Portfolio Assignment

ryan25

wild_ibcaninppt_1211.ppt

Home >Business & Finance homework help >Economics homework help >Portfolio Assignment

Developing and Marketing Products

CHAPTER TWELVE

INTERNATIONAL

BUSINESS

The Challenges of Globalization

Canadian Edition

Wild • Wild • Valladares Montemayor

12 - *

Chapter Objectives

Explain the impact globalization is having on international marketing activities

Describe the types of things managers must consider when developing international product strategies

Discuss the factors that influence international promotional strategies and the blending of product and promotional strategies

Explain the elements that managers must take into account when designing international distribution strategies

Discuss the elements that influence international pricing strategies

In this chapter, you will learn how globalization affects international marketing activities.

You will also:

Explore how firms develop their international product strategies.
Understand how companies blend product and promotional strategies for international markets.
And examine the elements that influence international distribution and pricing strategies.

12 - *

Globalization and Marketing

Standardized product

and promotion

Adapted product

and/or marketing

Consistent image/message

Contain costs

Respond to local needs

Exploit unique image

Some companies market an identical product worldwide, whereas others adjust marketing strategies to national markets. But how do managers know which course to follow?

One argument says technology is causing needs and preferences to converge worldwide. Companies should, therefore, market the same products in the same way in all countries. This strategy helps contain costs because modifying products and marketing strategies is expensive.
Another perspective says that companies should adapt products and/or strategies to target markets to better satisfy local needs. A company can exploit its unique international image to take market share from local competitors.

Developing Product Strategies

12 - *

The BonWorth clothing factory in Mexico makes clothing for global retailers who intend to sell the same products worldwide without modification.

Companies can standardize or adapt their products in many ways when they decide to “go international.”

A worker laughs while ironing

clothing at the BonWorth clothing

factory in Mexico. The company

makes clothing for global retailers

who intend to sell the same

products worldwide without

modification. But even

globalization in this line of

business has its limits. A global

retailer must still adapt some

aspects of its promotional mix,

including its advertising and

pricing.

12 - *

Developing Product Strategies

Cultural

differences

Laws and

regulations

National

image

Counterfeit

goods

Many aspects of nation’s business environment influence international marketing strategies.

A company can adapt its product to suit local buyers’ tastes and product preferences that are rooted in culture. Or, it can search for a different cultural need that its product satisfies.
Likewise, a firm can adapt its product to satisfy a target market’s laws and regulations, or seek out target markets where a standardized product will sell.
A company may emphasize or downplay its own national image if it is a prominent feature of the final product. This can alter buyers’ perceptions of product quality and reliability, which is tied to the nation where a product is designed, assembled, or manufactured.
Counterfeit goods damage brand image. Buyers expect a certain level of craftsmanship and satisfaction from a particular brand. When a product fails to deliver on those expectations because it is a counterfeit, the company’s reputation is tarnished.

12 - *

Brand and Product Names

Brand name

Competitive advantage
Consistent image
Consider connotation

Product name

Select carefully
Respect cultures
Obey local laws

A brand name is legal property that can become so valuable as to become a firm’s competitive advantage. A consistent worldwide brand image is increasingly important as more people travel internationally. When selecting a brand name, a company should consider the connotations the name carries in the global marketplace.
Managers must also pay close attention to the names given to products in international markets. A product name that is not carefully researched can offend people for cultural reasons. Product names also may need to be changed to comply with the law in a target market, or to abide by a legal judgment that says a name is misleading.

Best Global Brands

12 - *

A brand name is central to a product’s personality and to how buyers perceive it.

A strong brand is essential for a global company whether its industry is electronics, delivery services, mobile phones, financial services, or computer software.

Why do you think having a global brand image is so important today?

Source: Newscom.

Vietnamese people ride motorbikes past a billboard for KFC amid a host of communist flags in Ho Chi Minh

City, Vietnam

A brand name is central to a product’s personality and to how buyers perceive it. The brands of all types of global companies blend into the urban surroundings in most nations. Here, Vietnamese people ride motorbikes past a billboard for KFC amid a host of communist flags in Ho Chi Minh

City, Vietnam. A strong brand is essential for a global company whether its industry is electronics, delivery services, mobile phones, financial services, or computer software. Why do you think having a global brand image is so important today?

