Chapter 16:International Marketing

A. Bricek | L. Bowman | F. CastronovoL. Corona | M. Vital

International Marketing

Marketing

Process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives

Int’l Mktg

Extension of activities across national boundaries

Int’l Mktg (cont’d)Expansion Foreign Mkts aware of systems:

Political

Cultural

Legal

Other:

Unfamiliar economic conditions

Advertising media

Distribution channels

Issues:

Regulations (i.e. TV)

Ads (Nike, Coca-Cola)

Confront 2 tasks:1. Capturing

synergies among various nat’l

mkts:Provide opportunities for additional revenues and for growth and cross- fertilization

2. Coordinating mkt activities among mkts:

Help lower mktg costs

Create unified mktg effort

International Market and Business Strategies

Marketing strategy must support business strategy

DifferentiationCost leadershipFocus

Differentiation Strategy

Mtkg managers develop tactics involving the 4 P’s btwn products and services of competitors

Product, Price, Promotion, Place (Distribution)

Based on perceived quality, fashion, reliability, or salient characteristics

i.e. Brand: Rolex vs. Target—no price cut for Rolex

Cost Leadership Strategy

Cost reductions in…Production and manufacturing

Sales

Acceptance of lower profit margins

Use of less expensive mat’ls & components

Concentrate on promotion (advertising)

Utilize channels of distribution (i.e. selling through discounters)

Focus Strategy

Concentrate on segments of consumer market/area/region within a market

Esp. target markets

International Market and Business Strategies

(cont’d)Budget and resource limitations, assessing country markets then ranking potential products

Influencing factors:Culture

Levels of competition

Channels of distribution

Ability to infrastructure

Int’l Marketing Management (cont’d)

The Marketing Mix1. How to develop the

firms productivity?

2. How to price those products?

3. How to sell those products?

4. How to distribute those products to the firm’s customers?

Int’l Marketing Management (cont’d)

Standardization vs. Customization

Int’l Marketing Management (cont’d)

Standardization vs. CustomizationStandardization

Manufacturing, distribution, promotional efficiencies to simple streamlined operations

Cost reduction focus

CustomizationTailor products to meet needs of customers in a given market

Revenue/sales focus

Organizational Structure

Issues (adopt 2-step process):

Product Policy

PRODUCT1st “P” of marketing mix

Products consists of tangible and intangible factors: Physical product and its packaging Image, installation, warranties, and credit terms

The success of a firm who competes internationally is based on its ability to develop products with tangible and intangible features that meet the needs of its customers in different markets.

TOYOTA Has success in selling automobiles in

Europe, Asia, and the Americas reflects upon:

Design and production of mechanically reliable vehicles

Offering competitive warranties Building a solid brand name for its products Providing spare parts and repair manuals Furnishing financing to its dealers and retail

customers

Standardize or Customize ProductsA key decision when working in

international markets is to decide whether to standardized products across markets or to customize products within individual markets.

TOYOTALike many firms internationally, blend of standardization and customization

Standardized Corporate commitment to building high quality,

mechanically reliable automobiles and maintaining the prestige of the TOYOTA name

Customized Products and product mix to meet the needs of local

markets Sells LEFT hand drive motor vehicles to Americas and

continental Europe Sells RIGHT hand drive motor vehicles to Japan,

Australia, South Africa, and United Kingdom

TOYOTA (cont’d) Warranties adjust from country to

country based on warranties offered by competitors

Name under which a product is sold may also vary: United States: Lexus Sports Coupe Japan: Toyota Soarer

Standardize or Customize

Nature of the products target customers…Industrial users or individual consumers?

Caterpillar’s bulldozers and front-end loaders are sold throughout the world with only minor modifications to meet local operating and regulatory requirements.

Commodities are typically standardized across different markets. Agricultural products Petroleum 512 MB computer memory chips Chemicals

Standardize or Customize (cont’d)General rule of thumb: closer to a body the

product is, the more likely the need for it to be customized.

Eddie Bauer in JAPAN Altered style of clothing to stretchy shirts and

straight-legged pants that the Japanese consumers prefer

Big Boy burger chain Added pork omelettes and fried rice to

menu in Thailand to attract local consumers

Legal ForcesLaws & Regulations of host countries may affect the product policies adopted by international firms. Such as imposed detailed labeling

requirements and health standards on consumer products that both foreign and domestic firms must follow strictly.

International firms must adjust the packaging and even the products themselves to meet consumer protection regulations.

Examples of Legal Forces

Grupo Modelo SA, the brewer of Corona beer had to reduce the nitrosamine levels of the beer it sells in Germany, Australia, and Switzerland to meet those countries’ health standards.

