press, 2004. Articles Adler, Lee. “Managing Marketing Research in the Diversified Multinational Corporation.” In Marketing in Turbulent Times and Marketing: The Challenges and Opportunities-Combined Proceedings, ed. Edward M. Mazze. Chicago: American Marketing Association, 1975, pp. 305-308. Cavusgil, S. Tamer. “Qualitative Insights into Company Experiences in International Marketing Research.” Journal of Business and Industrial Marketing (Summer 1987), pp. 41-54. Czinkota, Michael R. and Ilkka A. Ronkainen. “Market Research for Your Export Operations: Part I: Using Secondary Sources of Research.” International Trade Forum 30, no. 3 (1994), pp. 22-33. _____. “Market Research for Your Export Operations: Part II: Conducting Primary Market Research.” International Trade Forum 31, no. 1 (1995), pp. 16+. Davenport, Thomas H., Michael Hammer and Tauno J. Metsisto. “How Executives Can Shape Their Company’s Information Systems.” Harvard Business Review 67, no. 2 (March-April 1989), pp. 130-134. Davis, Tim R.V., and Robert B. Young. “International Marketing Research: A Management Briefing.” Business Horizons 45, no. 2 (March-April 2002), pp. 31-38. Doran, Kathleen Brewer. “Lessons Learned in Cross-Cultural Research of Chinese and North American Consumers,” Journal of Business Research 25 (2002), 823-829. Douglas, Susan P., C. Samuel Craig, and Warren J. Keegan. “Approaches to Assessing International Marketing Opportunities for Small- and Medium-Sized Companies.” Columbia Journal of World Business 17, no. 3 (Fall 1982), pp. 2-30. Ferley, Stephen, Tony Lea, and Barry Watson. “A Comparison of U.S. and Canadian Consumers.” Journal of Advertising Research 39, no. 5 (September/October 1999) pp. 55-65. Gilad, Benjamin. “The Role of Organized Competitive Intelligence in Corporate Strategy.” Columbia Journal of World Business 24 (Winter 1989), pp. 29-35. Glazer, Rashi. “Marketing in an Information-Intensive Environment: Strategic Implications of Knowledge as an Asset.” Journal of Marketing 55 (October 1991), pp. 1-19. Grunert, Klaus G., Trodsen, Torbjorn, Campous, Emilio, “Market Orientation in the Mental Models of Decision-Makers: Two Cross-Border Value Chains”. International Marketing Review, no. 27 (2010) . King, W.R. and V. Sethi. “Developing Transnational Information Systems: A Case Study.” Omega, January 1993, pp. 53-59. Luna, David, Laura A. Peracchio, and Maria D. de Juan. “Cross-Cultural and Cognitive Aspects of Web Site Navigation.” Journal of the Academy of Marketing Science 30, no. 4 (2002), pp. 397-410. Naumann, Earl, Donald W. Jackson, Jr., and William G. Wolfe. “Comparing U.S. and Japanese Market Research Firms,” California Management Review 36, No. 4, (Summer 1994), pp. 49-69. Prescott, Charles A. “The New International Marketing Challenge: Privacy,” Target Marketing 22, no. 4 (1999), p. 29. Sethi, S. Prakash. “Comparative Cluster Analysis for World Markets.” Journal of Marketing Research 8 (August 1971), p. 350. Sharer, Kevin. “Top Management’s Intelligence Needs: An Executive’s View of Competitive Intelligence.” Competitive Intelligence Review, Spring 1991, pp. 3-5. Wasilewski, Nikolai. “Dimensions of Environmental Scanning Systems in Multinational Enterprises.” Pace University, Working Papers no. 3 (May 1993). Solution Manual for Global Marketing Warren J. Keegan, Mark C. 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