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 o...
Int’l Mktg (cont’d)
Expansion  Foreign
Mkts aware of
systems:
Political
Cultural
Legal
Other:
Unfamiliar
economic
conditi...
Confront 2 tasks:
1. Capturing synergies
among various nat’l
mkts:
Provide opportunities for
additional revenues and
for g...
Marketing
Operations
Management
Finance
Accounting
HR
Management
International Market and
Business Strategies
Marketing
strategy must
support business
strategy
Differentiation
Cost leader...
Differentiation
Strategy
Mtkg managers develop
tactics involving the 4
P’s btwn products and
services of competitors
Produ...
Cost Leadership Strategy
Cost reductions in…
Production and
manufacturing
Sales
Acceptance of lower
profit margins
Use of ...
Focus Strategy
Concentrate on
segments of
consumer
market/area/regio
n within a market
Esp. target
markets
International Market and
Business Strategies (cont’d)
Budget and resource limitations, assessing
country markets then rank...
Int’l Marketing Management (cont’d)
The Marketing Mix
1. How to develop the firms
productivity?
2. How to price those
prod...
Int’l Marketing Management (cont’d)
Standardization vs. Customization
Ethnocentric
Approach
Polycentric
Approach
Geocentri...
Int’l Marketing Management (cont’d)
Standardization vs. Customization
Standardization
Manufacturing,
distribution, promoti...
Organizational Structure
Standardization:
centralized power and
control
Customization:
delegation of decision-
making power
Issues (adopt 2-step
process):
#1. Decision to
standardize elements
of marketing mix
• Design
• Brand Name
• Packaging
• P...
Product Policy
PRODUCT
1st “P” of marketing mix
 Products consists of tangible and intangible
factors:
 Physical product and its packag...
TOYOTA
 Has success in selling automobiles in Europe,
Asia, and the Americas reflects upon:
 Design and production of me...
Standardize or
Customize Products
A key decision when working in international
markets is to decide whether to standardize...
TOYOTA
Like many firms internationally, blend of standardization
and customization
 Standardized
 Corporate commitment t...
TOYOTA (cont’d)
 Warranties adjust from country to country
based on warranties offered by competitors
 Name under which ...
Standardize or
Customize
Nature of the products target customers…
Industrial users or individual consumers?
 Caterpillar’...
Standardize or
Customize (cont’d)
General rule of thumb: closer to a body the
product is, the more likely the need for it ...
Legal Forces
Laws & Regulations of host countries may
affect the product policies adopted by
international firms.
 Such a...
Examples of Legal
Forces Grupo Modelo SA, the brewer of Corona beer had to
reduce the nitrosamine levels of the beer it s...
Cultural Influences
International firms must adapt their products to
meet the cultural needs of the local markets.
 Chang...
Cultural Influences
(cont’d)
 Culture may FORCE change in a foreign market
 HBO has to edit its movies before it can be
...
Economic Factors
A country’s level of economic performance may
affect the desired attributes of a product.
 Consumers in ...
Brand Names
International firms often standardize the BRAND
NAME of their products.
 Firm can reduce cost on packaging, d...
Brand Names (cont’d)
Sometimes legal or cultural factors force a firm
to alter the brand names under which it sells its
pr...
Pricing Issues &
Decisions
PRICING
- Pricing policies directly affect a firms revenue
Shape the competitive environment
Ex. Toys “R” Us : success in ...
Pricing Issues
Continued
Exchange Rate Fluctuations
Currency rises in value, exporter must choose
between maintaining its ...
Pricing Issues
Broken Down
International firms must consider these factors
when developing their pricing policies
Must dec...
Pricing Policies
Three Pricing Policies
1. Standard pricing policy
2. Two-tiered pricing
3. Market pricing
Standard Pricing
Policy
Generic approach to international marketing
The firm charges the same price for its products
and s...
Two-Tiered Pricing
Policy
A firm that uses a ethnocentric marketing
approach uses this policy
The firm sets one price for ...
