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International Business
Environments & Operations

15e

Daniels ● Radebaugh ● Sullivan

International Business Environments and Operations 15e by Daniels, Radebaugh, and Sullivan

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Chapter 17

Marketing Globally

Chapter 17: Marketing Globally

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Learning Objectives

Understand a variety of international marketing strategies/policies and their appropriate circumstances
Discuss the pros and cons of product alterations when deciding between standardized and differentiated marketing programs among countries
Appreciate the pricing complexities when selling in foreign markets
Recognize country differences that may necessitate alterations in promotional marketing practices

The Learning Objectives for this chapter are

To understand a variety of international product policies and their appropriate circumstances
To discuss the pros and cons of product alterations when deciding between standardized and differentiated marketing programs among countries
To appreciate the pricing complexities when selling in foreign markets
To recognize differences that may necessitate alterations in promotional practices

Learning Objectives

Comprehend the different branding strategies companies may employ internationally
Discern effective practices and complications of international distribution
Perceive why and how emphasis within the marketing mix may vary among countries
Anticipate the ways that international marketing segmentation may evolve

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To comprehend the different branding strategies companies may employ internationally
To discern effective practices and complications of international distribution
To perceive why and how emphasis within the marketing mix may vary among countries
To anticipate the ways that international marketing segmentation may evolve

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Introduction

Marketing principles in foreign markets are similar to those in domestic markets
Product
Price
Promotion
Place
However, some or all elements may need to be adapted to better fit local markets

International marketing is like domestic marketing in that a firm needs a desirable product or service, must tell people about it, price it at an acceptable level, and offer it in the right location. However, because international marketing managers operate in an unfamiliar environment each of these activities becomes more complex.

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Introduction

Marketing as a Means of Pursuing an International Strategy

This Figure shows how international marketing fits in with a firm’s operations.

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Marketing Strategies

Marketing strategy depends on marketing orientation
Production
Sales
Customer
Strategic marketing
Social marketing

There are five common marketing orientations.

The production orientation assumes that customers want lower prices or higher quality. This approach is generally only used for commodity sales, passive exports, and foreign niches.

The sales orientation assumes that foreign customers are similar to domestic customers, so the company simply sells abroad what it can sell at home.

The customer orientation, in contrast, holds the country as a constant and varies the product and marketing method.

The strategic marketing orientation adapts product strategy by degree.

Finally, the social marketing orientation considers decisions from the perspective of all stakeholders. Firms using this approach try to act in a socially responsible way.

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Marketing Strategies

Firms can segment and target markets
By country
By global segment
Using multiple criteria

Companies have to segment markets and identify specific segments to target. Three basic ways to do this is are by country, by global segment, and using multiple criteria.

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Product Policies

Learning Objective:

Understand a variety of international marketing strategies/policies and their appropriate circumstances

Learning Objective : To understand a variety of international product policies and their appropriate circumstances.

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Product Policies

Learning Objective:

Discuss the pros and cons of product alterations when deciding between standardized and differentiated marketing programs among countries

Learning Objective : To be aware of product alterations when deciding between standardized and differentiated marketing programs among countries.

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Why Firms Alter Products

Firms alter products for
Legal considerations
Labeling requirements
Environmental protection regulations
Indirect legal considerations
Cultural considerations
Economic considerations

Firms prefer not to alter their product for foreign markets because of the costs involved in doing so. However, in many cases different legal, cultural, and economic conditions in the target market make product alterations a necessity.

When product changes are necessary, firms can still try to find ways to control alteration costs by changing only what needs to be changed and keeping everything else the same.

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The Product Line:
Extent and Mix

Product line decisions depend on
Sales and cost considerations
Product life cycle considerations

In addition to deciding whether a product needs to be adapted for a target market, firms also need to consider the extent and mix of the product line that will be sold in foreign markets. This requires sales and cost considerations as well as product life cycle considerations.

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Pricing Strategies

Learning Objective:

Appreciate the pricing complexities when selling in foreign markets

Learning Objective : To appreciate the pricing complexities when selling in foreign markets.

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Pricing Strategies

Potential obstacles in international pricing
Government intervention
Set minimum or maximum pricing
Prohibit certain pricing practices
Market diversity
Consumers may be willing to pay higher prices

Pricing in international markets is more complex than domestic pricing. Governments, for example, may establish pricing guidelines or even forbid certain pricing strategies. Similarly, market diversity can encourage different pricing across markets.

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Pricing Strategies

Pricing tactics
Skimming strategy
Penetration strategy
Cost-plus strategy
Export price escalation
Fluctuations in currency value

Firms can use different pricing strategies.

A skimming strategy involves charging a high price for a new product by aiming first at consumers willing to pay the price, and then progressively lowering the price.

Firms using a penetration strategy introduce a product at a low price to induce a maximum number of consumers to try it.

A cost-plus strategy involves pricing at a desired margin over cost. Keep in mind that export price escalation may occur. This typically happens for two reasons.

First, channels of distribution usually include additional intermediaries because exporters need to contract with organizations that know how to sell in foreign markets. Second, tariffs and transport are additional costs that may be passed on to consumers.

Finally, remember that pricing in highly volatile currencies can be extremely troublesome.

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Pricing Strategies

Why Cost-Plus Pricing Pushes Up Prices

This Figure shows why cost-plus pricing pushes up prices. Keep in mind that export price escalation can make it difficult to compete in foreign markets.

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Pricing Strategies

Gray market or product diversion
the selling and handling of goods through unofficial distributors

Today, easy access to information makes it much harder for firms to price on a country-to-country basis. Grey markets typically emerge when differences exist.

