Lecture 3: The Export Marketing Process

1.1 The Export Marketing Process

1.2 Introduction

In this lecture we will cover the following:

• An overview of the export marketing process;
• Assessing the firms potential;
• Selecting markets;
• Segmenting, targeting and positioning in selected markets;
• The marketing mix; and
• Market entry channels.
1.3 Answer the question

Correct Choice

X It involves an analysis (SWOT) of the enterprise and its product, followed by

an international market analysis, segmentation, targeting, and positioning,
and finally the creation of a value proposition (marketing mix).

It involves the creation of an export marketing plan, followed by an analysis

(SWOT) of the company, an international market analysis, and finally the
creation of an export marketing strategy.

Feedback:

The best practice is to begin with an assessment of the company’s capabilities, before designing a plan.

Next, let's take a look at the export marketing process.

1.4 The export marketing process

The export marketing process is a series of activities, shown in the diagram below.

1. SWOT ANALYSIS

Assess company's potential

• Assessment of the enterprise’s internal capacities

• Consideration of the enterprise’s external opportunities and threats

2. MARKET ANALYSIS

Assess potential markets

• Identification of potential markets Analysis of identified markets

• Selection of potential markets

3. MARKETING STRATEGY

Set objectives and create a marketing strategy

• Segmentation

• Targeting

• Positioning

4. INTERNATIONAL MARKETING MIX

Align choices in a marketing plan

• 5 P's of marketing

5. MARKET ENTRY MODES

Channels to be used to enter the markets

1.5 Assessing a company’s potential

Notes:

Let's use an example to look at each stage in more detail.

SCENARIO

An enterprise based in an LDC has succeeded in exporting its shellfish on an ad hoc basis to various
distributors in South Africa and the UK. The enterprise was initially set up to supply the hotel and
restaurant industry within the LDC, but soon began to get export enquiries due to the excellent quality of
their product. The enterprise has now invested both in a larger plant and in suitable export packaging, and
has branded the product. The plant has met with food safety standards representatives (HACCP). It now
wants to develop a marketing strategy. Click on the image on the right to see some of the main issues
raised by the enterprise's SWOT analysis.

Strengths

• Good local reputation

• Product quality

• Expanded plant

• HACCP

Weaknesses

• Still limited supply

• Limited financial resources
Opportunities
• High demand
• Clients looking for a reliable daily supplier of fresh shellfish
Threats
• Logistics chain not reliable enough
• Strong competition from Asia
• Sanitary barriers
1.6 IS THIS STATEMENT TRUE OR FALSE?

Correct Choice

TRUE

X FALSE

Feedback:

This is false.

There are a few factors relating specifically to exports and export readiness that must be included in this
exercise.

1.7 Assessing markets

Market opportunities are assessed based on the enterprise and product analysis.
The assessment therefore results in a selection of markets.
SCENARIO

A selection of markets needs to be based on the relative strengths, weaknesses, opportunities and threats
identified by the internal analysis of the enterprise. In our example, it was decided that the South African
and UK markets were still underserved with quality shellfish, particularly in the catering and hospitality
sector. Moreover, trade statistics for these markets show that there has been an increase in the
importation of shellfish over the past five years. Although the enterprise's plant size was increased, it is still
a relatively small supplier and the market size for these two markets is sufficient.
There are direct flights every day to Johannesburg and London, enabling the enterprise to deliver fresh
shellfish daily to these markets. The enterprise has a current working relationship with freight agents for
the respective markets who have the necessary facilities and distribution capability to handle fresh shellfish.
There are limitations in the storage facilities at the airport in the enterprise's own country. This poses a
challenge, since deliveries have to be made to the airport within two hours of departure. Flight delays,
therefore, can cause problems.

1.8 Answer the question

Correct Choice

The population of the country

X The number of restaurants and hotels

X The import tariff rate for the product to be exported

Feedback:

For shellfish, the population of a country is not particularly important. Even smaller countries have a large
enough population to ensure that, given adequate economic conditions, demand for shellfish will be high
enough for all but the largest enterprises.

The number of restaurants and hotels, and the import tariff, however, are all indicators of a viable market
for shellfish in a country.
1.9 Formulating export marketing objectives

The formulation of export objectives marks the start of the third stage of an export process.
This stage is meant to provide SMEs with a sense of direction: the needle of a business compass should
be steadily pointing towards future business activities, eliminating doubts and second thoughts, and
enabling a clear view of the tasks and challenges that lay ahead.
Building on the analysed market conditions and developments, as well as an enterprise’s state of export
readiness, this is the stage to define into detail what the SME wants to achieve, where, when and how. In
other words, the enterprise should be able to base itself on the outcome of its analysis and market
selection to formulate sound objectives. These objectives should provide the building blocks for the
enterprise's targets.
These, therefore, should be SMART:
Specific, Measurable, Achievable, Realistic and Time-bound.

