International Marketing for Guest Lectures2

8/3/2019 International Marketing for Guest Lectures2

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International EconomicsInternational Economics

ProgramProgram -- LjubljanaLjubljana

UniversityUniversity

THE FOUR PS: ANTHE FOUR PS: AN

INTERNATIONALINTERNATIONALPERSPECTIVEPERSPECTIVE

Product managementProduct management

Price managementPrice management Promotion and advertisingPromotion and advertising

managementmanagement

Place (channels of distribution)Place (channels of distribution)managementmanagement


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PRODUCT STRATEGYPRODUCT STRATEGY

COMPONENTSCOMPONENTS

Services

* Pre-Sale: Consulting

* Installation Services

* Post-Sale Services

* Warranty and Guarantee

* Manuals

Packaging

* Label* Brand Name

* Physical Package

Pysical Product

* Style

* Size

* Functional Attributes


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MARKETING/R&DMARKETING/R&D

INTERFACEINTERFACE

EXPORTEXPORTPERFORMANCEPERFORMANCE

Centralization

Competitive

Intensity in

Target Market

Customers'

Sophistication

Intensity andQuality of

Marketing/

R&D Interface

R&D

Investment

Performance of

New Products in

Export Markets

--

++

+

++

++

++

++

++

So What?1. It is worthwhile to invest in the marketing/R&D interface

2. It is worthwhile to invest in R&D, subject to cost/benefit analysis

3. The interface improves when centralization is reduced and it is easier

when customers are less sophisticated

4. International firms tend to invest more in R&D when the markets are

more competitive


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International MarketingInternational Marketing

Ljubljana UniversityLjubljana University

How to Brand?How to Brand? -- II

No brandingNo brandingLowerLower

production,production,

marketingmarketingand legaland legal

costscosts

FlexibleFlexible

inventoryinventory

managementmanagement

EspeciallyEspecially

useful foruseful forcommoditiescommodities

BrandingBrandingBetterBetter

identification/identification/

awarenessawarenessMoreMore

differentiationdifferentiation

potentialpotential

HigherHigher

probability ofprobability of

repeat salesrepeat sales

PossiblePossible

premiumpremium

pricingpricing


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How to Brand?How to Brand? -- IIII

Private brandPrivate brand Easier dealersEasier dealers

acceptanceacceptance

Possibly higherPossibly highermarket sharemarket share

No promotionNo promotion

Useful for smallUseful for small

and/or unknownand/or unknownmanufacturersmanufacturers

ManufacturerManufacturerbrandbrand

Better productBetter product

strategystrategycontrolcontrol

Better pricesBetter prices

RetainingRetaining

brand loyaltybrand loyalty

BetterBetter

bargaining visbargaining vis--

--vis channelsvis channels

CreatesCreates

channelchannel

dependencydependency


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How to Brand?How to Brand? -- IIIIII

MultipleMultiplebrandsbrands BetterBetter

segmentationsegmentation EmployeeEmployee

excitementexcitement

DefenseDefense

against a pooragainst a poorperformingperforming

brandbrand

More retailMore retail

shelf spaceshelf space

Catering toCatering to

switchersswitchers

Single marketSingle marketbrandbrand HigherHigher

marketingmarketingimpactimpact

More focusedMore focused

marketingmarketing

ReducedReducedadvertisingadvertising

Less marketLess market

confusionconfusion

Especially forEspecially for

highhigh--

quality/reputatiquality/reputati

on brandson brands


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How to Brand?How to Brand? -- IVIV

Local brandsLocal brands LegalLegal

necessitynecessity

ProblematicProblematicpronunciationpronunciation

MeaningfulMeaningful

namesnames

No negativeNo negativeconnotationsconnotations

Allowing crossAllowing cross--

marketmarket

variations invariations in

quality/pricequality/price

Global brandGlobal brand BetterBetter

marketingmarketing

focus / impactfocus / impact

Low costLow cost

advertisingadvertising

No brandNo brand

confusionconfusion Good forGood for

cultureculture--free orfree or

prestigiousprestigious

brandsbrands

EasilyEasily

identified byidentified by

consumersconsumers


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PRICINGPRICING THETHE

ECONOMIC ANGLEECONOMIC ANGLE Economists argue that export isEconomists argue that export is

worthwhile as long as the Priceworthwhile as long as the Price> Total Costs = FC + VS. This is> Total Costs = FC + VS. This isalways true for new investmentsalways true for new investmentsor for longor for long--range exportrange exportcommitmentcommitment

