Bachelor of International Marketing
BI Norwegian Business School University of Mannheim
Spring term 2018 June 4th, 2018
Written by:
Solvor Aasland Bendix G. Smith Maya S. Haddad Ingebjørg Johansson
Advisor:
Moritz Tischer
This paper is done as a part of the undergraduate program at BI Norwegian Business School. This does not entail that BI Norwegian Business School has cleared the methods applied, the results presented, or the
conclusions drawn.
Acknowledgements
We would like to thank the following who have contributed to the writing of this bachelor thesis in International Marketing:
A special thanks to No Isolation for the opportunity to write about such an interesting company. Especially Relations Manager, Germany, Mr.Christian Matzen, for his insight and contribution with useful information about No Isolation.
All the 15 persons that participated in the interviews, which gave us useful insight in the German school market. We are grateful for the time and effort they have invested in contributing to our thesis.
We would like to give a special thanks to Mr. Moritz Tischer (M. Sc., Lehr-stuhl for Business-to-Business Marketing, Sales & Pricing, Prof. Dr. Dr. h.c. mult. Christian Homburg), our advisor, for guidance and advice.
Mannheim, June 4, 2018
___________________________ ___________________________
Aasland, Solvor Haddad, Maya Stephanie
___________________________ ___________________________
Johansson, Ingebjørg Smith, Bendix Gjølstad
I. Executive summary
No Isolation was founded in 2015, with one single purpose: to reduce involuntary social isolation. Their goal is to reduce loneliness among children who are suffering from long-term illnesses or injuries. The AV1 robot is one of the world’s first communication robots that allows children to participate in their everyday lives, despite their long-term illness.
The objective of this paper is to examine the AV1 robot of No Isolation, and develop an entry strategy into the German market. The main focus in this thesis is to establish the level of attractiveness of AV1 in the German market and the company’s ability to internationalise.This is a business to business thesis, which means that the target
customers are schools in Germany. No Isolation have just started their preparatory work to enter the German market, and are planning to launch an avatar in Mannheim.
By gathering primary and secondary information, it is possible to identify No Isolation’s competitive advantages, and which obstacles they have to take into consideration when entering the German market. When identifying their internal strengths and weaknesses, and how the company can use these to take advantage of the opportunities and threats in new markets, it is possible to develop recommendations and implementations to improve their situation.
We found it logical to begin with methodology, because we wanted to get an impression of the school market in Baden-Württemberg, before establishing which secondary data was needed to collect. An example of this, was the importance of the hospital schools and privacy concern. We also wanted to get the interviews done as soon as possible, since we were not certain about how much time it would consume. We then decided to analyse the company, to see if they have the capabilities and resources to take the company abroad, before finally analysing the industry.
Table of contents
I. Executive summary iii
II. List of figures v
1. Introduction 1
1.1 The scope and objectives of the thesis 1
2. No Isolation 3
2.1 Background 4
2.2 Vision and mission 5
2.3 Product areas 6
2.4 Business model 7
2.5 Marketing and sales concept 8
3. Methodology 10
3.1 Research aim and research questions 12
3.2 Research design 12
3.3 Data collection 14
3.4 Data analysis 14
3.5 Data conclusion 17
4. Internal analysis 19
4.1 VRIO Framework 21
4.2 The Bakka model 24
4.3 ACE – model 30
4.4 Market network 35
4.5 Preparedness for internationalisation 36
5. External analysis 38
5.1 The industry 39
5.2 Competition 41
5.3 PEST – analysis 44
5.4 Porter's five forces 49
5.5 Globality of the industry 54
6. SWOT - analysis 56
7. Strategy 62
7.1 Solberg’s nine strategic windows 63
7.2 Strategic problem definition 65
7.3 Critical success factors 66
7.4 Entry strategy 67
7.5 Segmentation and positioning 68
7.6 Marketing mix 72
8. Final recommendations 78
III. Limitations 80
IV. Affidavit 81
V. Biography 82
VI. Appendix 91
II. List of figures
Figure 1: The research process
Figure 2: Preparedness for internationalisation (self provided from Solberg, 2016) Figure 3: VRIO-model (Rothaermel, 2015)
Figure 4: The Bakka model (Based on lecture notes and Solberg, 2016) Figure 5: ACE-model (Solberg 2016)
Figure 6: Niche entry barriers (self provided from Solberg, 2016) Figure 7: Porters five forces (Rothaermel, 2015)
Figure 8: Classification of industries (Solberg, 2016) Figure 9: SWOT-analysis (self provided)
Figure 10: Solberg’s nine strategic window (2016)
Figure 11: For layers of product (Masterson & Pickton, 2014)
Introduction
1 Introduction
1.1 Scope and objectives of the thesis
This thesis was written as a part of our bachelor’s degree in International Marketing on behalf of BI Norwegian Business School, while at exchange at the University of Mannheim. We are four students from BI who conducted this research paper with assistance from a contact person in No Isolation.
The scope of this thesis is to evaluate and recommend the best entry strategy for No Isolation to successfully penetrate the German market with their AV1 robot. The thesis is highly relevant, because No Isolation is currently in the preparatory process of evaluating how to enter the German market in the most beneficial way. No Isolation is targeting the Baden-Württenberg area, which is the location this thesis is focused on.
Problem definitions:
1. How can No Isolation optimise an entry into the German market?
2. What are the key success factors for AV1 to succeed in the German market, and what are the main challenges?
Objective:
The objective of this thesis is to establish the attractiveness of the German market, and the best entry strategy for No Isolation.
The aim of this thesis is to find out what advantages AV1 has as a niche product in the industries it operates in. We are also going to focus on what challenges they need to consider when internationalising the company, and how to overcome these obstacles.
The objective is to research the market potential for AV1 in Baden-Württemberg and analyse the internal factors within the company, before examining the external factors of the industry that No Isolation needs to take into account.
Considering these factors, we have come up with the following research questions to answer our problem definitions:
1. Are teachers and students in the Baden-Württemberg area willing to use AV1?
2. What is No Isolation’s biggest threats and who are their competitors?
3. How much is the potential German customer willing to pay for the AV1 robot?
4. What systems do German schools have when a child has to stay away from school for longer periods of time?
5. What social and cultural obstacles will No Isolation face when entering the German market?
6. Which factors impact the attractiveness of the German market?
No Isolation
2. No Isolation
2.1 Background information
“Thousands of children and young adults are unable to partake in their day-to-day activities due to long-term illness. Because of this, we created AV1.”
