Transcript The Value Chain

A Review of Marketing
The International Marketing Task
Foreign environment
(uncontrollable)
1
Political/legal
forces
7
Cultural
forces
Domestic environment
(uncontrollable)
Political/
legal
forces
(controllable)
Price
Promotion
6
Geography
and
Infrastructure
Economic
forces
2
Competitive
structure Competitive
Forces
Product
Channels of
distribution
7
Environmental
uncontrollables
country
market B
Level of
Technology
Economic climate
5
4
Structure of
distribution
3
Environmental
uncontrollables
country market A
Environmental
uncontrollables
country
market C
What is Marketing?
 Marketing
is much more than advertising
and selling
 For individual organizations, marketing is
as all decisions and activities involved in
getting and keeping customers
 Comparative Advantage: The Basis for
Exchange
Comparative Advantage: The Basis
for Exchange
Land of shirts and shorts - David and Hugo
 David spends all his day making shorts - 6 pairs a day
 David spends all his day making shirts - 6 pairs a day
 Hugo spends all his day making shorts - 6 pairs a day
 Hugo spends all his day making shirts - 10 pairs a day

Comparative Advantage: The Basis for
Exchange
Hugo has absolute advantage in shirt production (10/6)
 Neither person has absolute advantage in shorts
production (6/6)
 Comparative Advantage for shorts

– David - ratio of shorts to shirts = (6/6) = 1.0
– Hugo - ratio of shorts to shirts = (6/10) = 0.6
 David has relative, or comparative, advantage in shorts
production

Comparative Advantage for shirts
– David -ratio of shirts to shorts = (6/6) = 1.0
– Hugo - ratio of shirts to shorts = (10/6) = 1.6
Comparative Advantage: The Basis for
Exchange
When Comparative Advantages in production exist,
total production will be higher if everyone specializes
in their areas of comparative advantage.
 E.g. If Hugo and David each spend half their time on
shorts and half on shorts, and can produce half the
goods in half the time, they will produce:

David’s production
Hugo’s production
Total Production
Shirts
3
5
8
Shorts
3
3
6
Comparative Advantage: The Basis for
Exchange

If Hugo and David completely specialize in their area
of comparative advantage, they will produce:
David’s production
Hugo’s production
Total Production
Shirts
0
10
(+2) 10
Shorts
6
0
6
Comparative Advantage: The Basis for
Exchange



But Hugo has no pants!!
To realize higher production and still be fully clothed, they
need to exchange shirts for shorts.
The terms of trade must be mutually beneficial to motivate
both David and Hugo to participate. E.g. if the exchange rate
is set at 3 pairs of shorts for 3 shirts
David starts with 6 pairs of shorts
David trades 3 pairs of shorts for 3 shirts
David finishes with 3 pairs of shorts and 3 shirts
Hugo starts with 10 shirts
Hugo trades 3 shirt for 3 pairs of shorts
Hugo finishes with 7 shirts and 3 pairs of shorts
Why incur cost
of trading?
Comparative Advantage: The Basis for Exchange

Change exchange rate to facilitate trade
– Half the shirts are traded for half the shorts - 5 shirts for 3 pairs of shorts
David starts with 6 pairs of shorts
David trades 3 pairs of shorts for 5 shirts
David finishes with 3 pairs of shorts and 5 shirts
Hugo starts with 10 shirts
Hugo trades 5 shirts for 3 pairs of shorts
Hugo finishes with 5 shirts and 3 pairs of shorts


Why incur cost
of trading?
We can expect this market to move to an exchange rate somewhere
around 4 shirts for 3 pairs of shorts
That exchange rate will produce:
David starts with 6 pairs of shorts
David trades 3 pairs of shorts for 4 shirts
David finishes with 3 pairs of shorts and 4 shirts
Hugo starts with 10 shirts
Hugo trades 4 shirts for 3 pairs of shorts
Hugo finishes with 6 shirts and 3 pairs of shorts
Both David and Hugo end up with one shirt more than they would have it they worked alone.
Principles of Economics Illustrated
 Comparative
advantage in production
motivates specialized production (to
achieve higher total production).
 Specialized production results in
“discrepancies of assortment” which must
be resolved through trade.
 The exchange rate in trade must benefit all
parties to motivate participation
Barriers to Trade
Comparative advantage lays a foundation for
economic exchange but it does not guarantee
trade (even if the proper exchange rate is set).
 Hugo and David might refuse to trade for social,
moral, or political reasons.

