INTERNATIONAL MARKETING

1
INTERNATIONAL MARKETING

• Conf. Dr. Luminita Nicolescu

2
COURSE OBJECTIVES

• At the end of the course the students will be
  able to
• define and describe the international marketing
  management concept and the activities deals with
• to state the importance of culture and
  intercultural communication
• to organize the study of a countrys environment
• to formulate an international marketing strategy
  (including the marketing mix)

3
COURSE EVALUATION

• Class room participation (indv) 10
• Case studies (team work) 30
  
• Final examination (indv.) 60

4
WHY STUDY INTERNATIONAL MARKETING ?
5
INTERNATIONAL MARKETING DEFINED

• performance of business activities designed to
  plan, price, promote and direct the flow of a
  companys goods and services to consumers or
  users in more than one nation for a profit
• (Cateora, p.6)

6
THE INTERNATIONAL MARKETING TASK
7
Foreign environment (uncontrollable)
1
Economic forces
Political/legal forces
Domestic environment (uncontrollable)
2
7
Competitive structure
Political/ legal forces
Competitive Forces
(controllable)
Cultural forces
Environmental uncontrollables country market A
Price
Product
3
Channels of distribution
Promotion
6
Level of Technology
Geography and Infrastructure
Economic climate
4
5
Structure of distribution
7
SELF REFERENCE CRITERION

• un unconscious reference to ones own cultural
  values, experiences and knowledge as a basis for
  decisions

8
DEVELOPING GLOBAL AWARENESS

• Objectivity in assessments of
  opportunities
• 
  potential
• Tolerance of cultural differences
• Knowledge of culture, history, markets potential
  and general trends

9
STAGES OF INTERNATIONAL MARKETING INVOLVEMENT

• No Direct Foreign Marketing
• Ìnfrequent Foreign Marketing
• Regular Foreign Marketing
• International Marketing
• Global Marketing

10
GLOBAL MARKETING AT COCA-COLA

• The culture of the Coca-Cola Co. has moved from
  being an American company doing business
  internationally to an international company that
  happens to be headquarted in Atlanta ..
• . If you go back to our 1981 annual report, you
  will see references to foreign sales or
  foreign earnings. Today (1996) the word foreign
  is foreignto our corporate language
• (Roberto Goizueta, former president of Coca-Cola,
  up to 1997)

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INTERNATIONAL MARKETING CONCEPTS

• 1. Domestic market only
• 2. Domestic market extension
• 3. Multidomestic market concept
• 4. Global marketing concept

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GLOBAL MARKETING

• global market segments significant market
  segments with similar demands for the same
  product all over the world
• standardizing the marketing plan
• (standardized product but country specific
  advertising
• standardized brand/product images but
  adapted products to meet specific needs)

13
GLOBAL MARKETING

• To be global is a mind set, a way of looking
  at the market for commonalities that can be
  standardized across regions or country markets.

14
GLOBAL APPROACH TO MARKETING MANAGEMENT

• 1. The world (set of countries) is viewed as the
  market
• 2. Homogeneous market segments are sought across
  country market sets
• 3. Standardization of the marketing mix is sought
  wherever possible but adapted whenever culturally
  necessary

15
BENEFITS OF GLOBAL ORIENTATION

• 1. Economies of scale in production and/or
  marketing
• 2. Transfer of experience and know-how across
  countries
• 3. Uniform global image
• 4. Control and coordination of operations

16
INTERNATIONAL ENVIRONMENT

• geographic environment
• historic environment
• cultural environment
• political environment
• legal environment
• economic environment

17
GEOGRAPHY AND THE GLOBAL MARKET

• climate (temperatures, humidity)
• physical terrain (altitudes, forms)
• resources (raw materials, energy)
• population (size, growth rates, structure)

18
HISTORY AND GLOBAL MARKET

• history influences present behaviour
• (current and past events explain a countrys
  attitudes,
• prejudices and fears)
• history is subjective
• (the way historical events are recorded and
  interpreted in one culture can differ
  substantially from the way those same events are
  recorded and interpreted in another)

