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Introduction International Marketing
Fachhochschule LudwigshafenDr. rer. pol. Irene Giesen-Netzer, Diplom-KauffrauWS 2009/2010
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Introduction International Marketing
Part of Marketing conception (8 credits) Marketing planning and controlling
(60 points) Intro International Marketing (40
Points) Written test at the end
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Literature Albaum, G., Duerr, E., International
Marketing and export management, 2008
Backhaus, K., Büschken, J., Voeth, M., International Marketing, 2005
Lascu, D.-N., International Marketing, Third edition, 2008/ Third edition 2008www.atomicdog.com
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Content Basics of International Marketing The international Marketing Environment International Marketing Strategies International Marketing Mix Implementation of the international
Marketing Strategies
Case studies
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Content
Basics of International Marketing Importance Concepts Drivers
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Importance of IM
International expansion helps firm: Keep pace with competition Reach a larger market (e.g. US with
25% of worldwide products/services) Reap higher profits Prolong the lifecycle of their products
Also an option for small and medium sized companies
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Internationalization Philosophies
Domestic Marketing
Export Marketing
MultinationalMarket
ing
Global Marketing
Low or no
international commitment
Focus on domestic
consumers and home country
environment
Domestic focus
Limited international commitment
Involves direct
or indirect export
Ethnocentric
Substantial internationalcommitment
Focus on different
international countries
Polycentric
Extensive internationalcommitment
Focus on
regionsmarket
segments rather than countries
RegiocentricGeocentric
Raising commitment/ involvement to international markets
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Ethnocentric Orientation Guided by domestic market extension concept Domestic strategies, techniques, and personnel are
perceived as superior. International markets are secondary, regarded
primarily as outlets for surplus domestic production. International marketing plans are developed in-house
by the international division.
E.g. Disney resort in France: Disneyland Resort Paris had to adapt it to local preferences: European fairy tales, food, and dress code for staff.
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Polycentric Orientation Guided by the multidomestic marketing
concept Focuses on the importance and uniqueness of
each international market Firms establish independent businesses in
each target country. Fully decentralized, minimal coordination
with headquarters Marketing strategies are specific to each
country. Outcomes:
No economies of scale Duplicated functions Higher final product costs
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Regiocentric Orientation Guided by the global marketing concept World regions that share economic, political,
and/or cultural traits are perceived as distinct markets. (e.g. EU, NAFTA*)
Divisions are organized based on location. Regional offices coordinate marketing activities.
*North American free trade agreementDana-Nicoleta Lascu Atomic Dog Publishing 2006
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Geocentric Orientation Guided by the global marketing concept Marketing strategies aimed at market
segments, rather than geographic locations Maximizes efficiencies worldwide and
provides standardized product or service throughout the world
E.g. McDonalds
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International Expansion Drivers
Business Environment Drivers
Firm specific Drivers
CompetitionRegional Economic and Political IntegrationTechnologyImprovements in Transportation and TelecommunicationEconomic GrowthTransition to Market EconomyConverging Consumer Needs
Product Life CycleHigh New Product Development CostsStandardizationEconomies of ScaleCheap LaborExperience Transfers
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International Expansion Drivers: Business Environment (contd.)Competition Example: McCann Erickson has been handling
the Coca-Cola account in 129 countries since 1942. Therefore the advertising agency, follows longtime client, Coca Cola, Inc., to all countries where Coke is present.Nevertheless Coca-Cola moved the management of its dedicated Red Lounge China marketing unit from McCann Erickson to Leo Burnett, a competing advertising agency (2007). At the same time Leo Burnett lost some international accounts of its longtime client, McDonald's.
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International Expansion Drivers: Business Environment (contd.)
• Example: Regional agreements such as NAFTA, and the European Union (EU) lower and eliminate barriers and promote trade within these markets.
• Subsidiaries can be established in these markets to take advantage of free trade within the region.
Regional Economic and Political Integration
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International Expansion Drivers: Business Environment (contd.)TechnologyExamples: Consumers worldwide are exposed to
similar products, services, and entertainment, and marketing communications.
The Web and the Internet have revolutionized the way companies conduct business.
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International Expansion Drivers: Business Environment (contd.)
• Lower cost and higher quality communication due to satellite technology, teleconferencing, and e-mail
• Efficient transportation due to containerization and just-in-time technology
Transportation and Telecommunications
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• Emerging middle class with increasing buying power in big emerging markets such as Brazil and India.
• Opening of new markets previously closed, such as the markets of China and Vietnam.
Economic Growth
International Expansion Drivers: Business Environment (contd.)
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• Transition of the Eastern Bloc to a market economy created important new markets.
• Created opportunities to transform inefficient government-owned companies into successful enterprises.
Transition to a Market Economy
International Expansion Drivers: Business Environment (contd.)
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International Expansion Drivers: Business Environment (contd.)
Transition to a Market EconomyYum! Brands in China and Taiwan(e.g. Taco Bell, KFC, Pizza Hut) do well - in spite of E.coli (East cost) and rat infestation in NY
Yum! Brands is omnipresent in China and Taiwan
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Uniform consumer segments emerging worldwide:
Global teenagers Global elite Loyal to international brands (Nike, Levi’s, Coca-Cola, Heineken, Ralph Lauren, MTV, TV shows)
Converging Consumer Needs
International Expansion Drivers: Business Environment
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Consumers traveling abroad bring with them product experiences and demand brands that may not be available in the home-country market.
Converging Consumer Needs
International Expansion Drivers: Business Environment
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Bagel shop in Berlin (Potsdamer Platz)
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Firm-Specific Drivers (contd.)
Product Life Cycle Considerations: prolonging product lifecycle by entering growth markets
Sales
Intro Growth Maturity Decline
Profits
Sales
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e.g. Cigarette industryin emerging markets
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Firm-Specific Drivers (contd)
High New Product Development Costs
Firm must look beyond home-country market to recover investment costs.
E.g. Nike: one year to develop a new product, that last only half a year on the shelves in the US
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Price competition during the maturity of the product life cycle drives firm to new international markets in search of cheap labor. The firm lowers costs—thus prices—due to economies of scale and saving from standardization processes.
Firm-Specific Drivers
Standardization, Economies of scale, Cheap Labor
Experience TransfersExperience in one country serves as basis for strategies in new international markets.
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Obstacles to Internationalization
within the company outsideFinancesPsychological: unknown environmentSelf-Reference Criterion
Government BarriersBarriers imposed by International Competition
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Obstacles to Internationalization
Self-Reference Criterion Conscious and unconscious reference
to own national culture while operating in the host country. (e.g. eye contact US-Japan)
To counter the impact of the self-reference criterion, the corporation must select appropriate personnel for international assignments and engage in sensitivity training.
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Obstacles to Internationalization
Government Barriers Restriction placed on foreign
corporations by imposing tariffs, import quotas and other limitations, such as restrictive import license awards.
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Obstacles to InternationalizationBarriers imposed by International Competition
Blocked channels of distribution
Exclusive retailer agreements
Cutting prices
Advertising blitzes
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Case Study 1
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Content Basics of International Marketing The international Marketing
Environment International Marketing Strategies International Marketing Mix Implementation of the international
Marketing Strategies
Case studies
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Content
The international Marketing Environment World economy International Trade Regional Economic and Political
integration Cultural Influence on IM
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Rather than rising and falling separately, national economies have become interdependent and respond to the same environmental forces
The international economy performs as a single unit.(e.g. Finance/ Banking crises 2008/2009)
The World Economy
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Categories of countries First World (Developed countries), Second
World (Socialist countries), Third world (Developing countries)
United Nation: LLDCs Least developed countries and lowest income) LDCs (less developed and lower income) NICs (newly industrialized countries e.g. Singapore, South Korea, Hong Kong)
World Bank (and here): Developed Countries, Emerging Countries, Developing Countries
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Big Emerging Markets Present the greatest potential for
international trade and expansion Set the pace for the economy in the
region. Examples: China, India, Argentina,
Brazil, Mexico
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Characteristics of Emerging Markets
• High political stability• Sound currency, low inflation• Pro business, fiscally-conservative,
transparent government policies• Guarantees for the repatriation of
dividends and capital• Sound corporate law• Markets reflecting fair prices• Work ethics and a culture of integrity
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Political Environment At the basis of international law and international
relations: sovereignty (self determination and independence from external interference, authority over all nationals)
International trade limits sovereignty. Governments can invoke sovereignty and
jeopardize firm’s operations. E.g. Iran, Cuba
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Political Risk Evaluating Political Risk:
Business periodicals (The Economist, Wall Street Journal)
Commercial sources (Country reports, Chase, RUNDT’s)
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Political Risk Country risk rankings Least risky countries,
Score out of 100Source: Euromoney Country risk March 2008[1]
Rank Previous Country Overall score
1 1 Luxembourg 99.88
2 2 Norway 97.47
3 3 Switzerland 96.21
4 4 Denmark 93.39
5 5 Sweden 92.96
6 6 Ireland 92.36
7 10 Austria 92.25
8 9 Finland 91.95
9 8 Netherlands 91.95
10 7 United States 91.27Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Political Risk Political Risk Signals:
Poor economic performance Repression of ethnic groups and/or
general repression by the elite Internal diversity and incongruent
interests Radically changing government
structures Fierce nationalist sentiment
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Political Risk
Dana-Nicoleta Lascu Atomic Dog Publishing 2006
Risk Element Example
Economic performance signal
United Kingdom unemployment is increasing due to higher immigration and falling levels of economic activity.
Political repression signal
Peaceful protest is not a right for Russians: violent clashes between police and pro-democracy demonstrators in Moscow and St. Petersburg are the norm.
Internal diversity and incongruent interests
Eastern European and Turkish migrants are flocking to the high-income countries of the European Union. They do not acculturate easily and create divergent interests in Old Europe.
Political instability and the instability of government policies
Taiwan's ruling party, the DDP, endorses a separatist policy relative to China, limiting access to Taiwan's market. The opposition welcomes a closer relationship to China. The parties have physical fights.
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Political Risk Risks Related to Government Trade
Policies: Tariffs, exchange-rate controls, quotas, export/import license requirements, other trade barriers (embargos,
sanctions) Details next chapter/ International Trade barriers
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Political Risk (contd.) Risks Related to Government Economic Policy:
Controlling foreign investment through taxes
transfer of assets from company to local ownership:
- Confiscation (without compensation)- Expropriation (some reimbursement) - Creeping expropriation (paperwork, judicial
systems, regulations)- Nationalization (local government takes over)- Domestication (transfer to local enterprises)
Risks Related to Labor and Action Groups Risks Related to Terrorism
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Minimizing Political Risk Understand both ruling and opposition parties. Remain politically neutral. Be exemplary corporate citizens. Sell a quality product or service that is
essential for local development. Partner with local companies and create local
expertise. Use local suppliers. Obtain insurance coverage against
expropriation, nationalization, confiscation, and terrorism.
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Insurance e.g.Hompage www.opic.gov 21.1.09
Overseas Private Investment Corporation OPIC assists U.S. companies by providing•financing•political risk insurance, •and investment funds.
OPIC was established as an agency of the U.S. government in 1971 and currently does business in over 150 countries.
Types of CoverageCurrency Inconvertibility Expropriation Political Violence Standalone Terrorism Special Coverages Small Business Coverage
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International Legal Environment
International Laws Host Country Laws Home Country Laws Legal Systems:
Common law Code (Civil) law Islamic law
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Jurisdiction Not automatic
In EU: European Court of Justice Between Governments (UN): The International
Court of Justice Between international enterprises: host- or
home- or third country
BindingNon-Binding
Independent Third Party
Independent Third Party
ARBITRATIONARBITRATIONMEDIATIONMEDIATION
Instead of alawsuit
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Intellectual Property Rights
Violation of intellectual property rights is a significant threat to the competitiveness of international corporations.
Losses attributed to the violation of intellectual property rights are estimated to be $60 billion a year. (e.g. Software $11 billion, entertainment $8, pharmaceuticals $1 billon)
There is a saying in Shanghai: “We can copy anything except your mother” (even fake blood plasma)
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Intellectual Property Protection
Patent Protection of the rights of the inventor or
of the firm to use and sell the invention for a specified period of time.
Copyright Rights of owner of original work of art
(literature, music, film, design) to reproduce, sell, perform, or film the work.
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Intellectual Property Protection
Trademark Brand name, mark, symbol, motto, or
slogan that identifies a brand and distinguishes it from competitors’ brands. (E.g. Rolex, Gucci, Fendi/ Design copying without the trademark is legal)
Trade Secret Know-how, formulas, and special blends
that are not registered and are thus not protected by law.
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Counterfeiting
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Factors Influencing Intellectual Property Violations
Lack of appropriate legislation Lax enforcement Unavailability of authentic products High prices for authentic products that limit their
accessibility to local consumers Cultural Factors:
Values that perceive imitation as a form of flattery Feelings of interpersonal distrust and not getting fair
deal Emphasis on material wealth Belief that technology is common domain
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TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights,): member countries of the World Trade Organization, must sign the TRIPS agreement: minimum standards for the legal protection of property rights
Bilateral and multilateral conventions Enlisting home and host-country
government support
Protecting Intellectual Property
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Home Country Legislation Antitrust Legislation
Prevent anticompetitive activities such as the creation of monopolies and cartels.
Anti-Corruption Legislation Prevent multinational corporations from
using unethical means to obtain competitive advantage in a particular market
Foreign Corrupt Practices Act makes it illegal to bribe politicians.
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Natural Environment as a influencing factor for IM Geology and Shortage of natural
resources (access to resources, e.g. oil)
Topographies and access to Markets Hydrology Climate Population/ Human Capital Environmental Quality (regulations on
the natural environment, e.g. hormones, pesticides, CO2-Levels)
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Technological Environment as an influencing factor for IM
New product development Networks, warehouse management,
electronic data interchange (EDI) Web/Internet
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Technological Environment as an influencing factor for IM
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World Regions Population (2006 Est.)
Population % of World
Internet Usage, Latest Data
% Population (Penetration)
Middle East and Africa
1,105,295,089 17.0 52,148,100 13.8
Asia 3,667,774,066 56.4 387,593,457 10.6
Europe 807,289,020 12.4 312,722,892 38.7
North America 331,473,276 5.1 232,057,067 70.0
Latin America/Caribbean
553,908,632 8.5 88,778,986 16.0
Oceania/Australia
33,956,977 0.5 18,430,359 54.3
WORLD TOTAL
6,499,697,060 100.0 1,091,730,861 16.8
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Technological Environment as an influencing factor for IM
Opportunities Web/Internet: 200 million e-mail boxes in the United States.
People send more than 7 trillion e-mails each year in the United States.
The average e-mail user receives 31 e-mails per day.
Business-to-business e-commerce in the United States totals $1.3 trillion per year.
Businesses will place orders totaling $3 trillion per year worldwide via the Internet.
Twenty-five percent of all business-to-business purchases are placed through some type of Internet connection.
