Professional Documents
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Marketing
Marketing
Chapter 9
Chapter 9
Market Entry
and Expansion
Reactive Stimuli
Competitive pressures
Overproduction
Stable or declining
domestic sales
Excess capacity
Saturated domestic
markets
Proximity to customers
and ports
(B)
Contractual Agreements
Turnkey Operations
Co-production Agreements
Management Contracts
(IK)
Sales only
Assembly & Sales
Production & Sales
Production, Sales & Export
Exporting
Export management companies (EMCs)
Domestic firms that perform international
marketing services as commission
representatives or distributors for other firms.
Two primary forms of operation
Take title to goods and operate
internationally.
Perform services as agents.
Exporting
Trading companies
The most famous trading companies are the
sogoshosha of Japan.
Reasons for the success of the Japanese sogoshosha:
gather, evaluate, and translate market information
into business opportunities.
Their vast transaction volume provides them with cost
advantages.
serve large markets around the world and have
transaction advantages.
access to capital, both within Japan and in the
international capital markets.
Exporting
Export trading companies Act (ETCs)
Designed to improve the export performance
of small- and medium-sized firms.
Permits bank participation in trading
companies to allow better access to capital.
Reduces the antitrust threat to joint export
efforts to enable firms to share the cost of
international market entry.
Must balance the demands of the market and
the supply of the members to be successful.
Trading companies
Independent distributors that match up buyers and
sellers. Do not represent a manufacturer but find many
who can supply a buyer.
Most major trading companies are the sogoshosha of
Japan.
Reasons for the success of the Japanese sogoshosha:
Are organized to gather, evaluate, and translate
market information into business opportunities.
Cost advantages because of vast transaction volume
Serve large markets around the world and have
transaction advantages.
Have access to capital, both within Japan and in the
international capital markets.
Going International
E-commerce: Offering goods and services over the
Web:
Corporate websites.
B-to-C and C-to-B forums.
Firms must:
Provide 24-hour order taking and customer support
service (often outsourced)
Have the regulatory and customs-handling expertise
to deliver internationally.
Understand global marketing environments for further
development of business relationships.
Disadvantages of joint
ventures
Different levels of
control are required.
Difficulty in maintaining
the relationship.
Disagreements over
business decisions.
Disagreements over
profit accumulation and
distribution (profit
repatriation).
Chapter 10 Chapter 10
Product
Adaptation
Product Adaptation
Product Variables
Products can be differentiated by their
composition, country of origin, tangible
features such as packaging or quality, or
augmented features such as warranty.
TM 89
(IK)
Nature of Product
Technology Differences
Weights & Measures
Physical Environment
Cost/Benefit Relationship
Legal Requirements
Competition
Support Systems
Cultural differences
Market Conditions
Government Influences on
Adaptation
Government regulations
Political agendas
Firms can influence these regulations by lobbying
directly or through industry associations.
Economic integration reduces discretionary
governmental regulations to some extent.
Nontariff barriers
Include product standards, testing or approval
procedures, subsidies for local products, and
bureaucratic red tape.
Customer Variables
Customer characteristics, expectations, and preferences
Physical size, local behaviors, tastes, attitudes, and
traditions.
Consumption patterns, psychosocial characteristics,
general cultural criteria
Product positioning - Consumers perception of a
brand as compared with that of competitors brands.
Economic Conditions
Economic development
Affects demand characteristics and helps
determine potentials for selling certain kinds
of products and services.
Backward innovation of the product may be
required to meet local requirements.
Competition, Environment
Competitive offerings - Monitoring
competitors product features is critical in
adjusting the product for competitive
advantage.
Climate and geography influence core
product; tangible elements (mainly packaging);
and the augmented features.
Packaging Considerations
three major functions: protection, promotion, user
convenience.
Materials: vary by transportation mode, transit conditions,
storage, display, length of time in transit, regulations...
The promotional aspect of packaging relates mostly to
labeling.
User convenience. Containers must withstand logistics
challenge, and yet must be easy for customers to open.
Package aesthetics: prudent choice of colors and package
shapes.
