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MKT-312 International Marketing For EMBA PDF
MKT-312 International Marketing For EMBA PDF
International Marketing
Prepared by
Ahmed Sabbir
Marketing Marketing is the delivery of customer satisfaction at a profit-it is the simplest definition.
It basically involves-
Identify needs of the customer.
Find or develop product/service that can satisfy the needs.
Maintain customer relation.
International International marketing is the performance of business activities designed to plan, price,
Marketing Defined promote, and direct the flow of a company’s goods and services to consumers in more than one
nation for a profit.
Example, considering Apple - the tech giant designs its iPhone in California; outsources
its manufacturing jobs to different countries like - Mongolia, China, Korea, and Taiwan;
and markets them across the world. Apple have not restricted its business to a nation,
rather expanded it to throughout the world.
The International The international marketer’s task is more complicated than that of the domestic marketer
Marketing Task because the international marketer must deal with at least two levels of uncontrollable
uncertainty instead of one. Uncertainty is created by the uncontrollable elements of all
business environments, but each foreign country in which a company operates adds its
own unique set of uncontrollable factors.
Cultural The task of cultural adjustment, however, is the most challenging and important one
Adjustment confronting international marketers; they must adjust their marketing efforts to cultures
to which they are not attuned.
International marketers must:
adjust marketing efforts to cultures which they are not attuned to
be aware of frames of reference they are using in making decisions or evaluating the
potential of the market
– An important factor in determining or modifying a marketer’s reaction to
situations—social and even nonsocial.
– Cross-cultural misunderstandings can also occur when a simple hand gesture
has a number of different meanings in different parts of the world. When
wanting to signify something is fine, many people in the United States raise a
hand and make a circle with the thumb and forefinger. However, this same hand
Major Obstacles: The key to successful international marketing is adaptation to environmental differences
The Self-Reference from one market to another. Adaptation is a conscious effort on the part of the
Criterion and international marketer to anticipate the influences of both the foreign and domestic
Ethnocentrism uncontrollable factors on a marketing mix and then to adjust the marketing mix to
minimize the effects.
The SRC refers to the assumption that what is suitable for the home market will be
suitable for the foreign market and therefore there is no need to test whether or not the
product should be altered. That means, having sold a product successfully in the
domestic market a firm may assume that the product will, without adaptation, also be
successful in foreign markets.
It is of crucial importance when examining foreign markets that the culture of the country
is seen in context of the country. It is better to regard the culture as different from, rather
than better or worse than, the home culture. e.g.: Like McDonalds when entered India
they sold product aloo tikki burger in spite of their beef burger.
To counter the impact of the self-reference criterion, the corporation must select
appropriate personnel for international assignments and engage in sensitivity training.
Ethnocentricism
A belief that one’s own culture is superior and that all other cultures are inferior
It is the notion that people in one’s own company, culture, or country know best
how to do things.
Where the ethnocentric attitude exists, senior management view domestic techniques and
employees as superior to foreign and the most effective in the business. The domestic
business is seen as its priority and view overseas sales as addition to its domestic sales.
Cross Country Cross cultural is a comparison of a culture with one or more other cultures. The purpose
Analysis is to provide detailed information about the development of others in their own cultures
and compare this development across cultures. The comparison looks at not only what is
different between the cultures, but also what is similar or universal among them.
Balance of Trade A ‘balance of trade’ is a relationship between the country’s imports and exports, in
monetary value.
The term "Balance of Trade" may be defined as, the difference in value between the total
exports and total imports of a nation during a specific period of time.
Receipt:
Mechanize export sales
Money spent by foreign tourists
Transportation
Payments of dividend and interest for FDI abroad.
New foreign investment
Payment
Cost of goods imported
Overseas Spending of tourists
New overseas investment
Cost foreign military and economic aid
Nontariff Barriers
Nontariff barriers include: quotas, levies, embargoes, sanctions and other
restrictions, and are frequently used by large and developed economies.
Cultural Values
Underlying the cultural diversity that exists among countries are
fundamental differences in cultural values, that is, the importance of things
and ideas.
Examples: individualism vs. collectivism, power distance, uncertainty
avoidance, masculinity/femininity.
The cultures of the nations differed along four primary dimensions:
– Individualism/Collectivism Index- which focuses on self-
orientation;
– Power Distance Index- which focuses on authority orientation;
– Uncertainty Avoidance Index- which focuses on risk orientation;
– Cultural Values and Consumer Behavior- which focuses on
assertiveness and achievement.
Rituals
Life is filled with rituals, that is, patterns of behavior and interaction that are
learned and repeated. The most obvious ones are associated with major
events in life. Marriage ceremonies and funerals are good examples.
Beliefs
It includes religion, superstitions, and their related power structures. Religion
impacts people’s habits, their outlook on life, the products they buy, the way
they buy them, even the newspapers they read.
Acceptance of certain types of food, clothing, and behavior are frequently
affected by religion, and such influence can extend to the acceptance or
rejection of promotional messages as well.
Superstition plays a much larger role in a society’s belief system in some parts
of the world, for example, in parts of Asia, ghosts, fortune telling, palmistry,
head-bump reading, phases of the moon, demons, and soothsayers are all
integral parts of certain cultures.
Thought Processes
The degree to which ways of thinking vary across cultures.
Difference in perception
Asians tend to see the whole picture and can report details about the
background and foreground. Westerners alternatively focus on the
foreground and can provide great detail about central figures but see
relatively little in the background.
Influence of Consumption patterns, living styles, and the priority of needs are all dictated
Culture on
Consumpti
by culture. Culture prescribes the manner in which people satisfy their
on desires. Not surprisingly, consumption habits vary greatly. The consumption
of beef provides a good illustration. Some Thai and Chinese do not consume
beef at all, believing that it is improper to eat cattle that work on farms,
Not only does culture influence what is to be consumed, but it also affects
what should not be purchased. Muslims do not purchase chickens unless
they have been halalled, and like Jews, no consumption of pork is allowed.
Japan, France, Spain, Italy, Asia, Africa and the Middle Eastern Arab nations
in contrast, are high-context culture. In such cultures, the communication may
be indirect, and expressive manner in which the message is delivered
becomes critical. Because the verbal part (i.e. words) does not carry most of
the information, much of the information is contained in the nonverbal part
of the message to be communicated. The context of communication is high
because it includes a great deal of additional information, such as the message
sender’s values, position, background, and associations in the society. As
such, the message cannot be understood without its context.
Cultural • Being attuned to the nuances of culture so that a new culture can be
Sensitivity
and viewed objectively, evaluated and appreciated
Tolerance – Cultures are not right or wrong, better or worse, they are simply
different
– The more exotic the situation, the more sensitive, tolerant, and
flexible one needs to be
Individualism/Collective Index(IDV)
This refers to the strength of the ties that people have to others within their
community.
The Individualism/Collective Index refers to the preference of behavior that
promotes one’s self-interest. Cultures that are high in IDV reflect an “I”
mentality and tend to reward and accept individual initiative, while those low
in individualism reflect a “we” mentality and generally subjugate the
individual to the group.
Individualism pertains to societies in which the ties between individuals are
loose; everyone is expected to look after himself or herself and his or her
immediate family.
