Transcript Introduction International Marketing

Introduction
International Marketing
Fachhochschule Ludwigshafen
Dr. rer. pol. Irene Giesen-Netzer, Diplom-Kauffrau
WS 2009/2010
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Introduction International
Marketing
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Part of Marketing conception (8 credits)
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Marketing planning and controlling (60
points)
Intro International Marketing (40 Points)
Written test at the end
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Literature
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Albaum, G., Duerr, E., International
Marketing and export management,
2008
Backhaus, K., Büschken, J., Voeth, M.,
International Marketing, 2005
Lascu, D.-N., International Marketing,
Third edition, 2008/ Third edition 2008
www.atomicdog.com
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Content
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Basics of International Marketing
The international Marketing Environment
International Marketing Strategies
International Marketing Mix
Implementation of the international Marketing
Strategies
Case studies
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Content
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Basics of International Marketing
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Importance
Concepts
Drivers
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Importance of IM
International expansion helps firm:
 Keep pace with competition
 Reach a larger market (e.g. US with 25% of
worldwide products/services)
 Reap higher profits
 Prolong the lifecycle of their products
Also an option for small and medium sized
companies
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Internationalization Philosophies
Domestic
Marketing
Export
Marketing
Multinational
Marketing
Global
Marketing
Low or no
international
commitment
Limited
international
commitment
Substantial
international
commitment
Extensive
international
commitment
Focus on
domestic
consumers and
home country
environment
Involves direct
or indirect
export
Focus on
different
international
countries
Focus on
regions
market
segments
rather than
countries
Domestic focus
Ethnocentric
Polycentric
Regiocentric
Geocentric
Raising commitment/ involvement to international markets
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Ethnocentric Orientation
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Guided by domestic market extension concept
Domestic strategies, techniques, and personnel are
perceived as superior.
International markets are secondary, regarded
primarily as outlets for surplus domestic
production.
International marketing plans are developed inhouse by the international
division.
E.g. Disney resort in France: Disneyland Resort
Paris had to adapt it to local preferences:
European fairy tales, food, and dress code for staff.
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Polycentric Orientation
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Guided by the multidomestic marketing concept
Focuses on the importance and uniqueness of
each international market
Firms establish independent businesses in each
target country.
Fully decentralized, minimal coordination with
headquarters
Marketing strategies are specific to each country.
Outcomes:
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No economies of scale
Duplicated functions
Higher final product costs
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Regiocentric Orientation
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Guided by the global marketing concept
World regions that share economic,
political, and/or cultural traits are
perceived as distinct markets. (e.g. EU,
NAFTA*)
Divisions are organized based on location.
Regional offices coordinate marketing
activities.
*North American free trade agreement
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Geocentric Orientation
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Guided by the global marketing concept
Marketing strategies aimed at market
segments, rather than geographic
locations
Maximizes efficiencies worldwide and
provides standardized product or service
throughout the world
E.g. McDonalds
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International Expansion Drivers
Business Environment
Drivers
Competition
Regional Economic and Political
Integration
Technology
Improvements in Transportation
and Telecommunication
Economic Growth
Transition to Market Economy
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Firm specific Drivers
Product Life Cycle
High New Product
Development Costs
Standardization
Economies of Scale
Cheap Labor
Experience Transfers
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Converging Consumer Needs
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International Expansion Drivers:
Business Environment (contd.)
Competition
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Example: McCann Erickson has been handling the
Coca-Cola account in 129 countries since 1942.
Therefore the advertising agency, follows
longtime client, Coca Cola, Inc., to all countries
where Coke is present.
Nevertheless Coca-Cola moved the management
of its dedicated Red Lounge China marketing unit
from McCann Erickson to Leo Burnett, a competing
advertising agency (2007). At the same time Leo
Burnett lost some international accounts of its
longtime client, McDonald's.
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International Expansion Drivers:
Business Environment (contd.)
Regional Economic and Political
Integration
• Example: Regional agreements such
as NAFTA, and the European Union
(EU) lower and eliminate barriers and
promote trade within these markets.
• Subsidiaries can be established in
these markets to take advantage of
free trade within the region.
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International Expansion Drivers:
Business Environment (contd.)
Technology
Examples:
 Consumers worldwide are exposed
to similar products, services, and
entertainment, and marketing
communications.
 The Web and the Internet have
revolutionized the way companies
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conduct business.
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International Expansion Drivers:
Business Environment (contd.)
Transportation and
Telecommunications
• Lower cost and higher quality
communication due to satellite
technology, teleconferencing, and
e-mail
• Efficient transportation due to
containerization and just-in-time
technology
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International Expansion Drivers:
Business Environment (contd.)
Economic Growth
• Emerging middle class with increasing
buying power in big emerging
markets such as Brazil and India.
• Opening of new markets previously
closed, such as the markets of China
and Vietnam.
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International Expansion Drivers:
Business Environment (contd.)
Transition to a Market Economy
• Transition of the Eastern Bloc to a
market economy created important
new markets.
• Created opportunities to transform
inefficient government-owned
companies into successful
enterprises.
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International Expansion Drivers:
Business Environment (contd.)
Transition to a Market Economy
Yum! Brands in
China and Taiwan
(e.g. Taco Bell,
KFC, Pizza Hut)
do well in spite of E.coli
(East cost) and
rat infestation in NY
Yum! Brands is omnipresent in China and Taiwan 20
International Expansion Drivers:
Business Environment
Converging Consumer Needs
Uniform consumer segments emerging
worldwide:
 Global teenagers
 Global elite
Loyal to international brands (Nike, Levi’s,
Coca-Cola, Heineken, Ralph Lauren, MTV,
TV shows)
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International Expansion Drivers:
Business Environment
Converging Consumer Needs
Consumers traveling abroad bring with
them product experiences and demand
brands that may not be available in the
home-country market.
Bagel shop in Berlin (Potsdamer Platz)
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Firm-Specific Drivers
(contd.)
Product Life Cycle Considerations: prolonging
product lifecycle by entering growth markets
e.g. Cigarette industry
in emerging markets
Intro
Growth
Maturity
Decline
Sales
Sales
Profits
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Firm-Specific Drivers (contd)
High New Product Development Costs
 Firm must look beyond home-country
market to recover investment costs.
 E.g. Nike: one year to develop a new
product, that last only half a year on the
shelves in the US
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Firm-Specific Drivers
Standardization, Economies of
scale, Cheap Labor
Price competition during the maturity of the product life
cycle drives firm to new international markets in search
of cheap labor. The firm lowers costs—thus prices—due
to economies of scale and saving from standardization
processes.
Experience Transfers
Experience in one country serves as basis for strategies in
new international markets.
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Obstacles to
Internationalization
within the company
Finances
Psychological:
unknown environment
Self-Reference
Criterion
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outside
Government Barriers
Barriers imposed by
International
Competition
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Obstacles to
Internationalization
Self-Reference Criterion
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Conscious and unconscious reference to
own national culture while operating in the
host country. (e.g. eye contact US-Japan)
To counter the impact of the self-reference
criterion, the corporation must select
appropriate personnel for international
assignments and engage in sensitivity
training.
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Obstacles to
Internationalization
Government Barriers
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Restriction placed on foreign corporations
by imposing tariffs, import quotas and
other limitations, such as restrictive import
license awards.
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Obstacles
to Internationalization
Barriers imposed by International
Competition
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Blocked channels of distribution
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Exclusive retailer agreements
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Cutting prices
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Advertising blitzes
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Case Study 1
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Content
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

Basics of International Marketing
The international Marketing
Environment
International Marketing Strategies
International Marketing Mix
Implementation of the international Marketing
Strategies
Case studies
Dana-Nicoleta Lascu
31
Atomic Dog Publishing 2006
Content
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The international Marketing
Environment
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Dana-Nicoleta Lascu
World economy
International Trade
Regional Economic and Political integration
Cultural Influence on IM
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The World Economy
Rather than rising and falling separately,
national economies have become
interdependent and respond to the same
environmental forces
The international economy performs as a
single unit.
(e.g. Finance/ Banking crises 2008/2009)
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Categories of countries
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First World (Developed countries), Second
World (Socialist countries), Third world
(Developing countries)
United Nation: LLDCs Least developed
countries and lowest income) LDCs (less
developed and lower income) NICs (newly
industrialized countries e.g. Singapore, South
Korea, Hong Kong)
World Bank (and here): Developed Countries,
Emerging Countries, Developing Countries
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Big Emerging Markets
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Present the greatest potential for
international trade and expansion
Set the pace for the economy in the
region.
Examples: China, India, Argentina, Brazil,
Mexico
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Characteristics of Emerging
Markets
• High political stability
• Sound currency, low inflation
• Pro business, fiscally-conservative, transparent
government policies
• Guarantees for the repatriation of dividends
and capital
• Sound corporate law
• Markets reflecting fair prices
• Work ethics and a culture of integrity
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Political Environment
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At the basis of international law and
international relations: sovereignty (self
determination and independence from
external interference, authority over all
nationals)
International trade limits sovereignty.
Governments can invoke sovereignty and
jeopardize firm’s operations.
E.g. Iran, Cuba
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Political Risk
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Evaluating Political Risk:
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Business periodicals (The Economist, Wall
Street Journal)
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Commercial sources (Country reports, Chase,
RUNDT’s)
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Political Risk
Country risk rankings Least risky countries,
Score out of 100Source: Euromoney Country risk March 2008[1]
Rank
Previous
Country
Overall score
1
1
Luxembourg
99.88
2
2
Norway
97.47
3
3
Switzerland
96.21
4
4
Denmark
93.39
5
5
Sweden
92.96
6
6
Ireland
92.36
7
10
Austria
92.25
8
9
Finland
91.95
9
8
Netherlands
91.95
7
United States
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91.27 2006
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Political Risk
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Political Risk Signals:
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Poor economic performance
Repression of ethnic groups and/or general
repression by the elite
Internal diversity and incongruent interests
Radically changing government structures
Fierce nationalist sentiment
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Political Risk
Risk Element
Example
Economic
performance
signal
United Kingdom unemployment is increasing due to higher
immigration and falling levels of economic activity.
Political
repression signal
Peaceful protest is not a right for Russians: violent clashes
between police and pro-democracy demonstrators in
Moscow and St. Petersburg are the norm.
Internal diversity
and incongruent
interests
Eastern European and Turkish migrants are flocking to the
high-income countries of the European Union. They do not
acculturate easily and create divergent interests in Old
Europe.
Political instability
and the instability
of government
policies
Taiwan's ruling party, the DDP, endorses a separatist policy
relative to China, limiting access to Taiwan's market. The
opposition welcomes a closer relationship to China. The
parties have physical fights.
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Political Risk
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Risks Related to Government Trade Policies:
 Tariffs,
 exchange-rate controls,
 quotas,
 export/import license requirements,
 other trade barriers (embargos, sanctions)
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Details next chapter/ International Trade barriers
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Political Risk (contd.)
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Risks Related to Government Economic Policy:
 Controlling foreign investment through taxes
 transfer of assets from company to local
ownership:
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Confiscation (without compensation)
Expropriation (some reimbursement)
Creeping expropriation (paperwork, judicial
systems, regulations)
Nationalization (local government takes over)
Domestication (transfer to local enterprises)
Risks Related to Labor and Action Groups
Risks Related to Terrorism
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Minimizing Political Risk
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Understand both ruling and opposition parties.
Remain politically neutral.
Be exemplary corporate citizens.
Sell a quality product or service that is essential
for local development.
Partner with local companies and create local
expertise.
Use local suppliers.
Obtain insurance coverage against expropriation,
nationalization, confiscation, and terrorism.
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Insurance e.g.
Hompage www.opic.gov 21.1.09
Types of Coverage
Currency
Inconvertibility
Expropriation
Political Violence
Standalone Terrorism
Special Coverages
Small Business
Coverage
Overseas Private Investment
Corporation OPIC assists U.S.
companies by providing
•financing
•political risk insurance,
•and investment funds.
OPIC was established as an agency of
the U.S. government in 1971 and
currently does business in over 150
countries.
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International Legal
Environment
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International Laws
Host Country Laws
Home Country Laws
Legal Systems:
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Common law
Code (Civil) law
Islamic law
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Jurisdiction
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Not automatic
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In EU: European Court of Justice
Between Governments (UN): The International Court
of Justice
Between international enterprises: host- or home- or
third country
MEDIATION
ARBITRATION
Instead of a
lawsuit
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Independent Third
Party
Independent Third
Party
Non-Binding
Binding
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Intellectual Property Rights
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Violation of intellectual property rights is a
significant threat to the competitiveness of
international corporations.
Losses attributed to the violation of intellectual
property rights are estimated to be $60 billion a
year. (e.g. Software $11 billion, entertainment
$8, pharmaceuticals $1 billon)
There is a saying in Shanghai: “We can copy
anything except your mother” (even fake blood
plasma)
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Intellectual Property
Protection
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Patent
 Protection of the rights of the inventor or of
the firm to use and sell the invention for a
specified period of time.
Copyright
 Rights of owner of original work of art
(literature, music, film, design) to reproduce,
sell, perform, or film the work.
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Intellectual Property
Protection
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Trademark
 Brand name, mark, symbol, motto, or slogan
that identifies a brand and distinguishes it
from competitors’ brands. (E.g. Rolex, Gucci,
Fendi/ Design copying without the trademark
is legal)
Trade Secret
 Know-how, formulas, and special blends that
are not registered and are thus not protected
by law.
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Counterfeiting
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Factors Influencing Intellectual
Property Violations
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Lack of appropriate legislation
Lax enforcement
Unavailability of authentic products
High prices for authentic products that limit their
accessibility to local consumers
Cultural Factors:
Values that perceive imitation as a form of flattery
 Feelings of interpersonal distrust and not getting fair
deal
 Emphasis on material wealth
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Belief that technology is common domain
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Protecting Intellectual
Property
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TRIPS Agreement (Trade-Related Aspects
of Intellectual Property Rights,): member
countries of the World Trade Organization,
must sign the TRIPS agreement:
minimum standards for the legal protection
of property rights
Bilateral and multilateral conventions
Enlisting home and host-country
government support
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Home Country Legislation
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Antitrust Legislation
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Prevent anticompetitive activities such as the
creation of monopolies and cartels.
Anti-Corruption Legislation
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Prevent multinational corporations from using
unethical means to obtain competitive
advantage in a particular market
Foreign Corrupt Practices Act makes it illegal
to bribe politicians.
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Natural Environment as a
influencing factor for IM
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Geology and Shortage of natural
resources (access to resources, e.g. oil)
Topographies and access to Markets
Hydrology
Climate
Population/ Human Capital
Environmental Quality (regulations on
the natural environment, e.g.
hormones, pesticides, CO2-Levels)
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Technological Environment as
an influencing factor for IM
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New product development
Networks, warehouse management,
electronic data interchange (EDI)
Web/Internet
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Technological Environment as
an influencing factor for IM
World Regions Population
Population %
(2006 Est.)
of World
Internet Usage,
Latest Data
% Population
(Penetration)
Middle East
and Africa
1,105,295,089
17.0
52,148,100
13.8
Asia
3,667,774,066
56.4
387,593,457
10.6
Europe
807,289,020
12.4
312,722,892
38.7
North America
331,473,276
5.1
232,057,067
70.0
Latin America/
Caribbean
553,908,632
8.5
88,778,986
16.0
33,956,977
0.5
18,430,359
54.3
6,499,697,060
100.0
1,091,730,861
16.8
Oceania/
Australia
WORLD
TOTAL
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Technological Environment as
an influencing factor for IM
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Opportunities Web/Internet:
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200 million e-mail boxes in the United States. People
send more than 7 trillion e-mails each year in the United
States.
The average e-mail user receives 31 e-mails per day.
Business-to-business e-commerce in the United States
totals $1.3 trillion per year.
Businesses will place orders totaling $3 trillion per year
worldwide via the Internet.
Twenty-five percent of all business-to-business purchases
are placed through some type of Internet connection.
Internet retail sales account for almost 2.5 percent of all
retail sales
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Technological Environment as
an influencing factor for IM
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Threats Web/Internet
The payment mechanism is sometimes
difficult:
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Different currencies
Different method of payments (credit cards,
debit cards)
Credit card theft
Accepting credit cards from unknown buyers
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Content
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The international Marketing
Environment
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World economy
International Trade
Regional Economic and Political integration
Cultural Influence on IM
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Opposing Forces
National and local governments
want to protect small /medium enterprises
Build trade barriers
Reduction of trade barriers
Multinational firms and governments
of the multinational firms
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Arguments for Protectionism
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Protection of markets with excess
productive capacity/ of markets with
excess labor/ Employment protection
“Infant industry” argument
Natural resources conservation and
environmental protection
Consumer protection
National defense
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Tools of Government
Protectionism
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Tariffs: any type of tax imposed on
imported goods
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Discourage imports of particular goods
Protect local industry
Penalize countries that are not politically
aligned with the importing country.
Generate revenues
US tariffs are generally less than 15%.
Other countries impose tariffs greater than
100% for protected products.
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Tools of Government
Protectionism (contd.)