Think – Pair - Share

12 - *

Source : WENN.com/Newscom .

Thousands of fake phones and footwear pile up at a warehouse in China after a massive crackdown on counterfeit goods.

The production of counterfeits affects every product imaginable including cosmetics, soft drinks, medical devices, auto parts, watches, and household appliances.

What could government officials around the world do to better combat counterfeiting?

Slide 8 is the first “Think-Pair-Share” in this chapter. These slides are intended to stimulate discussion between students. The activity requires students to consider the question individually, and then share their thoughts with one classmate or a small group. The goals of these slides are to 1) improve students’ conceptual understanding of the material, 2) hone critical thinking skills, and 3) improve problem solving.

Thousands of fake phones and footwear pile up at a warehouse in China after a massive crackdown on counterfeit goods. Every nation deals with the problem of counterfeit products, though developing countries and emerging markets are most inundated with them. The production of counterfeits affects every product imaginable including cosmetics, soft drinks, medical devices, auto parts, watches, and household appliances. What could government officials around the world do to better combat counterfeiting?

12 - *

Product Life Cycles

New product development efforts

Result is shorter product life cycles

Consecutive market introductions

Technology and travel make obsolete

Companies traditionally extended a product’s life cycle by introducing it first in industrialized countries and later exporting it to emerging markets. But advances in global communications now alert consumers worldwide to the latest product introductions. Firms now undertake new product development at a more rapid pace, which is shortening the life cycles of products.

12 - *

Discussion Question

What elements in the national business environment influence decisions about whether to standardize or adapt international marketing efforts?

Source: www.redbull.ca

Red Bull is identical in every market in which it’s sold. The slender red, blue, and silver can packs 8.3 ounces of caffeine, carbohydrates, vitamins, and the amino acid taurine.

What elements in the national business environment influence decisions about whether to standardize or adapt international marketing efforts?

12 - *

Answer to Discussion Question

Laws and regulations of the target market can force product alteration. Cultural differences between home and target markets can force adaptations to better suit local buyers’ product preferences. National image of the country in which a product is designed, manufactured, or assembled can have a strong influence on buyers’ perceptions of quality and value. Counterfeit goods can damage buyers’ image of a brand. And advancements in global communications and the rapid pace of new product development is shortening product life cycles.

Answer:

12 - *

Push and Pull Strategies

Push Strategy

Pull Strategy

Pressure channel members to carry a

product and promote it to final users

Create buyer demand that will encourage channel members to stock a product

A company reaches distribution channels and potential buyers through its promotion mix, which includes personal selling, advertising, public relations, and direct marketing. There are two basic strategies that a firm can use in executing its promotional strategy.

A push strategy is used when a firm pressures channel members to carry a product and promote it to final users. Manufacturers of products sold in department and grocery stores often use a push strategy.
A pull strategy is used when a company creates buyer demand that will encourage channel members to stock a company’s product. Buyer demand is generated and “pulls” products through distribution channels to end-users.

12 - *

Choosing Push or Pull

Powerful channel members make push difficult

Fewer media outlets in emerging

markets makes pull difficult

Brand loyalty makes pull easier

Whether a firm uses a push or pull strategy depends on the type of distribution system present, the firm’s access to mass media, and the type of product it is selling.

Implementing a push strategy is difficult when channel members, not producers, wield power. It can also be ineffective when distribution channels are lengthy, in which case a pull strategy might be better.
If an emerging market has few forms of mass media, increasing consumer awareness and generating demand can be difficult. For example, billboards and radio can be used effectively when most consumers have no cable or satellite television or no access to broadband Internet.
Finally, a pull strategy may be best when buyers display brand loyalty because they know the product they want. A push strategy can be more appropriate for inexpensive consumer goods and when buyers are not brand loyal because they may seek the least expensive brand that a retailer carries.

12- *

International Advertising

Standardize where

possible

Lessons from the

European Union

Consider cultural

nuances

Exploit global

advertising outlets

A company may need to make only slight modifications to its advertising in a culturally similar target market. Yet, significant cultural differences can force the creation of entirely new ads.
Companies that advertise in multiple markets must determine those aspects of their advertising campaign that can be standardized and those that cannot.
A firm pursuing a global marketing strategy may choose to exploit the global reach of the World Wide Web and the global reach of sporting events such as the Olympics, World Cup Soccer, and Formula One auto racing.
Some marketers who tried a standardized advertising approach in Europe failed by overlooking cultural differences. Successful pan-European ads focus on the product, contain lots of visuals and few spoken and written words, and pay very close attention to language translation.

