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market is a task of critical importance. It has major implications concerning the firm’s entire marketing mix and the firm’s own control over it. In broad terms, a company has three types of entry possibilities. 1. !. $. Indirect export – sales to domestic intermediaries who resell the prod ct to c stomers overseas. "irect export – sales to a c stomer overseas who may be a reseller or an end# ser. %verseas &an fact rer – either independently or in some form of joint vent re.
CRITERIA FOR SE ECTING MODE OF ENTRY 'he appropriateness of partic lar modes of entry varies both among firms and for any individ al firm across markets and time. In choosing an entry method for a partic lar market a firm sho ld eval ate the following criteria. 1. ! (%&)*+, %-./('I0/S in relation to vol me timescale and segmental coverage. 'h s, for small or short#term vol mes overseas prod ction is probably inappropriate. (%&)*+, SI1/. Small firms are nlikely to possess s fficient reso rces to facilitate prod ction abroad. &%"/ *0*I2*-2I2I',. "ifferent markets re3 ire different modes. India, for example is generally hostile toward foreign prod cers wishing to locate there. &%"/ 56*2I',. It may be that all modes are possible for a partic lar market b t some are of 3 estionable 3 ality. 'h s an absence of s itably 3 alified intermediaries wo ld precl de indirect or direct exporting of say, high technology goods. I+0/S'&/+' 8/56I8/&/+'S. 'hese will be highest for overseas prod ction which may th s be precl ded. /ven so, investment may be re3 ired to finance say overseas intermediaries stocks. %)/8*'I+: (%S'S. 'he rec rring costs of entry m st be eval ated. +otably, the man fact rers’ incremental marketing costs rise in the se3 ence r nning from indirect, thro gh direct exporting to overseas prod ction. *"&I+IS'8*'I0/ "6'I/S. 'hese are costly and inconvenient and they vary across entry modes. 'h s, administrative tasks are far fewer for indirect exporters than for direct exporters. )/8S%++/2 8/56I8/&+'S. 'hese vary across entry modes. 'h s when I& staff are in short s pply it may be better to opt for indirect exporting. />)/8I/+(/ 8/56I8/&/+'S. ?irms become better at I& the more experienced they are at it. 'his arg es against the mode of indirect exporting. 8IS@S. Some risks favo r indirect exporting Afor exampleB political risks of expropriations. %ther risks favo r direct exporting or foreign prod ction Afor exampleB risk of losing to ch with c stomers.
(%+'8%2. (ontrol over the distrib tion channel varies enormo sly by mode of entry. ?or example, overseas prod ction by a wholly owned s bsidiary provides absol te control while indirect exporting gives little or no control. ?irm’s I& orientation whether domestic market extension orientation, m ltidomestic orientation or global orientation.
E!"ORTING /xporting is the easiest and most common means for entering a new foreign market and it is a low risk strategy. &any firms Cdrift’ into nplanned exporting by accepting chance orders. Dowever, systematically planned exporting to selected target markets is also common and it gives rise to several advantages. 1. !. $. 4. 7. It enables firms to develop and test their marketing plans and strategies before risking s bstantial investments in overseas plant. It facilitates small#scale I& It allows firms to engage in I& despite them lacking the know#how and experience to Cgo it alone’. It avoids many types of risk and allows firms to limit operating costs, administrative d ties and personnel needs. )erhaps the principal benefit, however, is that exporters are able to concentrate prod ction in a single location and this facilitates important economies of scale, other cost savings and prod ct 3 ality advantages.
* common b t fallacio s view is that exporting is a low#investment option. It does not, of co rse, re3 ire investment in foreign prod ction. Dowever, effective exporting does re3 ire significant investment in marketing reso rce, in strategy form lation and implementing the marketing mix. ?or example, the initial s ccess of the .apanese entry into the 6S* and other co ntries’ car markets was based on very extensive and expensive research and planning. INDIRECT E!"ORT Eith indirect export the firm’s goods are sold abroad witho t the firm cond cting any partic lar actions for the p rpose thereof. 'he firm’s o tp ts are exported by other organiFations. *ltho gh it is exporting, the company does not behave like a tr e international marketing firm. Indirect export is made possible in fo r man waysG thro gh export ho sesH via a specialist export managerH thro gh 6@ b ying offices of foreign storesH and thro gh complementary exporting.
E!"ORT #O$SES 'hese are firms which facilitate exporting on behalf of the prod cer. 'hey fall into three main gro psG AaB AbB AcB /xporting &erchants – these act as export principals, b ying and selling the goods they export. (onfirming Do ses – also act as principals and their main f nctions to provide credit for foreign c stomers when the prod cer is nwilling to do so. /xport *gents – sell abroad for the prod cer – in his own name or the prod cer’s. 6s ally cover a partic lar gro p of related prod cts Afor exampleB tableware. 8em neration by commission.
Advantages of trading via these three are similar to each other 1. !. 'he prod cer gains the benefit of the merchant’s market knowledge and contracts. De is relieved of the need to finance the export transaction and of the credit risk, export doc mentation, shipping and ins rance. /tc. 'his does not apply tho gh when an export agent is sed. 'he man fact rer does not bear the overhead costs of export marketing. Dence, he does not need to lay o t investment f nds. &any merchants and agents have specialist skills re3 ired for co nter trade, switch trading and so on. In some cases merchants receive preferential treatment from instit tional and organiFational c stomers. In the case of export agents, the man fact rer retains m ch control over the market when the sale is made in his own name.
$. 4. 7. 9.
Disadvantages of exporting via export houses: 1. !. $. 4. :enerally and critically, the prod cer has little or no control over his market Aexcept regarding export agentsB and his prod ct may be dropped whenever the merchant decides. *ny goodwill created in the market is s ally the merchant’s and not the man fact rer’s. 'here are problems in sec ring the merchant’s effort and loyalty vis#I#vis other items in his prod ct line. &erchants and agents are best s ited to short#term arrangements – they tend not to be motivated toward long#term relationships.
SE"CIA IST E!"ORT MANAGERS 'hese firms, known as (ombination /xport &anagers, in the 6S*, offer a f ll export management service. In essence, they become the prod cer’s export department, acting in his name and sing his letterhead. Dis rem neration is normally by way of commission on sales. Advantages of using a specialist export manager are the same as for export merchants plus: 1. !. $. 'he prod cer immediately gains his own export department witho t inc rring the overheads. 'he prod cer retains f ll market control. De can expect a contin ing long#term relationship.
Disadvantages: 1. !. $. -eing independent, the specialist export manager can drop the prod cer at will. 'he prod cer does not b ild his own export experience and this affects his f t re strategy choices. 'he specialist export manager may not have s fficient knowledge of all the prod cer’s target markets.
%$YING OFFICES OF FOREIGN STORES &any of the leading departmental stores in the advanced nations maintain b ying offices in 2ondon. ?or example, the top ten .apanese department stores are so represented in 2ondon as are two of the top fo r :erman ones. In addition, b yers from similar stores aro nd the world reg larly visit -ritain to b y. COM" EMENTARY E!"ORTING %ften called Cpiggy#back exporting’, this occ rs when one prod cer Athe carrierB ses his own established I& channels to market the o tp ts of another prod cer Athe riderB alongside his own. 'he carrier mayG AaB AbB AcB &erely transport the rider’s goods sing his own spare capacity. Sell the carrier’s goods for a commission. - y and sell the rider’s goods.
The carrier’s advantages are: 1 !. Increased profits from f rther spreading overheads. * more attractive prod ct range.
'he rider’s advantage is that he obtains simple, established, &o'()ost an* &o'(risk market entry+
DIRECT E!"ORT In direct exporting, the prod cer himself performs the export task rather than delegating it to others. 'he man fact rer sells directly to c stomers overseas who may be final sers or resellers. "irect exporting is facilitated by sellingH directly to the final serH thro gh agenciesH to distrib tors and stockistsH thro gh branch offices. SA ES TO FINA $SER Dere, the man fact rer c ts o t any kind of intermediary and goes direct to c stomers. 'hese might beG ind strial sersH government or reached by mail order, cons mers. In these cases marketing is m ch the same as in the home market, altho gh there are of co rse the added diffic lties ens ing from foreignness, distance, time, etc. AGENCIES *n overseas export agent is a person or firm hired to facilitate as sales contact between his principal and a c stomer. ?ormally, agents do not take title and their rem neration is normally a commission on sales. Sometimes in practice, however, the term agent is sed loosely and then it incl des distrib tors. Some agents do more than merely arrange sales. Some, for example, hold stocks for the principal or carry o t servicing on his behalf. Advantages of overseas agents include the following: 1. !. $. 4. 7. 'hey provide extensive knowledge and experience of local needs, c stomers and environment. 'heir existing prod ct lines are s ally complementary to the principal’s goods and this helps with market penetration. 'he exporter is involved in little or no investment o tlay. *gents can be a highly effective means of market penetration. 'here is little or no political risk.
There are some disadvantages of hiring agents: 1. !. $. 4. 'here are problems in obtaining the agent’s f ll commitment since he carriers other prod cts too. *gents often want immediate res lts and will not actively promote slow#selling goods even if they do not drop them. &any agents are too small to f lly exploit a major market – many serve only limited geographical segments. If the market grows to a large siFe it is more economic to se a branch office of a s bsidiary d e to the scale economies associated with these.
DISTRI%$TORS AND STOCKISTS "IS'8I-6'%8S are c stomers with preferential rights to b y and resell a range of a firm’s goods in a specific geographical area. "istrib tors then, earn profits, they are not paid commission. 'hey perform the s al distrib tion f nctions and they differ from ordinary wholesalers only in the matter of their geographical excl sivity.
?or laggards entering a foreign market. are large eno gh to s pport man fact re a minim m efficient scale. $. 4. !. many branch offices are opened. COM"ANY %RANC# OFFICE 'his is merely and extension of the firm into the foreign market for the p rpose of cond cting marketing and distrib tion. 7. !. $. and often it is when.S'%(@IS'S are simply distrib tors that receive more favo rable financial rewards for carrying a certain minim m level of stock level of stock. trade nion membership etc. )rod ction costs are lower in some foreign co ntries.. Ehen vol me has reached an efficient level they are less costly than sing a local intermediary. how these can be dismissed. 8isk of AmodestB losses d e to expropriation. $.ERSEAS "ROD$CTION ?irms that are strongly committed to I& are often drawn into overseas man fact re. Investment re3 irements and on#going overheads. %ften there are legal re3 irements concerning the minim m n mber of local staff that m st be employed. 9. 'his is why. "espite the differences in terms of the methods of their rem neration the advantages and disadvantages of distrib tors are very like those associated with overseas agents. or co# operation with a local company. the only way in may be by takeover of. ( stomer Service sho ld improve since intermediaries are notorio sly bad at this. 'ariff and non#tariff import barriers may precl de exploration into target co ntries. !. Some markets. 'his gives rise to some major benefitsG 1. O. Disadvantages of a branch office are: 1. ?irms are sometimes forced to prod ce locally since exporting heavy or b lky goods can be prohibitive in terms of transportation costs. 7. 6 . Sales performance sho ld increase since marketing effort will be foc sed excl sively on the firm’s own prod cts. . 4. partic larly regional markets s ch as +orth *merica. In cases where governments are c stomers their s pplier selection decisions sometimes discriminate against non#local prod cers. Advantages are: 1. 2ocation abroad allows firms to better nderstand c stomer needs. 'he firm retains absol te marketing control 'he firm sho ld ac3 ire more and better market information.
$. ?or example.ERSEAS "ROD$CTION )rod cing overseas does not necessarily re3 ire f ll#scale wholly owned prod ction. 7. !. 4. 'his is only one of several alternative strategies. 8ights to prod ce a patented prod ct. &arketing advice and assistance. 2icensing is a rapid growing phenomenon among firms worldwide.MET#ODS FOR O. 7. 'here is some risk that prod ct 3 ality will deteriorate when the licensee is less conscientio s than the licensor. 'he reven es from licenses are very modest.J of t rnover. ICENSING * licensing agreement is a commercial contract whereby the licensor Athe international marketerB gives something of val e to the licensee Athe national target market firm. It re3 ires no investment and the only costs are those of signing and policing the agreement.B in exchange for certain performances and payments. ?or example. *ltho gh the contract may specify a minim m sales vol me there is some danger that the licensee will not f lly exploit the market. !. components or plant. 9. $. $. Despite the gains of licensing there are some important disadvantages that may even be more powerful.. " e to 1. * major danger is that the licensee may become the licensor’s competitor. It allows entry into markets that wo ld otherwise be closed by say domestic competitiveness. :overnments often impose conditions on the payment of royalties or on the s pply of components. 4. 8ights to se a patented prod ction process. The disadvantages include the following: 1. licensing allows firms to introd ce new prod cts to many co ntries 3 ickly. . It provides all the C s al’ benefits of overseas prod ction concerning transport costs. s ch as that of expropriation. 'he licensor gains access to knowledge of the local environment. Schweppes have granted licenses allowing 6S* firms to man fact re it soft drinks and to market them there nder Schweppes brand name. 'echnical advice and assistance – incl ding the s pply of essential materials. 7. import barriers. Advantages of licensing: 1. It is a common entry mode among small and medi m firms and it is sed by large companies. tariffs or other government policies. !. the former may gain eno gh know#how from the latter as to be able to operate independently. 4. )hillip &orris the 6S* tobacco giant ses licensing agreements with the governments of 1= / ropean co ntries with nationaliFed tobacco ind stries. %wning to the very low investment re3 irements. s ally amo nting to only !J to . It is a 3 ick and easy mode of entry. 'he licensor may provide any of the followingG 1. 8ights to se a trademark. it avoids many I& risks. etc. bank or similar. " ring the license period. 7 . 9. 6npatented man fact ring know#how.
