Homework help for aviation

homework97

PrinciplesofMarketingChapter19.pptx

Home >Business & Finance homework help >Marketing homework help >Homework help for aviation

Principles of Marketing Seventeenth Edition

Chapter 19

The Global Marketplace

Learning Objectives

19-1 Discuss how the international trade system and the economic, political-legal, and cultural environments affect a company’s international marketing decisions.

19-2 Describe three key approaches to entering international markets.

19-3 Explain how companies adapt their marketing strategies and mixes for international markets.

19-4 Identify the three major forms of international marketing organization.

Learning Objective 1

Discuss how the international trade system and the economic, political-legal, and cultural environments affect a company’s international marketing decisions.

Learning Objective 1 Summary

A company must understand the global marketing environment, especially the international trade system. It should assess each foreign market’s economic, political-legal, and cultural characteristics. The company can then decide whether it wants to go abroad and consider the potential risks and benefits. It must decide on the volume of international sales it wants, how many countries it wants to market in, and which specific markets it wants to enter. These decisions call for weighing the probable returns against the level of risk.

Global Marketing Today

A global firm:

operates in more than one country

gains marketing, production, R&D, and financial advantages not available to purely domestic competitors

sees the world as one market

A global firm minimizes the importance of national boundaries and develops global brands. The global company raises capital, obtains materials and components, and manufactures and markets its goods wherever it can do the best job.

For example, U.S.-based Otis Elevator, the world’s largest elevator maker, is headquartered in Farmington, Connecticut. However, it offers products in more than 200 countries and achieves more than 83 percent of its sales from outside the United States. It gets elevator door systems from France, small geared parts from Spain, electronics from Germany, and special motor drives from Japan. It operates manufacturing facilities in the Americas, Europe, and Asia. Otis Elevator is a wholly owned subsidiary of global commercial and aerospace giant United Technologies Corporation .

Many of today’s global corporations—both large and small—have become truly borderless.

This does not mean, however, that every firm must operate in a dozen countries to succeed. Smaller firms can practice global niching. But the world is becoming smaller, and every company operating in a global industry—whether large or small—must assess and establish its place in world markets.

Global Marketing Today

The rapid move toward globalization means that all companies will have to answer some basic questions: What market position should we try to establish in our country, in our economic region, and globally? Who will our global competitors be and what are their strategies and resources? Where should we produce or source our products? What strategic alliances should we form with other firms around the world?

As shown in Figure 19.1, a company faces six major decisions in international marketing. We discuss each decision in detail in this chapter.

Global Marketing Today

Global firms ask a number of basic questions:

What market position should we try to establish in our own country, in our economic region, and globally?

Who will our global competitors be, and what are their strategies and resources?

Where should we produce or source our product?

What strategic alliances should we form with other firms around the world?

Global Marketing Today

Elements of the Global Marketing Environment

The International Trade System:

Tariffs are taxes on certain imported products designed to raise revenue or to protect domestic firms.

Quotas are limits on the amount of foreign imports a country will accept in certain product categories to conserve on foreign exchange and protect domestic industry and employment.

Foreign governments may charge tariffs and set quotas. For example, China slaps a 25 percent tariff on United States and other imported autos.

Global Marketing Today

Elements of the Global Marketing Environment

The International Trade System:

Exchange controls are a limit on the amount of foreign exchange and the exchange rate against other currencies.

Nontariff trade barriers are biases against bids or restrictive product standards that go against American product features.

Firms may also encounter exchange controls and nontariff trade barriers. For example, foreign businesses in China appear to receive unusually close scrutiny and harsh treatment from Chinese authorities, aimed at boosting the fortunes of local competitors.

