0910 Ws International Marketing Student En

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Introduction International Marketing

Fachhochschule LudwigshafenDr. rer. pol. Irene Giesen-Netzer, Diplom-KauffrauWS 2009/2010

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Introduction International Marketing

Part of Marketing conception (8 credits) Marketing planning and controlling

(60 points) Intro International Marketing (40

Points) Written test at the end

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Literature 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 2008www.atomicdog.com

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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 Atomic Dog Publishing 2006

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Content

Basics of International Marketing 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

MultinationalMarket

ing

Global Marketing

Low or no

international commitment

Focus on domestic

consumers and home country

environment

Domestic focus

Limited international commitment

Involves direct

or indirect export

Ethnocentric

Substantial internationalcommitment

Focus on different

international countries

Polycentric

Extensive internationalcommitment

Focus on

regionsmarket

segments rather than countries

RegiocentricGeocentric

Raising commitment/ involvement to international markets

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Ethnocentric Orientation 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 in-house

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 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:

No economies of scale Duplicated functions Higher final product costs

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Regiocentric Orientation 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 agreementDana-Nicoleta Lascu Atomic Dog Publishing 2006

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Geocentric Orientation 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

Firm specific Drivers

CompetitionRegional Economic and Political IntegrationTechnologyImprovements in Transportation and TelecommunicationEconomic GrowthTransition to Market EconomyConverging Consumer Needs

Product Life CycleHigh New Product Development CostsStandardizationEconomies of ScaleCheap LaborExperience Transfers

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International Expansion Drivers: Business Environment (contd.)Competition 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.)

• 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.

Regional Economic and Political Integration


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International Expansion Drivers: Business Environment (contd.)TechnologyExamples: Consumers worldwide are exposed to

similar products, services, and entertainment, and marketing communications.

The Web and the Internet have revolutionized the way companies conduct business.


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• Lower cost and higher quality communication due to satellite technology, teleconferencing, and e-mail

• Efficient transportation due to containerization and just-in-time technology

Transportation and Telecommunications


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• 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.

Economic Growth



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• Transition of the Eastern Bloc to a market economy created important new markets.

• Created opportunities to transform inefficient government-owned companies into successful enterprises.

Transition to a Market Economy



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Transition to a Market EconomyYum! 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

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Uniform consumer segments emerging worldwide:

Global teenagers Global elite Loyal to international brands (Nike, Levi’s, Coca-Cola, Heineken, Ralph Lauren, MTV, TV shows)

Converging Consumer Needs

International Expansion Drivers: Business Environment


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Consumers traveling abroad bring with them product experiences and demand brands that may not be available in the home-country market.

Converging Consumer Needs

International Expansion Drivers: Business Environment


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

Sales

Intro Growth Maturity Decline

Profits

Sales


e.g. Cigarette industryin emerging markets

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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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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.

Firm-Specific Drivers

Standardization, Economies of scale, Cheap Labor

Experience TransfersExperience in one country serves as basis for strategies in new international markets.


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Obstacles to Internationalization

within the company outsideFinancesPsychological: unknown environmentSelf-Reference Criterion

Government BarriersBarriers imposed by International Competition


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Self-Reference Criterion 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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Government Barriers 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 InternationalizationBarriers imposed by International Competition

Blocked channels of distribution

Exclusive retailer agreements

Cutting prices

Advertising blitzes


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Case Study 1

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Content Basics of International Marketing The international Marketing

Environment International Marketing Strategies International Marketing Mix Implementation of the international


Case studies


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Content

The international Marketing Environment World economy International Trade Regional Economic and Political

integration Cultural Influence on IM


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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)

The World Economy


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Categories of countries 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 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 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 Evaluating Political Risk:

Business periodicals (The Economist, Wall Street Journal)

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

10 7 United States 91.27Dana-Nicoleta Lascu Atomic Dog Publishing 2006

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Political Risk Political Risk Signals:

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 Risks Related to Government Trade

Policies: Tariffs, exchange-rate controls, quotas, export/import license requirements, other trade barriers (embargos,

sanctions) Details next chapter/ International Trade barriers


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Political Risk (contd.) Risks Related to Government Economic Policy:

Controlling foreign investment through taxes

transfer of assets from company to local ownership:

- 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 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

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.

Types of CoverageCurrency Inconvertibility Expropriation Political Violence Standalone Terrorism Special Coverages Small Business Coverage

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International Legal Environment

International Laws Host Country Laws Home Country Laws Legal Systems:

Common law Code (Civil) law Islamic law


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Jurisdiction Not automatic

In EU: European Court of Justice Between Governments (UN): The International

Court of Justice Between international enterprises: host- or

home- or third country

BindingNon-Binding

Independent Third Party

Independent Third Party

ARBITRATIONARBITRATIONMEDIATIONMEDIATION

Instead of alawsuit


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Intellectual Property Rights

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

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

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

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 Belief that technology is common domain


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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

Protecting Intellectual Property


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Home Country Legislation Antitrust Legislation

Prevent anticompetitive activities such as the creation of monopolies and cartels.