12 - *

Marketing Communications

Marketing communication is a circular process.

Translating promotional messages from one language to another can cause misinterpretations or incorrect translations. Language differences can also disrupt the feedback a company receives from buyers in a target market.
When a company develops its communication strategy for international markets, it either extends or adapts its product and its promotional strategies in five possible ways. Let’s look at these now.

12 - *

Communication Strategy 1

Simple and

profitable

Luxury

goods

Global

strategy

Extend product and communications

The first option is for a firm to use the same home-market product and promotional strategies in target markets.

This is often the simplest and most profitable strategy because the firm does not adapt its product or marketing.
Dual extension, as this method is called, is well suited to companies that use a global strategy to sell upscale luxury items with global brand names.
An industry’s low-cost leader can use this approach successfully because one product and one promotional message reduces costs.

12 - *

Communication Strategy 2

Different

buyer, need,

or function

Level of

economic

development

Can help

contain

costs

Extend product / adapt communications

The second option is for a firm to sell the same product into new target markets but alters its promotion.

The promotional message needs adaptation because the product appeals to a different buyer, satisfies a different need, or serves a different function.
This strategy helps contain costs because the product does not undergo any alterations. Still, developing new promotional campaigns can be expensive.
A target market may require this approach if it has a low level of economic development. In most developing countries, television and radio coverage are limited and the Internet is years behind. Here, marketers may use door-to-door personal selling and regional product shows or fairs.

12 - *

Communication Strategy 3

Local

content

laws

Can be

expensive

Safety codes,

infrastructure

Adapt product / extend communications

The third option is for a firm to adapt its product to target markets yet retain its home-market promotional strategy.

A company may unintentionally adapt its product when a target market requires that local materials, labor, or other resource be used to produce goods locally. Using these resources may cause a finished product to turn out differently than the product made in the home market.
Other requirements include product safety codes that are different from those in the home market, or changes needed to suit the local infrastructure.
This strategy can be very costly, especially if a company must invest in production facilities in target markets to remain close to shifting buyer preferences. But it can be successful if a firm sells a differentiated product and can charge a higher price to compensate for higher production costs.

12 - *

Communication Strategy 4

Satisfy

preferences

or needs

Needs large,

profitable

segment

Explain

product

benefits

Adapt product and communications

The fourth option is for a firm to adapt its product and its promotions to suit the target market.

Here, product adaptation better satisfies the needs or preferences of local buyers than the home-market version of the product.
The promotional message is also adapted to explain how the product meets those needs and preferences.
Dual adaptation, as this method is called, means higher costs and therefore tends to require a highly profitable segment in target markets.

12 - *

Communication Strategy 5

Low

purchasing

power

Level of

economic

development

Different

infrastructure

Product invention

The fifth option is for a firm to invent an entirely new product for a target market.

Low purchasing power can force product invention to appeal to local buyers who cannot afford the home market product or a modified home product.
It can be the only option when a target market’s infrastructure is very different than that at home.
Again, this strategy may be necessary when the target market and home market have widely different levels of economic development.

Communication Strategies

12 - *

Sometimes simple pictures can get the message across!

Photo: Gerry Taft, Mount Royal University

12 - *

Discussion Question

A company that creates buyer demand that will encourage channel members to stock a product is using a __________.

a. Push strategy

b. Pull strategy

c. Stock strategy

A company that creates buyer demand that will encourage channel members to stock a product is using a __________.

a. Push strategy

b. Pull strategy

c. Stock strategy

12- *

Answer to Discussion Question

A company that creates buyer demand that will encourage channel members to stock a product is using a __________.

a. Push strategy

b. Pull strategy

c. Stock strategy

The correct answer is b. Pull strategy

12 - *

Distribution Strategy

Planning, implementing, and controlling the physical

flow of a product from origin to consumption

Physical goods

Consulting services

News providers

Photo: Gerry Taft, Mount Royal University

A Siberian ferry delivering goods and people

Distribution involves planning, implementing, and controlling the physical flow of a product from its point of origin to its point of consumption. A distribution channel, then, is the physical path that a product follows on its way to customers.
Global service providers such as consulting companies and news services also require distribution channels to deliver their products to customers.