Non-Tariff Barriers: Measures, other than
traditional tariffs, that are used to distort
international trade flows


Raise prices of both imports and importcompeting goods.
Favor domestic over foreign supply sources
by causing importers to charge higher prices
and to restrict import volumes.
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Tools of Government
Protectionism (contd.)
Non-Tariff Barriers (contd.):
 Quotas:
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
Specify maximum quantity (unit limit) or value
of a product that may be imported during a
specified period.
Orderly market arrangements

Complicated approach to establishing what, in
essence, is a quota. (Textile and apparel
industries)
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Non-Tariff Barriers (contd.):
Licenses
Non-Automatic Import Licenses:
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
Issued on a discretionary basis to restrict
imports of a given product or from a certain
country
Examples:



Military equipment and other armament
from any country
Birds
Restrict volume and/or quantity of imports
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Non-Tariff Barriers (contd.):
Licenses (contd.)
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Automatic Import Licenses:
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Granted freely to importing companies
Facilitate import surveillance
Discourage import surges
Place administrative and financial
burdens on importer
May raise costs by delaying shipments
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Non-Tariff Barriers (contd.):
“Voluntary” Expansion/Restraints

Voluntary Import Expansion:
Governments agree to allow imports from a
particular country as a result of pressure from
another country.



Increases foreign access to a domestic market.
Increases competition and reduces local prices.
Voluntary Export Restraints:
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
Self-imposed export quotas—imposed to avoid a
greater penalty.
Used by the importing country to protect local
industries.
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Non-Tariff Barriers (contd.):
Price Controls


Increasing the Price of Imports to match
minimum domestic prices
Antidumping and Countervailing Duty
Actions:

investigations to determine



if products were sold below fair value to get rid of
excess inventory (dumping) or
as a result of foreign subsidies.
Such measures can intimidate importers.
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Non-Tariff Barriers (contd.):
Price Controls (contd.)

Paratariff Measures:
Additional charges that increase the
cost of imports

Examples:
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Advance import deposits
Import charges
Seasonal tariffs
Customs charges
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Non-Tariff Barriers (contd.):
Standards



Environmental, performance,
manufacturing and other standards used
as barriers to imports.
Primarily imposed by highly industrialized
countries
E.g. EU against hormone fed US beef,
bioengineered corn and soybeans
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Non-Tariff Barriers (contd.):
Percentage Requirements


Requirement that a percentage of the
products imported be locally produced
Local content requirement:



Often met by manipulating and/or assembling
the product on the territory of the importing
country, usually in a foreign trade zone.
Favoring local contribution and labor
Limiting foreign ownership to a certain
percentage.
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Non-Tariff Barriers (contd.):
Boycotts

Boycotts
 Action group calling for a ban on all
goods associated with a particular
company and/or country.
 Target company is representative of its
country of origin.
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Non-Tariff Barriers (contd.):
Embargos and Sanctions

Embargos

Prohibiting all business deals with the target
country; affects third parties.
E.g. US Cuba
Sanctions



Punitive trade restrictions applied by a country
or group against another country for
noncompliance.
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Non-Tariff Barriers (contd.):
Currency Controls

Blocked Currency


Differential Exchange Rates


Does not allow importers to exchange of local
currency for currency a seller is willing to accept
as payment.
Favorable and less favorable exchange rates
imposed on imports, based on the extent to
which the goods are necessary and desirable.
Foreign Exchange Permits

Give priority to imports in the national interest.
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Arguments for free trade





increases competition (lower prices for local
consumers)
Multinationals encourage efficiency in local
manufacturing and services.
Local firms no longer have to limit themselves
to the local, national market.
Increase production, achieve economies of
scale, and offer lower prices to world markets.
Avoidance of protectionism of other
governments
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Arguments for free trade
International trade Imperative
David Ricardo’s Theory
 Countries benefit from specialization in
an industry in which they have
comparative advantage and from trading
with one another.
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Arguments for free trade
Eastern worker in a Year makes:

2 bicycles or 4 bushels of wheat.
A Westerner can produce:

1 bushel or 1 bike.
Each country has 100 workers split evenly
between producing bikes or wheat
West has no absolute advantage!
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Arguments for free trade
Without international trade:



East produces 50*4=200 bushels and
50*2=100 bikes,
West produces 50*1=50 bushels and
50*1=50 bikes.
Together: 250 bushels and 150 bikes
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Arguments for free trade
With international trade based on
comparative advantage:
East has absolute advantages in both. But West has
a comparative advantage in bikes.
East specializes in growing wheat moving 10 workers
to it: East produces 60*4=240 bushels and
40*2=80 bikes
West specializes in producing bikes moving 25
workers to it: West produces 25 bushels and 75
bikes
Together: 265 bushels and 155 bikes
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Facilitators of International
Trade



International Trade and Economic
Development Organizations
Government Organizations
Other Institutions and Procedures
Facilitating International Trade
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World Trade Organization

Largest and most influential international
trade organization (153 members on
23 July 2008 from 197 countries worldwide)


Ensures free flow of trade
Functions:
Provides assistance to developing and transition
economies
 Offers help for export promotion. Promotes regional
trade agreements and economic cooperation.
 Reviews members’ trade policies and engages in
82
routine notification of new trade measures.
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
World Trade Organization
(contd.)
WTO agreements represent trade rules
and regulations and act as contracts
guaranteeing countries trade rights and
binding governments to free trade
policies.
Agreements:




General Agreement on Tariffs and Trade (GATT)
General Agreement on Trade in Services (GATS)
Trade-Related Aspects of Intellectual Property Rights
(TRIPS)
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Group of Eight - G8

Members from the most industrialized
countries: Canada, France, Germany, Italy,
Japan, United Kingdom, United States and
Russia


Yearly meetings involve heads of state,
government ministers, directors of central
banks
Addresses: biotechnology, food safety,
economic development, disarmament, arms
control, organized crime, drug trafficking,
84
terrorism, environmental issues and trade
United Nations Organizations





16 different United Nations Organizations
Maintain international peace and security
develop relations among countries
achieve international cooperation
encourage respect for human rights and freedom
 Promote the economic and financial welfare of
developing countries.
 Focus on developing industrial, communication,
agricultural and transportation infrastructures.
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International Monetary Fund
(IMF)






Specialized agency of the United Nations (UN),
185 member countries
Encourages unrestricted conversion of currencies
through clear values.
Member voting power linked to amount they
contribute.
a body instituting appropriate development
strategies.
Mediator between debtors and creditors
Provides training and technical assistance for
monetary and financial strategies
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Facilitators of International Trade:
The Development Banks

The World Bank




Specialized agency of the UN, works with
IMF
Largest international bank that sponsors
economic development
Employs international specialists
in economics, finance, sectoral development
Focus on health and information technology
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Facilitators of International Trade:
The Development Banks (contd.)




African Development Bank (poverty
reduction)
Asian Development Bank (Private sector)
European Bank for Reconstruction
and Development (focused on markets of
transition in Central and Eastern Europe)
Inter-American Development Bank
(private sector projects)
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Facilitators of International Trade:
Government Agencies
• Ministry of Trade, Ministry of Foreign
Affairs
• USA:
• US Department of Commerce; Export-Import
Bank of the United States
• State and Local Government Agencies, such
as the U.S. Chamber of Commerce
• US Agency for International Development
89
(USAID)
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Foreign Trade Zones (FTZs)
Free Trade Zones
Tax-free area not considered part of the country
in terms of import regulations and restrictions—
site is considered an international area.
 Merchandise in FTZ is outside the jurisdiction of
the host country’s customs services.
 Host country benefits:
 Creates demand for local services, products,
and raw materials—hence local jobs.
 Increases trade balance—re-exports add to
total number of exports from the respective
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2006
country.

Foreign Trade Zones (FTZs)
(contd.)

Firm benefits from using an FTZ:


Foreign goods are exempt from duties as long
as they do not enter the country.
Goods are imported when demand is high,
thus deferring tariffs until that time.

Payment is delayed until goods are sold.

Firm can use the FTZ for breaking bulk.

Lowers prices for goods sold in the importing
country
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Foreign Trade Zones (FTZs)
(contd.)

Firm benefits from using an FTZ, cont.:




Helps importing country impose local content
regulations on products from abroad.
Safer than most ports of entry—bonded
warehouse.
Products can be labeled as manufactured in
the foreign trade zone country, if products
from that country have a positive country-oforigin (country image).
E.g. Port of Rotterdam (NL)
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Other Customs-Privileged
Facilities


Variations of FTZ
Products are brought into an in-bond area,
manipulated (processed, repackaged,
assembled), and re-exported to country where
products originated.
• Low tariffs assessed only on value-added
processing that took place in the zone.
• Limits on products imported to encourage reexporting.
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Content

The international Marketing
Environment




Dana-Nicoleta Lascu
World economy
International Trade
Regional Economic and Political
integration
Cultural Influence on IM
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Obstacles to Economic and Political
Integration




Differences in culture (language,
traditions, norms, religion) and history
Physical distance/ not the same borders
Differences in level of economic
development
Political considerations:

Concerns regarding loss of sovereignty/
national identity
A history of conflict

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Levels of Regional Economic and/or
Political Integration
Political
Union
Monetary
Union
Common Market
Free Trade Agreement
General Bilateral/Multilateral Agreement
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General Agreements: Bilateral and
Multilateral Forums and Agreements

Bilateral Agreements


Regional trade cooperation between two countries
Multilateral Forums and Agreements:
General agreements between multiple countries.
 Typically, they are industry specific
 OPEC (Organization for Petroleum Exporting
Countries)/ Oil and Gas
 NATO (North Atlantic Treaty Organization)/ Military
 OECD (Organization for Economic Cooperation and
Development)
 APEC (Asia-Pacific Economic Cooperation)
 CIS (Commonwealth of Independent States) non97
Baltic successors to the Union of theAtomic
Soviet
Union 2006
Dana-Nicoleta Lascu
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
Free Trade Agreements:
Europe



Countries reduce or eliminate trade
barriers on all goods and services traded
between them.
Every country is free to charge its own
tariff to all external entities.
Example:

European Free Trade Association
(EFTA)
- Member countries: Iceland, Liechtenstein,
Norway and Switzerland
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Free Trade Agreements: Asia

Association of Southeast Asian Nations
(ASEAN)


Most successful example of regional economic
integration in Asia
Member countries: Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand,
and Vietnam.
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Free Trade Agreements:
Americas
• North American Free Trade Agreement
(NAFTA)
 Member countries: United States, Canada and
Mexico.
• Free Trade Area of the Americas (FTAA)
 Member countries: The 34 democratic nations
of North, Central, and South America.
 Ambitious plan to create a market of 800
million people and an annual production worth
$11 trillion in the current decade.
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Free Trade Agreements:
Africa
• Southern African Development
Community (SADC)

Free trade organization promoting economic
cooperation among 14 of Africa’s more
affluent countries: Angola, Botswana, the
Democratic Republic of Congo, Lesotho,
Madagascar, Malawi, Mozambique, Namibia,
Seychelles, the Republic of South Africa,
Swaziland, Tanzania, Zambia, and Zimbabwe.
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Customs Union


Trade association that eliminates or
greatly reduces all trade restrictions for
member countries
Identical Import duties and regulation for
non-members

South African Customs Union

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Botswana, Lesotho, Namibia, and
Swaziland
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Common Market
Establishing a common market involves:
 Eliminating all tariff and non-tariff
barriers to trade
 Adopting common external tariffs
 Allow for free movement of capital and
labor within the common market
 European Union reached this stage before
establishing a monetary and political
union
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Common Market (contd.)
•
Latin American Integration
Association

•
Member countries: Argentina, Bolivia, Chile,
Colombia, Ecuador, Mexico, Paraguay, Peru,
Uruguay, and Venezuela.
Andean Common Market

Member countries: Bolivia, Colombia, Ecuador,
Panama, Peru, and Venezuela.
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Common Market (contd.)
• Southern Cone Common Market
(MERCOSUR)

Member countries: Belize, Costa Rica, Dominican
Republic, El Salvador, Guatemala, Honduras,
Nicaragua, and Panama.
• Central American Common Market


Member countries: Brazil, Argentina, Paraguay
and Uruguay.
Bolivia and Chile are members with
contingencies.
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Common Market (contd.)

Common Market for Eastern and
Southern Africa (COMESA)

Angola, Burundi, Comoros, Democratic
Republic of Congo, Djibouti, Egypt,
Eritrea, Ethiopia, Kenya, Madagascar,
Malawi, Mauritius, Namibia, Rwanda,
Seychelles, Sudan, Swaziland, Uganda,
Zambia, Zimbabwe.
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Monetary Union
• Common monetary policy
• Unified central bank
• Single currency
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Monetary Union, Examples:
• European Monetary Union



Dana-Nicoleta Lascu
Also known as Euro zone, EUR-16, and
Euroland
Member countries: Austria, Belgium,
Finland, France, Germany, Greece,
Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain
European Central Bank
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Monetary Union, Examples:
European
Monetary
Union
3 criteria:
• No more than
2 % from average
interest rate
• Budget deficits below
3 % of GDP
• Public dept not
exceeding 60% of GDP
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Monetary Union, Examples:
(contd.)
• West African Economic and
Monetary Union

Benin, Burkina Faso, Ivory Coast, GuineaBissau, Mali, Niger, Senegal, Togo
• Economic Community of West
African States

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Benin, Burkina Faso, Cap Verde, Ivory
Coast, Gambia, Ghana, Guinea, GuineaBissau, Liberia, Mali, Niger, Nigeria, Senegal,
Sierra Leone, and Togo
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Political Union



Dana-Nicoleta Lascu
Highest level of integration
Common governing bodies, legislative
bodies, and enforcement powers
Example: European Union
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European Union
Member Countries: 27
Belgien (BE)
Italien (IT)
Rumänien (RO)
Bulgarien (BG)
Lettland (LV)
Schweden (SE)
Dänemark (DK)
Litauen (LT)
Slowakei (SK)
Deutschland (DE)
Luxemburg (LU)
Slowenien (SI)
Estland (EE)
Malta (MT)
Spanien (ES)
Niederlande (NL)
Tschechien (CZ)
Frankreich (FR)
Österreich (AT)
Ungarn (HU)
Griechenland (GR)
Polen (PL)
Vereinigtes Königreich (GB)
Irland (IE)
Portugal (PT)
Republik Zypern (CY)
Finnland (FI)
Candidate Countries: Croatia , Turkey
112
Bodies of the European
Union
• European Council:

The highest policy-making body, it consists of
heads of member-countries’ government.
• European Parliament (in Strasbourg, F):


Consists of 785 members elected by direct
universal suffrage with representation allocated
among member states based on their population
(5 years)
Debates the policies and legislation in the EU
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Bodies of the European
Union
• Council of Nations

Consists of representatives from parliaments of
member countries and acts as constitutional
council that has the power to overrule the Court of
Justice.
• Council of Ministers:
The decision-making body (legislature) of the
European Union
 Composed of one minister from each member
country
 Passes laws based on proposals of the European
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
Bodies of the European
Union (contd.)
• European Commission:





Dana-Nicoleta Lascu
The executive body of the European
Union.
Subordinated to the European Council
Consists of a president and
commissioners who are in charge of
initiating and supervising the execution of
laws and policies.
Answers to the European Parliament
Acts only on behalf of and in the interest
of the European Union, and not that of
individual member states
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Bodies of the European
Union (contd.)

