International Marketing

1
Session 13, 14

• International Marketing

2
What is Marketing?

• The process by which the firms abilities,
  products, and services are brought to the
  attention of customers, then sold and delivered
• Much more than just advertising and selling

3
The Four Ps

• Place / Foreign Market Intelligence
• Locating markets
• Trade restrictions
• Foreign competition

4
Forecasting Potential Demand

• Basic procedure How much will we sell per 1,000
  people?
• Multiply by population (in thousands)

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5
Forecasting Demand
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6

• Income inequality dramatically affects
  consumption
• Louis Vuitton, Christian Dior sell in India
• You wouldnt forecast anyone would buy just by
  looking at Indias per capita income

7
But other variables play big roles

• Leapfrogging
• Emerging countries may use more advanced products
  China cell phones
• Costs affect prices, which affect consumption
• All food, housing prices are high in Japan
• Japanese consume less of everything else
• Norwegian fruit prices high (not a necessity)
• They just consume less fruit
• Substitutes vary from country to country

8
Market Size Analysis

• Broad Scanning Techniques
• Limit detailed analysis to the most promising
  possibilities
• Good for LDCs, where precise data are less
  available
• Market Potential
• Existing consumption patterns
• Demographics
• Numbers, discretionary income, and other related
  measures
• Data on other countries
• Assumes one country is representative of another
• Time-series data
• Past to predict the future
• Income elasticity
• Depends on type of product
• Regression
• Demand related to various indicators

9
Market Size Analysis Failures

• Gap Analysis Gap analysis identifies market
  segments you are not serving adequately
• Traditional
• Usage
• Limited product lines
• Company doesnt deliver all product variations
• Distribution
• Company misses geographic or intensity coverage
• Competition
• New
• Cultural fit
• Shifts in meaning lead to recontextualizations
  with positive or negative
  consequences

10
Gap Analysis

• Gap analysis identifies market segments you are
  not serving adequately
• Types of gaps
• Usage Are people using less of the product than
  elsewhere?
• Product line What sales do we lose because
  others have the kinds of products people want?
• Distribution What sales do we lose because
  people get others products more easily?
• Competitive What sales do we lose because
  people just like others products better?

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Gap Analysis studies opportunities in areas where
you are now selling
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The Four Ps and Export Strategies

• Price
• Export pricing influenced by
• Exchange rates
• Transportation costs
• Duties
• Multiple channels
• Insurance costs
• Banking costs

13
Pricing is much more complex in international
business

• Changing values of currency
• Diversity of markets
• Physical distribution has to differ from one
  country to the next

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14
Distribution systems result in price escalation

• Many international buyers must be reached through
  complex channels
• They typically buy at small stores within walking
  or public transit distance from home

15
How Do Country Differences in Distribution Affect
MNCs?

• Entry
• Cost
• Pricing
• Retailing
• Quality

16
Distribution Channels US and Japan

• UNITED STATES
• Manufacturer
• Wholesaler

• JAPAN
• Manufacturer
• Wholesaler
• Regional distributor
• Local distributor
• Retailer

Retailer

• Back room
• Sales Floor

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Price escalation
Sell to retailer for 1.50
US production cost 1
U.S. retailer sells for 2.25
Ship sell to retailer in Canada for 1.60
Ship sell to distributor in Japan
Canada retailer sells for 2.40
Tariff .05Shipping .20Your cost1.25
Big distributor buys for 1.875, takes 20
markup, sells for 2.25
Small distributor adds 20, sells for 2.70
Store in Japan has high costs, adds 60, sells
for 4.32
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• Need to provide a sales program
• Promotional materials, services, training of
  sales people discounts for quantity, credit
• Dont be quick to cut the base price
• Government involvement no consistency
• Some laws set minimum prices to prevent
  monopoly, Japan, Germany protect small stores
• Many prohibit selling below cost
• Others set maximum prices

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The Four Ps

• Product
• What?
• What product (or product lines) where?
• Which product, how? Or issues of packaging
• Servicing
• Parts availability
• Repair services
• Technical advice
• Warehousing