– International Business - Tariffs, quotas, embargoes

Even if Hugo and David are willing to trade, the
costs of trade may exceed the benefits. If the
costs of trading exceed the value of two shirts,
Hugo will not trade.
Sources of Trading Costs
 Trading
costs stem from various “market
making” activities that are needed to
arrange and complete economic
transactions.
– Communication
– Negotiation
– Transportation
– Storage
Marketing: Micro and Macro levels

Macro Level:
– Marketing is the process by which buyers and sellers
are brought together and discrepancies of assortments,
place, and time are resolved.
– Marketing activities include:
Communication to inform buyers and sellers about each other.
 Negotiation and consummation of transactions
 Transportation of goods from the point of production to the
point of purchase.
 Storage of goods from the time of production to the time of
purchase

Marketing: Micro and Macro levels

Micro Level (The individual organization)
– Marketing is all the decisions and activities involved in getting and
keeping customers.
Marketing Strategy vs. Marketing Operation
Marketing Strategy – Organization sets its general direction and
objectives
Marketing Strategy:



Which product or services should be offered?
Which potential customers are targeted for selling efforts?
How will the organization position itself against competitors?
Marketing Operations – Organization attempts to implement its
strategy and meet its objectives
Marketing Operations
 How are the organization’s product or services designed?
 How are these products or services priced?
 How are these products or services distributed?
 How are these products or services advertised and sold?
4 Ps - Product

Product decisions are all decision which relate to the
physical product and/or service offering, including its name,
packaging, warranty, and availability. Product dimensions
include:
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–
Size of the product
Color(s) of product
Scent of the product
Materials/ composition of the product
Design of the product
Packaging materials
Package colors and package design
Brand name
Warranty
Availability of options
Customizing services
After-sale service offerings
Inventory levels
4 Ps - Price

Price decision are all decisions which relate to the
price of the product, price negotiation, and
payment terms. Pricing dimensions include:
–
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Price to end user
Price to distribution intermediaries
Fixed vs. negotiated pricing
Negotiation policies
Credit policies
Credit charges
Payment terms (the amount of time allowed for payment
and any discount given for payment on time)
– Volume discounts
– Introductory allowances
– Trade-in policies
4 Ps - Place

Place (distribution) decisions are all decisions which relate
to the places at which the product or service is made
available to buyers and the methods by which the product
or service reaches those places. Place dimensions include:
–
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Selection of geographic markets
Types of outlets from which end-users buy
Level of competition among end-use outlets
Number of end-use outlets
Required qualifications for end-use outlets
Specific identities for end-use outlets
Types of intermediaries which service end-use outlets
Level of competition among intermediaries
Number of intermediaries which service end-use outlets
Required qualifications for intermediaries which service end-use
outlets
– Specific identities for for intermediaries which service end-use
outlets
– Push v. pull policy

4 Ps - Promotion
Promotion decisions are all decisions which relate to communication
with buyers about the product or service, solicitation of purchases, and
short-term purchase incentives. Promotion dimensions include:
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Size of advertising budget, if any
Selection of all ad media (television, radio, magazines, etc.)
Selection of ad vehicles (Time, Sports Illustrated, etc.)
Ad Scheduling
Ad appeals
Ad executions
Ad allowance (co-op advertising) programs
Size of sales force
Levels of sales force compensation
Method of sales force compensation
Sales quotas at which commissions or bonuses activate or change
Sales territory definitions
Sales force selection and training
Size of budget for consumer promotions
Types of consumer promotions to be used.
Size of budget for “trade promotions”
Types of trade promotions used.
Principles of Marketing
Management

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Before making any marketing decisions, analyze the buyers – segment the
market.
Consider how the market is changing.
Evaluate your strengths and weaknesses, both in absolute terms and relative
to your competitors.
Given buyer characteristics, market segments, market trends, and your
strengths and weaknesses, choose a marketing strategy that will allow your
organization to reach its objectives.
Make product, price, place, and promotion decisions that are consistent with
buyer analysis and marketing.
In developing your marketing strategy and programs, share ideas within the
organization, study other successful organizations to see how they do it, and
pick the best ideas.
Make sure your program is legal and ethical
As part of the implementation process, make sure that everyone in your
organization knows your marketing strategy and the role s/he plays in making
that strategy work.
The International Marketing Task
Foreign environment
(uncontrollable)
1
Political/legal
forces
7
Cultural
forces
Domestic environment
(uncontrollable)
Political/
legal
forces
(controllable)
Price
Promotion
6
Geography
and
Infrastructure
Economic
forces
2
Competitive
structure Competitive
Forces
Product
Channels of
distribution
7
Environmental
uncontrollables
country
market B
Level of
Technology
Economic climate
5
4
Structure of
distribution
3
Environmental
uncontrollables
country market A
Environmental
uncontrollables
country
market C
International Marketing Concepts
Concept
EPRG Schema
Domestic Market
Extension
(Ethnocentric)
Multi-Domestic Market
(Polycentric)
Global Marketing
(Regio/Geocentric)
Examples of Global Marketing
Product Design
Canon photocopier/McDonalds/Toyota/Ford
Brand Name
Marlboro/Coke/Pepsi/Mercedes/Caterpillar
Product Positioning
Colgate toothpaste/Unilever fabric softener
Packaging
Gillette razors
Advertising Strategy
Coca-Cola/British Airways/Benetton
Sales Promotion
IBM
Distribution
Benetton/United Distillers
Customer Service
American Express/Hertz