Internet retail sales account for almost 2.5 percent of all retail sales Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Technological Environment as an influencing factor for IM
Threats Web/InternetThe payment mechanism is sometimes difficult: Different currencies Different method of payments (credit
cards, debit cards) Credit card theft Accepting credit cards from unknown
buyers
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Content
The international Marketing Environment World economy International Trade Regional Economic and Political
integration Cultural Influence on IM
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Opposing Forces
National and local governmentswant to protect small /medium
enterprises
Build trade barriers
Reduction of trade barriers
Multinational firms and governments of the multinational firmsDana-Nicoleta Lascu Atomic Dog Publishing 2006
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Arguments for Protectionism
Protection of markets with excess productive capacity/ of markets with excess labor/ Employment protection
“Infant industry” argument Natural resources conservation and
environmental protection Consumer protection National defense
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Tools of Government Protectionism
Tariffs: any type of tax imposed on imported goods Discourage imports of particular goods Protect local industry Penalize countries that are not politically
aligned with the importing country. Generate revenues
US tariffs are generally less than 15%. Other countries impose tariffs greater
than 100% for protected products.Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Tools of Government Protectionism (contd.)
Non-Tariff Barriers: Measures, other than traditional tariffs, that are used to distort international trade flows Raise prices of both imports and
import-competing goods. Favor domestic over foreign supply
sources by causing importers to charge higher prices and to restrict import volumes.
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Tools of Government Protectionism (contd.)
Non-Tariff Barriers (contd.): Quotas:
Specify maximum quantity (unit limit) or value of a product that may be imported during a specified period.
Orderly market arrangements Complicated approach to establishing what, in
essence, is a quota. (Textile and apparel industries)
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Non-Tariff Barriers (contd.):Licenses
Non-Automatic Import Licenses: Issued on a discretionary basis to
restrict imports of a given product or from a certain country
Examples: Military equipment and other
armament from any country Birds
Restrict volume and/or quantity of imports
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Non-Tariff Barriers (contd.):Licenses (contd.)
Automatic Import Licenses: Granted freely to importing companies Facilitate import surveillance Discourage import surges Place administrative and financial
burdens on importer May raise costs by delaying shipments
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Non-Tariff Barriers (contd.):“Voluntary” Expansion/Restraints
Voluntary Import Expansion: Governments agree to allow imports from a particular country as a result of pressure from another country. Increases foreign access to a domestic market. Increases competition and reduces local prices.
Voluntary Export Restraints: Self-imposed export quotas—imposed to avoid
a greater penalty. Used by the importing country to protect local
industries.
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Non-Tariff Barriers (contd.):Price Controls
Increasing the Price of Imports to match minimum domestic prices
Antidumping and Countervailing Duty Actions: investigations to determine
if products were sold below fair value to get rid of excess inventory (dumping) or
as a result of foreign subsidies. Such measures can intimidate importers.
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Non-Tariff Barriers (contd.):Price Controls (contd.)
Paratariff Measures:
Additional charges that increase the cost of imports Examples:
Advance import deposits Import charges Seasonal tariffs Customs charges
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Non-Tariff Barriers (contd.):Standards
Environmental, performance, manufacturing and other standards used as barriers to imports.
Primarily imposed by highly industrialized countries
E.g. EU against hormone fed US beef, bioengineered corn and soybeans
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Non-Tariff Barriers (contd.):Percentage Requirements
Requirement that a percentage of the products imported be locally produced
Local content requirement: Often met by manipulating and/or assembling
the product on the territory of the importing country, usually in a foreign trade zone.
Favoring local contribution and labor Limiting foreign ownership to a certain
percentage.
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Non-Tariff Barriers (contd.):Boycotts
Boycotts Action group calling for a ban on all
goods associated with a particular company and/or country.
Target company is representative of its country of origin.
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Non-Tariff Barriers (contd.):Embargos and Sanctions
Embargos Prohibiting all business deals with the
target country; affects third parties. E.g. US Cuba
Sanctions Punitive trade restrictions applied by a
country or group against another country for noncompliance.
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Non-Tariff Barriers (contd.):Currency Controls
Blocked Currency Does not allow importers to exchange of
local currency for currency a seller is willing to accept as payment.
Differential Exchange Rates Favorable and less favorable exchange
rates imposed on imports, based on the extent to which the goods are necessary and desirable.
Foreign Exchange Permits Give priority to imports in the national
interest.Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Arguments for free trade
increases competition (lower prices for local consumers)
Multinationals encourage efficiency in local manufacturing and services.
Local firms no longer have to limit themselves to the local, national market.
Increase production, achieve economies of scale, and offer lower prices to world markets.
Avoidance of protectionism of other governmentsDana-Nicoleta Lascu Atomic Dog Publishing 2006
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Arguments for free trade
International trade ImperativeDavid Ricardo’s Theory Countries benefit from
specialization in an industry in which they have comparative advantage and from trading with one another.
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Arguments for free trade
Eastern worker in a Year makes: 2 bicycles or 4 bushels of wheat.
A Westerner can produce: 1 bushel or 1 bike.
Each country has 100 workers split evenly between producing bikes or wheat
West has no absolute advantage!
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Arguments for free trade
Without international trade: East produces 50*4=200 bushels and
50*2=100 bikes, West produces 50*1=50 bushels and
50*1=50 bikes. Together: 250 bushels and 150 bikes
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Arguments for free trade
With international trade based on comparative advantage:East has absolute advantages in both. But
West has a comparative advantage in bikes.East specializes in growing wheat moving 10
workers to it: East produces 60*4=240 bushels and 40*2=80 bikes
West specializes in producing bikes moving 25 workers to it: West produces 25 bushels and 75 bikes
Together: 265 bushels and 155 bikesDana-Nicoleta Lascu Atomic Dog Publishing 2006
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Facilitators of International Trade
International Trade and Economic Development Organizations
Government Organizations Other Institutions and Procedures
Facilitating International Trade
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World Trade Organization Largest and most influential international
trade organization (153 members on 23 July 2008 from 197 countries worldwide)
Ensures free flow of trade Functions:
Provides assistance to developing and transition economies
Offers help for export promotion. Promotes regional trade agreements and economic cooperation.
Reviews members’ trade policies and engages in routine notification of new trade measures.
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World Trade Organization (contd.)
WTO agreements represent trade rules and regulations and act as contracts guaranteeing countries trade rights and binding governments to free trade policies.
Agreements: General Agreement on Tariffs and Trade (GATT) General Agreement on Trade in Services (GATS) Trade-Related Aspects of Intellectual Property
Rights (TRIPS) Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Group of Eight - G8 Members from the most industrialized
countries: Canada, France, Germany, Italy, Japan, United Kingdom, United States and Russia Yearly meetings involve heads of state,
government ministers, directors of central banks
Addresses: biotechnology, food safety, economic development, disarmament, arms control, organized crime, drug trafficking, terrorism, environmental issues and trade
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United Nations Organizations
16 different United Nations Organizations Maintain international peace and security develop relations among countries achieve international cooperation encourage respect for human rights and freedom
Promote the economic and financial welfare of developing countries. Focus on developing industrial, communication, agricultural and
transportation infrastructures.
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International Monetary Fund (IMF)
Specialized agency of the United Nations (UN), 185 member countries
Encourages unrestricted conversion of currencies through clear values.
Member voting power linked to amount they contribute.
a body instituting appropriate development strategies.
Mediator between debtors and creditors Provides training and technical assistance
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Facilitators of International Trade: The Development Banks
The World Bank Specialized agency of the UN, works with
IMF Largest international bank that sponsors
economic development Employs international specialists
in economics, finance, sectoral development Focus on health and information technology
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Facilitators of International Trade: The Development Banks (contd.)
African Development Bank (poverty reduction)
Asian Development Bank (Private sector) European Bank for Reconstruction
and Development (focused on markets of transition in Central and Eastern Europe)
Inter-American Development Bank (private sector projects)
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Facilitators of International Trade: Government Agencies
• Ministry of Trade, Ministry of Foreign Affairs
• USA:• US Department of Commerce; Export-
Import Bank of the United States
• State and Local Government Agencies, such as the U.S. Chamber of Commerce
• US Agency for International Development (USAID)
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Foreign Trade Zones (FTZs)Free Trade Zones
Tax-free area not considered part of the country in terms of import regulations and restrictions—site is considered an international area.
Merchandise in FTZ is outside the jurisdiction of the host country’s customs services.
Host country benefits: Creates demand for local services, products,
and raw materials—hence local jobs. Increases trade balance—re-exports add to
total number of exports from the respective country.
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Foreign Trade Zones (FTZs) (contd.)
Firm benefits from using an FTZ: Foreign goods are exempt from duties as long as
they do not enter the country. Goods are imported when demand is high, thus
deferring tariffs until that time. Payment is delayed until goods are sold. Firm can use the FTZ for breaking bulk. Lowers prices for goods sold in the importing country
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Foreign Trade Zones (FTZs) (contd.)
Firm benefits from using an FTZ, cont.: Helps importing country impose local
content regulations on products from abroad.
Safer than most ports of entry—bonded warehouse.
Products can be labeled as manufactured in the foreign trade zone country, if products from that country have a positive country-of-origin (country image).
E.g. Port of Rotterdam (NL) Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Other Customs-Privileged Facilities
Variations of FTZ Products are brought into an in-bond area,
manipulated (processed, repackaged, assembled), and re-exported to country where products originated.• Low tariffs assessed only on value-added processing
that took place in the zone. • Limits on products imported to encourage re-
exporting.
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Content
The international Marketing Environment World economy International Trade Regional Economic and Political
integration Cultural Influence on IM
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Obstacles to Economic and Political Integration
Differences in culture (language, traditions, norms, religion) and history
Physical distance/ not the same borders Differences in level of economic
development Political considerations:
Concerns regarding loss of sovereignty/ national identity
A history of conflict
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General Bilateral/Multilateral Agreement General Bilateral/Multilateral Agreement
Free Trade Agreement Free Trade Agreement
Common Market Common Market
Monetary Union
Monetary Union
Political UnionPolitical Union
Levels of Regional Economic and/or Political Integration
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General Agreements: Bilateral and Multilateral Forums and Agreements
Bilateral Agreements Regional trade cooperation between two countries
Multilateral Forums and Agreements: General agreements between multiple countries. Typically, they are industry specific OPEC (Organization for Petroleum Exporting Countries)/ Oil and
Gas NATO (North Atlantic Treaty Organization)/ Military OECD (Organization for Economic Cooperation and Development) APEC (Asia-Pacific Economic Cooperation) CIS (Commonwealth of Independent States) non-Baltic successors
to the Union of the Soviet Union
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Free Trade Agreements: Europe
Countries reduce or eliminate trade barriers on all goods and services traded between them.
Every country is free to charge its own tariff to all external entities.
Example: European Free Trade Association
(EFTA)- Member countries: Iceland,
Liechtenstein, Norway and Switzerland
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Free Trade Agreements: Asia
Association of Southeast Asian Nations (ASEAN) Most successful example of regional economic
integration in Asia Member countries: Brunei, Cambodia, Indonesia,
Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
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Free Trade Agreements: Americas
• North American Free Trade Agreement (NAFTA) Member countries: United States, Canada and
Mexico.• Free Trade Area of the Americas (FTAA)
Member countries: The 34 democratic nations of North, Central, and South America.
Ambitious plan to create a market of 800 million people and an annual production worth $11 trillion in the current decade.
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Free Trade Agreements: Africa
• Southern African Development Community (SADC) Free trade organization promoting
economic cooperation among 14 of Africa’s more affluent countries: Angola, Botswana, the Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mozambique, Namibia, Seychelles, the Republic of South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe.
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Customs Union Trade association that eliminates or
greatly reduces all trade restrictions for member countries
Identical Import duties and regulation for non-members South African Customs Union
Botswana, Lesotho, Namibia, and Swaziland
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Common MarketEstablishing a common market involves: Eliminating all tariff and non-tariff
barriers to trade Adopting common external tariffs Allow for free movement of capital and
labor within the common market European Union reached this stage
before establishing a monetary and political union
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Common Market (contd.)• Latin American Integration
Association Member countries: Argentina, Bolivia, Chile,
Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela.
• Andean Common Market Member countries: Bolivia, Colombia,
Ecuador, Panama, Peru, and Venezuela.
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Common Market (contd.)• Southern Cone Common Market
(MERCOSUR) Member countries: Belize, Costa Rica,
Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.
• Central American Common Market
Member countries: Brazil, Argentina, Paraguay and Uruguay.
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Common Market (contd.) Common Market for Eastern
and Southern Africa (COMESA) Angola, Burundi, Comoros, Democratic
Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe.
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Monetary Union• Common monetary policy• Unified central bank • Single currency
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Monetary Union, Examples:
• European Monetary Union Also known as Euro zone, EUR-16,
and Euroland Member countries: Austria, Belgium,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain
European Central Bank
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Monetary Union, Examples:
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European Monetary Union3 criteria:• No more than
2 % from average interest rate
• Budget deficits below3 % of GDP
• Public dept not exceeding 60% of GDP
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Monetary Union, Examples: (contd.)
• West African Economic and Monetary Union Benin, Burkina Faso, Ivory Coast, Guinea-
Bissau, Mali, Niger, Senegal, Togo• Economic Community of West
African States Benin, Burkina Faso, Cap Verde, Ivory
Coast, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo
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Political Union
Highest level of integration Common governing bodies,
legislative bodies, and enforcement powers
Example: European Union
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European Union
Belgien (BE) Italien (IT) Rumänien (RO)
Bulgarien (BG) Lettland (LV) Schweden (SE)
Dänemark (DK) Litauen (LT) Slowakei (SK)
Deutschland (DE) Luxemburg (LU) Slowenien (SI)
Estland (EE) Malta (MT) Spanien (ES)
Finnland (FI) Niederlande (NL) Tschechien (CZ)
Frankreich (FR) Österreich (AT) Ungarn (HU)
Griechenland (GR) Polen (PL) Vereinigtes Königreich (GB)
Irland (IE) Portugal (PT) Republik Zypern (CY)
Member Countries: 27
Candidate Countries: Croatia , Turkey
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Bodies of the European Union
• European Council: The highest policy-making body, it consists
of heads of member-countries’ government.• European Parliament (in Strasbourg, F):
Consists of 785 members elected by direct universal suffrage with representation allocated among member states based on their population (5 years)
Debates the policies and legislation in the EU
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Bodies of the European Union
• Council of Nations Consists of representatives from parliaments
of member countries and acts as constitutional council that has the power to overrule the Court of Justice.
• Council of Ministers: The decision-making body (legislature) of
the European Union Composed of one minister from each
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Bodies of the European Union (contd.)• European Commission:
The executive body of the European Union.
Subordinated to the European Council Consists of a president and
commissioners who are in charge of initiating and supervising the execution of laws and policies.
Answers to the European Parliament Acts only on behalf of and in the
interest of the European Union, and not that of individual member states
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Bodies of the European Union (contd.)
European Central Bank: Enacts the monetary policy for the
countries that are members of the European Monetary Union
Maintains price stability within the European Monetary Union
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Bodies of the European Union (contd.)
