Definition

New

Product Development +Development of original products, product improvements, product modifications, and new brands through the firms own R & D efforts

Process
Idea

generation Idea screening Concept development Market strategy development Business analysis Product development Test marketing commercialization

Product life cycle

The

Typical Product Life Cycle (PLC) Has Five Stages +Product Development, Introduction, Growth, Maturity, Decline

Product issues in international marketing

Product

and services continuum Product need satisfaction Approaches to Product introduction 1. Customization 2. Standardization 3. Adaptation

Contd.
Adaptations

Mandatory 2. Discretionary Physical product vs. communication adaptation Branding

1.

Contd.
International

PLC Diffusion of innovation

What is International Marketing?

Domestic

marketing

encompasses a firms efforts in its

home country.
International

marketing

Involves marketing goods and services outside the home country.

 The Marketing Environment Uncontrollable environment - Socio-economic and demographic environment - Cultural environment - Technological environment - Political and legal environment - Financial environment

Controllable environment - Product - Place - Price - Promotion

PHYSICAL/GEOGRAPHICAL ENVIRONMENT INCLUDES

Natural resource endowments Weather and climatic conditions Topographical factors Location aspects in the global context Port facilities

THREATS AND OPPORTUNITIES ASSOCIATED WITH PHYSICAL ENVIRONMENT

Shortage of raw material- can lead to cost increase Increased energy costs Anti-pollution pressures Changing role of governments- governments vary in their efforts and concerns to promote a clean environment

DEMOGRAPHIC FACTORS

Size of the population Population growth rates Population age mix Ethnic and other markets Educational groups Household patterns Geographical shifts in population

POPULATION SIZE

1.

2.

Poor countries with small population Not very attractive for business Can serve as niches for small firms

1.
2.

Advanced countries with large population Attractive markets Strong competition

POPULATION GROWTH RATE 1. 2.

World population growth rateIn developing countries2% per year In developed countries0.6% per year

A growing population does not mean growing markets unless these markets have sufficient purchasing power. Falling death rate Increasing birth rate in developing countries Decreasing birth rate in developed countries

POPULATION AGE MIX

1. 2. 3. 4.

5.

6.

Population can be subdivided into six age groups: Preschool School-age children Teens Young adults (age 25-40 years) Middle aged adults (age 40-65 years) Older adults (age 65 years and above) For marketers,the most populous age groups shape the marketing environment.

ETHNIC AND OTHER MARKETS

Countries vary in ethnic make-ups Ethnic groups have certain specific wants and buying habits. Also, within each ethnic group are consumers who are quite different from each other.

EDUCATIONAL GROUPS

Five educational groups-

1. 2.

3.

4. 5.

Illiterates High school dropouts High school diplomas College degrees Professional degrees

HOUSEHOLD PATTERNS

1.
2.

3.

4.

Traditional households Diverse/nontraditional householdsSingle-live alones Adult live togethers Single parent families Childless married couples

GEOGRAPHICAL SHIFTS IN POPULATION

Migratory movements between and within countries Within countriesrural to urban Regional differences can occur within countries Marketers look at where consumers are gathering

Economic environment

Economic systems Population, Income (per capita, GNP) Possibility of effective utilization of resources, financial stability. Banking facilities available, nature of credit facilities offered, short, medium and long term (terms and interest rates) Availability of local accounting services Foreign exchange facilities Remittance of profits Availability of insurance Situation of balance of payments Communication and transport infrastructure Urbanization Market prospect Product and product modification

CLASSIFICATION OF ECONOMIES BASED ON GNI

1)LOW

INCOME ECONOMIES: Economies with per capita GNI of $825 or less in 2004 59 low income economies
2)HIGH

INCOME ECONOMIES: Economies with per capita GNI of $10,066 or above in 2004

Contd
56

high income economies

3)MIDDLE

INCOME ECONOMIES Economies with per capita income between $826 and $10,065 in 2004 94 middle income economies

Low priced models for developing countries. Example: LOGAN launched by RENAULT.