Collectivism as its opposite pertains to societies in which people from birth
onward are integrated into strong, cohesive groups, which throughout
people’s lifetime continue to protect them in exchange for unquestioning
loyalty. The collectivist side means that people like to belong to their social
framework and share the values of one’s groups. That is, people are
influenced by one’s family and the extended family consisting of neighbors
and relatives.
Power Distance Index(PDI)
The power distance index measures the tolerance of social inequality, that is,
power inequality between superiors and subordinates within a social system.
Cultures scoring low in uncertainty avoidance are associated with a low level
of anxiety and stress, a tolerance of deviance and dissent, and a willingness to
take risks.
Masculinity/Femininity (MAS)
The masculinity/femininity index refers to one’s desire for achievement and
entrepreneurial tendencies, and the extent to which the dominant values in
society are “masculine”.
Assertiveness, the acquisition of money and not caring for others, and the
quality of life or people are all cultural traits in countries with high MAS
scores.
Low-scoring cultures are associated with fluid sex roles, equality between the
sexes, and an emphasis on service, interdependence, and people.
Some cultures allow men and women to take on many different roles, while
others make sharp divisions between what men should do and what women
should do. In societies that make a sharp division, men are supposed to have
dominant, assertive roles and women more service-oriented, caring roles.
Subculture A subculture is a distinct and identifiable cultural group that has values in
common with the overall society but also has certain characteristics that are
Global Market Market segmentation is the process of subdividing a market into distinct
Segmentation subsets of customers that behave in the same way or have similar needs.
Global market segmentation is the process of dividing the world market into
distinct subsets of customers that behave in the same way or have similar
needs.
Or, it is the process of identifying specific segments-whether they be country
groups or individual consumer groups-of potential customers with
homogeneous attributes who are likely to exhibit similar buying behavior.”
- Geographic segmentation also has major limitations: The mere fact that”
markets are in the same world geographic region does not meant that they
are similar.
- Japan and Vietnam are both in East Asia, but one is a high income,
postindustrial society and the other is an emerging, less developed, pre
industrial society.
Demographic Segmentation
- Demographic segmentation-is based on measurable characteristics of
populations such as age, gender, income, education, and occupation.
- A number of demographic trends aging population, fewer children, more
women working outside the home, and higher incomes and living
standards-suggest the emergence of global segments.
- For most consumer and industrial products, national income is the single
most important segmentation variable and indicator of market potential.
- The World Bank segments countries into high income, upper middle
income, lower middle income, and low income.
Psychographic Segmentation
- In Psychographic Segmentation, segments are defined on the basis of
social class, lifestyle and personality characteristics.
Behavior Segmentation
- Behavior segmentation focuses on whether people buy and use a product,
as well as how often and how much they use it.
- Consumers can be categorized in terms of
Usage rates for example, heavy, medium, light, and nonuser.
User status: potential users, nonusers, ex-users, regulars, first-
timers, and users of competitors’ products.
Benefit Segmentation
- Benefit segmentation is the segmentation of the consumers based on what
particular benefit of the product appeals to them.
- Benefit segmentation in marketing considers that for a particular service
or product what is the value perceived, advantages or benefit that a
customer gets.
- This type of segmentation may be used in clothing, appliance, consumer,
cosmetic, and several other industries.
- Benefit segmentation can be used by mobile phone manufacturers to
divide their market into work-oriented customers, highly social
customers, and customers who consider mobile phones as a status
symbol. Highly social customers would expect mobile phones to be
durable, technologically advanced, and easy to use. Work-oriented
customers would prefer buying phones that are inexpensive and durable.
Mobile phones are considered as a status symbol by many people. They
expect their phone to be technologically advanced, expensive, sleek, and
stylish.
Global Targeting is the act of evaluating and comparing the identified groups and
Targeting then selecting one or more of them as the prospect(s) with the highest
potential. Actually, Market targeting is nothing but selecting the best
profitable segment.
Criteria For The three basic criteria for assessing opportunity in global target markets are
Targeting the same as in single-country targeting.
1. Current Segment Size and Growth Potential
- Is the market segment currently large enough that it presents a
company with the opportunity to make a profit?
- If it is not large enough or profitable enough today, does it have
high growth potential so that it is attractive in terms of a
company’s long-term strategy?
2. Potential Competition
- A market or market segment characterized by strong competition
may be a segment to avoid or one in which to utilize a different
strategy. Often a local brand may present competition to the
entering multinational.
- In Peru, Inca Kola is as popular a Coca-Cola. In Bangladesh Mojo
is a same type soft drinks brand.
3. Compatibility and Feasibility
- If a global target market is judged to be large enough, and if
strong competitors are either absent or not deemed to represent
insurmountable obstacles, then the final consideration is whether
a company can and should target that market.
- In many cases, reaching global market segments requires
considerable resources such as expenditures for distribution and
travel by company personnel.
- Another question is whether the pursuit of a particular segment
is compatible with the company’s overall goals and established
sources of competitive advantage.
Global High-tech and high-touch positioning are two strategies that can work well
product for a global product.
positioning
strategy High-tech Positioning
- High-tech products are sophisticated, technologically complex,
and/or difficult to explain or understand. (e.g., Cell phones and
audio/video components, automobiles are high-tech categories with
strong global positions).
- Such products are frequently purchased on the basis of concrete
product features, although image may also be important. Buyers
typically already possess or wish to acquire considerable technical
information.
- Marketing communication for high-tech products should be
informative and emphasize features.
- High-tech products may be divided into three categories:
Technical products-Computers, chemicals, tires, and financial
services are just a sample of the product categories whose
buyers have specialized needs; require a great deal of product
information and who share a common “language.”
Special-interest products- While less technical and more leisure
or recreation oriented, special-interest products also are
characterized by a shared experience and high involvement
among users. Again the common language and symbols
associated with such products can transcend language and
cultural barriers. Fuji bicycles, Adidas, and Nike Sports
equipment, Canon cameras are successful example of special
interest products.
Demonstrable products- Products that “speak for themselves” in
advertising of features and benefits can also travel well.
High-touch Positioning
- Marketing of high-touch products requires less emphasis on
specialized information and more emphasis on image. Like high-tech
products, however, high-touch categories are highly involving for
consumers.
- Buyers of high-touch products also share a common language and set
of symbols relating to themes of wealth, materialism, and romance.
- The three categories of high-touch products are
products that solve a common problem,
Political Risk
Political risk, or the risk of a change in government policy that would adversely
impact a company’s ability to operate effectively and profitably, is a deterrent to
expanding internationally. The lower the level of political risk, the more likely it
is that a company will invest in a country or market.
The difficulty of assessing political risk is inversely’ proportional to a country’s
stage of economic development: All other things being equal the less developed
a country, the more difficult it is to predict political risk. The higher the level of
income per capita, the lower the level of political risk.
Market Access
A key factor in locating production facilities is market access. If a country or a
region limits market access because of local content laws, balance-of-payments
problems, or any other reason, it may be necessary to establish a production
facility within the country itself.
Shipping Considerations
In general, the greater the distance between the product source and the target
market, the greater the time delay for delivery and the higher the transportation
cost. However, innovation and new transportation technologies are cutting both
time and dollar costs.