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CULTURE AND GLOBAL MARKET

• WHY STUDY CULTURE?
• buyer behaviour and consumer needs are driven by
  cultural norms
• cultural forces are a major factor in shaping a
  companys international marketing mix programs

20
DEFINING CULTURE

• Hofstede culture is the collective programming
  of the mind which distinguishes the members of
  one group or category from those of another.
• (Hofstede, G. Cultures and Organizations
  Software of the Mind, 1991, p. 5)
• Cateora culture is the sum of total knowledge,
  beliefs, arts, morals, laws, customs and any
  other capabilities and habits acquired by humans
  as members of society.
• (Cateora, R. and Graham, J. International
  Marketing, 1999, p. 86)

21
THE ESSENCE OF CULTURE

• it is learned
• consists of many parts interrelated to each other
• it is shared by individuals as members of the
  society

22
THE PROCESS OF CULTURAL ANALYSIS
Elements of culture

• Material Social
  Religion Aesthetics Value
• culture Language interaction
  Education systems
• cultural knowledge
• cultural
  sensitivity
• 
  cross-cultural comparisons

The analysis of cultures
Adapt to local culture
Change the local culture
23
ELEMENTS OF CULTURE

• material culture
• language
• social interaction
• religion
• education
• aesthetics
• value systems

24
Material culture

• technology
• economics

25
Language

• verbal language
• non-verbal language
• countries with more languages
• one language spoken in more countries

26
Social interaction

• family
• roles and status
• reference groups

27
Religion

• belief system
• superstition

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Education

• level of education
• rate of literacy
• quality of education

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Aesthetics

• colors and shapes
• music and dance
• beauty standards

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Value systems

• attitude towards time
• monochronic
• polychronic
• formality
• attitudes toward change
• attitudes towards foreign cultures

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THE ANALYSIS OF CULTURES

• cultural knowledge - factual
• -
  interpretive
• cultural sensitivity
• cross-cultural comparisons

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Cross-cultural comparisons

• high vs. low-context cultures
• cultural homogenity
• cultural values (Hofstede model)

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Hofstede model
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ADAPT TO LOCAL CULTURE

• cultural congruence
• adapt to business customs

35
CHANGE THE LOCAL CULTURE

• the process of cultural borrowing
• planned and unplanned cultural change

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THE ECONOMIC ENVIRONMENT

• the international market environment (world
  economy)
• - world trade system, international trade
  environment
• - regional economic arrangements
• the economic environment within a nation
• - market characteristics

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INTERNATIONAL TRADE ENVIRONMENT

• world trade statistics
• major palyers
• MNCs, Keiretsu, Sogo Shosha, Zaikai

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MNCs IN THE WORLD TRADE

• importance of MNCs and intra-firm trade
• distribution of world trade
• 1 / 3 intra-firm MNCs
• 1 / 3 MNCs with non-affiliated corporations
• 1 / 3 between non-MNCs
• Source WTO, Press 57/9 Oct 1996, p. 1 and
  UNCTAD

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REGIONAL ECONOMIC AGREEMENTS

• free trade areas (NAFTA, CEFTA)
• custom unions (ASEAN)
• common markets (MERCOSUR)
• monetary unions (European Union)
• political unions (CIS, European Union ???)

40
MARKET CHARACTERISTICS

• population (size, growth, structure)
• GNP GNP/capita PPP
• household income
• consumption patterns
• infrastructure
• inflation
• the rapport liberalism/protectionism

41
Purchasing power parity (PPP)

• adjust GNP for the cost of living
• what the money can buy measures the purchasing
  power of different countries over the same type
  of goods and services
• allows for comparisons of standards of living
  across countries

42
Country Income Groups (Atlas Method)
Development status
Income group
US / cap
Industrial countries
High income
gt 9,266
Middle income
upper middle
2996-9,265
Developing
countries
lower middle
756-2995
Low income
lt755
Source World Bank,
World Development Report 2000
43
Infrastructure

• transportation
• communications
• commercial infrastructure
• financial infrastructure

44
Protectionism

• barriers imposed against imports and foreign
  businesses by a country
• tariff barriers a tax imposed by a government
  on goods entering at its borders
• non-tariff barriers
• (quotas, standards, export subsidies, voluntary
  export restraints)

