978-0134129945 Chapter 6 Lecture Note Part 1

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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 roles of information technology, management information systems, and big data in

a global company’s decision-making processes

2 Describe the various sources of market information, including direct perception

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3 Identify the individual steps in the traditional market research process and explain some of the

ways global marketers adapt them

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

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 marketing-related issues.

Even so, marketers must do their homework if they are making the most of modern information

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, MANAGEMENT INFORMATION SYSTEMS, AND

BIG DATA FOR GLOBAL MARKETING

(Learning Objective #1)

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.

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An MIS should provide a means for gathering, analyzing, classifying, storing, retrieving, and

reporting relevant data.

The term Big Data refers to extremely large data sets that can be subjected to computation

analysis to reveal patterns and trends.

Big Data and Big Data Analytics have long been the province of astronomers, meteorologists,

and other members of the scientific community. It is only recently that big data collection and

analysis have been used in business situations.

The exploding popularity of Facebook and other social media platforms has resulted in a wealth

of big data. The cost of data collection has dropped so dramatically that a company can amass

data irrespective of a particular question, problem, or purpose that its marketers might have.

One component of a firm’s MIS is a business intelligence (BI) network that helps management

make decisions. Global competition, together with the advent of the big data era, 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, FedEx, Google, Netflix, Spotify, Wal-Mart and other companies to operate as real time

enterprises (RTEs). The RTE model is growing in popularity and as more executives and

managers realize leveraging big data via advanced analytics can be source of competitive

advantage.

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.

RKETING METRICS AND ANALYTICS

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 are 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 Clubcards 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.

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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.

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Customer relationship management (CRM) is one of the business tools that help companies

leverage the data they collect. 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. Data

warehouses can serve other purposes as well. For example, they can help retailers with multiple

store locations fine-tune product assortments.

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:

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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

(Learning Objective #2)

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. It means seeing,

felling, hearing, smelling, or tasting for oneself to find out what is going on in a particular

country.

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 (See Exhibit 6-3). 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

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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, as

defined by the American Marketing Association, 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 different ways. One is to design and implement a

study with in-house staff; the other is to use an outside market research firm (Figure 6-2).

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:

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“What information do I need?”

“Why do I need this information?”

Step 2: Problem Definition

Marketers must be aware of the impact that SRC (self-reference criterion) 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. Suppose

a marketer wants to assess the basic market potential for a product. To find the answer,

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.

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.

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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.

Global marketing guru David Arnold offers the following guidelines regarding data gathering:

• Use multiple indicators rather than a single measure.

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• 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

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