Saudi Arabia requires electrical connecting cords on consumer appliances to be 2 meters long. GE suffered embarrassment and loss of profits when

goods were turned back at a Saudi port when an inspector determined GE’s cords were only 2 yards long.

These widely varying technical standards adopted by countries for such electrical appliances and

broadcasting and telecommunications equipment force firms to customize their products.

Cultural Influences

International firms must adapt their products to meet the cultural needs of the local markets. Change labeling on product’s

package into the primary language of the host country

Understanding the way a certain cultural thinks Japanese consumers are quality conscious German consumers are environmentally

conscious

Cultural Influences (cont’d) Culture may FORCE change in a foreign

market

HBO has to edit its movies before it can be broadcasted in a culturally conservative country such as Asia

Gwen Stefani and Beyonce Knowles had to change their costuming and artistic elements when performing in Malaysia

Economic FactorsA country’s level of economic performance may affect the desired attributes of a product. Consumers in richer countries often favor

products with loaded extra performance features

Consumers in poorer countries typically opt for stripped-down versions of the same products Packaging toothpaste in a single use sizes

to make affordable for all local citizens

Brand NamesInternational firms often standardize the BRAND NAME of their products. Firm can reduce cost on packaging,

design, and advertising Capture spillover of its advertising

messages from one market to the next Avon’s entry into China was made easier

by the fact that millions of consumers had seen its products advertised on Honk Kong’s television

Brand Names (cont’d)

Sometimes legal or cultural factors force a firm to alter the brand names under which it sells its products. North America

Diet Coke by Coca-Cola Other markets

Coca-Cola Light by Coca-Cola

Pricing Issues & Decisions

PRICING- Pricing policies directly affect a firms

revenueShape the competitive environment

Ex. Toys “R” Us : success in Germany, Japan, the United States, forced competitors to fight for Asian, European, and North American consumers according to Toys “R” Us terms

Must develop pricing strategies, international firms are more complex then a domestic firm

Cost of doing business vary widely by country

Pricing Issues Continued

Exchange Rate Fluctuations Currency rises in value, exporter must choose between maintaining its prices in the home currency or maintain its prices in the host currency

Distribution practices affect the final price Intense competition among distributors in the U.S. minimizes the margin between retail prices and manufacturer’s prices

Ex. Japan

Pricing Issues Broken Down

International firms must consider these factors when developing their pricing policies

Must decide whether they want to apply consistent prices across all those markets or customize prices to meet the needs of each

Must remember that competition, culture, distribution channels, income levels, legal requirements, and exchange rate stability

Pricing PoliciesThree Pricing Policies1. Standard pricing policy

2. Two-tiered pricing

3. Market pricing

Standard Pricing Policy

Generic approach to international marketing

The firm charges the same price for its products and services regardless of where they are sold or the nationality of the customer

Ex. Crude oil (Aramco, Kawaitt Oil, and Pemex)

Charged different prices to any and all customers at different prices based on supply and demand

Two-Tiered Pricing Policy

A firm that uses a ethnocentric marketing approach uses this policy

The firm sets one price for all its domestic sales and a second price for all its international sales

Often used by domestic firms just beginning to internationalize

Two-Tiered Continued

Works for the short-run, but not in the long-run

Unlikely to develop the international skills, expertise, and outlook to compete in the international market place

Vulnerable to dumping (selling of a firms products in a foreign market for a price lower than that charged in the firm’s domestic market)

Market PricingFollows a polycentric approach

Most complex

Prices are set on a market-by-market basis

Go’s off of the profit-maximizing price

Market PricingTwo conditions must be met to successfully practice market pricing

1. Face different demand or cost conditions of the countries where they sell their product

2. Prevent arbitrage

Market Pricing Advantages

Can set higher prices where tolerated and lower prices where necessary

Directly make relevant costs against local sales within each foreign market

Closely monitor sales

Willing to delegate authority to local managers to allow the price adjustments

Market Pricing Risks

1.) Damage its brand name

2.) Development of a gray market for its products

3.) consumer resentment against discriminatory prices

Market Pricing Risks ContinuedDamage its brand name

Any international firm that sells brand name products and adopts market pricing should review the prices charged by local managers to ensure that the integrity of its brand names and its market images is maintained across all of its markets

Risks ContinuedGray markets

A market that results when products are imported into a country legally but outside the normal channels of distribution authorized by the manufacturer (parallel importing)Price in one market is lower than the price the firm charges in another market, allowing entrepreneurs to buy the good in the lower-price market and resell it for profit in the higher-price market

Risks ContinuedOccurs when firms fail to adjust local prices after major fluctuations in exchange rates

Ex. Coca-Cola & Merck

Products commonly influenced: automobiles, cameras, computers, ski equipment, and watches