Global Marketing Today

Elements of the Global Marketing Environment

The International Trade System:

General Agreement on Tariffs and Trade (GATT):

A 61-year-old treaty

Designed to promote world trade

Reduces tariffs and other international trade barriers

The World Trade Organization (WTO) replaced GATT in 1995 and now oversees the original GATT provisions. WTO and GATT member nations (currently numbering 153) have met in eight rounds of negotiations to reassess trade barriers and establish new rules for international trade. Their actions have been productive. The first seven rounds of negotiations reduced the average worldwide tariffs on manufactured goods from 45 percent to just 5 percent.

Global Marketing Today

Elements of the Global Marketing Environment

The International Trade System:

World Trade Organization

Enforces GATT rules

Mediates disputes

Imposes trade sanctions

Global Marketing Today

Regional Free-Trade Zones

Certain countries have formed free trade zones or economic communities.

European Union (EU)

North American Free Trade Agreement (NAFTA)

Central American Free Trade Association (CAFTA)

Union of South American Nations (UNASUR)

Regional Free Trade Zones

Certain countries have formed free trade zones or economic communities. These are groups of nations organized to work toward common goals in the regulation of international trade.

One such community is the European Union (EU). Formed in 1957, the EU set out to create a single European market by reducing barriers to the free flow of products, services, finances, and labor among member countries and developing policies on trade with nonmember nations. Today, the EU represents one of the world’s largest single markets.

In 1994, the North American Free Trade Agreement (NAFTA) established a free trade zone among the United States, Mexico, and Canada. The agreement created a single market of 463 million people who produce and consume over $18 trillion worth of goods and services annually.

In 2005 the Central American Free Trade Agreement (CAFTA-DR) established a free trade zone between the United States and Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.

Other free trade areas have formed in Latin America and South America. For example, the Union of South American Nations (UNASUR), modeled after the EU, was formed in 2004 and formalized by a constitutional treaty in 2008. Consisting of 12 countries, UNASUR makes up the largest trading bloc after NAFTA and the EU.

Each nation has unique features that must be understood. A nation’s readiness for different products and services and its attractiveness as a market to foreign firms depend on its economic, political-legal, and cultural environments.

Global Marketing Today

Elements of the Global Marketing Environment

Economic Environment

Economic factors reflect a country’s attractiveness as a market.

Industrial structure

Income distribution

With sales stagnating in its mature markets, Coca-Cola is looking to emerging markets—such as Africa—to meet its ambitious growth goals. Its African distribution network is rudimentary but effective.

The international marketer must study each country’s economy. The country’s industrial structure shapes its product and service needs, income levels, and employment levels.

The second economic factor is the country’s income distribution. Industrialized nations may have low-, medium-, and high-income households. In contrast, countries with subsistence economies consist mostly of households with very low family incomes. Still other

countries may have households with either very low or very high incomes.

Global Marketing Today

Elements of the Global Marketing Environment

Economic Environment

Industrial Structure:

Subsistence economies

Raw material exporting economies

Emerging economies (industrializing economies)

Industrial economies

Subsistence economies are where the vast majority of people engage in simple agriculture. They consume most of their output and barter the rest for simple goods and services. They offer few market opportunities. Many African countries fall into this category.

Raw material exporting economies are rich in one or more natural resources but poor in other ways. Much of their revenue comes from exporting these resources. Some examples are Chile (tin and copper) and the Democratic Republic of the Congo (copper, cobalt, and coffee). These countries are good markets for large equipment, tools and supplies, and trucks. If there are many foreign residents and a wealthy upper class, they are also a market for luxury goods.

In emerging (industrializing) economies, fast growth in manufacturing results in rapid overall economic growth. Examples include the BRIC countries—Brazil, Russia, India, and China. As manufacturing increases, the country needs more imports of raw textile materials, steel, and heavy machinery, and fewer imports of finished textiles, paper products, and automobiles. Industrialization typically creates a new rich class and a growing middle class, both demanding new types of imported goods.

Industrial economies are major exporters of manufactured goods, services, and investment funds. They trade goods among themselves and also export them to other types of economies for raw materials and semifinished goods. The varied manufacturing activities of these industrial nations and their large middle class make them rich markets for all sorts of goods. Examples include the United States, Japan, and Norway.