Quote from No Isolation’s homepage (No Isolation, 2018).
No Isolation is a Norwegian company established in Oslo in October 2015. The
company was founded by Karen Dolva, together with Marius Aabel and Matias Doyle.
Dolva studied computer science and interaction design, which gave her an advantage in the development of their products (The Guardian, 2017).
It all started when founder Karen Dolva had a conversation with her roommate, who worked as a nurse. They were discussing the situation children have to face when hospitalised for a longer period. In the beginning they would get a lot of visitors (if the condition allowed it) from friends and family, but after a few weeks this would rapidly decline and the child would not get the opportunity to participate in both the educational and the social aspects of their day to day life anymore. This concerned Dolva, who then proceeded to research the topic. She came in contact with founder of the Cornelia Foundation (Cornelia Stiftelsen), Anne Fi Troye, who have since collaborated with No Isolation on several occasions. The purpose of the Cornelia foundation is to help all children and youths with a cancer diagnosis with their education (Appendix 1).
No Isolation also has a close collaboration with The Norwegian Cancer Society (Kreftforeningen), who has shown great interest in the company. The Norwegian Cancer Society is a nationwide non-profit organisation which works against cancer and offers help to patients in Norway. They helped her get in touch with children who could benefit from the product, and have also assisted her and the two other co-founders in developing the first prototype of AV1 (No Isolation, 2018).
Another important partner to mention is the University of Oslo, the largest university in Norway and a leading university in Europe. The University of Oslo gave Dolva and her partners valuable insight when it came to preparatory research before launching the
product in the market. No Isolation signed a distributor contract with the IT-giant Atea worth 12 million NOK, to get a stronger foothold in the market and to get recognised (DN Gründer, 2017a). They also cooperate with the Norwegian tele company “Telia”, where No Isolation get, among other things, 10 NOK for every old cell phone that is recycled at Telia stores (Telia, 2016).
2.2 Vision and mission
No Isolation’s vision is a world without involuntary loneliness. They want to prevent isolation and loneliness. Their main focus is to help children, but they also target the elderly.
A research discovered that in the European Union, about 520 000 children and
adolescents in the age group 5-19 have an illness that keeps them away from school for more than 2 months. This would mean that there is an empty desk in 1 out of 6
classrooms. These numbers are rather high, and this is what AV1 is meant to reduce (No Isolation, 2018).
Dolva has herself said that she “envisages a situation in which schools buy or hire several robots that are transferred between pupils as and when the need arises”.
Her dream is “to end social isolation completely and it doesn’t matter how long it takes.”
(The Guardian, 2017).
Their stated mission is: “No Isolation builds communication tools designed to reduce involuntary loneliness and social isolation in vulnerable groups in society” (No Isolation, 2018).
They want to create technology which is easy to use for the ones in need of more aid, rather than for fast movers. Focus on functionality and quality that children and elderly easily can comprehend is a priority. A quote from their homepage states that: “At No Isolation we develop niche products that are just as sleek and functional for the end user, as generic products are for the mass market” (No Isolation, 2018).
Dolva is also very passionate about female roles in the private sector. Especially in the IT-business. In the Norwegian IT-businesses, 75% are men, and 40% are between 30 and 39 years old (DN Gründer, 2017b). Women are severely underrepresented,
something she expresses as very sad, because a lot of the work they are doing has more female traits than male. For instance, accuracy, the ability to create and follow an exact recipe and detail- orientation. This might be why the employees at No Isolation are almost 50/50 divided between men and women (Dagens Næringliv, 2017).
2.3 Product areas
No Isolation currently offers two products; AV1 and KOMP. In this thesis the focus will be primarily on AV1, which is made to help kids participate in everyday situations at school and with friends.
AV1 is an avatar that is placed on the school desk of the absent child, which the child can control via phone or tablet from home. The avatar has no screen but a camera, speaker and microphone. “AV1 is not only a pair of eyes and ears in a classroom (Independent, 2017).” It allows the sick child to participate in discussions in class and answer questions while being at home. The avatar has several options: the child can raise the hand by flashing a light signal. There is the option to whisper by turning down the volume of the robot, and an option to mark the presence and the absence of the child, if he or she does not want to or can participate in the course anymore.
The other product No Isolation is currently offering, is KOMP (No Isolation, 2018). This is a communication tool to help seniors keep in touch with their friends and family. In Norway, 26 000 of the older generation only has contact with family and relatives once a month, or less. Communication goes faster, and this can cause the elderly to fall behind. 7.2% of the population in the European Union report that they have absolute no contact with friends or relatives.
Researchers have uncovered the fact that loneliness has a correlation with increased mortality risk, and higher risks of developing illnesses such as dementia. 32 % of
people aged 65 or older lived alone in 2014 in the EU (Federal Statistical Office of Germany, 2016, p. 69).
This is the basis for why No Isolation developed the product KOMP. No Isolation wanted to develop a tool to help these people stay in contact with their families in their everyday life. With KOMP it is easy to call, text and share pictures for everyone. It is specifically developed to make it easy for seniors to handle.
2.4 Business model
No Isolation sells highly advanced technological robots at a high price to cover the costs of production. As of right now, the sales alone are not sufficient to carry the company. They are dependent on sponsoring from other, larger companies to achieve their goals.
AV1 is offered to private persons as a leasing option. It can either be rented for a period shorter than 6 months, or for a period longer than 6 months. If rented shorter than 6 months, the monthly price is 2990 NOK (Norwegian prices). Per today, 5th of March, the exchange rate is 9,7, so it equals to 308 EURO. If rented longer than 6 months, the price is 18 900 NOK per year. This equals approximately 1950 EURO.
If the buyer represents a school or a municipality, No Isolation also offers a purchasing option. This costs 24 000 NOK, or 2475 EURO. The school can then adjust the robot to the child who will be using it. It comes with insurance, which includes a new, free robot the three first times it gets broken. The fourth time the school has to pay 2500 NOK or 257 EURO deductible. Additionally to this, the school has to pay 1000 NOK monthly for unlimited mobile internet (No Isolation, 2018).
No Isolation have their own research department, and use their knowledge to get
awareness around social isolation and involuntary loneliness in the society. An example of how they are trying to accomplish this is for instance through TEDx talks in Arendal and Vienna (Youtube, 2017), and articles in the Huffington Post (Huffington Post, 2017).