fa)t. having an e3 ity interest in his b siness or by retaining excl sivity of key inp tsH and take action to motivate the licensee. Sometimes s bstantial technical training has to be provided for he man fact rer’s personnel. $. (ommon franchisers in many co ntries incl de. In a franchise arrangement the franchiser s pplies a standard package of goods. 7. especially to government c stomers. +o need to invest in plant overseas. It is only feasible when reliable and capable man fact rers can be identified – which is not always the case. !. * major problem with licensing is the diffic lty of effectively controlling the licensee. 'his type of entry proced re is sed by s ch firms as (olgate. *voidance of risks associated with c rrency. personal involvement and local market knowledge. components or ingredients along with management and marketing services or advice. Dis objectives often conflict with those of the licensor and disagreements are common. $. /ntry into market otherwise closed by import barriers. *st te management of the license agreement is essential for the licensor. *n extra benefit. FRANC#INSING 'his is a type of licensing altho gh franchising does more formally specify what is expected of the franchisee Athe national target market firm. by say.9. 8etention of market control * locally made image which enhances marketing s ccess. expropriation etc. )epsi (ola. however. 'he latter company retains f ll control over marketing and distrib tion while having man fact re done by proxy. 9.re/ 1. Advantages include the following: 1. is that since it involves the franchiser’s s pply of ingredients or components it does provide some leverage for controlling the franchisee’s activities. 'he advantages and disadvantages are largely the same as for licensing. 'he man fact rer may event ally become a rival 5 ality control problems in man fact ring may arise. 8 . !. 'he franchiser s pplies capital. 4. Disa*-antages of Contra)t man. *n additional disadvantage of franchising is that many franchisees are sed for each co ntry and the search for competent candidates is both costly and time cons ming. 'he licensor sho ld cond ct extensive search and apply good selection criteria when choosing licenseesH design contracts that protect both partiesH control the licensee.B. 2ower transport costs and sometimes lower prod ction costs. 4. Doliday Inn. and @ent cky ?ried (hicken. CONTRACT MAN$FACT$RING 'his involves a long#term contract whereby a firm in a foreign co ntry ndertakes to man fact re or assemble a prod ct on behalf of another firm located o tside the co ntry. (ontract man fact re is perhaps best s ited to co ntries where market smallness prohibits plant investment or to firms whose main strengths are in marketing vis#I#vis prod ction. and )rocter and :amble.
?or these reasons firms s ch as I-& are rel ctant to engage in .0 provides local knowledge. "isagreements may arise over the parties’ respective shares in e3 ity. ?irms involved incl de >erox.0. /. Accordingly and for other reasons a JV offers various advantages: 1. /ns re it is the international marketer that retains effective control by the terms of the contract. 3 ickly.0. 9. &inimise its extent by caref l selection of partners. form lation of jointly beneficial contracts. by retaining private ownership of a key inp t.0 re3 ires smaller capital o tlays and is th s especially attractive to smaller or risk# averse firms. +igeria. &assey ?erg son. India. retaining the right to appoint key exec tives and so on.0 facilitates profits on man fact ring which licensing and franchising does not.ni1. pre#arranging for arbitration to resolve any clashes that occ r.0 is an arrangement whereby two firms in different co ntries join forces for man fact ring financial and marketing p rposes and where each has a share in the e3 ity and in the management of b siness. . It can provide for close control over marketing and other operations. 7. /. Dowever. The potential for conflict re uires firms to either: 1. .ENT$RES * .0OINT . 4.0 since their own co ntries get more profit and technological gains from the latter. .:.0 red ces the risk of expropriation since a local firm is involved. 2icensing. !. AbB 'hey fre3 ently operate in a co ntry or market in which none of the participants is c rrently active.0’s are very common and fast becoming more so.. .e characteristicsG AaB 'hey typically involve a large n mber of participants. the ties these involve are less strong than formal . (onsortia are developed for pooling financial and managerial reso rces and to lessen risks.0 permits coverage of a larger spread of co ntries since each one re3 ires less investment. <.apan.0’s. . Ehen f nds are limited . Some governments prohibit independent operation or enco rage .0’s is that the different parties often have a conflict of interest. I(I and )hilips. JV’s are usually evaluated as an alternative to a fully owned manufacturing set-up abroad. 'he major disadvantage of . . . franchising and contract man fact re are loose forms of . ?acilitates good feedback. profits and effort or over their ideas concerning marketing strategy. !. CONSORTIA 'hese are similar to joint vent res b t they have t'o . (l b &editeranee pays m ch attention to this factor.:. $. 9 .
distrib tion set# p and so on. (omplete ownership re3 ires s bstantial investment f nding and this might precl de some firms. !. market knowledge and all the other trappings of a Cgoing concern’.ERSEAS "ROD$CTION (2#O 445 foreign o'ners6i7 or ( FDI Y O2NED S$%SIDIARIES) (3 'his involves the f llest commitment to market or markets. b t also beca se e3 ity is not shared. 'he firm is able to operate a completely integrated and synergistic international system. !.0’s. 7.2#O Y O2NED O. 10 .0’s. *c3 isition is a mode of rapid entry and offers the benefits of an existing management team. 9. 4. Despite these strong benefits there are also major disadvantages: 1. 1==J ownership involves bigger conse3 ences in the face of expropriation. Advantages of wholly-owned overseas manufacture are several: 1. /ntry by creating new capacity is beneficial if there are no likely candidates to take#over or if ac3 isition is prohibited by the government. $. 'he firm does not have to share the profit with a partner of any kind 'he firm has complete control over all decisions and so none of the efficiency drains arising in inter#firm conflict as with . &ore positively. 'he firm gains close contact with the market. high expectations and motivations. ?or example. this entry mode allows for the se of the newest prod ction technology and it often generates among staff the feelings of optimism. )artly d e to $. 'heir reasoning is that host co ntry profits andKor development is not helped s fficiently when it merely profits andKor development is not helped s fficiently when it merely provides materials andKor nskilled labo r. $. Some overseas governments disco rage 1==J foreign ownership and sometimes they prohibit it. 'hese were major benefits for "ats n when they created new capacity in S nderland and 'ennessee. It can be achieved thro gh the creation of capacityAsetting p shopB or by ac3 isition of an existing firm. 'here are none of the problems of inter#firms mis#comm nication that arise in . 7. 'he firm gains a more complete Cfeel’ for I& and more varied experience. 'here may be an ins fficient s pply of s itable managers either in the target co ntry or to be posted abroad from the home co ntry. 'his mode foregoes the benefits of a partner’s market knowledge. license agreements etc. :eneral &otors enjoyed these gains when entering the 6@ market thro gh the ac3 isition of 0a xhall &otors. 4.
they had to gain it by entering into t rnkey projects with foreign firms that had the technology.rnkey 7ro8e)ts/ AaB * way of earning great economic ret rns from the firm’s know#how. In a sense it is j st a very specialiFed kind of exporting. ?or example. 'his can be a disadvantage if that co ntry s bse3 ently proves to be a major market for the o tp t of the process that has been exported. AbB If the firm’s technology is a so rce of competitive advantage. AbB 6sef l in cases where ?"I is limited by host government reg lations. the governments of some oil#rich co ntries have set o t to b ild their own petrole m refining ind stries. *t completion of the contract. and as a step toward that goal. pharmace tical. then selling this technology thro gh a t rnkey project is also selling competitive advantage to potential and act al competitors. 'his is act ally a means of exporting process technology to other co ntries. incl ding the training of operating personnel. A*-antages of t. risk of nationaliFation or economic collapse.g. AdB * t rnkey strategy. the contractor agrees to handle all details of the project for a foreign client. petrole m refining and metal refining ind stries. all of which se complex. expensive prod ction#process technologies. Since many of these co ntries lacked petrole m# refining technology. 11 . the foreign client is handed the LkeyM to a plant that is ready for f ll operation –hence the term Lt rnkeyM.rnkey/ AaB ?irm that enters into a t rnkey project with a foreign enterprise may inadvertently create a competitor. AcB 'he firm that enters into a t rnkey deal will have no long#tern interest in the foreign co ntry. ' rnkey projects are common the chemical.T$RNKEY "RO0ECTS In a t rnkey project. %ne way aro nd this is to take a minority e3 ity interest in the operation set p by the t rnkey project. as opposed to a more conventional type of ?"I. enables a firm to operate in a co ntry where the political and economic risks are high Ae. Disa*-antages of T. AcB S ch t rnkey deals are attractive to the selling firm beca se they wo ld probably have no other way to earn a ret rn on their val able know#how in that co ntry. have restricted ?"I in their oil and refining sector.
*ccelerates prod ct introd ctions demanded by shorter )2(s. Disa*-antagesG • • (onflict .9. A*-antages of SIAs for a firm/ • • • • • • • *c3 ires needed market share. )rod ces economies of scale. /xampleG * co#operative arrangement between -oeing and a consorti m of . 'hat reaching the objective alone wo ld be too costly. +ot all SI*s are s ccessf l.apanese firms to prod ce the .STRATEGIC INTERNATIONA A IANCES (SIA) *n SI* is a b siness relationship established by two or more companiesAact al or potential competitorsB to cooperate o t of m t al need to share risk in achieving a common objective. Some fail.o can give away more than yo receive. *c3 ires technology 6tilises excess man fact ring capacity 8ed ces new market risk and entry costs. franchising.Aeasy foreign entry methodB. &ajor reason for fail re can be lack of perceived benefits to one or more of the partners. take too m ch time and be too risky. 9 9 9 9 12 . * strategic international alliance impliesG iB iiB iiiB ivB (ommon objective 'hat one partner’s weaknesses will be offset by the other’s strength. %vercomes legal and trade barriers. 'hat there are synergistic benefits to be had. wide#bodied aircraft. SIAs can be joint vent res. %thers are disbanded after reaching their goals. licensing.
It comprises the feat res. 3 ality. se or cons mption that might satisfy a want or need. the Ccore’ prod ct varies between 'hird Eorld co ntries and ind strial developed co ntries. colo r etc. sport.g.gmente* 7ro*. services. e.e. perceived benefits which may vary between co ntries. 'hey may offerG rep tationH deliveryH 13 . AaB AbB &arketers m st always view a prod ct in terms of its ability to satisfy needs or solve problems. people. places."ROD$CT DECISIONS IN INTERNATIONA MARKETS Ehat is a prod ctN 1. organiFations.! Augmented Formal Core Core 7ro*. A.$ 'he Ccore prod ct’ is the need which is being satisfied or the problem which is being solved by the prod ct.4 'his is what the market recogniFes as the tangible offer.)t 1. ideas.7 AaB AbB 'hese are the additional services and benefits which Cs rro nd’ a prod ct.)t 1. siFe. It incl des physical objects. In marketing terms a prod ct is the total tility or satisfaction that a b yer receives as a res lt of a p rchase. In the case of a bicycleG in the 'hird world – sed as a means of transportH in the developed world – sed for recreation.1 * prod ct is anything that can be offered to a market for attention. packaging and brand name.)t 1. Forma& 7ro*. may have to be sed from co ntry to co ntry. ac3 isition. 1. i. 'his is a vital concept in international marketing. 0ariations in 3 ality. It exists at three levels. *gain this may have important implications for international marketing. styling.
'his fail re was d e to the fact that the prod ct was at a different stage in its prod ct life cycle in ?rance and the 6nited States. 'his gives s fo r possible prod ct#comm nication strategies Asee next chapter for a more detailed analysis of comm nication decisionB.! 'he 3 estion of whether or not to adapt the prod ct is often considered in conj nction with the promotionKcomm nication iss e.1 IM "ROD$CT STRATEGIES/ STANDARDISATION . 'ake bicycles for exampleG 14 . #tandardised product$adapted communication !. ( stomers may val e reliable delivery. /liminate oldKweak prod cts.$ !. develop new prod cts for a specific market or gro p of markets.7 'his strategy is sed where a prod ct meets different needs in different co ntries. AaB AbB AcB AdB Sell prod cts nmodifiedKstandardiFe. !roduct standarised "ommunications #tandardised "ommunications adapted Standardisation worldwide of both prod ct and comm nication *daptation of comm nications only !roduct adapted *daptation of prod ct only -oth prod ct and comm nications adapted.4 'his is the obvio s strategy for the occasional exporter b t also some major international companies seeking economies of scale.AcB AdB AeB AfB AgB before and after sales servicesH installation and maintenanceH g aranteeH financeH credit *ccording to many marketers Afor example 2evitt. (oca (ola and )epsi (o have been s ccessf l with this strategy.S ADA"TATION 'his topic was introd ced in (hapter 1. Standardisation vs adaptation !. :+ !. So it is vital for the international marketer to be aware of needs and expectations and the extent to which they vary between different co ntries when making prod ct decisions. credit or after sales service more than 3 ality or price. 'he first two can be considered together. #tandardised product and communications !. 'here are fo r areas whose decision m st be made. &odify or adapt prod cts where necessary.B it is at this level of the prod ct that the Cnew’ competition is taking place. )olaroid also failed in ?rance with their instant pict re camera beca se of fail re to modify their prod ct and comm nications activities from the s ccessf l 6S* version.