Package size: varies by purchasing patterns and market
conditions.
Product Counterfeiting
Counterfeit goods Goods bearing an unauthorized
representation of a trademark, patented invention,
or copyrighted work that is legally protected in the
country where it is marketed.
The European Union estimates that trade in
counterfeit goods accounts for 2 percent of total
world trade.
The largest number of counterfeit goods are
sourced from China, Brazil, Taiwan, Korea, and
India.
Combating Counterfeiting
Some acts, agreements, and alliances that help combat
counterfeiting include:
The Omnibus Tariff and Trade Act of 1984
The Trademark Counterfeiting Act of 1984
The Trade-Related Aspects of Intellectual Property
Rights (TRIPS) agreement
The International Anti-Counterfeiting Coalition (1978)
Counterfeit Intelligence and Investigating Bureau
Chapter 11
Chapter 11
Export Pricing
Export Pricing
Price Dynamics
The alternatives strategies for first-time pricing:
Skimming - Achieve the highest possible contribution
in a short initial time period, and then gradually lower
the price as more segments are targeted and more
products are available.
Market pricing Determined based on competitive
prices; production and marketing is adjusted to the
price.
Penetration pricing Offer products at a low price to
generate volume sales and achieve high market
share, to compensate for lower per unit return.
Domestic:
- Shipping and insurance
- wholesaler margin
- retailer margin
Exported:
- higher shipping & insurance costs
- Tariff
- Importer, wholesaler and jobbers margins
- VAT at each value-added level
If manufacturers price is $6.00 then domestic customers
price may be $12.00 to $14.00 and foreign customers price
may be anywhere from $20.00 to $45.00
Incoterms
(First issued by ICC in 1936, revised 6 times since then)
These delivery terms influence the quoted export price
EXW (named place)
FCA FREE CARRIAGE (named place)
FAS (named port of shipment)
FOB (named port of shipment)
CFR OR C&F (named port of destination)
CIF (named port of destination)
CPT CARRIAGE PAID TO (named place of destination)
CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)
DAF DELIVERED AT FRONTIER (named place)
DES DELIVERED EX SHIP (named port of destination)
DDU DELIVERED DUTY UNPAID (named place of destination)
DDP DELIVERED DUTY PAID (named place of destination)
Terms of Payment
Cash in advance
Relieves the exporter of all risks and allows
for immediate use of the money.
Used for first time transactions or situations
where the exporter doubts the importers
solvency.
Terms of Payment
Letter of credit (lc) (Opener, Issuer, Beneficiary)
An instrument issued by the bank at the request of
the buyer.
The bank promises to pay money on presentation of
specified documents like the bill of lading, consular
invoice, and description of the goods.
Classified as irrevocable versus revocable, confirmed
versus unconfirmed, and revolving versus nonrevolving.
Terms of Payment
Drafts (Drawer, Drawee, Payee)
Similar to personal check; an order by one party to
pay another.
Buyer must obtain shipping documents before
obtaining possession of the goods involved in the
transaction.
Documentary collection
The seller ships the goods, and the shipping
documents and the draft are presented to the
importer through banks acting as the sellers agent.
The draft , also known as the bill of exchange, may be
either a sight draft, time draft or arrival draft.
Terms of Payment
Bankers acceptance - A time draft drawn on and
accepted by a bank; it is sold in the short-term money
market.
Discounting - Selling a draft to the bank at a discount
from face value; it can be with recourse or without
recourse.
Open account - The normal manner of doing business in
the domestic market; also known as open terms.
Consignment selling Allows the importer to defer
payment until goods are actually sold.
Payment Risks
Commercial risk
Refers to the insolvency of, or protracted payment
default by, an overseas buyer.
Results from deterioration of conditions in the buyers
market, fluctuations in demand, unanticipated
competition, or technological changes.
Political risk
Can neither be controlled by the buyer nor the seller.
Price Negotiations
Pricing is the most sensitive issue in business
negotiations; the exporter should discuss it as part of a
comprehensive package and should avoid price
concessions early on in the negotiations.