For example, Acer, a Taiwanese company and the seventh largest producer of
computers, practices what it calls the “fast-food business model.” Using this
logistics strategy eliminates the minimum one- to two-month time lag for
shipping goods by sea and costly inventory expense and provides consumers
with the latest product.
Country Infrastructure
In order to present an attractive setting for a manufacturing operation, it is
important that the country’s infrastructure be sufficiently developed to support
a manufacturing operation.
The required infrastructure will vary from company to company, but minimally
it will include power, transportation and roads, communications, service and
component suppliers, a labor pool, civil order, and effective governance.
Foreign Exchange
Exchange rate an important criteria for international market decision making.
At any point in time, what has been an attractive location for production may
become much less attractive due to exchange rate fluctuation. The prudent
company will incorporate exchange volatility into its planning assumptions and
be prepared to prosper under a variety of exchange rate relationships.
Creating a The first step in choosing export markets is to establish the key factors
product profile influencing sales and profitability of the product in question. If a company is
for getting started for the first time in exporting, its product-market profile will
International most likely be based on its experience in the home market, which may or may
Entry not be relevant to the individual export markets being considered.
The basic questions to be answered can be summarized as the nine Ws:
1. “Who buys our product?
2. Who does not buy our product?
3. What need or function does our product serve?
4. What problem does our product solve?
International The first issue that an expanding firm must address is whether to export or
Market Entry produce locally. In many emerging markets, this issue is resolved by a national
and Expansion policy that requires local production.
Decision Any company wishing to enter the market of such a country must source locally.
Model In high-income countries, local production is normally not required, so the
choice is up to the company.
Assuming that the choice is up to the company, the trade-offs for local versus
regional or global production are cost, quality, delivery, and customer value.
Costs include labor, materials, capital, land, and transportation. Scale economies
are an important factor in determining cost: For every product, there is some
minimum volume required to justify the investment required to establish a
production site. If the product is heavy, transportation costs are greater and
provide an incentive to locate production closer to the Customer. Offsetting
transportation costs are scale economies that result from spreading fixed costs
over a greater production volume.
1. Sourcing: Home, third, or host country?
Cost, market access, country of origin factors
2. In country or in-region marketing organization.
Cost, market impact assessment. If choice is to establish own
organization, must decide who to appoint to key positions.
3. Selection, training, and motivation of local distributors and agents.
4. Marketing mix strategy: Goals and objectives in sales, earnings, and
share of market positioning; marketing mix strategy
5. Strategy implementation
Exporting
- Exporting is just one strategy for a company that has decided to go
international.
- Exporting accounts for some 10% of global activity
Direct exporting – the company sells to a customer in another country
Indirect exporting – the company sells to a buyer (importer or
distribution) in the home country, who in turn exports the product
The Internet
o Initially, Internet marketing focused on domestic sales
o A surprisingly large number of companies started receiving
orders from customers in other countries,
o Resulting in the concept of international Internet marketing (IIM)
Direct sales-Particularly for high technology and big ticket industrial
prod
Contractual agreements
- Long-term,
- Non-equity association between a company and another in a foreign
market
Licensing
- A means of establishing a foothold in foreign markets without large
capital outlays
- A favorite strategy for small and medium-sized companies
- Legitimate means of capitalizing on intellectual property in a foreign
market
Franchising
- Franchiser provides a standard package of products, systems, and
management services
- Franchise provides market knowledge, capital, and personal
involvement in management
- Expected to be the fastest-growing market-entry strategy
Export marketing is the integrated marketing of goods and services that are
destined for customers in international markets.
The probability that a firm will advance from one stage to the next depends on
different factors. Moving from stage 2 to stage 3 depends on management’s
An international marketer who has gone through the planning process has a
framework for analyzing marketing problems and opportunities and a basis for
coordinating information from different country markets.
International commitment
After company objectives have been identified, management needs to
determine whether it is prepared to make the level of commitment required
for successful international operations-commitment in terms of dollars to be
invested, personnel for managing the international organization, and determination
to stay in the market long enough to realize a return on these investments.
The degree of commitment to an international marketing cause reflects the
extend to a company’s involvement
For the company already committed, the key decisions involve
allocating effort and resources among countries and product(s),
deciding on new markets to develop or old ones to withdraw from, and
Determining which products to develop or drop.
Market Companies must decide whether to expand by seeking new markets in existing
Expansion countries or, alternatively, seeking new country markets for already identified
Strategies and served market segments. These two dimensions in combination produce four
strategic options as presented in Figure 1.
Stages of The stages in the evolution of the global corporation, from domestic to
Development international, multinational, global, and transnational is depicted in the following
Model table.
Stage & Domestic International Multinational Global Transnational
Company
Strategy Domestic International Multi- Global Global
domestic
Model - Coordinated Decentralized Centralized Integrated
Federation Federation Hub Network
View of Home Extension National Global Global
World Country Markets Markets Markets markets
or Resources and resources
Orientation Ethnocentric Ethnocentric Polycentric Mixed Geocentric
Domestic Stage
- focus on domestic markets
- environment scanning is local
- Structure is domestic, typically functional or divisional, foreign sales
through an export department and logistics are outsourced.
Forces A useful way of gaining insight into the nature of competition is through industry
influencing analysis. As a working definition, an industry can be defined as a group of firms
Competition in that produce products that are close substitutes for each other. In any industry,
an industry
competition works to drive down the rate of return on invested capital toward the
rate that would be earned in the economist’s perfectly’ competitive industry.
Threat of Substitute
Products
This force considers how easy or difficult it is for competitors to join the
marketplace in the industry being examined.
The easier it is for a competitor to join, the greater the risk of a business's market
share being depleted. Barriers to entry include absolute cost advantages, access to
inputs, economies of scale and well-recognized brands.
New entrants to an industry bring new capacity, a desire to gain market share and
position, and, very often, new approaches to serving customer needs.
Porter describes eight major sources of barriers to entry, the presence or absence
of which determines the extent of the threat of new industry entrants.
1) Economies of scale- refers to the decline in per unit product costs as the
absolute volume of production per period increases.
2) Product differentiation is the extent of a product’s perceived uniqueness-
If there is a threat from a rival product the firm will have to improve the
performance of their products by reducing costs and therefore prices and by
differentiation.
This force analyzes how much power a business's supplier has and how much
control it has over the potential to raise its prices, which, in turn, would lower a
business's profitability.
If suppliers have enough leverage over industry firms, they can raise prices high
enough to significantly influence the profitability of the industry.
Several factors influence supplier bargaining power:
1. Suppliers will have the advantage if they are large and relatively few in
number.
Porter’s Five Forces of buyer bargaining power refers to the pressure consumers
can exert on businesses to get them to provide higher quality products, better
customer service, and lower prices.
The ultimate aim of industrial customers is to pay the lowest possible price to
obtain the products or services that they use as inputs. Usually, therefore, the
buyers’ best interests are served if they can drive down profitability in the supplier
industry.
The following are conditions under which buyers can exert power over suppliers:
1. When they purchase in such large quantities that supplier firms depend
on the buyers’ business for survival.