Global Marketing Today

Elements of the Global Marketing Environment

Economic Environment

Income Distribution:

Low-income households

Middle-income households

High-income households

The second economic factor is the country’s income distribution.

Industrialized nations may have low-, medium-, and high-income households. In contrast, countries with subsistence economies consist mostly of households with very low family incomes. Still other countries may have households with either very low or very high incomes. Even poor or emerging economies may be attractive markets for all kinds of goods.

These days, companies in a wide range of industries—from cars to computers to candy—are increasingly targeting even low- and middle-income consumers in emerging economies. For example, in India, Ford recently introduced a new model targeted to consumers who are only now able to afford their first car.

Global Marketing Today

Elements of the Global Marketing Environment

Political-Legal Environment

Country’s attitude toward international buying

Government bureaucracy

Political stability

Monetary regulations

Nations differ greatly in their political-legal environments. Some nations are very receptive to foreign firms; others are less accommodating. For example, India has tended to bother foreign businesses with import quotas, currency restrictions, and other limitations that make operating there a challenge. In contrast, neighboring Asian countries, such as Singapore and Thailand, court foreign investors and shower them with incentives and favorable operating conditions.

Political and regulatory stability is another issue. For example, Venezuela’s government is notoriously volatile because of economic factors such as inflation and steep public spending, which increases the risk of doing business there. Although most international marketers still find the Venezuelan market attractive, the unstable political and regulatory situation will affect how they handle business and financial matters.

Companies must also consider a country’s monetary regulations. Sellers want to take their profits in a currency of value to them. Ideally, the buyer can pay in the seller’s currency or in other world currencies. Short of this, sellers might accept a blocked currency—one whose removal from the country is restricted by the buyer’s government—if they can buy other goods in that country that they need or can sell elsewhere for a needed currency. In addition to currency limits, a changing exchange rate also creates high risks for the seller.

Most international trade involves cash transactions. Yet many nations have too little hard currency to pay for their purchases from other countries. They may want to pay with other items instead of cash. Barter involves the direct exchange of goods or services. For example, China agreed to help the Democratic Republic of Congo develop $6 billion of desperately needed infrastructure in exchange for natural resources needed to feed China’s booming industries.

Global Marketing Today

Elements of the Global Marketing Environment

Cultural Environment

Impact of culture on marketing strategy

Impact of marketing strategy on cultures

The Impact of Culture on Marketing Strategy

Sellers must understand the ways that consumers in different countries think about and use certain products before planning a marketing program. Companies that ignore cultural norms and differences can make some very expensive and embarrassing mistakes.

Business norms and behaviors also vary from country to country. American business executives need to understand these kinds of cultural nuances before conducting business in another country.

By the same token, companies that understand cultural nuances can use them to their advantage in the global markets. For example, furniture retailer IKEA’s stores are a big draw for up-and-coming Chinese consumers. But IKEA has learned that customers in China want a lot more from its stores then just affordable Scandinavian-design.

The Impact of Marketing Strategy on Cultures

Whereas marketers worry about the impact of global cultures on their marketing strategies, others may worry about the impact of marketing strategies on global cultures. For example, social critics contend that large American multinationals, such as McDonald’s, Coca-Cola, Starbucks, Nike, Google, Disney, and Facebook, aren’t just globalizing their brands; they are Americanizing the world’s cultures.

Global Marketing Today

Deciding Whether To Go Global

Factors to consider:

Can the company understand the consumers?

Can company offer competitively attractive products?

Will company be able to adapt to local culture?

Not all companies need to venture into international markets to survive. For example, most local businesses need to market well only in their local marketplaces. Operating domestically is easier and safer because managers don’t need to:

learn another country’s language and laws

deal with unstable currencies

face political and legal uncertainties

redesign their products to suit different customer expectations

However, companies that operate in global industries, where their strategic positions in specific markets are affected strongly by their overall global positions, must compete on a regional or worldwide basis to succeed.