They currently have 60 employees that are highly qualified and dedicated to what they do in the company. These employees are located in Amsterdam, London and Oslo.
They are divided into a product-, design-,marketing and research department in Oslo, while sales-representatives, operation-department and customer-care are available in all the three countries.
They develop products that are customized to the segments targeted, such as the AV1 for children and adolescents and KOMP for seniors. The researchers dive deeply into the complexity of problems that long-term sick children and elderly encounter. Once enough information is collected, they present it to the rest of the company and give them a 5-day design sprint. This method is developed by Google (Google Ventures, 2016). The result of this design sprint is simple cardboard prototypes which are presented on the fifth day to potential future users to validate. In this process of developing better prototypes, they get feedback from potential users and repeat the process until the solution is market ready.
In short, they start with “why”, and make sure they are confronting the actual problem, and ensure a proper solution together with the concerned group (Start With Why, 2018).
2.5 Marketing and sales concept
Representatives from No Isolation are currently travelling around, meeting with potential partners, organisations for patients, hospitals, insurance companies and ministries to expand the network of partners. These networks can provide experience, contacts, investors, and help them find financial solutions to prevent the economic burden to impact the family of the child. An avatar can be too expensive for a family to apprehend, so investors who can assist the financial challenge is necessary. This, in combination with their expertise knowledge of isolation, loneliness and other sensitive topics, characterise their approach as consultative sales (Appendix 1).
In regards to marketing, No Isolation mainly advertise in Norway. An example of marketing for AV1 in Norway, is television commercials. They also have a commercial for KOMP on the airport trains screens. They use companies like Telia, Bloomberg, Financial Times, Case for Change, and World Economic Forum, to assist promotion.
As mentioned, No Isolation has a collaboration with Atea. Atea is the third biggest IT- infrastructure provider in Europe. Atea is a company of advisors who work for
technological solutions and they use their competence to “build the future with IT, and create a better future for organisations and society at large” (Atea, 2018). On the 19th of January 2017, No Isolation and Atea signed a distribution agreement. The purpose of the collaboration was to launch 500 robots when the schools started in the fall. The collaboration with Atea gives No Isolation a significant advantage when it comes to marketing and sales. By working closely with customers and partners they develop solutions to help the segments targeted (Atea, 2017). As already stated, No Isolation has agreements with several partners, and because of these agreements they can access more efficient markets and sales concepts (No Isolation, 2018).
Concerning marketing in the international market, No Isolation has started adapting their marketing efforts. On youtube they have adapted the main marketing film to different countries and languages. This movie is currently (March 8 2018) available on youtube directed towards Great Britain, Germany and Romania. They have also
translated their homepage, www.noisolation.com, into different languages and adjusted it to the respective country.
Methodology
3. Methodology
In this chapter, the research process and data collection will be explained. With help from the research model (Gripsrud, Olsson & Silkoset 2016, p. 39) the research structure was designed as follows:
Figure 1: The research process (Gripsrud, Olsson & Silkoset, 2016, p. 39)
As this thesis is written in a B2B perspective, it was found logical to conduct interviews instead of surveys because of accessibility to data. It was important to get an
understanding of individual experiences and opinions. In order to find out if the AV1 robot has any potential, an analysis of the German school market was conducted. Based on this, we started looking for people in close relations with schools. 15 individual interviews were conducted with teachers, principals, and teacher students. Each interview lasted approximately one hour. Before each interview we had a short introduction about the product, and our intention with the collected content.
Both primary and secondary data was used to collect our research and answer our research questions. First, our goals and research questions had to be developed, before deciding on design and collection of necessary data. Finally, we analysed the data collected and summarised the findings.
3.1 Research aim and research questions
After exploring the entry potential for AV1, it is possible to analyse the results and see what No Isolation can do with this potential. The research aim is to determine the best entry strategy for AV1 in the German market. To reach this goal, we will evaluate the German school market, and establish which factors should be prioritised. The findings will be used as guidance for the recommendations of the best entry strategy into Germany.
Looking at AV1’s current position and ambitions we have come up with the following research problems:
How can NoIsolation optimize an entry into the German school market?
What are the key success factors for AV1 to succeed in the German market, and what are the main challenges?
The objectives of this thesis is to establish the attractiveness of the German market, and the best entry mode for No Isolation.
The research questions for this thesis are:
1. Are teachers and students in the Baden-Württemberg area willing to use AV1?
2. What is No Isolation’s biggest threats and who are their competitors?
3. How much is the potential German customer willing to pay for the AV1 robot?
4. What systems do German schools have when a child has to stay away from school for longer periods of time?
5. What social and cultural obstacles will No Isolation face when entering the German market?
6. Which factors impact the attractiveness of the German market?
3.2 Research design
There are three different designs which can be used to collect data (Gripsrud, Olsson &
Silkoset, 2016):
1. Explorative design
This design is used when there is insufficient information about the topic. The goal is often to get a deeper insight and understanding of the topic in question. This is done by doing research, both primary and secondary, and assembling it in a flexible and
unstructured process. In our case, this entails researching the company, the differences between the Norwegian and German market, as well as how the German consumers would react to the implementation of AV1.
2. Descriptive design
When you have the information you need, but want to describe the situation of the specific topic. It is often tied to quantitative analysis techniques where the hypothesis’
is tested in large scales. Descriptive design is mainly for surveys, observations and the diary method.
3. Causal design
By using a form of experiment, researchers can prove how a specific cause will lead to a specific effect by using a set of conditions. The goal of this method is to see if manipulation of the independent variables have any effect on the dependent variables.
It is important to establish which types of data is needed, how to collect it, and how to analyse it. Based on prior knowledge, we can decide upon which research design to pursue to get the answers needed. A lot of information about No Isolation and the market is needed to continue this thesis, and by establishing and distinguishing between the three design methods, it is possible to gain a better understanding of No Isolation’s situation and collect enough data to answer the research questions. We went for an explorative design. This design is used to reduce the risk and get better answers in order to gain a deeper understanding of the company and the market.
Because of our limited knowledge about both No Isolation and the German market, the explorative design was optimal. Our secondary data was gathered through information online and with assistance from our contact person in No Isolation. The primary data
was collected through in-depth interviews. The information collected gave us a better understanding of the business and the market relevant to the business.