AaB AbB )etrol companies adapt their f el to climatic conditions b t standardiFe their advertising and other promotional activities. (ar man fact rers need different tires and temperat re control systems in Sa di *rabia than they do in the 6@. 15 .9 'his strategy is relevant where the prod ct satisfies the same need Aor solves the same problemB in many markets b t conditions of se vary. ?or example. AaB AbB 6S prod ct – can be made or packaged in plastic and be disposable.AaB AbB AcB ?ranceK-elgi m 6@ 'hird Eorld – sport#recreation # recreation # means of transport Adaptation product$standardi%ed communication !.. Adaptation of both product and communications !. take these two stereotypes. )romotional activities m st reflect these prod cts attrib tes. :erman prod ct – m st be made or packaged in metal and m st be d rable and repairable beca se of :erman concern for environmental iss es. 'his strategy is the most costly one b t may be necessary to exploit a market f lly.
e. legal constrains. It involves decisions abo t facilities. adaptation is the major 3 estion.. handling facilities. time spent in distrib tion chain or sage rate vary. a<e&&ing $. AaB AbB )rotection.1 OT#ER AS"ECTS OF "ROD$CT DECISIONS %ther aspects of the prod ct decision principally concern packaging.raging 7ro*.g. 'he service problem is a complex one of the exporter. rep tationKrecognition varies from market to market.+ $. $.7 'his is an increasingly important part of the a gmented prod ct Apartic larly in the developed economiesB and is of great importance in international marketing.$ * problem might be the different siFe re3 ired in different co ntries. colo r preference.e. ?or I&. labeling and after sales service. )romotion.1 AaB /conomies of scale inG AiB AiiB AiiiB AivB AbB AcB AdB prod ctionH marketingKcomm nicationsH research and developmentH stock holding.S ADA"TATION FACTORS $. this iss es s ally concerns listing contents or se of appropriate lang age or lang ages. "a)kaging $. STANDARDISATION . standardiFation vs. denim jeansB. /asier management and control. cost of packaging. Domogeneity of markets. 'here are two aspects of packaging.4 2abelling is often an example of mandatory modification re3 ired by government reg lations. literacy. personnel and training. If the availability or 3 ality of servicing is do btf l. )ackaging may have to be adaptedKmodified if climates.g. cons mers may choose to b y domestic prod cts.)ts stan*ar*i>ation 4. i. ( lt ral insensitivity. )ackaging will be adapted if package siFe. ind strial and agric lt ral prod cts.9 =+ Fa)tors en)o. Ser-i)ing $.! *gain. familiarity. in other words world markets available witho t adaptation Ae. Sho ld they se distrib tors which wo ld involve training foreign staff and sending o t D5 personnel to monitor or sho ld they operate direct servicing policy in which case they wo ld fly o t maintenance staff when re3 iredN 'he appropriate decision varies with the technical sophistication and val e of the prod ct. 16 .
It res lts from differing c stomer needs. preferences and tastes. intermediary and c stomer feedback etc. Dis)retionary mo*ifi)ation AaB "iscretionary modification is called for only to make the prod ct more appealing in different markets. 6sing car man fact re as an example it may concernG &a' (egal re uirements such as: AiB AiiB &b' specified exha st emission levels Ahealth and safety lawB local components Aeconomic lawBH Technical re uirements such as: AiB AiiB modification of heatingKcooling systems for different climatesH engine modification to se locally available f els. Standards of maintenanceKrepair facilities. =+.g. Simpler. more rob st versions may be needed. the incremental costs of adaptation may exceed the incremental sales val e. ?actors enco raging adaptationKmodification =+: Man*atory mo*ifi)ation &andatory prod ct modification normally involves either adaptation to comply with government re3 irements or navoidable technical changes. 2evels of c stomer p rchasing power. for example standardiFation is expected in certain prod ctsG AiB AiiB camera filmH hotel chains AfB AgB Ehere Cmade in’ image is important to a prod ct’s perceived val e Ae. /ase of se may be a cr cial factor in decision#making. 2evels of ed cation and technical sophistication.AeB (ons mer mobility for travelersKto rists. AbB AcB AdB 17 . 2ow incomes may make a cheap version of the prod ct more attractive in some less developed economies. 'hese differences become apparent from market research and analysis. Sheffield for stainless steelB. ?or a firm selling a small proportion of its o tp t overseas. ?rance for perf me.
Screening. 'he new prod ct development process sho ld be implemented for each co ntry. and who prod ce a range of prod cts. b siness analysis.1 NE2 "ROD$CT DE. Strategic models allow managers to identify those prod cts Aor strategic b siness nitsB which sho ld be strengthened. harvested or divested. i. etc. *n international division. *s we have seen.1 "ROD$CT E IMINATION ?or companies that have been involved in international marketing for some time. responsive to international rather than p rely domestic marketing concerns. sales staff etc.ERSEAS MARKETS Sometimes international marketing managers may need to develop new prod cts for a specific overseas market or gro p of markets. maintained. intermediaries. research and development. 9. #uccess of new products 7. *gain the principles and concepts are the same as in domestic marketing and need not be disc ssed here in depth. international market research is more complex than domestic market research. is far more likely to introd ce new prod cts overseas s ccessf lly A"avidson and DarriganB 'here sho ld be a commitment to market research. AaB It is important to have an appropriate organiFational str ct re. test marketing. So rces of idea generation sho ld be as wide as possibleG c stomers. AbB AcB AdB @+ 9.?+ 7. analysis of their prod ct portfolio is vital. *nalytical models s ch as the -oston (ons lting :ro p’s growth#share matrix or the :eneral /lectric approach are sef l in this context. 'here is no need to analyse new prod ct development in depth here since the new prod ct development process is the same for international marketing as for domestic marketingG AaB AbB AcB AdB AeB AfB AgB idea generationH idea screeningH concept testingH b siness analysisH prod ct development and testingH test marketingH commercialiFation.! 18 .E O"MENT FOR O.! 'he s ccess of new prod cts in an international environment depends on a n mber of factors. 'his analysis will need to be ndertaken in all markets in which the company is operating since a Ccash cow’ in one co ntry may be a Cdog’ in another. competitors.e.
short prod ction r ns become increasingly expensiveH an excessive amo nt of management and sales force time is sed in trying to extend the life cycle of the prod ctH they may detrimentally affect the image and rep tation of the companyH they may mean that not eno gh reso rces can be allocated to the development of new prod cts.igh 5 estion marks Strengthen or divest C"ogs’ "ivest (ow Re&ati-e market s6are AbB :eneral /lectric approach (ompetitive position -odel attractivenes s . with a high opport nity cost in that the reso rces sed to prod ce them and partic larly to market them co ld be m ch more profitably sed elsewhere Ain managing prod cts regarded as stars or 3 estion marksB.ild selectively 2imited expansion or harvest "ivest 9. do not manage obsolete and marginal prod cts.igh -edium (ow #trong )rotect position .)igure *. with little or no contrib tion to profits.ild selectively )rotect and refoc s -edium Invest to b ild SelectivelyK manage for earnings &anage for earnings . 'hey are kept in the prod ct range. 0ther problems associated with marginal products are that: AaB AbB AcB AdB as sales fall. in both domestic and international markets. 19 .ea/ .+ AaB &arket :rowth rate -oston cons lting gro p’s growth#share matrix Digh CStars’ Strengthen 2ow C(ash cows’ &aintain or harvest .$ &any organiFations.
4 /limination AdivestmentB sho ld be part of a proced re for prod ct portfolio analysis. this type of strategy is far less feasible. pass thro gh some.)t &ife )y)&e an* t6e in*i-i*.9 A+ . however. the m ltinational company’s range of alternatives to prod ct elimination for a marginal prod ct is greater than for an exporter. all these factors become m ch more complex for the m ltinational company with overseas operations than with the mere exporter. altho gh not entirely impossible. 'he revol tion in comm nications among co ntries d ring recent years has narrowed the time gap between when sat ration occ rs in the home market and 20 . "ROD$CT IFE CYC E AND INTERNATIONA MARKETING MI! DECISIONS &any marketing mistakes have been made beca se firms have failed to take into acco nt the fat that in different co ntries a prod ct may be at different stages in its prod ct life cycle. prices. * m ltinational company can export or license or arrange for contract man fact ring as an alternative to direct man fact ring abroad. nder a n mber of different market conditions. marketing comm nications and channels of distrib tion need to be adapted as a prod ct Cages’ d ring its life cycle.! is a presentation of the generaliFed prod ct life cycle model. sales and competitive conditions differ in the vario s stages of the life cycle and that these differences have major implications for marketing strategy. It post lates that prod cts are born. It is ass med that st dents are familiar with the prod ct life cycle. 'he important conse3 ences of the concept are that ind stry. its implications and appropriate strategies in the domestic context..1 B+ B+C T#E "ROD$CT IFE CYC E IN INTERNATIONA MARKETING Mi)ro ana&ysisD 7ro*. 'he m ltinational company may be prod cing the prod ct nder consideration in a n mber of co ntries. ?irms were simply able to classify markets according to their economic development and la nch declining prod cts in rapid s ccession into co ntries with progressively less market development. ?actors to be taken into consideration d ring this review wo ld incl deG AaB AbB AcB AdB AeB 9. of vario s stages and that typically they ltimately die."ro*.a& firm 'he concept of the prod ct life cycle is well known among marketing scholars and practitioners.$ 'his approach was very convenient. ?ig re 7. Dowever. 'he marketing mix programmed for a new prod ct sho ld be f ndamentally different from the mix programme for a mat re prod ct. or all. where for each co ntry a periodic review of prod ct range is ndertaken. +owadays.7 c rrent profitabilityH effects of elimination on the sale of other AcomplementaryB prod ctsH after sales service implicationsH alternative prod ct opport nities in each co ntryH the effect on salesKprofits of prod ct life extension K rej venation.)tion e&imination 9. showing the fo r C s al’ stages of sales growth. &arketing principles tell s that prod cts. <. 9.
4 'he new sit ation is shown below. other developed co ntries shift from being importers of the prod ct to being self#s fficient. 'he shifts referred to correspond to the three stages in the prod ce life cycleG AaB AbB AcB introd ctionH growth and mat rityH and decline. *s a res lt of these developments. to exporters of it. less developed co ntries.ntry <.the last overseas market entered. "ro*.. with a view to implementing a global introd ction. international marketing m st consider many markets sim ltaneo sly.9 'he International 'rade )rod ct 2ife (ycle AI')2(B is sed in developing long#term prod ct strategy. <.7 'his is necessary to ens re that the prod ct is la nched in all potential markets before rivals have time to pre#empt the firm and to ens re that introd ction everywhere coincides with the most appropriate demand conditions. 8. (orresponding to these shifts. as do event ally.)t &ife )y)&e an* t6e marketE)o. mass cons mption co ntriesG AaB AbB AcB <. It post lates that many prod cts pass thro gh a cycle d ring which high income. are initially exportersH s bse3 ently lose their export marketsH ltimately become importers of the prod ct. Dence. 21 . the total d ration of the profit life cycle pattern is exactly the same for home sales as for someKmostKall overseas markets.
'hen. when domestic performance declined.! 'he prod ct life cycle is relevant to international marketing management. ?ig re 7. 'raditionally many firms have tended only to operate at home as long as performance there was satisfactory. they tried to close the gap by exporting. 22 .$ ill strate the gap between these extremes.<.t this is possible only if there are different prod ct life cycle patterns in different co ntries A?ig re 7. in the growth stage in co ntry >. while the prod ct is not known by c stomers in co ntry 1. .!B here the prod ct is in the decline stage in the home market. in the introd ction stage in co ntry .
DeinF Aoriginally CDeinF 7. AbB 23 .$ 'he advantages of branding incl de the followingG AaB AbB AcB AdB AeB AfB AgB AhB AiB O. ?ilofax.'o brand or not to brandN O. b t not concrete slabs.g. other associated prod cts can be introd ced. -old. (ellophane. 'ide. )rocter and :ambleB. however. 6ltrabrite is marketed for its cosmetic 3 alities. I' helps with market segmentation. Donda lawn mowersB. It is not so important if the company name is not sed Ae. Doover. "isplay space is more easily obtained and point#of#sale promotions are more practicable. 'his is partic larly important if global branding is so ghtH and whose attrib tes can be eval ated by cons mers. O. th s contrib ting to self#selection and improving c stomer loyalty. -randing is not relevant to all prod cts.g. e. >erox. @leenex.g. e. who even have different brand names within the same prod ct line.B It helps b ild a strong and positive corporate image. Strand cigarettesB does not adversely affect the firm’s other prod cts. whisky can be branded b t not coal. In many c lt res branding is preferred.9 'here are fo r choices of brand. DeinFB. carry its own dangers. *spirin.7 'he most s ccessf l examples of worldwide branding occ r where the brand has become synonymo s with the generic prod ct. 'his has the advantage of enabling the global organiFation to introd ce new prod cts 3 ickly and s ccessf lly. -lank family brand name for all prod cts. @elloggs. -randing is a way of obtaining legal protection for prod ct feat res. If branding is s ccessf l. Ty7e of <ran* O.g. A'ake toothpaste for exampleG (rest is marketed to a health conscio s segment. varieties’B. especially if the brand name sed is the company name Ae. AaB Individ al brand nameG 'his is the option chosen by )rocter and :amble for example. partic larly in the distrib tion channel. Sellotape. 'he main advantage of individ al prod ct branding is that an ns ccessf l brand Ae.g. *lso the cost of introd cing the new prod ct in terms of name research and awareness advertising will be red ced Ae. 'h s chocolate bars can be branded. 'his can event ally. only thoseG AaB AbB that can achieve mass sales beca se of the high cost of branding and the s bse3 ent advertising. Doover. -randing makes it easier to link advertising to other marketing comm nications programmes. nor the firm’s rep tation generally.g. Ehen the brand name has been adopted as the description of the generic prod ct As ch as 'hermos for a vac m flaskB the man fact rer of the brand can be find it diffic lt to convey the specific prod ct advantages of the brand.4 -randing facilitates memory recall. 'he need for expensive personal sellingKpers asion may be red ced.