Any of several factors might draw a company into the international arena.

Competitors might attack the company’s home market.

The company might want to counterattack these competitors in their home markets.

The company’s customers might be expanding abroad and require international servicing.

International markets might simply provide better opportunities for the company.

Global Marketing Today

Deciding Whether To Go Global

Factors to consider:

Can company deal with foreign nationals?

Do the company’s managers have the necessary international experience?

Has management considered regulation and political environment of other countries?

learn another country’s language and laws

deal with unstable currencies

face political and legal uncertainties

redesign their products to suit different customer expectations

Any of several factors might draw a company into the international arena.

Competitors might attack the company’s home market.

The company might want to counterattack these competitors in their home markets.

The company’s customers might be expanding abroad and require international servicing.

International markets might simply provide better opportunities for the company.

Global Marketing Today

Deciding Which Markets To Enter

Define international marketing objectives and policies

Foreign sales volume

How many countries to enter

Types of countries to enter based on:

Geography

Income and population

Political climate

In recent years, many major new markets have emerged, offering both substantial opportunities and daunting challenges. After listing possible international markets, the company must carefully evaluate each one. It must consider many factors.

For example, Walmart’s decision to enter Africa seems like a no-brainer. However, as Walmart considers expanding into African markets, it must ask some important questions. Can it compete effectively on a country-by-country basis with hundreds of local competitors? Will the various African governments be stable and supportive? Does Africa provide for the needed logistics technologies? Can Walmart master the varied and vastly different cultural and buying differences of African consumers? Walmart’s expansion in Africa will likely be a slow process, as it confronts many unfamiliar cultural, political, and logistical challenges.

Global Marketing Today

Netflix’s decision to expand into new European markets seems like a no-brainer. But despite its huge market potential, Europe presents Netflix with some formidable challenges.

More than a dozen local Netflix-like rivals have sprung up there during the past few years—services such as Snap in Germany, Infinity in Italy, and CanalPlay in France have been busy locking in subscribers and content rights. And Amazon.com’s Lovefilm is already the leading streaming service in Germany.

The goal is to determine the potential of each market, using indicators such as those shown in Table 19.1. Then the marketer must decide which markets offer the greatest long-run return on investment.

Learning Objective 2

Describe three key approaches to entering international markets.

Discussion Question

What factors do companies consider when deciding on possible global markets to enter?

Learning Objective 2 Summary

The company must decide how to enter each chosen market— whether through exporting, joint venturing, or direct investment. Many companies start as exporters, move to joint ventures, and finally make a direct investment in foreign markets. In exporting, the company enters a foreign market by sending and selling products through international marketing intermediaries (indirect exporting) or the company’s own department, branch, or sales representatives or agents (direct exporting). When establishing a joint venture, a company enters foreign markets by joining with foreign companies to produce or market a product or service. In licensing, the company enters a foreign market by contracting with a licensee in the foreign market and offering the right to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty.

Deciding How To Enter The Market

Once a company has decided to sell in a foreign country, it must determine the best mode of entry. Its choices are exporting, joint venturing, and direct investment. Figure 19.2 shows three market entry strategies, along with the options each one offers. As the figure shows, each succeeding strategy involves more commitment and risk but also more control and potential profits.

Deciding How To Enter The Market

Exporting

Exporting is when the company produces its goods in the home country and sells them in a foreign market. It is the simplest means involving the least change in the company’s product lines, organization, investments, or mission.

Indirect exporting

Direct exporting

The simplest way to enter a foreign market is through exporting. The company may passively export its surpluses from time to time, or it may make an active commitment to expand exports to a particular market.

Companies typically start with indirect exporting, working through independent international marketing intermediaries. Indirect exporting involves less investment and risk because the firm does not require an overseas marketing organization or network.