1. When the supplier’s products are viewed as commodities-that is, as
standard or undifferentiated-buyers are likely to bargain hard for low
prices because many supplier firms can meet their needs.
2. When the supplier industry’s products or services represent a significant
portion of the buying firms’ costs.
3. When the buyer is willing to achieve backward vertical integration.
Rivalry among firms refers to all the actions taken by firms in the industry to
improve their positions and gain advantage over each other. Rivalry manifests
itself in price competition, advertising battles, product positioning, and attempts
at differentiation.
Human Resources
- The quantity of workers available, the skills possessed by these workers,
wage levels, and the overall work ethic of the workforce together
constitute a nation’s human resource factors.
- Countries with a plentiful supply of low-wage labor have an obvious
advantage in the current production of labor-intensive products;
- Again, low wage countries may be at disadvantage when it comes to the
production of sophisticated products requiring highly skilled workers
capable of working without extensive supervision.
Physical Resources
- The availability, quantity, quality, and cost of land, water, minerals, and
other natural resources determine a country’s physical resources.
- A country’s size and location are also included in this category because
proximity to markets and sources of supply, as well as transportation
costs, are strategic considerations. These factors are obviously important
advantages or disadvantages to industries dependent on natural
resources.
Knowledge Resources
- The availability within a nation of a significant population with scientific,
technical, and market-related knowledge means a nation is endowed with
knowledge resources.
- The presence of these factors is usually a function of the educational
orientation of the society as well as the number of research facilities and
universities-both government and private—operating in the country.
Capital Resources
- Countries vary in the availability, amount, cost, and types of capital
available to the country’s industries.
- The nation’s savings rate, interest rates, tax laws, and government deficits
all affect the availability of capital.
- The advantage to industries with low capital costs versus those located in
nations with relatively high costs is sometimes decisive. Firms paying high
capital costs are frequently unable to stay in a market in which the
competition comes from a nation with low capital costs.
Infrastructure Resources
- Infrastructure includes a nation’s banking system, health care system,
transportation system, and communications system, as well as the
availability and cost of using these systems. More sophisticated industries
are more dependent on advanced infrastructures for success.
The size and pattern of growth of home demand are important only if the
composition of the home demand is sophisticated and anticipates foreign
demand. Large home markets offer opportunities to achieve economies of scale
and learning while dealing with familiar, comfortable markets.
Related and The presence of related and supporting industries provides the foundation on
Supporting which the focal industry can excel.
Industries
A nation has an advantage when it is home to internationally competitive
industries in fields that are related to, or in direct support of, other industries.
Internationally competitive supplier industries provide inputs to downstream
industries that are likely to be internationally competitive in terms of
technological innovation, price, and quality. Access is a function of proximity both
in terms of physical distance and cultural similarity. It is not the inputs themselves
that give advantage. It is the contact and coordination with the suppliers that
allow the firm the opportunity to structure the value chain so that linkages with
suppliers are optimized. These opportunities may not be available to foreign
firms.
Firm Strategy, The national context in which companies operate largely determines how
Structure and companies are created, organized and managed: it affects their strategy and how
Rivalry
they structure themselves.
Differences in management styles, organizational skills, and strategic perspectives
create advantages and disadvantages for firms competing in different types of
industries, as do differences in the intensity of domestic rivalry. In Germany, for
example, company structure and management style tend to be hierarchical.
Managers tend to come from technical backgrounds and to be most successful
when dealing with industries that demand highly disciplined structures, such as
chemicals and precision machinery.
A good example for this is the Japanese automobile industry with intense rivalry
between players such as Nissan, Honda, Toyota, Suzuki, Mitsubishi and Subaru.
Other Forces There are two final external variables to consider in the evaluation of national
Acting on the competitive advantage: chance and government.
Diamond
Chance
Chance events play a role in shaping the competitive environment. Chance events
are occurrences that are beyond the control of firms, industries, and usually
governments. Included in this category are such things as wars and their
aftermath, major technological breakthroughs, sudden dramatic shifts in factor or
input cost (e.g., the oil crises), dramatic swings in exchange rates, and so on.
Government
Although it is often argued that government is a major determinant of national
competitive advantage, the fact is that government is not a determinant but rather
an influence on determinants.
Generic In addition to the five forces model of industry competition, Porter developed a
Strategies for
framework of so-called generic business strategies based on two sources of
Creating
Competitive competitive advantage: low cost and differentiation.
Advantage Figure shows that the combination of these two sources with the scope of the
target market served (narrow or broad) or product mix width (narrow or wide)
yields four generic strategies:
• cost leadership,
Cost-leadership Advantage
When the unique value delivered by a firm is based on its position as the
industry’s low-cost producer, in broadly defined markets or across a wide mix of
products, a cost leadership advantage occurs.
Whatever its source, cost-leadership advantage can be the basis for offering lower
prices (and more value) to customers in the late more competitive stages of the
product life cycle.
e.g., Walmart
Differentiation
When a firm’s product delivers unique value because of an actual or perceived
uniqueness in a broad market, it is said to have a differentiation advantage.
This can be an extremely effective strategy for defending market position and
obtaining above-average financial returns; unique products often command
premium price,
E.g., Apple, Mcdonald, FedEx
Focused Differentiation
A focused differentiation strategy requires offering unique features that fulfill the
demands of a narrow market.
Focused cost
A focused cost leadership strategy requires competing based on price to target a
narrow market. A firm that follows this strategy does not necessarily charge the
lowest prices in the industry. Instead, it charges low prices relative to other firms
that compete within the target market.
In the shipbuilding industry, for example, Polish and Chinese shipyards offer
simple, standard vessel types at low prices that reflect low production costs.
Definition of Product
A product is anything that can be offered to a market for attention, acquisition, use, or consumption and that
might satisfy a want or need.
A product, can also be defined as a collection of physical, psychological, service, and symbolic attributes that
collectively yield satisfaction, or benefits, to a buyer or user.
A Product can be a physical goods (automobiles, books), a services (checking of account in a bank),
or an idea (consultancy in a firm, advice of a physician).
A number of frameworks for classifying products have been developed. A frequently used
classification is based on users and distinguishes between consumer and industrial goods. Both
types of goods, in turn, can be further classified on the basis of other criteria, such as how they are
purchased (convenience, preference, shopping and specially goods) and their life span (durable,
non-durable and disposable). These and other classification (frameworks developed for domestic
marketing are fully applicable to international marketing).
Local Products
A local product is available in a portion of a national market. In U.K, the term local product is
synonymous with regional product. These products may be new products that a company is
introducing using a rollout strategy, or a product that is distributed exclusively in that region.
Sometimes, the local product, marketed in one region is expanded to other regions of the nation
based on its acceptability.
For example, Amrita food products in Barishal.
National Products
A national product is one that, in the context of a particular company, is offered in a single national
market. Sometimes national products appear when a global company caters to the needs and
preferences of particular country markets.
Such examples notwithstanding there are several reasons why national products-even those that are
quite profitable-may represent a substantial opportunity cost to a company.
First, the existence of a single national business does not provide an opportunity to develop
and utilize international leverage from headquarters in marketing, R&D, and production.
Second, the local product does not allow for the transfer and application of experience gained
in one market to other markets.
