This document contains questions and answers related to international marketing strategies. It discusses factors that influence global pricing policies, considerations for international advertising messages, essential factors for prescreening international markets, challenges of international marketing research, macroenvironmental factors impacting international marketing, reasons why companies may quit international markets, factors encouraging product adaptation, and modes of entry into international markets. The document provides detailed responses to each question in bullet point form.

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MOUNT KENYA UNIVERSITY
SCHOOL OF BUSINESS AND ECONOICS
MBM6104 INTERNATIONAL MARKETING
Global Pricing Strategies ……………………………………………………………….Page 2
International Advertising Messages……………………………………………..….…..Page 4
Factors in Prescreening International market………………………………………...Page 4-5
Challenges of international marketing research……………………………………....Page 4-5
Macro-environmental factors that impact on firm’s international marketing……...Page 4-5
Reasons why companies may quit international market. ……………………………Page 5-7
Key factors that encourage product adaptation in international market…………...Page 8-9
Describe at least 5 modes of entry into an international market……………………Page 9-10
QUESTION TWO
(a) The main factors that influence global pricing policy in Decision making by multinational
companies.(8 mks)
(b) Enumerate the key considerations in choosing international advertising massages ( 7 mks)
QUESTION THREE
(a) What essential factors would one look for in pr-screening a mkt. ( 8 mks )
(b) Challeges of international marketing research (7 mks)
QUESTION FOUR
a) Macro-environmental factors that impact on firm’s international marketing.( 8 mks)
(b) Reasons why companies may quit international market (7 Marks)
QUESTION FIVE
(a) Key factors that encourage product adaptation in international market.(5 Marks)
(b) Describe at least 5 modes of entry into an international market (5 Marks)

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MOUNT KENYA UNIVERSITY
SCHOOL OF BUSINESS & ECONOMICS
MARKING SCHEME
MBM6104 INTERNATIONAL MARKETING
Q2 (a) The main factors that influence global pricing policy in Decision making
by mnc’s (10 mks)
i)Company goals- When developing a pricing strategy for its global markets, a firm
needs to decide what it wants to accomplish with its strategy. These goals can include
maximizing current profits, penetrating the market, protecting a premium image, and
so on. As a normal practice, when a firm initially enters a foreign market, it often
sets a relatively lower price in order to penetrate the market (Yu Mobile). Once the
firm is well entrenched, it may shift its objectives and bring prices in line with the
goals pursued in other countries.
ii) Company costs- Company costs are important considerations in determining
pricing decisions. The company wants to set the price that will cover all cost needed
to make and sell its products. Cost differentials between countries can lead to wide
price gaps. Costs considered include manufacturing costs, marketing costs,
distribution costs, etc. company costs consists of two parts: variable costs, costs
which change with sales volume, and fixed costs (e.g. overheads) that do not vary.
International pricing policies differ depending on the way costs are treated. The most
popular practice is cost-plus pricing, where a firm adds international costs and a
mark-up to the domestic manufacturing cost. The alternative approach is dynamic
incremental pricing, where pricing is arrived at after removing domestic fixed costs.
Only the variable costs generated by the exporting efforts (shipping, insurance,
overseas promotional costs, etc.) and a portion of the overhead load is recuperated.
iii) Customer demand-The willingness by customers to pay for a company’s
product(s) is critical in setting the ceiling price. The buying power, tastes, habits,
and substitutes vary from country to country. Consumers from countries with low
per capita income are usually price sensitive and any price premiums in such markets
pose challenges to the marketer. Nevertheless, a foreign company targeting mass

