The Association of Business Executives

QCF

International Marketing Examiners Report

Unit Title: International Marketing

Unit Code: 6INTM

QCF Level: 6

Date of Examination:

3rd December 2013

Structure of paper: Answer all three sections

Section A: Answer all five questions Q1 Q2 Q3 Q4 Q5

14 marks 14 marks 14 marks 14 marks 14 marks

Section B: Answer one question Either Q6 or Q7 15 marks

Section C: Answer one question Either Q8 or Q9 15 marks

Total marks available for the paper 100 marks

Introduction This was a relatively small cohort (57 scripts) with 35 (56 per cent) passes; and 25 (44 per cent) fails. There were four scripts that answered fewer than seven questions, although one of these did manage to obtain a pass. This is the fifth session for this examination which uses the following structure:

Section A five compulsory questions; each worth 14 marks.

Section B a choice of two questions; each worth 15 marks.

Section C a choice of two questions; each worth 15 marks.

Section A Question 1: A hotel chain is planning to enter a new international market. (a) Using examples to support your answer, assess the importance of standardising for the hotel chain.

Suggested Answer: In entering a new international market, an international hotel chain will have to decide on the extent to which it can standardise its positioning (target market) and all the brand elements (identity and image), as well as the marketing activities it uses to support its positioning. Hence, if the Radisson group of hotels was planning on entering Tonga it would need to understand what changes it would have to make based on any mandatory considerations (for example, legal requirements) as well as market-driven considerations (such as potential customers). More significantly, Radisson would have to know how these changes could affect the positioning. Thus the hotel chain is taking decisions on standardising. Hence, if the law required a name change or a change in the visual elements of the brand, this would prevent Radisson from being able to adopt a standardised positioning. However, if potential customers preferred a different type of check-in system, Radisson could implement this change without it having an impact on their overall positioning. The check-in system is in place but can be slightly modified to fit in with the local needs/customs.

(b) Critically evaluate two segmentation criteria that could be used to help clarify the target market for the hotel chain.

Suggested Answer: A wide range of segmentation criteria can be used such as reasons for stay, length of stay, type of traveller, profile of traveller (independent/group member/family member). Credit should be given where the criteria selected are appropriate to an international chain of hotels. An international chain of hotels needs to understand their customers in terms of reasons for

their stay, as those who stay in the hotel for business purposes require different facilities. Another criterion that an international chain of hotels can use to segment its target is by the profile of the customer; whether they are young or old, whether they are travelling on their own or as part of a group or a family. These characteristics would help a hotel to understand the customer segments better and to provide the appropriate services for each target group.

Learning Outcome 2: Know how to prepare and implement international marketing strategies and plans.

Examiners Comments: There were two parts to this question part (a), which was worth 4 marks, and part (b), which was worth 10 marks. For part (a), students needed to assess the importance of standardising (related to a hotel chain planning to enter a new international market). Many answers looked at either standardising or how to go about market entry and ignored assessing the importance and/or the context (i.e. a hotel chain), as required by the question. For part (b) students were required to critically evaluate... for a hotel and not just list segmentation variables or indeed focus on looking at measures of effectiveness of segmentation variables. To score well on this question each of these elements needed to be fully covered by candidates answers. Question 2: A fashion retailer is looking to expand overseas. With reference to three cultural factors, discuss how each factor might impact upon the business expansion plans.

Suggested Answer: There are many cultural factors that are important in the performance of international marketing, whether it is in designing the product or service or indeed deciding on brand elements or associations. Hence, the cultural factors could include language; values and attitudes; manners and customs; legal frameworks; religious beliefs; and aesthetics. Language difficulties can affect communication within the organisation (from head office to local markets). Indeed poor or even bad use of language creates problems in business in foreign markets; for example, incorrect translations of names that confuse or upset potential buyers/suppliers. In Germany, for instance, a more formal approach is required in both written and verbal communication/use of language. Thus a fashion retailer (working internationally with a variety of intermediaries in many different countries) dealing with German suppliers would need to ensure the language used is appropriate to the customs in Germany for conducting business.

Learning Outcome 4: Understand the marketing opportunities presented by emerging markets, and the potential problems of cultural and related factors.