20
Product Policy

• Your basic attitude toward what you offer the
  consumer
• Production Orientation little emphasis on
  marketing
• Assumes customers want lower prices or higher
  quality (or both)
• Used for
• commodity sales products where you cant create
  differentiation
• Passive exports, reducing surpluses in home
  market
• Small markets

21

• Sales orientation You decide on the product,
  then try to sell it
• Tends to work poorly in international trade
• Standardization lowers cost(?)
• Other ways of reducing costs.
• Customer orientation What can we sell in
  Country A?
• Quality
• Culture
• Takes geographic areas as a given
• Strategic marketing Try to use whichever of the
  orientations will maximize profits
• Adaptations in products over time.

22
Societal marketing orientation
Creates products to address social needs

• Use recycled products
• Use local resources
• Fill nutritional needs

23
Product Alterations

• Legal factors
• Related to safety or health protection
• Economic
• Personal incomes and infrastructure affect demand
• Indirect effects
• High gas taxes leadto smaller cars
• Cultural
• Focus groups may advise no-braineradaptations
• More sophisticated, deeply embedded cultural
  differences that affect sensemaking around
  product use, image, etc.
• Religious

24
Export-Related Problems

• Logistics
• Arranging transportation
• Determining transport costs
• Handling documentation
• Obtaining financial information
• Coordinating distribution
• Packaging
• Obtaining insurance

• Legal Procedures
• Governmental red tape
• Product liability
• Licensing agreement
• Customs duty procedure

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Question for consideration?

• When foreign laws are less strict people
  poorer, should you sell a cheaper product?

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Alteration costs vary, but can be high

• A common approach is to standardize basic
  elements, design the final product so it can be
  cheaply customized
• PCs
• Operating systems
• Appliances use same compressors, casings, sealant
  systems
• Have features to address different kinds of
  clothes in different nations

27
The Four Ps

• Promotion
• Advertising
• Sales effort
• Marketing information

28
Promotion Determining the Push/Pull Mix

• PUSH
• You decide what to sell (sales orientation)
• You sell through direct sales techniques
• PULL
• Sell what customer wants (customer orientation)
• You encourage demand through techniques such as
  advertising
• The Push-Pull Mix
• Push is more likely when
• Self-service is not predominant
• Product price is a high portion of income
• Advertising is restricted
• A complex distribution system encourages push
  techniques

29
Promotion

• Standardization of Advertising Programs
• Advantages of standardized advertising include
• Some cost savings
• Better quality at local level
• Rapid entry to different countries
• Challenges
• Translation
• Legality
• Message Needs
• Communication styles

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• Cost and availability of media to reach target
  markets
• Government regulation
• little commercial TV in Scandinavia
• Local media
• Coke, Unilever provide free samples at big
  religious pilgrimmages in India
• Can you standardize your message globally?
• GLOBAL INTEGRATION VS. LOCAL RESPONSIVENESS
  Revisted

31
International Branding Decisions

• Brand versus no brand
• Manufacturers brand versus private brand
• One brand versus multiple brands
• Worldwide brand versusmultiple brands
• What to do with acquisitions

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Branding Issues

• Language Factors
• Acquisitions
• Country-of-Origin Images
• Images of products are affected by where they are
  made
• Generic and Near-Generic Names
• If a brand name is used for a class of product,
  the company may lose the trademark

33
Chapter Review

• Introduce techniques for assessing sizes for
  given countries
• Describe a range of product policies and the
  circumstances in which they are appropriate
• Contrast policies of standardized versus
  differentiated marketing programs for each
  country in which sales are made
• Emphasis how environmental differences complicate
  the management of marketing worldwide
• Discuss major international considerations within
  the marketing mix
• Product
• Pricing
• Promotion
• Branding
• distribution

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Chapter Objectives

• Introduce techniques for assessing sizes for
  given countries
• Describe a range of product policies and the
  circumstances in which they are appropriate
• Contrast policies of standardized versus
  differentiated marketing programs for each
  country in which sales are made
• Emphasis how environmental differences complicate
  the management of marketing worldwide
• Discuss major international considerations within
  the marketing mix
• Product
• Pricing
• Promotion
• Branding
• distribution

16-2