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markets in emerging economies may offer lower prices by changing the product
formula, packaging or size. However, this strategy can cause brand dilution (leading
to negative perceptions) or cannibalization, where high income consumers switch to
the cheaper products in the company’s product line.
Another strategy of dealing with pricing in the low-income mass markets is to
introduce niche marketing that is, targeting the upper-end of the market at a
premium. Of course the company could also have a portfolio of products that cater
for different income tiers. The last option is to sell the old versions of the product at
a lower price to low income segments of the market. Having said that, it is important
to note that the nature of demand changes over time. In countries that were entered
recently, the company may need to stimulate trial through discounting or a
penetration pricing strategy. In more mature markets, the company gains more
through repeat buyers. Once brand loyalty has been achieved, price will play a lesser
role as a purchase criterion, and can then afford to use premium pricing strategy.
Pricing in a mature market will also depend on how well a company is able
differentiate its products from the competition.
iv)Competition-Competition plays a major role in international product pricing.
Differences in competitive situations across countries usually lead to cross-border
pricing differentials. In some countries, an international company may face few
competitors (it could even enjoy monopoly situation), while in other countries, a
firm has to deal with numerous competing brands. The nature of competition differs:
global versus local players, private firms versus state-owned companies. Some
governments subsidize their own local companies, making it very tricky for foreign
companies to compete in such an uneven business environment. The presence of
counterfeits products could also force a foreign company to lower its prices.
v) Distribution channel- Distribution channels make a big contribution to the issue
of global pricing. Variations in trade margins and the length of the channels
influence the ex-factory price charged by the company. The balance of power
between manufacturers and their distributors is another factor behind pricing
practices. In some countries such as France and the UK, large retailers are able to
buy in bulk and therefore bargain for huge discounts from manufacturers. This can
make them charge lower prices and still obtain profits. It then becomes a challenge
for an international marketer.

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vi)Government policies- Government policies can also have a direct and indirect
impact on pricing policies. Factors that have direct impact include sales tax rates
(e.g. value-added taxes), tariffs, and price controls. Sometimes government
interference can be very blatant. The Chinese government for example sets minimum
prices in scores of industries. The goal is to stamp out price wars to protect Chinese
economy against deflation pressures. Firms that ignore the pricing rules are fined
very heavily. Huge government deficits would normally spur interest rates (cost of
capital), currency volatility, and inflation. The interplay of these factors will affect
the product cost. Inflation can also impact labor costs, ultimately affecting pricing
decisions.
Q2 (b) Enumerate the key considerations in choosing int’l advertising massages
( 10 mks)
The following considerations are critical in advertising messages:
a) Localized or standardized- The arguments usually exist on whether to go for local
approach or international approach in advertising messages.
b) Buyers consumption system
c) Language and culture
d) International market segment
e) Government regulations/control
Q3 (a) What essential factors would one look for in pr-screening a mkt. ( 8 mks)
Methods for pre-screening market opportunities
i) Per capita income –The average income per persons in respect to the national
income of a country.
ii) Population – Population growth rate as measured by birth- rate and death rate
iii) Competition- The level of competition and laws regarding the same in a country.
iv)Political risk- The political stability persisting in a country in short-and- long
term.

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(b) Challeges of international marketing research (1 2 mks)
Because of complexity, international marketing research may encounter difficulties
that are uncommon in domestic marketing research. They include the following:
i. Problem of numerous markets-The spread of the numerous foreign markets comes
with challenges such as costs, cultural imperatives, etc.
ii. Problems with secondary data. Secondary data is likely to be less available in
foreign markets than in domestic markets. Secondly, there is a high likelihood of
weaker statistical sources, which will eventually prove unreliable.
iii. Problems with primary data- Primary data in foreign markets is subject to
influence arising from cultural attitudes, etc.
iv. Language-Cultural differences, interpretations, inferences, meaning, etc.
v. Social organization-decision makers and influencers (eg clans), the role of
women, family owned businesses, etc.
vi. Obtaining responses-suspicion of being a government tax representative, fear of
giving information to competitors, unwillingness to talk to strangers, etc. In most of
Asia for example, respondents will give responses that will please the interviewer
because they do not want to hurt him/her; and they do this as a sign of politeness.
vii. The complexity of research design, due to operation in a multi-country, multi-
cultural, and multi-linguistic environment
viii. The lack of secondary data available for many countries and product markets
ix. The high cost of collecting primary data, particularly in developing countries
x. The high cost of collecting primary data, particularly in developing countries
xi. The problem associated with coordinating data collection in different countries
xii. The difficulties of establishing the comparability and equivalence (construct,
measure, and sampling) of data and research conducted in different contexts