Yet, shortYet, short--term exporting couldterm exporting couldbe worthwhile as long as thebe worthwhile as long as thePrice > Variable Costs. FeasiblePrice > Variable Costs. Feasiblefor penetration pricing or for afor penetration pricing or for a

new product. Can also applynew product. Can also applywhen excess capacity exists forwhen excess capacity exists forsome inputssome inputs


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PRICING ALONG THEPRICING ALONG THE

EXPERIENCE CURVEEXPERIENCE CURVECumulative Production

Quantity

Per Unit Average Production

Cost

1000

2000

4000

8000

16000

1.00

0.80

0.64

0.512

0.4096

1.00

0.80

0.64

0.512

0.4096

1000 2000 160004000 8000

Cumulative Production Quantity

AveragePro

ductionCostperUnit


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CURRENCY CHOICECURRENCY CHOICE

Exporter FactorsExporter Factors

Market orientationMarket orientation Product differentiationProduct differentiation

Customers importance andCustomers importance and

continuitycontinuity

Power in negotiationsPower in negotiations

Market FactorsMarket Factors

CompetitionCompetition

Importance of product to buyerImportance of product to buyer

Legal restrictions on foreignLegal restrictions on foreign

currencycurrency

The major question is whether to useThe major question is whether to usethe customers local currencythe customers local currency


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CURRENCYCURRENCY

FLUCTUATIONSFLUCTUATIONS

Currencies fluctuate widelyCurrencies fluctuate widelyhowhow

should we manage the risks?should we manage the risks?

Forward TransactionsForward Transactions buybuyanother currency against theanother currency against the

transactions currency.transactions currency.

Exchange rate depends onExchange rate depends on

Exchange rate on day of transactionExchange rate on day of transaction

Forwards time horizonForwards time horizon

Currencies interest differentialsCurrencies interest differentials

Important!Important! Forward transactions designed toForward transactions designed to

reduce fluctuation risks, they arereduce fluctuation risks, they are

NOT monetary gamblesNOT monetary gambles


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GETTING YOUR MONEYGETTING YOUR MONEY

There are three major paymentThere are three major paymentmethods:methods:

Open AccountOpen Account Open credit,Open credit,

hence risky. Should be usedhence risky. Should be usedonly for large and stableonly for large and stablecustomerscustomers

CAD/CODCAD/COD Importer has to payImporter has to pay

to get the goods against theto get the goods against theshipping documentsshipping documents risks onlyrisks onlythe shippingthe shipping

L/C (letter of credit)L/C (letter of credit) paymentpaymentassured if exporter fulfilled theassured if exporter fulfilled theorder obligationsorder obligations no risks tono risks toexporterexporter


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WHEN TO USE VC+?WHEN TO USE VC+?

At the exporters levelAt the exporters level

Low differentiation potentialLow differentiation potential

High export commitmentHigh export commitment

Capacity to take upCapacity to take up--front lossesfront losses

High domestic profitabilityHigh domestic profitability

Available production capacityAvailable production capacity

High economiesHigh economies--ofof--scalescale

Situational factorsSituational factors

High market growth potentialHigh market growth potential

High customer price sensitivityHigh customer price sensitivity Strong competitionStrong competition

Ability to eliminate competitorsAbility to eliminate competitors


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COST ASCALATIONCOST ASCALATION

Shorten the channelShorten the channel Eliminate master distributorEliminate master distributor

Establish a sales subsidiaryEstablish a sales subsidiary

Reduce costsReduce costs

Lower costs or reduce qualityLower costs or reduce quality

Assemble/produce in exportAssemble/produce in exportmarket, preferably at a taxmarket, preferably at a tax--freefree

zonezone Compensate the channelCompensate the channel

separately for some servicesseparately for some services

Consider a 10% price increase from 1.00 to 1.10.

With master and local distributors each on 30%

mark up, the user price increases 10% from 1.69 to

1.859. However, an exporters 0.10 becomes 0.169

at the end-user level! What to do???


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GLOBAL ADVERTISINGGLOBAL ADVERTISING

MANAGERSMANAGERS Learning from and transferringLearning from and transferring

successful ideas across unitssuccessful ideas across units

Propose / encourage initiatives forPropose / encourage initiatives for

special regional or global marketingspecial regional or global marketing

events (e.g., sports)events (e.g., sports)

Encourage SBUs in developingEncourage SBUs in developing

markets to use upmarkets to use up--toto--datedate

advertising techniquesadvertising techniques Develop and manage advertisingDevelop and manage advertising

learning seminarslearning seminars

Consult to SBUsConsult to SBUs

Develop methods to measureDevelop methods to measure

effectivenesseffectiveness

Coordinate local agenciesCoordinate local agencies


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INTERNATIONALINTERNATIONAL

ADVERTISING THEMESADVERTISING THEMES CasesCases advertising a commonadvertising a common

solution to a universal problemsolution to a universal problem(usually for industrial products)(usually for industrial products)