A third shortcoming a single-country product is the lack of transferability of managerial
expertise acquired in the single-product area.
International products
International products are offered in multinational, regional markets. The classic international
product is the Euro product, offered throughout Europe but not in the rest of the world. A company
can move from international to global position. This is possible through acquisition of businesses
operating in multi-regions.
For example, Renault car which was an Euro product entered the Brazilian market and became a
multi-regional company. Renault combined with Nissan in Asia and moved from a multi-regional
to a global position.
Global Product
Global products are those products that are marketed internationally under the same brand name,
features and specifications across countries. Global products are different from regional products or
brands, which are specific to a particular region.
Apple is an American company which produces its products in China. India imports Apple
products. For India, Apple products are global products. Sony, General Electric and Levis are other
strong global brands.
The main advantages of global products is the achievement of economies of scale and Economies of
scope. Global brand recognition is another advantage.
Review Question
Differentiate between national and international products
Global product
Global products are offered in global markets. A global product is designed to meet the needs of
global market. Global Products are standardized products with a common brand name, with
uniform features in all countries. E.g.: Gillette, Benetton Sweaters
Global product differs from a global brand in one important respect: It does not carry the same name
and image from country to country. Like the global brand, however, it is guided by the same
strategic principles, is similarly positioned, and may have a marketing mix that varies from country
to country.
Product Positioning
Occupy a clear distinctive and desirable place relative to competing products in the minds of
target consumers.
Positioning refers to the act of locating a brand in customers’ minds over and against other
products in terms of product attributes and benefits that the brand does and does not offer.
Positioning Strategy
Several general strategies have been suggested for positioning products: positioning by attribute or
benefit, quality/price, use or application, and use/user. Two additional strategies, high-tech and
high-touch, have been suggested for global products.
Attribute or Benefit
A frequently used positioning strategy exploits a particular product attribute, benefit, or feature. In
global marketing, the fact that a product is imported can itself represent a benefit positioning.
Economy, reliability, and durability are other frequently used attribute/benefit positions.
Volvo automobiles are known for solid construction that offer safety in the event of a crash. In the
ongoing credit card wars, VISA’s advertising focuses on the benefit of worldwide merchant
acceptance.
Use/User
Positioning can also be achieved by describing how a product is used or associating a product with
a user or class of users the same way in every market. For example, Benetton users the same
positioning for its clothing when it targets the global youth market. Marlboro’s extraordinary success
as a global brand is due in part to the product’s association with cowboys.
High-tech Positioning
High-touch Positioning
Preferences
There are marked and important differences in preferences around the world factors such as color
and taste. Marketers who ignore preferences do so at their own peril.
Sometimes, a product design that is successful in one world region does meet with success in the
rest of the world. BMW and Mercedes dominate the luxury car market in Europe and are strong
competitors in the rest of the world, with exactly the same design.
Cost
In approaching the issue of product design, company managers must consider cost factors broadly.
Of course, the actual cost of producing the product will create a cost floor. Other design related
cost whether incurred by the manufacturer or the end user-must also be consider.
Compatibility
The last product design issue that must be addressed by company managers is product compatibility
with the environment in which it is used.
For example, electrical systems are designed such a way that range from 50 to 230 volts and from 50
to 60 cycles, means that the design of any product powered by electricity must be compatible with
the power system in the country of use.
To capitalize on opportunities outside the home country, company managers must devise and
implement appropriate marketing programs. Depending on organizational objectives and market
needs, a particular program may consist of extension strategies, adaptation strategies, or a
combination of the two.
A third approach to global product planning is to extend, without change, the basic home-market
communications strategy while adapting the product to local use or preference conditions.
For example, Soap and detergent manufacturers have adjusted their product formulations to meet
local water and washing equipment conditions with no change in their basic communications
approach.
A company may also utilize the product-communication adaptation (dual adaptation) strategy. As
the name implies, both the product and one or more promotional elements are adapted for a
particular country or region.
Unilever’s experience with fabric softener in Europe exemplifies the classic multinational road to
adaptation.
The four alternatives are not mutually exclusive. A company can simultaneously utilize different
product/communication strategies in different parts of the world.
Pricing Define
In the narrowest sense, price is the amount of money charged for a product or a service. More
broadly, price is the sum of the values that customers exchange for the benefits of having or using
the product or service.
Price can be defined in ratio terms, giving the equation
Resources given up
Price = ---------------------------
goods received
Price is the only element in the marketing mix that determine a firm’s market share and profitability.
It is treated as a key strategic tool for creating and capturing customer value. Prices have a direct
impact on a firm’s bottom line.
Pricing is a very critical decision in international marketing management because it is a major factor
influencing a firm’s total revenue from exports and its profitability. There is no thumb rule or any
formula that can be applied in pricing a product correctly. There is no doubt that as is the case in the
domestic market the interaction of the market force like demand and supply affect the price at which
the product can be sold in the international market. Besides, several other factors: economic, social,
political, marketing conditions and product attributes influence the decision making in the
international marketing.
In any given marketing three basic factors determine the limits of pricing decisions of a firm. These
are product cost, the purchasing power of the consumers and demand and supply force.
The marketing manager uses following the parameters for arriving at a price.
1. Costs
2. Demand and supply
3. Economic, legal and political conditions
Costs: Costs represent the base line for setting the price. In other words, costs represent the price
floor beyond which prices cannot be dropped. Costs are made up of two components, fixed costs
and variable costs.
Cost-based pricing involves setting prices based on the costs of producing, distributing, and selling
the product plus a fair rate of return for the company’s effort and risk. A company’s costs may be an
important element in its pricing strategy .
Demand & Supply: For a marketing manager, the upper limit is demonstrated by the demand and
supply conditions as they exist in the market. The demand conditions are interpreted from the
Economic, Legal and Political conditions: These represent parameters outside the market forces
which influence the price structure. The countries where the economic policies are directed by the
Government, the economic and political conditions have an important bearing on price structures.
Economic factors such as a boom or recession, inflation, and interest rates affect pricing decisions.
Legalities lengthen any process and complicate it and thereby influence the price structure.
The more the legal constraints to be adhered to, more the price charged from the customers, in an
effort to pass the increase in costs.
The marketing manager arrives at a price, within the parameters of cost, demand & supply and
economic, political and legal parameters, by adopting a process that fulfils his marketing objective.
Export Pricing
Export pricing is a technique of fixing the prices of goods and services which are intended to be
exported and sold in the overseas markets.
Export pricing is much more difficult than domestic pricing, because the exporter has to take into
account not only the cost of production but also the influence and impact of the conditions prevailing
in the international markets.
An important pre-requisite for scientific export pricing decisions is regular availability of authentic
basic data relating to export products, foreign market and other relevant marketing information. The
details of information requirements vary from product to product, market to-market and firm to
firm. In general, the following information is usually necessary for facilitating export pricing
decision:
Market Information
1. Market Structure-high competition, little competition or low competition
2. Peculiarities of the market-developed and developing countries. Particular segments in
developed countries may be interested in low price goods.