Anti-Corruption Legislation 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 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

New product development Networks, warehouse management,

electronic data interchange (EDI) Web/Internet


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World Regions Population (2006 Est.)

Population % 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

Oceania/Australia

33,956,977 0.5 18,430,359 54.3

WORLD TOTAL

6,499,697,060 100.0 1,091,730,861 16.8

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Opportunities Web/Internet: 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 Dana-Nicoleta Lascu Atomic Dog Publishing 2006

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Threats Web/InternetThe payment mechanism is sometimes difficult: 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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Opposing Forces

National and local governmentswant to protect small /medium

enterprises

Build trade barriers

Reduction of trade barriers

Multinational firms and governments of the multinational firmsDana-Nicoleta Lascu Atomic Dog Publishing 2006

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Arguments for Protectionism

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

Tariffs: any type of tax imposed on imported goods 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.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

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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

import-competing 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:

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: 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.)

Automatic Import Licenses: 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: 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:

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 Does not allow importers to exchange of

local currency for currency a seller is willing to accept as payment.

Differential Exchange Rates 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.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

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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 governmentsDana-Nicoleta Lascu Atomic Dog Publishing 2006

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International trade ImperativeDavid 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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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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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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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 bikesDana-Nicoleta Lascu Atomic Dog Publishing 2006

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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 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) Dana-Nicoleta Lascu Atomic Dog Publishing 2006

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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, terrorism, environmental issues and trade

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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 Dana-Nicoleta Lascu Atomic Dog Publishing 2006

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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 (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 country.


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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-of-origin (country image).

E.g. Port of Rotterdam (NL) Dana-Nicoleta Lascu Atomic Dog Publishing 2006

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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 re-

exporting.


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Content




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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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General Bilateral/Multilateral Agreement General Bilateral/Multilateral Agreement

Free Trade Agreement Free Trade Agreement

Common Market Common Market

Monetary Union

Monetary Union

Political UnionPolitical Union

Levels of Regional Economic and/or Political Integration


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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) non-Baltic successors

to the Union of the Soviet Union


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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

Botswana, Lesotho, Namibia, and Swaziland


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Common MarketEstablishing 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. Dana-Nicoleta Lascu Atomic Dog Publishing 2006

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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 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 Union3 criteria:• No more than

2 % from average interest rate

• Budget deficits below3 % 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, Guinea-

Bissau, Mali, Niger, Senegal, Togo• Economic Community of West

African States Benin, Burkina Faso, Cap Verde, Ivory

Coast, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo


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Political Union

Highest level of integration Common governing bodies,

legislative bodies, and enforcement powers

Example: European Union


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European Union

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)

Finnland (FI) Niederlande (NL) Tschechien (CZ)

Frankreich (FR) Österreich (AT) Ungarn (HU)

Griechenland (GR) Polen (PL) Vereinigtes Königreich (GB)

Irland (IE) Portugal (PT) Republik Zypern (CY)

Member Countries: 27

Candidate Countries: Croatia , Turkey

113

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


114

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 CommissionDana-Nicoleta Lascu Atomic Dog Publishing 2006

115

Bodies of the European Union (contd.)• European Commission:

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


116

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


117

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


118Dana-Nicoleta Lascu Atomic Dog Publishing 2006

The EU Fifteen Member states

The European Parliament

The European CouncilThe European Court of Justice

Body of 546 members(elected every 5 years)

Council of Ministers:1 minister of each member country,

The legislature body

The Council of Nations:Representatives from the Parliament,

constitutional council, may overrule the Court of Justice

The European Commission:Works on behalf of the EU, Subordinate of the Council,

The executive body

Meeting place for headsOf the EU members

The European Central BankPrice Stability

Judgments overrideNational courts

119

Content




120

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


121

ExampleThe 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.

What went wrong?

122

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 air-conditioned hotel, a former palace, having yet another bottle of wine?

123

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.


124

Elements of Culture

Language Religion Cultural Values Cultural Norms


125

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)


126

Language (contd.)

Proxemics (Physical space)

Postures Orientations

(manners, conventions)

Oculesics (eye contact)

Chronemics (Timing of verbal exchange)

Haptics Kinesics (Gestures) Paralinguistics

(Intonation, accents, qualitiy of voice)

Appearances Olfactions

Non-verbal communication


127

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 of

worldly desires.