Carefully consider concessions that reduce price or
profitability; example: discounts, payment terms, product
features.
Revisit competitive prices to ascertain that the price
reflects market conditions accurately.
Focus negotiations first on substantive issues (quality
and delivery), then on price.
Leasing
Trade liberalization has benefitted lessors both
through expected growth in target economies
and eradication of country laws and regulations
hampering outside lessors.
Allows market penetration for the firms products,
when outright sale is not possible.
Total net income from leasing is often higher than
it would be if the unit was sold.
Dumping
Selling goods overseas at a price lower than in the
exporters home market or below the cost of production,
or both.
Ranges of dumping
Predatory dumping Intentionally selling at a loss in
another country in order to increase its market share
at the expense of domestic producers.
Unintentional dumping - Result of time lags between
the dates of sales transaction, shipment, and arrival.
Chapter 17
Chapter 17
Global Pricing
Global Pricing
Countertrade
Countertrade is a sale that encompasses an
exchange of goods, services, or ideas for other
goods, services, or ideas instead (or in addition
to) money.
Conditions that support countertrade are lack of
money, lack of value of money, lack of
acceptability of money as an exchange medium,
or greater ease of transaction by using goods.
Forms of Countertrade.
-
Straight barter
Counterpurchase agreement (with the government,
smaller deals)
Offset (with the government, larger, longer-term deals)
Buyback (from plant output)
Triangular Compensation {A (goods) B (goods) C
(cash) A}
Clearing agreements (Accounts cleared periodically)
Switch trading (one company sells to another its obligation to
make a purchase in a given country)
Limitations:
Requires that accounts be settled on a country-bycountry or even transaction-by-transaction basis.
Valuation of goods received in exchange can be difficult
Chapter 16 Chapter 16
Global Logistics and
Global
Logistics and
Materials Management
Materials
Management
A Definition of International
Logistics
International logistics - The design and management
of a system that controls the flow of materials into,
through, and out of the international corporation.
The systems approach helps the firm explicitly recognize
the linkages among the traditionally separate logistics
components within and outside of the corporation.
Interaction with outside organizations, suppliers, and
customers helps build on commonality of purpose in the
areas of performance, quality, and timing.
A Definition of International
Logistics
The systems approach also ensures
JIT - Just-in-time.
EDI - Electronic data interchange (more efficient
order processing).
International Shipping/Transportation
Modes
1. Air: (wide body jets)
2. Truck: Truck trains
3. Rail: Gauges, technology, unit trains
4. Inland Waterways: Barges (motorized, non-motorized)
5. Ocean: Container ships, Ro-Ro ships, Lighter aboard
ships, Supertankers, Ore carriers, LNG carriers
(Trades, Conferences, Lines, Liner/Tramp, rates, flags,
Insurance: General/Particular average)
6. Pipelines: Liquid, gas, domestic, transnational
7. Intermodal
IK
Customer Requirements
Shipper Requirements
Distributor Requirements
Climate
Government Requirements
Management of International
Logistics
Centralized logistics management - Headquarters retain
decision-making power and control over logistic activities
affecting international subsidiaries.
Decentralized logistics management
Each subsidiary is made a profit center which carries
responsibility for its performance.
Leads to greater local management satisfaction and better
adaptation to local market condition.
Required by firms operating in a number of international markets
that are diverse in nature.
Management of International
Logistics
Contract logistics
Outsourcing logistical management by employing
outside logistical expertise.
Helps firms to achieve improved service at equal or
lower cost.
Allows marketers to take advantage of an existing
network, complete with resources and experience.
Leads to loss of the firms control in the supply chain.
Chapter 12 Chapter 12
Marketing
Communication
Marketing Communication
International Negotiations
The two biggest dangers faced in
international negotiations:
Parochialism - The misleading perception that
the world of business is becoming ever more
American and that everyone will behave
accordingly.
Stereotyping - Generalizations about any
given group, both positive and negative.
Informal meetings
To discuss the terms and get acquainted.
It may be necessary to utilize facilitators (such as consultants
or agents) to establish the contact.