European Central Bank:


Enacts the monetary policy for the countries
that are members of the European Monetary
Union
Maintains price stability within the European
Monetary Union
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Bodies of the European
Union (contd.)
• European Court of Auditors:

In charge of controlling sound and lawful
management of the EU budget
• European Court of Justice:



The European Union’s equivalent of the United
States Supreme Court.
The final court of appeals
Can overrule decisions of the national courts
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The EU
Fifteen Member states
The European
Parliament
The European Council
The European
Court of Justice
Body of 546 members
(elected every 5 years)
Meeting place for heads
Of the EU members
Judgments override
National courts
Council of Ministers:
1 minister of each member country,
The legislature body
The European
Central Bank
Price Stability
The European Commission:
Works on behalf of the EU,
Subordinate of the Council,
The executive body
The Council of Nations:
Dana-Nicoleta
Representatives from the Parliament,
constitutional council,
may
overrule
the Court of Justice
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Content

The international Marketing
Environment




Dana-Nicoleta Lascu
World economy
International Trade
Regional Economic and Political integration
Cultural Influence on IM
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Culture



Culture is defined as a continuously changing
totality of learned and shared meanings,
rituals, norms, and traditions among the
members of an organization or society.
Culture is also defined as a society’s
personality.
Culture



Has a general influence on consumption
Has an influence on the stakeholders
Determines the manner in which individuals respond
to Marketing strategies
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Example
The Turkish Client
You are in the middle of negotiations with a potential Turkish
client in Istanbul, over lunch, at the Conrad Hilton Hotel.
You go to the self-service buffet and pile on your plate some
tasty pork chops from a serving dish clearly marked "pork."
You ask the waiter to bring a bottle of wine and offer some
to your potential Turkish client; he declines. Your products
are known for their quality in Turkey and elsewhere in the
world, and your client seems receptive to your price quote.
After lunch, the potential client invites you to his home for
coffee; you decline and state that you need to stay at the
hotel to get some work done and bid him good-bye.
You come back to your home country and find that you cannot
reach your Turkish client. His secretary always claims he is
not in, and he does not return your calls.
121
 What went wrong?
Example




The Turkish Client
in Turkey, the dominant religion is Islam, and
Islam bans the consumption of pork and
alcohol.
Could he have been offended by your not
going to his house for Turkish coffee?
Could the hotel staff have told him that you
spent the evening next door, at another airconditioned hotel, a former palace, having yet
another bottle of wine?
122
Constituents of Culture



Ecology—The manner in which society
adapts to its habitat.
Social Structure—The organization of
society.
Ideology—The manner in which
individuals relate to the environment and
to others.
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Elements of Culture




Language
Religion
Cultural Values
Cultural Norms
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Language

Spoken/Written Language




Differences in meaning in different countries
which share the same language (nappies –
diapers, trunk – boot, vacuuming – hoovering)
Dealing with multiple dialects
High costs of translation
High costs of translation blunders (e.g.
”Fresca”: soda pop, Mexico: slang for lesbian)
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Language (contd.)
Non-verbal communication






Proxemics (Physical
space)

Postures

Orientations (manners,
conventions)
Oculesics (eye contact)

Chronemics (Timing of

verbal exchange)
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Haptics
Kinesics (Gestures)
Paralinguistics
(Intonation, accents,
qualitiy of voice)
Appearances
Olfactions
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Religion


Society’s relationship to the supernatural
determines dominant values and attitudes.
Examples:
Protestant Religion—stresses hard work and frugality.

Judaism—stresses education and development.

Islam—focus on rules for social interaction. Bans the
use of interest rates. No pork or alcohol

Hinduism—encourages family orientation and dictates
strict dietary constraints. Strictly hierarchical. No Beef.

Buddhism—stresses sufferance and avoidance
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of worldly desires.
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
Religion and Its Impact
on Business




Business Days
Gender Roles
Gift Giving
Marketing Practices
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Christian
Business
Business
Business
Business
Business
Business
Moring
Islam
Business
Business
Business
Business
Judaism
Business
Business
Business
Business
Dana-Nicoleta Lascu
Business
Business
Sunday
Business
Business
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Cultural Values
• Enduring beliefs about a specific mode of
conduct or desirable end-state.
• Guide the selection or evaluation of behavior.
• Ordered by importance in relation to one
another to form a system of value priorities.
Ultimately affecting product preferences
and perception of products
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Learning New Cultures

Enculturation


Acculturation


Process by which individuals learn the beliefs
and behaviors endorsed by one’s own culture
Learning a new culture.
Assimilation

Full adoption and maintenance of the new
culture, and resistance to one’s old culture.
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Cultural Norms

Norms are derived from values and
defined as rules that dictate what is right
or wrong, acceptable or unacceptable.

Minimum
requirement
for a

“survival”
in a new
country

Imperative

What an outsider must or must not do.
Exclusive

What locals may do but an outsider cannot
do.
Adiaphora
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
What an outsider may or may not do.
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Cultural Norms
Imperatives
Exclusives
Business cards: Asia:
Wearing a sticker from
presentation and
a political party
receiving with both
hands. It has to stay
on the table, don’t
write on the card,
don’t put it in the back
pants pocket
In Saudi Arabic woman
are not allowed to
drive or walk in public
without a man.
Dana-Nicoleta Lascu
Adiaphorous
Eating with chopsticks
in Asia.
Drinking banana beer
in East Africa.
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National/Regional Character






Time Orientation
Business Hours
Gift Giving
Socializing
Gender Roles
Status Concern and
Materialism
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Other Manifestations of National
and Regional Character

Contact


e.g., phone, e-mail, in person
Access

e.g., transportation by bicycle, personal
automobile, public transportation
Holland
Taiwan
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China
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Cultural Variability

Term used to differentiate between
cultures on the Geert Hofstede
Dimensions, which are:

Power Distance

The manner in which interpersonal
relationships are formed when there are
perceived differences in power.
Germany
U.S.
Low
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Eastern
Europe
Latin
America
China
High
135
Atomic Dog Publishing 2006
Cultural Variability (contd.)

Term used to differentiate between
cultures (contd.)

Uncertainty Avoidance

The extent to which individuals are
threatened by uncertainty and risk and
thus adopt beliefs and behaviors that help
them to avoid the uncertainty.
Germany
U.S.
Low
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Japan
Central/
Eastern Europe
China
High
136
Atomic Dog Publishing 2006
Cultural Variability (contd.)

Terms used to differentiate between
cultures (contd.)

Masculinity/Femininity

The extent to which a culture is
characterized by assertiveness /
selfconfidence, rather than nurturing.
China
Canada
Sweden
Low
Masculinity
Dana-Nicoleta Lascu
Argentina
United
Australia States
High
Masculinity
137
Atomic Dog Publishing 2006
Cultural Variability (contd.)

Terms used to differentiate between
cultures (contd.)

Individualism/Collectivism

The extent to which individuals prefer to
act in the interest of the group rather than
in their own self-interest.
Thailand
Latin America
China
Low
Individualism
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Australia United
States
GB
High
Individualism
138
Atomic Dog Publishing 2006
Cultural Variability (contd.)

Hofstede adds later a next point

Long term Orientation/ short term




Time horizon of planning in a society
Values long term Orientation: frugality,
insistency
Values short term Orientation: flexibility,
egoism
www.culturegrams.com reports on more than 200 countries, each
U.S. state, and all 13 Canadian provinces and territories
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High vs. Low Context
Cultures

Low-Context Cultures


What is said is precisely what is meant.
High-Context Cultures:


The context of the message is meaningful.
Context:



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Message source
The source’s standing in society or in the
negotiating group
The source’s level of expertise, tone of
voice, body language
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Cultural Change and
Marketing
Marketers need to integrate culture when designing a
marketing strategy by going through the following process:
Researching symbolic elements and cultural
meanings in consumers’ lives
Identifying cultural meanings of the product
Designing the product accordingly
Designing the marketing campaign using
symbolic cultural elements
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Atomic Dog Publishing 2006
Obstacles to Cultural
Understanding
• Ethnocentrism

The belief that one’s own culture is superior
to another and that strategies that are used
in the home country will work just as well
internationally.
• The Self-Reference Criterion:
The unconscious reference to one’s own
national culture, to home-country norms and
values, and to their knowledge and
experience in the process of making
142
Dana-Nicoleta Lascudecisions in the home country.
Atomic Dog Publishing 2006

The Global Consumer Culture


Shared consumption-related symbols and
activities that are meaningful to market
segments
A global consumer culture is attributed to
the diffusion of products from the United
States to the rest of the world.



Entertainment (MTV, movies, CD’s)
Hamburgers and pizza
Jeans and running shoes, etc.
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Atomic Dog Publishing 2006
Global Consumer Culture
Trends



Proliferation of transnational firms and the
related globalized capitalism
Globalized consumerism and the desire for
material possessions
Homogenization of global consumption

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Referred to as McDonaldization or
Cocacolonization
144
Atomic Dog Publishing 2006
Positioning Based on Culture

Global consumer culture positioning


Local consumer culture positioning


Positioning the product to appeal to individuals who
want to be part of a global consumer culture.
Positioning the product so that it is associated with
local cultural meanings.
Foreign consumer culture positioning

Positioning the product as symbolic of a desired
foreign culture.
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Content






Basics of International Marketing
The international Marketing Environment
International Marketing Strategies
International Marketing Mix
Implementation of the international Marketing
Strategies
Case studies
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Atomic Dog Publishing 2006
Content

International Marketing Strategies



Dana-Nicoleta Lascu
International Marketing Research
International Marketing Planning
Expansion Strategies and Entry
147
Atomic Dog Publishing 2006
Case Study 2
148
International Marketing
Research: Definition
International marketing research is the systematic
•design,
•collection,
•recording,
•analysis,
•interpretation,
•and reporting
of information for a particular marketing decision
facing a company operating internationally.
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International Marketing
Research


International marketing managers need to
constantly monitor the different forces
affecting their international operations.
International marketing research is
especially complex.


Cultural differences
Consumers remain sometimes suspicious of
research
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Types of International
Marketing Research
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Research of Industry, Market
Characteristics, and Trends




Acquisition analyses
Diversification analyses
Market-share analyses
Export research
Dana-Nicoleta Lascu
152
Atomic Dog Publishing 2006
International Buyer Behavior
Research





Brand preferences
Brand attitudes
Brands awareness studies
Purchase behavior studies
Consumer segmentation studies

e.g. Consumers in China tend to go for
established luxury brands; they are more
likely to avoid social risk than Westerners
Dana-Nicoleta Lascu
153
Atomic Dog Publishing 2006
International Product
Research






Concept development and testing studies
Brand name generation and testing
Product testing
Competitive product studies
Packaging design studies
Test marketing
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Atomic Dog Publishing 2006
International Product
Research
Brand name generation and testing
Bad-Choice Brand Names









Clean Finger Nail
Kolic
Last Climax
Pocari Sweat
Shocking
Cat Wetty
Pipi
Polio
Zit
Dana-Nicoleta Lascu
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Chinese tissues
Japanese mineral water
Japanese tissues
Japanese sport drink
Japanese chewing gum
Japanese moistened hand towels
Yugoslavian orangeade
Czechoslovakian laundry detergent
Greek soft drink
155
Atomic Dog Publishing 2006
International Distribution
Research

Import/export analyses



E.g. Identifying logistic companies who
can handle customs
Channel performance and coverage
Plant/warehouse location studies
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Atomic Dog Publishing 2006
International Promotion
Research
How effective is the communication with
the target market?
 Studies of premiums, coupons, and deals
 Advertising effectiveness research
 Local media research
 Studies of personal selling activities:


Sales Force Compensation
Quota
Territory

Dana-Nicoleta Lascu
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International Pricing
Research











International market potential studies
Sales potential studies
Sales forecast
Cost analysis
Profit analysis
Price elasticity studies
Competitive pricing analyses
Studies projecting demand
Currency and countertrade studies
Studies of inflation rates and pricing
Studies of negotiation tactics
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Atomic Dog Publishing 2006
The International Marketing
Research Process

STEP 1 Define the International Marketing
Research Problem and Research Objectives




Exploratory (define the relevant dimensions,
generate hypotheses)
Descriptive (observe and describe the problem)
Causal research (cause-and-effect relationships)
STEP 2 Develop the Research Plan (sources,
instruments, methods, procedures, costs)
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The International Marketing
Research Process (contd.)

STEP 3 Decide on the Information Sources
Secondary Data:



Collected to address a problem other than the
specific international marketing problem that the
company is currently facing
Internal and external secondary Data
Collected before primary data
Primary Data:
Collected to address the specific international
160
marketing problem
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
Secondary Data Constraints


Conceptual Equivalence
 Concepts have different meanings in
different cultural environments.
Functional Equivalence
 Products themselves may be used for
different purposes in different country
environments.
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Secondary Data

Availability, Reliability, and Validity:


Published statistics may be unavailable—in
many markets, relevant market data has not
been collected; the most accurate secondary
data is available on industrialized countries.
Data may not be reliable and valid—data
may be underreported or exaggerated.
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Atomic Dog Publishing 2006
Top 10 Global Marketing Research
Firms
Rank
Company
Home
Country
1.
VCU N.V.
2.
IMS Health Inc.
3.
The Kantar Group
4.
Taylor Nelson
Sofres Plc.
U.K.
5.
Information
Resources Inc.
U.S.
6.
GfK Group
7.
Ipsos Group S.A.
8.
NFO WorldGroup Inc.
9.
Westat Inc.
10.
NOP World
Research
Revenues
(US$ millions)
Netherlands
U.S.
U.K.
2,814.0
1,219.4
1,033.2
908.3
554.8
Germany
France
U.S.
U.S.
U.K.
528.9
509.0
466.1
341.9
320.0
Source: “Top 25 Global Research Organizations,” Marketing News, Vol. 37,
No. 17, August 18, 2003, p. H4.
163
Primary Data



Used in international marketing research
far less than it should be: Temptation is to
use secondary data to serve all research
functions.
Expensive: The costs of collecting primary
data in international markets are likely to
be much higher, especially if an adequate
marketing research infrastructure is
lacking.
Time consuming
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Qualitative Research

Qualitative research has been useful as a first step
in studying international marketing phenomena.
 Examples:




Focus Groups
Depth interviews
Observation
Constraints:


Responses can be affected by culture.
Individuals may act differently if they know they are
being observed.
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Atomic Dog Publishing 2006
Quantitative Research

Quantitative research are more structured,
involving either descriptive research approaches,
(survey research), or causal research approaches
(experiments).
 Examples:




Content analysis, e.g. advertising research
Survey research
Experimental research
Constraints:

Dana-Nicoleta Lascu
Respondent factors
Infrastructure factors
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The International Marketing
Research Process (contd.)

STEP 5 Design Data Collection Instrument
 Emic instruments


Etic instruments


Measure phenomena specific to each culture.
Measure the same phenomenon in different cultures.
Constraints:

Translation costs and accuracy

Instrument reliability

Reluctance to answer certain questions
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The International Marketing
Research Process (contd.)

STEP 6 Decide on the Sampling Plan




Sample Unit (Who)
Sample Size (How many)
Sampling Procedure (Selection)
STEP 7 Collect, Analyze, and Interpret
Data
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Decision Support Systems
for Global Marketing

A coordinated collection of data, systems,
tools, and techniques, complemented by
supporting software and hardware
designed for the gathering and
interpretation of business and
environmental data.




Computerized
Interactive
Flexible
Discovery oriented
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Sales Forecasting

Sales Force Composite Estimates


Jury of Expert Opinion


Personal observations and expectations of the local
sales force and the international sales manager
Opinions of different experts about future demand
The Delphi Method

Experts to estimate market performance; findings are
aggregated, and experts are queried again with the
purpose of arriving at a consensus
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Sales Forecasting (contd.)

Time Series and Econometric Models

Use data of past performance to predict future
market demand.
Analogy Methods


Estimation method that relies on
developments and findings in markets …



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With similar levels of economic development, or
Where the product is in the same market
development stage, or
In markets which share similar cultural
171
characteristics
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Sales Forecasting (contd.)
Point of Sale Research
• Made with the help of store scanners, in
markets where they are available
• Involve comprehensive store audits.
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Content

International Marketing Strategies



Dana-Nicoleta Lascu
International Marketing Research
International Strategic Marketing
Planning
Expansion Strategies and Entry
173
Atomic Dog Publishing 2006
Developing an International
Marketing Strategy

Requirements:
Strategic fit between the company’s objectives,
competencies, and resources and the challenges of its
international market or markets.
 Link between the company’s resources and its
international objectives in a complex, international
environment.
 The strategic planning process must be systematic and
continuous
Company’s commitment to its international markets.

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Atomic Dog Publishing 2006
The International Strategic Plan
on different levels







Strategic plan allocates
resources to each
business unit based on
division goals and
objectives.
Portfolio analysis is used
to decide which brands
to harvest, invest in, or
divest.
Has longer-term focus
A marketing plan is
developed at product level,
product line level, or at
brand level.
Has shorter-term focus
Involves the marketing
department
Corporate


Division
Business Unit
Product Level


Strategic plan allocates
resources and establishes
objectives for the whole
enterprise worldwide.
Has long-term focus
Involves the highest levels
of management
Involves international
target market selection
Planning involves
decisions on which
consumer segments to
target in each country
and how to target them.
175
Developing the International
Marketing Plan

Develop strategies for the target market:



Product mix, Distribution, Promotion mix, Pricing
Plan international marketing programs
Manage the international marketing effort



Organize
Implement
Control
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Atomic Dog Publishing 2006
International Target
Marketing
The process of identifying and focusing
on those international market segments
that the company
can serve most effectively
and designing products,
services, and marketing programs
with these segments in mind.
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International Target
Marketing

Is Used by Companies to:



Identify consumer segments with similar traits
(International market segmentation).
Select segments company can serve
efficiently. Develop products tailored to each
segment (International market targeting).
Offer products to the target market,
communicating through the marketing mix,
product traits and benefits that differentiate it
in the consumer’s mind (Positioning).
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Atomic Dog Publishing 2006
International Segmentation
The process of identifying countries and/or
consumers that are similar with regard to key
traits, such as product-related needs and
wants, that would respond to a product and
related marketing mix.
Must be performed at country (macro
segmentation) level AND at the consumer
level (micro segmentation).
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Requirements for
International Segmentation
The extent to which international
market segments respond
differently to marketing
strategies
The extent to which the
international target market
is responsive to the
marketing strategies used
The ability to communicate with
the international target market
The ability to estimate
the size of the market
The extent to which the
international market is
large enough to warrant
investment
The extent to which international
consumer preferences are stable
180
over time
International MacroSegmentation
Country Attractiveness Analysis
 Market potential–indicators:





Gross domestic product (GDP) per capita
Industrial and agricultural sector statistics
Market size and potential
Consumer buying power
Investment figures (Foreign direct investment
data, other trade statistics)
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International MacroSegmentation (contd.)