128

Religion and Its Impact on Business Business Days Gender Roles Gift Giving Marketing Practices


Monday Tuesday Wednes-day

Thursday

Friday Saturday

Sunday

Christian

Business Business Business Business Business Business Moring

Islam Business Business Business Business Business Business

Judaism Business Business Business Business Business Business

129

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


130

Learning New Cultures Enculturation

Process by which individuals learn the beliefs and behaviors endorsed by one’s own culture

Acculturation Learning a new culture.

Assimilation Full adoption and maintenance of the new

culture, and resistance to one’s old culture.


131

Cultural Norms Norms are derived from values and

defined as rules that dictate what is right or wrong, acceptable or unacceptable. Imperative

What an outsider must or must not do. Exclusive

What locals may do but an outsider cannot do.

Adiaphora What an outsider may or may not do.


Minimum requirement for a “survival” in a new country

132

Cultural Norms


Imperatives Exclusives AdiaphorousBusiness cards: Asia: presentation and 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 pocketIn Saudi Arabic woman are not allowed to drive or walk in public without a man.

Wearing a sticker from a political party

Eating with chopsticks in Asia.Drinking banana beer in East Africa.

133

Time Orientation Business Hours Gift Giving Socializing Gender Roles Status Concern and

Materialism


National/Regional Character

134

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

ChinaTaiwan

135

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.

Low High

U.S.Germany

China

Latin AmericaEastern

Europe


136

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.

Low High

U.S. ChinaCentral/ Eastern Europe

Germany


Japan

137


Terms used to differentiate between cultures (contd.) Masculinity/Femininity

The extent to which a culture is characterized by assertiveness / selfconfidence, rather than nurturing.

LowMasculinity

High Masculinity

Sweden

United States

CanadaAustralia

China

Argentina


138


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.

LowIndividualism

Australia GB

HighIndividualism

Latin America

ThailandUnited States

China


139


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


140

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:

Message source The source’s standing in society or in

the negotiating group The source’s level of expertise, tone of

voice, body language


141

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


142

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 decisions in the home country.


143

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.


144

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 Referred to as McDonaldization or

Cocacolonization


145

Positioning Based on Culture

Global consumer culture positioning Positioning the product to appeal to individuals

who want to be part of a global consumer culture.

Local consumer culture positioning 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.


146



Case studies


147

Content

International Marketing Strategies International Marketing Research International Marketing Planning Expansion Strategies and Entry


148

Case Study 2

149

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.


150

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 researchDana-Nicoleta Lascu Atomic Dog Publishing 2006

151

Types of International Marketing Research


152

Research of Industry, Market Characteristics, and Trends

Acquisition analyses Diversification analyses Market-share analyses Export research


153

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


154

International Product Research

Concept development and testing studies

Brand name generation and testing Product testing Competitive product studies Packaging design studies Test marketing


155

International Product Research

Brand name generation and testingBad-Choice Brand Names Clean Finger Nail - Chinese tissues Kolic - Japanese mineral water Last Climax - Japanese tissues Pocari Sweat - Japanese sport drink Shocking - Japanese chewing gum Cat Wetty - Japanese moistened hand towels

Pipi - Yugoslavian orangeade Polio - Czechoslovakian laundry

detergent Zit - Greek soft drink


156

International Distribution Research

Import/export analyses E.g. Identifying logistic companies who can

handle customs Channel performance and coverage Plant/warehouse location studies


157

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


158

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


159

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)


160

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

marketing problem


161

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.


162

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.


163

Top 10 Global Marketing Research Firms

Rank

Company

Home

Research

Country

Revenues

(US$ millions)

1.

VCU N.V.

Netherlands

2,814.0 2.

IMS Health Inc.

U.S.

1,219.4 3.

The Kantar Group

U.K.

1,033.2 4.

Taylor Nelson

Sofres Plc.

U.K.

908.3 5.

Information

Resources Inc.

U.S.

554.8 6.

GfK Group

Germany

528.9 7.

Ipsos Group S.A.

France

509.0 8.

NFO WorldGroup Inc.

U.S.

466.1 9.

Westat Inc.

U.S.

341.910.

NOP World

U.K.

320.0

Source: “Top 25 Global Research Organizations,” Marketing News, Vol. 37, No. 17, August 18, 2003, p. H4.

164

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


165

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.


166

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: Respondent factors Infrastructure factors


167


STEP 5 Design Data Collection Instrument Emic instruments

Measure phenomena specific to each culture. Etic instruments

Measure the same phenomenon in different cultures.

