421 W10 Web Ch9 17x15 Slides031110


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  • Both this slide and the next offer 8 suggestions for managers that are seeking to develop global brand leadership.
  • 421 W10 Web Ch9 17x15 Slides031110

    1. 1. International Marketing <ul><li>Czinkota & Ronkainen </li></ul><ul><li>Winter 2010 </li></ul><ul><li>Web Slides </li></ul><ul><li>Ch. 9-15, 17 </li></ul>
    2. 2. Chapter 9 Market Entry and Expansion 0 Chapter 9 Market Entry and Expansion
    3. 3. Why Firms go International <ul><li>Proactive Stimuli </li></ul><ul><li>Profit advantage </li></ul><ul><li>Unique products </li></ul><ul><li>Technological advantages </li></ul><ul><li>Exclusive information </li></ul><ul><li>Economies of scale </li></ul><ul><li>Market size </li></ul><ul><li>Reactive Stimuli </li></ul><ul><li>Competitive pressures </li></ul><ul><li>Overproduction </li></ul><ul><li>Stable or declining domestic sales </li></ul><ul><li>Excess capacity </li></ul><ul><li>Saturated domestic markets </li></ul><ul><li>Proximity to customers and ports </li></ul>
    4. 4. Foreign Market Entry Strategies – 1/2. <ul><li>(A) Exporting (Casual, Indirect, Direct) </li></ul><ul><li>Contractual Agreements </li></ul><ul><ul><li>Licensing (patents, technology, trade secrets) </li></ul></ul><ul><ul><li>Franchising (brand, managerial know-how) </li></ul></ul><ul><ul><li>Subcontracting (from prime contractors) </li></ul></ul><ul><ul><li>Contract manufacturing (for foreign brands) </li></ul></ul><ul><ul><li>Turnkey Operations </li></ul></ul><ul><ul><li>Co-production Agreements </li></ul></ul><ul><ul><li>Management Contracts </li></ul></ul><ul><ul><li>(IK) </li></ul></ul>
    5. 5. Foreign Market Entry Strategies – 2/2. <ul><li>(C) Joint Ventures (minority/majority equity) </li></ul><ul><li>(D) Wholly-Owned Subsidiaries </li></ul><ul><ul><ul><ul><ul><li>Local Sales only </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Local Assembly & Sales </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Local Production & Sales </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Local Production, Sales & Export </li></ul></ul></ul></ul></ul><ul><li>Start-up of new operations </li></ul><ul><ul><li>Merger with an existing enterprise </li></ul></ul><ul><ul><li>Acquisition of an existing enterprise </li></ul></ul><ul><ul><li>Greenfield investment </li></ul></ul>
    6. 6. Exporting <ul><li>Export management companies (EMCs) </li></ul><ul><ul><li>Domestic firms that perform international marketing services as commission representatives or distributors for other firms. </li></ul></ul><ul><ul><li>Two primary forms of operation </li></ul></ul><ul><ul><ul><li>Take title to goods and operate internationally. </li></ul></ul></ul><ul><ul><ul><li>Perform services as agents. </li></ul></ul></ul>0
    7. 7. Exporting <ul><li>Trading companies </li></ul><ul><ul><li>The most famous trading companies are the sogoshosha of Japan. </li></ul></ul><ul><ul><li>Reasons for the success of the Japanese sogoshosha: </li></ul></ul><ul><ul><ul><li>gather, evaluate, and translate market information into business opportunities. </li></ul></ul></ul><ul><ul><ul><li>Their vast transaction volume provides them with cost advantages. </li></ul></ul></ul><ul><ul><ul><li>serve large markets around the world and have transaction advantages. </li></ul></ul></ul><ul><ul><ul><li>access to capital, both within Japan and in the international capital markets. </li></ul></ul></ul>0
    8. 8. Exporting <ul><li>Export trading companies Act (ETCs) </li></ul><ul><ul><li>Designed to improve the export performance of small- and medium-sized firms. </li></ul></ul><ul><ul><li>Permits bank participation in trading companies to allow better access to capital. </li></ul></ul><ul><ul><li>Reduces the antitrust threat to joint export efforts to enable firms to share the cost of international market entry. </li></ul></ul><ul><ul><li>Must balance the demands of the market and the supply of the members to be successful. </li></ul></ul>0
    9. 9. Going International <ul><li>E-commerce </li></ul><ul><ul><li>Various methods to market products over the internet: </li></ul></ul><ul><ul><ul><li>Development of corporate websites. </li></ul></ul></ul><ul><ul><ul><li>Business-to-consumer and consumer-to-business forums. </li></ul></ul></ul>0
    10. 10. Going International <ul><li>E-commerce concerns - Firms must be ready to: </li></ul><ul><ul><li>Provide 24-hour order taking and customer support service. </li></ul></ul><ul><ul><li>Have the regulatory and customs-handling expertise to deliver internationally. </li></ul></ul><ul><ul><li>Have an understanding of global marketing environments for further development of business relationships. </li></ul></ul>0
    11. 11. Licensing and Franchising <ul><ul><li>Advantages of licensing </li></ul></ul><ul><ul><li>Capital investment or knowledge or marketing strength is not required. </li></ul></ul><ul><ul><li>Additional return on R&D investments already incurred. </li></ul></ul><ul><ul><li>Reduces the risk of R&D failures </li></ul></ul><ul><ul><li>Ongoing licensing cooperation and support enables the Licensee benefits from new developments. </li></ul></ul><ul><ul><li>Allows a firm to test a foreign market without major investment of capital or management time. </li></ul></ul><ul><ul><li>Preempts a market for competition, especially if the licensor’s resources permit full-scale involvement only in selected markets. </li></ul></ul><ul><ul><li>Increases protection of intellectual property rights. </li></ul></ul>0
    12. 12. Licensing and Franchising <ul><ul><li>Disadvantages of licensing </li></ul></ul><ul><ul><ul><li>Licensor gets limited expertise. </li></ul></ul></ul><ul><ul><ul><li>Licensor creates its own competitor. </li></ul></ul></ul><ul><ul><ul><li>Allows multinational corporations (MNCs) to capitalize on older technology. </li></ul></ul></ul>0
    13. 13. Foreign Direct Investment <ul><li>Types of ownership - Joint ventures </li></ul><ul><ul><li>Two or more organizations form a new entity for some specific business. </li></ul></ul><ul><ul><li>Partners share assets, risks, and profits, in proportion of their respective ownership of the JV. </li></ul></ul><ul><ul><li>Reasons for joint ventures are governmental and commercial. </li></ul></ul>0
    14. 14. Foreign Direct Investment <ul><li>Advantages of joint ventures </li></ul><ul><ul><li>Pooling of resources. </li></ul></ul><ul><ul><li>Better relationships with local organizations. </li></ul></ul><ul><ul><li>The partner’s knowledge of the local market. </li></ul></ul><ul><ul><li>Minimize exposure to political risk. </li></ul></ul><ul><ul><li>Tap local capital markets . </li></ul></ul><ul><li>Disadvantages of joint ventures </li></ul><ul><ul><li>Different levels of control are required. </li></ul></ul><ul><ul><li>Difficulty in maintaining the relationship. </li></ul></ul><ul><ul><li>Disagreements over business decisions. </li></ul></ul><ul><ul><li>Disagreements over profit accumulation and distribution (profit repatriation). </li></ul></ul>0
    15. 15. <ul><li>Firms are categorized as: </li></ul><ul><ul><li>Resource seekers - Search for natural and human resources. </li></ul></ul><ul><ul><li>Market seekers - Search for better opportunities to enter and expand within markets. </li></ul></ul><ul><ul><li>Efficiency seekers - Attempt to obtain the most economic sources of production. </li></ul></ul>Foreign Direct Investment 0
    16. 16. <ul><li>Positive perspectives on foreign direct investors </li></ul><ul><ul><li>Bring in capital, economic activity, and employment. </li></ul></ul><ul><ul><li>Transfer technology and managerial skills. </li></ul></ul><ul><ul><li>Encourage competition, market choice, and competitiveness. </li></ul></ul>Foreign Direct Investment 0
