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BA 358 Ch 16 Intl Mktg



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  • -Toys r us: sell low priced toys in low cost warehouse like settings, pressure on its competitors to slash their costs, alter their distribution systems and shrink their profit margins - Cost of doing business: differences in transportation charges and tariffs , cause price of goods to vary country to country
  • -exchange rate: by maintaining currency in their home currency makes goods more expensive in the importing country, maintaining price in the host country cuts its profit margins by lowering the amount of home country currency it receives for each unit sold-Japan: their distribution system relies on a chain of distributors to get goods into the hands of consumers, often inflates the prices Japanese consumers pay for goods
  • Other examples coal, agriculture based on competitive prices with adjustments for quality and transportations with little regards to purchaser’s nationality
  • Ex. Toyota and Mazda were charged with dumping minivans in the U.s. market, they were not penalized for it but had to raise their pries to avoid further dumping complaints
  • This condition is usually met because taxes, tariffs, standards of living, levels of competition, infrastructure costs and availability, and numerous other factors vary by countryPricing policy will not work if customers are able to buy the products in a low price country and resell them for profit in a high price country. It is usually not a problem because of tariffs, transportation costs, and other transaction costs
  • Directly make costs: allows corporate stratagists and planners to better allocate the firms resources across markets
  • Ex. in the mid 1990’s after the yen strengthened relative to the U.S. dollar Japanese discounters were able to purchase and import Coke made in the U.s for 27% less than the price of Coke made in Japan, this disrupted the firms pricing strategy in both countries. Similar happened with Merck, when the British pound rose relative to other European Union currencies. The company was forced to cut prices in the UK of many of its drugs such as the recently developed AIDS drug Crixivan-free market: fewer govt regulations make it easier for gray markets to emerge
  • Estee lauder: charges $40 for Clinique facial soap in Tokyo the same sells for $10 in the US. J Crew: charges Japanese customers $130 for wool sweaters that sell for $48 in the U.S


  • 1. Chapter 16:International Marketing
    A. Bricek | L. Bowman | F. Castronovo
    L. Corona | M. Vital
  • 2. International 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
  • 3. Int’l Mktg (cont’d)
    Expansion  Foreign Mkts aware of systems:
    Unfamiliar economic conditions
    Advertising media
    Distribution channels
    Regulations (i.e. TV)
    Ads (Nike, Coca-Cola)
  • 4. 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
  • 5.
  • 6. International Market and Business Strategies
    Marketing strategy must support business strategy
    Cost leadership
  • 7. 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
  • 8. Cost Leadership Strategy
    Cost reductions in…
    Production and manufacturing
    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)
  • 9. Focus Strategy
    Concentrate on segments of consumer market/area/region within a market
    Esp. target markets
  • 10. International Market and Business Strategies (cont’d)
    Budget and resource limitations, assessing country markets then ranking potential products
    Influencing factors:
    Levels of competition
    Channels of distribution
    Ability to infrastructure
  • 11. 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?
  • 12. Int’l Marketing Management (cont’d)Standardization vs. Customization
  • 13. Int’l Marketing Management (cont’d)Standardization vs. Customization
    Manufacturing, distribution, promotional efficiencies to simple streamlined operations
    Cost reduction focus
    Tailor products to meet needs of customers in a given market
    Revenue/sales focus
  • 14. Organizational Structure
  • 15. Issues (adopt 2-step process):
  • 16. Product Policy
  • 17. PRODUCT
    1st“P” of marketing mix
    • Products consists of tangible and intangible factors:
    • 18. Physical product and its packaging
    • 19. 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.
  • 20. TOYOTA
    • Has success in selling automobiles in Europe, Asia, and the Americas reflects upon:
    • 21. Design and production of mechanically reliable vehicles
    • 22. Offering competitive warranties
    • 23. Building a solid brand name for its products
    • 24. Providing spare parts and repair manuals
    • 25. 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.
  • 26. TOYOTA
    Like many firms internationally, blend of standardization and customization
    • Standardized
    • 27. Corporate commitment to building high quality, mechanically reliable automobiles and maintaining the prestige of the TOYOTA name
    • 28. Customized
    • 29. Products and product mix to meet the needs of local markets
    • 30. Sells LEFT hand drive motor vehicles to Americas and continental Europe
    • 31. 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
    • 32. Name under which a product is sold may also vary:
    • 33. United States: Lexus Sports Coupe
    • 34. 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.
    • 35. Commodities are typically standardized across different markets.
    • 36. Agricultural products
    • 37. Petroleum
    • 38. 512 MB computer memory chips
    • 39. 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
    • 40. Altered style of clothing to stretchy shirts and straight-legged pants that the Japanese consumers prefer
    • 41. Big Boy burger chain
    • 42. 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.
    • 43. 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.
    • 44. Saudi Arabia requires electrical connecting cords on consumer appliances to be 2 meters long.
    • 45. 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.
  • 46. 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
    • 47. Understanding the way a certain cultural thinks
    • 48. Japanese consumers are quality conscious
    • 49. German consumers are environmentally conscious
  • Cultural Influences (cont’d)
    • Culture may FORCE change in a foreign market
    • 50. HBO has to edit its movies before it can be broadcasted in a culturally conservative country such as Asia
    • 51. 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
    • 52. Consumers in poorer countries typically opt for stripped-down versions of the same products
    • 53. 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
    • 54. Capture spillover of its advertising messages from one market to the next
    • 55. 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
    • 56. Diet Coke by Coca-Cola
    • 57. Other markets
    • 58. Coca-Cola Light by Coca-Cola
  • Pricing Issues & Decisions
  • 59. 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
  • 60. 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
  • 61. 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
  • 62. Pricing Policies
    Three Pricing Policies
    Standard pricing policy
    Two-tiered pricing
    Market pricing
  • 63. 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
  • 64. 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
  • 65. 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)
  • 66. 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
  • 67.
  • 68. 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
  • 69. 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
  • 70. Market Pricing Risks
    1.) Damage its brand name
    2.) Development of a gray market for its products
    3.) consumer resentment against discriminatory prices
  • 71. 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
  • 72. 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
  • 73. 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
  • 74. 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
  • 75. Promotion Issues & Decisions
  • 76. PROMOTION:
    3rd P of the international marketing mix
    Enhance desirability of its products among potential buyers
    Personal Selling
    Sales Promotion
    Public Relations
  • 77. 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
  • 78. 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)
  • 79. 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
  • 80. I. Message (cont’d)
    Ex. Europe & Japan
    US goods viewed as “trendy”
    Japanese products perceived as high quality
  • 81. II. Medium
    • Communication channel used by the advertiser to convey a message
    • 82. 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
  • 83. 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
  • 84. 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
  • 85. Personal Selling
    Making sales on basis of personal contacts
    As firms grow and develop sale basis in new markets, establishes its own sales force
  • 86. 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
  • 87. 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
  • 88. 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
  • 89. Distribution Issues and Decisions
  • 90. 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
  • 91. International Distribution
    Main issue- mode of transportation
    Faster modes of transportation:
    Air freight
    Motor carrier
    More expensive
    Slower modes of transportation:
    Ocean shipping
  • 92. 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
  • 93. 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
  • 94. 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
  • 95. 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
  • 96. 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
  • 97. Summary
    Marketing vs. International Marketing
    International Market and Business Strategies
    The Marketing Mix
  • 98. Any questions?