Sellers may eventually move into direct exporting, whereby they handle their own exports. The investment and risk are somewhat greater in this strategy, but so is the potential return.

Deciding How To Enter The Market

Joint-Venturing

Joint venturing is when a firm joins with foreign companies to produce or market products or services.

Licensing

Contract manufacturing

Management contracting

Joint ownership

Joint venturing differs from exporting in that the company joins with a host country partner to sell or market abroad.

A second method of entering a foreign market is by joint venturing.

Deciding How To Enter The Market

Joint-Venturing

Licensing is when a firm enters into an agreement with a licensee in a foreign market. For a fee or royalty, the licensee buys the right to use the company’s process, trademark, patent, trade secret, or other item of value.

Licensing is a simple way for a manufacturer to enter international marketing. The company thus gains entry into a foreign market at little risk; at the same time, the licensee gains production expertise or a well-known product or name without having to start from scratch.

In Japan, Budweiser beer flows from Kirin breweries, and Moringa Milk Company produces Sunkist fruit juice, drinks, and dessert items. Coca-Cola markets internationally by licensing bottlers around the world and supplying them with the syrup needed to produce the product.

Deciding How To Enter The Market

Joint-Venturing

Contract manufacturing is when a firm contracts with manufacturers in the foreign market to produce its product or provide its service. Benefits include faster startup, less risk, and the opportunity to form a partnership or to buy out the local manufacturer.

Another option is contract manufacturing. Sears used this method in opening up department stores in Mexico and Spain, where it found qualified local manufacturers to produce many of the products it sells. The drawbacks of contract manufacturing are decreased control over the manufacturing process and loss of potential profits on manufacturing.

Deciding How To Enter The Market

Joint-Venturing

Management contracting is when the domestic firm supplies management skill to a foreign company that supplies capital. The domestic firm is exporting management services rather than products.

Management contracting is a low-risk method of getting into a foreign market, and it yields income from the beginning. The arrangement is even more attractive if the contracting firm has an option to buy some share in the managed company later on.

The arrangement is not sensible, however, if the company can put its scarce management talent to better uses or if it can make greater profits by undertaking the whole venture. Management contracting also prevents the company from setting up its own operations for a period of time.

Hilton uses this arrangement in managing hotels around the world. For example, the hotel chain operates DoubleTree by Hilton hotels in countries ranging from the UK and Italy to Peru and Costa Rica, to China, Russia, and Tanzania. The properties are locally owned, but Hilton manages the hotels with its world-renowned hospitality expertise.

Deciding How To Enter The Market

Joint-Venturing

Joint ownership is when one company joins forces with foreign investors to create a local business in which they share joint ownership and control. Joint ownership is sometimes required for economic or political reasons.

Joint ownership is when a company buys an interest in a local firm, or the two parties form a new business venture. For example, the firm may lack the financial, physical, or managerial resources to undertake the venture alone. Alternatively, a foreign government may require joint ownership as a condition for entry.

Often, companies form joint ownership ventures to merge their complementary strengths in developing a global marketing opportunity. For example, Campbell Soup Company recently formed a 60/40 joint venture with Hong Kong-based Swire Pacific—called Campbell Swire—to help distribute the company’s soups better in China.

However, joint ownership has certain drawbacks. The partners may disagree over investment, marketing, or other policies. Whereas many U.S. firms like to reinvest earnings for growth, local firms often prefer to take out these earnings; whereas U.S. firms emphasize the role of marketing, local investors may rely on selling.

Deciding How To Enter The Market

Direct Investment

Direct investment is the development of foreign-based assembly or manufacturing facilities. It offers a number of advantages including:

Labor

Logistics

Control

Government incentives

Lower costs

Raw materials

The biggest involvement in a foreign market comes through direct investment.

If a company has gained experience in exporting and if the foreign market is large enough, foreign production facilities offer many advantages. The firm may have lower costs in the form of cheaper labor or raw materials, foreign government investment incentives, and freight savings. The firm may also improve its image in the host country because it creates jobs.