    17. 17. <ul><li>Negative perspectives on foreign direct investors </li></ul><ul><ul><li>Drain resources from host countries. </li></ul></ul><ul><ul><li>Starve smaller capital markets. </li></ul></ul><ul><ul><li>Discourage local technology development. </li></ul></ul><ul><ul><li>Bring in outmoded technology. </li></ul></ul><ul><ul><li>Create new competition for local firms. </li></ul></ul>Foreign Direct Investment 0
    18. 18. Chapter 10 Product Adaptation 0 Chapter 10 Product Adaptation
    19. 19. Product Variables <ul><li>Products can be differentiated by their composition, country of origin, tangible features such as packaging or quality, or augmented features such as warranty. </li></ul>0
    20. 20. Standardization vs. Customization: Decision Criteria <ul><li>Nature of Product </li></ul><ul><li>Technology Differences </li></ul><ul><li>Weights & Measures </li></ul><ul><li>Physical Environment </li></ul><ul><li>Cost/Benefit Relationship </li></ul><ul><li>Legal Requirements </li></ul><ul><li>Competition </li></ul><ul><li>Support Systems </li></ul><ul><li>Cultural differences </li></ul><ul><li>Market Conditions </li></ul><ul><li>(IK) </li></ul>TM 89 Product Design Strategy Standardization vs. Customization
    21. 21. Exhibit 10.2 - Standardization versus Adaptation <ul><li>Factors encouraging standardization </li></ul><ul><ul><li>Economies of scale in production </li></ul></ul><ul><ul><li>Economies in product R&D </li></ul></ul><ul><ul><li>Economies in marketing </li></ul></ul><ul><ul><li>“ Shrinking” of the world marketplace/economic integration </li></ul></ul><ul><ul><li>Global competition </li></ul></ul><ul><li>Factors encouraging adaptation </li></ul><ul><ul><li>Differing use conditions </li></ul></ul><ul><ul><li>Government and regulatory influences </li></ul></ul><ul><ul><li>Differing consumer behavior patterns </li></ul></ul><ul><ul><li>Local competition </li></ul></ul><ul><ul><li>True to the marketing concept </li></ul></ul>
    22. 22. Government Influences on Adaptation <ul><li>Government regulations </li></ul><ul><ul><li>Political agendas </li></ul></ul><ul><ul><li>Firms can influence these regulations by lobbying directly or through industry associations. </li></ul></ul><ul><ul><li>Economic integration reduces discretionary governmental regulations to some extent. </li></ul></ul><ul><li>Nontariff barriers </li></ul><ul><ul><li>Include product standards, testing or approval procedures, subsidies for local products, and bureaucratic red tape . </li></ul></ul>0
    23. 23. Customer Variables <ul><li>Customer characteristics, expectations, and preferences </li></ul><ul><ul><li>Physical size, local behaviors, tastes, attitudes, and traditions…. </li></ul></ul><ul><ul><li>Consumption patterns, psychosocial characteristics, general cultural criteria … </li></ul></ul><ul><ul><li>Product positioning - Consumers’ perception of a brand as compared with that of competitors’ brands. </li></ul></ul>0
    24. 24. Economic Conditions <ul><li>Economic development </li></ul><ul><ul><li>Affects demand characteristics and helps determine potentials for selling certain kinds of products and services. </li></ul></ul><ul><ul><li>Backward innovation of the product may be required to meet local requirements. </li></ul></ul>0
    25. 25. Competition, Environment <ul><li>Competitive offerings - Monitoring competitors’ product features is critical in adjusting the product for competitive advantage. </li></ul><ul><li>Climate and geography – influence core product; tangible elements (mainly packaging) ; and the augmented features. </li></ul>0
    26. 26. Global Brand Development <ul><li>Questions to ask when management seeks to build a global brand: </li></ul><ul><ul><li>Will anticipated scale economies materialize? </li></ul></ul><ul><ul><li>How difficult will it be to develop a global brand team? </li></ul></ul><ul><ul><li>Can a single brand be imposed on all markets successfully? </li></ul></ul>
    27. 27. Global Brand Development <ul><li>Create a compelling value proposition (warranty can also be a value proposition) </li></ul><ul><li>Think about all elements of brand identity and select names, marks, and symbols that have the potential for globalization </li></ul><ul><li>Research the alternatives of extending a national brand versus adopting a new brand identity globally </li></ul><ul><li>Develop a company-wide communication system </li></ul>
    28. 28. Packaging Considerations <ul><ul><li>three major functions: p rotection, promotion, user convenience. </li></ul></ul><ul><ul><li>Materials: vary by transportation mode, transit conditions, storage, display, length of time in transit, regulations... </li></ul></ul><ul><ul><li>The promotional aspect of packaging relates mostly to labeling. </li></ul></ul><ul><ul><li>User convenience. Containers must withstand logistics challenge, and yet must be easy for customers to open. </li></ul></ul><ul><ul><li>Package aesthetics: prudent choice of colors and package shapes. </li></ul></ul><ul><ul><li>Package size: varies by purchasing patterns and market conditions. </li></ul></ul>0
    29. 29. Country of Origin ( COO ) <ul><ul><li>The origin of a product may have a strong effect on consumer perceptions and biases. </li></ul></ul><ul><ul><li>This effect reduces as: </li></ul></ul><ul><ul><ul><li>Customers become more informed. </li></ul></ul></ul><ul><ul><ul><li>Countries develop the necessary bases to manufacture products. </li></ul></ul></ul>0
    30. 30. Product Counterfeiting <ul><li>Counterfeit goods – Goods bearing an unauthorized representation of a trademark, patented invention, or copyrighted work that is legally protected in the country where it is marketed. </li></ul><ul><li>The European Union estimates that trade in counterfeit goods accounts for 2 percent of total world trade. </li></ul><ul><li>The largest number of counterfeit goods are sourced from China, Brazil, Taiwan, Korea, and India. </li></ul>0
    31. 31. Combating Counterfeiting <ul><li>Some acts, agreements, and alliances that help combat counterfeiting include: </li></ul><ul><ul><li>The Omnibus Tariff and Trade Act of 1984 </li></ul></ul><ul><ul><li>The Trademark Counterfeiting Act of 1984 </li></ul></ul><ul><ul><li>The Intellectual Property Rights Improvement Act </li></ul></ul><ul><ul><li>The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement </li></ul></ul><ul><ul><li>The International Anti-Counterfeiting Coalition (1978) </li></ul></ul><ul><ul><li>Counterfeit Intelligence and Investigating Bureau </li></ul></ul>0
    32. 32. Chapter 11 Export Pricing 0 Chapter 11 Export Pricing
    33. 33. Price Dynamics <ul><li>The alternatives strategies for first-time pricing: </li></ul><ul><ul><li>Skimming - Achieve the highest possible contribution in a short initial time period, and then gradually lower the price as more segments are targeted and more products are available. </li></ul></ul><ul><ul><li>Market pricing – Determined based on competitive prices; production and marketing is adjusted to the price. </li></ul></ul><ul><ul><li>Penetration pricing – Offer products at a low price to generate volume sales and achieve high market share, to compensate for lower per unit return. </li></ul></ul>0
    34. 34. The Setting of Export Prices <ul><li>Export pricing strategy </li></ul><ul><ul><li>The standard worldwide price may be the same regardless of the buyer or may be based on average unit costs of fixed, variable, and export-related costs. </li></ul></ul><ul><ul><li>Dual pricing differentiates between domestic and export prices. </li></ul></ul>0
