Title: International Strategy: The Four Ps
1Chapter 5-
- International Strategy The Four Ps
2Introduction
- Due to the fact that nations cultures has the
biggest affect on global standardization, a need
for international Strategy of the Four Ps is
crucial. - International Product/Service Strategy
- International Place/Entry Strategy
- International Price Strategy
- International Promotion Strategy
3Issue of Unconscious reference to ones own
culture
- Self-reference criterion (SRC)
- example of IKEA
- To avoid SRC the following questions are to be
asked - In what ways are the targeted foreign buyers
similar to or different from domestic buyers? - What are the values of the people in the foreign
market?
4- What changes in the product services need to be
made to meet the foreign customers needs? - What are the signals that indicate change in the
market? - Does the market accept foreign ideas?
- Are there cross-cultural trends?
- How can the firm increase market share?
- How much disposable income do consumers have?
5PRODUCT/SERVICE STRATEGY CUSTOMIZATION vs
STANDARDIZATION
- Market the same product or service everywhere
(standardization) - Adapt the product or service for foreign markets
(customization) - Develop a totally new product or service
- In developing product/service strategy,
international managers need to be concerned with
the look and performance of a product.
6FIVE APROACHES OF PRODUCT/SERVICE STRATEGY
- Standardize product (service) and standardize
message - Standardize product (service) but customize
message - Customize product (service) but standardize
message - Customize product (service) and customize message
- Entirely different product or service
- International Managers must determine whether
their product or service can be sold in standard
form or if it must be customized to fit differing
foreign market needs.
7Viable alternatives when entering a foreign
market
- Standardization is marketing the same product or
service everywhere - Customization is adapting the product or service
for foreign markets - New product or service development for a foreign
market. - The combination of these three alternatives with
promotional efforts, the following strategies can
be developed.
8Standardize product/Standardize message Strategy
- This is a strategy whereby the same product and
message used for the home market is viable in the
foreign market or globally. - Coca-Cola, Pepsi-Cola, Avon are examples of
global products that need little or no
customization.
9Standardize product/Customize message Strategy
- This is a strategy whereby the same product sold
at home market is also sold at foreign market
with the exception of message. - Promotional message is customize to reflect the
economic, social and cultural norm of the country
where the product is being marketed.
10Customize product/Standardize message strategy
- A company does not generally realize high profits
right away when it introduces a brand new product
in a foreign market without undergoing diffusion
process. - If a company changes the products form to meet
the needs of a specific market, but promotes the
same use as it does in the domestic market, it is
sending a message of customize/standardize
Product strategy.
11Customize product/Customize message strategy
- This strategy is meant to differentiate both the
product and the message to fit the needs of the
users in the foreign country. - It is sometimes take some efforts to diffuse new
product/service in some cultures. - Generally, the more disruptive the innovation is,
the longer the diffusion process will take.
Diffusion of new products or services is also
affected by technological structure of the
country.
12PRODUCT/SERVICE STRATEGYTHREE TYPES OF SERVICES
- People Processing Services
- Customers become part of the production process.
Such as passenger transportation, health care,
food services, and lodging services. - Possession-Processing Services
- Services of this nature involve tangible actions
to tangible objects to enhance their value to
customers. Such as transporting freight,
installing equipment, and maintenance.
13- Information-Based Services
- The provision of these services involves
collecting,manipulating, interpreting, and
transmitting data to create value. Such as
accounting, banking, consulting, education,
insurance, legal services, and news.
14Technological structure of a country
- Use of current information technology such as the
Internet, may enable businesses to benefit from
favorable labor costs or exchange rates by
consolidating operations of supplementary
services (such as reservations) or certain office
functions (such as accounting) in just one or a
few countries.
15- A dualistic technological structure of a country
is the simultaneous existence of a modern
industrial sector and a sector which is involved
in a traditional agrarian and craft production. - An international manager should be aware of this
dualism and the necessities at time.
16PRODUCT/SERVICE STRATEGY DIFFUSING INNOVATIONS
- Definition The process by which innovation is
communicated through certain channels over time
among members. - Quick diffusion in a culture
- Types of innovations congruent, continuous,
dynamically continuous, and discontinuous
innovations - Dualistic technological Structures IT refers to
the simultaneous existence of a modern industrial
sector and a traditional sector involved in
agrarian and craft production. - Adaptive transformative innovation
- Transformative technological innovations
17International Place/Entry strategy
- Manufacturing Enterprise
- Manufacturing the product at home and exporting
it to the foreign country for distribution in the
local (host) market. - Manufacturing parts at home and exporting them to
then foreign country (for assembly), for
distribution in the local market, and/or for
export to other markets (including back to the
home market). - Manufacturing the product in the foreign country
for distribution the local market and/or for
export to other markets (including back to the
home market).