3. Ruling price in the foreign market including prices of substitutes
4. Terms of payment offered by the competitors and demanded by importers
5. Import duties, border fiscal charges and quota, restrictions.
6. Major sources of supply in the importing country-local and foreign
7. Trade preferences and/or trade agreements, if any
8. Extent of G.S.P. concessions, if any
9. Brand image, brand loyalty and consumer preferences
10. The nature of market segmentation, if any
11. Publicity-need, media and cost
12. Channels of distribution and margins allowed to various intermediaries
13. Shipping freight, insurance, packing, banking, transportation and other charges incidental to
export, and
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14. Documentation and invoicing requirements, health and sanitary regulations and other
government regulations.
As regards the supplies for additional exports, the essential information required is:
1. Whether it would involve curtailment of supplies to the domestic market?
2. Whether it would lead to the utilization of idle capacity, or
3. Whether it would require commissioning of new capacity?
Pricing strategy is an important part of fixing the international price. The price has to be competitive
and based on the quality of a product. Different pricing strategies are adopted in different foreign
countries because of certain environmental factors like political, economic, socio-cultural, and legal
and so on.
There are three main factors which affect the export price strategy to be adopted by the exporter in
the foreign markets, viz. the characteristics of the product and the nature of its demand, the
philosophy of its management and the market characteristics. The pricing strategy is a short-term
tool to make fit the prices in the changing competitive situations in the short run with its pricing
policy decisions.
Characteristics of the product and the nature of its demand: It is a major factor in fixing the
price of the product at a particular time. In other words, improvement in quality of the
product and product adaptation according to the changing competitive conditions in the
foreign market should be taken as a continuous process. Elasticity of demand is another
factor, which influences the price. If the demand of a product is inelastic, the price
reduction will not help to increase the revenue. In such a case, higher prices may be fixed
taking in view the competitive position in the market. If, on the other hand, product is
highly elastic, the sales revenue can be appreciably increased by slightly reducing the
price. Thus, pricing strategy, i.e. whether to fix higher price or lower price as compared to
the competitor’s prices very much depends upon the elasticity of demand and the
competitive position.
Pricing Approaches
Normally, the following pricing strategies are used in the export market:
1. Market Penetration Strategy: Under this strategy, exporters offer a very low introductory price
to speed up their sales and, therefore, widening the market base. It aims at capturing the
products in the market especially if the quality of the product is proved with its wide acceptance.
E.g. Orascom’s Banglalink introduce in Bangladeh.
2. Probe Pricing Strategy: Fixing low price for its product may have an adverse effect on the
imagwe of the firm and of the product. It may raise doubts in the minds of the buyers about the
quality of the product if it is lower than the price of competitors or if it is reduced subsequently.
In this strategy, the exporter may fix a higher price in the export market during the early stages of product
introduction. This is done to find out or probe the reaction of the buyers towards the price. The prices are
then adjusted accordingly.
3. Follow the Leader Pricing Strategy: In a competitive world market or where adequate market
information is not available, it may be useful to follow the leader in the market comparing its
product with that of the leader the exporter may then fix the price of its product. In such cases
the price of the product is lower than the leader’s product. However, this price has no rational
or scientific base for fixing the price.
4. Skimming Pricing Strategy: Under this strategy, a very high introductory price is fixed to skim
the revenue from the market. This policy is generally introduced when there is no competition
in the market. Such prices continue to be high till competitors enter the foreign market. As soon
as competitors enter the market, the exporter reduces the price. Sony has been a frequent
practitioner of market-skimming pricing, in which prices start high and slowly drop over time.
Condition for skimming price
A sufficient number of buyers have a high current demand;
The high initial price does not attract more competitors to the market;
The high price communicates the image of a superior product.
Lower cost
through volume Value>Differential from
lower cost alternative
Investment in Price
Special Value Considered Price Offerings
if Viable
Types of Dumping
The major types of Dumping prevalent today are:
1. Over-capacity dumping:
2. Government-support dumping
3. Tactical dumping (discriminatory pricing)
4. Predatory dumping
Over-capacity dumping occurs when a company produces and sells products at a price that is lower
than the average cost of production, trying to cover at least its fixed costs.
Government-supported dumping takes place when the government supports a particular industry
by providing subsidies, because of which such firms can sell their products at a price below the
production costs.
Tactical dumping occurs when a firm sells the same product at different prices in different markets.
Predatory dumping aims at eliminating the competition to gain exclusive control of the market. It is
an extreme form of discriminatory pricing where the firm aims at monopolizing a market. This
method of dumping is most likely to cause destructive injury to the country where the product is
being dumped.
Counter Trade
Counter-trade is one of the oldest forms of trade in the government mandate to pay for goods and
services with something other than cash.
Countertrade is a reciprocal form of international trade in which goods or services are exchanged
for other goods or services rather than for hard currency.
In short, a good-for-goods deal is Counter-trade. Counter trade constitutes an estimated 5-30 percent
of total world trade.
There are three primary reasons for Counter-trade:
(i) Provides a trade financing alternative to those countries that have an international debt
and liquidity problems,
(ii) Relationship may provide LDCs and MNCs with access to new markets, and
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(iii) Fits well conceptually with the resurgence of bilateral trade agreements between the
governments.
Types of Counter-trade
There are several types of Counter-trades including barter, counter-purchase, compensation trade,
switch trading, and offsets and clearing agreements.
Barter is the simplest of many types of Counter-trades. It is a onetime direct and
simultaneous exchange of products of equal value (one product or another). By removing
money as a medium of exchange, barter makes it possible for cash tied countries to buy and
sell. Although price must be considered in any counter-trade, price is only implicit and best
in the case of barter.
Under a counter purchase arrangement, the exporter sells goods or services to an importer
and agrees to also purchase other goods from the importer within a specified period. A recent
example of this is the ongoing trade between Congo and China where infrastructure is being
traded for a supply of metals. Unlike barter, which is a single transaction with an exchange
price only implied, counter-purchase involves two separate transactions—each with its own
cash value. A supplier sells a facility or product at a set price and orders unrelated or non-
resultant products to offset the cost to the initial buyer.
Next is compensation trade or buy back. A compensation trade requires a company to
provide machinery, factories or technology and to buy products made from this machinery
over an agreed on period. Unlike counter-purchase, which involves two unrelated products, the two
contracts in a compensation trade are highly related. Under a separate agreement to the sale of
plant or equipment, a supplier agrees to buy part of the plant’s output for a number of years.
In an offset, a foreign supplier or manufacturer is required to assemble the product locally
and purchase local components as an exchange for the right to sell its products locally. In
effect, the supplier has to manufacture at a location that may not be optimal from an
economic point of view. Offsets are often found in purchases of aircraft and Military
equipment.
Switch Trading: In this method one company trades products and services or, in some cases,
builds infrastructure like roads, railway lines, hospitals with another nation and, in turn, are
obligated to make a purchase from that nation. One such example is a deal proposed by the
Philippine Government where they offer to trade Philippine coffee for essential products.
Clearing Agreement is clearing account barter with no currency transaction required. With
a line of credit being established in the central banks of two countries, the trade in this case
is continuous and the exchange of products between two governments is designed to achieve
an agreed on value or volume of trade tabulated or calculated in non-convertible “clearing
account units”.