3.3 Data collection
It is important to ensure that our data collection is both reliable and valid. That the data is reliable means to what degree we can trust the data collected. To have valid data entails to what degree we measure what we are supposed to measure (Gripsrud, Olsson
& Silkoset, 2016). Keeping this in mind we proceeded to collect the data to be able to answer the research questions. Because not all of the research questions could be answered by secondary data alone, collection of primary data was also needed.
Secondary research
Secondary data is data which is already available to us. Information was gathered online, which means that it was important to be critical towards the findings and make sure it was reliable. Our contact person at No Isolation assisted us to get answers to questions we were unable to find on the internet, or information we were uncertain about. For the internal analysis we mainly used No Isolation’s website and Proff.no to get information about the company. Several platforms were used to find relevant external information about the German market.
Primary research
To answer the rest of the research questions new information which was not available online was needed. We collected primary data through in-depth interviews. Qualitative research was the obvious choice to get more insight in greater detail.
3.4 Data analysis
Interviews
As previously mentioned we decided to conduct interviews. This is because it is the most effective way to uncover individual experiences, opinions and interests, rather than quantitative data about the school market. 15 interviews were conducted of people with an age span from 20 to 65, in order to have greater variety in our answers. The interview consisted of 43 questions and lasted up to 1 hour. All the participants were
chosen by convenience, because we wanted information from the teachers in Mannheim and the teacher students at the university. A negative side of this is that one-on-one interviews are very time consuming, not only to collect, but also to analyse.
Findings
Most of the participants were sceptical to the AV1 robot. Some more than others, but the most common concern was privacy. The teachers were afraid of getting recorded during their lectures, or to have the parents of the sick child watching. Most of them became more positive when it was explained that it is not possible to record on the AV1 robot, but a few of the interviewed were still hesitant. Among our interview subjects, we found that age and reluctance of usage had a correlation. The younger generation were more eager to try the new product, while the older generation had less faith in it and were more positive to the current system used in Germany.
Perhaps the biggest issue to introducing AV1 in Germany, is the lack of availability to internet in the schools according to the interview subjects. None of the schools had wireless internet, and some did not even have cell-phone reception. AV1 functions on mobile internet or wifi, so cell-phone reception is necessary. There was also a general consensus that the internet issue needs to be solved before implementing a product like AV1.
We also found a correlation between positiveness towards AV1 and how resourceful the different schools are. The teachers at financially strong schools were more optimistic and generally thought that AV1 could be a valuable asset for their school in the future.
The teachers at the schools with less financial funds however, had different opinions.
Some did not see the need at all, while others thought it would be too expensive, and difficult to implement.
Another interesting aspect we found was that price did not play a big part in the teacher wanting the product or not. Most of them concluded that if there was a need for it, and it proves to be helpful for the child, price would not be one of the biggest issues.
However, at the less resourceful schools, the teachers thought it would be necessary with sponsoring from investors. The schools had other, more prioritized issues to spend their money on before AV1 could be an option. According to some of our interview subjects, the majority of the parents at these schools make less money than the average
person in the area, which tells us that they can not afford AV1 for their child. Another point made, was that the costs for AV1 may be covered by health insurance in the future.
We also asked the interview subjects if they were willing to recommend the product to the school were they are working. Most said yes, although they would prefer more information. Some would rather recommend it to the parents, while a few as previously mentioned, did not see the need at all. When asked if they would recommend AV1 to friends or family, the majority said yes, but that they would need more information and proof that the product works as it should.
To determine willingness of use, we asked several questions in regards to what could persuade them to buy it. Most of them concluded that the best thing would be if the school or the city reimbursed it. This was to ensure that the children with less wealthy parents would have the same opportunities as the children with wealthier parents. Some also mentioned that they would be more open to obtaining the product if they saw other German schools using it first.
The biggest alternative to AV1 in Germany at the moment is the hospital schools.
German children, with e.g., cancer or ME, get admitted to the hospital and receive lectures and homework there. When the child gets better, he or she returns to school.
Depending on how long they have been gone and how much they have missed, they either return to their class or retake the semester they lost. During our interviews we found that many of the teachers are satisfied with this arrangement. However, almost everyone liked the idea of using the AV1 robot instead if it would prove more helpful for the child, and especially when considering the social aspect.
Building on this, a few of the teachers and headmasters at primary schools made
remarks that a lot of the kids are more eager to learn when there is technology involved.
At one school for example, they tried Ipads for a few days as part of an experiment, and found that kids who were reluctant to read and write, suddenly became very interested and focused when doing it on an Ipad. Teachers who had seen this, were more positive to AV1 and the positive aspects the robot could bring.
When asked if AV1 could be a better solution than the systems used today for helping kids who are long-term ill, we got a variety of different answers. Some said that the hospital schools were sufficient enough, combined with visits from friends and teachers.
Others thought that AV1 is a better solution, but only for kids who do not suffer from mental illnesses. There was also one teacher pointing out that it might be very difficult for sick kids to stay focused for longer periods of time. The example he used was that it is very unlikely for a cancer patient who undergoes chemotherapy to be able to pay attention for more than 30 minutes because he/she will simply be too tired.
The main impression we got from the various interviews, was overall optimistic - but there are three main obstacles that almost every interview subject mentioned:
1. The internet-issue. How is No Isolation going to solve this challenge?
2. Teachers (especially older) have to be persuaded that AV1 does not cross the line concerning privacy, recordings, and that the classroom environment is not being exploited by parents or others.
3. If No Isolation overcomes these factors, and get a few schools to try AV1, there will be a snowball effect according to our findings. Other schools are much more likely to try AV1 if a few schools in the area have good results to show the rest.
3.5 Data conclusion
Overall the interviews went well, and most of the teachers were optimistic. To convince them to buy the product more information is needed, which leads us to believe that the commercial shown before the interview was insufficient, and additional information should have been provided.
It is important to mention that even though some of the schools in Mannheim could be willing to buy the product, the same is not necessarily the case for other schools in Germany. Seeing as only 15 interviews were conducted, and no surveys, the number is simply too limited to be generalised and used as statistics.
By using interviews we got individual information about opinions and experiences. It also made the interview subject less reluctant to give candid answers, compared to for instance, if we had conducted focus groups. A lot of the questions discuss personal opinions, which could have been a problem to answer if there were more people in the room.
Validity
To answer the research questions, it was important to make sure that the validity of the questions were accurate. This means, to what extent do we measure what we want to measure. Content validity was our primary focus. That implies; “to what extent does the form of measurement used, cover the whole theoretical domain” (Gripsrud, Olsson &
Silkoset, 2016, p. 133).