Examiners Comments: The emphasis in this question was on discussing, but many students simply provided definitions/explanations). It was also necessary to cover three different/distinct cultural factors and make the link to a fashion retailer and the impact on business expansion plans to score full marks. Question 3: (a) Assess the suitability of two different methods for the physical movement of goods worldwide.

Suggested Answer: There are many methods for the physical movement of goods worldwide (and the terminology used may vary), such as transportation by air, by road, by sea, by train or indeed a method which may consist of a combination of transportation modes, such as by air and road. However, each method has to be clearly identifiable and, importantly, assessed in terms of such issues as cost, time, control, risk, resources. Within mainland Europe and the United States, transportation of physical goods is often done by road or train. However, if these goods are to be transported from a country in mainland Europe to the United States, then both transportation by air or sea and then by road or train may occur. The choice of method is based on trying to contain costs, reduce risk, minimise the number of resources used (notably people), and be as quick as possible.

(b) Assess the challenges faced by small businesses using international business logistics when compared to large-scale enterprises. Use examples to support your answer.

Suggested Answer: The understanding of international business logistics must cover more than physical distribution management. It has to be extended to include such issues as warehousing, stock or inventory control, procurement, payment, insurance. A small business, such as a manufacturer of technical measuring devices, is dependent on both inbound and outbound logistics. In todays marketplace, logistics is most often international, whereby raw materials, such as the stainless steel needed to make the devices will be obtained from outside the country where the manufacturing is done. Hence the small business may be required to pay for the materials before they have sold the finished products and this may be risky so the company will have to consider some financial assistance.

Learning Outcome 5: Understand the requirements for international physical distribution management and channel strategy.

Examiners Comments: There were two parts to this question part (a), which was worth 4 marks; and part (b), which was worth 10 marks.

For part (a), many students were unable to do what the question required, i.e. assess the suitability of two different methods for the physical movement of goods worldwide, and did not score marks as a result. Indeed a number of students did not seem to understand methods for the physical movement of goods and focused instead on methods of entry. Part (b) was problematic for some students as an assessment was required based on comparing and contrasting small businesses with large-scale businesses. Indeed, some students did not seem to understand the components of business logistics (beyond transportation) and/or did not follow through with an assessment of the issues involved. Question 4: Discuss the view that Understanding the macro-environment is the key to success for any company operating in international markets.

Suggested Answer: There are three aspects to this question: understanding the macro-environment, which entails evidencing an understanding of PEST factors without simply listing them more than one factor should be covered indicating knowledge of what success can mean, e.g. sales (volume/value/market share (volume/value), revenue, brand equity, performance; and also being able to make the link between the two. Hence an outline of an answer could be: Understanding the macro-environment (PEST factors) means understanding the drivers and inhibitors from both company and market (industry/consumer) perspectives that influence marketing decisions, such as which communication mix is appropriate for the international market. Furthermore, knowing which factors exist and which are important can help the company operating in international markets to organise its marketing activities. Thus if there are legal factors the company has to consider in terms of the type of media it can and cannot use, then this allows the company to optimise its communication mix and thus have the right support for its products. It also increases the possibility of success whether in terms of sales/revenue or building brand equity (awareness/recognition). Note: the macro-environment can be considered by outlining individual/different factors from a variety of frameworks (PEST/PESTEL/STEP/STEEPLE, etc.) and providing a discussion based on such factors.

Learning Outcome 1: Understand the complexities and challenges in international and global marketing, and be able to evaluate their potential and risks.

Examiners Comments: For this question many students were able to outline the macro-environmental factors, but were limited in their ability to discuss these factors in terms of understanding being the key to success. Furthermore, many students ignored any discussion of the view, i.e. that this was a correct or incorrect (or a mix of both) viewpoint. Question 5:

Using examples to support your answer, critically appraise how the internet and new technologies can both help and hinder determining international communication strategy for companies beginning to be involved in international marketing.