• European Court of Auditors: In charge of controlling sound and lawful
management of the EU budget• European Court of Justice:
The European Union’s equivalent of the United States Supreme Court.
The final court of appeals Can overrule decisions of the national
courts
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The EU Fifteen Member states
The European Parliament
The European CouncilThe European Court of Justice
Body of 546 members(elected every 5 years)
Council of Ministers:1 minister of each member country,
The legislature body
The Council of Nations:Representatives from the Parliament,
constitutional council, may overrule the Court of Justice
The European Commission:Works on behalf of the EU, Subordinate of the Council,
The executive body
Meeting place for headsOf the EU members
The European Central BankPrice Stability
Judgments overrideNational courts
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Content
The international Marketing Environment World economy International Trade Regional Economic and Political
integration Cultural Influence on IM
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Culture Culture is defined as a continuously
changing totality of learned and shared meanings, rituals, norms, and traditions among the members of an organization or society.
Culture is also defined as a society’s personality.
Culture Has a general influence on consumption Has an influence on the stakeholders Determines the manner in which individuals
respond to Marketing strategies
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ExampleThe Turkish Client
You are in the middle of negotiations with a potential Turkish client in Istanbul, over lunch, at the Conrad Hilton Hotel.
You go to the self-service buffet and pile on your plate some tasty pork chops from a serving dish clearly marked "pork." You ask the waiter to bring a bottle of wine and offer some to your potential Turkish client; he declines. Your products are known for their quality in Turkey and elsewhere in the world, and your client seems receptive to your price quote.
After lunch, the potential client invites you to his home for coffee; you decline and state that you need to stay at the hotel to get some work done and bid him good-bye.
You come back to your home country and find that you cannot reach your Turkish client. His secretary always claims he is not in, and he does not return your calls.
What went wrong?
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Example The Turkish Client in Turkey, the dominant religion is Islam,
and Islam bans the consumption of pork and alcohol.
Could he have been offended by your not going to his house for Turkish coffee?
Could the hotel staff have told him that you spent the evening next door, at another air-conditioned hotel, a former palace, having yet another bottle of wine?
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Constituents of Culture
Ecology—The manner in which society adapts to its habitat.
Social Structure—The organization of society.
Ideology—The manner in which individuals relate to the environment and to others.
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Elements of Culture
Language Religion Cultural Values Cultural Norms
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Language Spoken/Written Language
Differences in meaning in different countries which share the same language (nappies – diapers, trunk – boot, vacuuming – hoovering)
Dealing with multiple dialects High costs of translation High costs of translation blunders (e.g.
”Fresca”: soda pop, Mexico: slang for lesbian)
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Language (contd.)
Proxemics (Physical space)
Postures Orientations
(manners, conventions)
Oculesics (eye contact)
Chronemics (Timing of verbal exchange)
Haptics Kinesics (Gestures) Paralinguistics
(Intonation, accents, qualitiy of voice)
Appearances Olfactions
Non-verbal communication
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Religion Society’s relationship to the supernatural
determines dominant values and attitudes. Examples:
Protestant Religion—stresses hard work and frugality. Judaism—stresses education and development. Islam—focus on rules for social interaction. Bans the use of
interest rates. No pork or alcohol Hinduism—encourages family orientation and dictates strict
dietary constraints. Strictly hierarchical. No Beef. Buddhism—stresses sufferance and avoidance of
worldly desires.
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Religion and Its Impact on Business Business Days Gender Roles Gift Giving Marketing Practices
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Monday Tuesday Wednes-day
Thursday
Friday Saturday
Sunday
Christian
Business Business Business Business Business Business Moring
Islam Business Business Business Business Business Business
Judaism Business Business Business Business Business Business
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Cultural Values• Enduring beliefs about a specific mode of conduct or
desirable end-state.
• Guide the selection or evaluation of behavior.
• Ordered by importance in relation to one another to form a system of value priorities.
Ultimately affecting product preferences and perception of products
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Learning New Cultures Enculturation
Process by which individuals learn the beliefs and behaviors endorsed by one’s own culture
Acculturation Learning a new culture.
Assimilation Full adoption and maintenance of the new
culture, and resistance to one’s old culture.
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Cultural Norms Norms are derived from values and
defined as rules that dictate what is right or wrong, acceptable or unacceptable. Imperative
What an outsider must or must not do. Exclusive
What locals may do but an outsider cannot do.
Adiaphora What an outsider may or may not do.
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Minimum requirement for a “survival” in a new country
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Cultural Norms
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Imperatives Exclusives AdiaphorousBusiness cards: Asia: presentation and receiving with both hands. It has to stay on the table, don’t write on the card, don’t put it in the back pants pocketIn Saudi Arabic woman are not allowed to drive or walk in public without a man.
Wearing a sticker from a political party
Eating with chopsticks in Asia.Drinking banana beer in East Africa.
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Time Orientation Business Hours Gift Giving Socializing Gender Roles Status Concern and
Materialism
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National/Regional Character
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Other Manifestations of National and Regional Character
Contact e.g., phone, e-mail, in person
Access e.g., transportation by bicycle,
personal automobile, public transportation
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Holland
ChinaTaiwan
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Cultural Variability Term used to differentiate between
cultures on the Geert Hofstede Dimensions, which are: Power Distance
The manner in which interpersonal relationships are formed when there are perceived differences in power.
Low High
U.S.Germany
China
Latin AmericaEastern
Europe
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Cultural Variability (contd.)
Term used to differentiate between cultures (contd.) Uncertainty Avoidance
The extent to which individuals are threatened by uncertainty and risk and thus adopt beliefs and behaviors that help them to avoid the uncertainty.
Low High
U.S. ChinaCentral/ Eastern Europe
Germany
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Japan
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Cultural Variability (contd.)
Terms used to differentiate between cultures (contd.) Masculinity/Femininity
The extent to which a culture is characterized by assertiveness / selfconfidence, rather than nurturing.
LowMasculinity
High Masculinity
Sweden
United States
CanadaAustralia
China
Argentina
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Cultural Variability (contd.)
Terms used to differentiate between cultures (contd.) Individualism/Collectivism
The extent to which individuals prefer to act in the interest of the group rather than in their own self-interest.
LowIndividualism
Australia GB
HighIndividualism
Latin America
ThailandUnited States
China
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Cultural Variability (contd.)
Hofstede adds later a next point Long term Orientation/ short term
Time horizon of planning in a society Values long term Orientation:
frugality, insistency Values short term Orientation:
flexibility, egoism
www.culturegrams.com reports on more than 200 countries, each U.S. state, and all 13 Canadian provinces and territories
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High vs. Low Context Cultures
Low-Context Cultures What is said is precisely what is meant.
High-Context Cultures: The context of the message is meaningful. Context:
Message source The source’s standing in society or in
the negotiating group The source’s level of expertise, tone of
voice, body language
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Cultural Change and Marketing
Marketers need to integrate culture when designing a marketing strategy by going through the following process:
Researching symbolic elements and cultural meanings in consumers’ lives
Identifying cultural meanings of the product
Designing the product accordingly
Designing the marketing campaign using symbolic cultural elements
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Obstacles to Cultural Understanding
• Ethnocentrism The belief that one’s own culture is superior to
another and that strategies that are used in the home country will work just as well internationally.
• The Self-Reference Criterion: The unconscious reference to one’s own national
culture, to home-country norms and values, and to their knowledge and experience in the process of making decisions in the home country.
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The Global Consumer Culture
Shared consumption-related symbols and activities that are meaningful to market segments
A global consumer culture is attributed to the diffusion of products from the United States to the rest of the world. Entertainment (MTV, movies, CD’s) Hamburgers and pizza Jeans and running shoes, etc.
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Global Consumer Culture Trends
Proliferation of transnational firms and the related globalized capitalism
Globalized consumerism and the desire for material possessions
Homogenization of global consumption Referred to as McDonaldization or
Cocacolonization
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Positioning Based on Culture
Global consumer culture positioning Positioning the product to appeal to individuals
who want to be part of a global consumer culture.
Local consumer culture positioning Positioning the product so that it is associated
with local cultural meanings. Foreign consumer culture positioning
Positioning the product as symbolic of a desired foreign culture.
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Content Basics of International Marketing The international Marketing Environment International Marketing Strategies International Marketing Mix Implementation of the international
Marketing Strategies
Case studies
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Content
International Marketing Strategies International Marketing Research International Marketing Planning Expansion Strategies and Entry
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Case Study 2
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International Marketing Research: Definition
International marketing research is the systematic•design, •collection, •recording, •analysis, •interpretation, •and reporting
of information for a particular marketing decision facing a company operating internationally.
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International Marketing Research
International marketing managers need to constantly monitor the different forces affecting their international operations.
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Types of International Marketing Research
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Research of Industry, Market Characteristics, and Trends
Acquisition analyses Diversification analyses Market-share analyses Export research
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International Buyer Behavior Research
Brand preferences Brand attitudes Brands awareness studies Purchase behavior studies Consumer segmentation studies
e.g. Consumers in China tend to go for established luxury brands; they are more likely to avoid social risk than Westerners
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International Product Research
Concept development and testing studies
Brand name generation and testing Product testing Competitive product studies Packaging design studies Test marketing
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International Product Research
Brand name generation and testingBad-Choice Brand Names Clean Finger Nail - Chinese tissues Kolic - Japanese mineral water Last Climax - Japanese tissues Pocari Sweat - Japanese sport drink Shocking - Japanese chewing gum Cat Wetty - Japanese moistened hand towels
Pipi - Yugoslavian orangeade Polio - Czechoslovakian laundry
detergent Zit - Greek soft drink
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International Distribution Research
Import/export analyses E.g. Identifying logistic companies who can
handle customs Channel performance and coverage Plant/warehouse location studies
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International Promotion Research
How effective is the communication with the target market?
Studies of premiums, coupons, and deals Advertising effectiveness research Local media research Studies of personal selling activities:
Sales Force Compensation Quota Territory
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International Pricing Research
International market potential studies Sales potential studies Sales forecast Cost analysis Profit analysis Price elasticity studies Competitive pricing analyses
Studies projecting demand Currency and countertrade studies Studies of inflation rates and pricing Studies of negotiation tactics
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The International Marketing Research Process
STEP 1 Define the International Marketing Research Problem and Research Objectives Exploratory (define the relevant dimensions,
generate hypotheses) Descriptive (observe and describe the problem) Causal research (cause-and-effect relationships)
STEP 2 Develop the Research Plan (sources, instruments, methods, procedures, costs)
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The International Marketing Research Process (contd.)
STEP 3 Decide on the Information Sources Secondary Data: Collected to address a problem other than the specific
international marketing problem that the company is currently facing
Internal and external secondary Data Collected before primary data
Primary Data: Collected to address the specific international
marketing problem
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Secondary Data Constraints
Conceptual Equivalence Concepts have different meanings in
different cultural environments. Functional Equivalence
Products themselves may be used for different purposes in different country environments.
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Secondary Data Availability, Reliability, and Validity:
Published statistics may be unavailable—in many markets, relevant market data has not been collected; the most accurate secondary data is available on industrialized countries.
Data may not be reliable and valid—data may be underreported or exaggerated.
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Top 10 Global Marketing Research Firms
Rank
Company
Home
Research
Country
Revenues
(US$ millions)
1.
VCU N.V.
Netherlands
2,814.0 2.
IMS Health Inc.
U.S.
1,219.4 3.
The Kantar Group
U.K.
1,033.2 4.
Taylor Nelson
Sofres Plc.
U.K.
908.3 5.
Information
Resources Inc.
U.S.
554.8 6.
GfK Group
Germany
528.9 7.
Ipsos Group S.A.
France
509.0 8.
NFO WorldGroup Inc.
U.S.
466.1 9.
Westat Inc.
U.S.
341.910.
NOP World
U.K.
320.0
Source: “Top 25 Global Research Organizations,” Marketing News, Vol. 37, No. 17, August 18, 2003, p. H4.
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Primary Data Used in international marketing research
far less than it should be: Temptation is to use secondary data to serve all research functions.
Expensive: The costs of collecting primary data in international markets are likely to be much higher, especially if an adequate marketing research infrastructure is lacking.
Time consuming
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Qualitative Research Qualitative research has been useful as a first
step in studying international marketing phenomena. Examples:
Focus Groups Depth interviews Observation
Constraints: Responses can be affected by culture. Individuals may act differently if they know they are
being observed.
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Quantitative Research Quantitative research are more structured,
involving either descriptive research approaches, (survey research), or causal research approaches (experiments). Examples:
Content analysis, e.g. advertising research Survey research Experimental research
Constraints: Respondent factors Infrastructure factors
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The International Marketing Research Process (contd.)
STEP 5 Design Data Collection Instrument Emic instruments
Measure phenomena specific to each culture. Etic instruments
Measure the same phenomenon in different cultures.
Constraints: Translation costs and accuracy Instrument reliability Reluctance to answer certain questions
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The International Marketing Research Process (contd.)
STEP 6 Decide on the Sampling Plan Sample Unit (Who) Sample Size (How many) Sampling Procedure (Selection)
STEP 7 Collect, Analyze, and Interpret Data
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Decision Support Systems
for Global Marketing A coordinated collection of data,
systems, tools, and techniques, complemented by supporting software and hardware designed for the gathering and interpretation of business and environmental data. Computerized Interactive Flexible Discovery oriented
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Sales Forecasting Sales Force Composite Estimates
Personal observations and expectations of the local sales force and the international sales manager
Jury of Expert Opinion Opinions of different experts about future demand
The Delphi Method Experts to estimate market performance; findings
are aggregated, and experts are queried again with the purpose of arriving at a consensus
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Sales Forecasting (contd.) Time Series and Econometric Models
Use data of past performance to predict future market demand.
Analogy Methods Estimation method that relies on
developments and findings in markets … With similar levels of economic development, or Where the product is in the same market
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Point of Sale Research • Made with the help of store
scanners, in markets where they are available
• Involve comprehensive store audits.
Sales Forecasting (contd.)
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Content
International Marketing Strategies International Marketing Research International Strategic Marketing
Planning Expansion Strategies and Entry
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Developing an International Marketing Strategy
Requirements: Strategic fit between the company’s objectives,
competencies, and resources and the challenges of its international market or markets.
Link between the company’s resources and its international objectives in a complex, international environment.
The strategic planning process must be systematic and continuous
Company’s commitment to its international markets.
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The International Strategic Plan on different levels
Corporate
Division
Business Unit
Product Level
Strategic plan allocates resources and establishes objectives for the whole enterprise worldwide.
Has long-term focus Involves the highest levels of management Involves international target market selection
Strategic plan allocates resources to each business unit based on division goals and objectives.
Portfolio analysis is used to decide which brands to harvest, invest in, or divest.
Has longer-term focus
Planning involves decisions on which consumer segments to target in each country and how to target them.
A marketing plan is developed at product level, product line level, or at brand level.
Has shorter-term focus Involves the marketing
department
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Developing the International Marketing Plan
Develop strategies for the target market: Product mix, Distribution, Promotion mix, Pricing
Plan international marketing programs Manage the international marketing effort
Organize Implement Control
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International Target Marketing
The process of identifying and focusing on those international
market segments that the company
can serve most effectively and designing products,
services, and marketing programs with these segments in mind.
