International Marketing

1
International Marketing

• Tim Beal
• Lecture 7
• 27 April 2004

2
Today

• Housekeeping
• International Marketing functions and strategies

3
Housekeeping

• Marks for wine assignment have been posted
• If you have a query, check with your tutor first
• You should be making good progress on your major
  assignment
• Due 21 May

4
International Marketing functions and strategies

• First part of course looked at IM environment
• The outer ring in our diagram
• Firm and environment
• Now moving to inner circle

5
Branding, communications and pricing

• Start with presentation by Prof Roger Lewis on
  Communications and Branding
• This ties in especially with Zespri case study
  next week
• Janet Carruthers will also touch on it 18 May
• Also bear in mind its relationship with 4 Ps
• Eg pricing

6
Communications and pricing

• Video of discussion with Greg Crump
• Managing Director of Lighthouse Creative in Seoul
• Has been involved in marketing in Asia for many
  years
• Eg Heineken beer
• If time, then move to notes on pricing

7
Pricing

• Pricing strategiesLinks with product,
  distribution, communication
• Neglected area compared with product, promotion,
  distribution
• pricing is complex
• economic and legal
• psychological
• managers loathe to discuss pricing strategies
• key component of marketing
• eg Levitt and low prices more important than
  perceived differences

8
What is price?

• Number of definitions and perspectives
• traditional business approach
• price (cost profit)
• cost plus approach

9
Economics

• economists two approaches
• labour theory of value
• RicardoMarx
• Value is determined by human labour embodied in
  it
• supply and demand
• price is where supply and demand schedules
  intersect

10
Marketing definition

• price tangible intangible value of a product
  or service
• tangible physical characteristics
• intangible perceived extra values
• prestige
• status
• newness
• beauty, etc.

11
Case of IBM

• pre INCIS (police computer)
• no one got fired for buying IBM
• IBM was usually more expensive than competition
• less performance value for money
• BUT
• perceived as safe
• premium

12
Where put the emphasis?

• Tangible value
• Intangible value
• may vary with market
• both

13
Setting objectives

• Pricing goals and objectives eg
• return on investment (ROI)
• market share
• Pricing strategies
• to achieve goals
• Pricing tactics
• to achieve objectives

14
Integration with marketing strategy

• Pricing objectives and strategy must be
  integrated with other aspects of marketing
  strategy
• product development
• Communication

15
Two approaches

• Financial
• Marketing

16
Financial approach

• Makes sense if
• cost advantage
• demand steady
• market leader (oligopoly)
• Otherwise results unpredictable

17
Financial objectives

• Return on sales
• income/sales
• Return on assets
• earning/assets
• Return on investment
• income/(stockdebt)
• Clearly financial considerations always
  important, but inadequate

18
Marketing approach

• branded product rather than commodity
• commodity sells on price
• branded product has enhanced value

19
High
Branded markets
Price differentiation
Commodity markets
Low
Product differentiation
High
Low
20
Cost-driven pricing

• product development
• manufacturing
• promotion and distribution
• stir in profit requirement
• price
• two problems

21
two problems

• may underprice and not deliver optimum profit
• May overprice and not deliver sales
• therefore no profit

22
Marketing analysis

• Customer price perceptions
• Competitive and market environment

23
Customer price perceptions

• Indicator of quality
• has to be established in customers minds
• Example of Japnsese exports to US - Lecture 11

24
Elasticity of demand

• Elastic demand
• eg cornflakes, beer
• drop in prices produces more than proportional
  increase in demand
• eg 10 fall in prices produces 20 increase in
  sales
• Unit elasticity
• eg BMWs 10 drop in prices produces 10 increase
  in sales

25
Elasticity of demand

• Inelastic demand
• eg essentials (beer, textbooks)
• not responsive to change in price

26
Price perceptions

• If price seen as indicator of value then normal
  concepts of elasticity of demand may be varied
• Johnnie Walker Black Label
• Japanese distributor tried to raise sales by
  lowering price
• Sales dropped
• Why?

27
Price perceptions

• Black Label was bought as a gift
• high price was part of perceived value
• Price has cultural and contextual attributes
• (difficult to buy cheap alcohol at Asian airports)

28
Price has cultural and contextual attributes

• What is perceived as high price in one market may
  be seen differently in another
• Customers reaction to discounts may vary
• eg Japanese traditionally not responsive to bulk
  discount because of shopping habits
• Country image effect
• French wines attract premium in Japan because
  they are French
• in UK NZ wines are highly priced

29
Pricing strategies need

• Pricing strategies need to take into account-
• Costs
• Competition
• Customers buying behaviour and perceptions
• Market environment

30
Market environment

• Exchange rates
• Laws and regulations

31
Exchange rates

• Uncontrollable variable
• Depreciation (fall) helps exporters
• Appreciation hinders exporters
• Complex because effect on costs of imported
  inputs
• Desirable to move from commodity to product so
  less price sensitive

32
Quote customers currency

• Best practice is to give prices in customers
  currency
• but seldom done
• Amazon.com -US
• VUW NZ
• Need to hedge
• protection against currency fluctuations

33
Laws and regulations

• Japanese strategies of 1960s probably no longer
  tolerated by US
• Prices lower than domestic competition can lead
  to dumping charges or other countervailing
  measures
• eg US restrictions on Australian and NZ lamb
  steel

34
Dumping

• Various definitions but usually has two
  components
• 1 Selling at a lower price in foreign market than
  domestic market
• 2 Causing damage to domestic producers
• Not used in US lamb case but many other instances
• eg Kiwifruit

35
Kiwifruit dumping case

• US producers claimed that NZ was dumping
  kiwifruit
• NZ responded by pointing out that price in
  California was HIGHER than in NZ
• US said NZ was not a substantial market so could
  not be used as base
• Argued that Tokyo was more appropriate
• Prices higher in Tokyo than California US won

36
Pricing strategies (I)

• Avoid cost plus pricing
• Financial strategies should be subordinated to
  marketing
• Pricing strategy should be integrated with other
  aspects of marketing mix
• Preferable to move to branded product
• price inelastic
• premium price

37
Pricing strategies (II)

• Be aware of competition
• Be conscious of customer buying behaviour and
  perceptions
• Be aware of legal and political environment

38
Integration

• Pricing strategy needs to be integrated
• Product
• Communication
• How do you communicate premium service if no
  business class?
• Staff need to be involved
• Competition and alliances
• Market environment

39
Next week

• Market and environmental research and analysis
• Video Zespri in Korea