45
LEGAL ENVIRONMENT

• legal systems
• international legal disputes
• types of laws
• protection of intellectual property rights
• commercial laws within the countries
• anti-corruption laws

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BASES FOR LEGAL SYSTEMS

• 1. The common law
• 2. The code law
• 3. The islamic law

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INTERNATIONAL LEGAL DISPUTES

• Conflicts
• - between governments
• - between government and corporation
• - between corporations
• Resolution of conflicts
• - by World Court at Hague (the International
  Court of Justice) when between governments
• - in one of the countriesCourt or arbitration

48
INTERNATIONAL DISPUTE RESOLUTION

• 1. Conciliation non-binding agreement between
  parties to solve disputes by asking a third party
  to mediate differences
• 2. Arbitration the use of an arbitror from an
  arbitration commission whose resolutions are
  binding
• 3. Litigation law suits in public courts

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MINIMIZING INTERNATIONAL LEGAL PROBLEMS

• Be aware of commercial laws within countries
• Know the international conventions
• Design a good international contract!
• specify jurisdiction in case of dispute
• make provision for arbitration (use arbitration
  agreement)

50
Types of laws

• protection of intellectual property rights
• commercial laws
• legal and ethics bribery and corruption

51
Protection of intellectual property rights

• prior use vs. registration
• (ownership of intellectual property established
  by prior use or is established by registration)
• international conventions
• (Paris Convention Inter-American Convention
  Madrid Arrangement See www.wto.org)

52
Commercial laws within the countries

• marketing laws
• (promotion, labelling, channel of distributions,
  pricing)
• green marketing legislation
• (packaging, waste disposal, deforestation)
• antitrust legislation
• (anti monopoly, price discrimination, supply
  restrictions)

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Bribery and corruption

• Corruption perception indexes
• 1977 USA Foreign Corrupt Practices Act
• (amended through 1988 Omnibus Trade and
  Competitiveness Act)
• 1997 OECD countries anti-bribery treaty

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THE ANALYSIS OF THE INTERNATIONAL POLITICAL
ENVIRONMENT
Host country political governmental forces
actions

• Home country
• political
• environment

International agreements
Political risk assessment
Risk reduction strategies
55
Home country political environment

• Does it influence the international activity of
• the company?

56
Host country political environment

• political stability
• political risk
• assessing political vulnerability
• country risks indexes
• reducing political risk

57
Political stability

• the continuity of the set of rules or code of
  behaviour regardless of which government is in
  power
• 
  (Cateora, p. 145)

58
Political risk of global business

• the possibility that political decisions,
  events or conditions in a country will AFFECT THE
  BUSINESS CLIMATE in such a way that investors
  will loose money or not make as much money as
  expected when making decision to invest.
• (L.D.Howell, The International Executive, Vol. 34
  (6), 485-489, Dec, 1992)

59
Political risks of global business

• governmental policies, rules and regulations
  economic risks
• loss of control and ownership
• confiscation the seizing of a companys assets
  without payment
• expropriation the seizing of the companys
  assets with some reimbursement
• domestication transfer of foreign investments
  to national control and ownership
• political sanctions embargoes
• interest groups boycotts

60
Governmental policies and regulations

• import restrictions
• local content laws
• operating regulations
• tax controls
• investment regulations
• exchange controls

61
Assessing political vulnerability

• Determine
• politically sensitive products
• (fast food restaurants, products that can affect
  health)
• risk assessment
• (in-house political analysits, external sources)

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Reducing political vulnerability

• good corporate citizenship
• strategies to lessen political risks
• - joint ventures
• - expanding the investment base
• - licensing
• - planned domestication
• political payoffs

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MARKET SELECTION APPROACHES

• systematic approach
• non-systematic approach
• mixed approach
• relational approach

64
A. THE SYSTEMATIC APPROACH

• is using a structured and formalized decision
  making process including various statistical
  methods to analyze the potential of target
  markets
• it has a normative nature

65
MARKET SELECTION PROCESS

• an information gathering and screening process
  that involves collecting data and passing the
  alternative country choices through a series of
  filters to eliminate the less- promissing
  opportunities.
• (Cundiff and Hilger, Marketing in the
  International Environment, 1984)