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International Target Marketing
Is Used by Companies to: Identify consumer segments with similar
traits (International market segmentation). Select segments company can serve
efficiently. Develop products tailored to each segment (International market targeting).
Offer products to the target market, communicating through the marketing mix, product traits and benefits that differentiate it in the consumer’s mind (Positioning).
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International Segmentation
The process of identifying countries and/or consumers that are similar with regard to key traits, such as product-related needs and wants, that would respond to a product and related marketing mix.
Must be performed at country (macro segmentation) level AND at the consumer level (micro segmentation).
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Requirements for International Segmentation
The ability to estimate the size of the market
The extent to which the international market is large enough to warrant investment
The extent to which international consumer preferences are stable over time
The ability to communicate with the international target market
The extent to which the international target market is responsive to the marketing strategies used
The extent to which international market segments respond differently to marketing strategies
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International Macro-Segmentation
Country Attractiveness Analysis Market potential–indicators:
Gross domestic product (GDP) per capita Industrial and agricultural sector statistics Market size and potential Consumer buying power Investment figures (Foreign direct
investment data, other trade statistics)
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International Macro-Segmentation (contd.)
Political, legal and financial environment of country: Ethnic conflict History of war engagement Antiforeigner sentiment Recent nationalization activities Legal ambiguity Trade barriers Exchange rate controls
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International Macro-Segmentation (contd.)
Marketing support infrastructure: Availability and reliability of distribution and
logistics providers Availability of competent partners for strategic
alliances. Quality of telecommunication and
transportation infrastructure. Availability of other service providers:
- Marketing research firms- Financial firms- Management consulting firms
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International Macro-Segmentation (contd.)
Strength of own Brand — brand franchise Lead country (where products are first
adopted) Lag country (where products are last
adopted) Degree of Market Fit with Company
Policies, Goals, and Resources.
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Typology of international target market
See: Backhaus,K., Büschken, J., Voeth, M, International Marketing, 2005
Market attractiveness:e.g. Labor costsBrand managementWorking hoursNew marketsMachine running timesTaxesEnvironmental standardsAdministrative barriersImport barriers
Structure (natural) barriersStrategic (competition) barriers
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Bases for Micro-Segmentation
Clusters of consumers that respond in a similar way to the marketing strategies
Demographic (descriptive statistics): Age Occupation Education Income Ethnicity Race Nationality Life-cycle stage Social class
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Bases for Segmentation (contd.)
Psychographic: lifestyles, values, attitudes, interests, opinions
Hofstede dimensions: Power-distance Masculinity-femininity Uncertainty avoidance Individualism-collectivism
Global segments (psychodemographic segments): Global teenagers Global elite Global gay and lesbian segment High sensation seekers
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Bases for Segmentation (contd.)
Benefit Segmentation Example: Cooking oil markets can be
segmented based on benefits sought—olive oil is targeted to consumers who seek health benefits.
Geographic Segmentation Example: Avon segments its market
geographically.
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Bases for Segmentation (contd.)
Idealconsumer
Usage User Status
NonusersOccasional usersMedium usersHeavy users
User of competitors productsPotential usersFirst time usersRegular users
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Country Screening and Selection
Three stages: Assign importance score to each
country screening criteria. Evaluate country performance on each
of the screening criteria. Calculate country attractiveness score.
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Country Screening/ SelectionExample
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Target Market Decisions
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Strategy Purpose
Differentiated targeting strategy
Differentiated targeting strategies identify, or even create, market segments that want different benefits from a product and target them with different brands, using different marketing strategies. Example: Procter & Gamble with different laundry detergents
Concentrated targeting strategy
Companies select only one market segment and target it with a single brand. Companies that cannot afford to compete in a mature market with an oligopoly may choose to pursue a small segment–a niche. Example: Mont Blanc pens
Undifferentiated targeting strategies
The product is aimed at all markets using a single strategy, regardless of the number of markets and countries targeted. Example: Coca Cola
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Positioning the BrandDefinition: Placing the brand in the consumers
mind in relation to other competing productsSix possible positioning strategies to reach a
unique selling proposition1. Attribute/Benefit Positioning2. Price/Quality Positioning3. Use or Application Positioning4. Product User Positioning5. Product class Positioning6. Competitor Positioning
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Positioning the BrandAttribute/Benefit Positioning: Positioning that communicates product attributes/
benefits, differentiating each brand from the other company brands and those of competitors (e.g. Procter & Gamble)
Price/Quality Positioning A strategy whereby products and services are
positioned as offering the best value for the money (e.g. Wal-Mart)
Or a strategy that offers the best product that money can buy (e.g. Mercedes-Benz, Kempinsky)
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Positioning the BrandUse or Applications Positioning The process of marketing a precise product
application that differentiates it in the consumers’ minds from other products that have a more general use e.g. bikes in Asia or in the USA)
Product User Positioning A positioning strategy that focuses on the
product user, rather than on the product. (e.g. Mont Blanc for business executives)
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Positioning the BrandProduct Class Positioning A strategy used to differentiate a company as a
leader in a product category. E.g. Disney sells magic, Harley sells excitement
Competitor Positioning The process of comparing the firms’ brand with
those of competitors, directly or indirectly.
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Content Basics of International Marketing The international Marketing Environment International Marketing Strategies International Marketing Mix Implementation of the international
Marketing Strategies
Case studies
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Content
International Marketing Strategies International Marketing Research International Marketing Planning Expansion Strategies and Entry
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Going International: Evaluating Opportunities
Consider drivers of international expansion in the environment:
Competition Regional economic and political integration Economic growth Technology Converging consumer needs
Consider firm-related international expansion drivers:
Product life-cycle considerations New product development costs Experience transfers Labor costs
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Example: Labor Cost Drivers
Hourly Compensation Costs in U.S. Dollars for Production Workers in Manufacturing 2006
Source: http://stats.bls.gov
Country Compensation ($U.S.)
United States 22.87
Austria 28.29
Australia 23.09
Brazil 3.03
Denmark 33.75
France 23.89
Germany 32.53
Israel 12.18
Italy 20.48
Japan 21.90
Korea 11.52
Mexico 2.50
Netherlands 30.76
Singapore 7.44
United Kingdom 24.71
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Control and Risk in International Expansion
Indirect Export
Direct Export
Licen-sing
Franchi-sing
Joint Venture
BranchSub-
sidiary
Control/Risk Low High
in home country in host country
Capital and Management
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Control and Risk in International Expansion
Companies need to decide whether to use middlemen in the process of taking their products internationally or to market directly to the international market: Using middlemen requires a company to relinquish
control: Distributors or agents sell the product . Direct international involvement exposes the
company to substantial risk, but it also affords the company significant control of the marketing mix.
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International Entry Mode: Indirect Exporting
Company uses home country intermediaries who, in turn, sell product overseas.
Lowest risk - Lowest control Often “first step” to a greater involvement Companies can use cooperative exporting, also
known as “piggybacking” or “mother-henning”. using the distribution system of exporters with
established systems for selling abroad who agree to handle the export function of a non-competing company on a contractual basis.
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International Entry Mode: Direct Exporting
Firm handles its exporting function usually using its own in-house export department.
Provides more control over the marketing mix than indirect exporting.
Involves the use of middlemen such as: Freight forwarders Shipping lines Insurers Merchant middlemen Retailers Other marketing service providers, such as
consultants, researchers and advertising companies
Internet boosted this kind of entry mode
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Top Purchasers of U.S. Exports
Country Purchases (Millions $U.S.)
Canada 190,163
Mexico 110,775
Japan 54,400
United Kingdom 35,960
China 34,721
Germany 31,381
South Korea 26,333
The Netherlands 24,286
Taiwan 21,731
France 21,240
Source: http://www.ita.doc.gov/td/industry/otea/, updated November, 2006.
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International Entry Mode: Licensing
An international entry mode that involves a licensor, who shares brand name, technology, and know-how with a
licensee in return for royalties.
Licensor: Offers know-how Shares technology Allows for the use of its brand name
Licensee: Pays royalties for the rights to use licensor’s technology,
know-how, and brand name
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A book published in the U.S. and its licensed Chinese reprint (for sale in Mainland China only)
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Licensing (contd.) Advantages:
Lower-risk entry mode (specially Licensing without the name Limits exposure to economic, financial, and political instability
Permits the company access to markets that may be closed or that may have high entry barriers.
Disadvantages: Can produce a new competitor: the licensee Can be problematic if licensee cannot guarantee
quality—it affects the brand’s overall reputation Solution: Licensing without the name
(examples: Lada, a Fiat made in the USSR, Dacia, a Renault made in Romania).
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International Entry Mode: Franchising
Franchising refers to the methods of practicing and using another person's philosophy of business. Primary international entry mode in the service industry.
Franchisor: Gives franchisee right to use brand name, trademarks
and business know-how in return for royalties.
Franchisee: Pays royalties for the right to use the know-how,
trademarks, and brand name.
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Franchising (contd.) Advantages:
Lower-risk entry mode Limits exposure to economic, financial, and political
instability Higher level of control Very rapid market penetration
Disadvantages: Can be problematic if franchisee cannot guarantee
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Franchising (contd.) Example: McDonalds
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St. Petersburg
Buenos Aires
Viterbo, Italia
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Franchising (contd.)Example: McDonalds
The McDonald’s restaurant on the left finds that the Quick imitation on the right has a comparable offering, including the Géant (giant) to compete with the Big Mac. (Here in France)Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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International Entry Mode: Joint Venture
Joint Venture: A corporate entity created with the participation of two companies that
share equity, capital, and labor, among others. Preferred entry mode in developing countries,
where they contribute to developing local expertise and to the country’s balance of trade if production is exported.
International firm provides expertise, know-how, most of the capital, brand name reputation, trademark
Local partner provides the labor, the infrastructure, local expertise and relationships, and connections to the government
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Joint Venture (contd.)Advantages: Higher control entry mode, potentially resulting in
higher profits. Costs and risks shared with joint-venture partner. Local partner shares local market expertise,
relationships, as well as connections to government decision-making bodies.
Disadvantages: Repatriation of profits may be difficult if local
government has control over/stake in the local joint-venture partner.
Can produce a new competitor: the joint-venture partner
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Selecting the International Entry Mode: Consortia
A company created with the participation of three or more companies
Can create monopoly effect, so they are only allowed … - Where expensive R&D is involved- In underserved markets- In markets where the government and/or the
marketplace can control its monopolistic activity. Example: Airbus (France Aerospatiale 38%, UK British
Aerospace 20%, Germany Daimler DASA 38%, Spain Constucciones Aeronauticas 4%); founded as a challenge to Boeing
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International Entry Mode: Branch Offices
Branch Offices: Entities are part of the international
company, rather than a new company (as in the case of the subsidiary).
Involves substantial investment Sales office Showroom
Engage in a full spectrum of marketing activity
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International Entry Mode: Wholly Owned Subsidiaries
Wholly Owned Subsidiaries: Involve long-term market commitment High cost High control of operations Greatest level of risk Can be developed by the company
(greenfielding) or can be purchased (acquisition or merger)
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International Strategic Alliances
Sometimes licensing, franchising and joint ventures are called Strategic Alliances. But in general the Strategic Alliances are more short term and have not the same level of international commitment than the named entry modes.
Strategic Alliance: a relationship between two or more companies attempting to reach joint corporate and market related goals -
while remaining independent organizations. Typically, the term refers to nonequity
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International Strategic Alliances
Examples of Strategic Allances Manufacturing:
Manufacturing alliance (A nonequity relationship, in which one firm handles the others manufacturing (or some aspects of it),
Contract manufacturing (manufacture of products) Engineering alliances, Technological alliances, R&D alliances
Marketing: A nonequity relationship, in which one firm
handles marketing (or some aspects) for another firm.
Distribution: One firm handles the distribution or some aspect
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Outsourcing
The strategic use of outside resources to perform activities that are usually
handled by internal staff and resources. E.g. customer service and billing. Outsourcing grew fast and further growth us
expected. The outsourcing market ist about US $100 billion.
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Outsourcing Asia has emerged as the outsourcing hub
and back-office of the Western world, and India, China, the Philippines, and Singapore are competing for the business. China is catching up as an outsourcing
base for English-speaking nations, a business dominated by India.
Note: Many outsourcing alliances have failed in recent years (nearly half of them).
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Success of Outsourcing:
Outsourcing must be done carefully, and with clear objectives and expectations of outsourcing activities.
Outsourcing partners must be selected based on their expertise in the outsourcing activity and based on their cultural fit with the firm.
The outsourcing firm must provide its partner in the strategic alliance with adequate training and skills that will help the partner adapt to other cultures.
The outsourcing plan should provide clear expectations, requirements, and expected benefits during all phases of the outsourcing activity.
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Case Study 3
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Content Basics of International Marketing The international Marketing Environment International Marketing Strategies International Marketing Mix Implementation of the international
Marketing Strategies
Case studies
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Content
International Marketing Mix International Product Mix
International Branding International Product and Service
Strategies International Distribution International Communication International Pricing
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Strategy and the company’s orientation
Geocentric company orientation
Global Standardization
Regiocentric company orientation
Regional Standardization
Polycentric company orientation
Local adaption
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Global Standardization
Global Standardization: Standardization of products across markets and of the marketing mix
worldwide. Advantages:Allows for economies of scaleEncourages global branding
- using the same brand name, logo, image and positioning everywhere in the world. (Ralph Lauren, Escada, Donna Karan, Pepsi, Coca Cola, Camel…)
- Global brands are more prestigious, signaling that the company has the resources to back the brand.
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Global StandardizationAdvantages (contd.):Effective in meeting the needs of global consumers (same usage of media (internet, music), international travel)Effective in meeting consumer needs of higher quality and lower price.Facilitated by international travel Disadvantage: Cannot meet the needs of all target consumers.
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Regional StandardizationRegional Standardization: Standardization of
products across regions and of the marketing mix within the region. (e.g.: EU, NAFTA, MERCOSUR)
Advantages: Allows for economies of scale Addresses consumer preferences for higher
quality and lower price Facilitated by international travel within the
region Disadvantage: Cannot perfectly meet the
needs of all target consumers in the region. E.g. Mercedes Benz, Levis
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Standardization: Global Localization
Global Localization: global branding with localized marketing adaptation to
differences in local culture, production capabilities, governmental restrictions, etc.
Types: Modular Adaptation: Offer parts (modules) that
can be assembled worldwide in different configurations, depending on market needs.
Core Product Strategy: Involves using a standardized strategy for the core product worldwide, but varying certain aspects of the offering (product ingredients, advertising, for example) from market to market. Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Adaptation: Mandatory Mandatory Adaptation:
Adapting products to local requirements so that they can legally and physically operate in the respective countries.
Examples: Left-hand driving in the United
Kingdom 220 volt appliances in Europe, 110
volt appliances in the U.S.Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Adaptation: Non-Mandatory
Local Non-Mandatory Adaptation: Adapting a product to better meet the
needs of the local market, or developing new brands for individual local markets, even though such adaptation is not required.