24 . e.g. . 'he 6S based company Sears. @elloggPs – (orn ?lakes. e. C-ody &ist’ when translated into :erman means Cman re’R Eorldwide research s ggests that the beneficial 3 alities of a brand name are that they sho ldG AaB AbB AcB AdB AeB AfB s ggest benefits. It sho ld not be a cas al aftertho ght. both in prod ction and promotion. @odakH be meaningf l. 8ice (rispies etc.g.))ess )riteria for <ran*ing O. G&o<a& <ran* *e)isions O.< ?or the international company marketing prod cts which can be branded are two f rther policy decisions to be made. Slimline tonicH s ggest 3 alities s ch as action or colo r. *s in AbB above it allows new Cnames’ to be introd ced 3 ickly and relatively cheaply. AdB 'he company trade name combined with an individ al prod ct name. Ae.g.g. research fo nd that there was no recogniFed Spanish translation for dental tartar. recogniFe and remember Ai.g.t whether a global brand is the best policy or even possible depends on a n mber of factors. -randing sho ld be a central and strategic part of both prod ct and promotional Qplanning. e. 'hese areG AaB AbB O. 'his is obvio sly the option for the global organiFation with Cinconsistent’ prod ct lines where the family brand name above is not appropriate. /.g Shake Cn 0acBH be easy to prono nce.AcB Separate family names for different prod ct divisions e. which address the two basic policy decisions above. S. see C-ody &ist’ aboveBH be distinctive.O the problem of deciding if and how to protect the company’s brands Aand associated trademarksBH and whether there sho ld be one global brand or many different national brands for a given prod ct. short and p nchyBH be acceptable in all markets both ling istically and c lt rally Ae.B.e. * similar word implied Csorrow’. ?or international companies name research can avoid possible fa x pas beca se of c lt ral and lang age differences. 'he major arg ment in favo r of a single global brand is the economies of scale that it prod ces. 'he brand name was s ccessf lly changed to Lcrest *nti#Sorro’. and women’s clothing nder the @errybrook brand. for instance where the brand name has already been registered in a foreign co ntry. 6ltrabrite toothpaste. Ehen )rocter and :amble wished to la nch C(rest 'artar (ontrol’ into So th *merican co ntries.g.t within each Cfamily’ the advantages identified in AbB still apply. sells electrical appliances nder the name @enmore. ega& )onsi*erations for <ran*ing O. . It therefore re3 ires research in all the markets in which the brand is planned to be marketed. 'his option both legitimiFes Abeca se of the company nameB and individ alises Athe individ al prod ct nameB..1= AaB 2egal constraints may limit the possibilities for a global brand.
e. for example &axwell Do se is &axwell @affee in :ermany. Sho ld the m ltinational company keep the name it has ac3 iredN AcB "RICING DECISION IN INTERNATIONA MARKETING C+ 1. Eorse still is the problem of piracy where a well known brand name is co nterfeited. and denim jeans. a gmented prod ct feat res. yet its importance can often be overstated. 'he major brand is more likely to be branded globally than secondary brands.1! &any other infl ences affect the global branding decision. e. . It is illegal in most parts of the parts of the world b t in many co ntries there is little if any enforcement of the law. ?or many prod cts. Ehere price for example.t sometimes a minor spelling change is all that is needed. )ricing is the only mix decision that prod ces reven eH the other elements involve costs.11 /ven if a firm has no legal diffic lties with branding globally.g nprono nceable names.B. with prod cts s ch as cigarettes A6S*B. partic larly d ring times of economic recession. C. then it may not be worth the heavy expendit re needed to establish and maintain a global brand in each co ntry G a series of national brands may be more effective. prod ct 3 ality. there may be c lt ral problems. is a more important factor. 'here are many examples of imitation in international branding. 'here are many examples of problems in global branding.&t. 'he problem of how to brand a prod ct arising from ac3 isition or joint vent re. A2evis is one of the most pirated brand names.1 T#E RO E OF "RICING 'he principles involved in making decisions on price are the same for both domestic and international marketing. incl dingG AaB AbB "ifferences between the firm’s major brand and its secondary brands. s ch as Erigley Speermint in :ermany. 1. 'hey will be briefly disc ssed here with partic lar reference to their application to the international context before covering in detail the partic lar concerns that marketers have regarding I& pricing. 2egal in ?rance and &onkey in Spain. names with other meanings A ndesirable or even obsceneB.g. ?or many prod cts it is the major decision determinant. 'he importance of brand to the prod ct sale. b t internationally is hard to achieve beca seG AiB AiiB in some co ntries registration is diffic ltH brand imitation and piracy are rife in certain parts of the world. other mix aspects are more important.AbB )rotection of the brand name will often be needed.ra& as7e)ts of <ran*ing O. %ther marketing considerations O.! 25 .
A""ROAC#ES TO "RICING ?irms or strategic b siness nits AS-6sB within firms can be classified with regard to pricing policies according to the strongest infl ence on the pricing decision. 1.7 *s a response to price change by competitors. as a response toG AiB AiiB AiiiB AivB AvB AviB AcB AdB costs increasesH a decision to sell as a loss leaderH a sales promotionH a change in the prod ct life cycle stageH a change in disco nt policyH a decision to reposition the prod ce. total cost is the basis for pricing with market demand having little or no effect. ind strial n ts. In the international context the need for flexibility in pricing arises beca se different conditions may exist in different markets and firms may adopt different marketing objectives ASee Section $ belowB.$ 26 . Dowever. bolts and screwsB. !. research tends to s ggest that too many firms adopt cost based pricing for all their prod cts and in all their markets when other approaches wo ld be more effective in achieving their objectives. Ehen the company wants to decide on a price policy for an entire prod ct line.1. :+ !. In International marketing this means a ret rn to the Cstandardisation vs adaptation’ iss e. Ae.4 )rice setting is not a Conce and for all C decision.$. Ehen the company wants to initiate a price change. 1. both at a formal and a gmented level. even in ind strial prod ct markets demand intensities can vary between co ntries.g. (ommon mistakes incl deG AaB AbB AcB AdB pricing is too cost orientated Asee belowBH pricing is not revised often eno gh to reflect changing market conditionsH pricing is decided in isolation rather than as part of an integrated marketing planH and pricing is not flexible or varied eno gh to meet the differing re3 irements of the different market segments Aor co ntriesB. AaB AbB Ehen a new prod ct is la nched. ?or example. 'his is a sensible policy in markets where price is the only or more important factor in the p rchase decisions and where there is little differentiation among prod ct offerings. S ccessf l international marketing involves an analysis of the extent to which prices sho ld be adapted to meet the different environmental and competitive sit ations in the company’s markets.! Dere.1 Cost <ase* 7ri)ing !. ?lexible pricing is necessary to cover the following sit ations Asee -))’s (I& st dy text for &arketing )lanning and (ontrolB. which gives opport nities for price differentiation. 'he key to s ccessf l domestic pricing is flexibility. &any companies do not handle pricing well.
Com7etition <ase* 7ri)ing !.1 * f ll analysis of this model can be fo nd in many textbooks concerned with marketing principles. 'he priceK3 ality diagram below ill strates the competitive price strategies open to an international firm.. Ehere a firm can base its price levels in relation to its competitors in order to achieve certain objectives the price charged m st be consistent with those objectives. 'his is the tr e marketing based approach and p ts c stomers’ needs and preferences at the heart of the pricing decision.. )rice setting is flexible to meet changing marketing environments. or even within the same segment over time. )enetration pricing strategy 7. 'hese demand levels may vary from one co ntry to another.4 'his enables marketers to set prices according to demand conditions Ai.7 AbB ?ig re . S per bargain strategy 9. the c stomer’s ability and willingness to payB. -argain pricing strategy O. 27 . within the same co ntry among different segments. there is no pricing decision to make. 8elative price .Deman* <ase* 7ri)ing !.9 'here are two aspects of competition based pricing relevant to the international context. Dere c rrent world market prices are known to c stomers and any change is established as a res lt of interaction among a large n mber of b yers and sellers. (heap goods strategy !.e.igh 1. in these markets. Dit S r n pricing strategy -edium !.igh 8elative )rod ct 5 ality -edium (ow . %ver pricing strategy . "emand based prices are most prevalent in branded cons mer goods b t are increasingly possible in many ind strial goods markets. Shoddy goods pricing strategy (ow $. 'h s. *verage pricing strategy <. 'his is the case with commodity prices s ch as those for tea and coffee. AaB Ehere there is almost perfect competition individ al s ppliers of a prod ct have no control over the price they charge. )remi m pricing strategy 4.
. * company may have different objectives in different markets and th s need to adopt different pricing policies. in one market early cash recovery may be the objective leading to premi m pricing in a small niche market.1 T#E FACTS INF $ENCING INTERNATIONA MARKETING "RICING DECISIONS )ricing is affected both by a company’s own objectives and a variety of external factors. 'hese are as followsG AiB AiiB AiiiB AivB ?inancial &arketing (ompetitive )rod ct differentiation # cash generation. . AbB 2evel of demand. AaB 'he company’s marketing pricing objectives. ?or example. stage in the prod ct life cycle and c lt ral attit des. naware that they co ld obtain the same 3 ality at a lower price or a higher 3 ality at the same price. Asee marginal cost pricing is disc ssed in section 7 o this chapterB AbB * firm might adopt Strategy O Acheap goods strategyB in a less developed co ntry beca se of low disposable income levels while prod cing a better 3 ality prod ct at a higher price in a market where disposable incomes are higher AStrategies 7 or 1B AcB *ny of strategies 4. s ggesting a more penetrative pricing strategy. Selling shoddy goods deval es the brand name. a cheap goods strategy AOB might be sed. 8elatively low prices wo ld be s itable in the following circ mstancesG AiB AiiB in markets of low economic developmentH in the mat rityKsat ration stags of the prod ce life cycleH and 28 . 'his is infl enced by the market’s state of economic development. or < Aover pricing. Some examples of the model’s application in the international context wo ld be as follows. larger market the objective might be longer term market share. and will disco rage repeat p rchases. .+ $. ret rn on investment # maintainKimprove market share # skimKpenetrate depending on stage in prod ct life cycle # prevent new entry # follow competition # market stabiliFation Atacit agreementsB – high price aids perception of prod ct differences..!. and also on commercial ones. In another. profit. while in another.e. more knowledgeable market. 'his self#denying ordnance can be j stified on ethical gro nds. and < sho ld be avoided by professional marketers. hit and r n pricing or shoddy goods pricingB might be adopted in markets where c stomers are relatively ignorant. 'he principal ones are as follows. i. AaB * firm might adopt Strategy $ Aat least in the short termB in one co ntry in order to penetrate a diffic lt competitive market while adopting Strategy 1 in another where it already has a good rep tation and fewer real competitors. @otler states that strategies 4.
if any.AiiiB AcB AdB AeB AfB AgB =+ 4. market share. mar/et factors give s pricing discretionN A?or example. degree of knowledgeNB AivB Ehat. both domestic and international.1 where the prod ct is perceived as a basic one Ain that it satisfies physiological needs in &aslow’s hierarchyB. if any. market segmentationNB AiiiB Ehat. attit des concerning exporting. /xport pricing is made more complex byG AaB AbB AcB AdB AeB AfB AgB greater diffic lties of ac3 iring reliable market informationH problems in reacting to fre3 ent changes in demand in m ltiple marketsH greater complexities in acc rately allocating costsH problems of responding to exchange rate fl ct ationsH additional diffic lties in deciding on payment termsH barter trading Aor co ntertradeB which may sometimes be an nfamiliar practiceH and other complications. )ricing in foreign c rrency. prod ct differentiation. n mber and siFe of c stomers. if any. s ch as legal and c lt ral factors. E!"ORT "RICING /xport pricing involves all the complexities of the domestic pricing decision pl s some major additional complications. export pricing is both more challenging and more risky. cross elasticity.re 4. objectivesNB AvB %verall.! *s in any other pricing exercise. (osts :overnment restrictions and controls. loyalty. are we a Cprice taker’ or a Cprice maker’N 29 . ?or sales overseas price determination m st incorporate additional considerations in relation to individ al markets. EF7ort 7ri)ing 7ro)e*. * thoro gh pricing proced re developed by &onroe is shown in 'able 1 on the next page. they are incomplete in the partic lar context of export pricing. &a' !ricing discretion AiB Ehat. 'he intensity of competition. company factors give s pricing discretionN A?or example. dependence on exports. (onse3 ently. in this partic lar market. * comprehensive set of export criteria are set o t below. export pricing sho ld be based on an integrative approach. 'he n mber and type of intermediaries in the distrib tion channel. &any governments have both maxim m and minim m permitted prices for certain prod cts. parents. which vary between export markets. customer factors give s pricing discretionN A?or example. specialiFationNB AiiB Ehat. Ehile the g idelines prescribed in 'able 1 constit te a so nd basis for price decision# making. n mber and siFe of rivals. if any. product factors give s pricing discretionN A?or example. * sales val e in a company’s home c rrency is ncertain d e to exchange rate fl ct ations.
