International Business
Lola2230
Gaspar2eChapter12.pptx© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Chapter 12 Global Marketing
Introduction to Global Business
Distinguish between marketing research and marketing intelligence systems.
Distinguish between standardization and adaptation.
Describe how new products are developed and how existing products are managed for international markets.
Explain the four different methods of promoting international marketing products, and provide some advantages and disadvantages of each.
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After studying this chapter, you should be able to:
Define channels of distribution and physical distribution, and indicate the role of each of these for marketing products internationally.
Discuss the objectives and decisions involved in international pricing.
Discuss aspects of customer service required for goods and services that are globally marketed.
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After studying this chapter, you should be able to:
Analyzing International Markets
To determine in which countries to conduct business and which market segments they should target, companies use market potentials and sales potentials.
Market potential is the total number of units of a product that could possibly be sold by all companies doing business in a specific international market.
Sales potential is the percentage of a market potential that a specific company expects to sell in a specific international market.
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Kinds of Markets
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Consumer Markets
Food, clothing, transportation, banking services, credit services, entertainment
Industrial Market
Equipment and machinery, supplies, lubri-cants, consulting services, cleaning services, adver-tising, marketing research, raw materials, etc.
Government Markets
Major infra-structure projects such as roads, bridges, dams, airports, com-munications, clean water; health care services; military operations
Information Required: Surveying International Demographics
Companies need to collect a variety of information about foreign markets, including:
A country’s population
Income levels in proposed foreign markets
GDP per capita as a measure of a nation’s purchasing power
Comparison of the average incomes of the wealthiest 20 percent of people in a nation to the average incomes of the poorest 20 percent
Age of a nation’s population
A nation’s ethnicity and religions
Whether a market is located in a rural or an urban area
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EXHIBIT 12.1 PER CAPITA GDPs, 2013 (ESTIMATE)
| Nation | Per Capita GDP |
| 1 Qatar | $102,100 |
| 2 Liechtenstein | 89,400 |
| 3 Monaco | 85,500 |
| 4 Luxembourg | 77,900 |
| 5 Singapore | 62,400 |
| 6 Norway | 55,400 |
| 7 Switzerland | 54,800 |
| 8 Brunei | 54,800 |
| 9 United States | 52,800 |
| 10 Netherlands | 43,300 |
| 11 Canada | 43,100 |
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Marketing Research vs. Marketing Intelligence Systems
Marketing research
Information collected at one particular time
Marketing intelligence system (MIS)
Information collected regularly over time
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Packaging, marketing, and labeling
Psychographic information
Socio-demographic information
Industry data sales, trends by product category
Specific perceptions of products and career opportunities
Aspirations of customers
Employment opportunities and salary comparisons
Success of competitors and specific details about their marketing and compensation plans
Usage of products by category
Demographic profile of customers by country
Country market information (i.e., income, population, female population)
Daily financial information including sales, expenses, and so on
Political risk analysis and its impact upon current business and start-up operations
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Examples of Information Needed from an MIS
EXHIBIT 12.2 TYPOLOGY OF INFORMATION SOURCES FOR MARY KAY COSMETICS MARKETING INTELLIGENCE SYSTEM—EUROPE
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Making the Standardization and Adaptation Decision
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Standardization
Marketing strategies used in international markets that are the same as those used in a firm’s domestic market
Adaptation
Marketing strategies used in international markets that are different from those used in a firm’s domestic market
Glocalization
The marketing strategy that involves pursuing a standardization strategy in foreign markets when possible and an adaptation one when necessary
Developing the International Product Mix
Options for marketing products overseas:
Sell the same domestic product overseas.
Modify products for different countries and regions.
Develop new products for foreign markets.
Incorporate all product differences into one design and develop a global product suitable for most world markets.
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Developing New Products for International Markets
Steps in developing new products for overseas markets:
First, decide on the sources of new product ideas.
Evaluate new product ideas against a set of variables related to product success.
Subject new product ideas to concept testing—presenting the idea to a small sample of the market to gauge its reaction.
Move to the business analysis step, when projections of potential revenues and profits are made.
Develop the physical product; product design is an important part of this step.
Subject the product to market testing—development of the marketing mix for the product.
The last step is commercialization of the new product, when it is manufactured and introduced to the foreign market.
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EXHIBIT 12.3 CHARACTERISTICS AFFECTING RATE OF ADOPTION & LEVEL OF ADOPTION FOR NEW PRODUCTS
Low
Rate
of
Adoption
and
Low
Level
of
Adoption
Rapid
Rate
of
Adoption
and
High
Level
of
Adoption
Little Relative Advantage High
Inconsistent Compatibility Consistent
Difficult Complexity Simple
Can’t Triability Can
Difficult Communicability Easy
High Cost Low
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Managing Existing Products
Product life cycle (PLC) is a depiction of the sales and profits for a new product over its lifetime.
The PLC helps international markets decide when to modify their marketing strategy.
Product elimination (PE) is a formal, written procedure to determine which of a firm’s products should be dropped.
Many companies do not have formal PE programs.
They put together crash programs when products get into trouble.
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EXHIBIT 12.4 THE PRODUCT LIFE CYCLE
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Where to Locate Research and Development Facilities
Having one facility in the home country reduces R&D costs and exerts more control and coordination over the R&D program.
Advantages to having one facility in the home country and one or more additional facilities in the foreign markets:
The MNC has access to foreign scientists and engineers.
New products developed overseas are more likely to be attuned to the firm’s overseas markets.
Products developed for emerging markets can be successfully sold in developed markets, called reverse strategy.