12 - *

Distribution Channels

Cost implications

Number of

intermediaries

Channel length

Intensive channel

Many resellers

Exclusive channel

One / few resellers

Degree of exposure

Distribution strategies are based on decisions of how to get goods into a country and how to distribute them within a country.

Degree of exposure refers to how widely available a product is in the marketplace.

In an exclusive channel, a firm grants the right to sell its product to one or a limited number of resellers. This gives the firm greater control over sales to wholesalers and retailers and can create a barrier that makes it difficult or impossible for competitors to penetrate.
In an intensive channel, a firm grants the right to sell its product to many resellers. This makes buying a product convenient for buyers because it is sold through many outlets. But it does not provide control over reseller decisions such as what competing brands to sell and it does not create strong barriers to channel entry.

Channel length refers to the number of intermediaries in place between the producer and the buyer.

This decision is governed by the fact that as the number of intermediaries grows, the more costly distribution becomes because each adds a fee for its services.

12 - *

Product Characteristics

Value

density

Product’s value relative

to its weight and volume

The lower a product’s value

density, the more localized

is its distribution system

Product characteristics also are factors in distribution strategies.

Value density is the value of a product relative to its weight and volume.
As a rule, the lower a product’s value density, the more localized its distribution system. For example, commodities have low value-density ratios, which means that value is low relative to the cost of shipping.
Products with high value-density ratios include emeralds, semiconductors, and premium perfumes. These products can be processed or made practically anywhere and then shipped to markets because their transportation costs are small relative to their end values.

12 - *

Distribution Problems

Financial loss

Strategic impact

Lack of market

understanding

Theft and

corruption

A country’s distribution system develops over time and reflects its unique history and traditions. A firm can experience trouble if it ignores two potential distribution problems in target markets.

A lack of market understanding can create significant financial losses for a company. A firm has no excuse for a lack of market research prior to entering a target market.
Theft and corruption can have a major negative impact on a company’s distribution strategy. While these potential problems are not always uncovered during the market research phase, a company should have a contingency plan in place if they arise.

12 - *

Discussion Question

In what ways do exclusive and intensive channels of distribution differ?

Home delivery of a new bedroom suite in China

Photo: Gerry Taft, Mount Royal University

In what ways do exclusive and intensive channels of distribution differ?

12 - *

Answer to Discussion Question

An exclusive channel is one in which a manufacturer grants the right to sell its product to only one or a limited number of resellers, as in the case of new automobiles. An intensive channel is one in which a producer grants the right to sell its product to many resellers, as in the case of general office supplies.

Answer:

12 - *

Pricing Strategy

Must match overall firm strategy

Low-cost leadership

Differentiation

Focus

A firm’s pricing strategy for target markets should match its overall international strategy. Chapter 11 covered the various business-level strategies available to firms.

A company pursuing a low-cost leadership strategy has the lowest cost structure in its industry, which allows it to lower prices relative to rivals.
A firm pursuing a differentiation strategy has developed a reputation among buyers throughout an industry as having a unique product, which allows it to charge a higher price than low-cost competitors.
And a business following a focus strategy serves the needs of a very narrow market segment by being a low-cost leader, by differentiating its product, or by doing both. The company can charge more for its product because buyers place special value on how the product satisfies their needs.

12 - *

Worldwide Pricing

Single selling price for all international markets

Difficulties

Local production cost

Export / distribution cost

Local purchasing power

Exchange rates

A worldwide pricing strategy establishes one selling price for all international markets. A company may find the strategy difficult to implement for the following reasons.

First, production costs differ from nation to nation and selling prices may adjust to these additional costs.
Second, producing in one location does not guarantee one selling price in all target markets because the cost of reaching different markets varies.
Third, a company may decide to lower or raise a selling price to match the purchasing power of buyers in a target market.
And fourth, fluctuating exchange rates between home and target market currencies may change the price of a firm’s product when sold abroad.

