International Business

1
International Business
International Business 10e Daniels/Radebaugh/Sulli
van

• Chapter Sixteen
• Marketing Part II

2004, Prentice Hall, Inc
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End of term extra credit opportunities

• Presentations
• Nike-Reebok debate

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• Presentations on
• a country or
• a region (even a town/city in U.S.)
• some other subject in global business
• Up to 18 points can be added to class
  participation grade
• Grade can go above 100

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The Nike-Reebok debate

• A town meeting on global sourcing
• A few students play role of top executives in
  Nike Reebok
• Others play roles of other stakeholders
  (employees, foreign suppliers, etc.)
• Volunteer now for executive roles
• Up to 8 points added to midterm grade

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Midterm 2

• 25 to 28 multiple choice questions
• You choose 1 of 2 essays
• Slides for review session are on the class web
  site

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Marketing - Last time

• Basic concept - process by which the firms
  abilities, products, and services are brought to
  the attention of customers, then sold and
  delivered
• Kinds of product policies
• Video introduction Globally integrated vs.
  multidomestic marketing
• Forecasting demand in a new market
• Sales per 1,000 population?
• Alterations from country to country
• Gap analysis for countries where you already sell

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Today

• International management of
• Distribution
• Pricing
• Promotion
• Dental News and Hotresponse case
• The Alpha Dental question on the midterm

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How to Fail at Exporting

• Failure to obtain qualified export counseling
• Failure to develop a master international
  marketing plan
• Insufficient commitment by top managers
• Insufficient care in selecting overseas agents or
  distributors
• Chasing orders from around the world instead of
  establishing a base of profitable operations and
  orderly growth

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Distribution

• Definition The course that goods take between
  production and consumption
• physical path and
• legal title Who buys the product from the maker
  and sells it to others closer to the final
  customer?

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• Shipping is part of distribution
• But more important is the companies and the
  process through which the product is sold
• to retailers
• to the final customer

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• A distributor a firm that buys from maker or a
  larger distributor and sells to a retailer or a
  smaller distributor (or sometimes to the final
  customer)

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Direct Selling

• Selling direct to foreign retailers or end users
• Often difficult
• But gives you control of the process
• Avoids risk of a lazydistributor

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Pricing is much more complex in international
business

• Changing values of currency
• Diversity of markets
• Costs of transportation, warehousing
• Tariffs, quotas
• Government regulations
• Distribution methods have to differ from one
  country to the next

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Distribution systems result in price escalation

• It is impossible to build huge stores in many
  countries
• So many buyers must be reached through complex
  channels
• They typically buy at small stores within walking
  or public transit distance from home
• Small distributors serve the small stores

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Price escalation
Sell to retailer for 1.50
US production cost 1
U.S. retailer sells for 2.25
Ship sell to retailer in Canada for 1.60
Ship sell to distributor in Japan
Canada retailer sells for 2.40
Tariff .05Shipping .20Your cost1.25
Big distributor buys for 1.875, takes 20
markup, sells for 2.25
Store in Japan has high costs, adds 60, sells
for 4.32
Small distributor adds 20, sells for 2.70
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Selling is complex everywhere but even more so
abroad

• Need to provide a sales program
• Promotional materials, services, training of
  sales people discounts for quantity, credit
• Dont be quick to cut the base price

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• Government involvement no consistency
• Some laws set minimum prices to prevent
  monopoly, Japan, Germany protect small stores
• Many prohibit selling below cost
• Others set maximum prices

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Promotion Determining the Push/Pull Mix

• PULL
• You encourage demand through techniques such as
  advertising
• PUSH
• You sell through direct sales techniques
• A complex distribution system encourages push
  techniques

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Local media

• Coke, Unilever provide free samples at big
  religious pilgrimages in India

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International Branding Decisions

• Brand versus no brand
• Manufacturers brand versus private brand
• One brand versus multiple brands
• Worldwide brand versusmultiple brands
• What to do with acquisitions?

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more complexities

• Cost and availability of media to reach target
  markets
• Government regulation
• little commercial TV in Scandinavia
• Can you standardize your message globally?

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What do customers think of your country?

• In some countries people think foreign products
  are better
• But they may still be suspicious of real
  foreigners

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Language differences always create problems

• Chevrolet Nova
• Braniff Airlines introduces leather airline seats
• English Fly on leather
• Spanish Vuele en cueros

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From Ch 17 Government can help a lot

• In the U.S., the Export Assistance Center of the
  International Trade Administration (Department of
  Commerce) provides useful help
• In San Jose, the Silicon Valley Center for
  International Trade Development can be useful

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• Government agencies can
• Provide information on the process of exporting
• Provide information on events such as trade fairs
• Connect you with U.S. embassies who can find
  potential agents, distributors
• Critique your export strategy

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Conclusions from the Dental News case

• Dental News exists because
• There are few distributors of dental equipment in
  poorer countries
• Communications media from rich countries dont
  tell dentists in poorer nations what they can get
  and how
• So its hard to be a dentist in these nations

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Final hint on the Alpha Dental question

• When dealing with the steps part of the
  question, be sure that the first steps you
  suggest really are things you can do first

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Chapter Review

• Introduce techniques for assessing sizes for
  given countries
• Describe a range of product policies and the
  circumstances in which they are appropriate
• Contrast policies of standardized versus
  differentiated marketing programs for each
  country in which sales are made
• Emphasis how environmental differences complicate
  the management of marketing worldwide
• Discuss major international considerations within
  the marketing mix
• Product
• Pricing
• Promotion
• Branding
• distribution

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Chapter Objectives

• Introduce techniques for assessing sizes for
  given countries
• Describe a range of product policies and the
  circumstances in which they are appropriate
• Contrast policies of standardized versus
  differentiated marketing programs for each
  country in which sales are made
• Emphasis how environmental differences complicate
  the management of marketing worldwide
• Discuss major international considerations within
  the marketing mix
• Product
• Pricing
• Promotion
• Branding
• distribution

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Gap Analysis studies opportunities in areas where
you are now selling
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Gap Analysis

• Gap analysis identifies market segments you are
  not serving adequately
• Types of gaps
• Distribution What sales do we lose because
  people get others products more easily?
• Product line What sales do we lose because
  others have the kinds of products people want?
• Competitive What sales do we lose because
  people just like others products better?
• Usage Are people using less of the product than
  elsewhere?

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Product Policy

• Your basic attitude toward what you offer the
  consumer

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• Production Orientation little emphasis on
  marketing
• Assumes customers want lower prices or higher
  quality (or both)
• Used for
• commodity sales products where you cant create
  differentiation
• Passive exports, reducing surpluses in home
  market
• Small markets
• Sales orientation You decide on the product,
  then try to sell it
• Tends to work poorly in international trade

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• Customer orientation What can we sell in
  Country A?
• Strategic marketing Try to use whichever of the
  others will maximize profits

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Why will you alter products from one nation to
another?

• Legal requirements
• When foreign laws are less strict people
  poorer, should you sell a cheaper product?
• Indirect effects
• High gas taxes leadto smaller cars

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• Cultural reasons
• Toyota builds big pickup truck, it doesnt sell
  till its redesigned with space for a 10-gallon
  hat
• Toyota sent standard seatbelts to US, faced
  safety recall because McDonalds french fry
  grease dissolved the fabric
• Religious
• Economic
• Cheaper Barbies for poorer nations