Constraints: Translation costs and accuracy Instrument reliability Reluctance to answer certain questions


168


STEP 6 Decide on the Sampling Plan Sample Unit (Who) Sample Size (How many) Sampling Procedure (Selection)

STEP 7 Collect, Analyze, and Interpret Data


169

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


170

Sales Forecasting Sales Force Composite Estimates

Personal observations and expectations of the local sales force and the international sales manager

Jury of Expert Opinion 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


171

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 … With similar levels of economic development, or Where the product is in the same market

development stage, or In markets which share similar cultural

characteristicsDana-Nicoleta Lascu Atomic Dog Publishing 2006

172

Point of Sale Research • Made with the help of store

scanners, in markets where they are available

• Involve comprehensive store audits.

Sales Forecasting (contd.)


173

Content

International Marketing Strategies International Marketing Research International Strategic Marketing

Planning Expansion Strategies and Entry


174

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.


175

The International Strategic Plan on different levels

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

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

Planning involves decisions on which consumer segments to target in each country and how to target them.

A marketing plan is developed at product level, product line level, or at brand level.

Has shorter-term focus Involves the marketing

department

176

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


177

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.


178

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).


179

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).


180

Requirements for International Segmentation

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 over time

The ability to communicate with the international target market

The extent to which the international target market is responsive to the marketing strategies used

The extent to which international market segments respond differently to marketing strategies

181

International Macro-Segmentation

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)


182

International Macro-Segmentation (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


183


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:

- Marketing research firms- Financial firms- Management consulting firms


184


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.


185

Typology of international target market

See: Backhaus,K., Büschken, J., Voeth, M, International Marketing, 2005

Market attractiveness:e.g. Labor costsBrand managementWorking hoursNew marketsMachine running timesTaxesEnvironmental standardsAdministrative barriersImport barriers

Structure (natural) barriersStrategic (competition) barriers

186

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


187

Bases for Segmentation (contd.)

Psychographic: lifestyles, values, attitudes, interests, opinions

Hofstede dimensions: Power-distance Masculinity-femininity Uncertainty avoidance Individualism-collectivism

Global segments (psychodemographic segments): Global teenagers Global elite Global gay and lesbian segment High sensation seekers


188


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.


189


Idealconsumer

Usage User Status

NonusersOccasional usersMedium usersHeavy users

User of competitors productsPotential usersFirst time usersRegular users


190

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.


191

Country Screening/ SelectionExample

192

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

The product is aimed at all markets using a single strategy, regardless of the number of markets and countries targeted. Example: Coca Cola

193

Positioning the BrandDefinition: Placing the brand in the consumers

mind in relation to other competing productsSix possible positioning strategies to reach a

unique selling proposition1. Attribute/Benefit Positioning2. Price/Quality Positioning3. Use or Application Positioning4. Product User Positioning5. Product class Positioning6. Competitor Positioning


194

Positioning the BrandAttribute/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)


195

Positioning the BrandUse 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)


196

Positioning the BrandProduct 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.


197



Case studies


198

Content

International Marketing Strategies International Marketing Research International Marketing Planning Expansion Strategies and Entry


199

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 Labor costs


200

Example: Labor Cost Drivers

Hourly Compensation Costs in U.S. Dollars for Production Workers in Manufacturing 2006

Source: http://stats.bls.gov

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 11.52

Mexico 2.50

Netherlands 30.76

Singapore 7.44

United Kingdom 24.71

201

Control and Risk in International Expansion

Indirect Export

Direct Export

Licen-sing

Franchi-sing

Joint Venture

BranchSub-

sidiary

Control/Risk Low High

in home country in host country

Capital and Management

202

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.


203

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.


204

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 Shipping lines Insurers Merchant middlemen Retailers Other marketing service providers, such as

consultants, researchers and advertising companies

Internet boosted this kind of entry mode


205

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.

206

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: 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


A book published in the U.S. and its licensed Chinese reprint (for sale in Mainland China only)

207

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).


208

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.


209

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 copiedDana-Nicoleta Lascu Atomic Dog Publishing 2006

210

Franchising (contd.) Example: McDonalds


St. Petersburg

Buenos Aires

Viterbo, Italia

211

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 compete with the Big Mac. (Here in France)Dana-Nicoleta Lascu Atomic Dog Publishing 2006

212

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


213

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 yearsDana-Nicoleta Lascu Atomic Dog Publishing 2006

214

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


215

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 controlDana-Nicoleta Lascu Atomic Dog Publishing 2006

216

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)


217

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.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

218

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.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

219

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- offshoring Dana-Nicoleta Lascu Atomic Dog Publishing 2006

220

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).


221

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.


222

Case Study 3

223



Case studies


224

Content

International Marketing Mix International Product Mix

International Branding International Product and Service

Strategies International Distribution International Communication International Pricing


225

Strategy and the company’s orientation

Geocentric company orientation

Global Standardization

Regiocentric company orientation

Regional Standardization

Polycentric company orientation

Local adaption


226

Global Standardization

Global Standardization: Standardization of products across markets and of the marketing mix

worldwide. Advantages:Allows for economies of scaleEncourages 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.


