International Marketing

Strategies and Marketing mix

ESG March 2008
Jean-Philippe Javel

Size and nature of international markets

Niches Local markets Regional markets Global markets

Niche markets

Purely local niches

Limited to a specific geographical area Often, historical roots, consumer behavior linked to old traditions Small market but potential customers in several countries Example: Hummer H2
derived from the military vehicle Target:

Worldwide niches
-

Wealthy show-off Mostly urban

Niche in some countries, mass market in others

Example : oil lamp Decoration item (sailing style) in western countries

Local, regional and global markets

Local markets (country)

Strong cultural links Specific market conditions Examples :
medias (press, radio, TV) cheese airlines : state regulations (ex: Morocco)

Regional, multi-country markets

Specific products and marketing mix Example : cars
North America, Europe, Poor African countries
Chevrolet Tahoe

Global markets
Rather undifferentiated goods, universal solutions, not culturally related, commodities
Example : wheelbarrow Example: vehicle gasoline

Luxury brands
Strong global brand image Marketing mix may be adapted locally

The Maharaja Mac is an example of an Ad ap ted Marketing Mix

Adapting or standardizing your marketing strategy and/or mix ?

Markets and consumers needs and wants can be different in each country / region But it is not always optimal to localize the marketing strategy and radically change the whole marketing mix for each country
For example : developping a new product

Clickor press spaceb to retu ar

Mainly for cost reasons (economies of scale) and organisational reasons (simplify)

Adapt locally

Where is the optimum ?

Standardize globally

Customer needs and wants

Reduce costs Maximize profits

Consequently, a multinational company has to find out and implement the optimal approach, between global and local, depending on several factors and market screening

Strategic Adaptation to Foreign Markets

High

Level of cultural grounding

Need for adaptation

Low Industrial / Technology intensive Consumer

Nature of product

Marketing : Globalization versus Adaptation

Factors encouraging Factors encouraging

Adaptation to local markets

Different customer needs and wants, behavior patterns
cultural background
use conditions

Globalization
Its sometimes possible
Lifestyles and consumer behavior are converging (more or less)

Cost reduction
Economies of scale (lower manufacturing & purchasing costs) No product adaptation means less R&D, Marketing, inventories costs

Different economic situation Legal, tax, political barriers Different competition landscape

Simplify management
Easier control & coordination Centralized decisions

Specific sales/retail channels

External growth and acquisition of foreign local brands Unleash local managers initiative

Global marketing campaigns

Communication etc Possible fast worldwide launch

The 4 Types of International Marketing

Global marketing strategy

(same everywhere)

Local marketing strategies

(specific to each country or region)

Global tactics

Some tactics adapted locally

Mix of global & local tactics

Only local tactics & marketing mix

Pure Global

Global

Glocal

Pure Local

Bongrain : cheeses

Marketing Strategy : Pure global

Strategies and tactics are the same everywhere 2 conditions

Markets adequate for such globalization Strong brand policy, with no exception

Mostly luxury brands

Examples: - Chanel n5 perfume - Omega watches

Other examples
La Maison du Chocolat
same product same shops (Paris, New York, Tokyo) same service same positioning, highest price on the market

Ikea
same strategy everywhere (developped countries) : same brand, same positioning, same target same marketing mix : products and services, pricing, place, communication But a flop in China !

Marketing Strategy : Global

Same brand, same positioning, same product But the marketing mix can be partially adapted locally, depending of local market conditions and competition Example : Air France
- Same brand, same planes, same quality of service, maintenance and security - Pricing is adapted locally
When Air France has a quasi-monopolistic position (West Indies, some African countries), prices are very high When Air France is on a market with fierce competition, especially from low cost companies such as EasyJet or RyanAir (ex: Europe), prices are much lower and special promotions are proposed

Marketing strategy : Glocal

Think global, act local Standardizes certain core elements and localizes some marketing mix elements Example : Honda Accor Same brand and positioning in Europe and in the USA But the product is not the same everywhere
In Europe, Accor sales are low, and cars are imported from Japan In the US, sales are higher and a special product is manufactured for the US market
Automatic gearbox Slightly different style Different motors Different interior design and equipment

