The single most important cause of failure in international business is insufficient preparation and information. The failure of managers to comprehend cultural disparities, the failure to remember that customers differ from country to country, and the lack of investigation into whether or not a market exists prior to market entry has made international business a high-risk activity.
INTERNATIONAL AND DOMESTIC RESEARCH
The execution of international research may differ substantially from that of domestic research. The four primary reasons for this difference are:
In crossing national borders, a firm encounters parameters not found in domestic business. New parameters also emerge because of differing modes of operating internationally. Managers must therefore obtain information in order to make good business decisions.
New Environmental Factors
Many of the domestic assumption on which the firm and its activity were founded may not hold true internationally. Management needs to learn the culture of the host country, understand its political systems and level of stability, and comprehend the existing differences in societal structures and language.
The Number of Factors Involved
The number of changing dimensions increases geometrically. Coordination of the interaction among the dimensions becomes increasingly difficult because of their sheer number. Such coordination, however, is crucial to the international success of the firm for two reasons. First, in order to exercise some central control over its international operations, a firm must be able to compare results and activities across countries. Second, the firm must be able to learn from its international operations and must find ways to apply the new lessons learned to different markets. Without coordination, such learning cannot take place in a systematic way.
Broader Definition of Competition
Firms must determine the breadth of the competition, track competitive activities, and evaluate their actual and potential impact on company operations on an ongoing basis.
RECOGNIZING THE NEED FOR INTERNATIONAL RESEARCH
A major reason why managers are reluctant to engage I international research is their lack of sensitivity to differences in culture, consumer tastes, and market demands. A second reason is a limited appreciation for the different environment abroad. They are not prepared to accept that labor rules, distribution systems, the availability of media, or advertising regulations may be entirely different from those in the home market. A third reason is lack of familiarity with national and international data sources and inability to use international data once they are obtained. Finally, firms often build their international business activities gradually, frequently based on unsolicited orders.
Research allows management to identify and develop international strategies. The task includes the identification, evaluation, and comparison of potential foreign business opportunities and the subsequent target market selection. In addition, research is necessary for the development of a business plan that identifies all the requirements necessary for market entry, market penetration, and expansion. On a continuing basis, research provides the feedback needed to fine-tune various business activities. Finally, research can provide management with the intelligent to help anticipate events, take appropriate action, and adequately prepare for global changes.
DETERMINING RESEARCH OBJECTIVES
Research objectives will vary depending on the views of management, the corporate mission of the firm, the firm’s level of internationalization, and its competitive situation.
Going International – Exporting
A frequent objective of international research is that of foreign market opportunity analysis. A sequential process of researching foreign market potentials consist of:
- Preliminary screening for attractive country markets (Which foreign markets warrant detailed investigation?)
- Assessment of industry market potential (What is the aggregate demand in each of the selected markets?)
- Company sales potential analysis (How attractive is the potential demand for company products and services?)
Going International – Importing
When importing, the major focus shifts from supplying to sourcing. Management must identify markets that produce supplies or materials desired or that have the potential to do so. Foreign firms must be evaluated in terms of their capabilities and competitive standing.
Just as management would want to have some details on a domestic supplier, the importer needs to know about the reliability of a foreign supplier, the consistency of its product or service quality, and the length of delivery time. In addition, foreign government rules must be scrutinized as to whether exportation from the source country is possible. The international manager must also analyze domestic restrictions and legislation that may prohibit the importation of certain goods into the home country.
Research objectives include obtaining more detailed information for business expansion or monitoring the political climate so that the firm successfully can maintain its international operation. Information may be needed to enable the international manager to evaluate new business partners or assess the impact of a technological breakthrough on future business operations.
CONDUCTING SECONDARY RESEARCH
Identifying Sources of Data
Typically, the information requirements of firms will cover both macro information about countries and trade, as well as micro information specific to the firm’s activities. On many occasions, firms can make use of secondary data, that is, information that already has been collected by some other organization. A wide variety of sources present secondary data, the principal ones are governments, international institutions, service organizations, trade organizations, trade associations, directories and newsletters, electronic information services, and other firms.
Selection of Secondary Data
Even though one key advantage of secondary data over primary research is that they are available relatively quickly and inexpensively, the research should still asses the effort and benefit of using them. Secondary data should be evaluated regarding the quality of their source, their recency, and their relevance to the task at hand.
Interpretation and Analysis of Secondary Data
Secondary data were originally collected to serve another purpose that the one in which the researcher is currently interested. Therefore, they can often be used only as proxy information in order to arrive at conclusions that address the research objectives. The researcher must often use creative inferences, and such creativity brings risks. Therefore, once interpretation and analysis have taken place, a consistency check must be conducted. The researcher should always cross-check the results with other possible sources of information or with experts.
Many societies are increasingly sensitive to the issue of data privacy, and the concern has grown exponentially as a result of e-business. Readily accessible databases may contain information valuable to marketers, but they may also be considered privileged by individuals who have provided the data.
CONDUCTING PRIMARY RESEARCH
Primary data are obtained by a firm to fill specific information needs. Although the research may not be conducted by the company with the need, the work must be carried out for a specific research purpose in order to qualify as primary research.
Industrial versus Consumer Sources of Data
The researcher must decide whether research is to be conducted in the consumer or the industrial product area, which in turn determines the size of the universe and respondent accessibility.
Determining the Research Technique
Once the desired data structure is determined, the researcher must choose a research technique. As in domestic research, the types available are interviews, focus groups, observation, surveys, and the use of web technology.