    35. 35. Export pricing strategy <ul><ul><li>The two approaches to pricing products for exports are </li></ul></ul><ul><ul><ul><li>Cost plus method – Is the true cost, fully allocating domestic and foreign costs to the product; ensures profit margins; however, the firm’s competitiveness is compromised. </li></ul></ul></ul><ul><ul><ul><li>Marginal cost method - Considers the direct costs of producing and selling products for export as the floor beneath which prices cannot be set. </li></ul></ul></ul>0
    36. 36. The Setting of Export Prices <ul><li>Market-differentiated pricing </li></ul><ul><ul><li>based on the dynamic conditions of the marketplace. </li></ul></ul><ul><ul><li>prices change frequently due to changes in competition, exchange rate, or environment. </li></ul></ul>0
    37. 37. The Setting of Export Prices <ul><li>Export-related costs </li></ul><ul><ul><li>Unique export-related costs include: </li></ul></ul><ul><ul><ul><li>Cost of modifying a product for a foreign market. </li></ul></ul></ul><ul><ul><ul><li>Operational costs of exporting. </li></ul></ul></ul><ul><ul><ul><li>Cost incurred in entering the foreign market. </li></ul></ul></ul><ul><li>Price escalation </li></ul><ul><ul><li>A combined effect of clear-cut and hidden costs </li></ul></ul><ul><ul><li>results in an increase in export prices over and above the domestic prices. </li></ul></ul>0
    38. 38. Price Escalation Thru Exporting (see Exhibit 11-4 in your text) <ul><li>Domestic: </li></ul><ul><li>- Shipping and insurance </li></ul><ul><li>- wholesaler margin </li></ul><ul><li>- retailer margin </li></ul><ul><li>Exported: </li></ul><ul><li>- higher shipping & insurance costs </li></ul><ul><li>- Tariff </li></ul><ul><li>- Importer, wholesaler and jobber’s margins </li></ul><ul><li>- VAT at each value-added level </li></ul><ul><li>If manufacturer’s price is $6.00 then domestic customer’s </li></ul><ul><li>price may be $12.00 to $14.00 and foreign customer’s price </li></ul><ul><li>may be anywhere from $20.00 to $45.00 </li></ul>
    39. 39. Mitigating export-related costs <ul><ul><li>• Reorganize the channel of distribution. </li></ul></ul><ul><ul><ul><li>Product adaptation. </li></ul></ul></ul><ul><ul><ul><li>Use new or more economical tariff or tax classifications. </li></ul></ul></ul><ul><ul><ul><li>Assemble or produce overseas. </li></ul></ul></ul>0
    40. 40. Incoterms ( First issued by ICC in 1936, revised 6 times since then) <ul><li>These delivery terms influence the quoted export price </li></ul><ul><li>EXW (…named place) </li></ul><ul><li>FCA FREE CARRIAGE (…named place) </li></ul><ul><li>FAS (…named port of shipment) </li></ul><ul><li>FOB (…named port of shipment) </li></ul><ul><li>CFR OR C&F (…named port of destination) </li></ul><ul><li>CIF (…named port of destination) </li></ul><ul><li>CPT CARRIAGE PAID TO (…named place of destination) </li></ul><ul><li>CIP CARRIAGE AND INSURANCE PAID TO (…named place of destination) </li></ul><ul><li>DAF DELIVERED AT FRONTIER (…named place) </li></ul><ul><li>DES DELIVERED EX SHIP (…named port of destination) </li></ul><ul><li>DDU DELIVERED DUTY UNPAID (…named place of destination) </li></ul><ul><li>DDP DELIVERED DUTY PAID (…named place of destination) </li></ul>
    41. 41. Terms of Payment <ul><li>Cash in advance </li></ul><ul><ul><li>Relieves the exporter of all risks and allows for immediate use of the money. </li></ul></ul><ul><ul><li>Used for first time transactions or situations where the exporter doubts the importer’s solvency. </li></ul></ul>0
    42. 42. Terms of Payment <ul><li>Letter of credit (lc) (Opener, Issuer, Beneficiary) </li></ul><ul><ul><li>An instrument issued by the bank at the request of the buyer. </li></ul></ul><ul><ul><li>The bank promises to pay money on presentation of specified documents like the bill of lading, consular invoice, and description of the goods. </li></ul></ul><ul><ul><li>Classified as irrevocable versus revocable , confirmed versus unconfirmed , and revolving versus non-revolving. </li></ul></ul>0
    43. 43. Terms of Payment <ul><li>Drafts (Drawer, Drawee, Payee) </li></ul><ul><ul><li>Similar to personal check; an order by one party to pay another. </li></ul></ul><ul><ul><li>Buyer must obtain shipping documents before obtaining possession of the goods involved in the transaction. </li></ul></ul><ul><li>Documentary collection </li></ul><ul><ul><li>The seller ships the goods, and the shipping documents and the draft are presented to the importer through banks acting as the seller’s agent. </li></ul></ul><ul><ul><li>The draft , also known as the bill of exchange , may be either a sight draft , time draft or arrival draft . </li></ul></ul>0
    44. 44. Terms of Payment <ul><li>Banker’s acceptance - A time draft drawn on and accepted by a bank; it is sold in the short-term money market. </li></ul><ul><li>Discounting - Selling a draft to the bank at a discount from face value; it can be with recourse or without recourse. </li></ul><ul><li>Open account - The normal manner of doing business in the domestic market; also known as open terms. </li></ul><ul><li>Consignment selling – Allows the importer to defer payment until goods are actually sold. </li></ul>0
    45. 45. Payment Risks <ul><li>Commercial risk </li></ul><ul><ul><li>Refers to the insolvency of, or protracted payment default by, an overseas buyer. </li></ul></ul><ul><ul><li>Results from deterioration of conditions in the buyer’s market, fluctuations in demand, unanticipated competition, or technological changes. </li></ul></ul><ul><li>Political risk </li></ul><ul><ul><li>Can neither be controlled by the buyer nor the seller. </li></ul></ul>0
    46. 46. Complications in assessing the buyer’s Creditworthiness: <ul><ul><li>Credit reports may not be reliable. </li></ul></ul><ul><ul><li>Audited reports may not be available. </li></ul></ul><ul><ul><li>Financial reports may have been prepared according to a different format. </li></ul></ul><ul><ul><li>Many governments require that assets be annually re-evaluated upward, which can distort results. </li></ul></ul><ul><ul><li>Statements are in local currency. </li></ul></ul><ul><ul><li>The buyer may have the financial resources in local currency but may be precluded from converting to dollars because of exchange controls and other government actions. </li></ul></ul>0
    47. 47. Managing Foreign Exchange Risk <ul><li>To prevent currency related risks, the exporter can: </li></ul><ul><ul><li>Shift the risk through foreign currency contractual hedging. </li></ul></ul><ul><ul><li>Modify the risk by manipulating prices and other elements of a marketing strategy. </li></ul></ul><ul><li>Forward exchange market </li></ul><ul><ul><li>The exporter gets the bank to agree to a rate at which it will buy the foreign currency the exporter receives when the importer makes payment. </li></ul></ul><ul><ul><li>The rate is either a premium or a discount on the current spot rate. </li></ul></ul>0
    48. 48. Foreign Exchange Risk & Price Adjustments <ul><ul><li>Pass through – Make no change in the price, resulting in a less favorable price in foreign currencies and, most likely, lower sales. </li></ul></ul><ul><ul><li>Absorption - Decrease the export price in conjunction with increases in the value of the currency to maintain stable export prices in foreign currencies. </li></ul></ul><ul><ul><li>Partial pass-through only a portion of the increase. </li></ul></ul><ul><ul><li>Pricing-to-market - Destination-specific adjustment of mark-ups in response to exchange-rate changes. </li></ul></ul>0
    49. 49. Sources of Export Financing <ul><li>Commercial banks </li></ul><ul><ul><li>Provide assistance to only first rate credit risks. </li></ul></ul><ul><ul><li>Provide enhanced services which help exporters monitor and expedite their international transactions. </li></ul></ul><ul><ul><li>Marketers should assess the overseas reach of banks to avail greater market coverage. </li></ul></ul>0