We spent a lot of time preparing the interview questions. Both previous interviews and theory about interviews were used to form the questions. It was made sure to ask several questions on each topic to make sure all relevant information needed was collected. For illustration, determining willingness to pay, 8 questions were asked about price. This made the answers more accurate, less biased and easier to interpret. After a couple of interviews we also edited the interview guide, to adjust it better to the German teachers.
Reliability
Reliability is the level of consistency the results collected will have if the same research is to be executed several times. All research has inconsistencies, and it is important to keep these errors as insignificant as possible (Gripsrud, Olsson & Silkoset, 2016, p.
135).
Considering that we executed interviews instead of surveys, and our research is built on personal opinions, reliability is not as relevant for this data collection. One thing that could have been done differently could be to collect information through surveys in addition to interviews. It would have been difficult to collect surveys for the B2B market, but once done it would be possible to generalise more about the population and build statistics. If surveys were used, a Cronbachs Alpha test could have been
conducted to test the reliability of the data collected.
Internal Analysis
4. Internal analysis
In this chapter we have executed an analysis of No Isolation’s internal situation. It contains the factors of how organised the company is, and their resources and capabilities. The models used in this chapter were decided to be the most fitting to analyse No Isolation’s preparedness for internationalisation. The VRIO Framework will determine if No Isolation has any competitive advantages, and what causes these
advantages. The Bakka model will show us how the company is doing in the different internationalisation aspects, which will help us to analyse the ACE-model. To establish the focus and commitment to internationalisation of the company, the ACE-model was applied. These three models combined gives a deeper understanding of the internal factors of the analysis. The tools will be defined and then applied to No Isolation’s situation. The findings from the internal analysis will be used in a SWOT analysis, along with the findings from the external analysis.
Figure 2: Preparedness for internationalisation (self-provided from Solberg, 2016)
It is a common belief that larger firms are less vulnerable to failure, but it not necessarily true that size is a successfactor in the international market. Smaller companies tend to be better at adjusting and reacting more quickly to shifts in the market. They also prove to be more creative and initiative active than the larger companies. Size may therefore not be the most important factor, considering a
company’s preparedness for internationalisation. According to Solberg (2016), factors like “the firm’s international organisational culture”, “market share in reference
markets”, and “access to networks in international markets”, are more important factors to consider. This is what will be identified and discussed in this chapter.
After defining No Isolation’s performance on organisational culture, market share and access to key customers, it is possible to determine their preparedness for
internationalisation.
4.1 VRIO Framework
The “VRIO framework is a tool used to analyse firm’s internal resources and capabilities to find out if they can be a source of sustained competitive advantage”
(Strategic Management Insight, 2013).
VRIO is an acronym for Valuable, Rare, Inimitable, and Organised to capture value. J.B Barney, who developed the VRIO framework, describes these four attributes to be imperative to gain a sustainable competitive advantage (Strategic Management Insight, 2013). This is what we want to determine for No Isolation, to establish if they possess the necessary attributes to gain a competitive advantage. These attributes can be tangible or intangible. Tangible resources are often easy to imitate, which is why it is important to have a good base for the intangible attributes.
Figure 3: VRIO-model (Rothaermel, 2015)
Valuable
The first factor to consider is if the resources are valuable. This entails if the company contributes to a sustained improvement of the competitive position and efficiency of the
firm, as well as if the resources and capabilities of the company add value to exploit opportunities and defend against potential threats.
No Isolation has been able to develop product and service differentiation by being new and innovative to the market. There are few other companies offering the same products to the same market at the moment. The company uses a 3D-printer to produce their products, which makes the product appear more innovative. These are features that add perceived value for the customers. No Isolation has won several awards, for illustration
“Best Newcomer” and “Best Social Tech Startup” under Nordic Startup Awards in 2016. Dolva also made the “Abelia-list” of Norway’s most premier IT-women, as well as best innovator under the “Leadership talents” (ledertalentene) in 2016 (No Isolation, 2018). This proves that both the management and the employees are doing a good job with increasing the company’s value.
No Isolation has a reputation for having quality products and an excellent customer service, which can for illustration be seen through newspaper articles published. If the robot gets broken the consumer gets a new one for free, the first three times. The employees also help new customers understand and adjust the AV1 robot to the child.
They also assist the parents and the schools to fully understand how to use it.
No Isolation is overall performing well on customer service, employee satisfaction, and technology performance. To keep the resources valuable, the firm must continue to improve their products in order to keep up with market trends. No Isolation is continuously improving AV1, and this helps them to keep a competitive advantage.
Rare
The second factor to consider is the rarity of the resources. Rare means that it is not found in large numbers, and if it is above average or remarkable. This entails that the firm could have the resources and capabilities that can create advantages towards competitors. This can for example be done by differentiation. Differentiation is defined as: “Results of efforts to make a product or brand stand out as a provider of unique value to customers in comparison with its competitors” (Business Dictionary, 2018).
AV1 is an innovative product, and there are not many similar products on the market with the same product attributes. This implies that the resources and capabilities behind
AV1 is in fact rare. Ovidijus Jurevicius (Strategic Management Insight, 2013) describes this rarity as a resource few firms are in possession of, and when combined with being valuable it can make a competitive advantage.
On the other hand, No Isolation’s tangible resources are not necessarily rare. The raw materials are easily accessible. The intangible resources are also not that rare, as long as the rival companies has the intellectual resources of their employees.
A factor that makes No Isolation’s resources rare is their cooperation with Telia, Atea and The Norwegian Cancer Society, which can be perceived as reliable companies in the Norwegian market. The perception these companies has, can be transferred over to No Isolation because of this collaboration, and causing No Isolation’s resources to be perceived as more reliable and thus more rare. These collaborations give them as well a stronger foothold in the market, along with their innovative technology to keep
improving their products.
Inimitable
The third factor to consider is the inimitability of the resources and capabilities.
Inimitable means that the resources are costly to imitate. This entails that the resources are hard, or nearly impossible to copy for competitors. The high level of technology behind AV1, makes it expensive and difficult to imitate for other companies. AV1 is a niche product with a lot of research and development behind it, which would make the product hard to imitate without the right resources. Because of the close cooperation with users, they have been able to create unique products. No Isolation has an application for patent on digital coupling technology in Norway and the European Union which will most likely be granted in the near future. They also have a similar application in the US (Patentstyret, 2018). If these applications are granted, the product would be more difficult to imitate.