66
MACRO INDICATORS (Filter 1)
67
MICRO INDICATORS (Filter 2)- consumption-
production- imports

• radios
• televisions
• cinema seats
• scientists and engineers
• hospitals
• hospital beds
• physicians
• alcoholic liquor consumption

• gasoline consumption
• hotel beds
• tourist arrivals
• passenger cars
• steel production
• rice production
• number of farms
• electricity consumption
• land under cultivation

68
TECHNIQUES FOR MARKET SELECTION

• 1. Listing of selection criteria
• 2. Scoring market selection model
• 3. Customized weighted multivariate technique
• 4. Compensatory model industry analysis

69
1. LISTING OF SELECTION CRITERIAEXAMPLE
SCREENING PROCESS FOR A KIDNEY DIALYSIS EQUIPMENT
70
2. A SCORING MARKET SELECTION MODEL

• set criteria
• set ranking procedures
• set weights of selection criteria
• gather data concerning indicators
• calculate scores for each country
• select the country/countries

71
3. CUSTOMIZED WEIGHTED MULTIVARIATE TECHNIQUES

• large companies develop a screening monitoring
  system that includes a large number of variables
  weighted specifically for that firm
• variables are weighted based on their importance
  to the management

72
3. CUSTOMIZED WEIGHTED MULTIVARIATE TECHNIQUE

• EXAMPLE AMERICAN CAN
• - index of desirability
• - index of risk (payback)

73
4. COMPENSATORY MODEL INDUSTRY LEVEL MULTIPLE
SCREENING MODEL

• the tradeoff between demand potential and trade
  barriers in the context of firm strategy
• four variables used or each construct

74
B. NON-SYSTEMATIC APPROACH

• frequently based on non-solicited foreign orders
• little or no information search
• generally based on perceived psychic distance or
  other rules of thumb
• mainly used by small firms
• it has a descriptive nature

75
C. THE MIXED APPROACH

• starts with the non-systematic approach and
  continues with the systematic approach

76
D. RELATIONAL APPROACH

• focuses on the business relationship and the
  foreign customer as the level of analysis
• it is based o gathering relevant information
  about each partner and filtering out the less
  desirable partners
• suitable to industrial, institutional and
  services markets

77
WHEN,WHAT SELECTION APPROACH?

• SYSTEMATIC APPROACH
• Suitable for consumer goods
• More likely for non-contractual entry modes

• RELATIONSHIP APPROACH
• Suitable for industrial goods and services
• More likely for contractual entry modes

78
ALTERNATIVE MARKET ENTRY STRATEGIES

• exporting
• internet
• licensing
• franchising
• joint ventures
• wholly owned subsidiaries (acquisitions, green
  field)
• strategic alliances

79
MARKET ENTRY STRATEGIES DECISION CRITERIA FOR
MODE OF ENTRY

• Environment specific
• market size and growth
• risk
• government regulation
• competitive environment
• local infrastructure

• Firm specific
• need of control
• company objectives
• internal resources, assets and capabilities

80
GLOBAL SEGMENTATION AND POSITIONING

• reasons for international market segmentation
• levels of segmentation
• bases for country segmentation
• target marketing strategies
• international positioning strategies

81
LEVELS OF SEGMENTATION

• macrosegmentation
• (grouping the countries)
• microsegmentation
• (develop segments at country level
• - derived microsegmenation
• - cross-country segmentation)

82
REASONS FOR INTERNATIONAL MARKET SEGMENTATION

• macrosegmentation
• country screening
• global market research
• entry decision
• microsegmentation
• positioning strategy
• marketing mix policies

83
BASES FOR MACRO-SEGMENTATION

• DEMOGRAPHICS
• population size
• age structure
• urbanization degree
• ethnic composition
• SOCIO-ECONOMIC VARIABLES
• per-capita income
• Purchasing Power Parity (PPP)
• Socio- Economic Strata
• level of development

• CULTURE
• Hofstede model
• religion
• traditions
• POLITICAL CONDITIONS
• free market/mixed/ centrally planned
• political risk
• GEOGRAPHICAL
• geographic position
• climate