Suggested Answer: Any business/company beginning to be involved in international marketing could consider using the internet for a variety of purposes, such as communication, transactions and indeed distribution (in the sense of availability). The company could create a website wherein information was made available about the company and its products and even allow for some interaction between potential customers and the company (allowing queries to be raised and answered). This facility could even, depending on the type of products sold, be extended into a customer service resource. Clearly the technologies that underpin the transactional capabilities embedded into the internet (and help with security) can be used to facilitate transactions even allowing for cross-country payments. A company/business can also build an intranet and/or extranet that could help their intermediaries, both in terms of supporting selling and also in providing the information that these agents/distributors might need. However, there are issues that have to be considered in the use of the internet and new technologies, as there are resource and cost implications. Furthermore, they have to be integrated into the overall business and be appropriate for the various markets. The resource and cost implications have to be considered in designing and managing the combination of online platforms to use (i.e. which mix of internet, social media, e-tailing outposts, apps, etc. to use). The situation is constantly changing so it is also important to stay informed about the trends research will be needed and also to determine which combinations of applications are appropriate for which purpose and with which target group. Additionally, the use of the internet has to be fully integrated into the whole business and relevant to the various markets, as well as all the internal stakeholders.

Learning Outcome 7: Understand how to develop international sales and marketing communications strategies.

Examiners Comments: This question had a number of aspects, each of which was based on a critical appraisal and each of which had to be fully covered in answers. Use of examples; consideration of new technologies that can help and hinder determination of international communication strategy; and companies beginning to be involved in international marketing, all formed part of the question. Unfortunately, many students ignored one or more of these issues and/or did not critically appraise so could not score full marks.

Section B Question 6: It is often argued that in todays marketplace ethical factors have to be taken into consideration when conducting business internationally. Critically assess this statement, using examples to support your arguments.

Suggested Answer: There are many ethical factors that can be outlined (and terminology may vary widely), such as corporate governance, responsibility, intellectual property rights, bribery and corruption, issues around the environment, child labour, working standards and conditions, and targeting marketing to vulnerable individuals. Ethical standards are different depending on the country/market. However, there is an increasing emphasis on the corporate responsibility of large organisations from developed nations and how they operate in third world countries. Hence, Nike has embedded an ethical agenda into its working practices and endeavours to ensure that child labour is not used in the manufacture of its products. Nike has done this to counter the negative press it received and also to gain the acceptance of its customers who are more conscious of these ethical issues and do not wish to be associated with a company that does not have the same ethos as they do. Many customers (buyers/users/suppliers) are making decisions based on knowing that the companies they are engaged with share the same values that they do. Indeed, in todays marketplace with information more readily available it has become easier to access information upon which to ensure there is an alignment of ethical considerations in doing business.

Learning Outcome 3: Understand the organisation and management of international marketing operations.

Examiners Comments: Students were often unable to outline and explain/describe correctly ethical factors. Additionally, there was often a limited critical review of the statement and/or use of examples. Hence the full 15 marks could not be awarded in such cases. Question 7: At a conference a delegate was heard to say, Organisational structures supporting international marketing should integrate a range of management styles appropriate to different international economies and cultures.

Suggested Answer: International marketing is the performance of business activities that direct a flow of goods and services to consumers or users in more than one nation for a profit. There are a number of different marketing structures that can support these activities and several operational factors that can impact the decision of which structure will work best for an organisation. The different organisational structures appropriate to international marketing may be considered here (focusing on a more standard approach, e.g. functional, product, geographical, matrix, etc.; to a more managerial overview, e.g. export department, international division, and subsidiaries, etc.). There are also a number of different management styles (each with their advantages and disadvantages) that an international company can use. The different management styles used may also be discussed, although answers should indicate understanding of ethnocentric, polycentric, region-centric and geocentric approaches and also relate to outlining the distinction between the Western approach to business as opposed to that in

other parts of the world (Japan, Asia, etc.) The decision on which structure is best is closely related to the extent to which it is possible to integrate an appropriate management style in the different international markets.

Learning Outcome 3: Understand the organisation and management of international marketing operations.

Examiners Comments: Many students who answered this question did not critically appraise the statement and/or did not use examples. It is insufficient to simply outline (often incorrectly) organisational structures and/or management styles. The emphasis throughout must also be on different international economies and cultures.

Section C Question 8: (a) Assess four key financial risks involved in international marketing.

Suggested Answer: The financial risks identified could include difficulties in getting paid; losses due to partner defaults (temporary financial problems or bankruptcy), credit risk, repatriation of profit; currency fluctuations; additional capital requirements; political interference; and social unrest. Currency risk relates to losses that may arise from currency revaluation or devaluation. Hence, where a company has net income from a foreign countrys operations currently valued at $10million, if the US dollar decreases in comparison to that countrys currency in three months, the companys net income may be reduced to $7.5 million and it may incur a $2.5 million loss which would be difficult to overcome. However, the fact that the company is prepared to embrace this challenge is evidence of a commitment and willingness to be involved in international marketing.