    50. 50. Sources of Export Financing <ul><li>Forfeiting </li></ul><ul><ul><li>Provides the exporter with cash at the time of shipment. </li></ul></ul><ul><ul><li>The importer uses bills of exchange or promissory notes to pay the exporter at the time of shipment. </li></ul></ul><ul><ul><li>The exporter sells them to a third party at a discount from their face value for immediate cash. </li></ul></ul>0
    51. 51. Sources of Export Financing <ul><li>Benefits accrued by the exporter through forfaiting: </li></ul><ul><ul><ul><li>Reduction of risk. </li></ul></ul></ul><ul><ul><ul><li>Simplicity of documentation. </li></ul></ul></ul><ul><ul><ul><li>Cent percent coverage. </li></ul></ul></ul><ul><ul><ul><li>Helps to avoid content or country restrictions. </li></ul></ul></ul><ul><li>Major issues: availability and cost. </li></ul>0
    52. 52. Sources of Export Financing <ul><li>Factoring houses </li></ul><ul><ul><li>May purchase an exporter’s receivables for a discounted price. </li></ul></ul><ul><ul><li>Provide the exporter with a complete financial package that combines credit protection, accounts-receivable bookkeeping, and collection services. </li></ul></ul>0
    53. 53. Sources of Export Financing <ul><li>Differences between forfeiting and factoring: </li></ul><ul><ul><li>Factors usually want a large percentage of the exporter’s business, while most forfeiters work on a one-shot basis. </li></ul></ul><ul><ul><li>Factors usually do not have strong capabilities in the developing countries, forfeiters do. </li></ul></ul><ul><ul><li>Forfeiters work with capital goods, factors typically with consumer goods . </li></ul></ul><ul><ul><li>Forfeiters work with medium-term receivables, while factors work with short-term receivables. </li></ul></ul>0
    54. 54. Government Export Financing <ul><li>Official trade financing can take the form of either a loan or a guarantee, including credit insurance. </li></ul><ul><li>Advantages of trade financing by the government: </li></ul><ul><ul><li>Protection in the riskiest part of an exporter’s business. </li></ul></ul><ul><ul><li>Protection against political and commercial risks over which the exporter does not have control. </li></ul></ul><ul><ul><li>Encouragement to exporters to make competitive offers by extending terms of payment. </li></ul></ul><ul><ul><li>Broadening of potential markets by minimizing exporter risks. </li></ul></ul><ul><ul><li>Possibility of leveraging exporter accounts receivable. </li></ul></ul><ul><ul><li>Opportunity for commercial banks to remain active in the international finance arena. </li></ul></ul>0
    55. 55. Price Negotiations <ul><li>Pricing is the most sensitive issue in business negotiations; the exporter should discuss it as part of a comprehensive package and should avoid price concessions early on in the negotiations. </li></ul><ul><li>Carefully consider concessions that reduce price or profitability; example: discounts, payment terms, product features. </li></ul><ul><li>Revisit competitive prices to ascertain that the price reflects market conditions accurately. </li></ul><ul><li>Focus negotiations first on substantive issues (quality and delivery), then on price. </li></ul>0
    56. 56. Leasing <ul><li>Trade liberalization is expected to benefit lessors both through expected growth in target economies and eradication of country laws and regulations hampering outside lessors. </li></ul><ul><li>Allows market penetration for the firm’s products, which is not possible through outright sale. </li></ul><ul><li>Total net income from leasing is often higher than it would be if the unit was sold. </li></ul>0
    57. 57. Dumping <ul><li>Selling goods overseas at a price lower than in the exporter’s home market or below the cost of production, or both. </li></ul><ul><li>Ranges of dumping </li></ul><ul><ul><li>Predatory dumping – Intentionally selling at a loss in another country in order to increase its market share at the expense of domestic producers. </li></ul></ul><ul><ul><li>Unintentional dumping - Result of time lags between the dates of sales transaction, shipment, and arrival. </li></ul></ul>0
    58. 58. Remedies for dumping <ul><ul><li>Antidumping duty - Levied on imported goods sold at less than fair market value. </li></ul></ul><ul><ul><li>Countervailing duties - Imposed on imports which are subsidized in the exporter’s home country. </li></ul></ul><ul><li>To minimize the risk of being accused of dumping, focus on value-added products and increase differentiation by including services in the product offering </li></ul><ul><li>Keep excellent records </li></ul>0
    59. 59. Chapter 17 Global Pricing 0 Chapter 17 Global Pricing
    60. 60. Transfer Pricing Objectives <ul><li>Transfer pricing is established to : </li></ul><ul><ul><li>Be competitive in various markets </li></ul></ul><ul><ul><li>Reduce taxes and tariffs </li></ul></ul><ul><ul><li>Manage cash flows </li></ul></ul><ul><ul><li>Minimize exposure to foreign exchange risks </li></ul></ul><ul><ul><li>Avoid conflicts with home and host governments </li></ul></ul><ul><ul><li>Internal concerns such as goal congruence and motivation of subsidiary managers </li></ul></ul>0
    61. 61. <ul><ul><li>The three philosophies are cost-based, market-based, and arm’s-length price. </li></ul></ul><ul><ul><li>Transfer at cost to increase the profits of affiliates </li></ul></ul><ul><ul><li>Derive transfer prices from the local market conditions </li></ul></ul><ul><ul><li>Use arm’s-length pricing to ensure proper intracompany pricing and to minimize government interference </li></ul></ul>Transfer Pricing Philosophies 0
    62. 62. <ul><ul><li>The six methods of determining an arm’s-length price. </li></ul></ul><ul><ul><ul><li>The comparable uncontrolled price method (sales between unrelated parties) </li></ul></ul></ul><ul><ul><ul><li>The resale price method (sold to subsidiary for resale; price determined by similar product being sold by the MNC) </li></ul></ul></ul><ul><ul><ul><li>The cost-plus method (best for parts & components, apply uniform markup) </li></ul></ul></ul><ul><ul><ul><li>The comparable profits method; Profit split method (compare profits of seller vs. total organization; split profits between the two) </li></ul></ul></ul><ul><ul><ul><li>Any other reasonable method </li></ul></ul></ul>Arm’s Length Pricing for IRS 0
    63. 63. Pricing Within Individual Markets <ul><li>Pricing within the individual markets in which the company operates is determined by: </li></ul><ul><ul><li>Corporate objectives </li></ul></ul><ul><ul><li>Costs </li></ul></ul><ul><ul><li>Customer behavior and market conditions </li></ul></ul><ul><ul><li>Market structure and competition </li></ul></ul><ul><ul><li>Environmental constraints </li></ul></ul>0
    64. 64. <ul><li>Corporate objectives: to undersell a major competitor. </li></ul><ul><ul><li>to improve their efficiency and/or shift production bases. </li></ul></ul><ul><li>Costs: Easily measured, Varying inflation rates </li></ul><ul><li>When prices cannot be changed, try value pricing, stripping down products, introducing innovative products at a modest premium, and getting close to customers by using new technologies. </li></ul><ul><li>Demand and market factors: Price elasticity, customer perception of the product </li></ul><ul><li>Market structure and competition: Distribution structure, trade discounts, etc. </li></ul><ul><li>Environmental constraints: Government policies. Try non-price measures, emphasize other marketing mix elements </li></ul>Pricing Within Individual Markets 0