84
MULTICRITERIAL MACROSEGMENTATION

• Competitive advantages
• Risk
  Market
  potential
• 
  

Strong
Medium
Weak
High
High
Medium
Low
High
Low
Medium
Low
85
THE BASIC MARKETING STRATEGY

• Marketing
  
  Marketing
• information
  
  strategies
• 
  Differentiation

Positioning
Targeting
Market segmentation
86
MARKET SEGMENTATION(Micro-segmentation)
Market segmentation dividing the market in
groups of consumers (homogeneous inside the
groups and distinctive among them) with
different characteristics, behaviours and needs
whom it is necessary to offer different products
87
Segmentation variables for consumer markets

• Geographic
  Demographic
• region
  
  age, sex
• city size
  
  family size
• urban/rural
  
  income, occupation
• 
  
  education, religion
• Psyhographic
  Behavioural
• social class
  
  buying occasions
• lifestyle
  
  benefits sought
• personality
  
  user status
• 
  
  usage rate
• 
  
  loyalty status
• 
  
  attitudes towards product
• 
  

88
Segmentation variables for industrial markets

• Demographic
  Operating variables
• industry
  
  technology
• company size
  
  user/non user status
• location
  
  customer capabilities
• Purchasing approaches Other
  factors
• purchasing function organization
  situational
  factors urgency, size of
• power structure
  
  
  order
• general purchase policies
  
  personal characteristics attitudes
• purchasing criteria
  
  towards risk, loyalty

89
GLOBAL MICRO-SEGMENTATION

• derived segmentation
• cross-country segmentation

90
TARGETING

• Evaluating the market segments
• the segment attractiveness
• the companies strengths

91
TARGET MARKETING STRATEGIES

• universal (global ) segments cross-border
  segments that transcend national bounderies
• national segments local segments that differ
  from country to country
• mixed segments pursue both universal and local
  segments

92
POSITIONING -perceptual positioning-

• A product position the totality of perceptions,
  impressions and feeling the consumers have about
  a product relative to other concurrent products
• Consumers position products with or without the
  help of marketers

93
POSITIONING-strategic positioning-

• Positioning
• designing the products characteristics and
  creating a distinctive image to address the
  targeted market segment, so that to distinguish
  the product from the competition
• the image I want to create about my product

94
POSITIONING STRATEGIES

• Positioning can be done according to
• - the products attributes
• - the advantages offered to the consumer
• - the occasions on which the product is used
• - the users of the product
• - the origin of the product
• - the competitors

95
POSITIONING

• Once a position was chosen for a product
• - the product has to EFFECTIVELY occupy that
  position
• - the company has to COMMUNICATE the position to
  the targeted clients

96
THE BASIC MARKETING STRATEGY

• Segmentation positioning the basic marketing
  strategy because
• ALL companys MARKETING ACTIVITIES have to
  support the chosen POSITIONING.

97
THE BASIC MARKETING STRATEGY

• All tactical details of the marketing mix will be
  set according to the positioning strategy of the
  product.
• Product positioning
  

P
P
D
P
98

• INTERNATIONAL PRODUCT POLICY

99
CONSUMER PRODUCTS KEY ISSUES

• 1. Standardization/adaptation
• 2. Product policy decisions in international
  marketing
• - product line management
• - new product development
• - product diffusion
• - branding

100
1. STANDARDIZATION VS. ADAPTATION

• STANDARDIZATION
• common customer tastes
• economies of scale in production, RD
• marketing economies
• centralized management
• strong country of origin effect

• ADAPTATION
• different consumer tastes
• levels of economic development
• government influence and legal requirements
• use conditions
• competition

101
Degree of adaptation

• 0-3 adaptations relative standardization
• (ethnocentric orientation)
• 4-8 adaptations substantial adaptation
• (geocentric orientation)
• 9 adaptations total adaptation
• (polycentric orientation)

102
STANDARDIZATION /ADAPTATION
103
PRODUCTS COMPONENTS
SUPPORT SERVICESCOMPONENT
PACKAGING COMPONENT
? Repair and maintenance
? Deliveries
CORE COMPONENT
? Trademark
? Price
? Product platform ? Design features ? Functional
features ? Legal
? Warranty
? Installation
? Quality
? Brand name
? Package
? Instructions
? Spare parts
? Legal
? Styling
? Other related services
? Legal
104
Core component