The resources and capabilities behind the product AV1 are valuable, rare, and to a certain degree inimitable. This combined concludes that No Isolation has a competitive internal strength and high core competency.
Organised to capture value
No Isolation will not achieve sustainable competitive advantages if the company is not able to capture the value from their resources. The firm must be able to organise all their operations: management system, processes, policies, structures, and culture in
order to take advantage of the potential within the organisation. Because of the management’s engagement at No Isolation, the company is able to organise the
organisation's resources and capabilities in an effective manner to gain the best possible results. All the employees know the company’s values and missions, which make everyone equally motivated to achieve them. No Isolation has a horizontal structure within the company. There is a strong focus on working- environment and team work, and an employee centric approach.
No Isolation emphasizes insight, innovation and ideas. They state that they always have their eyes on the end users of the product, and the user design is the main pillar when they work (No Isolation, 2018). Throughout the company there is focus on working efficiently to solve the existing problems by testing their products and by engaging all of their 60 employees to get optimal solutions.
The company also manages to learn from their previous mistakes. They encountered complications when entering the Netherlands, because they had too much to handle at once. However, they have learned from their mistakes, and the first thing they did when entering Great Britain was to hire a country manager (Shifter, 2017).
Taking all these factors into consideration, it is possible to conclude that No Isolation has a sustainable competitive advantage. However, they need to improve their resources continuously, as it is not to difficult to replicate. Patents and R&D improvement are two solutions which can assist keeping their competitive advantage. Maintaining a strong bond with their collaborators is another solution. They need to review their VRIO framework constantly, as especially resources like employee’s competence are constantly changing and evolving.
4.2 The Bakka model
The Bakka model is used to describe which factors influence the firm’s decision- making when internationalising. Bjarne Bakka (1973) was one of the first to describe the internationalisation process. Solberg (2016) then extended the model and added a fifth stage: global marketing.
The five stages of the internationalisation process are:
1. Trial export 2. Extensive phase 3.Retraction exports 4.International marketing 5.Global marketing
This model will be used to identify where No Isolation is positioned in the
internationalisation process. First, the different stages of the model will be described, before positioning No Isolation in the model.
1. Trial export:
The first stage of internationalisation is challenging for the manager of the company. In this stage, the exporters have insufficient knowledge and expertise in the technical conditions of exporting and also in the fundamental market conditions in the foreign market. Because of this lack of knowledge and expertise, the risk of engaging may cause the exporter to make disastrous decisions. Another challenge is that gaining the necessary, adequate skills and expertise for the internationalisation is time consuming.
According to Bakka, the most imperative aspect of this phase is to get everyone in the company engaged in the export investment (Solberg, 2016)1.
2. Extensive export:
The second phase can be characterised as a more confident and courageous phase. The manager tends to make arrangements without having enough resources and thereby can not support their engagements sufficiently. The manager execute the different activities alone and the objective is generally imprecise.
3. Retraction export:
In the third phase, the firm has gained more experience and is more rational when it comes to decision making. The firm is able to identify the most attractive and rewarding markets and narrow down the ones that are marginal and unprofitable and will therefore
1 *This source is used throughout the model
only focus on the primary markets. In this phase, exporting is becoming a regular operation and is on the agenda for meetings.
4. International marketing:
The export activity in the fourth phase is an active engine to achieve the firm’s goals on one hand, and on the other hand the export is an integrated and inescapable part of the firm’s business. The opportunities of expansions are narrower in the home market, and the export is crucial for the company’s performance in this stage. The firm must conduct market analyses themselves, know the market better, and set up strategies to achieve their objectives.
5. Global marketing:
The firms in the fifth phase, which is extended by Solberg, is characterized as global or transnational organisations. Their main source of income is from the exports. The firm’s products and promotions are offered on a global level. Firms in this phase have become substantial in key markets, and can be characterised as global.
Figure 4: The Bakka model (Based on lecture notes and Solberg, 2016)
No Isolation’s internationalisation process:
Export motives:
At the beginning of writing this thesis, No Isolation was in the extensive export phase.
However, due to actively exploring other markets they have moved to the retraction stage. This implies that they have gained more experience, and are able to identify the most attractive and rewarding markets. Their market orientation has increased, and this is shown in how thorough their preparatory work in the new markets. The export efforts are embedded throughout the company, and the internationalisation process is a clear aspect to continue to focus on. This makes them proactive rather than
experimental.
Market selection:
No Isolation is currently operating in seven countries: Norway, Sweden, Denmark, the United Kingdom, the Netherlands, France, and Germany. According to the “Pagan Research”, No Isolation is helping about 350 families (Pagan Research, 2018).
The reason for choosing these markets is due to the easy accessibility in the
neighbouring countries and to the countries within the European Union. There are also similarities between the European market and the domestic market regarding culture and regulations. However, considering No Isolation’s ambitions they will most likely soon be moving over to the international phase. This means they would need to establish a foothold in, for instance, the American market to be positioned on a more global level. This has been stated by the management as a goal in the near future. No Isolation is now positioned in the retraction export phase. This is due to the several markets they have expanded to.
Market share:
Reference market refers to the market where No Isolation can identify their competitors and customers. Calculating an actual market share in the reference market is complex for AV1 due to the lack of numbers from the company and competitors’ sales, and as well for AV1 being a new product in a niche market. Solberg (2016) argues that
determining market share is complicated because of the fragmentation of such markets.
The company was established in 2015, and have already entered seven countries within 3 years.
Even though the market share is not possible to calculate at the moment, the market size is however in between insignificant and increasing. This is due to their expansion and increase in sales volume. This would put them between the extensive export phase and the retraction phase in the Bakka model.
Organisation:
No Isolation has currently 1-2 relation managers who work with business development in each country they enter. In addition, they normally have 2-3 employees per country who work with logistics (Appendix 2). This entails that the organisation is in between the extensive export and retraction phase. No Isolation have passed the phase of ‘one- man show’, but they have not yet established an export department. Even though they have not established an export department, having an “export team” with approximately 5 employees in each new country, implies that they possess some characteristics similar to an export department.
Entry strategy:
When No Isolation enter a new market, they usually approach local partners and potential future customers. They establish contact with patient organisations, hospitals, charities and health insurance companies in order to determine if there is a need for the product and if the host country has the same issue with loneliness. If it is the case, they start pilot projects to find and analyse the potential opportunities and threats in the new market.