    65. 65. The Euro and Marketing Strategy <ul><li>The potential advantages of a single-currency Europe include a more competitive market both internally and externally. </li></ul><ul><li>The euro pushes national markets closer together. </li></ul><ul><li>The single currency has made prices transparent for buyers. </li></ul><ul><li>Marketers can enhance the value of product and service offerings selectively, and thereby maintain price differentials across Europe. </li></ul>0
    66. 66. Countertrade <ul><li>Countertrade is a sale that encompasses more than an exchange of goods, services, or ideas for money. </li></ul><ul><li>Conditions that support countertrade are lack of money, lack of value of money, lack of acceptability of money as an exchange medium, or greater ease of transaction by using goods. </li></ul>0
    67. 67. Forms of Countertrade. <ul><li>- Straight barter </li></ul><ul><li>- Counterpurchase agreement (with the government, smaller deals) </li></ul><ul><li>Offset (with the government, larger, longer-term deals) </li></ul><ul><li>- Buyback (from plant output) </li></ul><ul><li>- Triangular Compensation {A (goods) -> B (goods) -> C (cash) -> A} </li></ul><ul><li>- Clearing agreements (Accounts cleared periodically) </li></ul><ul><li>- Switch trading (one company sells to another its obligation to make a purchase in a given country) </li></ul><ul><li>Blocked currencies (Typically soft currencies) </li></ul>
    68. 68. <ul><li>Merits: </li></ul><ul><ul><li>Permits the covert reduction of prices and therefore allows firms and governments to circumvent price and exchange controls. </li></ul></ul><ul><ul><li>An excellent mechanism to gain entry into new markets. </li></ul></ul><ul><ul><li>Provides stability for long-term sales. </li></ul></ul><ul><li>Limitations: </li></ul><ul><ul><li>Requires that accounts be settled on a country-by-country or even transaction-by-transaction basis.. </li></ul></ul>Why Use Countertrade? 0
    69. 69. Chapter 16 Global Logistics and Materials Management 0 Chapter 16 Global Logistics and Materials Management
    70. 70. A Definition of International Logistics <ul><li>International logistics - The design and management of a system that controls the flow of materials into, through, and out of the international corporation . </li></ul><ul><li>The systems approach helps the firm explicitly recognize the linkages among the traditionally separate logistics components within and outside of the corporation. </li></ul><ul><li>Interaction with outside organizations, suppliers, and customers helps build on commonality of purpose in the areas of performance, quality, and timing. </li></ul>0
    71. 71. A Definition of International Logistics <ul><li>The systems approach also ensures </li></ul><ul><ul><li>JIT - Just-in-time. </li></ul></ul><ul><ul><li>EDI - Electronic data interchange (more efficient order processing). </li></ul></ul><ul><ul><li>ESI - Early supplier involvement. </li></ul></ul><ul><ul><li>ECR - Efficient customer response systems (tracks sales at retail level, allows manufacturer to coordinate production to shelf-replacement needs). </li></ul></ul>0
    72. 72. Phases of international logistics <ul><ul><li>Materials management - Timely movement of raw materials, parts, and supplies through the firm. </li></ul></ul><ul><ul><li>Physical distribution - Movement of the firm’s product to its customers. </li></ul></ul>0
    73. 73. Logistics: major concepts <ul><ul><li>Systems concept - The extensive and complex materials-flow activities within and outside the firm must be considered in the context of their interaction. </li></ul></ul><ul><ul><li>Total-cost concept - Minimize overall logistics cost by identifying activity-based costs that impact after-tax profits. </li></ul></ul><ul><ul><li>Trade-off concept - Recognizes the linkages within logistics systems that result from the interaction of their components. </li></ul></ul>0
    74. 74. Supply Chain Management <ul><ul><li>An integration of the three-system concepts. </li></ul></ul><ul><ul><li>1. planning and management of all activities involved in sourcing and procurement , conversion , and logistics . </li></ul></ul><ul><ul><li>2. coordination and collaboration with channel partners. </li></ul></ul><ul><ul><li>3. Integration of supply and demand management within and across companies. </li></ul></ul>0
    75. 75. Basic differences between domestic and international logistics <ul><ul><li>Distance - Presence of firms in more than one country. </li></ul></ul><ul><ul><li>Currency variations and exchange rate differences. </li></ul></ul><ul><ul><li>Transportation modes - Reliability on carriers may be different; computation of freight rates may be different. </li></ul></ul>0
    76. 76. International Transportation Issues <ul><li>Choice of transportation determines how and when goods will be received. </li></ul><ul><li>Transportation issue can be divided into three components: </li></ul><ul><ul><li>Transportation modes/infrastructure </li></ul></ul><ul><ul><li>Availability of modes </li></ul></ul><ul><ul><li>Choice of modes. </li></ul></ul>0
    77. 77. <ul><li>1. Air: (wide body jets) </li></ul><ul><li>2. Truck: Truck trains </li></ul><ul><li>3. Rail: Gauges, technology, unit trains </li></ul><ul><li>4. Inland Waterways: Barges (motorized, non-motorized) </li></ul><ul><li>5. Ocean: Container ships, Ro-Ro ships, Lighter aboard ships, Supertankers, Ore carriers, LNG carriers </li></ul><ul><li>(Trades, Conferences, Lines, Liner/Tramp, rates, flags, Insurance: General/Particular average) </li></ul><ul><li>6. Pipelines: Liquid, gas, domestic, transnational </li></ul><ul><li>7. Intermodal </li></ul><ul><li>IK </li></ul>International Shipping Transportation modes - 1
    78. 78. Choice of Transportation Modes <ul><li>is influenced by: </li></ul><ul><ul><li>Transit time </li></ul></ul><ul><ul><li>Predictability (Air is more predictable than ocean) </li></ul></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Noneconomic factors (government involvement) </li></ul></ul>0
    79. 79. The International Shipment <ul><li>Involves multiple types of carriers. </li></ul><ul><li>Documentation is sometimes considered to be a trade barrier. </li></ul><ul><li>Trading regions such as the European Union have greatly simplified their required documentation for shipments. </li></ul>0
    80. 80. Exhibit 16.6 - Documentation for an International Shipment 0
    81. 81. Packaging for International Shipping <ul><li>Customer Requirements </li></ul><ul><li>Shipper Requirements </li></ul><ul><li>Distributor Requirements </li></ul><ul><li>Climate </li></ul><ul><li>Customs and traditions </li></ul><ul><li>Government Requirements </li></ul><ul><li>Cost (shipping, insurance, pilferage) </li></ul><ul><li>Physical hazards (acceleration, deceleration, dropping, pitching, rolling, vibrations, etc.) </li></ul>
    82. 82. Management of International Logistics <ul><li>Centralized logistics management - Headquarters retain decision-making power and control over logistic activities affecting international subsidiaries. </li></ul><ul><li>Decentralized logistics management </li></ul><ul><ul><li>Each subsidiary is made a profit center which carries responsibility for its performance. </li></ul></ul><ul><ul><li>Leads to greater local management satisfaction and better adaptation to local market condition. </li></ul></ul><ul><ul><li>Required by firms operating in a number of international markets that are diverse in nature. </li></ul></ul>0