Generally, a firm develops a deeper relationship with the government, customers, local suppliers, and distributors, allowing it to adapt its products to the local market better. Finally, the firm keeps full control over the investment and therefore can develop manufacturing and marketing policies that serve its long-term international objectives.

The main disadvantage of direct investment is that the firm faces many risks, such as restricted or devalued currencies, falling markets, or government changes. In some cases, a firm has no choice but to accept these risks if it wants to operate in the host country.

Deciding How To Enter The Market

Approaches to Marketing Strategy

Entrepreneurial marketing involves visualizing an opportunity and constructing and implementing flexible strategies.

Formulated marketing involves developing formal marketing strategies and following them closely.

Intrepreneurial marketing involves the attempt to reestablish an internal entrepreneurial spirit and refresh marketing strategies and approaches.

Having identified and evaluated its major competitors, a company now must design broad marketing strategies by which it can gain competitive advantage. But what broad competitive marketing strategies might the company use? Which ones are best for a particular company or for the company’s different divisions and products?

No one strategy is best for all companies. Each company must determine what makes the most sense given its position in the industry and its objectives, opportunities, and resources. Even within a company, different strategies may be required for different businesses or products.

Companies also differ in how they approach the strategy-planning process. Many large firms develop formal competitive marketing strategies and implement them religiously. However, other companies develop strategy in a less formal and orderly fashion. Such companies sketch out strategies on the fly, stretch their limited resources, live close to their customers, and create more satisfying solutions to customer needs. They form buyer’s clubs, use buzz marketing, and focus on winning customer loyalty

In fact, approaches to marketing strategy and practice often pass through three stages: entrepreneurial marketing, formulated marketing, and intrepreneurial marketing.

• Entrepreneurial marketing: Most companies are started by individuals who live by their wits. For example, in the beginning, Robert Ehrlich, founder and CEO of Pirate Brands, a snack food company, didn’t believe in formal marketing—or formal anything else. Until only a few years ago, he built his company with virtually no formal marketing.

• Formulated marketing: As small companies achieve success, they inevitably move toward more-formulated marketing. For example, as Pirate Brands has grown, it now takes a more formal approach to product development and its PR and distributor relations strategies. It has also developed more formal customer outreach efforts. As it grows, it will adopt more-developed marketing tools.

• Intrepreneurial marketing: Many large and mature companies get stuck in formulated marketing. They pore over the latest Nielsen numbers, scan market research reports, and try to fine-tune their competitive strategies and programs. These companies sometimes lose the marketing creativity and passion they had at the start. For example, intrepreneurial thinking has helped the Virgin Group grow into a collection of more 200 companies based on of intrepreneurs who found and developed new opportunities, often leading efforts that went against the grain.

The bottom line is that there are many approaches to developing effective competitive marketing strategies. There will be a constant tension between the formulated side of marketing and the creative side. It is easier to learn the formulated side of marketing, which has occupied most of our attention in this book. But we have also seen how marketing creativity and passion in the strategies of many of the companies studied have helped to build and maintain success in the marketplace.

Learning Objective 3

Explain how companies adapt their marketing strategies and mixes for international markets.

Learning Objective 3 Summary

Companies must also decide how much their marketing strategies and their products, promotion, price, and channels should be adapted for each foreign market. At one extreme, global companies use standardized global marketing worldwide. Others use adapted global marketing, in which they adjust the marketing strategy and mix to each target market, bearing more costs but hoping for a larger market share and return. However, global standardization is not an all-or-nothing proposition. It’s a matter of degree. Most international marketers suggest that companies should “think globally but act locally”—that they should seek a balance between globally standardized strategies and locally adapted marketing mix tactics.

Deciding On The Global Marketing Program

Standardized marketing mix involves selling the same products and using the same marketing approaches worldwide.