Also happen more in free-market economies

Undermine a firms market pricing policy, lower the firms profits, cause friction between the firms and distributors

Risks ContinuedConsumer resentment

Consumers in high-priced country may feel they are being gouged by pricing policies

Ex. Estee Lauder & J. Crew

Japanese newspapers and TV stations highlighted the issue claiming foreign companies take advantage of the Japanese consumers

Argue the price differences are due to the high cost of doing business in Japan

Promotion Issues & Decisions

PROMOTION:3rd P of the international marketing mix

Enhance desirability of its products among potential buyers

PROMOTION MIX:Advertising

Personal Selling

Sales Promotion

Public Relations

Advertising3 Factors to Consider:

The MESSAGE it wants to convey

The MEDIA available for conveying the message

The extent to which the firm wants to GLOBALIZE ITS ADVERTISING record

I. MessageFacts or impressions the advertiser wants to convey to potential customers

Convey messages of:Value (low price)

Reliability (quality)

Style (image and prestige)

I. Message (cont’d)

Ex. Coca ColaBelieves products help consumers enjoy life by showing worldwide

Ex. Honda & Kawasaki,

Motorcycles

Stress fun & excitement or riding

Poorer countries stress reliability & functionalism

I. Message (cont’d)

Ex. Europe & Japan

US goods viewed as “trendy”

Japanese products perceived as high quality

II. Medium• Communication channel

used by the advertiser to convey a message

• May have alterations from market to market based:

Availability, legal restrictions, standards of living, literacy rates, cultural homogeneity of the national market, & other factors

Ex. NestleFrench & German speaking Swiss audience

II. Medium (cont’d)

Countries level of economic development affect media

Less developed countries have limited TVs & literacy rates

Ex. Colgate-Palmolive, rural India

Infomercial on teeth brushing techniques

“Bringing the World into Focus” approach

Develop media customized for local market

III. Global vs. Local Advertising

Should it be everywhere or tailored to each local market the firm serves?

Ex. Unilever & Dove Soap

TV commercial (same) but different actors and use of language of that specific country when airing

Regional StrategyEx. IBM & Levi Strauss in European markets

Personal SellingMaking sales on basis of personal contacts

As firms grow and develop sale basis in new markets, establishes its own sales force

Advantages to Personal Selling

Hiring local sales reps are reasonably confident understanding local culture, norms, and customs

Promote personal contact with customers

Ease to obtain valuable market information

Sales PromotionComprises specialized marketing efforts

Coupons, in-store promos, sampling, direct mail campaigns, cooperative advertising, and trade fair attendance

US Dept of Commerce

Helps small US firms to participate in overseas trade as part of promo efforts

Flexible nature of sales promos make marketing campaign tailored and ideal to fit local customs & circumstances

Public RelationsEfforts aimed at enhancing a firms reputation and image with the general public

Opposed to specific advantages of individual product or service

Effective PR belief“Corporate citizen”: reputable and trusted

However, hard to quantify

Over time, positive image and reputation benefit host country

Distribution Issues and Decisions

Distribution Issues

Distribution- process of getting products and services from the firm into the hands of customers

Two Issues:Physically transporting its goods and services from where they are created to the various markets in which they are to be soldSelecting the means by which to merchandise its goods in the markets it wants to serve

International Distribution

Main issue- mode of transportationFaster modes of transportation:

Air freightMotor carrier

More expensive

Slower modes of transportation:Ocean shippingRailroadPipelineBarge

Cheaper

Transportation selected

Affects the firm’s inventory costs and customer service levels

Product’s useful shelf life

Exposure to damage

Packaging requirements

Slower modes of transportation, increase the firm’s international order cycle of time: time between the placement of an order and when the customer receives it; could cause customer’s to find alternate supply sources

Shelf life, damage,

packagingHighly perishable items are usually shipped by air freight

Less perishable items use cheaper transportation

Goods sent on longer voyages may need special packaging to protect it

Channels of Distribution

Distribution channel can consist of as many as 4 basic parts:

The manufacturer that creates the product or serviceA wholesaler that buys products and services from the manufacturer and then resells them to retailersThe retailer, which buys from wholesalers and then sells to customersThe actual customer, who buys the product or service for final consumption

Channel lengthThe number of stages in the distribution channel

Direct sales: a firm that sells directly to the final consumer

Longer channel involves retailers

The longest channels involve the use of wholesalers

ChallengeFinding the optimal distribution channel to match the firm’s unique competitive strengths and weaknesses with the requirements of each national market it serves

Some firms may hire a sales or import agent to distribute their goods

SummaryMarketing vs. International Marketing

International Market and Business Strategies

The Marketing MixProduct

Price

Promotion

Distribution

Any questions?