inventories. AbB *void traditional thinking. AeB (onsider the long#r n effects of the pricing decision. &aking the pricing decision AaB &ake f ll se of the information available. AdB &ake s re cost information identifies which costs will be affected by a partic lar pricing alternative. enco rage creativity. AgB (onsider the effect of experience in red cing costs as the c m lative prod ction 30 . AcB 6se sensitively analysis to determine which elements in the decision are not important.&b' costs and e1port pricing AiB Ehich costs are most s itable for exporting pricingN *re these f ll costs or marginal costsN ?or example. market share. transportation. . operational and m t ally consistent. does exporting form a major part of o r b siness or is it s bsidiary or even marginalN *re we adopting a long term or short term viewN Ehat are the true incremental costs of exportingN ?or example. develop priorities. tariffs etc are involved. ins rance. AfB -ase the pricing decision on the life cycle of each prod ct. :+ I*entify a&ternati-e+ AaB Identify eno gh alternatives to permit a sensible choice between choice between co rse of action. Ehat contrib te to overheads and profits do we re3 ire from export salesN TA% E C Integrated pricing g idelines AiiB AiiiB C+ Set )onsistent o<8e)ti-es+ AaB &ake s re that objectives are clearly stated. at any level in the firm. nderstands the relevant objectives. not j st a report of the past. AcB Involve market research people in the pricing problem. AbB Ehen there are several objectives.+ A)1. AeB (omm nicate with and involve acco nting with the cost aspects of a pricing decision. AcB &ake s re that everyone concerned with a pricing decision. vol me and profits. AbB &ake s re information is for the f t re. 4.ire re&e-ant information AaB -e s re that information abo t b yers and competitors are c rrent and reflects their c rrent and f t re sit ations. AdB (onsider all h man and organiFational problems which co ld occ r with a given pricing decision. prod ction. AbB (orrectly relate all the relevant variables in the problem. what extra packaging. AfB *nalyse the effect a partic lar alternative will have on scare reso rces. cash flows. or otherwise clarify the relationships between the objectives.
it sho ld be recogniFed that j dgement and prediction are needed abo t he f t re. with minim m diffic lty from h man and organiFational factors. long# r n marketing strategy.?+ vol me increases. is this effective and are there any significant side#effectsN AiiB AiiiB *t what stage is the prod ct in its life cycleN "oes this vary across markets and segmentsN Is price compatible with the life cycle stageN AivB Is there scope for viable differential pricingN Sho ld prices be e3 al to. list price. If price is sed as a promotional tool. ?inally. Maintain fee*<a)k an* )ontro& AaB "evelop proced res to ens re that pricing decisions fit into the firm’s overall marketing strategy. ? rther. AbB )rovide for a feedback mechanism to ens re that all who sho ld know the res lts of individ al price decisions are f lly informed. pricing decisions sho ld be logically made and sho ld involve rigoro s thinking. disco nts. &c' 2uyer behaviour and e1port pricing AiB Ehat level of b yer awareness prevails in the partic lar marketN "o c stomers know how competing prices compareN "o they try to compare pricesN Sho ld we try to strengthen or red ce b yer awarenessN Ehat degree of price awareness AelasticityB prevailsN *re b yers more responsive to price or other variablesN *re there segmental differencesN *re there any important psychological infl ences on price# ind ced behavio rN Dow does o r price compare to the Cgoing rate’N Sho ld we try to strengthen price elasticity or to dil te itN Ehat evidence is there concerning price interpretationN *re prices sed to j dge 3 alityN Is price compatible with o r brand imageN Is there a market stereotype infl ence on price perceptionsN AiiB AiiiB AdB &arketing factors and export pricing AiB Is o r marketing mix designed to emphasiFe price or non#price elementsN Is o r price consistent with other mix factors like 3 ality.g. not the past. above or below domestic pricesN Dow sho ld prices vary across export marketsN &f' "urrencies for e1port pricing AiB "o we have a general policy concerning c rrencies for export pricingN 31 . advertising and channelsN *re the vario s components of price consistent Ae. creditB. pricing decisions sho ld be made within a dynamic. 'o s mmarise.
'he concept of normal val e is central to the definition of d mping by :*''. AbB Ehere the o tp t being sold at marginal cost price forms only a small proportion of total o tp t. i. an isolated market can be fo nd where conditions for marginal cost pricing apply Asee belowB witho t jeopardiFing price levels in established markets.AiiB AiiiB AivB ?+ 7. Ehere is will not jeopardiFe prices in domestic or principal export markets not protected by tariffs. in the ordinary co rse of trade. It is a lengthy complex proced re to investigate claim of d mpling.1 Ehat c rrencies do we 3 ote and price in form export salesN (o ld we improve exporting performance by changing. however. provided the price charged exceeds the variable cost. 7. total profit Atho gh not percentage profitB will be increased by selling below market price b t above variable cost.$ In order to penetrate a diffic lt competitive market. anti#d mping legislation is not a serio s threat to the occasional or short term marginal cost price. for the like prod ct when destined for cons mption I the exporting co ntry. (learly any company has to sell well above marginal cost price Aprice at which only variable costs are coveredB in most of its markets. If. " mping takes place if the price of the prod ct exported from one co ntry to another is less than the comparable price. AcB AdB 32 . Is o r export c rrency policy consistent with the role of price in o r marketingKcompetitive strategyN Dow do we monitor and respond to c rrency fl ct ationsN Dow sho ld we do thisN MARGINA COST "RICING Ehen a company reaches a level of o tp t which generates eno gh reven e to cover all the costs of prod cing that o tp t Afixed and variableB then it is said to be at break even point. *ny o tp t above break even point yields a profit. "ecisions on s ch marginal b siness sho ld be made witin an overall sales and marketing and profit plan.e. since fixed costs have already been covered. Dence. if the opport nity cost is not too high.! Con*itions for margina& )ost 7ri)ing 7. If the government of the importing wishes to protect firms in a domestic ind stry it may try to impose Cd mping’ d ties. :*'' allows s ch imposition so long as a government can demonstrate that the prod ct is being sold in its co ntry at below Cnormal val e’. it is worth marginal cost pricing in the following fo r sit ations. Ehere the reso rces sed to prod ce the marginal o tp t cannot be sed more profitably elsewhere in the company. AaB Ehere there is little possibility of speedy intervention by the foreign government.
In this sit ation. higher than or lower than the open market arm’s length price. & ltinational firms m st decide whether the transfer price between nits of the same organiFation sho ld be e3 al to. AiiB AiiiB AivB AbB 'ransfer price greater then open market price In the following circ mstances it may be beneficial to the organiFation to set the transfer price above open market price. %nce again. 33 .! AaB 'ransfer price less than open market price * m ltinational organiFation will find it beneficial to set its transfer price below the open market price in the following sit ations. stock that is otherwise nsaleableB it is j stified in selling it even below marginal cost.e. )rovided that the costs of distrib tion and sale are covered it is worth selling the stock rather than scrapping it. AiB AiiB AiiiB If the importing co ntry taxes profits at a higher rate of tax than the exporting co ntry. 'he overall objective of transfer pricing sho ld be to provide s fficient profit and motivation to the decentraliFed nits while at the same time meeting corporate profit targets.1 TRANSFER "RICING Ehen a m ltinational firm adopts a decentraliFed organiFational str ct re. competitive market more 3 ickly by adopting a low initial transfer price Aprovided the market has high price elasticityB. (omponents. If inflation is high in the exporting co ntry it may be possible to transfer f nds by high transfer pricing to an economically Csafe’ co ntry. dividend repatriation is easy. If tariffs are at a relatively low level in the importing co ntry. Setting t6e transfer 7ri)e 9. It is in this context that the 3 estion of transfer pricing arises.If a company has s rpl s stock Ai. semi#finished or finished prod cts may have to be transferred between these man fact ring or assembly nits. AiB If the importing co ntry has a lower rate of profits than the exporting co ntry. If these components or prod cts are sold on the open market they will be sold at arms length price Amarket priceB. I? the importing co ntry has high tariff barriers. each of its man fact ring nits becomes a profit centre. 'he problem here is that operating reven es and profits are distorted and problems of managerial motivation and appraisal arise. @+ 9. it may be possible to penetrate a new. the impact of those barriers maybe lessened by charging a price below open market price and th s improve overall corporate profits. problems associated with transfer pricing in a domestic marketing sit ation become more complex in an international context. If dividend repatriation is restricted. for the ethnocentric organiFation. *s a competitive pricing strategy.
I+ the 6@ the Inland 8even e Afor profit tax effectsB the "epartment of ( stoms and /xcise Afor tariff effectsB and the &onopolies (ommission Afor the effects on fair competition and tradingB are all concerned with transfer pricing practices of m ltinational organiFations. Dowever abo t O=J of 6@ exports are invoiced in sterling.AivB If there is a fear of expropriation of assets the organiFation will wish to hold its cash assets in the most politically Cstable’ co ntry.. -eca se of this Cp blic s rveillance’ international companies increasingly feel the need to be seen to be playing fair to both domestic and host co ntries and to nions and other gro ps. It is also possible that the c rrency of payment will be the c rrency of a third co ntryH for example. %ne problem for importers is therefore the need to obtain foreign c rrency to make a payment. Dowever.$ In international trade. . the c rrency of the b yer’s co ntryB or the b yer m st pay in foreign c rrency Ae. the problem of managerial motivation and eval ation may override a transfer price that has the best economic j stification.1 ?inally.$ 9. 'he cost of imports t the b yer or the val e of exports to the seller might be increased or red ced by movements in foreign exchange rates. 9. the rate of exchange is T1.4 34 . Since sterling has been in decline in recent years there are advantages to 6@ exporters to change towards invoicing in selected foreign c rrencies Aor indeed notional nits of acco nt.. "ro<&ems of transfer 7ri)ing 9. a 6@ firm might sell goods to a b yer in -raFil and ask for payment in 6S dollars. and for exporters there can be the problem of exchanging foreign c rrency received for c rrency of their own co ntry.e. be the s bject and anti#d mpling actions E!"ORT G$ATIONS Dere we are concerned with the make p of the export price. AaB AbB 'he c rrency of the 3 otation. transfer pricing might.! *bo t .7 for the goods. sterling has fallen in val e against the 6S dollarB the cost to the importer wo ld by U1=. s ch as /(6sB..7 A+ . 'ax avoidance strategies are increasingly attracting the attention of governments and their tax a thorities. the importer wo ld expect to pay UO. -anks provide the service to importers and exporters of b ying and selling foreign c rrency.. ?or example. the c rrency of the exporter’s co ntryB.$. 'here are two important aspects of 3 oting export prices.g. Foreign eF)6ange risk . if a 6@ importer b ys goods from a 6S s pplier for T17.9= to U1. indirectly. or U9!7 more than originally anticipated.g. the exporter m st invoice the b yer in a foreign c rrency Ae.=J of 6@ imports are paid for in foreign c rrency. 'he terms Foreign ).rren)y 7ri)ing .===.4 *s already mentioned.=== when the exchange rate between the 6S dollar and sterling is T1.7= to U1 Ai. if by the time the date of payment arrives.
.7=B – only T14.. if the invoice had been in sterling Ae. and wo ld not be affected by the exchange rate movement.===. to pay the 6S T1=.=== originally expected.7 rather than 6S T17.O. Instead the 6S exporter wo ld have inc rred a loss from the exchange rate movement from T1. for 6S V1=. 'he firm paying in a foreign c rrency or earning reven e in a foreign c rrency therefore has a potential exchange risk form adverse movements in foreign exchange rates.. and m st eitherM aB make a AnetB payment in a foreign c rrencyH or bB earn AnetB receipts in a foreign c rrency.=== dollars to s pplier > If Cmatching’ receipts and payments is carried o t in this way. 35 .. and to maintain as m ch of its dollar receipts as it chooses in this acco nt.g.===B the 6@ importer wo ld not have had any foreign exchange risk. Dowever. 'his is an important factor for the small firm or the firm where export reven e is a small proportion of total reven e. 'he foreign exchange risk does not arise from a b siness that makes payments and earns receipts in the same foreign c rrency..< &atching receipts and payments is made easier by the ability of organiFations or individ als in the 6@ to hold a foreign c rrency acco nt. ?or example.. .O &atching c rrency receipts and payments Aor c rrency receipts and the repayment of c rrency loansB is only feasible if the international trader has receipts and payments in the same c rrency to match.===. .=== it receives from c stomer ..7= instead of the T17. and at the same time the 6@ company sells goods abroad to c stomer . the exchange rate between the foreign c rrency and the company’s domestic c rrency wo ld be irrelevant and exchange risk wo ld be avoided. .=9!.. movements in foreign exchange rates – which occ r contin ally in the foreign exchange markets – introd ce a serio s element of risk ACgambling’ of a Clottery’ on the way exchange rates moveB which might deter firms from entering international sales or p rchase agreements. 5 otation in own c rrency – advantages It is administratively convenient.. . ?or example. altho gh gains as well as losses can be made. &any traders are not so l cky.7 'he 6S exporter wo ld receive T17. beca se payments in the c rrency can be made o t of cash income in the same c rrency. and so any trader who has foreign c rrency expos re inc rs a foreign exchange risk – ie a risk of losses from adverse movements in exchange rates. a company that earns receipts and makes payments in 6S dollars can choose to hold a 6S dollar acco nt with its 6@ bank. It is possible to set p Chedging’ arrangements to red ce the risk of losses. in the same example. receiving AUO.$. ntil the time comes to se the c rrency to make dollar payments. if a 6@ company b ys goods from s pplier > costing 6S T1=. the company can se the 6S T1=. .$.7=.9 'here is also a change of making a profit o t of favo rable movements in exchange rates b t.1= 'he risk of variation in the exchange rate is born by the foreign c stomer.1 ?oreign c rrency Cexpos re’ refers to this sit ation. for UO.9= to T1..=== Ain dollarsB.7 x 1.