Political, legal and financial environment
of country:







Ethnic conflict
History of war engagement
Antiforeigner sentiment
Recent nationalization activities
Legal ambiguity
Trade barriers
Exchange rate controls
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International MacroSegmentation (contd.)

Marketing support infrastructure:




Availability and reliability of distribution and
logistics providers
Availability of competent partners for strategic
alliances.
Quality of telecommunication and
transportation infrastructure.
Availability of other service providers:
-
Dana-Nicoleta Lascu-
Marketing research firms
Financial firms
Management consulting firms
183
Atomic Dog Publishing 2006
International MacroSegmentation (contd.)

Strength of own Brand — brand franchise



Lead country (where products are first
adopted)
Lag country (where products are last adopted)
Degree of Market Fit with Company
Policies, Goals, and Resources.
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Atomic Dog Publishing 2006
Typology of international
target market
Market attractiveness:
e.g.
Labor costs
Brand management
Working hours
New markets
Machine running times
Taxes
Environmental standards
Administrative barriers
Import barriers
Structure (natural) barriers
Strategic (competition) barriers
See: Backhaus,K., Büschken, J., Voeth, M, International Marketing, 2005
185
Bases for Micro-Segmentation


Clusters of consumers that respond in a
similar way to the marketing strategies
Demographic (descriptive statistics):









Age
Occupation
Education
Income
Ethnicity
Race
Nationality
Life-cycle stage
Social class
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Atomic Dog Publishing 2006
Bases for Segmentation
(contd.)
Psychographic: lifestyles, values, attitudes,
interests, opinions
 Hofstede dimensions:






Power-distance
Masculinity-femininity
Uncertainty avoidance
Individualism-collectivism




Global teenagers
Global elite
Global gay and lesbian segment
High sensation seekers
Global segments (psychodemographic
segments):
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Atomic Dog Publishing 2006
Bases for Segmentation
(contd.)

Benefit Segmentation


Example: Cooking oil markets can be segmented
based on benefits sought—olive oil is targeted to
consumers who seek health benefits.
Geographic Segmentation

Example: Avon segments its market geographically.
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Atomic Dog Publishing 2006
Bases for Segmentation
(contd.)
Usage
Nonusers
Occasional users
Medium users
Heavy users
User Status
User of competitors
products
Potential users
First time users
Regular users
Ideal
consumer
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Atomic Dog Publishing 2006
Country Screening and
Selection
Three stages:
 Assign importance score to each country
screening criteria.
 Evaluate country performance on each of
the screening criteria.
 Calculate country attractiveness score.
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Atomic Dog Publishing 2006
Country Screening/ Selection
Example
191
Target Market Decisions
Strategy
Purpose
Differentiated
targeting strategy
Differentiated targeting strategies identify, or even
create, market segments that want different benefits
from a product and target them with different brands,
using different marketing strategies. Example: Procter &
Gamble with different laundry detergents
Concentrated
targeting strategy
Companies select only one market segment and
target it with a single brand. Companies that cannot
afford to compete in a mature market with an oligopoly
may choose to pursue a small segment–a niche.
Example: Mont Blanc pens
Undifferentiated
targeting strategies
Dana-Nicoleta Lascu
The product is aimed at all markets using a single
strategy, regardless of the number of markets and
countries targeted.
Example: Coca Cola
192
Atomic Dog Publishing 2006
Positioning the Brand
Definition: Placing the brand in the consumers
mind in relation to other competing products
Six possible positioning strategies to reach a
unique selling proposition
1.
2.
3.
4.
5.
6.
Attribute/Benefit Positioning
Price/Quality Positioning
Use or Application Positioning
Product User Positioning
Product class Positioning
Competitor Positioning
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Atomic Dog Publishing 2006
Positioning the Brand
Attribute/Benefit Positioning:

Positioning that communicates product attributes/
benefits, differentiating each brand from the other
company brands and those of competitors (e.g. Procter
& Gamble)
Price/Quality Positioning

A strategy whereby products and services are
positioned as offering the best value for the money
(e.g. Wal-Mart)

Or a strategy that offers the best product that money
can buy (e.g. Mercedes-Benz, Kempinsky)
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Positioning the Brand
Use or Applications Positioning

The process of marketing a precise product application
that differentiates it in the consumers’ minds from other
products that have a more general use e.g. bikes in Asia
or in the USA)
Product User Positioning

A positioning strategy that focuses on the product user,
rather than on the product. (e.g. Mont Blanc for
business executives)
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Atomic Dog Publishing 2006
Positioning the Brand
Product Class Positioning

A strategy used to differentiate a company as a leader
in a product category. E.g. Disney sells magic, Harley
sells excitement
Competitor Positioning

The process of comparing the firms’ brand with those of
competitors, directly or indirectly.
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Atomic Dog Publishing 2006
Content






Basics of International Marketing
The international Marketing Environment
International Marketing Strategies
International Marketing Mix
Implementation of the international Marketing
Strategies
Case studies
Dana-Nicoleta Lascu
197
Atomic Dog Publishing 2006
Content

International Marketing Strategies



Dana-Nicoleta Lascu
International Marketing Research
International Marketing Planning
Expansion Strategies and Entry
198
Atomic Dog Publishing 2006
Going International:
Evaluating Opportunities

Consider drivers of international expansion in
the environment:






Competition
Regional economic and political integration
Economic growth
Technology
Converging consumer needs
Consider firm-related international expansion
drivers:
Product life-cycle considerations

New product development costs

Experience transfers
Dana-Nicoleta 
Lascu
Labor costs

199
Atomic Dog Publishing 2006
Example: Labor Cost Drivers
Country
Compensation ($U.S.)
United States
22.87
Austria
28.29
Australia
23.09
Brazil
3.03
Denmark
33.75
France
23.89
Germany
32.53
Israel
12.18
Italy
20.48
Japan
21.90
Korea
Netherlands
11.52 Hourly Compensation Costs
2.50 in U.S. Dollars for Production
Workers in Manufacturing 2006
30.76
Singapore
7.44
United Kingdom
24.71
Mexico
Source: http://stats.bls.gov
200
Control and Risk in
International Expansion
Low
Indirect
Export
Control/Risk
Direct
Export
in home country
Licen- Franchi- Joint
Branch
sing
sing Venture
Capital and Management
High
Subsidiary
in host country
201
Control and Risk in
International Expansion

Companies need to decide whether to use
middlemen in the process of taking their
products internationally or to market
directly to the international market:


Using middlemen requires a company to relinquish
control: Distributors or agents sell the product .
Direct international involvement exposes the company
to substantial risk, but it also affords the company
significant control of the marketing mix.
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International Entry Mode:
Indirect Exporting
Company uses home country intermediaries who,
in turn, sell product overseas.
 Lowest risk - Lowest control
 Often “first step” to a greater involvement
 Companies can use cooperative exporting, also
known as “piggybacking” or “mother-henning”.

using the distribution system of exporters with
established systems for selling abroad who agree to
handle the export function of a non-competing
company on a contractual basis.
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International Entry Mode:
Direct Exporting
Firm handles its exporting function usually using its
own in-house export department.

Provides more control over the marketing mix
than indirect exporting.

Involves the use of middlemen such as:






Freight forwarders
Internet boosted this
Shipping lines
kind of entry mode
Insurers
Merchant middlemen
Retailers
Other marketing service providers, such as
consultants, researchers and advertising companies204
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Top Purchasers of U.S. Exports
Country
Purchases (Millions $U.S.)
Canada
190,163
Mexico
110,775
Japan
54,400
United Kingdom
35,960
China
34,721
Germany
31,381
South Korea
26,333
The Netherlands
24,286
Taiwan
21,731
France
21,240
Source: http://www.ita.doc.gov/td/industry/otea/, updated November, 2006.
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International Entry Mode:
Licensing
An international entry mode that involves a licensor,
who shares brand name, technology, and know-how
with a licensee in return for royalties.
Licensor:




A book published in the U.S. and
its licensed Chinese reprint (for
sale in Mainland China only)
Offers know-how
Shares technology
Allows for the use of its brand name
Licensee:

Pays royalties for the rights to use licensor’s technology,
know-how, and brand name
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Licensing (contd.)

Advantages:



Lower-risk entry mode (specially Licensing without
the name Limits exposure to economic, financial, and
political instability
Permits the company access to markets that may be
closed or that may have high entry barriers.
Disadvantages:


Can produce a new competitor: the licensee
Can be problematic if licensee cannot guarantee
quality—it affects the brand’s overall reputation

Solution: Licensing without the name (examples:
Lada, a Fiat made in the USSR, Dacia, a Renault
made in Romania).
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International Entry Mode:
Franchising
Franchising refers to the methods of practicing
and using another person's philosophy of
business. Primary international entry mode in the
service industry.
Franchisor:


Gives franchisee right to use brand name, trademarks
and business know-how in return for royalties.
Franchisee:


Pays royalties for the right to use the know-how,
trademarks, and brand name.
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Franchising (contd.)

Advantages:





Lower-risk entry mode
Limits exposure to economic, financial, and political
instability
Higher level of control
Very rapid market penetration
Disadvantages:



Can be problematic if franchisee cannot guarantee quality
Can produce a new competitor: the franchisee
Problematic if the concept can be easily copied
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Franchising (contd.) Example:
McDonalds
St. Petersburg
Viterbo, Italia
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Buenos Aires
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Franchising (contd.)
Example: McDonalds
The McDonald’s restaurant on the left finds that the Quick imitation
on the right has a comparable offering, including the Géant (giant) to
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compete with the Big Mac. (Here in France)
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International Entry Mode:
Joint Venture
Joint Venture: A corporate entity created with the
participation of two companies that share equity,
capital, and labor, among others.

Preferred entry mode in developing countries, where
they contribute to developing local expertise and to the
country’s balance of trade if production is exported.


International firm provides expertise, know-how, most of the
capital, brand name reputation, trademark
Local partner provides the labor, the infrastructure, local
expertise and relationships, and connections to the government
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Joint Venture (contd.)
Advantages:
Higher control entry mode, potentially resulting in higher
profits.
 Costs and risks shared with joint-venture partner.
 Local partner shares local market expertise, relationships,
as well as connections to government decision-making
bodies.
Disadvantages:




Repatriation of profits may be difficult if local government
has control over/stake in the local joint-venture partner.
Can produce a new competitor: the joint-venture partner
70% of all joint ventures break up within 3.5 years
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Selecting the International
Entry Mode: Consortia
A company created with the participation
of three or more companies
Can create monopoly effect, so they are only allowed …
Where expensive R&D is involved
In underserved markets
In markets where the government and/or the
marketplace can control its monopolistic activity.
Example: Airbus (France Aerospatiale 38%, UK British
Aerospace 20%, Germany Daimler DASA 38%, Spain
Constucciones Aeronauticas 4%); founded as a
challenge to Boeing
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International Entry Mode:
Branch Offices

Branch Offices:




Entities are part of the international company,
rather than a new company (as in the case of
the subsidiary).
Involves substantial investment
 Sales office
 Showroom
Engage in a full spectrum of marketing activity
High level of control
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International Entry Mode:
Wholly Owned Subsidiaries

Wholly Owned Subsidiaries:





Involve long-term market commitment
High cost
High control of operations
Greatest level of risk
Can be developed by the company (greenfielding)
or can be purchased (acquisition or merger)
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International Strategic
Alliances
Sometimes licensing, franchising and joint ventures
are called Strategic Alliances. But in general the
Strategic Alliances are more short term and have
not the same level of international commitment
than the named entry modes.
Strategic Alliance: a relationship between two or
more companies attempting to reach joint
corporate and market related goals - while
remaining independent organizations.
Typically, the term refers to nonequity alliances.
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International Strategic
Alliances
Examples of Strategic Allances
Manufacturing:
 Manufacturing alliance (A nonequity relationship, in
which one firm handles the others manufacturing (or
some aspects of it),
 Contract manufacturing (manufacture of products)
Engineering alliances, Technological alliances, R&D
alliances
 Marketing:
 A nonequity relationship, in which one firm handles
marketing (or some aspects) for another firm.
 Distribution:
 One firm handles the distribution or some aspect of
the distribution process for another firm.

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Outsourcing
The strategic use of outside resources to
perform activities that are usually handled by
internal staff and resources.
E.g. customer service and billing.
 Outsourcing grew fast and further growth us
expected. The outsourcing market ist about US $100
billion.
+ effective cost cutting technique
+ accessibility 24/7
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- offshoring
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
Outsourcing


Asia has emerged as the outsourcing hub and
back-office of the Western world, and India,
China, the Philippines, and Singapore are
competing for the business.
 China is catching up as an outsourcing base
for English-speaking nations, a business
dominated by India.
Note: Many outsourcing alliances have failed in
recent years (nearly half of them).
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Success of Outsourcing:




Outsourcing must be done carefully, and with clear
objectives and expectations of outsourcing activities.
Outsourcing partners must be selected based on their
expertise in the outsourcing activity and based on their
cultural fit with the firm.
The outsourcing firm must provide its partner in the
strategic alliance with adequate training and skills that
will help the partner adapt to other cultures.
The outsourcing plan should provide clear expectations,
requirements, and expected benefits during all phases of
the outsourcing activity.
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Case Study 3
222
Content






Basics of International Marketing
The international Marketing Environment
International Marketing Strategies
International Marketing Mix
Implementation of the international Marketing
Strategies
Case studies
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Content

International Marketing Mix

International Product Mix





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International Branding
International Product and Service Strategies
International Distribution
International Communication
International Pricing
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Strategy and the company’s
orientation
Geocentric company
orientation
Global Standardization
Regiocentric company
orientation
Regional
Standardization
Polycentric company
orientation
Local adaption
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Global Standardization
Global Standardization: Standardization of products
across markets and of the marketing mix worldwide.
Advantages:
Allows for economies of scale
Encourages global branding
- using the same brand name, logo, image and
positioning everywhere in the world. (Ralph Lauren,
Escada, Donna Karan, Pepsi, Coca Cola, Camel…)
- Global brands are more prestigious, signaling that
the company has the resources to back the brand.
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Global Standardization
Advantages (contd.):
Effective in meeting the needs of global consumers (same
usage of media (internet, music), international travel)
Effective in meeting consumer needs of higher quality and
lower price.
Facilitated by international travel
Disadvantage:
Cannot meet the needs of all target consumers.
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Regional Standardization
Regional Standardization: Standardization of products
across regions and of the marketing mix within the region.
(e.g.: EU, NAFTA, MERCOSUR)
 Advantages:
 Allows for economies of scale
 Addresses consumer preferences for higher quality
and lower price
 Facilitated by international travel within the region
 Disadvantage: Cannot perfectly meet the needs of all
target consumers in the region.
 E.g. Mercedes Benz, Levis
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Standardization:
Global Localization
Global Localization: global branding with
localized marketing adaptation to differences in
local culture, production capabilities, governmental
restrictions, etc.
Types:


Modular Adaptation: Offer parts (modules) that can be
assembled worldwide in different configurations,
depending on market needs.
Core Product Strategy: Involves using a standardized
strategy for the core product worldwide, but varying
certain aspects of the offering (product ingredients,
advertising, for example) from market to market.
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Adaptation: Mandatory

Mandatory Adaptation:
 Adapting products to local requirements so
that they can legally and physically operate
in the respective countries.
 Examples:
 Left-hand driving in the United Kingdom
 220 volt appliances in Europe, 110 volt
appliances in the U.S.
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Adaptation: Non-Mandatory

Local Non-Mandatory Adaptation:
 Adapting a product to better meet the needs
of the local market, or developing new brands
for individual local markets, even though such
adaptation is not required.
 Examples:


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Fast-food traditional hamburger places selling
vegetarian burgers in India and falafel sandwiches
in the Middle East.
The Mercedes A class was developed for the
narrow European streets. This automobile can
easily fit up on narrow sidewalks and allow
sufficient room for passers-by. Atomic Dog Publishing 231
2006
Private Label (Retailer)
Brands

Compete effectively with multinational
corporations because they:



Offer premium store brands perceived by local
markets as high-quality.
Are innovative
Appeal to consumers during economic downturns,
and in general, since consumers today demand high
quality at lower prices.
• Campina, a popular pan-European dairy
company of Dutch origin offers many retailer
brands that compete with its own; for example,
the company sells dairy products under the
Albert Heijn (a popular Dutch retailer) brand
name.
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Global Branding

Country of Origin:


Country with which good/service is associated.
Country of Manufacture:


Country where the product is manufactured
(for products).
Country where the headquarters are located
(for services).
In the absence of other product
information, country of origin impacts
consumers’ product evaluations.
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Product Stereotypes


Product-specific stereotypes that associate
the country of origin as a certification of
quality.
Examples product-country stereotypes:
French perfume, Kenyan or Columbian coffee,
Chinese silk, Italian couture, Italian olive oil, German
beer


Example of service-country stereotype:

French waiters / with poor service.
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Ethnocentrism

The belief




that one’s culture is superior to another and that
strategies used in one’s home country will work just
as well internationally
the belief that purchasing foreign products hurts the
local economy by causing loss of jobs, and that it is
morally wrong and unpatriotic.
Domestic marketing extension concept
Leads to the rejection of foreign products.
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Service Entry Barriers


Represent a manifestation of protectionism at
the firm level, government level and consumer
level
Examples:





Requirement to use national service providers
Prohibition against employment of foreign nationals
Direct competition from government providers
Restrictions on movement
Tariffs on international services
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Protecting Brand Names
internationally


Addressed first by GATT (General
Agreement on Tariffs and Trade); now
under WTO umbrella
Counterfeiting:


Design: Copying designs or scents of another
company
Brand Name: Selling counterfeit products as
brand name originals
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Counterfeiting Factors

Consumer Factors:




Willingness to purchase counterfeit goods because
risk is low and prestige gains are high.
Willingness to purchase counterfeit goods/products
that are consumed in publicly.
Consumers and retailers might not notice the
difference.
Technology factors:


Affordable, quality copying technology
Local partners of multinational firm have access to
know-how.
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Counterfeiting Factors
(contd.)