12 - *

Dual Pricing

Different selling price abroad than at home

Price escalation

Lower local price

Separate international from domestic buyers

If not, arbitrage possible

A dual pricing strategy means that a product has a different selling price (typically higher) in export markets than it has in the home market.

Price escalation results from exporting costs and currency fluctuations.
But a product’s export price may be lower than its price at home if a firm decides that domestic sales are to cover all production costs and exports are to cover only the added costs of exporting and selling abroad, such as shipping and tariffs.
To apply dual pricing successfully, a company must keep its domestic and international buyers separate. If it cannot, buyers could undermine the policy through arbitrage, whereby they buy products in the low priced market and resell them in the higher priced market.

12 - *

Pricing Issues

Intra-company transfer

Free-market price

Upper or lower limits

Unfairly low export price

Transfer price

Arm’s length price

Price controls

Dumping

Several key factors affect pricing strategy decisions.

Transfer price is a product’s selling price when it is sold among a company and its subsidiaries. Multinational companies sometimes use transfer pricing to manage their global tax burdens by having subsidiaries in high-tax countries charge low prices for their output exported to affiliated parties.
An arm’s-length price is the free-market price that unrelated parties charge one another. Governments may assign arm’s-length prices on intra-company transfers to reduce tax evasion with the use of transfer prices. Emerging markets, which need schools, hospitals, and infrastructure, are often hurt most by the manipulation of prices solely to reduce corporate taxes.
A price control is an upper or lower limit placed on the price of a product within a country. Upper-limit price controls provide price stability when inflation is driving up prices. Lower-limit price controls can be used to help local companies compete against the less expensive imports of foreign companies or be used to ward off price wars.
Dumping occurs when the price of a good is lower in export markets than in the domestic market. Charges of dumping can arise when a foreign competitor floods a target market with inexpensive imports to undercut competitors’ prices, or can arise when changes in exchange rates cause unintentional dumping.

12 - *

Discussion Question

A pricing strategy in which a company must keep its domestic and international buyers separate is called __________.

a. Dual pricing

b. Worldwide pricing

c. Arm’s length pricing

A pricing strategy in which a company must keep its domestic and international buyers separate is called __________.

a. Dual pricing

b. Worldwide pricing

c. Arm’s length pricing

12 - *

Answer to Discussion Question

A pricing strategy in which a company must keep its domestic and international buyers separate is called __________.

a. Dual pricing

b. Worldwide pricing

c. Arm’s length pricing

The correct answer is a. Dual pricing

Think – Pair - Share

12 - *

You are an independent consultant currently working for Philip Morris. Competitors are alleging that in important developing markets such as Turkey, Philip Morris created special tobacco blends containing additives that give brands such as Marlboro an extra “kick.”

If true, practices such as this by tobacco companies put the “standardization versus adaptation” issue in an unusual perspective.

If Philip Morris does, in fact, adapt its products this way, do you argue such policies are ethical?

If summoned before the firm’s board of directors, what advice would you give regarding the company’s policy on this issue?

Slide 36 is the second “Think-Pair-Share” in this chapter. These slides are intended to stimulate discussion between students. The activity requires students to consider the question individually, and then share their thoughts with one classmate or a small group. The goals of these slides are to 1) improve students’ conceptual understanding of the material, 2) hone critical thinking skills, and 3) improve problem solving.

There are a number of underlying debates in this dilemma. The policies of the tobacco companies differ around the world because smoking is viewed quite differently around the world. In Turkey, smoking is not perceived as an evil, cancer-causing substance as it is in the United States. And in China, smoking can be considered a status symbol that you are successful and can afford the habit. Students should consider their own cultural bias in answering this question. If there are students from other countries in the class, it is very interesting to compare their different responses. With respect to image management, certainly Philip Morris must address the critics and the best way to do this may be to assert that they are adhering to local laws abroad and they are satisfying local demand for a stronger product.

Follow Your Dreams!

12- *

I wish you all the best.

See the world.

The Seine river, Downtown Paris.

Follow Your Dreams!

12- *

I wish you all the best.

See the world’

The original Trans-Siberian Railway

Follow Your Dreams!

12- *

I wish you all the best.

See the world.

Rural Iceland

Follow Your Dreams!

12- *

I wish you all the best.

See the world.

Þingvellir National Park, Iceland