They export the products from their production site in Norway. The relation managers in each country is responsible for the distribution of the products (Appendix 2). On this basis, No Isolation’s position is in the extensive export phase. If No Isolation were to successfully penetrate the European market and get relatively high sales in these countries, they could consider establishing small sales subsidiaries to become more internationalised, which is the next phase of the Bakka model.
Marketing mix:
By the time this thesis was written, No Isolation has made some adaptations to the marketing mix. For instance, the language and promotion has been adjusted to the target markets. Although these adaptations are considered as limited adaptations, so this concludes that No Isolation’s marketing mix is currently in the extensive export phase.
Dolva has stated that it is important to have local presence, and that hiring local
resources in the new markets will be a priority in the future. She has emphasised that it is important to have someone who has a local network, speaks the language and knows the culture, in the respective country (Shifter, 2017). When these measures are
implemented, No Isolation would shift over to the retraction phase.
Economic result:
In 2016 No Isolation had an operating income of 1 862 000 NOK, but their operating result was negative; -6 498 000 NOK. Their profitability according to proff.no,was - 60,7%. They have a negative economic result. This would conclude that No Isolation is in the extensive export phase.
The solidity on the other hand is very strong, with 91% (Proff, 2018). No Isolation continuously invests in new markets and this is the reason for the negative contribution.
Dolva said in October 2017 that the AV1 robot should be profitable between six months to two years (Shifter, 2017). They focus on investing the money as soon as it is
apprehended. Because of the negative contribution margin, they are dependent on sponsors and investors. No Isolation received 4.9 million dollars in three funding rounds, and in December 2017 they received 2.1 million dollars in fundings from private investors (Pagan Research, 2018).
Taking all these factors into consideration, No Isolation’s position is between the extension and the retraction phase. They are on their way to become retractive, due to the success they have achieved in Norway and their expansion into the European market. The marketing mix of No Isolation needs to be further developed regarding cultural adaptation and pricing of the product in the market. The different markets they have targeted, shows that the company has become more proactive, but they still need to successfully enter other markets than the ones in Europe to be considered more internationalised. As for the negative economic result, it should be taken into
consideration in order to be more prepared for internationalisation. It is not necessarily
a disadvantage to have a negative result at this early stage, but proceeding with this level of confidence could prove to become too much risk in the long-term. No Isolation is a relatively new company, but they are expanding rapidly and the internationalisation process of the company is a main priority. According to our analysis of the factors in the Bakka model, No Isolation’s position is promising when it comes to the
internationalisation. However, we need to further analyse the internal strength and competence of the company, and the ACE-model will be applied to do so.
4.3 ACE-model
To determine the international organisational culture it is important to look at the
“attitudes, experiences and procedures that firms with extensive international
involvement have developed over time” (Solberg, 2016, ch. 4, p. 12). The beneficial export circle, also known as the ACE-model were used to pin down No Isolation’s current situation. To back up this model, we identified their stage in the
internationalisation process through the Bakka model. With help from the results from the Bakka model, the ACE-model will be used to analyse how prepared No Isolation is to internationalise.
To understand the success and failures of export, there have been conducted several studies. Solberg (2016) argues that the main conclusion from this research is that the top management in a company needs to be actively involved to succeed in exporting to international markets. This involvement helps the rest of the company with the
assistance needed to export successfully. Solberg also argues that one of the main key success factors for export is to continuously work on networks in the potential
international markets. The beneficial export circle have been used to get better insight on these factors. The beneficial export circle, or ACE, involves the topics; attitudes, competence and embodiment (Solberg, 2016).
Figure 5: ACE-model (Solberg 2016)
Attitudes
Solberg defines four factors that affect the attitudes of the organisation; risk orientation, market orientation, cultural awareness and approaches to problems when entering new markets. These are important factors the organisation needs to comprehend when planning to penetrate a new market, and to get a better understanding about the differences between the organisation’s home country and the foreign country they are targeting.
Risk orientation, or flexibility concentrates on the fact that the organisation has to be open to meet risk when internationalising. The organisation must be willing to take action, and to commit sufficient resources to succeed in exporting. Risk orientation also includes the ability to think new, and take opportunities that surface during this process.
No Isolation is a company willing to take risks, considering their quick entry in the international market at such an early stage, and has faced risks during their expansion.
They have been bold in expanding to different countries so early. Their entry to the different countries has gone well in most cases. An exception is the case with the Netherlands, the entry was not as successful as expected, as mentioned earlier.
Although No Isolation has a negative contribution, they have been risk-takers, willing to continue expanding and investing in new markets. This implies that their risk orientation is high.
When it comes to market orientation, the organisation needs to understand more than the need of the customer. It also includes understanding the position of the firm’s products, compared to the competitors’ positions. It also includes a focus on cost. This requires insight into customers and their preferences, the competitors’ strategy and distributions, and also about laws and regulations that affect the organisation. Acquiring this insight takes time and effort, especially since it is a relatively unknown market.
This insight is a part of the company’s organisational culture.
No Isolation has a significant focus on internationalising, and their focus from the start has been to end social isolation, also across borders. No Isolation uses many resources in obtaining market knowledge. They approach new markets to establish if the need for AV1 is present, and analyse opportunities and threats before entering the market. They have also stated that they from now on are going to focus on a country manager and local representatives to get higher market orientation, to avoid the mistakes they did in the Netherlands (Shifter, 2017). As they have targeted markets with similar culture, this has made it easier considering market orientation. If they were to expand to markets with more complex and different cultures in the future, they would need to have a bigger focus on this subject
Cultural awareness is how companies behave when they meet different people from different cultures. This is an imperative factor when operating in foreign markets. Thus, it is important to study the culture in the individual country the organisation is planning to penetrate, and it is crucial to avoid “beginners mistakes”, which often arise because of cultural differences (Solberg, 2016). Because they target similar countries, they have not needed to have much focus on cultural awareness. No Isolation’s focus on
networking and establishing contact gives them a foundation when it comes to developing cultural awareness.
The fourth factor of the attitudes is how the company approaches complications.