• CORE COMPONENT the physical product with its
  functional features
• alterations in design, functional features,
  flavors, color
• may require both discretionary or mandatory
  adaptation

105
Packaging component

• PACKAGING COMPONENT all aspects of a products
  package style features, packaging, labelling,
  trademarks, brand name, quality, price
• may require both discretionary and mandatory
  changes

106
Packaging functions

• PROTECTIVE FUNCTIONS
• climate
• handling
• safety

• PROMOTIONAL FUNCTIONS
• visual aesthetics
• package size
• color of package
• no. of items

107
Support services component

• SUPPORT SERVICES COMPONENT includes repair and
  maintenance, instructions, installation,
  warranties, deliveries, availability of spare
  parts
• depend on the behavioural patterns, literacy,
  educational levels in different countries

108
COUNTRY OF ORIGIN EFFECT (COE)

• COE any influence that the country of
  manufacture has on consumers positive or
  negative perception of the product (Cateora, p.
  349)
• Country stereotypes
• Country/product stereotypes

109
TYPES OF ADAPTATION

• Mandatory adaptation
• (legal, technical, geographical)
• Discretionary adaptation
• (cultural)

110
2. PRODUCT POLICY DECISIONS IN INTERNATIONAL
MARKETING

• 2.1. Product line management
• 2.2. Branding

111
2.1. PRODUCT LINE MANAGEMENT

• Product mix the set of all product lines and
  all items a firm offers
• Product line a group of closely related
  products

112
PRODUCT LINE MANAGEMENT

• add new products
• drop exiting products

113
PRODUCT LINE MANAGEMENT

• Add new products on a foreign market by
• 1. Sell the same product as in the home market
• (domestic market extension ethnocentric)
• 2. Adapt existing products to each local market
  (multi-domestic strategy polycentric)
• 3. Develop a new standardized product for all
  markets (global strategy geocentric)
• 4. Acquire local brands and reintroduce

114
NEW PRODUCT DEVELOPMENT
Idea generation
Screening
Business evaluation
Prototype development
Market testing
Launching on the market
115
PRODUCT LIFE CYCLE
116
2.2. BRANDING

• Brand name, term, sign, symbol, logo or a
  combination of these

117
BRANDING STRATEGIES

• Geographical scope
• local brands
• regional brands
• global brand
• Whose brand?
• manufacturers brand
• private brand

• Existence of brand
• no brand
• branding
• No. of products with the same name
• individual brands
• family/umbrella brands
• No. of brands in one market
• multiple brands
• single brand

118
GLOBAL VS. LOCAL/NATIONAL BRANDS

• GLOBAL BRANDS
• economies of scale
• brand awareness (brand equity)
• capitalize on media overlap
• prestige

• LOCAL/NATIONAL BRANDS
• legal constraints
• already used in the country
• cultural barriers (pronouncing meaning)
• patriotism and buy local attitude

119
PROTECTION OF BRANDS

• product piracy
• (imitation, falsification, priority)
• protecting brand names
• (national and international laws)

120

• INTERNATIONAL DISTRIBUTION POLICY

121
TYPES OF DISTRIBUTION STRUCTURES

• 1. According to philosophy
• import-oriented channel structures
• mass consumption structures
• 2. According to how the product gets from the
  producer to the consumer
• conventional channel structures
• modern channel structures direct

122
Import-oriented distribution structures

• the philosophy is that one supplier sells a
  limited supply of goods at high prices to a small
  number of affluent customers
• the channel structure in these countries have a
  limited number of middlemen

123
Mass consumption-distribution

• the philosophy is that a supplier sells to as
  many as possible customers and one supplier does
  not dominate the distribution system
• the channel structure in these countries is
  highly developed and has a variety of
  intermediaries (a buyers market)

124
Traditional channel structures

• 1. Length of the channel
• short
• long
• 2. Form of organization
• corporate
• franchise
• independent