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Q (4) Macro-environmental factors that impact on firm’s int’l marketing. (10
marks)
i) The political/Legal environment
The political environment has a great bearing on the marketing and business
activities of a firm. It consists of laws, government agencies, and pressure groups
that limit various organizations and individuals. The marketer must not only consider
the present political climate, but must determine future political stability.
Broadly, the political/Legal environment hinges on the following:
i) Government in power
ii) Government bureaucracy
iii) Fiscal and monetary policies of government
iv)Government attitude towards business
v)Government’s commitment to reforms…especially in business sector, health
sector, etc.
vi) Taxation policies
vii) New legislations, including creation and activities of regulatory agencies, etc.
viii) Expropriation
ix) Nationalization
i) Economic environment
This includes:
-Exchange rates
-Monetary/fiscal policies of government
-Inflation
-Rate of economic growth, rates of inflation,

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-Unemployment rate
-Income levels
-Trade barriers/quotas/tariffs
-Taxes
-Economic policies
-Consumer demand and spending patterns are affected by the economy and the
perception of
the future economic outlook
-It is important to determine consumer buying power, and willingness to purchase.
iii) Social/cultural environment
Culture and the socio-cultural environment influence the behavior of consumers who
comprise markets, the managers who plan and implement international/export
management programs, negotiations, and the marketing intermediaries that
participate in the international marketing process.
-The pressure from lobbyists/pressure groups/activists- to create laws- pollution,
environmental issues, etc.
-Population structure-age, sex, gender, income levels, education, social groups, etc.
-Cultural diversity/differences-have a strong bearing on business practices.
iv) Technological Environment
-How good/efficient is the technological environment, how does this technology
support the business/marketing environment
-Are you using obsolete technology that makes you uncompetitive? - Modern
technology helps to reduce production costs and wastages…
- Are consumers technologically up to date? Consumer’s technological knowledge
influences their desires for goods and services.

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-Technological infrastructure- fibre optics, telephones, e-banking, e-government,
etc. Examples of changing technology: Changes in transportation methods have
enabled the development of out of town shopping centers.
-Inventory control systems make companies more efficient, this cost efficiency can
be passed onto the consumer.
-It has helped develop relationships with suppliers and, this cost efficiency can be
passed on to consumers.
-Can be used as a barrier to entry and as a point of competitive advantage
v) Geographical environment
-Terrain, Physical features, etc.
vi) Natural environment
-Drought, Snow, Flooding etc.
Q4 (b) Reasons why companies may quit int’l market
Exits in international marketing are not uncommon. Decisions to exit or divest a
foreign market are not taken lightly. Companies may have good reasons to pull out
of their foreign markets. The following are some of the reasons for exiting
international markets:
i) Sustained losses- Key markets are often entered with a long-term
perspective. Most companies recognize the fact that an immediate payback
of their investments is not realistic and are willing to absorb losses for
many years. That as it may be, at some point, the company usually has a
limit to how long a period of time of losses it is willing to sustain.
ii) Volatility- Companies at times underestimate the risks of the host
country’s economic and political environment. Sometimes companies are
quickly lured by the prospects of quick returns in emerging markets while
paying little or no attention to the political and economic realities. A
volatile business environment can easily force a company to pull out.
iii) Premature entry-The entry timing decision is very important. Entries can
be premature for reasons such as underdeveloped marketing infrastructure

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(distribution, supplies, etc.), low buying power, and lack of a strong local
partner. In such situations, it makes business sense to exit instead of just
hanging on.
iv) Ethical reasons-Companies that operate in countries with questionable
human rights records for example, can receive a lot of flak (embargos,
product boycotts, etc.). Rather than running the risk of bad reputation, a
company can decide to pull out of such a country.
v) Intense competition-Intense rivalry is another reason for exiting a foreign
market. Markets that look appealing on paper usually attract many
competitors. The result is often overcapacity, triggering price wars and
loss-loss situations for all players competing against one another. Rather
than sustaining losses, the sensible thing to do is to exit the market,
especially when rival players have competitive advantages that are difficult
to overcome.
vi) Resource reallocation- A key element of marketing strategy formulation
is resource allocation. A strategic review of foreign operations often leads
to a shake-up of the company’s country portfolio, spurring the company to
reallocate its resources across markets
Q 5 (a) Key factors that encourage product adaptation in int’l market.
Factors encouraging product adaptation
i) Differences in technical standards- Firms must meet technical standards
in order to sell in different national markets. In Europe for example, there
are restrictions on the sale of beef from cows treated with growth
hormones.
ii) Consumer and personal use products- Products sold to consumers for
personal use are likely to meet with market success when adapted to local
markets. Products such as food, clothing and entertainment cater to highly
individual tastes and hence must adapt to the differing needs of local
populations. For example Coca-Cola found itself losing market share in
Japan to companies marketing a variety of new soft drinks: sugarless
blended Asian teas, fermented milk drinks, fruit flavored noncarbonated
drinks with less sugar. Rather than stick with its cola soft drinks, it began