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Product Counterfeiting
Problems created by counterfeiting:
Damage to brand image by inferior counterfeits
Sales revenues lost to counterfeiters
Dangers to customers from defective and hazardous counterfeits
Costs of combating counterfeit products
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Developing the International Promotion Mix
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Publicity
Advertising
Sales Promotion
Personal Selling
Advertising and Personal Selling
Advertising media include television, radio, newspapers, magazines, direct mail.
Media can reach large audiences at low cost per contact.
Radio is effective where television ownership is low.
Newspapers may have different editions for different parts of the world.
Magazines may be targeted to specific industries (vertical publications) or to specific jobs in industries (horizontal publications).
Direct mail is the most focused medium.
Personal selling is considered very effective in international markets, but there is a high cost per contact.
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Sales Promotion
Sales promotions include contests and sweepstakes, coupons, end-aisle displays in stores, sponsorships, and trade shows.
Can produce tangible benefits in short periods of time.
Sponsorships are increasingly important.
Trade shows are extremely popular for marketing products in foreign countries.
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Publicity
Publicity refers to unpaid stories about a firm, its products or services, and its executives that appear in the media.
Large companies have public relations departments that attempt to influence media to report about them.
Benefits of publicity:
Helps firms to prospect for new customers
Paves the way for sales calls when a favorable press release is sent to prospects ahead of a sales call
Helps sell minor products and stretches the promotional budget
Favorable stories provide objective, unbiased, third-party endorsement for a firm
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Developing the International Distribution Mix
International distribution includes two major aspects:
Channels of distribution
Physical distribution
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Indirect Strategy
Uses existing distribution channels to market products and services
Requires no up-front investment
Market knowledge can assist in introducing products more quickly
Channels may also carry competitive products
Channel controls marketing efforts
Direct Strategy
Bypasses existing channels of distribution by using marketing and sales offices located in foreign countries
Requires upfront investment in recruiting and training a sales force
Maintains control over marketing efforts
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Channels of Distribution
Channels of Distribution (continued)
Two major kinds of channels of distribution are agents and distributors.
Agent—a channel of distribution that represents a firm in a foreign market and is paid by commission
Distributor—a channel of distribution that purchases products from a firm doing business in a foreign market and then resells them to other buyers
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Physical Distribution
Physical distribution
Storage and transportation operations that are used in moving products to a foreign market
Distribution issues in overseas markets:
Access to layers of in-country distribution systems
Poor logistical infrastructures and security in developing nations create difficulty in delivering orders in complete, accurate, and good condition
Greater shipping distance requires more emphasis on package design and increases logistics costs
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Physical Distribution (continued)
Companies selling products overseas often use freight forwarders—agents who are chiefly involved with physical distribution activities and documentation.
Containerization is shipping products to overseas markets in trailer-sized containers—by truck, train, airplane, oceangoing vessel.
Intermodal transport
International shipments using different modes of land, sea, and air transportation
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Developing the International Pricing Mix
Major aspects of a company’s international pricing strategies:
Developing pricing objectives for international markets
Setting prices in international markets
Addressing the issue of dumping
Setting transfer prices
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Pricing Objectives
Determining international pricing mix involves four major objectives:
Performance objectives—bottom-line goals
Prevention objectives—used to keep competitors out of a foreign market
Maintenance pricing objectives—designed to keep the status quo
Survival objective—pricing strategy used to allow a company to survive in an international market
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EXHIBIT 12.5 PRICING OBJECTIVES FOR INTERNATIONAL PRODUCTS AND SERVICES
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Setting Prices in International Markets
Price-setting factors:
Costs of product
Attractiveness of competitive products and their prices
How competitive the product is
How much marketing support (promotion budget, level of customer service, number of salespeople selling the product, etc.) the product will get
What the demand for the product will likely be
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Setting Prices in International Markets (continued)
Approaches to setting prices:
Charging the same price in the foreign market as in the domestic market:
Recognizes a product’s fixed and variable costs and includes costs of transportation, storage, and promotion required to market the product overseas
Using a market differentiation approach:
Recognizes product costs, but places a greater emphasis upon the demand that exists for products at various prices
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Gray Marketing and Dumping
Gray marketing (“parallel importation”)
Unauthorized importers selling a product in the manufacturer’s domestic market for less than what the manufacturer sells the product in that market
Dumping
Selling at a price in a foreign market that undercuts the prices of competing local firms by:
Setting the foreign market price below what is charged in the seller’s home-country (domestic) market
Setting a price above what is charged domestically, but below the marginal cost to move and sell the product overseas
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Transfer Pricing
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Transfer Price
A price a firm charges its overseas subsidiaries when selling them products they will resell
Arms Length Price
A price that an overseas market is willing to pay or the price that is customarily paid for the transferred products in the overseas market
Can be used to minimize taxes
Developing the International Customer Service Mix
Share of wallet
The percentage of purchases in a category a buyer gives to one vendor
Reliability
The performance of various aspects of customer service that meets customer expectations
Empowerment
The aspect of customer service that allows employees to take care of customer problems immediately, without having to consult superiors
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market potential
sales potential
marketing research
marketing intelligence system (MIS)
standardization
adaptation
glocalization
global product
concept testing
business analysis
market testing
commercialization
product life cycle (PLC)
product elimination
reverse strategy
vertical publication
horizontal publication
indirect strategy
direct strategy
agent
distributor
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Key Terms
physical distribution
freight forwarder
containerization
intermodal transport
dumping
gray marketing
transfer price
arms length price
share of wallet
reliability
empowerment
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Key Terms (continued)