Transfer Pricing
A rational system of transfer pricing is required to ensure profitability at each level. Global
companies, while determining transfer prices for supplies to subsidiaries and affiliated in foreign
countries, take into account a number of factors like taxes and duties leviable in the countries
concerned, their market conditions, ability of the potential customers to pay for the customers to pay
for the company’s products, different profit transfer rules, Marketing Mix conflicting objectives of
joint venture partners and varying government regulations.
There are four major approaches to transfer pricing:
1. Transfer at cost
2. Transfer at cost plus overhead and margin
3. Transfer at price derived from end market prices
4. Transfer at “arm’s length price”
Grey Marketing
A Grey market, in simple terms, is the buying of a good in one market and selling it in another
market to benefit from the difference in prices prevailing in the 2 markets. It is also known as a
parallel market. It is the selling of a good through a distribution channel which has not been
authorized to sell that good by the original manufacturer. Although it is legal, it is unofficial and
unauthorized. Grey marketing could occur within a country but it is becoming increasingly
prevalent across countries among international brands with high price differentials and low costs of
transportation, tariffs, taxes etc.
Grey markets tend to develop in markets where information about the prices of similar goods like
cars, designer goods, consumer durables etc are cheap and easy to obtain.
Terms of Payment
These are the conditions under which the seller will complete the sale if they are satisfied. The terms
include the specific period within which the buyer needs to pay off the amount dues to the seller of
the product or service. It can be said in general that, terms of payment reflects the extent to which
the seller requires a guarantee of payment before he loses control over the goods.
There are four main methods using by the exporters and importers to fulfil the contract value. These
are Advance payment, open Account System, Consignment Sale and Documentary Collection.
Open account
It is just opposite to the Advance payment.
Open account means that payment is left open to an agreed-upon future date.
When an Exporter agrees to sell the commodity on open account system to the Importer, he
despatches the goods to the buyer directly followed by the transport documents and an
invoice requesting payment.
Characteristics of Consignment
Applicability Recommended for use in competitive environments to enter new
markets and increase sales in partnership with a reliable and trustworthy foreign
distributor.
Risk: Significant risk to the exporter because payment is required only after the goods
have been sold to the end customer
Pros:
o Help enhance export competitiveness on the basis of greater availability and
faster delivery of goods
o Help reduce the direct costs of storing and managing inventory
Cons
o Exporter is not guaranteed payment
o Additional costs associated with risk mitigation measures
Documentary Collection
A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of a
payment to the remitting bank (exporter’s bank), which sends documents to a collecting bank
(importer’s bank), along with instructions for payment. Funds are received from the importer and
Types of payment
There are three standard ways of payment methods in the export import trade international trade
market:
1. Clean Payment
2. Collection of Bills
3. Letters of Credit L/C
Clean Payments
In clean payment method, all shipping documents, including title documents are handled directly
between the trading partners. The role of banks is limited to clearing amounts as required.
Applicant/
Importer/Buyer: Applicant is the buyer of the goods or services supplied by the seller.
Letter of credit is opened by the issuing bank as per applicant's request.
Beneficiary/
Exporter/ Seller: Seller of goods or provider of service.
Beneficiary is the party in whose favor the LC is established.
Issuing Bank: The bank that issues or opens LC at the request of an applicant or its own
behalf.
Advising Bank: Advising bank is the bank through which the LC is advised to the exporter.
Or, the bank to which the issuing bank forwards the LC with instruction to
notify the exporter/beneficiary. It is a bank situated in the exporting country.
L/C Types
Revocable & Irrevocable Letter of Credit (L/C): A Revocable Letter of Credit can be cancelled
without the consent of the exporter. An Irrevocable Letter of Credit cannot be cancelled or
amended without the consent of all parties including the exporter.
Sight & Time Letter of Credit: If payment is to be made at the time of presenting the
document then it is referred as the Sight Letter of Credit. In this case banks are allowed to
take the necessary time required to check the documents. If payment is to be made after the
lapse of a particular time period as stated in the draft then it is referred as the Term Letter of
Credit.
Confirmed Letter of Credit (L/C): When an issuing bank authorize or requests another bank
/third bank to confirm its irrevocable credit and the letter has added its confirmation, such
confirmation constitutes a definite undertaking of the confirming bank in addition to that of
issuing bank. This type of L/C is called confirmed irrevocable letter of credit. A confirmed
letter of credit is typically used when the issuing bank of the letter of credit may have
questionable creditworthiness and the seller seeks to get a second guarantee to assure
payment.
International Distribution
Distribution means the process by which we make the goods or the service available to the end
consumer.
Distribution is the course that goods take between production and the final consumer. This course
often differs on a country by country basis and MNCs will spend a considerable amount of time in
examining the different systems that are in place, the criteria to choose distributors and channels
and how distribution segment will be employed.
The marketing function of distribution involves the critical process of ensuring that the products of
a firm reach the proper location for sale at the proper time and in proper quantity.
Distribution decisions are also of critical importance because they are often long-term in nature,
involving the signing of contracts with transporters or equipment leasers or the development of
expensive capital equipment or infrastructures, such as rail lines, wharfs, ports, docks and loading
facilities.
This process, difficult in domestic markets grows more complicated in international environments
because it has two stages. First, the international exporter must transport goods from the domestic
production site the foreign market, and then establish methods of distribution for the goods within
the foreign country.
A distribution channel in marketing refers to the path or route through which goods and services
travel to get from the place of production or manufacture to the final users.
When the Companies have to market abroad they use two principal distribution channels: (i) direct
selling and (ii) indirect selling.
Direct Selling
Direct selling is employed when a manufacturer develops an overseas channel. This channel requires
that the manufacturer deals directly with a foreign party without going through an intermediary in
a home country.
A distribution system is said to be direct when the product or service leaves the producer and goes
directly to the customer with no middlemen involved.
The greatest advantage of direct selling channel is the active market exploitation, since the
manufacturer is more directly committed to its foreign markets.
Direct selling has a number of problems also. It is difficult channel to manage if the manufacturer is
unfamiliar with foreign market. Moreover, the channel is time consuming and expensive. Without a
large volume of business the manufacturer may find it too costly to maintain the channel.
Indirect selling
Indirect selling also known as the local or domestic channel is employed when a manufacturer
markets its product through another firm that acts as the manufacturer’s sales intermediary
(middleman).
As such, the sales intermediary is just another local or domestic channel for the manufacturer
because there are no dealings abroad with a foreign firm. By exporting through an independent local
middleman, the manufacturer has no need to set up an international department.
An indirect distribution channel relies on intermediaries to perform most or all distribution
functions.
Advantages
The channel is simple and inexpensive. The manufacturer incurs no startup cost for the
channel and is relieved of the responsibility of physically moving goods overseas.
Because the intermediary very likely represents separate clients who can help share
distribution costs, the costs on moving the goods are further reduced.
Disadvantage
Dependence on intermediary
Lesser control: Exporter does not enjoy much control over marketing operations.
1. Foreign Distributor:
A foreign distributor is a foreign firm that has exclusive rights to carry out distribution for a
manufacturer in a foreign country or specific area. Order must be channeled through the
distributor even when the distributor chooses to appoint a subagent or sub-distributor. The
distributor purchases merchandise from the manufacturer at a discount and then resells or
distributes the merchandise to the retailers and sometimes final consumers. In this regard,
the distributor’s function in many countries may be a combination of wholesaler and retailer.
