Real or passive internationalization?

The anlysis of the kitchen hoods sector lets us show the advantages of the strategic approach

.

Premium price Planning Bestpractice Internationalisation Export International marketing

Log in to use the pretty print function and embed function.
Aren't you signed up yet? Log in!

In the context of a globalizing economy, internationalization has become an increasingly important strategic leverage. However, the process of internationalization is a difficult and particularly demanding task in terms of resources, that only a strategic planning approach can make less risky.
There are two different paths to reach foreign markets: the "passive" internationalization, and the "real" internationalization.

In the first case, the economic agents who carry on the risk of selling the products to the foreign markets are external to the company (buyers, importers, distributors). The company is a passive agent in the act of selling abroad. This form of export is an attempted sale, characterized by a strong lack of commercial relationships. The occasionality and the lack of analysis aimed at identifying a target market makes passive export a process with little chance of success in the long run. The lack of strategic assessment of the critical factors for competitive advantage, in fact, does not guarantee a long-term positioning on the target market to the company. One of the most important deficits relates to an ineffective segmentation of the target market, not allowing the company to seize the opportunities offered by the differentiation of its offer through specific marketing mix tools.

Consider, for instance, the case of Italian exports of kitchen hoods. As shown in the following chart, until 2007 Italy was the main exporter of kichen hoods in the world, thanks to an undisputed product leadership.
Then, the sector experienced a remarkable change: comparing the first graph with the second one, it is shown how Italy lost its leadership in favor of China and how its actual second position is threatened by Germany. During this period, Italy has suffered both a strong contraction of its share of world trade and a reduction of the amount of exports, which experienced a decrease from 628 million euros to 358 million in 2017.


Main Exporters of kitchen hoods 2007

Main Exporters of kitchen hoods 2017


Italian exportations, mostly composed by medium price goods, during the last 10 years suffered the consequences of the rise of emerging countries characterized by low costs of labor (China in the first place) and a difficult global economic situation, in the aftermath of the 2007-2008 financial crisis.
The two phenomena, impacting in a sub-contracting entrepreneurial context, thus not accustomed to using appropriate international marketing tools, led companies into following two separate paths: on one side, companies mostly intimidated by a cost competition began a delocalization process; on the other side, companies that are more aware of their competitive advantages decided to further qualify their products, in order to offer a product characterized by identifiability and high quality.
The latter path led to an increase in average export prices. Despite this, it is interesting to observe how the average Italian exporters' price continues to be much lower than the German exporters' one. The German companies of the sector are more capable of enhancing the quality of the product, exploiting premium price market segments.

average export price of cooker hoods

The price differential is stronger in some countries than others. For instance, in the Swiss market, the average price of German kitchen hoods is 244€, while the average Italian price is 152€. Another example is the English market, where the average German price is 168€, while the Italian one is 98€.
This evidence suggests that the Italian kitchen hood producers, although involved in a profound transformation, still have a long path towards positioning on premium price market segments. One of the still partially used tool is the definition of a specific marketing mix for every target market, which would make it possible to differentiate their offer from their international competitors. Only an active internationalization approach allows to seize the opportunities of differentiation and makes a better allocation of risks possible in the context of less favorable phases of world trade.