Technological Environment

Technological developments have been revolutionizing the business scene. Facilitates introduction of new products. Improves operational efficiency Some modern technological breakthroughs : 1) Biotechnology 2) Nanotechnology 3) Satellites 4) Supercomputers

Technology facilitating communications

E-mail Internet E-commerce Telecommunication s

Technological Environment

Positives: Cost of doing business worldwide has declined. Increase in productivity.

Negative:

- Reduction in requirement of skilled labour.

Socio-cultural Environment
Encompasses

Language Non verbal language Religion Values and attitudes Manners and customs Material elements Aesthetics Education Social institutions Family

Contd.
Never

touch the head of a Thai as the head is considered sacred. Red colour implies death in Africa Number 7 is unlucky in Kenya Triangular shapes should be avoided in Hongkong Market for computers is more lucrative in advanced countries like US where education levels are also high.

Different cultures and different ways to greet

Contd.

India: Namaste Netherland: Goddag Sweden: pleased to meet you Tanzania : Jambo United Kingdom : how do you do

Intercultural socialization
Be

culturally prepared Learn local communication complexities Mix with nationals Be creative and experimental Be culturally sensitive Be realistic in expectations

Hofstede Dimensions

Gert Hofstede, a Dutch researcher, was able to interview a large number of IBM executives in various countries, and found that cultural differences tended to centre around four key dimensions: Individualism vs. collectivism: To what extent do people believe in individual responsibility and reward rather than having these measures aimed at the larger group? Japan actually ranks in the middle of this dimension, while Indonesia and West Africa rank toward the collectivistic side. The U.S., Britain, and the Netherlands rate toward individualism. Power distance: To what extent is there a strong separation of individuals based on rank? Power distance tends to be particularly high in some Latin American countries, while it is more modest in Northern Europe and the U.S.

Contd.

Masculinity vs. femininity . Masculine values involve competition and conquering nature by means such as large construction projects, while feminine values involve harmony and environmental protection. Japan is one of the more masculine countries, while the Netherlands rank relatively low. The U.S. is close to the middle, slightly toward the masculine side. Uncertainty avoidance involves the extent to which a structured situation with clear rules is preferred to a more ambiguous one; in general, countries with lower uncertainty avoidance tend to be more tolerant of risk. Japan ranks very high and the U.S. is in the lower

range of the distribution.

Political Environment
Government stability Incentives for international trade (low interest on loans, construction subsidies, tax breaks) eg-Walt Disney theme park in France Controls on international trade (tariffs, quotas, buy national) to protect domestic manufacturers 1. Tariff on US Tobacco cos. in Japan 2. Quota on number of vehicles Honda sells in US 3. Buy nationally made military uniforms in US

Regional Trade Agreements-Economic community(EU)

Political environment
Regulations to protect purity of environment and preserve the ecological balance have assumed importance in many countries In most countries promotional activities are subject to various controls. Many countries have laws to educe monopolistic power and thereby give opportunity to small and new entrepreneurs.eg. MRTP in India.

Legal environment
Laws

across borders. When laws of two countries differ, it may be possible in a contract to specify in advance which laws will apply during course of dealing among the parties in question.

Contd.

The reality of legal systems. Some legal systems, such as that of the U.S., are relatively transparentthat is, the law tends to be what its plain meaning would suggest. In some countries, however, there are laws on the books which are not enforced (e.g., although Japan has antitrust laws similar to those of the U.S., collusion is openly tolerated). Further, the amount of discretion left to government officials tends to vary. In Japan, through the doctrine of administrative guidance, great latitude is left to government officials, who effectively make up the laws.

Contd.

Legal systems of the World. approaches to law across the World, with some differences within each: Common law, the system in effect in the U.S., is based on a legal tradition of precedent. Each case that raises new issues is considered on its own merits, and then becomes a precedent for future decisions on that same issue. Code law, which is common in Europe, gives considerably shorter leeway to judges, who are charged with matching specific laws to situationsthey cannot come up with innovative solutions when new issues come up.