Since 1986, Honda has developped a new brand, Acura, on the high-end, in the US & Japan, with specific models and a dedicated retail network

Coca Cola marketing is coherent worldwide and some elements are global

Brand Colors Symbols Same major sales channels Some advertising campaigns Sponsoring of major sport events
Olympic Games since 1928 Football World Cup

But some elements of the products are localized Example: adaptation of the Diet Coke product
Diet has a negative meaning in many countries. It was changed to light in South Europe and Japan. (same problem with coke in French !) Cherry flavor for the US market

USA

Packaging, name and formulas can be different in local markets

China

Thailand

Marketing strategy : Pure local

Brands, positioning, products and marketing mix are totally specific and adapted to each country Example: Bongrain, world leader of cheeses
Tastes, preferences and traditions are very different in each country Presence in 150 countries Several hundreds of brands and products, with local marketing mix
France : Caprice des Dieux, Saint Agur, Chavroux etc (28 brands) Spain : Burgo de Arias etc Hungary: Pannonia etc USA : Alouette etc India : Le Bon China : Pikifou Japan: Gerard Selection

Examples of product adaptation

Depending on needs and wants differences, and local constraints, there are various approaches :

Exactly the same core product worldwide

-

Natural goods : Evian water

Manufactured luxury goods : Cartier watches

Partially localized product

Personal Computers : keyboard (20 different types in Europe), electrical power, software etc

Mainly or totally localized product

Cosmetics : different ethnic skins etc Yoghourts :
French and American tastes

are very different

(creamy formula, flavor, size, number of items)

Coffee : very different tastes and preferences in the world

International pricing strategies

Main reasons to adapt pricing in local markets

Different strategic goals in each country

- Market penetration / high-end
Example : Bonne Maman jam

Different standards of living

- LOreal mass market products are less expensive in China - Coca-Cola prices are lower in India than in Japan

Manufacturing and/or shipping costs

- Evian bottle sold in Japan or in the USA (far away from France): the price includes a rather high transport cost

Tax, custom duties Currency rates Competition

International pricing strategies

Limits of different pricing by country

May blur brand image and positioning
- example : Champagne Pommery used to be sold at different prices in Europe, which was confusing some consumers (who travel)

Foreign market price gaps may lead to gray marketing and parallel imports
- sales of authentic, legally trademarked goods through unauthorized or tolerated channels - example : Renault cars imported from Spain and sold in France - example of a technological response : DVD zones - same issue with different tax levels : - blank CD or DVD - cigarettes

Less and less price differences are possible in the European

Union because of 2 factors easing price comparisons : Euro common currency

Internet price comparators leguide.com, Kelkoo, Lycos etc

International pricing strategies

Example : Louis Vuitton - Alma bag

Price is around 40% higher in Japan than in France (585 ) But Louis Vuitton has to impose purchase limits to Japanese tourists in France

Counterfeiting is also a major concern !

International communication strategies Advertising

Choice of medias : a localized approach is usually better

Different audience Different regulations
Example: alcohol

Message : a certain level of globalization is usually preferable

Economies of scale Brand image coherence worldwide But most multinational companies choose a advertising agency with offices worldwide, to enable a global level of coherence in localized campaigns There are few actual worldwide global advertising campaigns
Example : Launch of Gillette Mach 3 Same TV commercial in 19 European countries and in the US Only the soundtrack and slogan were translated The best a man can get : La perfection au masculin Choice of an international stars : David Beckham

TV commercials, press ads etc often require localization

-

International communication strategies When is globalization of promotion most possible?

Products / brands that can use a primarily visual appeal Products / brands that can use images associated with rather universal appeals

such as sex or wealth

Products / brands that appeal to a market segment with universally similar tastes, interests, needs, and values Products with a nationalistic flavor if the country has a reputation in that field High tech products free of cultural bounds

Example : Apple iPod Worldwide advertising campaign

Same campaigns worldwide

Different music soundtracks : Rock, electro / house, hip hop, jazz etc Characters are presented in shadow style to avoid ethnic issues and to focus more on the product (contrast effect) 32 million iPods sold in 2005, more than 60% of market share 900 million songs sold through iTunes Music Stores, nearly 85% of the legal market

Apple is now a dominant leader on the MP3 player market

-

International communication issues

In which countries cant you launch such a campaign ?