    83. 83. Management of International Logistics <ul><li>Contract logistics </li></ul><ul><ul><li>Outsourcing logistical management by employing outside logistical expertise. </li></ul></ul><ul><ul><li>Helps firms to achieve improved service at equal or lower cost. </li></ul></ul><ul><ul><li>Allows marketers to take advantage of an existing network, complete with resources and experience. </li></ul></ul><ul><ul><li>Leads to loss of the firm’s control in the supply chain. </li></ul></ul>0
    84. 84. The Supply Chain and the Internet <ul><li>Global net e-commerce revenue is expected to surpass the $1 trillion dollar mark by 2012. </li></ul><ul><li>Companies enter e-commerce through hub sites (also known as virtual malls or digital intermediaries) which bring together buyers, sellers, distributors, and transaction payment processors in a marketplace (e Bay, Priceline, Amazon etc.). </li></ul><ul><li>Companies using e-commerce need to be prepared for 24-hour order-taking and customer service. </li></ul>0
    85. 85. Logistics and Security <ul><li>Logistics systems are vulnerable to terrorist attacks and piracy; to prevent them, governments impose security measures (screening of shipments and shippers). </li></ul><ul><li>Security measures: </li></ul><ul><ul><li>Affect the firm’s ability to plan their international shipments and distributions. </li></ul></ul><ul><ul><li>Increases the cost of supply chain activities. </li></ul></ul>0
    86. 86. Logistics and Security <ul><li>Strategies employed for reducing security costs: </li></ul><ul><ul><li>Replace international shipments with domestic. </li></ul></ul><ul><ul><li>Eliminate the use of vulnerable international transportation. </li></ul></ul><ul><ul><li>Redesign the logistics strategies to incorporate the effects of substantial and long-term interruptions of supplies and operations. </li></ul></ul>0
    87. 87. Recycling and Reverse Logistics <ul><li>The firm’s ability to develop reverse logistics is a key determinant for market acceptance and profitability. </li></ul><ul><li>Reverse distribution </li></ul><ul><ul><li>Ensures that a firm can retrieve a product from the market for subsequent use, recycling, or disposal. </li></ul></ul><ul><ul><li>Is a complex customer service, inventory control, information management, cost accounting, and disposal process. </li></ul></ul><ul><ul><li>Reverse logistics management is highly specialized. </li></ul></ul>0
    88. 88. Chapter 12 Marketing Communication 0 Chapter 12 Marketing Communication
    89. 89. Exhibit 12.1 - The Marketing Communication Process Sender (Encodes Message) Message Feedback Message Channel Receiver (Decodes Message ) Noise Communication Outcome 0
    90. 90. International Negotiations <ul><li>The two biggest dangers faced in international negotiations: </li></ul><ul><ul><li>Parochialism - The misleading perception that the world of business is becoming ever more American and that everyone will behave accordingly. </li></ul></ul><ul><ul><li>Stereotyping - Generalizations about any given group, both positive and negative. </li></ul></ul>0
    91. 91. International Negotiations Process <ul><li>Five-stage negotiated selling process: </li></ul><ul><ul><li>Offer </li></ul></ul><ul><ul><ul><li>Initiated by either the seller or the buyer . Allows the parties to assess each other’s needs and commitment. </li></ul></ul></ul><ul><ul><li>Informal meetings </li></ul></ul><ul><ul><ul><li>To discuss the terms and get acquainted. </li></ul></ul></ul><ul><ul><ul><li>It may be necessary to utilize facilitators (such as consultants or agents) to establish the contact. </li></ul></ul></ul><ul><ul><li>Strategy formulation </li></ul></ul><ul><ul><ul><li>Review and assess all factors to be negotiated, and </li></ul></ul></ul><ul><ul><ul><li>Prepare for actual give-and-take of the negotiation. </li></ul></ul></ul>0
    92. 92. International Negotiations <ul><ul><li>Negotiations details </li></ul></ul><ul><ul><ul><li>Two approaches are used: competitive and collaborative . </li></ul></ul></ul><ul><ul><ul><li>Depend on the cultural background and business traditions prevailing in different countries. </li></ul></ul></ul><ul><ul><li>Outcomes </li></ul></ul><ul><ul><ul><li>The choice of location for the negotiations and the negotiator characteristics play a role in the outcome. </li></ul></ul></ul>0
    93. 93. Negotiating in other Countries 1/2 <ul><li>A combination of attitudes, expectations, and habitual behavior influences negotiation style. </li></ul><ul><li>Approaches used for adjusting to the style of the host-country negotiators: </li></ul><ul><ul><li>Team assistance (using specialists to allow all points to be considered) </li></ul></ul><ul><ul><li>Traditions and customs (status relations & business procedures) </li></ul></ul><ul><ul><li>Language capability (a culturally and linguistically competent interpreter may be needed) </li></ul></ul><ul><ul><li>Determination of authority limits (US & European negotiators have much greater authority the Asians) </li></ul></ul><ul><ul><li>Patience </li></ul></ul>0
    94. 94. Negotiating in other Countries 2/2 <ul><ul><li>Negotiation ethics (may be different and, sometimes, seem unethical to US & Europeans) </li></ul></ul><ul><ul><li>Silence (must be interpreted correctly. It not always negative) </li></ul></ul><ul><ul><li>Persistence (insisting on quick answers may be seen as a threat. Let things develop as per local culture) </li></ul></ul><ul><ul><li>Holistic view (concessions should come at the end of bargaining after all other issues have been discussed) </li></ul></ul><ul><ul><li>The meaning of agreements (written, legal contracts may not be needed or even be negative) </li></ul></ul>0
    95. 95. Negotiating over the Internet <ul><li>The use of Internet allows the exporter to: </li></ul><ul><ul><li>Overcome distances. </li></ul></ul><ul><ul><li>Minimize social barriers. </li></ul></ul><ul><ul><li>Obtain instant feedback. </li></ul></ul><ul><ul><li>Negotiate from a home base. </li></ul></ul><ul><ul><li>Negotiate with a number of customers simultaneously. </li></ul></ul>0
    96. 96. The Internet <ul><ul><li>Helps a company increase its presence in the marketplace. </li></ul></ul><ul><ul><li>Allows 24-hour access to customers and prospects. </li></ul></ul><ul><ul><li>Improves customer service. </li></ul></ul><ul><ul><li>Allows the exporter to gather market information. </li></ul></ul><ul><ul><li>Provides an opportunity to close sales and communicate with internal constituents, apart from customers. </li></ul></ul>0
    97. 97. The promotional mix <ul><ul><li>Advertising </li></ul></ul><ul><ul><li>Personal selling </li></ul></ul><ul><ul><li>Publicity </li></ul></ul><ul><ul><li>Sales promotion </li></ul></ul><ul><ul><li>Sponsorship . </li></ul></ul><ul><li>The choice of tools leads to either a push or a pull emphasis in marketing communications. </li></ul>0
    98. 98. Push & Pull Strategies <ul><li>Push strategies - Focuses on personal selling; considered useful for marketing industrial goods which have shorter channels of distribution. </li></ul><ul><li>Pull strategies - Depend on mass communications to reach target audiences over long distribution channels. </li></ul><ul><li>Integrated marketing communications - Coordinated use of a broad range of promotional tools to reach a target market. </li></ul>0
    99. 99. Direct marketing <ul><ul><li>Establishes relationship with a customer in order to initiate immediate and measurable responses. </li></ul></ul><ul><ul><li>Accomplished through direct-response advertising (direct mail literature and catalogs), telemarketing (telephone via call centers), and direct selling (database marketing to create individual relationships with each customer) . </li></ul></ul><ul><ul><li>All these can be highly personalized tools if the target audience can be identified and defined narrowly. </li></ul></ul>0