Contd.

Socialist law is based on the premise that the government is always right and typically has not developed a sophisticated framework of contracts (you do what the governments tells you to do) or intellectual property protection (royalties are unwarranted since the government ultimately owns everything). Former communist countries such as those of Eastern Europe and Russia are trying to advance their legal systems to accommodate issues in a free market.

Case study
U

S Ice cream co. in Korea

Def.-Intl. Mkting
International

marketing refers to marketing carried out by companies overseas. It refers to firm-level marketing activities across border including market identification and targeting, entry mode selection, marketing mix and strategic decisions to compete in international markets.

Main steps in marketing management process

R-STP-MM-I-C

R-Research
STP-Segmentation,

positioning MM-Marketing mix I-Implementation C-Control

Targeting,

Global information systems

Information is one of the most basic ingredients of a successful marketing strategy. For achieving success in International Markets, information about buyer behaviour and the overall business environment is vital to effective managerial decision making. In order to research markets, marketers must be aware about information sources, methods of data acquisition and analysis.

The global marketer must scan the world for information about opportunities and threats and make information available via a management information system in order to reduce the uncertainty around marketing decision making.

Overview of global marketing information systems

Marketing Information System (MIS) provides managers and other decision makers with continuous flow of information about markets, customers, competitors, and company operations. A MIS should provide a means of gathering, analysing, classifying, storing, retrieving and reporting relevant data about customers, channels, sales and competitors. A companys MIS should also cover important aspects of a companys external environment. Global competition intensifies the need for an effective MIS. Global companies like Toyota and Ford have sophisticated electronic data interchange (EDI) systems to improve inter company information sharing. Internet has complemented and dramatically expanded the ability to access up to date information anywhere in the world. MIS must provide relevant information in a timely, costefficient and actionable manner.

Elements of information system

The following constitute the elements of the global information system. Economic - rate of growth of GNP, level of inflation, incomes Social - people, demographics, culture Political - risk, instability, attitudes to "foreigners" Technology - current, rate of change, infrastructure Resources - money, manpower, materials, Fiscal - taxes, exchange rates Institutions - banks, interest rates

Tools of information systems

Electronic

Data Interchange(EDI) Efficient Consumer Response (ECR) Electronic Point of Sale (EPOS) Intranets Data warehouses

Formal Marketing Research

Marketing

Research is the project specific systematic gathering of data in the search scanning mode. Marketing research can be taken up by in-house team of the global firm or outsourced to outside firms specialized in marketing research.

Steps in Market research

Problem definition: The purpose of the study, background and required information, and decision making usage of the information is detailed. Defining the research problem to be addressed is the most important step because all other steps will be based on this definition.

Developing an approach to the problem: A broad specification of how the problem will be addressed is developed to allow the researcher to break the problem into salient issues and manageable pieces. Required information is identified. This step is guided by discussions with decision makers, industry experts.

Research design formulation: Framework / blueprint for conducting the Marketing Research project are prepared

Contd.
Fieldwork or data collection: A properly selected and trained field force gathers project data through personal interviewing, telephone, mail or electronically.

Data preparation and analysis: Data collected is edited, coded, transcribed and verified to allow researchers to derive meaning from the data.

Report preparation and presentation: The research findings are documented and presented to decision makers through written reports and presentations. The report should address the specific research questions identified, describe approach, research design, adopted data collection and data analysis procedures and conclude the results and major findings.

Marketing decision and intelligence requirement

Marketing decision

Go international or remain domestic

Marketing intelligence Assessment of global market and firms potential share in it, in view of local and international competition .

Contd.

Which markets to enter

A ranking of world markets according to market potential, local competition and political situation.

Contd.

How to enter target markets

Size of markets, intl. trade barriers, transport costs, local competition, govt. requirement, political stability.