Two-Tiered
Continued
Works for the short-run, but not in the long-run
Unlikely to develop the international skills,
expert...
Market Pricing
Follows a polycentric approach
Most complex
Prices are set on a market-by-market basis
Go’s off of the prof...
Market Pricing
Two conditions must be met to successfully
practice market pricing
1. Face different demand or cost conditi...
Market Pricing
Advantages
Can set higher prices where tolerated and lower
prices where necessary
Directly make relevant co...
Market Pricing Risks
1.) Damage its brand name
2.) Development of a gray market for its
products
3.) consumer resentment a...
Market Pricing Risks
Continued
Damage its brand name
Any international firm that sells brand name
products and adopts mark...
Risks Continued
Gray markets
A market that results when products
are imported into a country legally
but outside the norma...
Risks Continued
Occurs when firms fail to adjust local prices after
major fluctuations in exchange rates
Ex. Coca-Cola & M...
Risks Continued
Consumer resentment
Consumers in high-priced country may feel they
are being gouged by pricing policies
Ex...
Promotion Issues &
Decisions
PROMOTION:
3rd P of the international marketing mix
Enhance desirability of its products among
potential buyers
PROMOTION ...
Advertising
3 Factors to Consider:
The MESSAGE it wants to convey
The MEDIA available for conveying the message
The extent...
I. Message
Facts or impressions the
advertiser wants to
convey to potential
customers
Convey messages of:
Value (low price...
I. Message (cont’d)
Ex. Coca Cola
Believes products help
consumers enjoy life by
showing worldwide
Ex. Honda & Kawasaki,
M...
I. Message (cont’d)
Ex. Europe & Japan
US goods viewed as
“trendy”
Japanese products
perceived as high quality
II. Medium
• Communication channel
used by the advertiser to
convey a message
• May have alterations from
market to market...
II. Medium (cont’d)
Countries level of
economic development
affect media
Less developed
countries have limited
TVs & liter...
III. Global vs. Local
Advertising
Should it be everywhere
or tailored to each local
market the firm serves?
Ex. Unilever &...
Personal Selling
Making sales on basis of
personal contacts
As firms grow and
develop sale basis in
new markets, establish...
Advantages to Personal
Selling
Hiring local sales reps are reasonably confident
understanding local culture, norms, and
cu...
Sales Promotion
Comprises specialized
marketing efforts
Coupons, in-store
promos, sampling,
direct mail campaigns,
coopera...
Public Relations
Efforts aimed at
enhancing a firms
reputation and image
with the general public
Opposed to specific
advan...
Distribution Issues
and Decisions
Distribution Issues
Distribution- process of getting products
and services from the firm into the hands
of customers
Two I...
International
Distribution
Main issue- mode of transportation
Faster modes of transportation:
Air freight
Motor carrier
Mo...
Transportation
selected
Affects the firm’s inventory costs and
customer service levels
Product’s useful shelf life
Exposur...
Shelf life, damage,
packaging
Highly perishable items are usually shipped by
air freight
Less perishable items use cheaper...
Channels of
Distribution
Distribution channel can consist of as
many as 4 basic parts:
The manufacturer that creates the p...
Channel length
The number of stages in the distribution
channel
Direct sales: a firm that sells directly to the final
cons...
Challenge
Finding the optimal distribution channel to
match the firm’s unique competitive strengths
and weaknesses with th...
Summary
Marketing vs. International Marketing
International Market and Business Strategies
The Marketing Mix
Product
Price...
Any questions?