Examples: Fast-food traditional hamburger places selling
vegetarian burgers in India and falafel sandwiches in the Middle East.
The Mercedes A class was developed for the narrow European streets. This automobile can easily fit up on narrow sidewalks and allow sufficient room for passers-by.Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Private Label (Retailer) Brands
Compete effectively with multinational corporations because they: Offer premium store brands perceived by local
markets as high-quality. Are innovative Appeal to consumers during economic
downturns, and in general, since consumers today demand high quality at lower prices.
• Campina, a popular pan-European dairy company of Dutch origin offers many retailer brands that compete with its own; for example, the company sells dairy products under the Albert Heijn (a popular Dutch retailer) brand name.Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Global Branding Country of Origin:
Country with which good/service is associated.
Country of Manufacture: Country where the product is manufactured
(for products). Country where the headquarters are located
(for services).
In the absence of other product information, country of origin impacts consumers’ product evaluations.Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Product Stereotypes Product-specific stereotypes that
associate the country of origin as a certification of quality.
Examples product-country stereotypes:French perfume, Kenyan or Columbian coffee,
Chinese silk, Italian couture, Italian olive oil, German beer
Example of service-country stereotype:French waiters / with poor service.
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Ethnocentrism The belief
that one’s culture is superior to another and that strategies used in one’s home country will work just as well internationally
the belief that purchasing foreign products hurts the local economy by causing loss of jobs, and that it is morally wrong and unpatriotic.
Domestic marketing extension concept Leads to the rejection of foreign products.
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Service Entry Barriers Represent a manifestation of protectionism
at the firm level, government level and consumer level
Examples: Requirement to use national service providers Prohibition against employment of foreign
nationals Direct competition from government providers Restrictions on movement Tariffs on international services
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Protecting Brand Names internationally
Addressed first by GATT (General Agreement on Tariffs and Trade); now under WTO umbrella
Counterfeiting: Design: Copying designs or scents of
another company Brand Name: Selling counterfeit products
as brand name originals
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Counterfeiting Factors
Consumer Factors: Willingness to purchase counterfeit goods
because risk is low and prestige gains are high. Willingness to purchase counterfeit
goods/products that are consumed in publicly. Consumers and retailers might not notice the
difference.
Technology factors: Affordable, quality copying technology Local partners of multinational firm have
access to know-how. Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Counterfeiting Factors (contd.)
Distribution factors: Supply chains are not adequately controlled. Traders may use Internet chat rooms and unauthorized
dealerships.
Local government factors: Governments may not interfere; even the government
may run counterfeiting operations. Cracking down would lead to loss of jobs and unrest. Customs representative and other enforcement officials
may not be familiar with authentic brands.
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Combating Counterfeiting Lobbying the U.S. government. Lobbying other governments involved. Change product’s appearance to
differentiate the authentic brands from copies.
Better control of distribution chain operations.
Key: cooperation with the local government
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Industrial Products and Services vs. Consumer Products and Services
Issues: Service encounters are primarily social
encounters, and rules and expectations related to services vary from culture to culture.
Culture does not play as important a role for industrial products.
The decision to purchase industrial products rests with the top-management at the company’s headquarters.
The purchase process often takes several months. In many countries, local government has
substantial input in the supplier decision, favoring national suppliers.
For professional services, the local government can directly restrict the company to local suppliers, or require local licenses/credentials.
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Industrial Products and Services vs. Consumer Products and Services
Issues: Industrial consumers are businesses;
business-to-business markets are characterized by fewer buyers and a larger purchase volume.
The business-to-business market is geographically concentrated.
Decision processes involve many decision makers and influencers in the country of operation and in the home country.
Demand for industrial products is derived from demand for consumer products and thus is much more volatile.
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Product Standards: ISO 9000
Industrial consumers need a high degree of standardization for industrial products and services.
Quality standards (for each industry and businesses) are set by the International Organization for Standardization (ISO), a nongovernmental federation of national standards bodies.
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Product Standards: ISO 9000Quality management
Quality refers to all product or service features that are required by the customer:
Implies that the organization ensures that its products or services satisfy customer requirements and comply with any regulations applicable to them.
Specifies that the organization must meet customer and regulatory requirements and follow its policies and procedures while advancing quality through continuous improvement.
Addresses issues such as the phases of product development and requires performance measurement throughout the process through performing internal audits, monitoring customer satisfaction, and taking corrective action.Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Product Standards: ISO 14000Environmental issues
Family of environmental management system (EMS) standards designed to help businesses reduce their impact on the environment and to facilitate sustainable development and foster international trade.
Discourage multinational firms from engaging in hazardous environmental practices, such as locating plants that generate hazardous emissions in poor countries with weak environmental regulations.
Promote corporate policies that are environmentally sound, efficiency-embracing, and have innovative technologies and processes.
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Product Standards: ISO 14000
To receive this certification … Multinational companies will have to develop
EMS similar to the ISO 9000 standards and a policy that stresses commitment to continual improvement and prevention of pollution.
Firms provide assurances of compliance with laws/regulations, and provide a framework for setting and reviewing objectives and targets.
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Standards for Production, Rather Than Product
Both ISO 9000 and ISO 14000 address the production process, rather than the product. However, it is implied that the process affects the product
In the context of both, certification refers to the issuing of a certificate by an independent external body that has audited the organization’s management system and verified that it conforms to the requirements of the standards.
The auditing body then registers the certification in the client’s register.
ISO 9000 and ISO 14000 are implemented by about 610,000 organizations in 160 countries.
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ISO 9000 Certifications Worldwide
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Region Total Percent Share
Number of Countries
Africa and West Asia 48,327 6.22 58
Central and South America
22,498 2.90 27
North America 59,663 7.68 3
Europe 379,937 48.92 48
Far East 247,091 31.82 23
Australia and New Zealand
19,092 5.20 2.46
Source: www.iso.ch, 2005 Annual Report, May 2006
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Content
International Marketing Mix International Product Mix
International Branding International Product and Service
Strategies International Distribution International Communication International Pricing
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The International Product Life Cycle
International Corp. IC manufacturesproduct in developedcountries; exports todeveloping countries
IC movesproduction todevelopingcountry; beginsimporting tohome country
Developingcountry competitorexports product to IC homecountry; competeswith IC imports
Developing countrymarkets remain valuabletarget Markets for IC; IC homecountry market Isdiminishing
Sales
Introduction and Growth Stages:
Early Maturity:
LateMaturity
Decline
TimeDana-Nicoleta Lascu Atomic Dog Publishing 2006
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International Product Life Cycle: Introduction/Growth
The Product Introduction Stage Products are first developed in industrialized
countries. Products are traditionally first marketed in
industrialized countries; however, increasingly, product life cycles are shortened and the product is marketed in emerging markets as well.
The Growth Stage Characterized by:
Increasing competition from other multinationals
Rapid product adoption Product is marketed primarily in developed
countries. Product is exported to developing countries. E.g. iPhone, television in India,
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International Product Life Cycle: Maturity/Decline
The Maturity Stage: Product is adopted by most target consumers. Sales are leveling off. Profits decline due to intense
competition. Manufacturing operations move to developing countries to
take advantage of cheap labor. New competitors: firms from developing countries.
The Decline Stage: Products are losing ground to new technologies and product
alternatives. Decrease in sales and profits. Product life cycle is extended through sales to consumers in
developing countries.
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Dimensions of the International Product Mix
Product mix/portfolio The total number of products that a
company offers its target markets. Product line
All the brands the company offers in one product category.
Product length Total number of brands in the product
mix.
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Dimensions of the International Product Mix
Product width Total number of product lines the
company offers to its target international consumers.
Product depth Total number of different offerings in a
product line.
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Example: UnileverWhat are the numbers for product length, product width, product depth and produce line?
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Product Area
Culinary products
Brandnames Variants
Ragú Spaghetti SaucesCalvé Whisky Cocktail Sauce
Hellmann's Mayonnaise
Knorr Soups
Bertolli Pastas
Amora Vinaigrettes
Wishbone Salad Dressing
Colman's Mustard
Pepperami
Pot Noodle
Frozen foods Findus 4 Salti in PadellaIce cream Magmum (Classic, Temptation, Minis, White, Ecuador)
Cote D'Or
Cornetto
Klondike Bars
Solero
Tea Lipton (Lipton Yellow, Lipton Ice tea, Lipton Brisk)Bovril (UK)
Product Length: 4Product Width: 18Product Depth: Lipton: 3
Magnum: 5Product Line: Tea: 2 Ice cream:5
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New Product Development
High risk High cost Challenges in international markets:
Competition can appropriate the product/service idea and deliver final product or service to the market more swiftly than the initial developer.
International consumers might not respond as anticipated .
Local and/or home-country government might impose restrictions on product testing.
Technological infrastructure of individual markets may be substandard and unable to support the product.
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New Product Development
Generating new product ideas
Screening new Product ideas
Developing and evaluating concepts
Product Business analysis
Designing/Developing the product
Test marketing
Lancing product internationallyDana-Nicoleta Lascu Atomic Dog Publishing 2006
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Step 1: Generating New Product Ideas
Most product and service firms are driven by the marketing concept. Most of the time product development decisions
are based on identifying the needs, wants, and desires of consumers.
Technology firms focus on the products: Focus is on research and development
Sources of new Ideas Consumers (home country, internationally),
Competitive Analyses, Channel Members, Employees, Top Management, Inventors, Consultants, Researchers
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Step 2: Screening Ideas Consider:
USP /Superior consumer fit (needs and values) Support senior management Lucrative market potential Defined brand strategy and promotional plan Fit between product strategy and technological
advantage Likely trade adoption (retailers, supermarkets) Usually a check list is developed in this stage
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Step 3: Developing & Evaluating Product Concepts
Develop detailed description of product. Ask consumers to evaluate and indicate
willingness to buy Use:
Focus Groups Conjoint Analysis
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Step 4: Performing a Product Business Analysis
Estimate: Project costs Return on investment Cash flow Fixed/variable costs The price level for the product!
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Step 5: Designing and Developing the Product
Create prototypes Create brand identity (name, logo,
packaging) Marketing mix Coordinate strategy across
international subsidiaries Product development is increasingly
take place in emerging markets (e.g. India, Czech Republic, China, Russia)
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Step 6: Test MarketingTesting new product performance in a limited area
of a national or regional target market. Provides estimate of product performance in the
respective country or region. Expensive Time consuming Open to competitive sabotage
Note: 8 out of 10 products fail!
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Types of Test Marketing Simulated Test Marketing
Test marketing simulates purchase environment where samples of target consumers are observed during the decision-making process.
Controlled Test Marketing Test marketing that involves offering a
new product to a group of stores and evaluating market reaction.
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Test Marketing Actual test Marketing
Focus on cities appropriate for the test. Involves selecting distributors and the
additional marketing infrastructure. Most costly Leaves the company most exposed to
competitive sabotage.
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Step 7: Launching Product Internationally
Introducing a new product to the international market
Quality of launch: High service quality On-time shipment Appropriate product availability Quality sales force and support Quality and amount of promotion
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International Launch Decisions
Consumers and countries Timing of launch Marketing mix decisions
Product Place Price Promotion
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Degree of Product/Service Newness
Extent to which a product/service is new to a market
New product to existing market/existing company 33,7% of “new product”
New product line to a company 16,8% New item in an existing product line 11,9%
(success rate the highest 83%) Modification of an existing company product
18% Innovation, new product to the world; 18,8%
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Degree of Product/Service Newness
Popular classification of innovations: Radical innovations (new industries or
standards), Dynamically continuous innovations
(Change in the consumption patterns), Continuous innovation
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Product Diffusion
Cultural similarity
Economic similarity
Country-Market Factors
New Product/Service
adoption
Compatibility withAdopter’s needs
USP/relativeadvantage
Observability
Triability
Product Factors
Product Diffusion: speed of adoption
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International SegmentationConsumer Adopters
Innovators: (2.5% of the total market) Risk takers who can afford to pay a higher
price during the introduction stage Primarily consumers in developed countries
Early adopters: (13.5% of the total market) Consumers who purchase the product early in
the lifecycle stage and who tend to be opinion leaders in their community.
Primarily consumers in developed countries
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Consumer Adopters (contd.)
Early majority: (34% of the total). Consumers who enjoy status of being among the
first to purchase a popular product Consumers are primarily from developed
countries. Late majority: (34% of the total)
Consumers who adopt popular products when the risk associated with them is minimal
Consumers are from both developed and developing countries.
Laggards: (16%) The last consumers to adopt a product; they are
risk averse and conservative in their spending Consumers are primarily from developing
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Content Basics of International Marketing The international Marketing Environment International Marketing Strategies International Marketing Mix Implementation of the international
Marketing Strategies
Case studies
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Content
International Marketing Mix International Product Mix International Distribution
Operations and Logistics Retailing
International Communication International Pricing
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Issues Related to International Distribution
Using Established Channels: Channels that already exits Could charge high prices Could be blocked by competition Channel partnership is a long-term decision: Company
may be bound indefinitely to the channel choice. Building Own Channels:
Necessary if there are no channels/ or existing channels do not conform to company needs.
Expensive Time-consuming
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International DistributionUsing Home-Country Middlemen
Using Home-Country Middlemen: The Company is likely not to be involved in
managing the marketing mix in the host market Export Management Companies:
Highly specialized in certain industries and/or regions. Mostly represent smaller businesses. E.g. Amex
Works as a “company's export department” Trading Companies:
Large Companies that specialize in intermediary services (risk reduction, financial assistance)
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International DistributionUsing Home-Country Middlemen
Home-Country Brokers and Agents: Middlemen who bring international buyers and
sellers together in the company's home country. Do not carry title to the product/ commission
based Manufacturer’s export agent: represent a
manufacturer Buying offices: buyers located in the firm’s home
country, representing different international firms
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International DistributionUsing Home-Country Middlemen
Cooperative Export Arrangements: Also known as piggybacking and mother
henning e.g. car manufacture market tires Involve exporters agreeing to handle export
functions for unrelated companies on a contractual basis
Complementary export agents export complementary products on a commission basis.
Complementary export merchants take title to the complementary products that they export.
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International DistributionUsing Home-Country Middlemen
Export merchants: Intermediaries who take title to and
possession of the products they carry. Responsible for shipping and marketing the
products in the target market. Carry competing brands Examples:
- Export jobber, who carries commodity goods, but does not take physical possession of the goods.
- Norazi agent, who deals in illegal and/or gray market products.
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International Distribution Using Foreign-Country Middlemen
Using Host-Country Middlemen: The Company is likely to have a presence in the
host country
Merchant Middlemen: Intermediaries who carry the
manufacturer’s product line in a particular country.
Usually carries title to and has physical possession of the products.
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International Distribution Using Foreign-Country Middlemen
Agents and Brokers: Bring Seller and buyers together but do
not carry title and take possession of the products
There are many types of agents and brokers in international markets, such as manufacturers’ representatives and managing agents.
Act as the manufacturer’s sales representatives and are paid on commission.