125
Modern channel structures

• door-to-door
• mail
• telemarketing
• catalogue
• Internet

126
EXAMPLES OF DISTRIBUTION STRUCTURES

• THE AMERICAN STRUCTURE
• large variety of retailers
• diminishing number of wholesalers
• discount stores
• large retailers who control the network

• THE JAPANESE STRUCTURE
• many small wholesalers dealing with larger number
  of retailers
• manufacturers control networks
• small retailers benefiting from strong
  protectionThe Large Scale Retail Store Law

127
DISTRIBUTION PATTERNS

• middlemen services
• line breadth
• costs and margins
• channel length
• nonexistent channels
• blocked channels
• power and competition
• stocking

128
Functions of middlemen

• COMMERCIAL
• credit
• promotion
• merchandising
• market studies
• transfer of title

• PHYSICAL (LOGISTICS)
• reception of merchandise (port/airport)
• transport local/national/ international
• warehousing
• packaging/break bulk
• after-sale services

129
MIDDLEMEN CHOICES

• Merchants
• - take title to manufacturers goods - assume
  trading risks
• - less controllable

• Agents
• - work on commission - do not take title to the
  merchandise

130
KEY ELEMENTS IN DISTRIBUTION DECISIONS

• functions performed by middlemen
• cost of their services
• their availability
• extent of control that the manufacturer can exert

131
FACTORS AFFECTING CHANNEL CHOICE

• cost (cost of developing the channel cost of
  maintaining)
• capital requirement
• control (over price, volume, promotion and type
  of outlets)
• coverage (geographic and/or market segments)
• continuity (individual-related loyality)

132
INTERNATIONAL DISTRIBUTION

• great diversity of distribution channels
• impact on cost and efficiency
• distribution - barrier to entry
• cost too high
• channel controlled by competitors
• only local - no national networks
• legislation protecting certain retailers or
  networks

133
TRENDS IN DISTRIBUTION STRUCTURES

• - from traditional to modern structures
• (new forms new alliances new processes)
• - hyper-markets
• - specialty stores category killers
• - internationalization of retailing

134

• INTERNATIONAL PRICING POLICY

135

• Price standardization
• versus
• pricing policy standardization

136
PRICING POLICIES IN INTERNATIONAL MARKETING

• Full-cost or variable-cost pricing ?

• Full-cost pricing
• total cost plus a profit margin
• usually used in domestic market

• Variable-cost pricing
• marginal (incremental) cost of producing goods
• premise any return over variable cost makes a
  contribution to the profit
• unused production capacity

137
PRICING POLICIES IN INTERNATIONAL MARKETING

• Skimming or penetration pricing?

• Penetration strategy
• products at low prices
• capture and hold market share
• competitive maneuver

• Skimming strategy
• products at high prices
• price-insensitive market segment
• if limited supply exists
• maximize profits until competition steps in

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PARALLEL IMPORTS

• Definition
• importers buy products from distributors in one
  country and sell them in another to distributors
  who are not part of the manufacturers regular
  distribution chain

• Causes
• lack of distribution and price control
• conditions
• large price differentials
• exclusive distribution
• variations in the value of currencies
• restrictions import quotas, high tariffs

139
PARALLEL IMPORTS

• ALIGNING PAN-REGIONAL PRICES
• S1 Determine optimal price for each country
• S2 Find out wether parallel imports are likely
  to occur at that prices
• S3 Set a pricing corridor

• Solution ???
• harmonization of prices across countries

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PRICE ESCALATION

• higher prices in foreign markets than in home
  markets
• Why?
• Cost of exporting

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PRICE ESCALATION

• COST OF EXPORTING
• taxes and administrative costs
• inflation
• exchange rates fluctuations
• distribution system
• transportation costs

• LESSENING PRICE ESCALATION
• lower production costs
• lower tariffs
• lower distribution costs
• free trade zones

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DUMPING

• What is dumping?
• Selling at an unfair price
• prices below cost of production
• prices below the price of the same goods in the
  home market

• Causes of dumping
• subsidies in production
• subsidies in export
• subsidies in transport

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COUNTERTRADE AS A PRICING TOOL

• Types of counter-trade
• 1. Barter
• 2. Compensation
• 3. Counter-purchase
• 4. Product buy-back