There are a number of benefits for using a foreign distributor. Unlike agents, the distributor
is a merchant who buys and maintains merchandise in its own name. This arrangement
simplifies the credit and payment activities for the manufacturer. To carry out the
distributing function the foreign distributor is often required to warehouse adequate
products, parts, and accessories. Apple Computer now does its own distribution in Japan
because the services of Toray Industry, its foreign distributor, proved inadequate.
2. Foreign Retailer:
If foreign retailers are used, the product in question must be a consumer product rather than
an industrial product. There are many channels by which a manufacturer may contact
foreign retailers and trust them in carrying product ranging from a personal visit by
manufacturer’s visit to mailings of catalogues, brochures and other literature to prospective
retailers. Retailers enable producers to reach a wider audience, particularly if broad coverage
by the major retail chains can be obtained.
3. State Controlled Trading Company:
For some products particularly utility and telecommunication equipment a manufacturer
must contact and sell to the state controlled companies.
4. End User:
Sometime a manufacturer is able to sell directly to foreign end users with no intermediaries
involved in the process. This direct channel is a logical and natural choice for costly industrial
products. For most consumer products the approach is practical for some products and in
some countries. A significant problem with consumer purchasers can result from duty and
clearance problems. A consumer may place an order without understanding his or her
country’s import regulations. When the merchandise arrives the consumer may not be able
to claim it. As a result the product may be seized or returned on a freight collect basis.
Harvard’s Michael Porter has proposed the value chain as a tool for identifying ways to create more
customer value.
Value Chain is a synthesis of activities performed to design, produce, market, deliver, and support
its product.
What factors influence the choice of distribution channels and mode of transportation?
Communication is interchange of thought or information between two or more persons to bring about mutual
understanding and desired action. It is the process of conveying information from a sender to a receiver
with use of a medium in which the communicated information is understood the same way by both
sender and receiver.
Marketing communications are the means by which firms attempt to inform, persuade, and remind
consumers-directly or indirectly—about the products and brands they sell.
Brand communication is undertaken by organizations to create popularity for their product among
the end-users. Brand communication goes a long way in promoting products and services among
target consumers.
The decisions regarding the message content, message structure, message format and
message source are influenced by certain environmental factors such as cultural factors
and legal factors. The differences in the environmental factors among the countries may
call for different messages as deemed appropriate for each market.
4. Budget Decisions: The total promotional expenditure and apportionment of this amount to
different elements of the promotion mix are very important and difficult decisions.
Integrated marketing communications (IMC) is of the coordination and integration of all marketing
communications tools, avenues, and sources in a company into a seamless program designed to
maximize the impact on customers and other stakeholders.
Components of IMC
The Foundation: It involves detailed analysis of both the product and the target market. It is
essential for marketers to understand the brand, its offerings and end-users. They need to be
aware of the needs, attitudes and expectations of the target customers as well as keep a close
watch on competitor’s activities.
The Corporate Culture: The features of products and services have to be in line with the
work culture of the organization. Every organization has a vision and the marketers to keep
that in mind before designing products and services.
Brand Focus: Brand Focus represents the corporate identity of the brand.
Consumer Experience: Marketers need to focus on consumer experience, i.e. what the
customers feel about the product. A consumer is likely to choose a product which has good
packaging and looks attractive. Products need to meet and exceed customer expectations.
Communication Tools: Communication tools include various modes of promotion of a
particular brand; such as advertising, direct selling, promoting through social media such as
facebook, twitter, etc.
Promotional Tools: Brands are promoted through various promotional tools such as trade
promotions, personal selling and so on. Organizations need to strengthen their relationship
with customers and external clients.
Integration Tools: Organizations need to keep a regular track on customer feedbacks and
reviews.
Review Question
Define Integrated Marketing Communication. What are its components?
Explain the tools used in Integrated marketing communication in brief.
A Global Communication strategy is extremely beneficial for a firm. It can help market the product
or service in many different countries around the world. Global communication has historically
required large budgets. However, emerging communication techniques like social media can make
global communication campaigns affordable for companies of all sizes.
Different countries interact in business-related activities on an everyday basis. There are different
economic, social and cultural differences among them. These differences prove to be obstacles in
business communication. Knowledge of such factors eliminates the common mistakes and
misunderstandings involved with business communication between different cultures. There are
various factors which influence business communication decisions in international markets.
These are explained below.
Advertising:
Any paid form of non-personal presentation and promotion of ideas, goods, or services by an
identified sponsor. It is a means by which a firm communicates with potential customers,
highlighting its product.
Global advertising is the use of the advertising appeals, messages, art, copy, photographs,
stories, and video segments in multiple country markets. Global campaigns with unified themes
can help to build long-term product and brand identities and offer significant savings by
reducing costs involved in producing advertisements. Global advertising also offers companies
economies of scale in advertising as well as improved access to distribution channels.
There are two major decisions that a firm has to address:
The major question faced by firms is if the specific advertising message and media
strategy needs to be changed from country to country. Local country managers can share
important information, such as when to use caution in advertising creativity. Example:
Some Examples of Cultural considerations are: Images of Male/female intimacy are in
bad taste in Japan, and illegal in Saudi Arabia
Another issue faced by advertisers is which medium to use when communicating with
the target audience. The available alternative media can be broadly categorized as:
1. Print media: daily and weekly newspapers to magazines and business publications
with national, regional, or international audiences
2. Electronic media: broadcast television, cable television, radio, and the Internet
3. Other media: outdoor, transit, and direct mail advertising
Globally, media decisions must take into account country specific regulations.
Example: In Europe, television advertising either does not exist or is extremely limited in
Denmark, Sweden and Norway. The time allowed for advertising each day varies from
12 minutes in Finland to 80 in Italy, with 12 minutes per hour per channel allowed in
France and 20 in Switzerland, Germany, and Austria.
Personal selling is personal communication between a firm representative and a potential customer
to persuade prospective customer to buy something their product or service idea. This is in contrast
to the mass, impersonal communication of advertising, sales promotion and other promotional tools.
The efforts of sales people have a direct impact on such diverse activities as:
Increase awareness of new products and business ventures.
Keeping existing products running well in market.
Provide convenience to customers as products are sold directly at homes.
Creating a relationship and trust through interpersonal approach.
Generating actual sales for the firms.
Direct Feedback from customers.
Supplement with the product promotion.
Provides an effective method in explaining firm’s reliability and reputation, product features,
clarifying customer doubts and resolving their issues.
One of the major limitations is its high cost, especially in advanced countries.
Sales promotion:
Short-term incentives to encourage the purchase or sale of a product or service.
Sales promotion refers to any paid consumer or trade communication program of limited
period that adds substantial value to a product or brand.
Sales promotion is a vital element of marketing communication policy which accounts
for more promotional expenditures than advertising, personal selling and publicity in
some countries.
Review Questions
1. Define Sales promotion. What are the different types of Sales Promotion?
2. What are the major decisions that the firm has taken for an advertising strategy in the global market?