Adapted marketing mix involves adjusting the marketing mix elements in each target market, bearing more costs but hoping for a larger market share and ROI.

Companies that operate in one or more foreign markets must decide how much, if at all, to adapt their marketing strategies and programs to local conditions.

The question of whether to adapt or standardize the marketing strategy and program has been much debated over the years. On the one hand, some global marketers believe that technology is making the world a smaller place, and consumer needs around the world are becoming more similar. This paves the way for global brands and standardized global marketing which result in greater brand power and reduced costs from economies of scale.

On the other hand, the marketing concept holds that marketing programs will be more effective if tailored to the unique needs of each targeted customer group. If this concept applies within a country, it should apply even more across international markets. Despite global convergence, consumers in different countries still have widely varied cultural backgrounds. They still differ significantly in their needs and wants, spending power, product preferences, and shopping patterns.

However, global standardization is not an all-or-nothing proposition. It’s a matter of degree. Most international marketers suggest that companies should “think globally but act locally”—that they should seek a balance between standardization and adaptation. Starbucks has found this balance internationally, leveraging its substantial global brand recognition but adapting its marketing and operations to specific markets.

Deciding On The Global Marketing Program

Product

Straight product extension means marketing a product in a foreign market without any change.

Product adaptation involves changing the product to meet local conditions or wants.

Product invention consists of creating something new for a specific country market.

Maintain or reintroduce earlier products

Create new products

Five strategies are used for adapting product and marketing communication strategies to a global market (see Figure 19.3). We first discuss the three product strategies and then turn to the two communication strategies.

Straight product extension: Top management tells its marketing people, “Take the product as is and find customers for it.” The first step, however, should be to find out whether foreign consumers use that product and what form they prefer.

Product adaptation: For example, Kraft has adapted its popular Oreo cookie to the unique tastes of consumers all around the world, whether it’s mango-and-orange flavored Oreos in the Asia Pacific region, green tea Oreos in China, a chocolate and peanut variety in Indonesia, or banana and dulce de leche in Argentina. Chinese Oreos are less sweet than the American standard; Oreos in India are less bitter.

Product invention: As markets have gone global, companies ranging from appliance manufacturers and carmakers to candy and soft drink producers have developed products that meet the special purchasing needs of low-income consumers in developing economies.

Deciding On The Global Marketing Program

Promotion

Companies can either adopt the same communication strategy they use at home or change it for each market.

Even in standardized communications campaigns, adjustments may be required for language or cultural differences.

Some global companies use a standardized advertising theme around the world. For example, Apple sold millions of iPods with a single global campaign featuring silhouetted figures dancing against a colorful background. And other than for language, the Apple website looks about the same for any of the more than 70 countries in which Apple markets its products.

In Western markets, fast-casual clothing retailer H&M runs fashion ads with models showing liberal amounts of bare skin. But in the Middle East, where attitudes toward public nudity are more conservative, the retailer runs the same ads digitally adapted to better cover its models.

Global companies often have difficulty crossing the language barrier, with results ranging from mild embarrassment to outright failure. Seemingly innocuous brand names and advertising phrases can take on unintended or hidden meanings when translated into other languages. For example, Interbrand of London, the firm that created household names such as Prozac and Acura, recently developed a brand name “hall of shame” list, which contained these and other foreign brand names you’re never likely to see inside the local Kroger supermarket: Krapp toilet paper (Denmark), Plopp chocolate (Scandinavia), Crapsy Fruit cereal (France), Poo curry powder (Argentina), and Pschitt lemonade (France).

Similarly, advertising themes often lose—or gain—something in the translation. In Chinese, the KFC slogan “finger-lickin’ good” came out as “eat your fingers off.” And Motorola’s Hellomoto ringtone sounds like “Hello, Fatty” in India. Marketers must be watchful to avoid such mistakes.

Other companies follow a strategy of communication adaptation, fully adapting their advertising messages to local markets.