Contd.

How to market in target markets

For each market buyer behaviour, competitive practise, distribution channel, media.

Scope of Research
Market

measurement studies studies studies

Competitive

Environmental

Sources of information
Secondary

1.
2.

data Internal source External source data

Primary

Secondary data
Internal

source

Sales and cost records of the organization

Secondary data
External

source

UN, WB, EU, Embassy, Competitors annual budgets, Internet

Secondary data
Major

issues-

1. 2. 3.

Availability of data Reliability of data Comparability of data

Primary data
Collection

methods

1. 2. 3. 4.

Observation Focus groups Surveys Experiments

Observation

Fresh

data can be gathered by observing relevant actors and settings. A record of consumer reactions is prepared by observer.

Focus group
Focus

group is a gathering of 6-10 persons who spend a few hours with a skilled interviewer to discuss a project, service, organization or other marketing entity. The discussion is recorded through note taking/ audio/ videotape and is subsequently studied to understand consumer belief and behaviour.

Survey Research
Companies

undertake surveys to learn peoples knowledge, beliefs, preferences, satisfaction and so on and to measure magnitudes in the population.

Experiments Research
Experimental

research calls for selecting matched group of subjects, subjecting them to different treatments, controlling extraneous variable and checking whether observed response differences are statistically significant.

Primary data
Research instrument-Questionnaires Contact methods 1. Mail questionnaire 2. Telephonic interview 3. Personal interview

Primary data
Main

1.
2. 3.

issues Comparability of data Willingness of potential respondent Ability of respondent to understand and communicate. Language problem. Use back translation.

Global Market entry strategies

Once

a company decides to target a particular country, it has to determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures and direct investment. Each succeeding strategy involves more commitment , risk, control and profit potential.

Indirect Export

Companies work through independent intermediaries to export their product.

There are 4 types of intermediariesDomestic based export merchants-buy manufacturers products and sell them abroad. Domestic based export agents-seek and negotiate foreign purchases and are paid a commission. They do not purchase the product on their own account like merchants. Co-operative organizations-carry out exporting activities on behalf of several producers Export management companies-agree to manage a companys export activities for a fee. They find customers, arrange for the transportation formalities and also arrange for the receipt of payment from the customer.

1.

2.

3.

4.

Direct Export
Companies

may decide to handle their own export. A co. can carry on direct exporting in several ways1. Domestic based export department 2. Overseas sales branch 3. Travelling export sales representative 4. Foreign based agents

Licensing
The licensor licenses a foreign co. to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty. The licensor gains entry in foreign market at little risk. The licensee gains production expertise or a well known product or brand name. Once contract ends the licensee may become potential competitor. Example-KFC

Turnkey projects

A firm uses knowledge and expertise it has gained in one or more markets to provide a working projecte.g., a factory, building, bridge, or other structureto a buyer in a new country. The firm can take advantage of investments already made in technology and/or development and may be able to receive greater profits since these investments do not have to be started from scratch again.

Management contracts

A firm agrees to manage a facility e.g., a factory, port, or airportin a foreign country, using knowledge gained in other markets. The co. can use similar expertise it has used in similar venture earlier . The co. may encounter difficulties to work in a new country with a different infrastructure, culture, and political/legal environment.

Contract manufacturing
Contract

manufacturing involves having someone else manufacture products while you take on some of the marketing efforts yourself. This saves investment, but again you may be training a competitor.

Joint ventures

Foreign investors may join with local investors to create a joint venture co. in which they share ownership and control. Forming a JV may be necessary as the foreign firm might lack the financial, physical or managerial resources to undertake the venture alone. Example-when Unilever wanted to enter icecream market in China it joined forces with Sumstar to deal with formidable Chinese bureaucracy

Direct Investment
The ultimate form of foreign involvement is direct ownership of foreign based assembly or manufacturing facilities. The foreign co. can buy part or full interest in a local co. or build its own facilities. This can be done if foreign market appears large enough. Example-CPC Internationale

Topic
Segmentation,

Targeting, and Positioning: Building the Right Relationships with the Right Customers

Objectives
Be

able to define the three steps of target marketing: market segmentation, targeting, and market positioning. Understand the major bases for segmenting consumer and business markets.