Distribution factors:



Supply chains are not adequately controlled.
Traders may use Internet chat rooms and
unauthorized dealerships.
Local government factors:



Governments may not interfere; even the government
may run counterfeiting operations.
Cracking down would lead to loss of jobs and unrest.
Customs representative and other enforcement
officials may not be familiar with authentic brands.
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Combating Counterfeiting





Lobbying the U.S. government.
Lobbying other governments involved.
Change product’s appearance to
differentiate the authentic brands from
copies.
Better control of distribution chain
operations.
Key: cooperation with the local
government
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Industrial Products and Services vs.
Consumer Products and Services
Issues:






Service encounters are primarily social encounters, and
rules and expectations related to services vary from
culture to culture.
Culture does not play as important a role for industrial
products.
The decision to purchase industrial products rests with
the top-management at the company’s headquarters.
The purchase process often takes several months.
In many countries, local government has substantial input
in the supplier decision, favoring national suppliers.
For professional services, the local government can
directly restrict the company to local suppliers, or require
local licenses/credentials.
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Industrial Products and Services vs.
Consumer Products and Services
Issues:
Industrial consumers are businesses; business-tobusiness markets are characterized by fewer
buyers and a larger purchase volume.
 The business-to-business market is
geographically concentrated.
 Decision processes involve many decision makers
and influencers in the country of operation and in
the home country.
 Demand for industrial products is derived from
demand for consumer products and thus is much
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more volatile.

Product Standards: ISO 9000


Industrial consumers need a high degree
of standardization for industrial products
and services.
Quality standards (for each industry and
businesses) are set by the International
Organization for Standardization (ISO), a
nongovernmental federation of national
standards bodies.
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Product Standards: ISO 9000
Quality management

Quality refers to all product or service features
that are required by the customer:



Implies that the organization ensures that its products
or services satisfy customer requirements and comply
with any regulations applicable to them.
Specifies that the organization must meet customer
and regulatory requirements and follow its policies
and procedures while advancing quality through
continuous improvement.
Addresses issues such as the phases of product
development and requires performance measurement
throughout the process through performing internal
audits, monitoring customer satisfaction, and taking
corrective action.
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Product Standards: ISO 14000
Environmental issues



Family of environmental management system (EMS)
standards designed to help businesses reduce their impact
on the environment and to facilitate sustainable
development and foster international trade.
Discourage multinational firms from engaging in hazardous
environmental practices, such as locating plants that
generate hazardous emissions in poor countries with weak
environmental regulations.
Promote corporate policies that are environmentally
sound, efficiency-embracing, and have innovative
technologies and processes.
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Product Standards: ISO 14000

To receive this certification …
 Multinational companies will have to develop EMS
similar to the ISO 9000 standards and a policy that
stresses commitment to continual improvement and
prevention of pollution.
 Firms provide assurances of compliance with
laws/regulations, and provide a framework for setting
and reviewing objectives and targets.
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Standards for Production,
Rather Than Product




Both ISO 9000 and ISO 14000 address the production
process, rather than the product. However, it is implied
that the process affects the product
In the context of both, certification refers to the issuing
of a certificate by an independent external body that has
audited the organization’s management system and
verified that it conforms to the requirements of the
standards.
The auditing body then registers the certification in the
client’s register.
ISO 9000 and ISO 14000 are implemented by about
610,000 organizations in 160 countries.
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ISO 9000 Certifications
WorldwideSource: www.iso.ch, 2005 Annual Report, May 2006
Region
Total
Percent
Share
Number of
Countries
Africa and West Asia
48,327
6.22
58
Central and South
America
22,498
2.90
27
North America
59,663
7.68
3
Europe
379,937
48.92
48
Far East
247,091
31.82
23
19,092
5.20
2.46
Australia and New
Zealand
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Content

International Marketing Mix

International Product Mix





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International Branding
International Product and Service
Strategies
International Distribution
International Communication
International Pricing
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The International
Product Life Cycle
Introduction
and Growth
Stages:
Early
Maturity:
Late
Maturity
Decline
International Corp.
IC manufactures
product in developed
countries; exports to
developing countries
IC moves
production to
developing
country; begins
importing to
home country
Developing
country
competitor
exports product
to IC home
country;
competes
with IC
imports
Developing country
markets remain valuable
target Markets for IC;
IC home
country market Is
diminishing
Sales
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International Product Life
Cycle: Introduction/Growth

The Product Introduction Stage



Products are first developed in industrialized
countries.
Products are traditionally first marketed in
industrialized countries; however, increasingly,
product life cycles are shortened and the product is
marketed in emerging markets as well.
The Growth Stage
Characterized by:
 Increasing competition from other multinationals
 Rapid product adoption
 Product is marketed primarily in developed countries.
 Product is exported to developing countries.
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E.g. iPhone, television in India,
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
International Product Life
Cycle: Maturity/Decline
The Maturity Stage:




Product is adopted by most target consumers.
Sales are leveling off. Profits decline due to intense
competition.
Manufacturing operations move to developing countries
to take advantage of cheap labor.
New competitors: firms from developing countries.
The Decline Stage:
Products are losing ground to new technologies and
product alternatives.
 Decrease in sales and profits.
 Product life cycle is extended through sales to consumers
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in developing countries.
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
Dimensions of the
International Product Mix

Product mix/portfolio


Product line


The total number of products that a company
offers its target markets.
All the brands the company offers in one
product category.
Product length

Total number of brands in the product mix.
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Dimensions of the
International Product Mix

Product width


Total number of product lines the company
offers to its target international consumers.
Product depth

Total number of different offerings in a product
line.
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Example: Unilever
What are the numbers for product length, product
width, product depth and produce line?
Product Area
Culinary products
Frozen foods
Ice cream
Tea
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Brandnames
Variants
Ragú Spaghetti Sauces
Calvé Whisky Cocktail Sauce
Hellmann's Mayonnaise
Product Length: 4
Knorr Soups
Product Width: 18
Bertolli Pastas
Product Depth: Lipton: 3
Amora Vinaigrettes
Magnum:
Wishbone Salad Dressing
Product Line: Tea: 2
Colman's Mustard
Ice cream:5
Pepperami
Pot Noodle
Findus 4 Salti in Padella
Magmum
(Classic, Temptation, Minis, White, Ecuador)
Cote D'Or
Cornetto
Klondike Bars
Solero
Lipton
(Lipton Yellow, Lipton Ice tea, Lipton Brisk)
Bovril (UK)
5
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New Product Development



High risk
High cost
Challenges in international markets:
Competition can appropriate the product/service idea
and deliver final product or service to the market more
swiftly than the initial developer.
 International consumers might not respond as
anticipated .
 Local and/or home-country government might impose
restrictions on product testing.
 Technological infrastructure of individual markets may
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be substandard and unable to support
theDogproduct.
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
New Product Development
Generating new product ideas
Screening new Product ideas
Developing and evaluating concepts
Product Business analysis
Designing/Developing the product
Test marketing
Lancing product internationally
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Step 1: Generating New
Product Ideas

Most product and service firms are driven
by the marketing concept.


Technology firms focus on the products:


Most of the time product development decisions are
based on identifying the needs, wants, and desires of
consumers.
Focus is on research and development
Sources of new Ideas

Consumers (home country, internationally),
Competitive Analyses, Channel Members, Employees,
Top Management, Inventors, Consultants,
Researchers
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Step 2: Screening Ideas

Consider:






USP /Superior consumer fit (needs and values)
Support senior management
Lucrative market potential
Defined brand strategy and promotional plan
Fit between product strategy and technological
advantage
Likely trade adoption (retailers, supermarkets)
Usually a check list is developed in this stage
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Step 3: Developing &
Evaluating Product Concepts



Develop detailed description of product.
Ask consumers to evaluate and indicate
willingness to buy
Use:


Focus Groups
Conjoint Analysis
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Step 4: Performing a Product
Business Analysis

Estimate:





Project costs
Return on investment
Cash flow
Fixed/variable costs
The price level for the product!
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Step 5: Designing and
Developing the Product





Create prototypes
Create brand identity (name, logo,
packaging)
Marketing mix
Coordinate strategy across international
subsidiaries
Product development is increasingly take
place in emerging markets (e.g. India,
Czech Republic, China, Russia)
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Step 6: Test Marketing
Testing new product performance in a limited area
of a national or regional target market.
 Provides estimate of product performance in the
respective country or region.
 Expensive
 Time consuming
 Open to competitive sabotage

Note: 8 out of 10 products fail!
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Types of Test Marketing

Simulated Test Marketing


Test marketing simulates purchase
environment where samples of target
consumers are observed during the decisionmaking process.
Controlled Test Marketing

Test marketing that involves offering a new
product to a group of stores and evaluating
market reaction.
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Test Marketing

Actual test Marketing




Focus on cities appropriate for the test.
Involves selecting distributors and the
additional marketing infrastructure.
Most costly
Leaves the company most exposed to
competitive sabotage.
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Step 7: Launching Product
Internationally

Introducing a new product to
the international market
Quality of launch:





High service quality
On-time shipment
Appropriate product availability
Quality sales force and support
Quality and amount of promotion
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International Launch
Decisions



Consumers and countries
Timing of launch
Marketing mix decisions




Product
Place
Price
Promotion
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Degree of Product/Service
Newness
Extent to which a product/service
is new to a market





New product to existing market/existing
company 33,7% of “new product”
New product line to a company 16,8%
New item in an existing product line 11,9%
(success rate the highest 83%)
Modification of an existing company product
18%
Innovation, new product to the world; 18,8%
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Degree of Product/Service
Newness
Popular classification of innovations:
 Radical innovations (new industries or
standards),
 Dynamically continuous innovations (Change in
the consumption patterns),
 Continuous innovation
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Product Diffusion
Product Diffusion: speed of adoption
Product Factors
Country-Market Factors
USP/relative
advantage
Cultural
similarity
Compatibility with
Adopter’s needs
Economic
similarity
New
Product/Service
adoption
Observability
Triability
270
International Segmentation
Consumer Adopters

Innovators: (2.5% of the total market)



Risk takers who can afford to pay a higher price
during the introduction stage
Primarily consumers in developed countries
Early adopters: (13.5% of the total market)


Consumers who purchase the product early in the
lifecycle stage and who tend to be opinion leaders
in their community.
Primarily consumers in developed countries
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Consumer Adopters (contd.)

Early majority: (34% of the total).



Late majority: (34% of the total)



Consumers who enjoy status of being among the first
to purchase a popular product
Consumers are primarily from developed countries.
Consumers who adopt popular products when the risk
associated with them is minimal
Consumers are from both developed and developing
countries.
Laggards: (16%)
The last consumers to adopt a product; they are risk
averse and conservative in their spending
272
 Consumers are primarily from developing countries.
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
Content






Basics of International Marketing
The international Marketing Environment
International Marketing Strategies
International Marketing Mix
Implementation of the international Marketing
Strategies
Case studies
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Content

International Marketing Mix


International Product Mix
International Distribution




Dana-Nicoleta Lascu
Operations and Logistics
Retailing
International Communication
International Pricing
274
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Issues Related to
International Distribution

Using Established Channels: Channels
that already exits




Could charge high prices
Could be blocked by competition
Channel partnership is a long-term decision:
Company may be bound indefinitely to the channel
choice.
Building Own Channels:



Necessary if there are no channels/ or existing
channels do not conform to company needs.
Expensive
Time-consuming
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International Distribution
Using Home-Country Middlemen
Using Home-Country Middlemen: The Company
is likely not to be involved in managing the
marketing mix in the host market

Export Management Companies:



Highly specialized in certain industries and/or regions.
Mostly represent smaller businesses. E.g. Amex
Works as a “company's export department”
Trading Companies:
Large Companies that specialize in intermediary services
(risk reduction, financial assistance)
 The Japanese Model: sogo shoshas or general trading
company (more investment holdings) Atomic Dog Publishing 276
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
International Distribution
Using Home-Country Middlemen

Home-Country Brokers and Agents:




Middlemen who bring international buyers and
sellers together in the company's home country.
Do not carry title to the product/ commission based
Manufacturer’s export agent: represent a
manufacturer
Buying offices: buyers located in the firm’s home
country, representing different international firms
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International Distribution
Using Home-Country Middlemen

Cooperative Export Arrangements:




Also known as piggybacking and mother
henning e.g. car manufacture market tires
Involve exporters agreeing to handle export
functions for unrelated companies on a
contractual basis
Complementary export agents export
complementary products on a commission
basis.
Complementary export merchants take title to
the complementary products that they export.
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International Distribution
Using Home-Country Middlemen

Export merchants:




Intermediaries who take title to and possession
of the products they carry.
Responsible for shipping and marketing the
products in the target market.
Carry competing brands
Examples:
- Export jobber, who carries commodity goods,
but does not take physical possession of the
goods.
- Norazi agent, who deals in illegal and/or gray
market products.
279
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International Distribution
Using Foreign-Country Middlemen
Using Host-Country Middlemen: The Company is
likely to have a presence in the host country

Merchant Middlemen:
 Intermediaries who carry the manufacturer’s
product line in a particular country.
 Usually carries title to and has physical
possession of the products.
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International Distribution
Using Foreign-Country Middlemen

Agents and Brokers:
 Bring Seller and buyers together but do not
carry title and take possession of the products
 There are many types of agents and brokers in
international markets, such as manufacturers’
representatives and managing agents.


Act as the manufacturer’s sales representatives and
are paid on commission.
Act as managing agents (also known as
compradors), with an exclusive arrangement with the
company, representing it in the foreign market; they
are paid as a percentage of sales.
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International Logistics

The international distribution function is
supported by a number of service providers:


Transportation firms, home country freight forwarders
and customs brokers, government agencies,
nongovernmental organizations, logistics alliances, and
other firms.
Logistics costs account for a large percentage of a
company's gross revenues (10-30%) making
logistics the single highest operating cost.
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International Logistics
Transportation
Order
processing
Logistics
Warehousing
Inventory
control
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International Transportation



transportation determines whether
products arrive at the international
destination on time and in good
condition.
transportation costs can increase the
product price in the target country.
transportation infrastructure


excellent in industrialized countries (by rail,
air, and waterway ports)
Intermodal transportation has been
greatly facilitated by containerization
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U.S Merchandise Value by Mode of
Source: U.S. Department of Transportation,
Transportation Bureau of Transportation Statistics, May 2006;
based on total, water, and air data in the United States.
Mode of Transportation
Total (in millions of U.S. dollars)
Imports
Water
Air
Truck
Rail
Pipeline
Other and unknown
Total Imports
724,946
329,387
237,706
78,131
36,829
61,672
1,469,671
Exports
Water
Air
Truck
Rail
Pipeline
Other and unknown
Total Exports
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233,639
270,041
215,247
30,229
1,671
67,109
817,936
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Characteristics of Each Mode of
Transportation
Mode
Cost
Speed
Product Examples
Truck
Flexibility
(re: Area
coverage)
High
Higher
Higher
Rail
Medium
Medium Lower
Air
High
High
Highest
Water
Low
Low
Low
Lower
Low
Consumer goods, erishables,
automobiles
Coal, gasoline, forestry
products, grains,
automobiles
Jewelry, electronics,
expensive low-volume
products
Grains, gasoline, forestry
products, cement and
fertilizers
Oil and gasoline, chemicals,
semi-liquid coal, refined 286
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Pipeline Low
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Logistics Facilitators

Transportation Firms



Distribution Centers


Designed to speed up warehousing and delivery by
channeling distribution to a hub.
Freight Forwarders and Customs Brokers


Intermodal transportation firms
Containerization
Arrange for transportation, customs clearance,
document filling (Often specialized)
Government Agencies

Promote national security, international involvement of
local firms. Provide financing and insurance for high risk
ventures.
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Warehousing and Inventory
Control


Critical decision: number of warehouses and
distribution centers needed to optimally
implement the logistics function.
In most industrialized countries, distribution
centers are an option for the international firm;
they:
 Receive goods from different producers.
 Take orders from buyers.
 Distribute goods promptly.
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Warehousing and Inventory
Control (contd.)