    100. 100. Trade Shows and Missions <ul><li>Trade shows may be general ( horizontal ) or specialized ( vertical ). They provide: </li></ul><ul><ul><li>Opportunity to introduce, promote, and demonstrate new products. </li></ul></ul><ul><ul><li>Goodwill and contacts. </li></ul></ul><ul><ul><li>Locate trade intermediaries and suppliers. </li></ul></ul><ul><ul><li>Meet government officials and decision makers. </li></ul></ul><ul><ul><li>Collecting market research and competitive intelligence. </li></ul></ul><ul><ul><li>Reach sizable sales prospects in a brief time period at a reasonable cost per contact. </li></ul></ul>0
    101. 101. Reasons for not participating in trade fairs <ul><ul><li>High cost. </li></ul></ul><ul><ul><li>Difficulty in choosing the appropriate trade fairs </li></ul></ul><ul><ul><li>Coordination. </li></ul></ul><ul><li>Other promotional events that the exporter can use are trade missions , seminar missions , solo exhibitions, virtual trade shows, etc. </li></ul>0
    102. 102. Personal selling <ul><ul><li>Involves high costs per contact. </li></ul></ul><ul><ul><li>Provides immediate feedback on customer reaction as well as information on markets. </li></ul></ul><ul><ul><li>Can be used for consumer selling in low-wage markets </li></ul></ul>0
    103. 103. Chapter 13 Distribution Management 0 Chapter 13 Distribution Management
    104. 104. Channel Structure <ul><li>Channels can vary from direct (producer-to-consumer types) to elaborate (multilevel channels employing many types of intermediaries). </li></ul><ul><li>Channel configurations for the same product will vary within industries, even within the same firm, because national markets quite often have unique features. </li></ul><ul><li>Channel structures are designed to manage multidirectional connections for: </li></ul><ul><ul><ul><li>Physical movement of goods and services. </li></ul></ul></ul><ul><ul><ul><li>Transactional title flows. </li></ul></ul></ul><ul><ul><ul><li>Information communications flows. </li></ul></ul></ul>0
    105. 105. <ul><li>The general distribution systems used by companies include: </li></ul><ul><ul><li>Direct sales to customers through a firm’s own field sales force or through electronic commerce. </li></ul></ul><ul><ul><li>Indirect sales through independent intermediaries at the local level. </li></ul></ul><ul><ul><li>Indirect sales through an outside distribution system having a regional or global coverage. </li></ul></ul>Channel Strategies 0
    106. 106. Channel Design Influences <ul><li>Customer characteristics </li></ul><ul><ul><li>The demographic and psychographic characteristics of targeted customers form the basis for channel design decisions. </li></ul></ul><ul><ul><li>Focusing on customer needs: why, when, and how they buy helps to generate a competitive advantage. </li></ul></ul>0
    107. 107. Channel Design Influences <ul><li>Culture </li></ul><ul><ul><ul><li>The existing channel structures or the distribution culture. </li></ul></ul></ul><ul><ul><ul><li>The functions performed by the various types of intermediaries. </li></ul></ul></ul><ul><ul><ul><li>Foreign legislation affecting distributors and agents </li></ul></ul></ul>0
    108. 108. Channel Design Influences <ul><li>Competition </li></ul><ul><ul><li>Channels used by competitors may be the only product distribution system that is accepted by both the trade and consumers. </li></ul></ul><ul><ul><li>If distribution channels used by competitors are not satisfactory, the exporter can: </li></ul></ul><ul><ul><ul><li>Form jointly owned sales companies with distributors to exercise more control. </li></ul></ul></ul><ul><ul><ul><li>Seek a good company fit in terms of goals and objectives. </li></ul></ul></ul>0
    109. 109. Channel Design Criteria <ul><li>Company objectives: market share and profitability </li></ul><ul><li>Nature of the product: consumer, industrial </li></ul><ul><li>Capital: financial requirements for setting up a channel system </li></ul><ul><li>Cost: of maintaining a channel </li></ul><ul><li>Coverage: intensive, selective, exclusive </li></ul><ul><li>Control: depends on company plans for the future </li></ul><ul><li>Continuity: expressed thru visible market commitment </li></ul><ul><li>Communication: for channel coordination </li></ul>0
    110. 110. Selection of Intermediaries <ul><li>Two basic decisions: </li></ul><ul><ul><li>Determining the type of intermediary relationship </li></ul></ul><ul><ul><ul><li>Distributorship </li></ul></ul></ul><ul><ul><ul><li>Agency relationship </li></ul></ul></ul><ul><ul><li>Determining the type of exporting function </li></ul></ul><ul><ul><ul><li>Indirect exporting </li></ul></ul></ul><ul><ul><ul><li>Direct exporting </li></ul></ul></ul><ul><ul><ul><li>Integrated distribution </li></ul></ul></ul>0
    111. 111. The distributor agreement <ul><ul><li>Some important terms to be included: </li></ul></ul><ul><ul><ul><li>Contract duration. </li></ul></ul></ul><ul><ul><ul><li>Geographic and customer boundaries. </li></ul></ul></ul><ul><ul><ul><li>Method of compensation. </li></ul></ul></ul><ul><ul><ul><li>Products and conditions of sale. </li></ul></ul></ul><ul><ul><ul><li>Means of communication between parties. </li></ul></ul></ul><ul><ul><ul><li>Process of dispute resolution/dissolution </li></ul></ul></ul>0
    112. 112. Gray Markets <ul><li>Gray markets (parallel importation) </li></ul><ul><ul><li>Authentic and legitimately manufactured trademark items that are produced and purchased abroad but imported or diverted to the market by bypassing designated channels. </li></ul></ul><ul><ul><li>Fuelled by price segmentation and exchange rate fluctuation. </li></ul></ul><ul><ul><li>They under-cut local marketing plans, erode long-term brand images, eat up costly promotion funds, and sour manufacturer–intermediary relations. </li></ul></ul>0
    113. 113. Gray Markets <ul><li>Arguments for gray markets: </li></ul><ul><ul><li>The right to “free trade.” </li></ul></ul><ul><ul><li>Consumers benefit from lower prices. </li></ul></ul><ul><ul><li>Discount distributors find a profitable market niche. </li></ul></ul>0
    114. 114. Gray Markets <ul><li>Arguments against gray markets: </li></ul><ul><ul><li>Hurts the legitimate owners of trademarks. </li></ul></ul><ul><ul><li>Reduces incentive among trademark owners to undertake product development. </li></ul></ul><ul><ul><li>Take unfair advantage of the trademark owners’ marketing and promotional activities. </li></ul></ul><ul><ul><li>Can deceive consumers by not meeting product standards or their normal expectations of after-sale service. </li></ul></ul>0
    115. 115. Gray Markets <ul><li>Solutions to the gray market problem: </li></ul><ul><ul><li>A contractual relationship that ties businesses together. </li></ul></ul><ul><ul><li>A one-price policy. </li></ul></ul><ul><ul><li>Producing different versions of products for different markets. </li></ul></ul><ul><ul><li>Conducting educational and promotional campaigns. </li></ul></ul>0
    116. 116. Chapter 14 Global Product Management and Branding 0 Chapter 14 Global Product Management and Branding
    117. 117. Global Product Development <ul><li>The goal of the product development process is to build adaptability into products and product lines to achieve worldwide appeal. </li></ul>0
    118. 118. Global Product Development <ul><li>Stages of the product development process </li></ul><ul><ul><li>Idea generation </li></ul></ul><ul><ul><li>Screening </li></ul></ul><ul><ul><li>Product and process development </li></ul></ul><ul><ul><li>Scale-up </li></ul></ul><ul><ul><li>Commercialization </li></ul></ul>0