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imitating its Japanese competitors, offering its own version of Asian tea,
its fermented milk drink, all under different brand names. This strategy
pushed its sales up and gained a very large market share within a very short
time.
iii) Variation in consumer needs and differing use conditions- The
conditions under which products are used may differ from country to
country. Climate, for instance has an effect on products sensitive to
temperature or humidity, making it necessary to modify these products for
tropical or arctic markets.
iv) Differing income levels- Product features are sometimes modified to
make them affordable to consumers of low income levels. In Western
countries with high incomes, bicycles are leisure items and consumers look
out for advanced features such as lightweight alloys, a large number of
gears, detachable wheels, etc., all of which are additional costs to the
product. In developing countries where income levels are low, bicycles are
considered basic transportation tools, and marketers provide these without
the luxury of additional features so as to price them affordably.
v) Impact of cultural differences- Cultural differences affect tastes the
acceptance products, and consumption habits. For example, food is a very
sensitive product in multi-cultural environments.
vi) Government regulations – Government regulations leading to
differences in standards might also force product adaptation. For example,
cars imported into the United States must adhere to strict emission
controls.
Q5 (b) Describe at least 5 modes of entry into an international market
Modes of entry into international market include:-
i) Exporting- Indirect and direct exporting
Indirect exporting
-Working through independent intermediaries
-Domestic-based export merchants-they buy manufacturer’s products and then sell
them

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abroad
-Domestic based agents seek and negotiate foreign purchases for a commission
(especially
trading companies)
-Cooperative organizations export on behalf of several producers
-Export management companies manage a company’s export activities for a fee
Direct exporting
-A company handles its own exports
-Domestic based export department or division
-Overseas branch or subsidiary
-Traveling export sales reps
-Foreign-based distributors or agents
ii. Licensing
Broadly speaking, licensing is a method of foreign market operation where a
company in one country (the licensor) enters into a contractual agreement with a
company or person in another country (the licensee) whereby the licensee is given
the right to use something of great value owned by the licensor. A license usually
involves one or more of the following:
Technology, know-how, manufacturing processes, Trademark, brand name, logos,
Product and/or facility design, Marketing knowledge and processes other types of
knowledge and trade secrets.
In exchange, the licensee pays the licensor royalties or fees, which are the licensor’s
main source of income from its licensing operations, and which usually include the
following:
-a sum paid at the beginning of an agreement for the initial transfer
of special machinery, parts, blueprints, knowledge and so on.

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- the amount that the licensee must pay each year to the licensor
as a minimum guarantee
- the actual royalty that the licensee agrees to pay the
licensor each year
- to cover expenses, a fee in the form of a prepaid royalty is used
in those countries that prohibit initial payments. In addition, fees are also paid for
any new plans, blue prints, and so on.
iii. Management contracting- A management contract allows a firm to be involved
in the management of a business organization. The local investor provides the capital
for the enterprise, while the international marketer provides the necessary know-how
to manage the company. The agreement between the two parties may give the
international marketer an option of buying all or part of the newly created company.
Example: Hilton Hotels.
iv. Contract manufacturing- This is a cross between licensing and direct
investment. A company contracts for the manufacture or assembly of its products by
manufacturers established in foreign markets, either targeted for sales there or
elsewhere while still retaining the responsibility for marketing and distributing its
products. Often, the contract will call for a transfer of technology and provision of
technical assistance to the foreign market based manufacturer.
v. Franchising-the franchisor offers complete brand concept and operating system
vi. Joint ventures- Companies, one local, one foreign coming together to share
ownership and control. E.g. Toyota and General Motors came together to form New
United Motor Manufacturing Inc.