Warehouses located in free trade zones are
typically also facilities where product assembly
and packaging may be conducted.
Trend:




companies are attempting to address customer
demand while reducing inventory costs,
using just-in-time inventory systems,
creating product flow rather than stock by ordering
products more often and in lower quantity
All intermediaries are using the Universal Product
code (UPC) – where possible - which links suppliers’
and customers’ electronic inventory systems
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Steps Involved in Forming
Logistics Alliances








Establish objectives.
Identify providers.
Express needs/wants.
Evaluate and select bidder.
Develop integration plan.
Create win-win relationship.
Measure and analyze performance.
Redefine goals and objectives.
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Challenges to International
Distribution and Logistics

Distribution challenges in developing countries



Transportation infrastructure
Containerization
Parallel imports (gray markets):


Defined as distribution systems that are not
authorized by the manufacturer: Products purchased
in a low-price market are diverted to other markets.
Hurt company’s image
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Facing Logistics Challenges:
Combating Parallel Imports
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Content

International Marketing Mix


International Product Mix
International Distribution




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Operations and Logistics
Retailing
International Communication
International Pricing
293
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International Retailing
All the activities involved in selling products
and services to final international
consumers for their personal consumption.
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Internationalization of
Retailing

Retailers are rapidly expanding
internationally in order to:





Gain competitive advantage
Increase sales
Increase profits
Improve overall firm performance
As they expand internationally, retailers
can take advantage of cost savings and
learn from experiences in a way that could
further enhance home-country operations.
295
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Internationalization of
Retailing



Trend:
Markets, retailing technologies and
consumers are changing
Consolidation in the food and general
merchandise sectors
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Top 10 Global Retailers
Source: "2007 Global Powers of Retailing," January2007, www.stores.org.
R
Country
Retailer
Format
1
U.S.
Wal-Mart
2
France
Carrefour
3
U.S.
Home Depot
Discount, Hypermarket, Supermarket,
Superstore Warehouse
Cash & Carry, Convenience, Discount,
Hypermarket, Specialty, Supermarket
DIY, Specialty
4
Germany
Metro
5
U.K.
Tesco
6
U.S.
Kroger
7
U.S.
8
Sales /US$
millions
312,427
92,778
81,511
69,134
Target
Cash & Carry, Department, DIY,
Hypermarket, Specialty, Supers tore
Convenience, Department Hypermarket,
Supermarket, Superstore
Convenience, Discount, Specialty,
Supermarket, Warehouse
Department, Discount, Superstore
U.S.
Costco
Warehouse
51,862
9
U.S.
Sears
Department, Specialty, Mail, E-commerce
49,124
10
Germany
Schwartz
Discount, Hypermarket,
Supercenter/Superstore
45,891
68,866
60,553
52,620
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Retail formats
General
Merchandise
Specialty stores
Specialized
Markets
Department stores
General
Merchandise
Discount stores
Off-Price Retailers
Catalog
Showrooms

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Food
Retailers
Conventional
supermarkets
Superstores
Warehouse clubs
or Wholesale
Clubs
Convenience store

Non-store
Retailers
Internet Retailing
Vending machines
Television Home
Shopping
Catalog Retailing
and Mail Retailing
Direct selling
Network
Marketing

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General Merchandise:
Specialty Stores

Specialty Stores offering a narrow product line
and wide assortment:
 Music stores
 Clothing stores…
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General Merchandise:
Specialized markets

Specialized markets that house stores
specializing in a particular product category
 Jade market, Hong Kong
 Covered bazaar, Istanbul—the shops are
selling primarily brass products and Turkish
folk decorative object.
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General Merchandise:
Department Stores


Offer a broad variety of goods and wide
assortments
Trend




U.S. and Canada: recent substantial losses
Europe: expansion of national chains throughout the
European Union
Asia: on the decline
E.g. Germany: Hertie announced the close down of
19 (out of 73) stores in many German cities in Jan
2009
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General Merchandise:
Discount Stores



Sell High Volumes of Merchandise
Offer Limited Service, Charge Lower Prices
Types:


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All-Purpose: offer wide variety of merchandise
and limited depth. E.g.
Category specialists (category killers): Carry a
narrow variety of merchandise and offer a wide
assortment. E.g.
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General Merchandise:
Off-Price Retailers



Sell brand name and designer merchandise at
below regular retail prices.
Overruns, irregular products, previous seasons’
products
Examples:
 Factory outlet stores
 Close-out retailers (broad, inconsistent
assortments)
 Single-price retailers (all products for the
same price)
303
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General Merchandise:
Catalog Showrooms

Catalog Showrooms:


Showrooms displaying products of catalog
retailers, offering high-turnover, brand name
goods at discount prices.
Internationally goods sold through this
venue tend not to be brand name, but,
rather, goods that have not sold the last
season through the catalog.
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Food Retailers

Conventional Supermarkets:


Self-service retailers with annual sales higher
than $2 million and less than 20,000 square
feet of store space.
Superstores:


Combination stores (food and drug)
Hypermarkets—combine supermarket,
discount, and warehouse retailing.
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Food Retailers

Warehouse Clubs (Wholesale Clubs):



Require members to pay an annual fee. E.g.
SAM's, Costco
Operate in low-overhead, warehouse-type
facilities.
Offer limited lines of brand-name and dealerbrand merchandise at a substantial discount.
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Food Retailers

Convenience
Store


Convenience store in Poland—note
that Procter & Gamble products
(especially their pan-European
detergent Ariel) are predominant.
Dana-Nicoleta Lascu


Small residential
retailers or retail
chains consisting
of small
neighborhood
stores.
Open long hours.
Carry limited lines
of higher-turnover
necessities.
307
One-stop
shopping.
Atomic Dog Publishing 2006
Nonstore Retailing

Internet Retailing:



Also known as interactive home shopping
or electronic retailing.
Includes both new dot-com companies and
traditional retailers attempting additional
market penetration.
Increase company diversification.
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Global Internet Retailing
Sector Segmentation
Category
% Market
Share
Tickets & Travel
29.00%
Computers, Electronics & Software 28.70%
Household
12.80%
CDs, Music and Videos
11.80%
Books
8.50%
Apparel and Gifts
5.00%
Toys & Games
4.20%
Other
0.10%
Total 100.0%
Source: “Global Internet Retail,” Internet Retail Industry Profile: Global,
May 2004, 1–17.
309
Nonstore Retailing

Vending machines:





Increasing in popularity
Accepting of Smart
cards, credit cards
Technology is facilitating
an interactive consumer
experience.
Different formats
At Atlanta Airport – a vending machine
worldwide
selling iPods (minis and shuffles).
Used most in Japan
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Nonstore Retailing
Vending machines in the Netherlands
with hot snacks and Japan with
different vegetables
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Nonstore Retailing (contd.)

Television Home Shopping:

China

Japan

Acorn, China
A venue for selling merchandise to consumers
in their homes using cable channels.
Examples: infomercials and direct response
advertising.
Popular in North America and Europe, and
becoming increasingly popular in Asian
markets.
USA
USA, UK, Germany, Japan
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Canada
312
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Nonstore Retailing (contd.)

Catalog Retailing and Direct Mail Retailing:




Venues for selling merchandise to consumers
using catalogs and other types of direct mail.
E.g. Quelle, Neckermann, Otto
It allows for the international expansion of
retailers.
Must be adapted to local market needs and
practices. (e.g. in Japan the consumers expect
to receive the product before paying)
The potential fur Catalog retailing remains
high international
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Nonstore Retailing (contd.)

Direct Selling:


A retailing venue whereby a salesperson,
typically an independent distributor, contacts a
consumer, demonstrates product use and
benefits, takes orders and delivers the
merchandise. E.g. Avon
Direct selling firms are most active in the
growth markets (in emerging markets).
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Network Marketing
(Multilevel Marketing)



Variation on direct selling
Involves signing up sales representatives
to go into business for themselves with
minimal start-up capital and sell more
“distributorships” and merchandise. E.g.
Herbalife, Amway
Network marketing is growing rapidly,
especially in emerging markets.
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Issues in International
Retailing

Legislation and Regulation





e.g. China banned direct selling till 1998,
Germany: Control of packaging disposal
Germany, France: Limit the period for sales
Taxation and Cross Border Shopping
Variations in Retailing Practice and Customs


Consumer: US: prefer to shop in bulk, Japan: prefer
to shop in smaller quantities every day
Sales: Friendly in US, sometimes rude in Eastern
Europe
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Issues in International
Retailing

Challenges in Developing Countries:





Deficient telephone service
Unreliable mail service
Low income
Unavailability of credit cards
Trends




Retailers worldwide are integrating their databases
(supplier and consumer)
Marketplace is getting more transparent (practices
and prices)
More consumers will become retailers (auction sides)
In developed countries consumer demographics
present a problem to retailers (age)
317
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Content






Basics of International Marketing
The international Marketing Environment
International Marketing Strategies
International Marketing Mix
Implementation of the international Marketing
Strategies
Case studies
Dana-Nicoleta Lascu
318
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Content

International Marketing Mix



International Product Mix
International Distribution
International Communication




Dana-Nicoleta Lascu
Promotional Mix and Advertising
Strategies
Publicity, Public Relations and Sales Promotion
strategies
Personal Selling and Personal Management
International Pricing
319
Atomic Dog Publishing 2006
International Promotional Mix
Understanding the
norms, motivations,
SalesAdvertising
promotion
attitudes, interests, and
opinions of the target
Promotional
market is crucial to
Mix
company success in
Sales force
PR and
marketing to and
MangePublicity
ment
communicating with
different cultures
320
around
Dana-Nicoleta
Lascu the globe.
Atomic Dog Publishing 2006
The International
Communication Process
Encoding
SENDER
Decoding
MEDIUM
Target Market
Feedback
(Recall, Purchase)
•
•
•
RECEIVER
Noise:
Cultural differences
Competing Messages
Consumer interests
Sponsor (sender) encodes message.
Sponsor sends message through the channel
(medium) to the international consumer (receiver).
International consumer receives the message and
decodes it into meaningful information.
Dana-Nicoleta Lascu
321
Atomic Dog Publishing 2006
Communication Issues

Each step in the communication process
presents a challenge in international
message transfers:


Encoding also requires accurate translation: Product
name and message should be tested.
Media infrastructure might be underdeveloped or
incapable of handling the message.
Dana-Nicoleta Lascu
322
Atomic Dog Publishing 2006
Non Personal and Personal
Communication Media
Non-Personal
 Print media
 Broadcast media
 Interactive media

Not widely available in developing countries.
Personal
 Salespeople
 Telemarketers
 Trade show and exhibits

Individuals can interact with knowledgeable company
323
representatives.
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Atomic Dog Publishing 2006
International Communication
Challenges





Media infrastructure
Unreliable mail
Limited broadcast media
Media is not used for advertising
Translation deficiencies—meanings intended
may not be the meanings conveyed.
 Illiteracy
 Status of promotion
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Lessen Communication
Challenges



Hire research firm to evaluate message in
multiple international markets.
Evaluate effectiveness of the
communication using recall tests and
other memory-based procedures.
Evaluate effectiveness of communication
in getting different international target
markets to purchase the product.
Dana-Nicoleta Lascu
325
Atomic Dog Publishing 2006
Advertising
A nonpersonal communication by an
identified sponsor across international
borders, using broadcast, print, and/or
interactive media.
Media Infrastructure
Availability
Reliability
Restrictions
Costs
Dana-Nicoleta Lascu
326
Atomic Dog Publishing 2006
Media Reliability


The probability of the media to air
advertising messages on time, at an
acceptable quality and with the agreedupon frequency
International constraints:



Print lag times
Poor quality
Off-air television or government-controlled television
and radio that does not allow advertising.
Dana-Nicoleta Lascu
327
Atomic Dog Publishing 2006
Media Restrictions

Limitations imposed by existing media:




Limiting the number and types of
advertisements (EU Airtime: 12minutes/h for
advertising)
Cultural differences
Clustered ads
Media scheduling
Dana-Nicoleta Lascu
328
Atomic Dog Publishing 2006
Media Costs

Differ greatly between countries, and even
within a particular country:




Income per capita of target market
Competition for media by advertisers
Firm status (local-nonlocal)
Translation costs
Dana-Nicoleta Lascu
329
Atomic Dog Publishing 2006
Global Media
U.S. Advertising Expenditures Compared
to World Ad Expenditures
Year U.S. Ad Spending
Change
(Billion US$)
2000
2001
2002
2003
2004
+ 8.8
– 7.9
+ 2.2
+ 4.6
+ 5.8
247.5
Change
World Ad
Spending
(Billion US$)
+ 11.3
474.3
231.3
– 6.5
440.9
236.9
+ 2.4
450.5
249.2
+ 5.2
471.1
266.4
+ 6.9
498.3
Source: Robert J. Coen, Universal McCann’s Insider Report, December 8,
2003, www.universalmccann.com
330
Various International Formats,
Features, and Trends

Dominance of global Media


Infomercials & TV Shopping






e.g. CNN, MTV, Walt Disney, Cosmopolitan
QVC, Home Shopping Network (HSN)
Home Order Television
Billboards and Bus Stops
Advertising on the Sides of Private Homes
Advertising on Outdoor Umbrellas and
Awnings
Ads on Plastic shopping bags
Dana-Nicoleta Lascu
331
Atomic Dog Publishing 2006
Various International Formats,
Features, and Trends
• Posters on Kiosks and Fences
Advertising Yes mineral water
on fences in Bangladesh.
Dana-Nicoleta Lascu
Advertising Marlboro cigarettes
on a kiosk in Poland.
332
Atomic Dog Publishing 2006
Using English and U.S. Movie
Stars in Local Advertisements
English:



Requires less space
in print and
broadcasting time.
Conveys a
cosmopolitan
attitude.
Endows a product
or service with
status.
Dana-Nicoleta Lascu
333
Atomic Dog Publishing 2006
Product Placement
Placing brands in movies and television
programming with the purpose of promoting
the products to viewers.
 U.S. movies’ box-office receipts are
steadily increasing.
 U.S. films are very successful abroad.
Dana-Nicoleta Lascu
334
Atomic Dog Publishing 2006
Advertising Regulations




Comparative Advertising
Advertising to Children
Advertising vice Products (e.g. tobacco)
Other Regulations:

-
-
Vary by country; examples:
France: Requirement to keep the French
language pure.
Islamic countries ban the use of sex in
advertising.
Dana-Nicoleta Lascu
335
Atomic Dog Publishing 2006
Advertising Infrastructure




Develop Ads In-House
Home-Country Agencies
Local Advertising Agencies (specially for
polycentric orientation)
International Agencies: (specially for geocentric
orientation)

Top agencies are: Dentsu, Inc. (Japan),McCann Erickson (New
York),BBDO (New York),Young & Rubicam (New York)
 Local Agencies to implement International Agency
messages
Dana-Nicoleta Lascu
336
Atomic Dog Publishing 2006
Advertising Strategy

Standardization vs. Adaptation



Standardization reduces costs: No duplication of
effort for each market.
Individual campaigns delay product launches.
Consumers increasingly share similar frames of
references with regard to products and
consumption. (“global consumer”)
“A battle between marketing and sales”:
marketing wants to be global whereas sales
insists on being local”: Result: Consistent overall
image with local differences
Dana-Nicoleta Lascu
337
Atomic Dog Publishing 2006
Barriers to Standardization


Communication Infrastructure
Agencies might not serve a particular
market.

Consumer Literacy

Legal Restrictions and Self-Regulation

Differing Values and Purchase Motivations

Attitudes Toward Product Country of Origin

Communication is culture specific
338
Atomic Dog Publishing 2006
Dana-Nicoleta Lascu
Budgeting Decisions

Objective-and-Task Method:
 Identify advertising goals.
 Conduct research
 Determine cost of achieving goals.
 Allocate the necessary sum.

Percent-of-Sales Method (it is used by
almost 50%)

Base budget on past or projected sales.
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Budgeting Decisions (contd.)