Act as managing agents (also known as compradors), with an exclusive arrangement with the company, representing it in the foreign market; they are paid as a percentage of sales.
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International Logistics
The international distribution function is supported by a number of service providers: Transportation firms, home country freight
forwarders and customs brokers, government agencies, nongovernmental organizations, logistics alliances, and other firms.
Logistics costs account for a large percentage of a company's gross revenues (10-30%) making logistics the single highest operating cost.
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International Logistics
Order process-
ing
Order process-
ing
Inventorycontrol
Inventorycontrol
Ware-housingWare-
housing
Transpor-tation
Transpor-tation
LogisticsLogistics
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International Transportation
transportation determines whether products arrive at the international destination on time and in good condition.
transportation costs can increase the product price in the target country.
transportation infrastructure excellent in industrialized countries (by
rail, air, and waterway ports) Intermodal transportation has been
greatly facilitated by containerization
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U.S Merchandise Value by Mode of Transportation
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Mode of Transportation Total (in millions of U.S. dollars)
Imports
Water 724,946
Air 329,387
Truck 237,706
Rail 78,131
Pipeline 36,829
Other and unknown 61,672
Total Imports 1,469,671
Exports
Water 233,639
Air 270,041
Truck 215,247
Rail 30,229
Pipeline 1,671
Other and unknown 67,109
Total Exports 817,936
Source: U.S. Department of Transportation, Bureau of Transportation Statistics, May 2006; based on total, water, and air data in the United States.
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Characteristics of Each Mode of Transportation
Oil and gasoline, chemicals, semi-liquid coal, refined products
LowLowerLowPipeline
Grains, gasoline, forestry products, cement and fertilizers
LowLowLowWater
Jewelry, electronics, expensive low-volume products
HighestHighHighAir
Coal, gasoline, forestry products, grains,automobiles
LowerMediumMediumRail
Consumer goods, erishables, automobiles
HigherHigherHighTruck
Product ExamplesSpeedCostFlexibility(re: Area coverage)
Mode
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Logistics Facilitators Transportation Firms
Intermodal transportation firms Containerization
Distribution Centers Designed to speed up warehousing and delivery
by channeling distribution to a hub. Freight Forwarders and Customs Brokers
Arrange for transportation, customs clearance, document filling (Often specialized)
Government Agencies Promote national security, international
involvement of local firms. Provide financing and insurance for high risk ventures.
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Warehousing and Inventory Control
Critical decision: number of warehouses and distribution centers needed to optimally implement the logistics function.
In most industrialized countries, distribution centers are an option for the international firm; they: Receive goods from different producers. Take orders from buyers. Distribute goods promptly.
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Warehousing and Inventory Control (contd.)
Warehouses located in free trade zones are typically also facilities where product assembly and packaging may be conducted.
Trend: companies are attempting to address customer
demand while reducing inventory costs, using just-in-time inventory systems, creating product flow rather than stock by
ordering products more often and in lower quantity
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Steps Involved in Forming Logistics Alliances
Establish objectives. Identify providers. Express needs/wants. Evaluate and select bidder. Develop integration plan. Create win-win relationship. Measure and analyze performance. Redefine goals and objectives.
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Challenges to International Distribution and Logistics
Distribution challenges in developing countries Transportation infrastructure Containerization
Parallel imports (gray markets): Defined as distribution systems that are not
authorized by the manufacturer: Products purchased in a low-price market are diverted to other markets.
Hurt company’s image
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Facing Logistics Challenges: Combating Parallel Imports
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Content
International Marketing Mix International Product Mix International Distribution
Operations and Logistics Retailing
International Communication International Pricing
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International Retailing
All the activities involved in selling products and services to final international consumers for their personal consumption.
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Internationalization of Retailing
Retailers are rapidly expanding internationally in order to: Gain competitive advantage Increase sales Increase profits Improve overall firm performance
As they expand internationally, retailers can take advantage of cost savings and learn from experiences in a way that could further enhance home-country operations.
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Internationalization of Retailing
Trend: Markets, retailing technologies and
consumers are changing Consolidation in the food and general
merchandise sectors
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Top 10 Global RetailersR Country Retailer Format Sales /US$
millions1 U.S. Wal-Mart Discount, Hypermarket, Supermarket,
Superstore Warehouse312,427
2 France Carrefour Cash & Carry, Convenience, Discount, Hypermarket, Specialty, Supermarket
92,778
3 U.S. Home Depot DIY, Specialty 81,511
4 Germany Metro Cash & Carry, Department, DIY, Hypermarket, Specialty, Supers tore
69,134
5 U.K. Tesco Convenience, Department Hypermarket, Supermarket, Superstore
68,866
6 U.S. Kroger Convenience, Discount, Specialty, Supermarket, Warehouse
60,553
7 U.S. Target Department, Discount, Superstore 52,620
8 U.S. Costco Warehouse 51,862
9 U.S. Sears Department, Specialty, Mail, E-commerce 49,124
10 Germany Schwartz Discount, Hypermarket, Supercenter/Superstore
45,891
Source: "2007 Global Powers of Retailing," January2007, www.stores.org.
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Retail formats
General Merchandise
Food Retailers
Non-store Retailers
Specialty storesSpecialized MarketsDepartment storesGeneral Merchandise Discount storesOff-Price RetailersCatalog Showrooms
Conventional supermarketsSuperstoresWarehouse clubs or Wholesale ClubsConvenience store
Internet RetailingVending machinesTelevision Home
ShoppingCatalog Retailing and Mail RetailingDirect sellingNetwork Marketing
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General Merchandise: Specialty Stores
Specialty Stores offering a narrow product line and wide assortment: Music stores Clothing stores…
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General Merchandise: Specialized markets
Specialized markets that house stores specializing in a particular product category Jade market, Hong Kong Covered bazaar, Istanbul—the shops are selling primarily
brass products and Turkish folk decorative object.
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General Merchandise: Department Stores
Offer a broad variety of goods and wide assortments Trend
U.S. and Canada: recent substantial losses Europe: expansion of national chains throughout the European Union Asia: on the decline
E.g. Germany: Hertie announced the close down of 19 (out of 73) stores in many German cities in Jan 2009
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General Merchandise: Discount Stores
Sell High Volumes of Merchandise Offer Limited Service, Charge Lower Prices Types:
All-Purpose: offer wide variety of merchandise and limited depth. E.g.
Category specialists (category killers): Carry a narrow variety of merchandise and offer a wide assortment. E.g.
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General Merchandise: Off-Price Retailers
Sell brand name and designer merchandise at below regular retail prices.
Overruns, irregular products, previous seasons’ products
Examples: Factory outlet stores Close-out retailers (broad, inconsistent
assortments) Single-price retailers (all products for the same
price)
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General Merchandise: Catalog Showrooms
Catalog Showrooms: Showrooms displaying products of
catalog retailers, offering high-turnover, brand name goods at discount prices.
Internationally goods sold through this venue tend not to be brand name, but, rather, goods that have not sold the last season through the catalog.
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Food Retailers Conventional Supermarkets:
Self-service retailers with annual sales higher than $2 million and less than 20,000 square feet of store space.
Superstores: Combination stores (food and drug) Hypermarkets—combine supermarket,
discount, and warehouse retailing.
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Food Retailers Warehouse Clubs (Wholesale Clubs):
Require members to pay an annual fee. E.g. SAM's, Costco
Operate in low-overhead, warehouse-type facilities.
Offer limited lines of brand-name and dealer-brand merchandise at a substantial discount.
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Food Retailers Convenience Store
Small residential retailers or retail chains consisting of small neighborhood stores.
Open long hours. Carry limited lines
of higher-turnover necessities.
One-stop shopping.
Convenience store in Poland—note that Procter & Gamble products (especially their pan-European detergent Ariel) are predominant.
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Nonstore Retailing Internet Retailing:
Also known as interactive home shopping or electronic retailing.
Includes both new dot-com companies and traditional retailers attempting additional market penetration.
Increase company diversification.
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Global Internet Retailing Sector Segmentation
Category % Market Share
Tickets & Travel 29.00%Computers, Electronics & Software 28.70%Household 12.80%CDs, Music and Videos 11.80%Books 8.50%Apparel and Gifts 5.00%Toys & Games 4.20%Other 0.10%
Total 100.0%
Source: “Global Internet Retail,” Internet Retail Industry Profile: Global, May 2004, 1–17.
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Nonstore Retailing Vending machines:
Increasing in popularity
Accepting of Smart cards, credit cards
Technology is facilitating an interactive consumer experience.
Different formats worldwide
Used most in JapanDana-Nicoleta Lascu Atomic Dog Publishing 2006
At Atlanta Airport – a vending machine selling iPods (minis and shuffles).
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Nonstore Retailing
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Vending machines in the Netherlandswith hot snacks and Japan with different vegetables
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Nonstore Retailing (contd.)
Television Home Shopping: A venue for selling merchandise to
consumers in their homes using cable channels.
Examples: infomercials and direct response advertising.
Popular in North America and Europe, and becoming increasingly popular in Asian markets.
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USA
Japan
China
Acorn, China
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Nonstore Retailing (contd.)
Catalog Retailing and Direct Mail Retailing: Venues for selling merchandise to
consumers using catalogs and other types of direct mail. E.g. Quelle, Neckermann, Otto
It allows for the international expansion of retailers.
Must be adapted to local market needs and practices. (e.g. in Japan the consumers expect to receive the product before paying)
The potential fur Catalog retailing remains high international
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Nonstore Retailing (contd.)
Direct Selling: A retailing venue whereby a salesperson,
typically an independent distributor, contacts a consumer, demonstrates product use and benefits, takes orders and delivers the merchandise. E.g. Avon
Direct selling firms are most active in the growth markets (in emerging markets).
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Network Marketing (Multilevel Marketing)
Variation on direct selling Involves signing up sales representatives to
go into business for themselves with minimal start-up capital and sell more “distributorships” and merchandise. E.g. Herbalife, Amway
Network marketing is growing rapidly, especially in emerging markets.
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Issues in International Retailing
Legislation and Regulation e.g. China banned direct selling till 1998, Germany: Control of packaging disposal Germany, France: Limit the period for sales
Taxation and Cross Border Shopping Variations in Retailing Practice and
Customs Consumer: US: prefer to shop in bulk, Japan:
prefer to shop in smaller quantities every day Sales: Friendly in US, sometimes rude in
Eastern Europe
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Issues in International Retailing
Challenges in Developing Countries: Deficient telephone service Unreliable mail service Low income Unavailability of credit cards
Trends Retailers worldwide are integrating their databases
(supplier and consumer) Marketplace is getting more transparent (practices and
prices) More consumers will become retailers (auction sides) In developed countries consumer demographics
present a problem to retailers (age)
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Content Basics of International Marketing The international Marketing Environment International Marketing Strategies International Marketing Mix Implementation of the international
Marketing Strategies
Case studies
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Content
International Marketing Mix International Product Mix International Distribution International Communication
Promotional Mix and Advertising Strategies
Publicity, Public Relations and Sales Promotion strategies
Personal Selling and Personal Management International Pricing
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International Promotional Mix
Understanding the norms, motivations, attitudes, interests, and opinions of the target market is crucial to company success in marketing to and communicating with different cultures around the globe.
Sales-promotion
Sales forceMange-ment
PR and Publicity
Advertising
PromotionalPromotionalMixMix
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The International Communication Process
SENDER RECEIVERMEDIUM
•Sponsor (sender) encodes message.•Sponsor sends message through the channel
(medium) to the international consumer (receiver).•International consumer receives the message and decodes it into meaningful information.
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Encoding Decoding
Target MarketFeedback
(Recall, Purchase)
Noise:Cultural differences
Competing Messages
Consumer interests
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Communication Issues Each step in the communication
process presents a challenge in international message transfers: Encoding also requires accurate translation:
Product name and message should be tested. Media infrastructure might be underdeveloped
or incapable of handling the message.
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Non Personal and Personal Communication Media
Non-Personal Print media Broadcast media Interactive media
Not widely available in developing countries.
Personal Salespeople Telemarketers Trade show and exhibits
Individuals can interact with knowledgeable company representatives.
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International Communication Challenges
Media infrastructure Unreliable mail Limited broadcast media Media is not used for advertising Translation deficiencies—meanings intended
may not be the meanings conveyed. Illiteracy Status of promotion
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Lessen Communication Challenges
Hire research firm to evaluate message in multiple international markets.
Evaluate effectiveness of the communication using recall tests and other memory-based procedures.
Evaluate effectiveness of communication in getting different international target markets to purchase the product.
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AdvertisingA nonpersonal communication by an
identified sponsor across international borders, using broadcast, print, and/or
interactive media.
Media InfrastructureAvailabilityReliabilityRestrictionsCosts
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Media Reliability The probability of the media to air
advertising messages on time, at an acceptable quality and with the agreed-upon frequency
International constraints: Print lag times Poor quality Off-air television or government-controlled
television and radio that does not allow advertising.
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Media Restrictions Limitations imposed by existing
media: Limiting the number and types of
advertisements (EU Airtime: 12minutes/h for advertising)
Cultural differences Clustered ads Media scheduling
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Media Costs Differ greatly between countries, and
even within a particular country: Income per capita of target market Competition for media by advertisers Firm status (local-nonlocal) Translation costs
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Global MediaU.S. Advertising Expenditures Compared
to World Ad ExpendituresYear U.S. Ad Spending Change World Ad
Change(Billion US$) Spending
(Billion US$)2000 247.5 + 11.3 474.3
+ 8.82001 231.3 – 6.5 440.9 – 7.92002 236.9 + 2.4 450.5
+ 2.22003 249.2 + 5.2 471.1 + 4.62004 266.4 + 6.9 498.3 + 5.8Source: Robert J. Coen, Universal McCann’s Insider Report, December 8, 2003, www.universalmccann.com
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Various International Formats, Features, and Trends
Dominance of global Media e.g. CNN, MTV, Walt Disney, Cosmopolitan
Infomercials & TV Shopping QVC, Home Shopping Network (HSN) Home Order Television
Billboards and Bus Stops Advertising on the Sides of Private Homes Advertising on Outdoor Umbrellas and Awnings Ads on Plastic shopping bags
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Various International Formats, Features, and Trends
Advertising Yes mineral water on fences in Bangladesh.
Advertising Marlboro cigarettes on a kiosk in Poland.
• Posters on Kiosks and Fences
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Using English and U.S. Movie Stars in Local Advertisements
English: Requires less
space in print and broadcasting time.
Conveys a cosmopolitan attitude.
Endows a product or service with status.
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Product Placement
Placing brands in movies and television programming with the purpose of promoting the products to viewers.
U.S. movies’ box-office receipts are
steadily increasing. U.S. films are very successful abroad.
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Advertising Regulations Comparative Advertising Advertising to Children Advertising vice Products (e.g.
tobacco) Other Regulations:
Vary by country; examples:- France: Requirement to keep the French
language pure.- Islamic countries ban the use of sex in
advertising.