Definition
Market Segmentation: Dividing a
market into distinct groups with distinct needs, characteristics, or behaviour who might require separate products or marketing mixes.

Need for market segmentation

Marketers

understand that they cannot be all things to all people, all of the time. Buyers and markets are too complex and diverse for one simple marketing formula to adequately address the needs of all.

Segmentation and positioning

Market segmentation Identifies markets with common traits. Market targeting Process of evaluation of the selected segments and then deciding which market segments to operate within. Market positioning Process whereby marketers position the product to occupy a clear and distinctive position relative to other competing products.

Market segmentation
Markets

are comprised of buyers and they differ in wants, resources, locations and buying patterns. Market segmentation is the process that marketers use to divide up the market into smaller segments that can be efficiently addressed.

Segmenting consumer markets

Geographical segmentation-Region (eg. Whole of Europe), Country size (giant, large, medium, small), density (urban, suburban, rural), climate.

Demographic segmentation- (Most popular segmentation) Age, gender, family size, income, occupation(professional, homemaker, businessman), education.

- Psychographic segmentation- Lifestyle (achievers/ strivers), and personality- based (authoritarian/ ambitious/ gregarious) segmentation
- Behavioural segmentation purchase occasion (regular / special), benefit sought (quality, economy, service), usage (light, medium or heavy user) , readiness state (unaware, aware, interested), loyalty status, attitude towards product.

Segmenting business markets

Demographic segmentation -which Industries , company size, location. Operating variables- Technology, usage status (heavy, medium or light users). Purchasing approaches-should we focus on cos. seeking quality, service, or price ? Situational factors- Urgency (should we focus on cos. Wanting fast delivery or not), size of order. Personal characteristics- Buyer-seller similarity (should we focus on clients having same values as us or not), loyalty.

Requirements for effective segmentation

Measurable Size-to have estimate of sales turnover possible from serving the segment. Accessible - Can be reached and served .
Substantially Large and profitable enough to serve. Actionable - Effective programs can be developed to serve the segment.

Targeting
Evaluating

Market Segments

- Segment size and growth and segment structural attractiveness. Level of competition and availability of substitute products. Power of buyers and power of suppliers

Company

objectives and resources

Target marketing strategies

Undifferentiated (mass) marketing Differentiated (segmented) marketing Concentrated (niche) marketing-targeting segments where there are no competitors Micromarketing-tailor made products for individuals. Eg.insurance policies

 Positioning

Positioning: The place the product

occupies in consumers minds relative to competing products. Typically defined by consumers on the basis of important attributes.

Essential criteria to accomplish a good positioning strategy

Features and benefits must be important to the consumer. Must be distinctive from the competition. Must deliver superior quality or service. Difference must be communicable and visible to buyers. Pre-emptive and competitors unable to replicate. Affordable Profitable -------------------------------------------

International marketing-Product decisions

What is a product? Put simply, a product is a bundle of utilities. To be more concise, a product can be defined as a collection of physical, service and symbolic attributes which yield satisfaction or benefits to a user or buyer. A product is a combination of physical attributes say, size and shape, and subjective attributes say image or quality. A customer purchases on both dimensions.

International PLC
Stages Export

strength is evident by innovator country Foreign production starts Foreign production becomes competitive in export market Import competition starts

International Product policy

Product

communications extension Extended product-communications adaptation Product adaptation communications extension Product adaptation-communications adaptation Product invention

Standardization vs adaptation
Customer

orientation Stage of market development Legal considerations Climatic conditions

Other points of discussion

Branding

Labelling
Packaging Warranties

and services