Historical Method


Competitive Parity


Use international competitors’ budgets as benchmark.
Executive-judgment method (30%)


Base budget on past expenditures giving more weight
to recent expenditures.
Use collective executive opinion.
All-You-Can-Afford

Best suits small and medium firms.
Dana-Nicoleta Lascu
340
Atomic Dog Publishing 2006
Top 10 Global Marketers
Source: Advertising Age, "Top 100 Global Marketers," November 20, 2006, pp. 1-53.
Rank Company
Headquarters
Media Spending ($ in
millions)
1
Procter & Gamble Co. Cincinnati
8,190
2
Unilever
London/Rotterdam
4,272
3
General Motors Corp.
Detroit
4,173
4
Toyota Motor Corp.
Toyota City, Japan
2,800
5
L'Oreal
Clichy, France
2,773
6
Ford Motor Co.
Dearborn, Michigan
2,645
7
Time Warner
New York
2,479
8
DaimlerChrysler
Auburn Hills, Michigan Stuttgart,
Germany
2,104
9
Nestlé
Vevey, Switzerland
2,033
10
Johnson & Johnson
New Brunswick, New Jersey
1,968
341
Content

International Marketing Mix



International Product Mix
International Distribution
International Communication




Dana-Nicoleta Lascu
Promotional Mix and Advertising Strategies
Publicity, Public Relations and Sales
Promotion strategies
Personal Selling and Personal Management
International Pricing
342
Atomic Dog Publishing 2006
International Publicity
A communication about a company and/or the
company’s products that the company does not
pay for. Can be negative or positive.
 it is considered more credible than any
promotional action.
 The company can influence publicity through
public relations.
 Publicity includes:




Print articles
Broadcast messages
Word-of-mouth communication about the company
and/or its products
Internet increases publicity venues.
343
Dana-Nicoleta Lascu
Atomic Dog Publishing 2006
Negative/Positive Publicity

Multinational companies in particular experience
negative publicity:




Antiglobalization sentiments
Symbol of home-country market dominance
Negative publicity can be harmful to the
company; the company needs to address it
promptly.
Positive publicity is very valuable:


Difficult to measure its impact, but it is substantial
since the source is perceived as credible.
Has high impact on consumer purchase decisions
Positive publicity is difficult to come by.

Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Strategies for Maximizing Positive
Publicity in a Foreign Market
General Strategies
Actions and Outcomes
Supplement ad campaigns with
publicity campaigns.
Establish third-party editorial
credibility for products; convey more
information in greater detail about
products.
Publishers are more likely to pick up a
story if they have a good translation
of the information.
It helps when securing funds for new
campaigns.
The right distributor may come along
if the company signals it is looking for
distributors.
Company may obtain leads if it has
detailed information and contact
345
information in the press release.
Translate and be careful about
translations.
Inform the managers in the home
country about publicity efforts.
Use publicity to secure a distributor or
a distribution network.
Use publicity as a sales lead.
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Atomic Dog Publishing 2006
International Public Relations
A concerted effort on the part of a company
to generate good will among publics that are
essential to the company :
community,
government,
consumers,
employees…
Dana-Nicoleta Lascu
346
Atomic Dog Publishing 2006
International Public Relations
Examples

News Releases/Letters/Company
Publications:



Companies must regularly communicate with their
publics.
When new products are introduced, companies
should offer news releases, press releases, and/or
company publications promoting the new product or
service.
Event Sponsorship and Presence:


Growing venue for international marketing
communications
Important tool for shaping public opinion
Dana-Nicoleta Lascu
347
Atomic Dog Publishing 2006
International Public Relations
Examples (contd.)

Corporate Advertising


Image Advertising


enhances perceptions of a company in a given market
by creating a positive impression on the target
consumers.
Advocacy Advertising


promote the company behind the brand.
Advertising a particular position or point of view that
the company endorses.
Public Appearances

Company representatives’ public involvement,
speaking on behalf of the international firm and its
products.
348
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Atomic Dog Publishing 2006
Consumer Sales Promotion
Sponsored communications to the target consumer
or trade segment that stimulate purchases or
improve relationships with middlemen
 Examples:







Point-of-Sale Displays
Free Samples, Premiums
Coupons, Gifts
Sweepstakes, Contests
Promotional tie-ins
Frequency programs
Price-offs
Dana-Nicoleta Lascu
349
Atomic Dog Publishing 2006
Global Consumer Sales
Promotion

Global Campaigns: a worldwide standardized
advertising campaign that is not adjusted to
differentiate target markets (seldom)



Require a priori feedback from local markets
Rarely attempted in sales promotion
Useful for markets where there are multiple
languages and dialects, and which have a
unifying language.
Dana-Nicoleta Lascu
350
Atomic Dog Publishing 2006
Modular Consumer Sales
Promotion

Modular Campaigns: Provide a template that
can be varied from market to market.


Campaign centered around one theme.
Message is customized for each market.
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Local Consumer Sales
Promotion

Local Campaigns: Tailored to local needs
 Retailer cooperation is of particular
importance.


Gain significant importance in markets not
reached by other media.
Free samples, common in United States
supermarkets, are becoming a common
form of consumer sales promotion in
many countries.
Dana-Nicoleta Lascu
352
Atomic Dog Publishing 2006
Online Sales Promotion

All-around mode of Communication with
prospective Consumers:



Sweepstakes
Coupons
Promotional Pricing
Dana-Nicoleta Lascu
353
Atomic Dog Publishing 2006
Legal, Ethical, and Logistical
Issues

Sales-Promotion - related legislation differs
from one country to another:




Certain campaigns may be illegal.
Examples:
Buy one, get one free
Sweepstakes based on pure chance
Promotions may have to be printed in multiple
languages.
Number of responses may overwhelm the company
and the postal system.
Dana-Nicoleta Lascu
354
Atomic Dog Publishing 2006
The ICC International Code of Sales
Promotion: Examples of Rules
Be legal, decent, honest, and truthful and aimed at
avoiding disappointment and complaints.
Be framed in such a manner that they would not
abuse public trust or exploit the public’s lack of
experience or knowledge; this is especially true
when it comes to children.
Make it easy to identify the terms of the offer and its
true value to consumers and to intermediaries.
Be administered with adequate resources and with
the appropriate supervision.
Respect the privacy of consumers.
Be safe for consumers.
355
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Atomic Dog Publishing 2006
International Trade Promotion
Business-to-business promotion that usually
held annually. Trade shows and exhibitions
offer potential buyers and sellers a chance
to meet face-to-face.
Trade shows bring many decision makers to
a single location for a limited time, enabling
firms to get their message to a large number
of people at one time.
Dana-Nicoleta Lascu
356
Atomic Dog Publishing 2006
Trade Shows





one-fifth of the overall U.S. (one forth in
Europe) firms’ communication budgets.
Organized at set intervals (usually one
year), and tend to be specialized in one
domain.
Neutral sales environment
Bring together managers from different
departments in buyers’ organizations.
Governments ensure that national/local
companies are represented.
357
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Atomic Dog Publishing 2006
Examples of International
Trade Shows






Frankfurt Book
Fair
Documenta
Venice Biennale
DRUPA
Interkama
World Fair
The World Fair is an excellent venue for
358
broad exposure for international firms.
Content

International Marketing Mix



International Product Mix
International Distribution
International Communication




Dana-Nicoleta Lascu
Promotional Mix and Advertising Strategies
Publicity, Public Relations and Sales Promotion
strategies
Personal Selling and Personal
Management
International Pricing
359
Atomic Dog Publishing 2006
International Personnel
Issues


Hiring decisions are a function of the
company’s involvement in the market.
Market presence, entry mode and
commitment to market determine:

Size of the sales team

Types of sales representatives
Dana-Nicoleta Lascu
360
Atomic Dog Publishing 2006
International Personnel Issues
Dana-Nicoleta Lascu
361
Atomic Dog Publishing 2006
Infrastructure and
Technology Issues:
Infrastructure Issues:
 In developed countries telemarketing is often
used in selling products,
Condition: companies need access to a reliable
telephone system
 Technology Issues:
 electronic data interchange (EDI): buying and
selling firms share important data on
production, inventory, shipping, and
purchasing.
Condition:
 the firms have the appropriate resources and
362
trust their local partner with the
information.
Dana-NicoletaLascu
Atomic
Dog Publishing 2006

Legal Issues



In many countries, a written contract does
not mean much: Sellers and buyers can
readily choose to ignore the agreement
without any penalty.
The legal systems may endorse contracts
but not defend them.
In many cultures, a contract may have little
value, while someone’s word or a
handshake may be fully reliable.
Dana-Nicoleta Lascu
363
Atomic Dog Publishing 2006
International Presence

Companies using home-country
middlemen


Rely on sales force of the intermediary for
international sales
Companies using host-country brokers and
agents

Rely on sales force of the intermediary for
international sales
Dana-Nicoleta Lascu
364
Atomic Dog Publishing 2006
International Presence

Companies using host-country
manufacturers’ representatives and
distributors



Are engaged, at some level, in personal selling
Hires local salespeople to call on distributors
May have local sales office, or a wholly-owned
subsidiary that engages in the marketing function
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Employees of the
International Firm

Expatriates



Employees working in a foreign country
Types:

Home-country nationals

Third-country nationals
Locals (Local Employees)
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Atomic Dog Publishing 2006
Expatriates:
Home-Country Nationals

Home-Country Nationals:




Preferred by companies whose products are at the
forefront of technology
Preferred when selling relies on extensive training and
highly specialized information
Preferred where there is a greater interdependence
between overseas unit and corporate headquarters
Disadvantages:




High costs
Cultural barriers
Lack of local personal connections in the local
environment
Difficulty finding employees willing to take on
international assignments
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Expatriates: Third-Country
Nationals




Employees working temporarily in the
assignment country who are NOT nationals of
that country OR of country in which
headquarters is located
Speak numerous languages
Familiar with customs and business practices in
different environments
Have learned, through experience, to adapt
optimally for international assignments
368
Cost less than home-country nationals
Atomic Dog Publishing 2006
 Lascu
Dana-Nicoleta
Host-Country Nationals




Local salespeople who work in the home country
for an international corporation
Understands the business environment and
business practices in the company’s home
country
Well trained technically
Willing to return to home country to work for
the multinational firm
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Long Distance International
Selling
Selling via the Internet or mail is likely an
important venue used in approaching new
international customers.
Costs of distance selling are lower, allowing
for greater market coverage, but the selling
infrastructure (mail, Internet accessibility)
lags behind in developing countries.
Dana-Nicoleta Lascu
370
Atomic Dog Publishing 2006
Managing International
Employees
Transplant successful
personnel home country
policies will run against
obstacles in different
international
environments.

Issues related to
culture come into
play.
Dana-Nicoleta Lascu
Buyer-Seller Relationship:
 Hard sell is inappropriate in
many countries in Asia.
 Eye-to-eye contact may be
seen as aggressive.
 Business cards in China are
handed with both hands and
received with both hands in
to convey respect.
 Negotiation differs depending
on culture; in many
environments, e.g. Latin
America, it is expected that a
personal relationship is
established before the
negotiation.Atomic Dog Publishing 371
2006
Successfully Managing
Expatriates
Success requires:




Effective selection/screening
Appropriate training and development strategies
Motivating for peak performance
Ensuring successful repatriation
50% of expatriate assignments
FAIL!
Dana-Nicoleta Lascu
372
Atomic Dog Publishing 2006
Recruiting Expatriates

The Ideal Expatriate Has …





A high cultural sensitivity and awareness
The ability to adapt behavior in cross-national
settings
A high level of resiliency
Extensive international knowledge and
willingness to gain it
A strong desire to work overseas
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Atomic Dog Publishing 2006
Attenuating Culture Shock


Culture shock is a pervasive feeling of anxiety
resulting from one’s presence in an unfamiliar
culture.
Culture shock is lessened by adequately training
the employees:
 Short courses in cross-cultural
communications
 Cultural immersion
Culture shock is also lessened by creating
appropriate expectations for the employees
 Help them anticipate their physical and social
environment.
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Motivating Expatriates


Start with recruiting only those employees
who are most motivated to take up an
international assignment.
Offer compensation, leave and family
policies, and career incentives that will
motivate employees to perform well
abroad.
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Incentives for International
Post Assignments

Cost of Living/Post Adjustment:


Housing Allowance:



A compensation incentive whereby the company adjust
expatriate salaries to reflect the cost of living in the new
environment at standards in the expatriate’s home country.
A compensation incentive whereby the company covers part or
the entire cost of housing for the expatriate employee while
abroad.
May include covering for the cost of household help and security
Education Allowance:


A compensation incentive whereby the company agrees to cover
the cost of children’s education at an international private school
in the country of assignment.
May include covering costs of attending a boarding school at the
expatriate’s home country
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Atomic Dog Publishing 2006
Incentives for International
Post Assignments (contd.)

Home-Leave Allowance:


Moving Allowance:


A compensation incentive whereby the company pays
for employee and family to vacation in the home
country.
A compensation incentive whereby the company pays
for relocation expenses for moving the family
household abroad and back to the home country.
Repatriation Allowance:

A large sum paid for the successful completion of the
international assignment.
377
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Atomic Dog Publishing 2006
Expatriate Obstacles


Gravitating toward home-country
expatriates and relying extensively on
expatriate groups and forums (websites
that unite expatriates in a region,
newspapers, etc.)
Isolation
Isolation
Dana-Nicoleta Lascu
Going Native
378
Atomic Dog Publishing 2006
Repatriation Issues



Company changes in expatriate employee’s
absence
Loss of status, lack of social circle at work and at
home; relationships may have changed over time
Reverse culture shock: anxiety experienced after
returning to the home country; attributed to:



Longing for the international environment left behind
Difficulty readjusting to the home country
Difficulty readjusting to the corporate culture at one’s
own firm
Reverse culture shock can be avoided by
maintaining a connection to company
headquarters.
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Multiple Choice

True or False
1)A third-country national is also known as a local.
2)An advantage of hiring home-country nationals for
international operations is that they are less expensive
for the company.
3)Expatriates working in a particular foreign country are
either home-country nationals or host-country
nationals.
4)Organizational culture refers to personality traits shared
at the national level.
5)Reverse culture shock is a feeling of anxiety experienced
after returning to the home country.
6)In low-context cultures, what is said is precisely what is
meant
380
Multiple Choice
Choose the best answer
7)In Asian countries, what approach to selling would work
best? a) confident, persuasive b) modest, exhibiting a
humble attitude c) serious, formal hard sell d) none of the
above
8)What are some preferred traits of expatriates? a)
sensitivity to others b) willingness to gain international
knowledge c) high level of resiliency d) all of the above
9)How do companies motivate expatriates? a) guaranteed
promotion b) travel and other allowances c) finding spouses
employment in the country of assignment d) all of the above
10)To relieve reverse culture shock, companies can a)
keep an employee updated with office emails. b) offer
promotion on return to the home country. c) fly an expatriate
back regularly for meetings. d) all of the above
381
Content






Basics of International Marketing
The international Marketing Environment
International Marketing Strategies
International Marketing Mix
Implementation of the international Marketing
Strategies
Case studies
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Atomic Dog Publishing 2006
Content

International Marketing Mix




Dana-Nicoleta Lascu
International Product Mix
International Distribution
International Communication
International Pricing
383
Atomic Dog Publishing 2006
Pricing Impact
Pricing is especially important in
international marketing strategy decisions,
due to its effect on product positioning,
market segmentation, demand
management, and market share dynamics.
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Pricing Considerations
Political
And Legal
Environment
Economic
financial
Environment
Production
Facility
Pricing
Decisions
Competitive
Environment
Ability to
keep track
385
Production Facilities
Ability to keep track of costs
The location of production facilities determines
 cost control
 price of the products
 Multinationals shift production to take
advantage of lower costs and exchange rates.
Small- to medium-size firms are limited to
exporting.
 Some companies price products “out of the
market”.
Products can be manufactured and assembled in
different countries.
 Difficult to track costs
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Environmental Considerations



International
companies must react
effectively to changes
in the
competitive
environment,
political and legal
environment
economic and financial
environment.
Dana-Nicoleta Lascu
387
Atomic Dog Publishing 2006
Competitive environmental
Influences

Competition




Retail challenges difficult to identify
Competition from unauthorized channels,
gray markets/Parallel Imports
Cheaper prices in countries with weaker
currencies
Competition offers legal “copycat” products
Dana-Nicoleta Lascu
388
Atomic Dog Publishing 2006
Competitive environmental
Influences: Dumping


Selling products below cost to get rid of excess
inventory and/or to undermine competition
Foreign companies can impose high prices at
home as a result of trade barriers imposed
against imports.
Company uses profits to sell at much lower
prices in foreign markets:


Builds market share
Suppresses profitability of competitors with open
home markets
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Political and Legal Influences

Political and Legal:

Setting limits on gross margins.

Setting price limits.

Local government subsidies to manufacturers.

Tariffs

Restricting repatriation of profits by multinationals.