Specific: the product(s) and market(s) should be specified.

Measurable: the objectives should be quantitative, expressed in terms of sales value, sales growth, market
share, number of customers etc.
Achievable: the objectives should be based on the enterprise's strengths, its critical success factors (the
internal potential), as well as market opportunities (external potential).
Realistic: the objectives should be realistic, in the sense that the required investments should remain in
proportion to expected gains.
Time-bound: a specific period within which the objectives are to be achieved should be set. Formulating
short-term, mid-term and long-term objectives is advisable.
1.10 IS THIS STATEMENT TRUE OR FALSE?

Correct Choice

X TRUE

FALSE

Feedback:

This is true.

The objectives all include specific targets that need to be achieved within a time period.
1.11 Formulating a marketing strategy

You have been introduced to the concepts of segmentation, targeting and positioning in lecture 2. A
marketing strategy is based on these previous steps in the export marketing process, and must be
conducted in order to create the foundation for the development of a marketing mix.
The end result of this process therefore provides the following:
• Specifically defined market segments within the chosen export market.
• A decision as to which of the market segments will be targeted.
• Decisions regarding the ways in which the product will be positioned in the minds of the customers in
those targeted segments.
• Once the marketer knows how the product will be positioned in the targeted segment, the marketing mix
(value proposition) can be developed.

SCENARIO
The markets in the UK and South Africa will be segmented in the following way:
• Distributors to the catering trade based in London and Johannesburg
• Large hotels and restaurants in London and Johannesburg
• Delis and fishmongers in London and Johannesburg
• The mass retail markets (supermarkets) in London and Johannesburg
The segments that are targeted for this strategy are:
Distributors to the catering trade based in London and Johannesburg
The product will be positioned as follows:
Fresh shellfish harvested the same day, in different sizes, not frozen, packaged in catering packs most
suited to the catering industry, packed in disposable cooler boxes with dry ice. Coolers are branded with a
statement and images to show the ways in which the shellfish are produced in an environmentally friendly
facility in sea water. The product is safe (HACCP), of good quality and the supply is reliable.
1.12 Answer the question

Correct Choice

Target markets

Targeted segment

Product positioning to segment

Market segments

Feedback:

The UK and South Africa are examples of target markets.

Catering distributors, supermarkets, and hotels are market segments.

The chosen channel marketed to catering distributors is a targeted segment.

Advertising the product as being supplied fresh, daily and in amounts suited to catering is an example of
product positioning to segment
1.13 The international marketing mix

The marketing mix can be represented as follows:

Packaging
...with a packaging and presentation that preserves and protects the product while making it attractive to the
customer.
Promotion
... promoted effectively through tailored activities and channels.
Price
...at a price that customers can afford and are willing to pay.
Place
...delivered through channels that are convenient and accessible to the target customers.
Product
Adapting/creating a product or service to meet the needs or wishes of markets or customers.

1.14 Creating a marketing mix - introduction

Based on a SWOT analysis, market analysis, and overall marketing strategy (segmentation, targeting and
positioning), strategic decisions regarding specific elements of the marketing mix need to be made.
These include:
1.a product and packaging strategy;
2.a price strategy;
3.a distribution strategy; and
4.a promotion strategy.

1.15 Creating a marketing mix

A marketing mix is made up of four components, which work together to help a product enter its target
market.

DEVELOPING A PRODUCT AND PACKAGING STRATEGY

How can SMEs develop their product range in accordance with customer needs and the prevailing market
conditions (competition, rules, regulations) in their target markets? Can their existing product assortment
be used, or does it need adapting?
Constructing a product strategy includes analysing features/benefits analysis, determining the unique
selling proposition, knowing the extent to which a product can be adapted, adapting the product
packaging (marketing and legislation requirements), knowing the product life cycle stage and seasonality,
an awareness of environmental concerns.
SCENARIO
The product strategy consists in the fact that the shellfish are sold fresh (not frozen), on the same day they
are harvested, at various different sizes, and packaged to suit the catering industry. Packaging serves to
keep the product at a required temperature in convenient and disposable coolers.