227

Global StandardizationAdvantages (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.


228

Regional StandardizationRegional 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


229

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. Dana-Nicoleta Lascu Atomic Dog Publishing 2006

230

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.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

231

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: 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.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

232

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.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

233

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.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

234

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.


235

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.


236

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


237

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


238

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. Dana-Nicoleta Lascu Atomic Dog Publishing 2006

239

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.


240

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


241

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.


242

Industrial Products and Services vs. Consumer Products and Services

Issues: Industrial consumers are businesses;

business-to-business 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 more volatile.


243

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.


244

Product Standards: ISO 9000Quality 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.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

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Product Standards: ISO 14000Environmental 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.


246

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.


247

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.


248

ISO 9000 Certifications Worldwide


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

Australia and New Zealand

19,092 5.20 2.46

Source: www.iso.ch, 2005 Annual Report, May 2006

249

Content

International Marketing Mix International Product Mix

International Branding International Product and Service

Strategies International Distribution International Communication International Pricing


250

The International Product Life Cycle

International Corp. IC manufacturesproduct in developedcountries; exports todeveloping countries

IC movesproduction todevelopingcountry; beginsimporting tohome country

Developingcountry competitorexports product to IC homecountry; competeswith IC imports

Developing countrymarkets remain valuabletarget Markets for IC; IC homecountry market Isdiminishing

Sales

Introduction and Growth Stages:

Early Maturity:

LateMaturity

Decline

TimeDana-Nicoleta Lascu Atomic Dog Publishing 2006

251

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. E.g. iPhone, television in India,


252

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 in

developing countries.


253

Dimensions of the International Product Mix

Product mix/portfolio The total number of products that a

company offers its target markets. Product line

All the brands the company offers in one product category.

Product length Total number of brands in the product

mix.


254

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.


255

Example: UnileverWhat are the numbers for product length, product width, product depth and produce line?


Product Area

Culinary products

Brandnames Variants

Ragú Spaghetti SaucesCalvé Whisky Cocktail Sauce

Hellmann's Mayonnaise

Knorr Soups

Bertolli Pastas

Amora Vinaigrettes

Wishbone Salad Dressing

Colman's Mustard

Pepperami

Pot Noodle

Frozen foods Findus 4 Salti in PadellaIce cream Magmum (Classic, Temptation, Minis, White, Ecuador)

Cote D'Or

Cornetto

Klondike Bars

Solero

Tea Lipton (Lipton Yellow, Lipton Ice tea, Lipton Brisk)Bovril (UK)

Product Length: 4Product Width: 18Product Depth: Lipton: 3

Magnum: 5Product Line: Tea: 2 Ice cream:5

256

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 be substandard and unable to support the product.


257

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 internationallyDana-Nicoleta Lascu Atomic Dog Publishing 2006

258

Step 1: Generating New Product Ideas

Most product and service firms are driven by the marketing concept. Most of the time product development decisions

are based on identifying the needs, wants, and desires of consumers.

Technology firms focus on the products: Focus is on research and development

Sources of new Ideas Consumers (home country, internationally),

Competitive Analyses, Channel Members, Employees, Top Management, Inventors, Consultants, Researchers


259

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


260

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


261

Step 4: Performing a Product Business Analysis

Estimate: Project costs Return on investment Cash flow Fixed/variable costs The price level for the product!


262

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)


263

Step 6: Test MarketingTesting 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!


264

Types of Test Marketing Simulated Test Marketing

Test marketing simulates purchase environment where samples of target consumers are observed during the decision-making process.

Controlled Test Marketing Test marketing that involves offering a

new product to a group of stores and evaluating market reaction.


265

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.


266

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


267

International Launch Decisions

Consumers and countries Timing of launch Marketing mix decisions

Product Place Price Promotion


268

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%


269

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


270

Product Diffusion

Cultural similarity

Economic similarity

Country-Market Factors

New Product/Service

adoption

Compatibility withAdopter’s needs

USP/relativeadvantage

Observability

Triability

Product Factors

Product Diffusion: speed of adoption

271

International SegmentationConsumer 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


272

Consumer Adopters (contd.)

Early 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. Late majority: (34% of the total)

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 Consumers are primarily from developing

countries.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

273



Case studies


274

Content

International Marketing Mix International Product Mix International Distribution

Operations and Logistics Retailing

International Communication International Pricing


275

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


276

International DistributionUsing 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)Dana-Nicoleta Lascu Atomic Dog Publishing 2006

277


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


278


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.


279


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.


280

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.


281

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.


282

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.