(b) Discuss how two of the risks identified in (a) can be minimised. Use examples to support your answer.

Suggested Answer: A corporation may prevent (or limit) financial risk from international marketing by using risk management techniques, such as asset diversification or risk hedging and financial auditing mechanisms. Hence, where there is a currency risk the company may hedge (protect) against this by signing a swap contract with another firm in order to exchange fixed amounts in different currencies at a specified date. Thus, a company can use any number of countertrade arrangements (barter, switch trading, counter purchase/swap, buyback, offset, compensation trade) to minimise currency risk.

Learning Outcome 6: Understand the financial aspects of international marketing.

Examiners Comments:

There were two parts to this question: part (a) was worth 9 marks; and part (b) was worth 6 marks. For part (a) students needed to assess four key financial risks in international marketing; while part (b) required students to discuss how two of the risks identified in (a) could be minimised (using examples). Hence parts (a) and (b) were linked and, where there were errors made in answers to part (a) these were compounded in part (b). Many students simply considered risks in international marketing and did not look at financial risks or assess them. In some cases, candidates failed to cover four financial risks, as required by part (a). In part (b) there was only a superficial (or non-existent) discussion of how two of the risks could be minimised. Hence marks that could be awarded were limited in certain cases. Question 9: It is often argued that: The methods of financing international marketing in developed markets are heavily dependent on the government in terms of assistance and also in managing foreign exchange dealings.

Suggested Answer: The sources of financial assistance available to exporting companies include government and international development agency initiatives. Additionally, there are various public sources available to venturing overseas, such as export credit, development loans, and debt-equity swaps. However, almost all financing arrangements that link one company in one country with another company in another country will involve the government as there are likely to be foreign exchange dealings (which of course are determined by governments) and indeed often international insurance arrangements (which are also indirectly linked to governments). In developed markets, such as any country in Europe, the role of the government is more evident in the support provided to its exporting companies (both large and small). Thus, various forms of assistance are made available, such as financial resources (less expensive loans) and advice; and other resources, for example, secondary data and consultancy advice.

Learning Outcome 6: Understand the financial aspects of international marketing.

Examiners Comments: For this question students needed to outline the methods of financing, sources of financial assistance, and how governments help manage foreign exchange dealings; with emphasis on discussing the statement and using examples. There was some variability in the manner in which students chose to answer this question, as in order to score the full 15 marks, the answer had to include reference to developed markets, an understanding of financing (for international marketing) and defence of the statement, as well as use of examples. However, a few good answers were provided here.

Conclusions

Stronger answers in scripts were highly focused on the question itself and did what the question asked (i.e. assess/discuss/critically appraise). Strong candidates also showed a strong understanding of all the issues that the question raised, and clearly addressed then in their answers. In addition, they answered all parts of the question. Stronger answers were far less descriptive and did not only explain/define, but used the knowledge of the subject i.e. international marketing, and applied this knowledge to their responses. Stronger answers also included appropriated examples that related to international marketing and/or the context given, which were used to illustrate/explain relevant points. The answers that were better organised aligned their sections to the parts of the question and thus achieved higher marks. Recommendations to students and tutors for future examinations:

Ensure you fully cover all aspects of the question. Almost all questions have more than one issue that has to be covered and each of these issues is allocated marks, so to score well, all the components of the question have to be addressed by candidates.

This is the QCF examination for International Marketing. Hence the expectation is that each of the questions relates to international marketing some students do not contextualise or indeed bring in the international perspective to each question.

Furthermore, students are expected to show that they can discuss/assess/critically evaluate, and that they are familiar with each command word.

It is also important to stay focused on what the question is asking, i.e. if the question asks for three factors to be discussed and is allocated fourteen marks, then three separate factors have to be discussed to score the full fourteen marks.

Consider sectionalising answers so that each issue highlighted by the question is easily identifiable and is clearly addressed, as answers that are highly descriptive/narrative-driven or repetitive do not tend to score well.

Diagrams/visuals are often appropriate for an answer (and indeed often the best way to organise an answer), but where these are included they must be used and commented on not simply inserted without any explanation.