receivables may be sold forward A p to five years in some casesB from the date of a contract to increase their sterling reven e or lower the effective cost of sterling export finance Awhile at the same time minimiFing exchange riskB.14 Eere a forward market exists for a c rrency and where dealing is at a premi m to sterling. ?oreign c rrency pricing also makes it easy to relate to retail prices overseas. the less easy to convert into other c rrenciesB. b t in this role exporters are acting as c rrency spec lators. Advantages of foreign currency pricing . *lso. 'he exporter might be made v lnerable to a severe risk of loss..1$ Dere the exporter accepts any exchange risk of fl ct ating val es. 8esol tion of this potential conflict depends to a large extend onG AaB AbB AcB the relative strengths of the two partiesH the importance of the contract to either partyH and occasionally the economic sit ation in both co ntries As ch as the balance of payments positionB.1O 36 . foreign c rrency pricing can help to sec re contracts in the first place. cash flows and possibly costs easier and avoids expos re to exchange rate risks.1. . .e. ... i. 4esolving differences between e1porter and importer ..17 . 6@ exporters fre3 ently prefer to 3 ote prices in sterling.. *n exporter can gain a competitive edge by 3 oting in a foreign c rrency if the importer wo ld prefer his own c rrency. thanks to any forward premi m the exporter co ld increase vol me by offering a lower c rrency price than the spot rate of exchange wo ld indicate.t foreign c stomers normally prefer to receive price 3 otations in their own c rrency since it places the risk of exchange rate fl ct ation on the exporter and facilitates comparison of prices from a n mber of foreign so rces.1< "espite the advantages of foreign c rrency pricing note above. 'he exporter however can accept exchange risks Aprofits or lossesB if he wishes. In addition.e. It makes calc lation of profits. 'his risk can be covered in the forward exchange market.19 . ?oreign c rrency invoicing can sometimes help exporters to borrow at lower rates of interest than at homes.. Is this part of their missionN 'hese risks become even greater the Csofter’ a c rrency is Ai..3uotation in foreign currency . either to avoid expos re to c rrency fl ct ation or beca se of exchange control reg lations. constant adj stment to a sterling price list is avoided.
!= Ehichever c rrency is need there are a n mber of ways of minimiFing problems ca sed by foreign c rrencies. In more ethnocentric export companies. and who is responsible for arranging for the transport.g. 'here are a n mber of internationally accepted standard forms of dividing these costs between b yer and seller.. 37 . %ne of the key tasks of the international marketer involved in pricing decisions is to take into acco nt all the relevant costs in order that exports achieve the defined level of profitability or market share.. /ach party to the transaction th s takes on the risk associated with its own c rrency. AbB 'o p rchase Aor sellB forward as appropriate Asee aboveB whereby a fixed rate is agreed for the given s m at a specified date in the f t re by a bank. * strengthening or weakening in one party’s c rrency wo ld be felt in relation to the dollar and the other party wo ld not be affected. this may be more acceptable than other alternatives.!1 Ehatever the pricing objectives or the basis for pricing of an organiFation. Eho pays what. e. 'he net s m Aafter commissionB received or paid at the end of the period is at least g aranteed. has to be confirmed when the sale contract is agreed. overseas prices are based on domestic prices pl s additional costs of freight etc. AaB 'he simplest way is to have an appropriate cla se in the contract to adj st the price if it fl ct ates within agreed limits or to renegotiate if these are exceeded.!! In addition to the obvio s man fact ring costs of he exporter they are be significant extra costs in getting the goods to a foreign b yer. 'he one disadvantage is that there is a do ble exchange transaction involved. AcB In a sit ation where either or both c rrencies are nstable a third c rrency can be 3 oted. domestic advertising. cost aspects are of vital importance as a g ide. e. the costs of )hysical movements are as followsG aB bB cB dB eB fB . :enerally.g. selling.. If the dollar changed val e. distrib tion etc. the 6S dollar.!4 transport from the man fact rer’s premises to the docksH loading aboard shipH freight chargesH nloading c stoms d tiesH and transport from the docks to the c stomer’s wareho se *s well as these costs of physical movement there are also ins rance charges and possibly additional costs for any delays. Shipping terms ... %ften however the domestic price will incl de costs not relevant to the export sit ation.otation .. Dowever.!$ . it wo ld be likely to be relative to both c rrencies and the risk Aor benefitsB wo ld be shared. Terms of a 7ri)e 1.
'he point of delivery of the goods from the seller to the b yer is alongside the ship. 'his represents the minim m obligations for the seller. Ab= pay export charges Aif anyB. ?or example C?*S ?elixstowe’ for the export of goods by a 6@ firm to an overseas b yer wo ld mean that the exporter m stG AaB AbB deliver the goods free alongside ship at ?elixstowe’H and pay all the costs.. incl ding freight and ins rance..!.!< 'he overseas b yer m st nominate the carrierAsB to take the goods from ?elixstowe to their destination and AaB pay freight from ?elixstowe. &bB )A#: )ree Alongside #hip AiB 'he seller arranges toG A1B deliver the goods alongside the named ship at the port of loading named in the contractH and A!B pay all the charges p to delivery of the goods alongside ship.o will note that many of the descriptions contain the term Cfree’. . 'his indicated the time at which legal title passes from seller to b yer Aand th s risk of loss in case of damage.: 51-wor/s ..!9 'he b yer m st take delivery at the exporter’s factory and pay all the costs of freight. and AdB pay for ins rance of the goods from their timeKpoint of delivery at ?elixstowe. 38 . *mong the more common forms of 3 otation are the followingG &a' 56. ins rance and other expense items to get the goods transported from the s pplier’ factory to their destination. . to bring the goods alongside the ship at ?elixstowe. AiiB 'he b yer is responsible forG A1B choosing the carrier to transport the goods abroad and paying the cost of freight from the port of shipment incl ding the cost of loading the goods on board ship Aif loading costs are separate from freight chargesBG A!B arranging ins rance and paying ins rance from arrival at the dockside onwardsH and A$B arranging and paying for any export license and export taxes. theft and so forthB.!7 'he standard forms are known as I+(%'/8&S and have been designated by the International (hamber of (ommerce... incl ding freight and ins rance charges to that point. AcO pay for loading the goods on board ship Aif separate from freight chargesB. .
'he seller m stG AaB AbB AcB AdB AeB nominate the carrier and so make the contract of carriageH pay for transportation of the goods to the place of shipment and ins re the goods p to this pointH provide and pay for the export licenseH pay export taxesH deliver the goods on boardH . the exporterKseller m st nominate the carrier to ship the goods abroad.$$ 39 .g. if the shipping terms for an export consignment from the 6@ are ?%. AbB W AdB CFR/ Cost an* Freig6t .$= AbB AcB AdB AeB . C?%. 'he costs p to this point are borne by the sellerKexporter. 'he sellerKexporter m stG AaB pay for transportation.. 'he place of delivery is the ship’s rail.FO%/ Free on %oar* . (?8 differs from ?%-. it is the b yer who specifies the shipping company.!O ?%..$1 'he b yer m stG AaB nominate the carrier to transport the goods Ae...means that the b yer does not have to pay for transporting or ins ring the goods from the place where they are originally dispatched p to the point when they are taken on board ship.2%S *ngles’ wo ld mean that an *merican s pplier wo ld be responsible for sending goods for shipment on board at 2os *ngeles.$! Eith (ost and ?reight. In these respects. arrange the contract of carriage and pay freight charges. freight and ins rance charges to the named port of shipment Ae. and to pay cost s p to that pointBH provide and pay for the export licenseH pay export taxes deliver the goods on board the ship Aor airline flight etcB that the b yer has specifiedH pay for the cost of loading the goods on board ship Aif loading costs are separate from freight chargesBH .Stranraer. sailing date and timeBH give the seller the details of the ship and sailing timeH pay for the carriage from this point Aie freight from that point..g. incl ding costs of nloading at the place of destinationBH arrange and pay for ins rance of the goods from this point.
and so the b yer henceforward bears the risk of loss or damage to the goodsH pay for nloading costs at the port of destination if these costs are separate from the freight charges.$9 (ost. an obligation of great practical importance beca se the s pplier does not want the b yer to ref se the goods after they have been shipped to the b yer’s co ntry. 'he b yer m stG AaB AbB AcB AdB pay for the ins rance of the goods from the time they are taken on board... with the exception that it is the seller. when the appropriate doc ments Aeg bill of lading. . AbB AcB . AiB .$4 'ho gh the s pplier pays the freight charges to the ort of destination. not the b yer.. 40 . ins rance and freight is similar to (?8. )ay for any import license re3 iredH *ccept delivery of the goods.$. except that additionally the seller m stG AaB arrange for ins rance of he goods from the port of shipment to the port of destination Athe amo nt of ins rance cover is often the (I? val e of the goods pl s 1=JBH pay the ins rance premi mH provide the b yer with the ins rance policy or certificate. Ehen they are on board. the place of delivery of the goods is the ship’s rail when the goods are taken on board. the s pplier is paying freight charges for goods that have already been delivered to the b yer. Ins rance and ?reight. In a (?8 contract. who m st arrange and pay for the ins rance of the goods to the port of destination. . 'he obligations of the seller are therefore the same as for (?8. invoiceB have been presented. . C(?8 8otterdam’ wo ld mean that the 6@ exporter m st pay freight charges for delivery to the port of 8otterdamBH send to the b yer advice of the carrier and the shipment date..$7 AeB (I?G (ost. they are the responsibility of the b yer. the seller already having paid freight charges to get them theeH *rrange and pay for transportation and ins rance from the port of destination to their final destination in the b yer’s co ntry. the place of delivery by the seller is still the ship’s rail when the goods are taken on board so that the ins rance taken o t by the seller will be in favo r of the b yer in the event of loss or damage etc to the goods d ring shipment.AfB AgB AhB pay for the cost of loading the goods if the loading charge is separate from the freight chargeH provide the b yer with a clean on board bill of ladingH pay the cost freight charges to the named port of destination Aeg..$< Eith (I?..
which is Dong @ong.1 'he first two of these have been considered above and this section is devoted to the third..ty 7ai* . 'he terms of shipment might therefore by L(I? Dong @ong’ meaning that the exporter ndertakes to pay for the freight charges and ins rance of the goods to the port of destination. ins rance etcH and agreeing with the seller the method of payment. local market price and so forthBH agreeing with the seller the basis of shipping.$ 'he most sec re method of payment for an exporter is to obtain payment in f ll in advance of shipping the goods. %pen acco nt trading. If terms for an import of goods from 'aiwan are C(I? 6@ port’ this means that the exporter in 'aiwan can deliver the goods to any 6@ port.4= . . transfer price. having paid import d ties on the goods..! 'here are any n mber of variations in the method of payment that may be agreed between the exporting company and its c stomer b t the following provide a series of Cyardsticks’. MET#ODS OF "AYMENT In the context of international marketing there are three essential elements in taking pricing decisionsG AaB AbB AcB determining the basis of calc lating the price Aeg cost pl s. )ayment on shipment.$O 'he b yer’s obligations are the same as for (?8. )ayment in advance also means that the exporter. with the exception that he does not have to pay for the ins rance of the goods between the port of shipment and the port of destination.41 DD"/ De&i-ere* *. 'hey are listed in order of increasing risk for the exporter.. <. by not giving the b yer any credit. AaB AbB AcB AdB AeB )ayment in advance.4! 'he seller m st pay the costs of delivering the goods to the named destination. and so does not tie p working capital for exports Aforeign debtorsB. does not have to finance the sale himself for a credit period. 41 . "oc mentary collections. 'he b yer’s responsibility is to take delivery of the goods at the named destination. De will then not have any risk that the foreign b yer will ref se the pay or be nable to pay for goods that have already been shipped to him. "ayment in a*-an)e <. 2etters of credit Adoc mentary creditsB. arrange and pay ins rance and provide doc ments that will enable the b yer to take delivery. 'he 6@ importer wo ld obvio sly be well advised to have the port of delivery specified to avoid nnecessary transport costs in the 6@.. B+ <. 'he seller m st therefore pay the import d ties or taxes.. 'his represents the maxim m obligation for the seller.