Taxing and/or encouraging reinvestment of profits.
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Political and Legal
Influences: Transfer Pricing

A pricing strategy used in intra-firm sales:
between units



a) marked based or
b) cost based
Products priced at market level:


Help multinationals under-report profits.
Decreases tax burdens in countries where
company has foreign direct investment.
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Economic and Financial
Influences:

Economic, Financial, Monetary:

Inflation



Percentage that covers the exchange rate



Sometimes companies must low prices only to stay
in the market
Fluctuating exchange rates
Binding to strong currency
Hard versus soft currencies
Countertrade: a company sells a product and
agrees to accept products from the buyer’s
firm or trade institution for payment (20% of
the world trade)
392
Dana-Nicoleta Lascu
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Economic and Financial Influences:
Countertrade Brokers



Perfect matches for product exchanges are
rare.
Exchanges are complex.
Numerous companies specialize in
brokering barter deals. E.g. Active
International, Tradewell Inc
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Countertrade
Disadvantages:
Advantages:
 Foreign lenders could have
 Facilitates sale of
prior claim on goods.
products in
 Restricts profit margins.
emerging markets.  Encourage economic
inefficiency.
 Can help an
exporting company  Prices are distorted.
 Could receive inferior quality
bypass trade
goods.
restrictions.
 Exchange partners can become
competitors.
 Involves extensive negotiations.
394
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Types of Countertrade







Usually a monetary exchange to a certain degree
is involved, except in Barter
Clearing Agreement with a clearing currency
Switch Trading (professional switch trading
firm in between)
Compensation (part cash, part products)
Counter purchase /parallel barter
Offset Purchase (long-term; the seller agrees,
in return to purchase a certain percentage of the
sales)
Buyback Agreements (turn key plant; plant
outputs)
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Setting Prices



Tends to be intuition- and experience
driven
Highly decentralized
Important for marketing managers to be
familiar with the price elasticity of their
products
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Terms of Sale
(Incoterms = International Commercial Terms)




Devised by the International Chamber of
Commerce (ICC), updated in 2000.
Applies both to domestic and to international
transactions.
E-Terms:
 Seller makes the goods available at the seller’s
plant/factory/business.
 EXW—Ex Works (factory, warehouse, etc.):
Title and risk pass to buyer from seller’s
factory/plant/warehouse; seller has minimum
responsibility.
Sources: http://www.iccwbo.org/incoterms
397
Terms of Sale (Incoterms)

F-Terms:
 Seller delivers goods to the carrier that the buyer
appoints.
 FCA—Free Carrier (place after the origin point): Title
and risk pass to buyer when the seller delivers goods
cleared for export to a buyer’s carrier. Seller loads
goods on buyer’s vehicle.
 FAS—Free Alongside Ship (at port, after all port
charges): Title and risk pass to the buyer after the
merchandise is delivered alongside the ship by the
seller, who is in charge of export clearance.
 FOB—Free on Board (port, after all port charges):
Title and risk pass to buyer once delivered on board
the ship by the seller, who is in charge of export
clearance.
398
Incoterms (contd.)

C-Terms:
 Seller must arrange for transportation without
assuming the risk of loss.
 CFR—Cost and Freight (destination port): Title, risk,
and insurance cost pass to the buyer when delivered
on board the ship by the seller, who pays
transportation costs to the destination port.
 CIF—Cost, Insurance and Freight (destination port):
Title, risk, and insurance costs pass to buyer when
delivered on board the ship by the seller. The seller
pays transportation and insurance costs to the
destination port
399
Incoterms (contd.)

C-Terms:


CPT—Carriage Paid To (place at destination;
includes all port charges): Title, risk, and
insurance costs pass to the buyer when
delivered to the carrier or seller. The seller
pays transportation and insurance costs to the
destination port.
CIP—Carriage and Insurance Paid To (place at
destination): Title and risk pass to buyer when
delivered to the carrier or seller. The seller
pays transportation and insurance costs to the
destination port.
400
Incoterms (contd.)

D-Terms:
 Seller bears all costs and risks to bring the
goods to a location agreed upon by the
buyers.
 DAF—Delivered to Frontier (border of
country): Title and risk pass to the buyer who
is responsible for import clearance.
 DES—Delivered Ex Ship (on board ship to
destination port): Title, risk, and responsibility
for vessel unloading and import clearance pass
to buyer when the seller delivers goods on
board the ship to the destination port.
401
Incoterms (contd.)

D-Terms:



DEQ—Delivered Ex Quay (Wharf), Duty Paid
(destination port, includes duties and taxes but not
destination charges and delivery): Title and risk pass
to buyer when delivered on board ship at the
destination by the seller.
DDU—Delivered Duty Unpaid (destination; excludes all
duties and taxes): Title, risk, and responsibility for the
vessel’s discharge and import clearance pass to the
buyer when delivered on board the ship at the
destination point by the seller.
DDP—Delivered Duty Paid (buyer’s door; includes all
charges): Title and risk pass to the buyer when the
seller delivers goods to the destination; seller is
responsible for import clearance.
402
Incoterms (contd.)
Sellers
risk,
title,
insurance
Buyers
risk,
title,
insurance
403
Terms of Payment



Cash in Advance—Best for seller, but not for
buyer. It is used for sellers’ markets primarily or
for high-risk buyer environments.
Open Account—Goods are delivered without
payment guarantee; the buyer and seller
conducted past transactions, and continued
business is expected for both.
Consignment with Open Account—Sellers still
own the merchandise, so risk is low; but costs of
recovering the goods are high in international
transactions.
Dana-Nicoleta Lascu
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Terms of Payment


Documentary Collection—Title and possession pass to buyer
when documents attesting to title and shipping documents
pass as well. The payment document, (bill of exchange or
draft), requiring the buyer to pay on sight (sight draft) or at
a specified time (time draft), is sent through seller’s bank to
buyer’s bank after the goods are shipped. The buyer then
pays the sight draft or accepts the time draft; documents are
released to the buyer who takes possession of the goods.
Letter of Credit (L/C)—Letter is drawn by buyer’s bank,
which guarantees to pay seller for merchandise upon
presentation of documents providing evidence of shipment,
adherence to the purchase order, and inspection. The bank
releases funds when all conditions of sale are met. Most L/Cs
are irrevocable.
405
Pricing Practices
Higher Home Market Prices
Justified by:




Lower labor or raw material cost in the
international market
Strong local competition in the international
market
Lower buying power of host-country consumers
Marketing strategy: Increase market share via
penetration pricing.
Dana-Nicoleta Lascu
406
Atomic Dog Publishing 2006
Pricing Practices (contd.)
Lower Home Market Prices
Justified by:




No cost advantages to producing overseas
Few or no challenges from international
competition.
Limited market potential
International buyers can afford higher prices.
Dana-Nicoleta Lascu
407
Atomic Dog Publishing 2006
Aggressive Export Pricing
Goal: Gain market share in the international
market
Dynamic Incremental Pricing:



Assumes certain fixed costs.
Does not factor in international promotion costs
for domestic distribution or full overhead.
Product cost reflects only variable costs.
Dana-Nicoleta Lascu
408
Atomic Dog Publishing 2006
Standardized vs. Local Pricing
Local Pricing


Prices set to meet purchase power of consumers
and to account for differences in local
distribution systems, market position, and taxes.
Even/odd pricing
Standardized Pricing

Uniform price worldwide
Dana-Nicoleta Lascu
409
Atomic Dog Publishing 2006
Penetration Pricing and
Skimming
Penetration Pricing


Price lower than competitors in order to quickly
penetrate the market at competitors’ expense.
Goal: high sales volume
Skimming


Pricing above competitors’ prices when
competition is minimal.
Focus on quality, uniqueness and status.
Dana-Nicoleta Lascu
410
Atomic Dog Publishing 2006
True or False
True or False
1)Dumping is defined as selling products at cost to get
rid of excess inventory and/or to undermine
competition.
2)Dumping represents a problem if it threatens to
cause injury to an established industry in a
particular market and/or if it delays the
establishment of a viable domestic industry.
3)Hard currency is currency that is accepted for
payment by any international seller.
4)Countries with a shortage of soft currency reserves
are more likely to engage in countertrade.
5)Aggressive export pricing involves pricing products
below market price to penetrate new markets.
411
Multiple Choice
Choose the best answer
6)Which of the following is NOT an external economic or financial factor
affecting pricing decisions? a) inflation pressure on price b) shortage of
hard currency c) transfer pricing d) fluctuating exchange rates
7)A manufacturer may charge different prices in different markets for
the same product a) to meet target market needs. b) due to changes in
the exchange rate. c) due to differences in wholesale prices. d) all of the
above
8)What company was responsible for initiating a countertrade
relationship with the Soviet Union in the late 1960s? a)
McDonald's b) PepsiCo c) Philip Morris d) none of the above
9)What type of countertrade involves buying a party's position in a
countertrade in exchange for hard currency and selling it to another
customer? a) compensation b) switch trading c) counter purchase
d) offset purchase
10)If a firm's objectives are centered on generating high profit and
recovering product development costs quickly, it is likely to use which
one of the following international pricing strategies? a) skimming
b) penetration pricing c) standardized pricing d) competitive pricing
412
Content






Basics of International Marketing
The international Marketing Environment
International Marketing Strategies
International Marketing Mix
Implementation of the international
Marketing Strategies
Case studies
Dana-Nicoleta Lascu
413
Atomic Dog Publishing 2006
Organizing for International
Marketing Operations



Companies often need to reorganize to more effectively
meet the international challenges
Organizational designs have to fit with their external
environment and with company characteristics and goals.
Organizational design is determined by factors:
 In the firm’s environment






competition, (quick decisions->more flexibility->decentralized)
environmental stability,
similarity with the home country,
common regional integration,
availability of qualified labor.
Factors within the firm
Dana-Nicoleta Lascu
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Atomic Dog Publishing 2006
Factors Within the Firm

Internationalization as a priority:


Involvement in international business


an international division that oversees international
operations.
Minimal involvement in international business


Organizational structure with worldwide regional
divisions in charge of particular countries.
small international department.
Companies usually maintain their organizational
structure when they go international.


Concerning hierarchy and centralization.
Concerning product lines
Dana-Nicoleta Lascu
415
Atomic Dog Publishing 2006
International Organizational
Designs
International
divisions
The matrix
structure
Organizational
designs
Worldwide
regional
divisions
Product
Divisions
416
Worldwide Regional Division
Structure



Operations are organizes by geographical region
or by country.
Subsidiaries report directly to the single division
responsible for operations in the country or
geographic region.
Creates competitive advantage for firms


Example: It is better equipped to immediately process
and respond to country-specific information and
conditions because of its strong regional focus.
Allows for some duplication of activities and thus
might increase costs.
Dana-Nicoleta Lascu
417
Atomic Dog Publishing 2006
Worldwide Regional Division
Structure
W
o
r
l
d
w
i
d
e
R
e
g
i
o
n
a
l
D
i
v
i
s
i
o
n
S
t
r
u
c
t
u
r
e
:
F
r
i
t
o
Worldwide Regional Division Structure: Frito-Lay.
Dana-Nicoleta Lascu
418
Atomic Dog Publishing 2006
Product Division Structure



Subsidiaries report to the product division
(strategic business unit) with responsibility for
the particular products.
In the past, this structure was common for hightech companies or multinational companies with
diversified portfolios
increasingly, this format is replaced by the matrix
structure.
Dana-Nicoleta Lascu
419
Atomic Dog Publishing 2006
International Division
Structure

Firms with an international division have two
main divisions:




The domestic division
The international division
export department structure: division has
responsibility for all international operations
international division structure: all foreign
subsidiaries report directly to a single division
responsible for international operations.
Dana-Nicoleta Lascu
420
Atomic Dog Publishing 2006
Matrix Structure



Takes into account the multiple
dimensions involved in doing business
internationally—functional areas, product,
and region/country.
In a matrix structure, two dimensions are
integrated so that each operational unit
reports to both region/country managers
and product managers.
E.g. Unilever with global and local brands
Dana-Nicoleta Lascu
421
Atomic Dog Publishing 2006
Example of Matrix Structure:
BASF Corp.
Europe
North
America
Asia Pacific
South America,
Africa, Middle East
Chemicals
Plastics
Performance
Products
Functional
Solutions
Agricultural
Solutions
Oil & Gas
422
Controlling
Marketing Operations
Challenges
 Local units and a regional focus add levels that
complicate management, communication, and
evaluation processes.
 External environment changing at different
rates.
 Tendency to resist influence in both directions:

Headquarters involvement

Subsidiary Input
Dana-Nicoleta Lascu
423
Atomic Dog Publishing 2006
Controls
Formal Controls
 Establishing performance standards
 Measuring performance
 Addressing discrepancies
Informal Controls
 Frequent contact between home-country
headquarters and regional/local office.
 Rotate managers to different assignments.
 Hire third-country managers to oversee new or
problematic operations.
 Training employees
Dana-Nicoleta Lascu
424
Atomic Dog Publishing 2006
Future Perspectives in
International Marketing
Dana-Nicoleta Lascu
425
Atomic Dog Publishing 2006
Future Perspectives in
International Marketing

Internet:
 expanded the area of international
marketing
 increased access to new markets
 Research conducted by Nielsen found
that more than 491 million people are
using the internet (one third in the US)
Dana-Nicoleta Lascu
426
Atomic Dog Publishing 2006
Internet use in selected
international markets
Country
Active Users
(in millions)
PC Time per
Person per
Month
Sessions/Visits per
Person per Month
Australia
10.8
34 hrs 28 min
63
Brazil
17.9
35 hrs 53 min
31
France
23.0
39 hrs 49 min
44
Germany
32.8
34 hrs
36
Italy
18.2
25 hrs 27 min
30
Japan
36.6
14 hrs 57 min
25
Spain
12.7
28 hrs 45 min
33
United States
61.0
82 hrs 32 min
67
427
Internet retail industry profile
Source: Internet Retail Industry Profile:
“Global Internet Retail," April 2006: Datamonitor
a. Online Retail Sector Growth (in billions)
Year
2003
2004
2005
b. Retail Segments' Share
Product Category
Drugs, health, beauty
Computer and related materials
Clothing and shoes
Kitchen and home
Jewelry
Other
c. Geographic Segmentation
Geography
European market
U.S. market
Asia-Pacific market
Rest of the world
$ Billion
425.1
544.6
656.4
% Growth
26.00
28.10
20.50
% Share
23.50
17.50
11.70
4.60
4.00
38.70
% Share
44.40
22.50
21.70
11.40
428
Challenges for the Internet

Companies can’t handle the amount of sales:

46 percent of companies with e-commerce capabilities
turn away international orders because they do not
have the processes in place to fill them.

About $10 million are turned away annually by
companies due to:

Language and cultural barriers that hinder basic
communications.

Difficulty handling the destination country’s import
and tax regulations or export controls in the home
country.

Difficulty in handling cumbersome payment
mechanisms.

High rate of credit card theft, adding to the
company’s risk.
429
Dana-Nicoleta Lascu
Atomic Dog Publishing 2006
Product Challenges

Product life cycles will become shorter:



International firms must be prepared for rapid new
product introductions simultaneously in world
markets, regardless of the markets’ levels of
development.
The battle for market share for market leaders will
increasingly take place in developing countries.
As the world population grows, there will be
significant changes in the consumption process.
(Environmental concern)
Dana-Nicoleta Lascu
430
Atomic Dog Publishing 2006
Promotion Challenges



Firms will compete on their ability to resonate
themes that appeal to world consumers.
Integrated marketing communications are going
to be standard for both international consumer
product companies and for business-to-business
communications.
Consumers will expect extensive information on
the websites of companies with which they do
business.
Dana-Nicoleta Lascu
431
Atomic Dog Publishing 2006
National and Global Appeals
National advertising campaigns will continue to be
used for local brands, services and issues.
Global advertising campaigns will continue to be
developed for global market segments. The global
elite continues to be the target market for the
Jaguar automobile.
Dana-Nicoleta Lascu
432
Atomic Dog Publishing 2006
Distribution




Companies will continue to pursue measures to
reduce distribution costs by adopting just-in-time
inventory systems and creating product flows
rather than stocks.
Companies will coordinate their inventory
systems with suppliers and clients through
electronic data interchange.
Companies will have to abide by post September
11, 2001, security measures, which will further
reduce merchandise theft.
Entertainment will be especially important when
communicating with consumers in all retailing
environments.
433
Dana-Nicoleta Lascu
Atomic Dog Publishing 2006
True or false
1)Companies operating in countries characterized by unstable
political environments or countries where government policies
are unstable need an organizational structure that allows
them to react quickly.
2)Companies operating in countries that have ample educated
and qualified labor are more likely to be centralized.
3)A worldwide regional division structure has two main divisions:
the domestic division and the international division.
4)An advantage of the worldwide regional division structure is
that it is better equipped to immediately process and respond
to country-specific information and conditions than other
formal structures.
5)In a regional or worldwide matrix division structure,
subsidiaries report to the product division (strategic business
unit) with responsibility for the particular products.
6)Informal controls are used in international marketing to ensure
that international company operations are in line with
company goals and objectives.
434
Choose the best answer
7)Which of the following companies has a worldwide
regional division structure? a) Frito-Lay b) Coke c) Eli
Lilly d) none of the above
8)Which of the following companies has a matrix
structure? a) IBM b) Unilever c) Disney d) all of the
above
9)What is the process for instituting formal controls? a)
measuring performance, establishing standards, addressing
discrepancies b) establishing standards, measuring
performance, addressing discrepancies c) addressing
discrepancies, establishing standards, measuring
performance d) none of the above
10)In spite of extensive Internet access worldwide,
companies are not equipped to handle sales due to a)
language and cultural barriers. b) difficulty handling the
destination country's import and tax regulations. c) difficulty in
handling export controls in the home country. d) all of the
above
435