High quality (e.g., BMW)High quality (e.g., BMW)

New! (e.g., WINDOWS XP)New! (e.g., WINDOWS XP)

COO (for strong COO nations)COO (for strong COO nations)

Celebrities (e.g., Michael JordanCelebrities (e.g., Michael Jordanfor Nike)for Nike)

LifestyleLifestyle for luxury productsfor luxury products

World brands (e.g., Coca Cola)World brands (e.g., Coca Cola) Market leadership (e.g.,Market leadership (e.g.,

Marlboro)Marlboro)


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PUBLIC RELATIONSPUBLIC RELATIONS

Always exporters responsibilityAlways exporters responsibility

Channel might have differentChannel might have differentprioritiespriorities

Maintain the impact if channelMaintain the impact if channelchangeschanges

Media people prefer producersMedia people prefer producersinformationinformation

Small exporters should useSmall exporters should usesmall tradeshows and do presmall tradeshows and do pre--show PRshow PR

Less competition for attentionLess competition for attention More accurate positioningMore accurate positioning

Media is availableMedia is available


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WHY TRADESHOW?WHY TRADESHOW?

SalesSales

LeadsLeads

Identify new product usesIdentify new product uses

Create awarenessCreate awareness

For companyFor company

For its products / brandsFor its products / brands

New product introductionsNew product introductions

Find/recruit new channels ofFind/recruit new channels of

distributiondistribution

Support for existing channelsSupport for existing channels

EspionageEspionage


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TRADESHOW BUDGETSTRADESHOW BUDGETS

AND EFFECTIVENESSAND EFFECTIVENESS

Major costs:Major costs:

Booth cost (25%)Booth cost (25%)

Services at the show (22%)Services at the show (22%)

Building the booth (15%)Building the booth (15%)

Transportation (11%)Transportation (11%)

Enhancing effectiveness withoutEnhancing effectiveness without

increasing booth sizeincreasing booth size

Create interest (e.g., draws)Create interest (e.g., draws)

DemonstrationsDemonstrations

Booth styleBooth style The right people at the boothThe right people at the booth

brochuresbrochures


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WILL THEY WAIT FORWILL THEY WAIT FOR

ATTENTION?ATTENTION?

3-5

Minutes

1-3

Minutes

30-60"

30- "0

0

10

20

30

40

50

0 30-60" 3-5

Minutes

The implication is that most people willThe implication is that most people will

wait very little and will leave if notwait very little and will leave if not

attended to. Thus, the number ofattended to. Thus, the number ofexhibitors, their preparation, andexhibitors, their preparation, and

planning their time are criticalplanning their time are critical

considerationsconsiderations


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MAJOR CHANNELMAJOR CHANNEL

CHOICESCHOICES Agents. 3Agents. 3--10% commission,10% commission,

depending on:depending on:

PrePre--sale servicessale services Sales services (e.g., erection)Sales services (e.g., erection)

PostPost--sale servicessale services

Importers/Distributors. WideImporters/Distributors. Wide

markmark--up differences (30% isup differences (30% istypical) depending on:typical) depending on:

Level of required servicesLevel of required services

Level of risk in buying and sellingLevel of risk in buying and selling

Sales subsidiary. High exporterSales subsidiary. High exporterriskrisk requires reasonablerequires reasonableprofitabilityprofitability


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AGENTS VERSUSAGENTS VERSUS

DISTRIBUTORSDISTRIBUTORS

Distributors (unlike agents)

Low exporter controlLow exporter control Always exclusive at some levelAlways exclusive at some level

BuyBuy

Possess and warehousePossess and warehouse

Determine market pricesDetermine market prices

Can represent competitorsCan represent competitors

Advertise and promote on theirAdvertise and promote on their

ownown Control the flow of informationControl the flow of information

from the market to the exporterfrom the market to the exporter


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IMPORTANT CHANNELIMPORTANT CHANNEL

TASKSTASKS Identify / open up new markets

Personal relationships with

buyers and potential buyers Know the competitive landscape

Have sufficient salespeople

Be able to assess credit risks

Promote at tradeshows

Provide services for products

Select and manage sub-channel

Manage the 4 Ps


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CHANNELCHANNEL

CONTRACTSCONTRACTS Territory definition

Product lines included. New productlines yes/no and under whatconditions

Exclusivity yes/no, for whichterritory, for how long, and underwhat conditions

Compensation from exporter

Payments when (with sale or afterpayment is received)

What happens if something goeswrong (e.g., arbitration)

How and when does the contractHow and when does the contractexpireexpire

Documents

International Marketing for Guest Lectures2