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Pricing Strategies

Negotiating Import-Export Prices

This Table shows ways that exporters can negotiate prices more effectively.

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Promotion Strategies

Learning Objective:

Recognize country differences that may necessitate alterations in promotional practices

Learning Objective : To be familiar with country differences that may necessitate alterations in promotional practices.

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Promotion Strategies

Promotion
the presentation of messages intended to help sell a product or service
Push-pull mix
Push
uses direct selling techniques
Pull
relies on mass media

Promotion can vary significantly depending on the company, the product, and the country of operation. Push promotion uses direct selling while pull relies on mass media.

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Promotion Strategies

Advantages of standardized advertising
lower cost
better quality at local level
common global image
rapid entry into multiple countries
However, firms could have problems with
translation
legalities
market needs

Companies face numerous challenges because of diverse national environments. Very often, companies find that they have to adapt their promotion to local market conditions. For example, companies may find that promotion in rural areas requires specially designed strategies. Similarly, government regulations can pose problems as can differences in income levels.

Keep in mind that even if a standardized approach is possible it may not always be beneficial.

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Branding Strategies

Learning Objective:

Comprehend the different branding strategies companies may employ internationally

Learning Objective : To comprehend the different branding strategies companies may employ internationally.

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Branding Strategies

Brand
an identifying mark for a product or service

Brands give products instant recognition.

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Branding Strategies

Advantages of a worldwide brand
global image
global player identification
Problems with global brands
language
brand acquisition
country-of-origin
generic and near-generic names

Using the same brand worldwide helps a firm develop a global image, but may not always be possible because of language differences or because the firm has acquired a locally branded product.

Country-of-origin can also be a factor in branding.

A global brand can help a company overcome negative country-of-origin images, but keep in mind that images can change.

Note also that the advantages of a well-known brand can be negated if the brand becomes a generic term.

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Distribution Strategies

Learning Objective:

Discern effective practices and complications of international distribution

Learning Objective : To discern effective practices and complications of international distribution.

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Distribution Strategies

Distribution
the course – physical path or legal title – that goods take between production and consumption

When it comes to distribution, international marketing managers not only have to figure out how to get the product to a particular country, they also need to develop a strategy to get it to the end user.

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Distribution Strategies

Deciding whether to standardize
Distribution can vary substantially among countries
Distribution can be difficult to change

As with other elements in the marketing mix, managers need to decide whether distribution can be standardized or whether it needs to be adapted to fit the needs of each market. In general, distribution is the most difficult element to standardize.

Keep in mind that the cost and time involved in establishing a distribution system can make it difficult to change even when the situation changes.

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Distribution Strategies

When choosing distributors and channels firms must consider
whether internal handling is feasible
which distributors are qualified
the reliability of after-sales service

Companies must decide whether to handle distribution in-house or outsource it. If a firm decides to outsource, it must ensure that it uses a qualified distributor. In addition, reliable after-sales service needs to be available especially for products using new technology.

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Distribution Strategies

Distributors choose which products to handle
To get a distributor to work for them, companies may have to
give incentives
use successful products as bait for new ones
convince distributors that their product and company are viable

Companies looking for distributors may find that many are locked into exclusive arrangements. In some cases, it may be necessary to offer distributors incentives or offer proven products as bait for taking on new ones. Companies may even find that they have to convince distributors of the viability of the company itself.

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Distribution Strategies

Factors that can contribute to distribution cost differences among countries include
Infrastructure conditions
The number of levels in the distribution system
Retail inefficiencies
Size and operating hour restrictions
Inventory stock-outs

Distribution costs can vary between countries because of infrastructure conditions, the number of levels in the distribution system, retail inefficiencies, size and operating hour restrictions, and inventory stock-outs.

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Distribution Strategies

E-commerce and the Internet
Opportunities
can replace traditional sales methods
faster customer service
Problems
cannot differentiate sales programs between countries
still must comply with local laws

The growth in online availability creates new opportunities and challenges in selling globally over the Internet.

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Managing the Marketing Mix

Learning Objective:

Perceive why and how emphasis within the marketing mix may vary among countries

Learning Objective : To perceive why and how emphasis within the marketing mix may vary among countries.

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Managing the Marketing Mix

Gap analysis
a method for estimating a company’s potential sales by identifying prospective customers it is not serving adequately
Usage
Product line
Distribution
Competitive

The difference between total market potential and a company’s sales is a result of gaps.

A usage gap exists when collectively, all competitors sell less than the market potential.

A product line gap exists when the company lacks some product variations.

A distribution gap exists when a company misses geographic or intensity coverage.

A competitive gap exists when competitors’ sales are not explained by product line and distribution gaps.

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Managing the Marketing Mix

Gap Analysis

This Figure shows the different gaps companies can face.

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

COMPETITIVE ENVIRONMENT

OPERATING ENVIRONMENT

PHYSICAL AND SOCIAL FACTORS

OBJECTIVES

MEANS Functions

OPERATIONS

STRATEGY AND STRUCTURE

Modes

Marketing Global production and supply chain management Accounting and taxation Finance Human resources

• •

• • •

Cost of Production =

$1.00 and Selling Price = $1.50

Importer’s Cost =

$1.90 and Selling Price = $2.85

Transport Cost = $.25

Tariff = $.15

Tariff Wall

Country A Country B

Usage gap

Potential sales for all companiesSales lost

to competitorsActual sales for all companies

Competitive gap

Product line gap

Distribution gap

Company’s current sales