According to Solberg (2016), the most common complications are custom duties, transportation costs, cultural differences, lack of distribution channels and political risks. An organisation with the right attitude sees these obstacles as challenges rather than problems. As No Isolation is expanding mostly to European countries, there have not been many complications when it comes to custom duties, transportation costs,
political risks and cultural differences. They have endured obstacles when entering Germany. According to our contact person at No Isolation, they first got rejected when entering the country, but they are trying to find other ways around this, and managed to get a meeting with the minister of education (Appendix 2). This indicates that their attitudes toward complications are adequate.
Competence
The second part of the ACE model concerns competence. The main subjects are management skills and marketing skills. Solberg (2016) argues that management skills do not determine if the export venture is successful or unsuccessful, and the only correlation found between success and failure is sales techniques. Although other skills are necessary, they might not be sufficient to succeed at internationalisation.
While the majority of exporters claim to have high focus on design and quality, the most successful ones seem to be more concerned with product development and to be in close collaboration with the customers. This can be argued as a key success factor, because customer communication is imperative for a successful product development.
The successful exporter also manages to obtain a higher price for their product, which may have a correlation with their market share and stability in their operating home- country. There is also a parallel between close communication with the customer and charging higher prices for the product. When a product is adapted to the customer needs, the willingness to pay increases (Solberg, 2016).
In regards to market communication, experienced sales people have higher competence, they travel more and usually have a more extensive network than others. Solberg (2016) also states that place, or distribution might be the most important of the four P’s in the marketing mix. This is because distribution is the link between exporters and the target customers. When it comes to other factors, social relations, flexibility, trust and norms are needed to become a successful exporter.
No Isolation develops their product in close relations with their potential customers.
They want to make a product that is easy to use, and people are willing to use. This customer communication gives No Isolation a potential advantage when it comes to sales and high price. They are also competent when it comes to market communication,
as they have a focus on high competence among employees and travel a lot to build connections and networks. Social relations and communication is a top priority in No Isolation.
Embodiment
Even though the attitudes and the competencies in the organisation is important for success in export, it is not possible to implement these factors without a mutual goal and understanding throughout the whole company. This focuses especially on the top management, which is the key role to select priorities within the company. Research has found that the main reason for an unsuccessful export is a lack of management
involvement. Another important factor is the board of directors. Most of the successful ventures has a board that focuses on the long term strategy and markets, instead of too much focus on the near future. A strong focus on the export venture throughout the entire organisation is one of the most important factors in regard to successful internationalisation (Solberg, 2016).
The top management involvement in No Isolation is high. Dolva has had a global focus from the beginning, and prioritises the internationalisation of the firm. They have selected the neighbouring and most similar countries first, to establish a foothold in the international market. They also have a long-term focus, and invest more money than they save to expand rapidly. To successfully export it is important to have a top to bottom commitment throughout the whole organisation. Something in which No Isolation shows through their export venture being embedded within the whole company.
Analysing No Isolation and the ACE-model, there are several important traits that can indicate their success as exporters, according to Solberg (2016). They have a good attitude towards future growth, and a willingness to invest in new markets. Embodiment is an essential factor, and the part of the ACE-model where No Isolation has the highest score on. The company emphasizes innovation and new ideas. They have since the beginning put the consumer into consideration when producing their products and the design. They test out their products with the consumer and involve all the employees to produce the best solutions (No Isolation, 2018). They are also risk oriented, but per today they still lack some efforts regarding competence.
4.4 Market network
The last important factor to consider in the analysis of preparedness of
internationalisation is “access to customers through market networks”. It is critical for No Isolation to identify and maintain their customer base. Through this part we will identify their network and how to best utilize it to find customers with potential and how to collect better and more reliable market information.
Johanson and Mattson (Solberg, 2016) specifies that interorganizational relations is a critical success factor when firms are in the internationalisation process. Johanson and Vahlne later discussed the problem, and suggested the term “liability of outsidership”.
This concerns the disadvantage firms experience when they do not belong to a relevant network in the international market.
When looking at the market network, we have to analyse the network the company operates in. Companies can either operate in a centralised network, or a decentralised network. A centralised network means that the company is the “main player” in their network, and have close relations to all the surrounding partners. A decentralised network is when the company relies on one or more big players and owes most of their network to these bigger companies (Solberg). No Isolation has many collaboration partners who are more extensive than they are, which puts them in a more decentralised network position.
When analysing No Isolation’s market networks it was discovered that their network is extensive due to their number of collaborators, investors and suppliers. No Isolation have invested a lot of time and effort into getting connections and contacts in different countries, and in establishing a stronger position in the market. On the other hand, as mentioned above, they have many collaborations with different partners, the most significant network collaboration being Atea, the IT-giant, who offers them a vast distribution network. As a result No Isolation appears as a more stable and recognized company. This could put them in an advantage with gaining a vaster network, but it could also be a disadvantage if they become too reliable on these collaborations.
Having a well-established network can give the company considerable advantages. This reduces the need for analyses in the new and existing markets, and saves the company time and costs. Studies of Norwegian international companies has shown that
companies with well-established networks abroad have a more successful product development, and will also be better equipped to position themselves in new markets (Solberg, 2016). No Isolation currently has a broad network of contacts, and
continuously works on expanding it.
4.5 Preparedness for internationalisation
As mentioned, there are three indicators that are used to measure how prepared a company is for internationalisation: the firm’s international organisational culture, the firm’s market share in its reference markets, and the firm’s access to networks in international markets (Solberg, 2016).
As pointed out in the Bakka model, due to lack of numbers from No Isolation and their competitors sales, it is difficult to determine their market share in the reference market.
However, due to its importance in developing a marketing strategy, it was focused more on their position in the market through number of competitors, and their presence in the market compared to No Isolation’s presence. If the company has a big market share, they have the opportunity to set the prices in the market, be perceived as better, and gain trust from consumers. Determining market share is a complex task, because the market and its boundaries are often hard to define, especially in a relatively new industry (Solberg, 2016).
Because No Isolation is operating in a niche market, they do not face any immediate risk of being outcompeted by other larger players in the robotics industry. Their barriers of entry consist of:
Figure 6: Niche entry barriers (self provided from Solberg, 2016)
The results gathered through this internal analysis puts them in the second stage in Solberg’s Nine Strategic Windows; the adolescent company. Considering that there are currently no competitors of No Isolation in Norway, and that the awareness is high, they have a solid position in their home market. Because of their investors, they have the economic strength to carry the company abroad. However, they lack some international experience and organisational culture as they are a newly established company. Because of this, they risk facing difficulties in the international market.