18- Service Enterprises
- Some, such as consulting companies, can provide
the services from their home country or they can
set up subsidiaries in the foreign country. - Others, such as insurance and baking companies,
generally must establish subsidiaries in the
foreign country.
19- For a multinational corporation, or a company
considering entry into the international arena, a
more specific set of strategic alternatives,
often varying by targeted country, focuses on
different ways to enter a foreign market. - Managers need to consider how potential new
markets may best be served by their company in
light of the risks and the critical environmental
factors associated with their entry strategies.
20Various entry and ownership strategies
- The various entry and ownership strategies
available to firms include - Exporting Strategy
- Indirect Exporting
- Direct Exporting
- Manufacturing in Foreign Country Strategy
- Licensing/Franchising
- Management Contracts
- Joint Ventures/Contractual Alliances
- Wholly Owned Subsidiaries
21- These alternatives are not mutually exclusive
several may be employed at the same time.
22Exporting -Indirect Vs Direct
- Exporting is a relatively low-risk way to begin
international expansion or to test out an
overseas market. Little investment is involved,
and fast withdrawal is relatively easy. - Indirect exporting is the most logical entry
strategy when a domestic company decides to
internationalize its operations. - Indirect exporting is when a company other than
the owner of the products export goods to another
country. It less risky than direct exporting.
23- Direct exporting With Direct Exporting, a company
is directly responsible and involved with
exporting its goods to other countries. - An advantage of direct exporting is that the
staff has greater knowledge of the product line
of the firm than an indirect exporter.
24Licensing
- An international licensing agreement grants the
rights to a firm in the host country to either
produce or sell a product, or both. - This agreement involves the transfer of rights to
patents, trademarks, or technology for a
specified period of time in return for a fee paid
by the licensee. - Anheuser-Busch, for instance, has granted
licenses to produce and market Budweiser beer in
England, Japan, Australia, and Israel.
25Franchising
- Similar to licensing, franchising involves
relatively little risk. - Franchising entry strategy is when a company
internationalizes its operation by granting a
foreign company permission to use a certain
product and incorporates a set of procedures for
making the product. - Franchises are well known in the domestic fast
food industry McDonalds for example, operates
primarily on this basis.
26- For a large up-front fee and considerable royalty
payments, the franchisee gets the benefit of
McDonalds reputation, existing clientele,
marketing clout, and management expertise. - The big M is well recognized internationally,
as are many other fast-food and hotel franchises
such as Holiday Inn.
27Strategic alliance
- A strategic alliance is a viable entry mode for a
company which has decided to internationalize its
operations and whose managers lack international
experience. - Joint ventures are one form of strategic global
alliance. It involves agreement by two or more
companies to produce a product or service
together.
28Other forms of strategic alliances
- Other forms of strategic alliances may be based
on contributions other than financial ones, a
firms technology, for example, in return for a
foreign partners manufacturing capacity, access
to low-cost labor, and marketing channels.
29International Price Strategy
- International pricing relates to the managerial
decision of what to charge for goods produced in
one nation and sold in another. - In international pricing, a firm must develop
strong international money management skills
because fluctuating exchange rates force periodic
adjustments in price.
30Advantages of international pricing method
- Some Multinational corporations use the
international pricing method to avoid high local
taxes, mandates to increase local wages, local
mandates to lower prices and getting around
currency restrictions. - Fluctuating Exchange Rates and Costs
- Countertrade
- Barter
- Compensation
- Switch
- Counterpurchase
31International Promotion Strategy
- Advertising indicates attitudes, beliefs, images,
symbols, and presence. Most of these are
intimately tied together by culture, and
marketers err when they make mistakes about
global similarities and real national
differences. - France and the US, while sharing a common western
civilization, differ in their visual print and TV
ads as they reflect the old world and new world
respectively.
32- Todays advertising signals tell us to combine
global commitment with local vision and to make
promotion appeals compatible with international
and national life styles. - Global marketing firms need to scan the
environment for advertising signals i.e. purchase
behavior or brand opinion based on cultural
attitudes, purchase situations or brand
associations tied to I symbols - unitarianizm,
country of origin, for opportunities in the
global promotions arena.
33Why International Promotional strategies Fail?
- Insufficient Research
- Overstandardization
- Poor Follow-up
- Narrow Vision
- Rigid Implementation
34Developing an Effective International Promotional
Strategy
- the promotional mix
- the extent of worldwide promotional
standardization - the most effective message
- the most effective medium
- the necessary controls
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