    119. 119. Global Product Development <ul><li>Sources for idea generation: </li></ul><ul><ul><li>Company </li></ul></ul><ul><ul><li>Customers </li></ul></ul><ul><ul><li>Lead users </li></ul></ul><ul><ul><li>Procurement requisitions from governments and supranational organizations </li></ul></ul><ul><ul><li>Facilitating agents, such as advertising agencies or market research organizations </li></ul></ul>0
    120. 120. Screening Product Ideas <ul><li>Product ideas are screened on the basis of market , technical , and financial criteria. </li></ul>0
    121. 121. Global Product Development <ul><li>The use of computer aided design (CAD) allows inexpensive adaptation of the product designs for future markets. </li></ul><ul><li>The product development process can be initiated by any unit of the organization, in the parent country or abroad. </li></ul>0
    122. 122. Global Product Development <ul><li>The assignment of product development responsibility may be based on a combination of special (market and technical) knowledge as well as long-term or political considerations. </li></ul><ul><li>Though product development activity takes place in the parent country, the affected units participate in the development and market planning for a new product. </li></ul>0
    123. 123. Global Product Development <ul><li>Reasons for investing in R&D activities abroad: </li></ul><ul><ul><li>Aids technology transfer from parent to subsidiary. </li></ul></ul><ul><ul><li>Develops new and improved products for foreign markets. </li></ul></ul><ul><ul><li>Develops new products and processes for simultaneous application in world markets of the firm. </li></ul></ul><ul><ul><li>Generates new technology of a long-term exploratory nature. </li></ul></ul><ul><ul><li>Curries favor with host-country governments </li></ul></ul>0
    124. 124. Global Product Development <ul><ul><li>Multidisciplinary teams in an organization </li></ul></ul><ul><ul><ul><li>Maximize the payoff from R&D by streamlining decision making. </li></ul></ul></ul><ul><ul><ul><li>Reduce development time of a new product. </li></ul></ul></ul><ul><ul><ul><li>Reduce overall material costs. </li></ul></ul></ul><ul><ul><ul><li>Trim manufacturing processes. </li></ul></ul></ul><ul><ul><li>Companies increase communication and exchange of personnel to reduce language and cultural barriers among R&D teams. </li></ul></ul><ul><ul><li>R&D consortia have been established provide the benefits and face the challenges of any strategic alliance. </li></ul></ul>0
    125. 125. Global Product Development <ul><li>Testing of new product concepts for performance and customer acceptance </li></ul><ul><ul><li>Is the final stage of product development. </li></ul></ul><ul><ul><li>Ranges from reliability tests to mini-launches. </li></ul></ul><ul><ul><li>Is undertaken to avoid high rate of product failure. </li></ul></ul><ul><li>Reasons for product failure: </li></ul><ul><ul><li>Relying on instinct or hunch rather than testing and research. </li></ul></ul><ul><ul><li>Lack of product distinctiveness. </li></ul></ul><ul><ul><li>Unexpected technical problems. </li></ul></ul>0
    126. 126. International product testing <ul><ul><li>Laboratory test markets - Captures consumer reactions in a controlled environment. </li></ul></ul><ul><ul><li>Micro test-marketing - Uses a permanent panel of consumers and assesses their willingness to buy after exposure to media and purchase incentives. </li></ul></ul><ul><ul><li>Forced distribution tests - Relies on the continuous report of consumer reactions to new products already in the market. </li></ul></ul>0
    127. 127. Global Product Launch <ul><ul><li>Introducing the product into countries in three or more regions within a narrow timeframe. </li></ul></ul><ul><ul><li>Measures undertaken for successful launches: </li></ul></ul><ul><ul><ul><li>Involvement of country managers. </li></ul></ul></ul><ul><ul><ul><li>Pre-launch attention to localization and translation requirements. </li></ul></ul></ul><ul><ul><ul><li>Increased education and support of the sales channel. </li></ul></ul></ul><ul><ul><li>Benefits of a successful global launch: </li></ul></ul><ul><ul><ul><li>Permits the company to showcase the product. </li></ul></ul></ul><ul><ul><ul><li>Removes old models at once. </li></ul></ul></ul><ul><ul><ul><li>Captures new product’s higher margins. </li></ul></ul></ul>0
    128. 128. Management of the Product and Brand Portfolio <ul><li>Should have a balanced product and market portfolio— a proper mix of new, growing, and mature products to provide a sustainable competitive advantage. </li></ul><ul><li>Product portfolio analysis </li></ul><ul><ul><li>Is based on growth rates and market share positions. </li></ul></ul><ul><ul><li>Is used to analyze: </li></ul></ul><ul><ul><ul><li>Business entities, product lines, or individual products. </li></ul></ul></ul><ul><ul><ul><li>Market, product, and business interlinkages. </li></ul></ul></ul>0
    129. 129. Management of the Product and Brand Portfolio <ul><li>Advantages of product portfolio approach </li></ul><ul><ul><li>A global view of competitive structures. </li></ul></ul><ul><ul><li>A guide for formulation of global marketing strategy based on allocation of scarce resources. </li></ul></ul><ul><ul><li>A guide for formulation of marketing objectives based on the role of product lines in the markets served. </li></ul></ul><ul><ul><li>A convenient visual communication goal. </li></ul></ul><ul><li>Disadvantages of product portfolio approach </li></ul><ul><ul><li>Foreign competition does not follow the same rules as domestic competition. </li></ul></ul><ul><ul><li>Relationships between market share and profitability may vary. </li></ul></ul><ul><ul><li>Government regulations. </li></ul></ul><ul><ul><li>Local content laws. </li></ul></ul><ul><ul><li>Different production sites impact perceptions of risk and quality. </li></ul></ul>0
    130. 130. Branding Policies <ul><ul><li>Three choices of branding: </li></ul></ul><ul><ul><ul><li>Use of the corporate name . </li></ul></ul></ul><ul><ul><ul><li>Use family brands for a wide product line. </li></ul></ul></ul><ul><ul><ul><li>Use individual brands for each item in the product line. </li></ul></ul></ul><ul><ul><li>Global brands are a key way of creating consistency and impact. May be completely standardized or some elements of the product may be adapted to local conditions. </li></ul></ul><ul><ul><li>Characteristics of global brands </li></ul></ul><ul><ul><ul><li>Carry a strong quality signal and compete on emotion. </li></ul></ul></ul><ul><ul><ul><li>Cater to the need of feeling cosmopolitan. </li></ul></ul></ul><ul><ul><ul><li>Reflect the professional and personal status of the user. </li></ul></ul></ul><ul><ul><ul><li>Use their monetary and human resources to benefit society </li></ul></ul></ul>0
    131. 131. Branding Policies <ul><li>Private branding </li></ul><ul><ul><li>The intermediaries’ own branded products or “store brands.” </li></ul></ul><ul><ul><li>Methods used for private branding: </li></ul></ul><ul><ul><ul><li>Umbrella branding with the intermediary’s name. </li></ul></ul></ul><ul><ul><ul><li>Separate brand names for individual products or product lines. </li></ul></ul></ul><ul><ul><li>Private brand goods have achieved a significant penetration in many countries due to increase in price sensitivity and decrease in brand loyalty. </li></ul></ul>0
    132. 132. Exhibit 14.7 - Private Brand Strategies SOURCES: Adapted from Sabine Bonnot, Emma Carr and Michael J. Reyner, “Fighting Brawn with Brain,” The McKinsey Quarterly 40 (no 2. 2000): 85-92; and Francois Glemet and Rafael Mira, “The Brand Leader’s Dilemma,” The Mckinsey Quarterly 33 (no 2. 1993):4. 0
    133. 133. MKT-421 Winter 2010 <ul><li>End of Class Slides </li></ul>