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Advertising Infrastructure Develop Ads In-House Home-Country Agencies Local Advertising Agencies (specially for
polycentric orientation) International Agencies: (specially for
geocentric orientation) Top agencies are: Dentsu, Inc. (Japan),McCann Erickson
(New York),BBDO (New York),Young & Rubicam (New York)
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Advertising Strategy Standardization vs. Adaptation
Standardization reduces costs: No duplication of effort for each market.
Individual campaigns delay product launches. Consumers increasingly share similar frames of
references with regard to products and consumption. (“global consumer”)
“A battle between marketing and sales”: marketing wants to be global whereas sales insists on being local”: Result: Consistent overall image with local differences
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Barriers to Standardization
Communication Infrastructure Agencies might not serve a particular
market. Consumer Literacy Legal Restrictions and Self-Regulation Differing Values and Purchase Motivations Attitudes Toward Product Country of Origin Communication is culture specific
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Budgeting Decisions Objective-and-Task Method:
Identify advertising goals.
Conduct research
Determine cost of achieving goals.
Allocate the necessary sum.
Percent-of-Sales Method (it is used by almost 50%) Base budget on past or projected sales.
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Budgeting Decisions (contd.)
Historical Method Base budget on past expenditures giving more
weight to recent expenditures.
Competitive Parity Use international competitors’ budgets as
benchmark.
Executive-judgment method (30%) Use collective executive opinion.
All-You-Can-Afford Best suits small and medium firms.
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Top 10 Global Marketers
Rank Company Headquarters Media Spending ($ in millions)
1 Procter & Gamble Co. Cincinnati 8,190
2 Unilever London/Rotterdam 4,272
3 General Motors Corp. Detroit 4,173
4 Toyota Motor Corp. Toyota City, Japan 2,800
5 L'Oreal Clichy, France 2,773
6 Ford Motor Co. Dearborn, Michigan 2,645
7 Time Warner New York 2,479
8 DaimlerChrysler Auburn Hills, Michigan Stuttgart, Germany
2,104
9 Nestlé Vevey, Switzerland 2,033
10 Johnson & Johnson New Brunswick, New Jersey 1,968
Source: Advertising Age, "Top 100 Global Marketers," November 20, 2006, pp. 1-53.
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Content
International Marketing Mix International Product Mix International Distribution International Communication
Promotional Mix and Advertising Strategies Publicity, Public Relations and Sales
Promotion strategies Personal Selling and Personal Management
International Pricing
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International PublicityA communication about a company and/or
the company’s products that the company does not pay for. Can be negative or positive.
it is considered more credible than any promotional action.The company can influence publicity
through public relations.Publicity includes: Print articles Broadcast messages Word-of-mouth communication about the
company and/or its products Internet increases publicity venues.
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Negative/Positive Publicity
Multinational companies in particular experience negative publicity: Antiglobalization sentiments Symbol of home-country market dominance
Negative publicity can be harmful to the company; the company needs to address it promptly.
Positive publicity is very valuable: Difficult to measure its impact, but it is
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Strategies for Maximizing Positive Publicity in a Foreign Market
Company may obtain leads if it has detailed information and contact information in the press release.
Use publicity as a sales lead.
The right distributor may come along if the company signals it is looking for distributors.
Use publicity to secure a distributor or a distribution network.
It helps when securing funds for new campaigns.
Inform the managers in the home country about publicity efforts.
Publishers are more likely to pick up a story if they have a good translation of the information.
Translate and be careful about translations.
Establish third-party editorial credibility for products; convey more information in greater detail about products.
Supplement ad campaigns with publicity campaigns.
Actions and OutcomesGeneral Strategies
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International Public Relations
A concerted effort on the part of a company to generate good will among publics that are essential to the company :community, government, consumers, employees…
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International Public Relations Examples
News Releases/Letters/Company Publications: Companies must regularly communicate with their
publics. When new products are introduced, companies should
offer news releases, press releases, and/or company publications promoting the new product or service.
Event Sponsorship and Presence: Growing venue for international marketing
communications Important tool for shaping public opinion
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International Public Relations Examples (contd.)
Corporate Advertising promote the company behind the brand.
Image Advertising enhances perceptions of a company in a given
market by creating a positive impression on the target consumers.
Advocacy Advertising Advertising a particular position or point of view
that the company endorses. Public Appearances
Company representatives’ public involvement, speaking on behalf of the international firm and its products.
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Consumer Sales Promotion
Sponsored communications to the target consumer or trade segment that stimulate purchases or improve relationships with
middlemen Examples:
Point-of-Sale Displays Free Samples, Premiums Coupons, Gifts Sweepstakes, Contests Promotional tie-ins Frequency programs Price-offs
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Global Consumer Sales Promotion
Global Campaigns: a worldwide standardized advertising campaign that is not adjusted to differentiate target markets (seldom)
Require a priori feedback from local markets
Rarely attempted in sales promotion Useful for markets where there are
multiple languages and dialects, and which have a unifying language.
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Modular Consumer Sales Promotion
Modular Campaigns: Provide a template that can be varied from market to market. Campaign centered around one theme. Message is customized for each market.
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Local Consumer Sales Promotion
Local Campaigns: Tailored to local needs Retailer cooperation is of particular
importance. Gain significant importance in
markets not reached by other media. Free samples, common in United
States supermarkets, are becoming a common form of consumer sales promotion in many countries.
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Online Sales Promotion All-around mode of Communication
with prospective Consumers:
Sweepstakes Coupons Promotional Pricing
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Legal, Ethical, and Logistical Issues
Sales-Promotion - related legislation differs from one country to another: Certain campaigns may be illegal. Examples:
- Buy one, get one free - Sweepstakes based on pure chance
Promotions may have to be printed in multiple languages.
Number of responses may overwhelm the company and the postal system.
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The ICC International Code of Sales Promotion: Examples of Rules
Be legal, decent, honest, and truthful and aimed at avoiding disappointment and complaints.
Be framed in such a manner that they would not abuse public trust or exploit the public’s lack of experience or knowledge; this is especially true when it comes to children.Make it easy to identify the terms of the offer and its
true value to consumers and to intermediaries.Be administered with adequate resources and with
the appropriate supervision.Respect the privacy of consumers.Be safe for consumers.
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International Trade Promotion
Business-to-business promotion that usually held annually. Trade shows and exhibitions offer potential buyers and sellers a chance to meet face-to-face.
Trade shows bring many decision makers to a single location for a limited time, enabling firms to get their message to a large number of people at one time.
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Trade Shows one-fifth of the overall U.S. (one forth in
Europe) firms’ communication budgets. Organized at set intervals (usually one year),
and tend to be specialized in one domain. Neutral sales environment Bring together managers from different
departments in buyers’ organizations. Governments ensure that national/local
companies are represented.
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Examples of International Trade Shows
Frankfurt Book Fair
Documenta Venice Biennale DRUPA Interkama World Fair
The World Fair is an excellent venue for broad exposure for international firms.
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Content
International Marketing Mix International Product Mix International Distribution International Communication
Promotional Mix and Advertising Strategies Publicity, Public Relations and Sales
Promotion strategies Personal Selling and Personal
Management International Pricing
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International Personnel Issues
Hiring decisions are a function of the company’s involvement in the market.
Market presence, entry mode and commitment to market determine: Size of the sales team Types of sales representatives
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International Personnel Issues
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Infrastructure and Technology Issues:
Infrastructure Issues: In developed countries telemarketing is often
used in selling products, Condition: companies need access to a reliable
telephone system Technology Issues:
electronic data interchange (EDI): buying and selling firms share important data on production, inventory, shipping, and purchasing.
Condition: the firms have the appropriate resources and trust their local partner with the information.
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Legal Issues In many countries, a written contract
does not mean much: Sellers and buyers can readily choose to ignore the agreement without any penalty.
The legal systems may endorse contracts but not defend them.
In many cultures, a contract may have little value, while someone’s word or a handshake may be fully reliable.
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International Presence Companies using home-country
middlemen Rely on sales force of the intermediary for
international sales
Companies using host-country brokers and agents Rely on sales force of the intermediary for
international sales
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International Presence Companies using host-country
manufacturers’ representatives and distributors Are engaged, at some level, in personal selling Hires local salespeople to call on distributors May have local sales office, or a wholly-owned
subsidiary that engages in the marketing function
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Employees of the International Firm
Expatriates Employees working in a foreign country Types:
Home-country nationals Third-country nationals
Locals (Local Employees)
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Expatriates: Home-Country Nationals
Home-Country Nationals: Preferred by companies whose products are at
the forefront of technology Preferred when selling relies on extensive
training and highly specialized information Preferred where there is a greater
interdependence between overseas unit and corporate headquarters
Disadvantages: High costs Cultural barriers Lack of local personal connections in the local
environment Difficulty finding employees willing to take on
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Expatriates: Third-Country Nationals
Employees working temporarily in the assignment country who are NOT nationals of that country OR of country in which headquarters is located
Speak numerous languages Familiar with customs and business practices
in different environments Have learned, through experience, to adapt
optimally for international assignments Cost less than home-country nationals
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Host-Country Nationals Local salespeople who work in the home
country for an international corporation Understands the business environment and
business practices in the company’s home country
Well trained technically Willing to return to home country to work for
the multinational firm
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Long Distance International Selling
Selling via the Internet or mail is likely an important venue used in approaching new international customers.Costs of distance selling are lower, allowing for greater market coverage, but the selling infrastructure (mail, Internet accessibility) lags behind in developing countries.
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Managing International Employees
Transplant successful personnel home country policies will run against obstacles in different international environments.
Issues related to culture come into play.
Buyer-Seller Relationship: Hard sell is inappropriate
in many countries in Asia. Eye-to-eye contact may
be seen as aggressive. Business cards in China
are handed with both hands and received with both hands in to convey respect.
Negotiation differs depending on culture; in many environments, e.g. Latin America, it is expected that a personal relationship is established before the negotiation.
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Successfully Managing ExpatriatesSuccess requires: Effective selection/screening Appropriate training and development
strategies Motivating for peak performance Ensuring successful repatriation
50% of expatriate assignments FAIL!
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Recruiting Expatriates
The Ideal Expatriate Has … A high cultural sensitivity and awareness The ability to adapt behavior in cross-
national settings A high level of resiliency Extensive international knowledge and
willingness to gain it A strong desire to work overseas
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Attenuating Culture ShockCulture shock is a pervasive feeling of
anxiety resulting from one’s presence in an unfamiliar culture.
Culture shock is lessened by adequately training the employees: Short courses in cross-cultural
communications Cultural immersion
Culture shock is also lessened by creating appropriate expectations for the employees Help them anticipate their physical and
social environment.Dana-Nicoleta Lascu Atomic Dog Publishing 2006
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Motivating Expatriates Start with recruiting only those
employees who are most motivated to take up an international assignment.
Offer compensation, leave and family policies, and career incentives that will motivate employees to perform well abroad.
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Incentives for International Post Assignments
Cost of Living/Post Adjustment: A compensation incentive whereby the company adjust
expatriate salaries to reflect the cost of living in the new environment at standards in the expatriate’s home country.
Housing Allowance: A compensation incentive whereby the company covers
part or the entire cost of housing for the expatriate employee while abroad.
May include covering for the cost of household help and security
Education Allowance: A compensation incentive whereby the company agrees to
cover the cost of children’s education at an international private school in the country of assignment.
May include covering costs of attending a boarding school at the expatriate’s home country
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Incentives for International Post Assignments (contd.)
Home-Leave Allowance: A compensation incentive whereby the company
pays for employee and family to vacation in the home country.
Moving Allowance: A compensation incentive whereby the company
pays for relocation expenses for moving the family household abroad and back to the home country.
Repatriation Allowance: A large sum paid for the successful completion of
the international assignment.
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Expatriate Obstacles Gravitating toward home-country expatriates
and relying extensively on expatriate groups and forums (websites that unite expatriates in a region, newspapers, etc.)
Isolation
Isolation Going Native
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Repatriation Issues Company changes in expatriate employee’s
absence Loss of status, lack of social circle at work and at
home; relationships may have changed over time
Reverse culture shock: anxiety experienced after returning to the home country; attributed to: Longing for the international environment left behind Difficulty readjusting to the home country Difficulty readjusting to the corporate culture at one’s
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Multiple Choice True or False1)A third-country national is also known as a local. 2)An advantage of hiring home-country nationals
for international operations is that they are less expensive for the company.
3)Expatriates working in a particular foreign country are either home-country nationals or host-country nationals.
4)Organizational culture refers to personality traits shared at the national level.
5)Reverse culture shock is a feeling of anxiety experienced after returning to the home country.
6)In low-context cultures, what is said is precisely what is meant
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Multiple ChoiceChoose the best answer7)In Asian countries, what approach to selling would
work best? a) confident, persuasive b) modest, exhibiting a humble attitude c) serious, formal hard sell d) none of the above
8)What are some preferred traits of expatriates? a) sensitivity to others b) willingness to gain international knowledge c) high level of resiliency d) all of the above
9)How do companies motivate expatriates? a) guaranteed promotion b) travel and other allowances c) finding spouses employment in the country of assignment d) all of the above
10)To relieve reverse culture shock, companies can a) keep an employee updated with office emails. b) offer promotion on return to the home country. c) fly an expatriate back regularly for meetings. d) all of the above
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Content Basics of International Marketing The international Marketing Environment International Marketing Strategies International Marketing Mix Implementation of the international
Marketing Strategies
Case studies
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Content
International Marketing Mix International Product Mix International Distribution International Communication International Pricing
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Pricing Impact
Pricing is especially important in international marketing strategy decisions, due to its effect on product positioning, market segmentation, demand management, and market share dynamics.
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Pricing Considerations
PoliticalAnd Legal
Environment
Economicfinancial
Environment
CompetitiveEnvironment
Ability to keep track
ProductionFacility
Pricing Pricing DecisionsDecisions
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Production Facilities Ability to keep track of costs
The location of production facilities determines cost control price of the products Multinationals shift production to take advantage
of lower costs and exchange rates. Small- to medium-size firms are limited to exporting.
Some companies price products “out of the market”.
Products can be manufactured and assembled in different countries. Difficult to track costs
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Environmental Considerations
International companies must react effectively to changes in the
competitive environment,
political and legal environment
economic and financial environment.
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Competitive environmental Influences
Competition Retail challenges difficult to identify
Competition from unauthorized channels, gray markets/Parallel Imports
Cheaper prices in countries with weaker currencies
Competition offers legal “copycat” products
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Competitive environmental Influences: Dumping
Selling products below cost to get rid of excess inventory and/or to undermine
competition Foreign companies can impose high prices
at home as a result of trade barriers imposed against imports.
Company uses profits to sell at much lower prices in foreign markets: Builds market share Suppresses profitability of competitors with
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Political and Legal Influences
Political and Legal: Setting limits on gross margins.
Setting price limits.
Local government subsidies to manufacturers.
Tariffs
Restricting repatriation of profits by multinationals.
Taxing and/or encouraging reinvestment of profits.
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Political and Legal Influences: Transfer Pricing
A pricing strategy used in intra-firm sales: between units a) marked based or b) cost based
Products priced at market level: Help multinationals under-report profits. Decreases tax burdens in countries
where company has foreign direct investment.