A low budget ? Why not try viral marketing ? Be creative !

Market entry strategies

Market entry strategies Exporting

Direct
Domestic base Overseas sales branch Traveling sales representative Foreign-based distributors/agent

Indirect-occasional, or active exporting

Domestic-based export merchant Domestic-based export agent Cooperative organizations Export-management company

Market entry strategies Contractual Agreements

- Franchising: A contractual arrangement where a wholesaler or retailer (the Franchisee) agrees to make some payment and to meet the operating requirements of a manufacturer or other franchiser in exchange for the right to use the firms name and to market its goods or services

- Foreign Licensing: an agreement that grants foreign marketers the right to distribute a firms merchandise or to use its trademark, patent, or process in a specified geographic area.
- Subcontracting: a contractual agreement where a firm hires a local company to produce goods or services in a specific geographic area.

Market entry strategies International Direct Investment

An additional strategy for entering global markets Requires direct investment in foreign firms, production, and/or marketing facilities Advantages
cheaper labor cost in some countries government incentives creates better image deeper relationships with government, customers, suppliers and distributors - full control of operations and marketing

Risks involved:
- economic difficulties of the host country - political instability and negative perception

Comparison of Market Entry Strategies

Form
Export
Ownership

Control
Very limited
Total

Risk
Low
High

Advantage
Low cost
Control

Joint Ventures

Shared

Moderate

Local expertise
Low cost

Licensing

Limited

Moderate

Internet

Total

High

No physical presence required

Market Screening

Economic Size and Structure

Social and Cultural Factors

Living Standards

Growth Prospects

Nature of The Society

Distinctive Features
Marketing Systems

Environmental Factors

Segmentation of The Market

Import Restrictions

Legal Framework

Political Stability

Consumer Groups

Geographical Factors

Distribution

Promotion

Consumer Behaviour

Extent of Competition

After International Marketing, Bennett & Blythe, 2002

The 12C framework to analyse international markets

Country - What are the political, legal and economic issues of your potential overseas market, as well as its current market potential and your knowledge and experience of it? Currency - If foreign currencies fluctuate a lot against your home currency, you may have difficulties in pricing your goods or making a profit. Some countries, like China dont allow their currency to leave the country, so you may have to work in $ Culture - Every culture is different - even from one European country to another. Your product, advertising and even brand may need to be adapted to suit your new market. Control & Co-ordination - Trading abroad is not only about selling, but also after sales service. All these people will have to be hired, trained, managed and controled. Concentration (of markets) some countries are vast (China, India etc). It may not be so easy or cost effective to sell to different groups in isolated areas. However, there may be opportunities to sell cross-countries to different nationalities with similar cultural/language attitudes Commitment - Selling abroad seriously requires long term planning, significant financial investment, time and skills of your staff. There are risks and the return on investment may be long to come.

The 12C framework to analyse international markets

Communication - You need to consider the language skills of you, your staff and your contacts abroad, and what media or information technology they have (advertising, telecommunications, e-mail etc). If it is difficult to communicate, it will slow up and complicate matters. It may also prevent you from developing your business properly. Choices (of consumers) - It is possible that there are perfectly good products or services available from local suppliers. Yours are likely to be more expensive, so consider what would make your product better or more desirable. Channels of distribution - Getting goods and services to overseas markets can be difficult. Building an efficient retail network is usually hard and long. Contractual obligations - Make sure that the contract meets everyones needs and that you and your customer are fully aware of the commitments listed. Failure to meet the exact requirements of the contract, can result in nonpayment. Capacity to pay - You should take a look at the customer and their ability to pay as well as the country itself. This will include not only financial health, but also political issues, and currency and banking regulations. Caveats (laws) Some countries have laws that are very protective of their local traders and do not readily accept imports. There may be restrictions or differences between your country and the foreign market about what can be sold and under what circumstances.