144
COUNTERTRADE AS A PRICING TOOL

• Motives
• gain access to new or difficult markets
• overcome exchange rate controls or lack of hard
  currency
• increase sales volume
• generate long-term customer goodwill

• Shortcomings
• no in-house use for goods offered by customers
• timely and costly negotiation
• uncertainty on future prices
• transaction costs

145
TRANSFER PRICING

• Benefits
• lowering duty costs
• reducing income taxes
• facilitating profit repatriation

146
TRANSFER PRICING

• How to set them
• 1. Local manufacturing cost standard mark-up
• 2. Cost of most efficient producer standard
  mark-up
• 3. Negotiated prices
• 4. Arms length prices (as for independent
  customers)

147
ADMINISTERED PRICES

• prices set for the entire market
• cooperation of competitors (cartels)
• governments
• international agreements (OPEC, shipping)

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• INTERNATIONAL PROMOTION POLICY

149
INTERNATIONAL PROMOTIONAL PLAN

• 1. Select target audience and positioning theme
• 2. Set campaign objectives degree of worldwide
  
• standardization
• 3. Determine the promotional mix
• 4. Determine promotional budget
• 5. Develop message strategy
• 6. Decide on media strategy
• 7. Assess effectiveness

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1. SELECT TARGET AUDIENCE AND POSITIONING THEME

• Target audience market segment
• global segment ?
• Positioning image for each country
• global positioning?

151
2. SET CAMPAIGN OBJECTIVES AND DEGREE OF
STANDARDIZATION

• Promotional objectives brand awareness, improve
  perception, promote new service
• Degree of standardization promotional mix,
  message, media

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Degree of standardization

• Segment
• Positioning
• Promotional objectives
• Promotional mix
• Message strategy
• Media strategy

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3. INTERNATIONAL PROMOTIONAL MIX

• advertising
• personal selling
• sales promotions
• public relations

154
WHAT IS GLOBAL ADVERTISING ?
Pattern Advertising

• Global Market Segmentation

World Brands
Pan-European Advertising
155
PATTERN ADVERTISING

• PLAN GLOBALLY, ACT LOCALLY!
• standardized basic message
• some degree of modification (different
• 
  media )

156
CHALLENGES TO GLOBAL ADVERTISING
Legal and Tax Considerations
Language Limitations
Cultural Diversity
Media Limitations
157
Legal considerations in advertising

• comparative advertising
• content of advertising message
• advertising of vicious products
• advertising towards children
• advertising taxation

158
OTHER FORMS OF PROMOTION
Sales promotions
Public relations
Personal selling
159
INTEGRATED MARKETING COMMUNICATION

• convey one and the same idea with a UNIFIED VOICE
• all promotional mix elements to center around a
  SINGLE KEY IDEA

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4. SETTING THE GLOBAL PROMOTIONALBUDGET

• ALLOCATE ACROSS
• COUNTRIES
• 1. Bottom-up
• 2. Top-down
• 3. Region angle

• SET THE BUDGET
• 1. Percentage of sale
• 2. Competitive parity
• 3. Objective-and-task

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5. MESSAGE STRATEGY STANDARDIZATION VS.
ADAPTATION

• MERITS OF STANDARDIZATION
• scale economies
• consistent image
• global consumer markets
• cross fertilization

• BARRIERS TO STANDARDIZATION
• cultural differences
• advertising regulations
• market maturity
• non-invented-here syndrom (NIH)

162
6. MEDIA STRATEGY

• TACTICAL CONSIDERATIONS
• availability
• cost
• coverage
• lack of market data

• SPECIFIC MEDIA
• newspapers
• magazines
• radio and television
• satellite and cable TV
• direct mail
• internet

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7. ASSESS EFFECTIVENESS

• controlling and monitoring
• reach promotional and marketing objectives
• corrections

164
COORDINATING INTERNATIONAL ADVERTISING

• cooperative advertising (monetary incentives)
• advertising manuals
• lead-country concept
• global or pan-regional meetings

165
CHOOSING AN ADVERTISING AGENCY

• market coverage
• quality coverage
• expertise in central international campaigns
• quality of support services
• the image the company wants to projects (local
  vs. global)
• size
• conflicting accounts