283

International Logistics

Order process-

ing

Order process-

ing

Inventorycontrol

Inventorycontrol

Ware-housingWare-

housing

Transpor-tation

Transpor-tation

LogisticsLogistics


284

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


285

U.S Merchandise Value by Mode of Transportation


Mode of Transportation Total (in millions of U.S. dollars)

Imports

Water 724,946

Air 329,387

Truck 237,706

Rail 78,131

Pipeline 36,829

Other and unknown 61,672

Total Imports 1,469,671

Exports

Water 233,639

Air 270,041

Truck 215,247

Rail 30,229

Pipeline 1,671

Other and unknown 67,109

Total Exports 817,936

Source: U.S. Department of Transportation, Bureau of Transportation Statistics, May 2006; based on total, water, and air data in the United States.

286

Characteristics of Each Mode of Transportation

Oil and gasoline, chemicals, semi-liquid coal, refined products

LowLowerLowPipeline

Grains, gasoline, forestry products, cement and fertilizers

LowLowLowWater

Jewelry, electronics, expensive low-volume products

HighestHighHighAir

Coal, gasoline, forestry products, grains,automobiles

LowerMediumMediumRail

Consumer goods, erishables, automobiles

HigherHigherHighTruck

Product ExamplesSpeedCostFlexibility(re: Area coverage)

Mode


287

Logistics Facilitators Transportation Firms

Intermodal transportation firms Containerization

Distribution Centers Designed to speed up warehousing and delivery

by channeling distribution to a hub. Freight Forwarders and Customs Brokers

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.


288

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.


289

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 Dana-Nicoleta Lascu Atomic Dog Publishing 2006

290

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.


291

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


292

Facing Logistics Challenges: Combating Parallel Imports


293

Content

International Marketing Mix International Product Mix International Distribution

Operations and Logistics Retailing

International Communication International Pricing


294

International Retailing

All the activities involved in selling products and services to final international consumers for their personal consumption.


295

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.


296

Internationalization of Retailing

Trend: Markets, retailing technologies and

consumers are changing Consolidation in the food and general

merchandise sectors


297

Top 10 Global RetailersR Country Retailer Format Sales /US$

millions1 U.S. Wal-Mart Discount, Hypermarket, Supermarket,

Superstore Warehouse312,427

2 France Carrefour Cash & Carry, Convenience, Discount, Hypermarket, Specialty, Supermarket

92,778

3 U.S. Home Depot DIY, Specialty 81,511

4 Germany Metro Cash & Carry, Department, DIY, Hypermarket, Specialty, Supers tore

69,134

5 U.K. Tesco Convenience, Department Hypermarket, Supermarket, Superstore

68,866

6 U.S. Kroger Convenience, Discount, Specialty, Supermarket, Warehouse

60,553

7 U.S. Target Department, Discount, Superstore 52,620

8 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

Source: "2007 Global Powers of Retailing," January2007, www.stores.org.

298

Retail formats

General Merchandise

Food Retailers

Non-store Retailers

Specialty storesSpecialized MarketsDepartment storesGeneral Merchandise Discount storesOff-Price RetailersCatalog Showrooms

Conventional supermarketsSuperstoresWarehouse clubs or Wholesale ClubsConvenience store

Internet RetailingVending machinesTelevision Home

ShoppingCatalog Retailing and Mail RetailingDirect sellingNetwork Marketing


299

General Merchandise: Specialty Stores

Specialty Stores offering a narrow product line and wide assortment: Music stores Clothing stores…


300

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.


301

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


302

General Merchandise: Discount Stores

Sell High Volumes of Merchandise Offer Limited Service, Charge Lower Prices Types:

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.


303

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)


304

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.


305

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.


306

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 dealer-brand merchandise at a substantial discount.


307

Food Retailers Convenience Store

Small residential retailers or retail chains consisting of small neighborhood stores.

Open long hours. Carry limited lines

of higher-turnover necessities.

One-stop shopping.

Convenience store in Poland—note that Procter & Gamble products (especially their pan-European detergent Ariel) are predominant.


308

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.


309

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.

310

Nonstore Retailing Vending machines:

Increasing in popularity

Accepting of Smart cards, credit cards

Technology is facilitating an interactive consumer experience.

Different formats worldwide

Used most in JapanDana-Nicoleta Lascu Atomic Dog Publishing 2006

At Atlanta Airport – a vending machine selling iPods (minis and shuffles).

311

Nonstore Retailing


Vending machines in the Netherlandswith hot snacks and Japan with different vegetables

312

Nonstore Retailing (contd.)

Television Home Shopping: 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.

Dana-Nicoleta Lascu Atomic Dog Publishing 2006CanadaUSA, UK, Germany, Japan

USA

Japan

China

Acorn, China

313


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


314


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).


315

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.