Deciding On The Global Marketing Program

Price

Uniform pricing charges the same price in all markets but does not consider income or wealth where the price may be too high in some or not high enough in other markets.

Standard markup pricing is a price based on a percentage of cost but can cause problems in countries with high costs.

Companies also face many considerations in setting their international prices. Regardless of how companies go about pricing their products, their foreign prices probably will be higher than their domestic prices for comparable products.

An Apple iPad 3 that sells for $499 in the United States goes for $624 in the United Kingdom. Why? Apple faces a price escalation problem. It must add the cost of transportation, tariffs, importer margin, wholesaler margin, and retailer margin to its factory price. Depending on these added costs, a product may have to sell for two to five times as much in another country to make the same profit.

To overcome this problem when selling to less-affluent consumers in developing countries, many companies make simpler or smaller versions of their products that can be sold at lower prices. Others have introduced new, more affordable brands in emerging markets. For example, Levi recently launched the Denizen brand, created for teens and young adults in emerging markets such as China, India, and Brazil who cannot afford Levi’s-branded jeans.

Deciding On The Global Marketing Program

Distribution Channels

Seller’s headquarters organization supervises the channel and is also a part of the channel.

Channels between nations move the products to the borders of the foreign nations.

Channels within nations move the products from their foreign point of entry to the final customers.

An international company must take a whole-channel view of the problem of distributing products to final consumers. Figure 19.4 shows the two major links between the seller and the final buyer. To compete well internationally, the company must effectively design and manage an entire global value delivery network.

Channels of distribution within countries vary greatly from nation to nation. There are large differences in the numbers and types of intermediaries serving each country market and in the transportation infrastructure serving these intermediaries.

For example, whereas large-scale retail chains dominate the U.S. scene, most of the retailing in other countries is done by small, independent retailers. In India, millions of retailers operate tiny shops or sell in open markets. Thus, in its efforts to sell rugged, affordable phones to Indian consumers, Nokia has had to forge its own distribution structure.

Learning Objective 4

Identify the three major forms of international marketing organization.

Learning Objective 4 Summary

The company must develop an effective organization for international marketing. Most firms start with an export department and graduate to an international division. A few become global organizations, with worldwide marketing planned and managed by the top officers of the company. Global organizations view the entire world as a single, borderless market.

Deciding On The Global Marketing Organization

Typical management of international marketing activities include:

Establishing an exporting department with a sales manager and staff

Creating an international division organized by geography, products, or operating units

Becoming a complete global organization

Companies manage their international marketing activities in at least three different ways: Most companies first organize an export department, then create an international division, and finally become a global organization.

A firm normally gets into international marketing by simply shipping out its goods. If its international sales expand, the company will establish an export department with a sales manager and a few assistants. As sales increase, the export department can expand to include various marketing services so that it can actively go after business. If the firm moves into joint ventures or direct investment, the export department will no longer be adequate.

Many companies get involved in several international markets and ventures. A company may export to one country, license to another, have a joint ownership venture in a third, and own a subsidiary in a fourth. Sooner or later it will create international divisions or subsidiaries to handle all its international activity. International divisions are organized in a variety of ways:

geographical organizations, with country managers who are responsible for salespeople, sales branches, distributors, and licensees

world product groups, each responsible for worldwide sales of different product groups

international subsidiaries, each responsible for their own sales and profits

Many firms have passed beyond the international division stage and are truly global organizations. Global organizations don’t think of themselves as national marketers who sell abroad but as global marketers. The top corporate management and staff plan worldwide manufacturing facilities, marketing policies, financial flows, and logistical systems. Global companies recruit management from many countries, buy components and supplies where they cost the least, and invest where the expected returns are greatest.

Today, major companies must become more global if they hope to compete. As foreign companies successfully invade their domestic markets, companies must move more aggressively into foreign markets. They will have to change from companies that treat their international operations as secondary to companies that view the entire world as a single borderless market.