Strategy formulation
Review and assess all factors to be negotiated, and
Prepare for actual give-and-take of the negotiation.
International Negotiations
Negotiations details
Two approaches are used: competitive and
collaborative.
Depend on the cultural background and business
traditions prevailing in different countries.
Outcomes
The choice of location for the negotiations and the
negotiator characteristics play a role in the
outcome.
Patience
Direct marketing
Establishes relationship with a customer in order
to initiate immediate and measurable responses.
Accomplished through direct-response
advertising (direct mail literature and catalogs),
telemarketing (telephone via call centers), and direct
selling (database marketing to create individual relationships with
each customer).
All can be highly personalized tools if the target
audience can be identified and defined narrowly.
Personal selling
Involves high costs per contact.
Provides immediate feedback on customer
reaction as well as information on markets.
Can be used for consumer selling in low-wage
markets
Chapter 13 Chapter 13
Distribution
Management
Distribution Management
Channel Structure
From direct (producer-to-consumer types) to elaborate
(multilevel channels using many types of intermediaries).
Channel configurations for the same product will vary within
industries, even within the same firm, because national
markets quite often have unique features.
Channel structures are designed to manage multidirectional
connections for:
Physical movement of goods and services.
Transactional title flows.
Information communications flows.
Foreign Wholesaling
1. Smaller
2. More numerous
3. More services, especially financing
4. Higher margins cf. U.S. wholesalers
5. Operate in permanent wholesale markets,
fewer trade shows
IK
Foreign Retailing
1. Much smaller
2. Fewer/smaller chains
3. Varied operating hours
4. Limited offerings
5. Nomenclature differences
6. Government regulations
7. Service level varies by country
8. Less self-service
IK
Channel Strategies
The general distribution systems used by
companies include:
Direct sales to customers through a firms own field
sales force or through electronic commerce.
Indirect sales through independent intermediaries at
the local level.
Indirect sales through an outside distribution system
having a regional or global coverage.
Selection of Intermediaries
Two basic decisions:
Determining the type of intermediary
relationship
Distributorship
Agency relationship
Contract duration.
Geographic and customer boundaries.
Method of compensation.
Products and conditions of sale.
Means of communication between parties.
Process of dispute resolution/dissolution
Gray Markets
Gray markets (parallel importation)
Authentic and legitimately manufactured trademark
items that are produced and purchased abroad but
imported or diverted to the market by bypassing
designated channels.
Fuelled by price segmentation and exchange rate
fluctuation.
They under-cut local marketing plans, erode longterm brand images, eat up costly promotion funds,
and sour manufacturerintermediary relations.
Gray Markets
Arguments for gray markets:
The right to free trade.
Consumers benefit from lower prices.
Discount distributors find a profitable market
niche.
Gray Markets
Arguments against gray markets:
Hurts the legitimate owners of trademarks.
Reduces incentive among trademark owners to
undertake product development.
Take unfair advantage of the trademark owners
marketing and promotional activities.
Can deceive consumers by not meeting product
standards or their normal expectations of aftersale service.
Gray Markets
Solutions to the gray market problem:
A contractual relationship that ties businesses
together.
A one-price policy.
Producing different versions of products for
different markets.
Conducting educational and promotional
campaigns.
Chapter 14
Chapter 14
Global Product
Global Product
Management
Management and Branding
and Branding
Disadvantages of product
portfolio approach
Foreign competition does not
follow the same rules as
domestic competition.
Relationships between market
share and profitability may vary.
Government regulations.
Local content laws.
Different production sites impact
perceptions of risk and quality.
Branding Policies
Three choices of branding:
Use of the corporate name.
Use family brands for a wide product line.
Use individual brands for each item in the product line.
Global brands are a key way of creating consistency and impact.
May be completely standardized or some elements of the
product may be adapted to local conditions.
Characteristics of global brands
Branding Policies
Private branding
The intermediaries own branded products or store
brands.
Methods used for private branding:
Umbrella branding with the intermediarys name.
Separate brand names for individual products or product
lines.