316

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


317

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)


318



Case studies


319

Content

International Marketing Mix International Product Mix International Distribution International Communication

Promotional Mix and Advertising Strategies

Publicity, Public Relations and Sales Promotion strategies

Personal Selling and Personal Management International Pricing


320

International Promotional Mix

Understanding the norms, motivations, attitudes, interests, and opinions of the target market is crucial to company success in marketing to and communicating with different cultures around the globe.

Sales-promotion

Sales forceMange-ment

PR and Publicity

Advertising

PromotionalPromotionalMixMix


321

The International Communication Process

SENDER RECEIVERMEDIUM

•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.


Encoding Decoding

Target MarketFeedback

(Recall, Purchase)

Noise:Cultural differences

Competing Messages

Consumer interests

322

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.


323

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 representatives.


324

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


325

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.


326

AdvertisingA nonpersonal communication by an

identified sponsor across international borders, using broadcast, print, and/or

interactive media.

Media InfrastructureAvailabilityReliabilityRestrictionsCosts


327

Media Reliability The probability of the media to air

advertising messages on time, at an acceptable quality and with the agreed-upon frequency

International constraints: Print lag times Poor quality Off-air television or government-controlled

television and radio that does not allow advertising.


328

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


329

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


330

Global MediaU.S. Advertising Expenditures Compared

to World Ad ExpendituresYear U.S. Ad Spending Change World Ad

Change(Billion US$) Spending

(Billion US$)2000 247.5 + 11.3 474.3

+ 8.82001 231.3 – 6.5 440.9 – 7.92002 236.9 + 2.4 450.5

+ 2.22003 249.2 + 5.2 471.1 + 4.62004 266.4 + 6.9 498.3 + 5.8Source: Robert J. Coen, Universal McCann’s Insider Report, December 8, 2003, www.universalmccann.com

331

Various International Formats, Features, and Trends

Dominance of global Media e.g. CNN, MTV, Walt Disney, Cosmopolitan

Infomercials & TV Shopping 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


332

Various International Formats, Features, and Trends

Advertising Yes mineral water on fences in Bangladesh.

Advertising Marlboro cigarettes on a kiosk in Poland.

• Posters on Kiosks and Fences


333

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.


334

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.


335

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.


336

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 messagesDana-Nicoleta Lascu Atomic Dog Publishing 2006

337

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


338

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


339

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.


340

Budgeting Decisions (contd.)

Historical Method Base budget on past expenditures giving more

weight to recent expenditures.

Competitive Parity Use international competitors’ budgets as

benchmark.

Executive-judgment method (30%) Use collective executive opinion.

All-You-Can-Afford Best suits small and medium firms.


341

Top 10 Global Marketers

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

Source: Advertising Age, "Top 100 Global Marketers," November 20, 2006, pp. 1-53.

342

Content


Promotional Mix and Advertising Strategies Publicity, Public Relations and Sales

Promotion strategies Personal Selling and Personal Management

International Pricing


343

International PublicityA 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.


344

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 Atomic Dog Publishing 2006

345

Strategies for Maximizing Positive Publicity in a Foreign Market

Company may obtain leads if it has detailed information and contact information in the press release.

Use publicity as a sales lead.

The right distributor may come along if the company signals it is looking for distributors.

Use publicity to secure a distributor or a distribution network.

It helps when securing funds for new campaigns.

Inform the managers in the home country about publicity efforts.

Publishers are more likely to pick up a story if they have a good translation of the information.

Translate and be careful about translations.

Establish third-party editorial credibility for products; convey more information in greater detail about products.

Supplement ad campaigns with publicity campaigns.

Actions and OutcomesGeneral Strategies


346

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…


347

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


348

International Public Relations Examples (contd.)

Corporate Advertising promote the company behind the brand.

Image Advertising enhances perceptions of a company in a given

market by creating a positive impression on the target consumers.

Advocacy Advertising 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.


349

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


350

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.


351

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.


352

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.


353

Online Sales Promotion All-around mode of Communication

with prospective Consumers:

Sweepstakes Coupons Promotional Pricing


354

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.


355

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.


356

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.


357

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.


358

Examples of International Trade Shows

Frankfurt Book Fair

Documenta Venice Biennale DRUPA Interkama World Fair

The World Fair is an excellent venue for broad exposure for international firms.

359

Content


Promotional Mix and Advertising Strategies Publicity, Public Relations and Sales

Promotion strategies Personal Selling and Personal

Management International Pricing


360

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


361

International Personnel Issues


362

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 trust their local partner with the information.


363

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.


364

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


365

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


366

Employees of the International Firm

Expatriates Employees working in a foreign country Types:

Home-country nationals Third-country nationals

Locals (Local Employees)


367

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 assignmentsDana-Nicoleta Lascu Atomic Dog Publishing 2006

368

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 Cost less than home-country nationals


369

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


370

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.


