Chapter 16:International Marketing A. Bricek | L. Bowman | F. Castronovo L. 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: 2. Coordinating mkt activities among mkts: 1. Capturing synergies among various nat’lmkts: Provide opportunities for additional revenues and for growth and cross- fertilization Help lower mktg costs Create unified mktg effort
International Market and Business Strategies Marketing strategy must support business strategy Differentiation Cost leadership Focus
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 Mix How to develop the firms productivity? How to price those products? How to sell those products? 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. Customization Standardization Manufacturing, distribution, promotional efficiencies to simple streamlined operations Cost reduction focus Customization Tailor products to meet needs of customers in a given market Revenue/sales focus
Issues (adopt 2-step process):
PRODUCT 1st“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.
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 Products A key decision when working in international markets is to decide whether to standardized products across markets or to customize products within individual markets.
TOYOTA Like many firms internationally, blend of standardization and customization
Corporate commitment to building high quality, mechanically reliable automobiles and maintaining the prestige of the TOYOTA name
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
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.
512 MB computer memory chips
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 Forces Laws & 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
GrupoModelo 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 Factors A 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 Names International 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.
Diet Coke by Coca-Cola
Coca-Cola Light by Coca-Cola
Pricing Issues & Decisions
PRICING - Pricing policies directly affect a firms revenue Shape 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 Policies Three Pricing Policies Standard pricing policy Two-tiered pricing 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, KawaittOil, 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 Pricing Follows a polycentric approach Most complex Prices are set on a market-by-market basis Go’s off of the profit-maximizing price
Market Pricing Two 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 Continued Damage 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 Continued Gray 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 Continued Occurs 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 Continued Consumer 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
Advertising 3 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. Message Facts 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 Cola Believes 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
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. Nestle French & 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 Strategy Ex. IBM & Levi Strauss in European markets
Personal Selling Making 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 Promotion Comprises 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 Relations Efforts 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 sold Selecting the means by which to merchandise its goods in the markets it wants to serve
International Distribution Main issue- mode of transportation Faster modes of transportation: Air freight Motor carrier More expensive Slower modes of transportation: Ocean shipping Railroad Pipeline Barge 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, packaging Highly 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 service A wholesaler that buys products and services from the manufacturer and then resells them to retailers The retailer, which buys from wholesalers and then sells to customers The actual customer, who buys the product or service for final consumption
Channel length The 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
Challenge Finding 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
Summary Marketing vs. International Marketing International Market and Business Strategies The Marketing Mix Product Price Promotion Distribution