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 country
    Pricing 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
  • BA 358 Ch 16 Intl Mktg

    1. 1. Chapter 16: International Marketing A. Bricek | L. Bowman | F. Castronovo L. Corona | M. Vital
    2. 2. 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
    3. 3. 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-
    4. 4. Confront 2 tasks: 1. Capturing synergies among various nat’l mkts: Provide opportunities for additional revenues and for growth and cross- fertilization 2. Coordinating mkt activities among mkts: Help lower mktg costs Create unified mktg effort
    5. 5. Marketing Operations Management Finance Accounting HR Management
    6. 6. International Market and Business Strategies Marketing strategy must support business strategy Differentiation Cost leadership Focus
    7. 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. 8. 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)
    9. 9. Focus Strategy Concentrate on segments of consumer market/area/regio n within a market Esp. target markets
    10. 10. 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
    11. 11. Int’l Marketing Management (cont’d) The Marketing Mix 1. How to develop the firms productivity? 2. How to price those products? 3. How to sell those products? 4. How to distribute those products to the firm’s customers? Product Pricing Promotion Place (Distribution)
    12. 12. Int’l Marketing Management (cont’d) Standardization vs. Customization Ethnocentric Approach Polycentric Approach Geocentric Approach • Market goods internationally the same way it does domestically • Easy to adopt • Customize marketing mix to meet the specific needs of each foreign market it serves • More costly • Analyze customer needs worldwide and adopt standard market mix for all markets
    13. 13. 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 Standardize product design (capture manufacturing economies of scale) Customize ads & distribution channels to meet local market needs
    14. 14. Organizational Structure Standardization: centralized power and control Customization: delegation of decision- making power
    15. 15. Issues (adopt 2-step process): #1. Decision to standardize elements of marketing mix • Design • Brand Name • Packaging • Product positioning #2. Critique global marketing program and develop plans • Implement customized elements of marketing mix • Promotion • Distribution
    16. 16. Product Policy
    17. 17. 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.
    18. 18. TOYOTA  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
    19. 19. 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.
    20. 20. TOYOTA Like many firms internationally, blend of standardization and customization  Standardized  Corporate commitment to building high quality, mechanically reliable automobiles and maintaining the prestige of the TOYOTA name  Customized  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
    21. 21. TOYOTA (cont’d)  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
    22. 22. 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.  Agricultural products  Petroleum  512 MB computer memory chips  Chemicals
    23. 23. 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
    24. 24. 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.
    25. 25. Examples of Legal Forces Grupo Modelo 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.
    26. 26. 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
    27. 27. 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
    28. 28. 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
    29. 29. 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
    30. 30. 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  Diet Coke by Coca-Cola  Other markets  Coca-Cola Light by Coca-Cola
    31. 31. Pricing Issues & Decisions
    32. 32. 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
    33. 33. 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
    34. 34. 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
    35. 35. Pricing Policies Three Pricing Policies 1. Standard pricing policy 2. Two-tiered pricing 3. Market pricing
    36. 36. 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, Kawaitt Oil, and Pemex) Charged different prices to any and all customers at different prices based on supply and demand
    37. 37. 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
    38. 38. 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)
    39. 39. 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
    40. 40. 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
    41. 41. 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
    42. 42. Market Pricing Risks 1.) Damage its brand name 2.) Development of a gray market for its products 3.) consumer resentment against discriminatory prices
    43. 43. 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
    44. 44. 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
    45. 45. 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
    46. 46. 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
    47. 47. Promotion Issues & Decisions
    48. 48. 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
    49. 49. 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
    50. 50. 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)
    51. 51. 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
    52. 52. I. Message (cont’d) Ex. Europe & Japan US goods viewed as “trendy” Japanese products perceived as high quality
    53. 53. II. Medium • 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
    54. 54. 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
    55. 55. 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
    56. 56. Personal Selling Making sales on basis of personal contacts As firms grow and develop sale basis in new markets, establishes its own sales force
    57. 57. 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
    58. 58. 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
    59. 59. 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
    60. 60. Distribution Issues and Decisions
    61. 61. 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
    62. 62. 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
    63. 63. 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
    64. 64. 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
    65. 65. 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
    66. 66. 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
    67. 67. 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
    68. 68. Summary Marketing vs. International Marketing International Market and Business Strategies The Marketing Mix Product Price Promotion Distribution
    69. 69. Any questions?

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