371

Managing International Employees

Transplant successful personnel home country policies will run against obstacles in different international environments.

Issues related to culture come into play.

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.


372

Successfully Managing ExpatriatesSuccess requires: Effective selection/screening Appropriate training and development

strategies Motivating for peak performance Ensuring successful repatriation

50% of expatriate assignments FAIL!


373

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


374

Attenuating Culture ShockCulture 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 Atomic Dog Publishing 2006

375

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.


376

Incentives for International Post Assignments

Cost of Living/Post Adjustment: 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.

Housing Allowance: 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


377

Incentives for International Post Assignments (contd.)

Home-Leave Allowance: A compensation incentive whereby the company

pays for employee and family to vacation in the home country.

Moving Allowance: 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.


378

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 Going Native


379

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 firmReverse culture shock can be avoided by maintaining a connection to company headquarters.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

380

Multiple Choice True or False1)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

381

Multiple ChoiceChoose the best answer7)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

382



Case studies


383

Content

International Marketing Mix International Product Mix International Distribution International Communication International Pricing


384

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.


385

Pricing Considerations

PoliticalAnd Legal

Environment

Economicfinancial

Environment

CompetitiveEnvironment

Ability to keep track

ProductionFacility

Pricing Pricing DecisionsDecisions

386

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


387

Environmental Considerations

International companies must react effectively to changes in the

competitive environment,

political and legal environment

economic and financial environment.


388

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


389

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 Atomic Dog Publishing 2006

390

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.


391

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.


392

Economic and Financial Influences:

Economic, Financial, Monetary: Inflation

Sometimes companies must low prices only to stay in the market

Fluctuating exchange rates Percentage that covers the exchange rate

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)


393

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


394

Countertrade

Advantages: Facilitates sale of

products in emerging markets.

Can help an exporting company bypass trade restrictions.

Disadvantages: Foreign lenders could have

prior claim on goods. Restricts profit margins. Encourage economic

inefficiency. Prices are distorted. Could receive inferior quality

goods. Exchange partners can

become competitors. Involves extensive

negotiations.Dana-Nicoleta Lascu Atomic Dog Publishing 2006

395

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 Atomic Dog Publishing 2006

396

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


397

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

398

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.

Sources: http://www.iccwbo.org/incoterms

399

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

400

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.

401

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.

402

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.

403

Incoterms (contd.)

Sellersrisk, title, insurance

Buyersrisk,title,insurance

404

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.


405

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.

406

Pricing PracticesHigher 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 Atomic Dog Publishing 2006

407

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.


408

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.


409

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


410

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.


411

True or FalseTrue or False1)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.

412

Multiple ChoiceChoose the best answer6)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

413



Case studies


414

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 firmDana-Nicoleta Lascu Atomic Dog Publishing 2006

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Factors Within the Firm Internationalization as a priority:

Organizational structure with worldwide regional divisions in charge of particular countries.

Involvement in international business an international division that oversees

international operations. Minimal involvement in international business

small international department. Companies usually maintain their

organizational structure when they go international. Concerning hierarchy and centralization. Concerning product lines


416

International Organizational Designs

The matrix structure

The matrix structure

Product DivisionsProduct Divisions

Worldwide regionaldivisions

Worldwide regionaldivisions

International

divisions

International

divisions

Organizationaldesigns

Organizationaldesigns

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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.


418

Worldwide Regional Division Structure


Worldwide Regional Division Structure: Frito-Lay.

Worldwide Regional Division Structure: Frito-Lay.

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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 high-tech companies or multinational companies with diversified portfolios

increasingly, this format is replaced by the matrix structure.


420

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.


421

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


422

Example of Matrix Structure: BASF Corp.

Chemicals

Plastics

Performance Products

FunctionalSolutions

AgriculturalSolutions

Oil & Gas

EuropeNorth

AmericaAsia Pacific

South America,Africa, Middle East

423

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


424

ControlsFormal 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


425

Future Perspectives in International Marketing


426

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)


427

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

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Internet retail industry profile

a. Online Retail Sector Growth (in billions)Year $ Billion % Growth2003 425.1 26.002004 544.6 28.102005 656.4 20.50b. Retail Segments' ShareProduct Category % Share

Drugs, health, beauty 23.50

Computer and related materials 17.50

Clothing and shoes 11.70

Kitchen and home 4.60

Jewelry 4.00

Other 38.70

c. Geographic SegmentationGeography % Share

European market 44.40

U.S. market 22.50

Asia-Pacific market 21.70

Rest of the world 11.40

Source: Internet Retail Industry Profile: “Global Internet Retail," April 2006: Datamonitor

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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.


430

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)


431

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.


432

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.


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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.


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True or false1)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.

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Choose the best answer7)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

Documents

0910 Ws International Marketing Student En