DEVELOPING A PRICE STRATEGY

What is the pricing policy, to what extent is the pricing different from the competition, and how is pricing
flexibility applied to promote sales (e.g. discounts, quantity offers, contractual tenders etc.).
In many cases SMEs will not be able to dictate their own prices. Market research should give insight into
the prevailing retail and wholesale prices, appropriate margins, and competitor prices. The considerations
to make in determining a pricing strategy are: cost, demand, competition, image, and segment. It is
necessary to consider the countermeasures that an SME's competitors may take. Will they strike back?
Will they be forced to defend themselves aggressively? Are they in a position that might allow them to take
long-term actions to undermine the SME's position?
SCENARIO
Pricing has been determined with the main emphasis placed on reliability and quality. The product is a
commodity and there is a prevailing market price range for different sizes and grades of it. The exporting
SME’s product is high grade and the market will therefore be developed based on quality and reliability
rather than aggressive pricing.

DISTRIBUTION STRATEGY (LOCATION)

Which distribution channels will be used?
How do they relate to the competition?
SCENARIO
The distribution strategy consists in delivering fresh shellfish daily, 5 days per week, and by air (direct
flights to market). Distributors are recognized and established in the catering trade, and import seafood
from all over the world. Although a distributor is shared with competitors, the strategy is to develop a track
record of reliability both in terms of quality and delivery. A high priority is placed on relationships with the
buyers, and on obtaining market information from the distributor for production planning.

PROMOTION STRATEGY
The promotional tools (the promotional mix) employed by the SME should be described(advertising, trade
fair participation, Direct Marketing, e-Marketing etc.)
SCENARIO
The promotional strategy will mainly involve the development of a relationship with the distributors based
on the SME's track record and provision of information that supports their commitment to supply a high
quality product in a reliable manner. This will involve multiple visits to distributors, invitations to distributors
to visit the plant, a website showing the plant and product, as well as regular updates regarding what is
happening at the plant for planning purposes.

1.16 Answer the question

Correct Choice

X Statement 1: Adapting a product for a particular market is an example of a

product strategy and therefore part of a marketing mix.

Statement 2: Selecting a distributor is an example of determining

"promotion" according to the 5Ps (product, packaging, price, place and
promotion.)

Feedback:

Selecting a distributor is an example of determining the "place" according to the 5Ps of a marketing mix,
not the "promotion."

1.17 Determining a market entry strategy

Small enterprises often start exporting through the receipt of unsolicited orders from abroad. As their
volume of export orders grows, these enterprises need to start thinking about setting up a long-term
relationship with their export markets by having some kind of representation in them. There are a range of
options for such representation:

APPOINTING AN AGENT
This is a common form of representation for exporters in developing countries. An agent is someone who
works an the exporter in a foreign market (the exporter is called the principal). The agent “introduces”
customers to the exporter and can help market the exporter’s products. For this, the agent is paid a fee or
a commission by the exporter. It is important to note that the agent does not buy the exporter’s goods, nor
does he/she enter into contracts with customers for these goods.
APPOINTING A DISTRIBUTOR
Many exporters confuse agents with distributors. A distributor is someone who buys the exporter’s goods
and then sells those goods to customers in his/her area, often through his/her own sales outlets.
Distributors can also provide exporters with services such as credit reports, marketing information and, in
some cases, design engineering.
E-COMMERCE
is an alternative which involves selling directly on the web to avoid middle men in the value chain.
JOINT VENTURE
Another option for well-established exporters might be to set up an association with a local partner to form
a joint venture. Often, however, this option involves binding legal implications, making it difficult for
exporters to withdraw from such agreements. Before agreeing to a joint venture, exporters should ensure
that it is possible to end the arrangement if required.
BRANCH OFFICE
SMEs can set up their own office in their export market. This strategy might be suitable for a well-
established export operation and would ensure that it has control over its channels of distribution. This
option is not really applicable for small exporters, however, as it can be costly and often involves a large
number of formalities.

1.18 Summary

• The export marketing process consists of four stages of strategic planning.

• The first stage involves an enterprise assessment, which forms the basis for determining export potential
and competitive advantage.
• The second stage involves a market analysis in order to create a short list of selected markets (countries) in
which the enterprise will be competitive.
• The third stage involves the process of segmentation, targeting and positioning within the selected country
markets. This stage is vital in identifying the customers and the best methods of marketing to them.
• The fourth stage involves the development of the marketing mix (product, price, packaging, place and
promotion) that will best suit the targeted segments.
• Numerous entry strategies can be used, and different strategies can be employed at different stages of
the exporting process. While agents may be best for initial entry, a more direct presence, such as a
branch office, may be best one the market is sufficiently developed.
1.19 Thank you for completing the lecture