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Economic and Financial Influences:
Economic, Financial, Monetary: Inflation
Sometimes companies must low prices only to stay in the market
Fluctuating exchange rates Percentage that covers the exchange rate
Binding to strong currency Hard versus soft currencies Countertrade: a company sells a product
and agrees to accept products from the buyer’s firm or trade institution for payment (20% of the world trade)
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Economic and Financial Influences: Countertrade Brokers
Perfect matches for product exchanges are rare. Exchanges are complex. Numerous companies specialize in brokering barter
deals. E.g. Active International, Tradewell Inc
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Countertrade
Advantages: Facilitates sale of
products in emerging markets.
Can help an exporting company bypass trade restrictions.
Disadvantages: Foreign lenders could have
prior claim on goods. Restricts profit margins. Encourage economic
inefficiency. Prices are distorted. Could receive inferior quality
goods. Exchange partners can
become competitors. Involves extensive
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Types of Countertrade Usually a monetary exchange to a certain
degree is involved, except in Barter Clearing Agreement with a clearing
currency Switch Trading (professional switch
trading firm in between) Compensation (part cash, part products) Counter purchase /parallel barter Offset Purchase (long-term; the seller
agrees, in return to purchase a certain percentage of the sales)
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Setting Prices Tends to be intuition- and experience driven Highly decentralized Important for marketing managers to be
familiar with the price elasticity of their products
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Terms of Sale (Incoterms = International Commercial Terms)
Devised by the International Chamber of Commerce (ICC), updated in 2000.
Applies both to domestic and to international transactions.
E-Terms: Seller makes the goods available at the
seller’s plant/factory/business. EXW—Ex Works (factory, warehouse,
etc.): Title and risk pass to buyer from seller’s factory/plant/warehouse; seller has minimum responsibility.
Sources: http://www.iccwbo.org/incoterms
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Terms of Sale (Incoterms) F-Terms:
Seller delivers goods to the carrier that the buyer appoints.
FCA—Free Carrier (place after the origin point): Title and risk pass to buyer when the seller delivers goods cleared for export to a buyer’s carrier. Seller loads goods on buyer’s vehicle.
FAS—Free Alongside Ship (at port, after all port charges): Title and risk pass to the buyer after the merchandise is delivered alongside the ship by the seller, who is in charge of export clearance.
FOB—Free on Board (port, after all port charges): Title and risk pass to buyer once delivered on board the ship by the seller, who is in charge of export clearance.
Sources: http://www.iccwbo.org/incoterms
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Incoterms (contd.) C-Terms:
Seller must arrange for transportation without assuming the risk of loss.
CFR—Cost and Freight (destination port): Title, risk, and insurance cost pass to the buyer when delivered on board the ship by the seller, who pays transportation costs to the destination port.
CIF—Cost, Insurance and Freight (destination port): Title, risk, and insurance costs pass to buyer when delivered on board the ship by the seller. The seller pays transportation and insurance costs to the destination port
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Incoterms (contd.) C-Terms:
CPT—Carriage Paid To (place at destination; includes all port charges): Title, risk, and insurance costs pass to the buyer when delivered to the carrier or seller. The seller pays transportation and insurance costs to the destination port.
CIP—Carriage and Insurance Paid To (place at destination): Title and risk pass to buyer when delivered to the carrier or seller. The seller pays transportation and insurance costs to the destination port.
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Incoterms (contd.) D-Terms:
Seller bears all costs and risks to bring the goods to a location agreed upon by the buyers.
DAF—Delivered to Frontier (border of country): Title and risk pass to the buyer who is responsible for import clearance.
DES—Delivered Ex Ship (on board ship to destination port): Title, risk, and responsibility for vessel unloading and import clearance pass to buyer when the seller delivers goods on board the ship to the destination port.
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Incoterms (contd.) D-Terms:
DEQ—Delivered Ex Quay (Wharf), Duty Paid (destination port, includes duties and taxes but not destination charges and delivery): Title and risk pass to buyer when delivered on board ship at the destination by the seller.
DDU—Delivered Duty Unpaid (destination; excludes all duties and taxes): Title, risk, and responsibility for the vessel’s discharge and import clearance pass to the buyer when delivered on board the ship at the destination point by the seller.
DDP—Delivered Duty Paid (buyer’s door; includes all charges): Title and risk pass to the buyer when the seller delivers goods to the destination; seller is responsible for import clearance.
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Incoterms (contd.)
Sellersrisk, title, insurance
Buyersrisk,title,insurance
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Terms of Payment Cash in Advance—Best for seller, but not
for buyer. It is used for sellers’ markets primarily or for high-risk buyer environments.
Open Account—Goods are delivered without payment guarantee; the buyer and seller conducted past transactions, and continued business is expected for both.
Consignment with Open Account—Sellers still own the merchandise, so risk is low; but costs of recovering the goods are high in international transactions.
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Terms of Payment Documentary Collection—Title and possession pass
to buyer when documents attesting to title and shipping documents pass as well. The payment document, (bill of exchange or draft), requiring the buyer to pay on sight (sight draft) or at a specified time (time draft), is sent through seller’s bank to buyer’s bank after the goods are shipped. The buyer then pays the sight draft or accepts the time draft; documents are released to the buyer who takes possession of the goods.
Letter of Credit (L/C)—Letter is drawn by buyer’s bank, which guarantees to pay seller for merchandise upon presentation of documents providing evidence of shipment, adherence to the purchase order, and inspection. The bank releases funds when all conditions of sale are met. Most L/Cs are irrevocable.
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Pricing PracticesHigher Home Market Prices
Justified by: Lower labor or raw material cost in the
international market Strong local competition in the international
market Lower buying power of host-country
consumers Marketing strategy: Increase market share
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Pricing Practices (contd.)Lower Home Market Prices
Justified by: No cost advantages to producing overseas Few or no challenges from international
competition. Limited market potential International buyers can afford higher prices.
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Aggressive Export Pricing Goal: Gain market share in the international market
Dynamic Incremental Pricing: Assumes certain fixed costs. Does not factor in international promotion costs for domestic
distribution or full overhead. Product cost reflects only variable costs.
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Standardized vs. Local Pricing
Local Pricing Prices set to meet purchase power of
consumers and to account for differences in local distribution systems, market position, and taxes.
Even/odd pricing
Standardized Pricing Uniform price worldwide
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Penetration Pricing and Skimming
Penetration Pricing Price lower than competitors in order to
quickly penetrate the market at competitors’ expense.
Goal: high sales volume
Skimming Pricing above competitors’ prices when
competition is minimal. Focus on quality, uniqueness and status.
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True or FalseTrue or False1)Dumping is defined as selling products at cost to
get rid of excess inventory and/or to undermine competition.
2)Dumping represents a problem if it threatens to cause injury to an established industry in a particular market and/or if it delays the establishment of a viable domestic industry.
3)Hard currency is currency that is accepted for payment by any international seller.
4)Countries with a shortage of soft currency reserves are more likely to engage in countertrade.
5)Aggressive export pricing involves pricing products below market price to penetrate new markets.
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Multiple ChoiceChoose the best answer6)Which of the following is NOT an external economic or financial
factor affecting pricing decisions? a) inflation pressure on price b) shortage of hard currency c) transfer pricing d) fluctuating exchange rates
7)A manufacturer may charge different prices in different markets for the same product a) to meet target market needs. b) due to changes in the exchange rate. c) due to differences in wholesale prices. d) all of the above
8)What company was responsible for initiating a countertrade relationship with the Soviet Union in the late 1960s? a) McDonald's b) PepsiCo c) Philip Morris d) none of the above
9)What type of countertrade involves buying a party's position in a countertrade in exchange for hard currency and selling it to another customer? a) compensation b) switch trading c) counter purchase d) offset purchase
10)If a firm's objectives are centered on generating high profit and recovering product development costs quickly, it is likely to use which one of the following international pricing strategies? a) skimming b) penetration pricing c) standardized pricing d) competitive pricing
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Content Basics of International Marketing The international Marketing Environment International Marketing Strategies International Marketing Mix Implementation of the international
Marketing Strategies
Case studies
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Organizing for International Marketing Operations
Companies often need to reorganize to more effectively meet the international challenges
Organizational designs have to fit with their external environment and with company characteristics and goals.
Organizational design is determined by factors: In the firm’s environment
competition, (quick decisions->more flexibility->decentralized)
environmental stability, similarity with the home country, common regional integration, availability of qualified labor.
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Factors Within the Firm Internationalization as a priority:
Organizational structure with worldwide regional divisions in charge of particular countries.
Involvement in international business an international division that oversees
international operations. Minimal involvement in international business
small international department. Companies usually maintain their
organizational structure when they go international. Concerning hierarchy and centralization. Concerning product lines
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International Organizational Designs
The matrix structure
The matrix structure
Product DivisionsProduct Divisions
Worldwide regionaldivisions
Worldwide regionaldivisions
International
divisions
International
divisions
Organizationaldesigns
Organizationaldesigns
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Worldwide Regional Division Structure
Operations are organizes by geographical region or by country.
Subsidiaries report directly to the single division responsible for operations in the country or geographic region.
Creates competitive advantage for firms Example: It is better equipped to immediately
process and respond to country-specific information and conditions because of its strong regional focus.
Allows for some duplication of activities and thus might increase costs.
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Worldwide Regional Division Structure
Dana-Nicoleta Lascu Atomic Dog Publishing 2006
Worldwide Regional Division Structure: Frito-Lay.
Worldwide Regional Division Structure: Frito-Lay.
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Product Division Structure
Subsidiaries report to the product division (strategic business unit) with responsibility for the particular products.
In the past, this structure was common for high-tech companies or multinational companies with diversified portfolios
increasingly, this format is replaced by the matrix structure.
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International Division Structure
Firms with an international division have two main divisions: The domestic division The international division
export department structure: division has responsibility for all international operations
international division structure: all foreign subsidiaries report directly to a single division responsible for international operations.
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Matrix Structure Takes into account the multiple dimensions
involved in doing business internationally—functional areas, product, and region/country.
In a matrix structure, two dimensions are integrated so that each operational unit reports to both region/country managers and product managers.
E.g. Unilever with global and local brands
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Example of Matrix Structure: BASF Corp.
Chemicals
Plastics
Performance Products
FunctionalSolutions
AgriculturalSolutions
Oil & Gas
EuropeNorth
AmericaAsia Pacific
South America,Africa, Middle East
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Controlling Marketing Operations
Challenges Local units and a regional focus add levels
that complicate management, communication, and evaluation processes.
External environment changing at different rates.
Tendency to resist influence in both directions: Headquarters involvement Subsidiary Input
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ControlsFormal Controls Establishing performance standards Measuring performance Addressing discrepancies
Informal Controls Frequent contact between home-country
headquarters and regional/local office. Rotate managers to different assignments. Hire third-country managers to oversee
new or problematic operations. Training employees
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Future Perspectives in International Marketing
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Future Perspectives in International Marketing
Internet: expanded the area of international
marketing increased access to new markets Research conducted by Nielsen
found that more than 491 million people are using the internet (one third in the US)
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Internet use in selected international markets
Country Active Users (in millions)
PC Time per Person per
Month
Sessions/Visits per Person per Month
Australia 10.8 34 hrs 28 min 63
Brazil 17.9 35 hrs 53 min 31
France 23.0 39 hrs 49 min 44
Germany 32.8 34 hrs 36
Italy 18.2 25 hrs 27 min 30
Japan 36.6 14 hrs 57 min 25
Spain 12.7 28 hrs 45 min 33
United States 61.0 82 hrs 32 min 67
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Internet retail industry profile
a. Online Retail Sector Growth (in billions)Year $ Billion % Growth2003 425.1 26.002004 544.6 28.102005 656.4 20.50b. Retail Segments' ShareProduct Category % Share
Drugs, health, beauty 23.50
Computer and related materials 17.50
Clothing and shoes 11.70
Kitchen and home 4.60
Jewelry 4.00
Other 38.70
c. Geographic SegmentationGeography % Share
European market 44.40
U.S. market 22.50
Asia-Pacific market 21.70
Rest of the world 11.40
Source: Internet Retail Industry Profile: “Global Internet Retail," April 2006: Datamonitor
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Challenges for the Internet
Companies can’t handle the amount of sales: 46 percent of companies with e-commerce
capabilities turn away international orders because they do not have the processes in place to fill them.
About $10 million are turned away annually by companies due to:
Language and cultural barriers that hinder basic communications.
Difficulty handling the destination country’s import and tax regulations or export controls in the home country.
Difficulty in handling cumbersome payment mechanisms.
High rate of credit card theft, adding to the company’s risk.
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Product Challenges Product life cycles will become shorter:
International firms must be prepared for rapid new product introductions simultaneously in world markets, regardless of the markets’ levels of development.
The battle for market share for market leaders will increasingly take place in developing countries.
As the world population grows, there will be significant changes in the consumption process. (Environmental concern)
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Promotion Challenges Firms will compete on their ability to resonate
themes that appeal to world consumers. Integrated marketing communications are
going to be standard for both international consumer product companies and for business-to-business communications.
Consumers will expect extensive information on the websites of companies with which they do business.
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National and Global Appeals
National advertising campaigns will continue to be used for local brands, services and issues.
Global advertising campaigns will continue to be developed for global market segments. The global elite continues to be the target market for the Jaguar automobile.
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Distribution Companies will continue to pursue
measures to reduce distribution costs by adopting just-in-time inventory systems and creating product flows rather than stocks.
Companies will coordinate their inventory systems with suppliers and clients through electronic data interchange.
Companies will have to abide by post September 11, 2001, security measures, which will further reduce merchandise theft.
Entertainment will be especially important when communicating with consumers in all retailing environments.
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True or false1)Companies operating in countries characterized by unstable
political environments or countries where government policies are unstable need an organizational structure that allows them to react quickly.
2)Companies operating in countries that have ample educated and qualified labor are more likely to be centralized.
3)A worldwide regional division structure has two main divisions: the domestic division and the international division.
4)An advantage of the worldwide regional division structure is that it is better equipped to immediately process and respond to country-specific information and conditions than other formal structures.
5)In a regional or worldwide matrix division structure, subsidiaries report to the product division (strategic business unit) with responsibility for the particular products.
6)Informal controls are used in international marketing to ensure that international company operations are in line with company goals and objectives.
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Choose the best answer7)Which of the following companies has a worldwide
regional division structure? a) Frito-Lay b) Coke c) Eli Lilly d) none of the above
8)Which of the following companies has a matrix structure? a) IBM b) Unilever c) Disney d) all of the above
9)What is the process for instituting formal controls? a) measuring performance, establishing standards, addressing discrepancies b) establishing standards, measuring performance, addressing discrepancies c) addressing discrepancies, establishing standards, measuring performance d) none of the above
10)In spite of extensive Internet access worldwide, companies are not equipped to handle sales due to a) language and cultural barriers. b) difficulty handling the destination country's import and tax regulations. c) difficulty in handling export controls in the home country. d) all of the above
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