'he interests of promoting international trade are helped by international agreed standard proced res and these have been form lated by the International (hamber of (ommerce. <. etters of )re*it (*o). In brief. the bank will have reco rse to the exporter for a ret rn of the paymentH or a collection arrangement for obtaining the f nds from abroad. -y doing so it is g aranteeing payment to the exporter provided that the latter complies with the terms and conditions 'he foreign bank asks a bank in the exporter’s co ntry to advise the credit to the exporter. )artic lar care sho ld be taken when the che3 e. or in another co ntry other than the exporter’s own. 1==J cash with order is not a common form of payment. it is 3 ite common for the overseas b yer to pay a cash deposit in advance.< 'he doc mentary credit system is a method of payment in international trade which gives a g arantee of payment to the exporter provided that it complies with vario s terms and conditions As ch as providing specified doc ments to a bank for checking after shipment of the goods and shipping the goods within a certain timeB. AaB negotiating the che3 e etc. AbB <. and then to pay the balance by another method. 'he obvio s drawback to payment in advance is the risk for the b yer that the exporter will not act ally dispatch the goods. the exporter sho ld make s re that the f nds are cleared first before making the shipment.O "oc mentary credits re3 ire international cooperation thro gh the banking system. #tage 9 42 . <. draft or other payment order calls for payment in the b yer’s own co ntry. In s ch circ mstances.mentary )re*its) <.7 Dowever. 'his does not necessarily involve the latter in making any commitment to the exporter to add its own g arantee of payment b t if it does so it is then known as a confirmed letter of credit.<..9. the doc mentary credit system works as followsG #tage + #tage 7 #tage 8 'he b yer and seller AexporterB agree a sales contract that incl des payment by a doc mentary credit 'he foreign b yer re3 ests his own ACforeign’B bank to iss e a letter of credit in favo r of the b yer. with reco rse. *s yo may imagine. it is possible that the exporter’s bank will insist on either.4 <. <. It also means that he b yer is financing the sale for some time before he takes physical possession of the goods. when payment is made in advance. )ayment in advance gives sec rity to the exporter. which means that if the foreign b yer stops the che3 e or is nable to pay beca se he lacks the f nds etc.1=. or if he does dispatch them. Dowever. 'he foreign bank iss es a letter of credit in favo r of the b yer. that they will not arrive in the re3 ired condition or to the right specification.
e.1! 'hese are the two basic types of doc mentary credit. impose exchange controls. all this international activity costs money. Eho pays what costs depends of the relative bargaining strength of the two parties.g. revocable credits are similar in their risk profile to trading on open acco nt and therefore rare. 'he right to amend or cancel can be exercised by the b yer at any time p to payments begin made to the exporter. advising bank and exporterB. * confirmed irrevocable letter of credit th s gives greater sec rity to the exporter beca se the g arantee is given by a bank in the exporter’s own co ntry. 'his can be overcome by confirmation Aor additional g arantee of paymentB by a bank in the exporter’s own co ntry. #tage : <.e. AaB * revocable credit allows the foreign b yer to amend the credit Aor even cancel itB witho t giving prior notice to the exporter. one of the clearersB. iss ing bank. 4evocable and irrevocable letters of credit <.11 +ot s rprisingly. 'he cost of iss ing a letter of credit is s ally borne by the b yer.1$ *ltho gh the irrevocable letter of credit gives the exporter the g arantee of a foreign bank. <. It therefore gives greater sec rity to the exporter beca se the iss ing bank’s g arantee remains in force. even if the b yer changes his mind. bill of lading and ins rance certificate. 43 . of co rse. for example. altho gh the b yer may be able to pers ade the exporter to bear some or all of the costs and charges. 'here are. the exporter may not be entirely happy relying on a bank abo t which the exporter has little information in a co ntry that might. the goods. and even shipped. 'hese normally incl de a commercial invoice. extra bank charges for a confirmed letter of credit b t the b yer may be able to pers ade the exporter to pay for he additional sec rity. bank g aranteeB will be withdrawn after the exporter had made. AbB *n irrevocable credit can be amended or cancelled only with the agreement of all parties to the credit Ai. (onse3 ently there is a risk that the credit Ai. b yer. In the 6@ an exporter might ask for a credit to be confirmed by a first#class 2ondon bank Ae. It makes little difference to the b yer whether it is confirmed or nconfirmed beca se the b yer event ally pays the iss ing bank Athe b yer’s own bankB which g arantees payment to the exporter whether the irrevocable credit is confirmed or not. )rovided the doc ments are in order the exporter arranges for payment to be made Aeither immediately or on deferred termsB by the b yer’s bank. " e to their insec rity.#tage * *fter shipping the goods the exporter has to present the doc ments specified by the letter of credit.
the exporter will still have title to the goods. Sec rity is provided to the exporter beca se there are doc ments of title to the shipped goods.yer 44 . the goods wo ld now be in transit and so he wo ld have the problem of deciding what to do with them when they arrive at their destination. If the b yer does not make the payment on shipment. 'hey provide some sec rity of payment for the exporter beca se the banks involved in a collection sho ld act in accordance with the internationally accepted r les that apply to collections.mentary )o&&e)tions <. <.1! 'he exporter and overseas b yer might agree an arrangement whereby the b yer pays for the goods as soon as they are shipped. or if the f nds are not cleared. by handling shipping doc ments as well as a bill of exchange or a che3 e. /xporter (ommercial doc ments Asent direct to b yerB )inancial documents 8emitting bank (ollectingKpresenting bank .! "(5A. Dowever. 'he system works as shown in ?ig re . 'he goods will therefore be in transit or at their point of destination when the payment is received.1. giving f ll details of the shipment.. "0((5"T<0.7on s6i7ment of t6e goo*s <.!..19 Do).17 <. beca se he holds the doc ments of tile. 'he exporter wo ld have to cable or telex the b yer to notify him of the shipment. below. and the exporter can arrange to keep these doc ments ntil payment has been received."ayment . and then expect the b yer to make an immediate payment. ?ig re . "oc mentary collections involve the exporter asking his bank to help with the arrangements for payment.
and (B. <. then open acco nt trading might be perfectly acceptable witho t excessive risk for the exporter.!! 'he methods of payment described above have foc sed on the degree of risk inc rred by the exporter. * f rther point to bear in mind is that a vast amo nt of world trade occ rs between fellow members of m ltinational gro ps Ae.!= %pen acco nt trading is the most risky method of trading for exporters. %pen acco nt trading has developed 3 ite extensively between co ntries in the /( for these reasons. which wo ld be desirable in an ideal world. 45 .!1 %i&&s of EF)6ange <. a vehicle man fact rer assembling cars in co ntry * with engines and gearboxes bo ght from its sister companies in co ntries . and sovereign and co ntry risk are considered low or non#existent.=J of 6@ exports.nt tra*ing <.1O 'he bank therefore has Cconstr ctive control’ over title to the goods and m st only release this title when the b yer complies with the re3 irements of the exporter.1< * significant feat re of a doc mentary collection is that if a bank is instr cted to handle commercial doc ments which incl de a bill of lading.g. It is fair to ask why an exporter.<. 'his is beca seG AaB AbB the bill of lading is a doc ment of titleH and a f ll set of the signed originals of this doc ment can be kept by the bank ntil the foreign b yerG AiB pays for the goods which may have arrived at their port of destination b t which the b yer cannot take possession of witho t the bill or ladingH or accepts a bill of exchange and gives it to the Ccollecting’ bankH or iss es a promissory note. does not insist on payment in advance. O7en a))o. as set o t in the collection order. altho gh it acco nts for some . beca se of the fierce competition in international trade. who is worried abo t the risk of non#payment. If the importer does not lie the payment terms. 'he exporter is often nable to get payment terms. the exporter can keep control over the goods ntil the b yer has either paid for them or accepted a bill of exchange. payment on shipment or a letter of credit every time he or she exports importer. when trading relations between an exporter and b yer are well#established. AiiB AiiiB <. another s pplier who might offer more favao rable terms. *S the final item in this chapter we look at the techni3 e of payment known as a -ill of /xchange. Dowever. 'his can be co pled with a n mber of different payment methods b t is s ch an important and established means of payment in international trade that it is worthy of consideration in its own right.
perhaps the best of both worlds. AaB AbB AcB 5thnocentric approach: gro p head3 arters dictates its s bsidiary’s pricing decisions totally. s ally for certain basic prod cts. bread in /gypB.<. <. Ehen s ch a bill is sent to the c stomer he is expected to sign it as the Cacceptor’ and the bill becomes an Caccepted’ bill.!$ * bill of exchange is defined asG AaB AaB AcB AdB AeB AfB AgB AhB AiB an nconditional order in writingH addressed by one person Athe drawerBH to another Athe draweeBH signed by the person giving itH re3 iring the person to whom it is addressedH to payH on demand. 'here are broadly two of government infl ences in pricing decisionsG AaB AbB price controlsH restrictive practices control "ri)e )ontro&s O. or at a fixed or determinable f t re timeH a s m certain in moneyH to.g. 'hey may also set maxim m prices.1 O. :overnments may also take the view that setting minim m prices is in the p blic interest by maintaining competition. Dowever foreign governments infl ence pricing decisions to a greater or lesser extent. *n international company m st be aware of the price legislation in each of the co ntries in which it operates. normally from the s pplier AexporterB to the c stomer.!4 'h s it is basically a re3 est for payment.g.! In most cases pricing decisions in foreign markets are based on the same principles as domestic pricing. or to the order of. FOREIGN MARKET "RICING Dere we are concerned with pricing strategies for prod cts that are both prod ced and marketed in an overseas co ntry. !olycentric approach: the s bsidiaries are a tonomo s.$ 'hese tend to become widespread when inflation takes hold. Restri)ti-e 7ra)ti)es )ontro&s 46 . H+ O. Ae. 'he extent of pricing control exercised from o tside that co ntry will depend on the organisation’s str ct re. a specified person. :overnments either forbid or lay down certain conditions for price increases. * bill known as a Cterm bill’ allows the recipient a period of credit before payment. foodB and in some instances lay down profit restrictions which will affect price levels. )rice controls still feat re in some co ntries for basic commodities Ae. or to bearer. =eocentric approach: control varies depending on the sit ation.
&any co ntries have a government agency whose main task is to protect the national or p blic interest by controlling s ch practices Ain the 6@. restricts or distorts competition. 47 . the %ffice of ?air 'radingB. 'he government control of s ch practices will have effects on foreign market pricing.O.4 * restrictive practice is an agreement or practice which prevents.
&ore f ndamental areG AaB AbB AcB gender rolesH context in which the prod ct is sedH who will se the prod ct 48 . a ?rench lemonade.COMM$NICATIONS DECISIONS IN INTERNATIONA MARKETS C+ 1. Standardised promotion refers essentially to the themes and messages portrayed in the promotion rather than identical media and a diences. C. Standardisation is rare and can only occ r when the prod ct and its c lt ral meaning are more or less identical across a n mber of co ntries and c lt res. 'he methods of promotion in any one market will be affected byG AaB AbB AcB AdB AeB AfB AgB 1.&t. 'he more normal state of affairs is that of adaptation of promotional effort to match the different comm nication re3 irements of the market in 3 estion. 'h s in a new market the se of Csamples’ may be sed to enco rage trial b t in a mat re market the se of Cprice off next p rchase’ co pons Aif allowedB might be more appropriate. media and other elements need to be altered. 2ang age problems can be overcome by translation and back translation to ens re meaning is conveyed properly. d e to the geographical and psychological separation of the prod cer and its market. the international marketer has to rely more on intermediaries and impersonal comm nication for a major part of the comm nication process.7 2ang age often presents a problem.ra& an* ot6er so)ia& )onstraints in 7romotion 1. "romotiona& o<8e)ti-es 1. generally the lang age. 2iteral translation rarely worksG there is a story that Ccome alive with )epsi’ when translated into one lang age means raising the dead to life. to make the point.1 "RO% EMS IN INTERNATIONA "ROMOTION /ffective comm nications are partic larly important in international marketing. In mat re markets the objectives will be to enco rage repeat p rchase and remind the c stomer.$ the promotional objectives for that marketH c lt ral and other social constraintsH facilities available for promotional effort in the marketH economic developmentH distrib tion infrastr ct reH media availabilityH and competition 1. Similarly brands may r n into problemsH one only has to mention )schitt. (onse3 ently.4 In new or developing markets the promotional objectives may be to create awareness and enco rage trial. 'he objectives chosen will th s infl ence the promotional campaign for a market. as for (oca (ola.! *ltho gh in some circ mstances it is possible broadly to standardiFe promotional messages.
billboards and cinema for exampleB. newspaper and magaFines will only be read by the ed cated elite. 'his legal minefield s ally means that some local professional advice is necessary before a promotion is considered in a foreign co ntry. 8adio. ca sing problems in coordination of promotional campaigns. In co ntries with low literacy. Similarly the se of gro nd coffee in the 6@ is still largely on special occasions where visitors or celebratory meals are involved. overstatement and p ns. radio. 'he 6@ has fallen in line with the rest of the /6 in banning tobacco advertisements on '0 Aincl ding the loss of the irony#laden Damlet advertisementsB. C8eaching the parts that other beers cannot reach’ co ld only be claimed in the 6@. It may also be connected with ed cational and literacy levels.11 'he level of economic development will affect the amo nt and way in which a prod ct is sed. the attit de towards promotional claims is relatively liberal. 'he promotion sho ld reflect these differences. affecting the choice of media. '0 or posters co ld be better sol tions. this may well be fo nd to be abs rd or offensive. altho gh considerable tightening p is in progress. 49 .< what can be claimedH what prod cts may be promotedH what media may be sedH when they may be promotedH and how m ch may be spent on promotion. when and where. E)onomi) *e-e&o7ment 1. an advertisement showing a man cooking for the family does not ca se comment A+ew 1ealand lamb '0 advertisementB. where the diversity of the /nglish lang age allows irony..1. 2egal constraints may exist coveringG AaB AbB AcB AdB AeB 1. 'he international marketer faces a legal minefield when considering promotional methods. 'his may be the distrib tor Awho may have promotional responsibility anywayB or a local advertising agency. '0. ?rance is amongst a host of co ntries that reg late what can be said in an advertisement.1= the media organiFation being localiFedH circ lation K a dience limitationsH and real restrictions. as is the attit de to what is promoted. ega& )onstraints in 7romotion 1. In some co ntries the media is regionaliFed rather than nationwide. and most Scandinavian co ntries prohibit '0 advertising of tobacco in any form. b t in co ntries with more rigid gender codes. affecting the message.9 'h s in the relatively liberated gender climate of the 6@. which not only allow f ll market coverage b t also provide a m lti#media option to the promoter. Fa)i&ities a-ai&a<&e in t6e market 1.O 'he 6@ is pec liar in having largely national media Anewspapers. (overage by the vario s media may be limited byG AaB AbB AcB 1. In ?rance it is an everyday prod ct. In the 6@.
50 .1 s ally needs adaptationH and s ally needs expert advice.rna&s !. a free advertising sheet.re 1. Sometimes.Distri<.g. 'he above disc ssion s ggests that promotion in international marketsG AaB AbB :+ !. etcBH direct mailH trade fairs and missionsH personal sellingH and telemarketing.1! 'he nat re of the trading channels in the market will determine their ability to provide all or even part of the promotional effort in a market. 'h s. these p blications have the advantage of providing a targeted a dience with little Cwastage’. &any 6@ professional and trade jo rnals have significant foreign readership. 1. a distrib tion system which consists mainly of small scale market traders cannot be expected to promote the prod ct to any significant degree. 'he entry of a foreign competitor into a market will normally provoke a response from local operators. " e to the nat re of the jo rnals. b t a major distrib tor s ch as (adb ry# Schweppes in the 6@ co ld be expected to promote (oco (ola as part of the dealership. ed cational and legal considerations Adisc ssed aboveB and hence the international marketer may need to adapt the promotion to more n s al media in order to gain ade3 ate coverage of the market. the entrant will have to consider not only the promotional programme b t his response to competition. newspapers. 'hey provide excellent b siness# to# b siness contact b t are ns itable for cons mer marketing beca se of their restricted circ lation and technical content. 'h s. '0. Tra*e an* 7rofessiona& 8o. "etails of foreign p blications can be fo nd in s ch p blications as Standard 8ate ad "ata Services Cb siness p blications’ for most major co ntries. radio. Me*ia a-ai&a<i&ity 1.! Ehere they are available. or a radio stationB. -eca se of the high cost of advertising it is s al to limit advertising to a few key markets where the market t rnover j stifies s ch investment. be they indigeno s or existing international companies. literacy levels and technical expertise will be high.1$ +ot all media are available in a market d e to economic. posters. affect the promotional programme in a co ntry.14 'he level of competition will of co rse. Com7etition 1. the appropriate media may not exist and the promoter may have to sponsor the media Ae.tion infrastr.17 T#E INTERNATIONA "ROMOTIONA MI! )ossible media for promotion areG AaB AbB AcB AdB AeB AfB trade and professional jo rnalsH cons mer media AmagaFines.)t.
Cons.=== a dienceB. agent or distrib tor in that co ntry is provided with leads as 3 ickly as possible. ?or trade contacts. providing an opport nity for prod cers. 'h s it is important that the local sales office.9 :enerally direct mail tends to be more expensive than advertising in terms of contact costs.4 extent of target market coverageH image carried by the medi mH literacy levelsH ownershipKrelationshipH ability to convey the messageH the cost of contact A s ally expressed as cost per 1. and has only slightly more response. they are less attractive and effective to the international marketer. Tra*e fairs an* missions !. it can have the advantage of providing more targeted a dience. distrib tors and c stomers to meet. *ltho gh Cfairs’ exist in the cons mer markets. Dire)t mai& !. which can save money significantly. In developing or lesser developed co ntries the international marketer may find that s ch information is harder to come by. Iss es to consider incl deG AaB AbB AcB AdB AeB AfB !. In developed markets direct mail can be sed in several waysG AaB AbB AcB direct response promotion. magaFines. &ajor media gro ps with international connections provide reports on readership and reader profiles. the se of international b yers g ides A@elly’s or " nn and -radstreet. In nderdeveloped co ntries where literacy and low incomes combine to provide low market coverage for newspapers. that is b ying Coff the peg’H to generate en3 iries for more personal contactH and to provide an introd ction for personal contact !. Dowever. 'hey allow not only comm nication with a targeted a dience b t also the ability to demonstrate and provide trial of the prod ct or service. 51 . '0 and radio. 'rade fairs are probably one of the most effective methods of initial b siness #to #b siness contact.$ Dere the directed nat re and coverage of the media are open to 3 estion. In many co ntries however. 'he major problem with sing direct mail in an international context is the inability to Cfollow p’ en3 iries generated. the data on cons mer media are sparse and the international marketer has to rely heavily on local knowledge. for exampleB provide ade3 ate contacts.mer me*ia !..7 In most developed co ntries s itable listings based on company or cons mer segmentation profiles are widely available. the se of posters and handbills A s ally handed o t in key trading centersB sho ld be considered as an alternative.
s ch as Cengineering’ or Ctoys’. that is that combined effect of margin and order siFe. 'he principal disadvantage of trade fairs is cost. AaB AbB AcB AdB AeB 'he ability to let potential c stomers see demonstrations and trial.O. *dvantages of trade fairs incl de the following. s ch as competitor activity and b yer response.!.11 'he international salesperson will re3 ire several attrib tesG AaB AbB AcB AdB AeB AfB AgB knowledge of the prod ct and marketH lang age and c lt ral knowledge specific to the co ntryH technical knowledge where necessaryH contacts. )ersonal selling is expensive b t effective. is s fficient to j stify the costs involved. 'his compares to abo t one in 7= with direct mail and advertising as a maxim m. the salesman. Ehere internationally renowned trade fairs are held in yo r own co ntry. 'he ability to make personal contact with existing and potential c stomers to maintain and develop relationships. 'he international salesman cannot work in isolation. !. (ontacting a large n mber of potential c stomers in one place. :iven the right s pport a good salesman can convert abo t one in three prospects. preferably from experience in the marketH s itable personalityH selling skillsH and motivation to s cceed. 'h s advertising and direct mail can be sed to generate en3 iries. specific to a partic lar trade. !. )roviding an opport nity for market research. &ost trade fairs are. can be sed to convert the lead to an order. and the expensive reso rce. the high cost of a presence at some of the major fairs. and the possibility of being ignored in the presence of major international competitors has led to the development of Cfringe’ ven es. 'h s.< ?or smaller companies. s ch as a local hotel. s pport m st incl deG AaB AbB AcB !. If the salesperson is to be efficient and effective. it is ideal in b siness# to# b siness marketing and might be essential in dealing with government p rchasing agencies. especially for smaller companies forced to compete with large m ltinational exhibitors. by their nat re. delivery and terms. 'he client is often enco raged to attend by direct mail invitations and the provision of refreshments. where the company may display its offers witho t competitor presence.1= In international marketing personal selling will be re3 ired one or more times in the trading channel. attendance sho ld be considered both from the domestic and international perspective. 52 .1$ )ersonal selling can only be j stified where the contrib tion.1! generation of en3 iriesH prod ct literat re and samples where relevantH and information on price. *llowing direct contact with major decision makers and infl encers at a time when they are interested in the prod ct. !. "ersona& se&&ing !.
'h s.1. Ehilst widely accepted in b siness#to#b siness trading.7= people and in "emocratic 8ep blic of (ongo. In most developed co ntries there is at least one telephone for every two people. In the former /astern block it is one telephone per ten people. is not so widely accepted. in the 6@ there is more resistance to telemarketing than in the 6S*. 'elemarketing re3 ires the ability to react accordingly and th s probably works best from within a market rather than on a co ntry#to#co ntry basis.ellow )ages offer list broking services to the international telemarketer.14 'elemarketing.+ $.1< :enerally.1 53 . !. the impersonal methods of comm nication are less expensive in terms of cost per contact. * f rther consideration is the ability to Cfollow p’ calls. 'he order siFe and potential contrib tion may well dictate the appropriate medi m. one per !. b t less effective than personal comm nication in Cgetting the order’. is often sed domesticallyG AaB AbB AcB !. one so rce claims that $=J of retail sales are now via telephone. 'elephone ownership varies considerably. in . high vol me sales on a b siness to b siness warrant trade fair visits. In ?rance the existence of &I+I'/2 has allowed the growth of telephone ordering to a considerable degree. whereas cons mer comm nications are better s ited to indirect methods s ch as advertisement " ANNING T#E INTERNATIONA "ROMOTIONA CAM"AIGN In planning an international promotional campaign the international marketer needs to make decisions concerningG AaB AbB AcB AdB AeB AfB AgB professional assistanceH the messageH the mediaH the promotional b dgetH monitoring and controlH organiFationH and independent or cooperative promotion . International directories are widely available and both -' and . In the international context. and foreign sales representations.19 !.rma one per . especially in prospecting c stomers.1== people. 'h s high val e. the lack of a telecomm nications infrastr ct re and c lt ral inhibitions to telephone selling may limit the attraction of this medi m. !.17 to prospect potential c stomers for personal sellingH to handle repeat p rchases not re3 iring personal visitsH to deal with c stomer en3 iries or complaints.'elemarketing !. showing widespread telephone access. that is the se of telephone to sell. the acceptance of telemarketing in cons mer markets.
? rther considerations concernG AaB AbB AcB $.4 'h s a small firm exporting to one market and wishing to perhaps . $.organiFe a stand at a trade fair.7 Ehilst commonality of needs is largely recogniFed worldwide.! 'he normal form of assistance is to hire an advertising agency eitherG AaB AbB $. &c"onalds in &oscow is a relatively expensive p rchase. market research.$ international agency with local officesH local agencies in each market In making the decision the international marketing manager sho ld considerG AaB AbB AcB AdB AeB AfB AgB AhB AiB AjB knowledge and coverage of the relevant marketH 3 ality and rep tation within each marketH additional services provided Afor example. the message has to be adapted. not able to be cons med 3 ickly Aa two ho r 3 e eB. 54 . the way in which these needs are satisfied varies. a new and different media campaign will be re3 ired. ?inally. and is regarded more as a special Ctreat’ rather than an everyday 3 ick. convenient snack. wo ld probably be best to se a 6@ based agency with local connections beca se it may well have lang age and comm nication problems and lacks experience in the foreign market. Se&e)ting t6e message $. legal restrictions may force both message and media adaptation. 'he criteria to se in selecting an advertising agency were explored in (hapter $. Ehere the media availability and market coverage is significantly different from the home market. Ehere the prod ct or service is perceived or sed in a significantly different way. a large international company s ch as >erox wo ld prefer to se an international agency with local offices beca se of he standardiFed nat re of their promotional campaign.9 localiFed or standardiFed campaignsH market conditionsH and market segments so ght 'he degree to which promotion sho ld be standardiFed is a diffic lt decision. %n the other hand.B ability of international marketeer’s own organiFationH ability to liaise with agency easilyH whether the campaign is to be standardiFed or notH val e of promotional b dgetH attit de in market to international vs local imageH organiFation of international marketeer’s companyH and degree to which marketer is responsible for promotion."rofessiona& assistan)e $. p blic relations. 'h s. etc. as does the fre3 ency with which these needs occ r in any society. Social and c lt ral val es will almost inevitably mean that selecting the message will re3 ire a local office or a local distrib tor.
they do not take into acco nt either competition or the re3 irements to achieve sales objectives. 55 .*get $. 'he advice of either yo r local distrib tor or advertising agency sho ld be so ght. :enerally. *s s ggested in the disc ssion above.11 'his is a more appropriate method of deciding on promotional b dgets. a case can be made for an appropriate b dget. the availability.g. nless yo are a m ltinational company operating in a partic lar co ntry.BH degree of c stomer response to the medi mH and cost per en3 iry generated. In practice promotion is often regarded as an Coptional’ cost and considerable diplomacy is re3 ired by the international marketer to j stify an increased b dget at a time of financial stringency. De)i*ing on t6e 7romotiona& <. %bjective f nding is based on the ass mption thatG AaB AbB AcB sales objectives in a partic lar market can be 3 antifiedH the appropriate level of promotion determinedH and the f nding necessary will be provided $.< the target market yo wish to contactH degree of market coverageH legal restraints on sing the medi mH physical constraints of medi m Ae. 6nfort nately.O *s in domestic markets there are several methods sed to decide on international promotionalAadvertisisngB b dgetG AaB AbB AcB AdB AeB $. In considering the se of any media one needs to take into acco ntG AaB AbB AcB AdB AeB AfB $. s ch information will be diffic lt to obtain. cost and effectiveness of media may not be the same as in domestic markets. In fact. all the first fo r tho gh sed. and has the advantage that when sales are hard to obtain..1= what can be affordedH percentage of sales competitor parityH historical precedentH and objective f nding. ability to show colo r etc. 'he first two are the most common.Se&e)tion me*ia $. are flawed in their logic.
'h s a foreign department store may be tempted to p t a special promotion on for a prod ct if the costs can be shared between it. Strategic decisions will always be the domain of the company. 'rade promotion is s ally ndertaken by the prod cer in most markets with en3 iries being direct to the distrib tor or agent. )romotional campaigns and s pport are often disc ssed as part of the ann al review with agents and distrib tors and form part of the total Cincentive’ to s ch. (osts are s ally easy to obtain from the international records. and this applies e3 ally to promotional campaigns. the distrib tor and the prod cer. calls and orders per call to establish the costs of contact and order generation. 'ypical monitoring meas res co ld incl deG AaB AbB AcB coding advertisements so that en3 iries can be related to a partic lar medi m or advertisementH comparing response rates between mediaH and comparing against other salesforce. 'he problem is deciding who does the promotion.14 )art of the task of a channel of distrib tion is that of promoting the prod ct. Smaller distrib tors s ch as retailers may well be tempted to promote the prod ct locally to the end sers. 'h s in most cases the company will rely on the advice and help of both the local distrib tors and agency in a partic lar market for operational and administrative decisions.1$ 6nless the company is large and experienced internationally. 56 . In*e7en*ent or )oo7erati-e 7romotion $. if an incentive is offered in the form of shared cost of promotion.1! Investment of any kind sho ld be related to the Cret rn’ that the investment generates. 'he response generated is often ignored.Monitoring an* )ontro& $. Organising internationa& 7romotion $. centraliFed promotion is not advisable. Ehere cons mer markets are involved the main distrib tor in any co ntry is s ally re3 ired to provide the promotion.
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