INTERNATIONAL MARKETING

Introduction to International Business 2014

INTERNATIONAL MARKETING
MANAGEMENT
Marketing is the process of planning and executing the
conception, pricing, promotion, and distribution of ideas,
goods, and services to create exchanges that satisfy individual
and organizational objectives.
International marketing is the extension of these activities
across national boundaries.
Firms expanding to new markets in foreign countries must
deal with: different legal, political, cultural systems AND
unfamiliar economic conditions, advertising media,
distribution channels.
INTERNATIONAL MARKETING
MANAGEMENT
International marketing managers also face 2 tasks their
domestic counterparts do not face:
Capturing synergies among various national markets: provide
opportunities for additional revenues & growth.
Coordinating marketing activities among those markets: to help lower
marketing costs and create a unified marketing effort.
INTERNATIONAL MARKETING
MANAGEMENT
MARKETING
OPERATIONS
MANAGEMENT
FINANCE
ACCOUNTING
HUMAN
RESOURCE
MANAGEMENT
INTERNATIONAL MARKETING & BUSINESS
STRATEGIES
The business strategies can be:
DIFFERENTIATION: develop pricing, promotional & distribution tactics
so the product/service is different from the customers point of view.
Example: Rolex watches, BMW automobiles, Montblanc pens
Differentiation can be based on:
Perceived quality
Fashion
Reliability, or other salient characteristics
COST LEADERSHIP: can be achieved through systematic reductions in
production costs, sales costs & acceptance of lower profit margins,
using less expensive materials, etc. Marketing managers usually focus
on promotional efforts, e.g. low price of the product & using channels
of distribution that allow to keep the retail price low.
Example: BIC pens


INTERNATIONAL MARKETING & BUSINESS
STRATEGIES
The business strategies can be:
FOCUS STRATEGY: marketing managers concentrate on particular
segments/particular area of the consumer market.
Example: SMH (Suisse Microlctronique et dHorlogerie) which
manufactures SWATCH watches, focuses on young, fashion-oriented
consumers in the world.


THE MARKETING MIX
After an international firm has decided to enter a particular
market, marketing decisions should answer 4 important
issues:
1. How to develop the firms productivity
2. How to price those products
3. How to sell those products
4. How to distribute those products to the firms customers

These elements are known as the MARKETING MIX and referred to the
4Ps of Marketing: Product, Pricing, Promotion and Place (or
distribution).
THE MARKETING MIX
Differentiation Cost leadership Focus
BUSINESS STRATEGIES
MARKETING MIX
PRODUCT

Develop the tangible
& intangible features
that meet the
customer needs in
diverse markets
PRICING

Develop policies that
bring in revenue &
strategically shape
the competitive
environment
PROMOTION

Devise ways to
enhance the
desirability of the
product/service to
potential buyers
PLACE

Get products &
services into
customers hands via
transportation &
merchandising
KEY DECISION-MAKING FACTORS

-Standardization vs. customization - Target customers: industrial/consumer
-Legal forces - Cultural influences
-Economic factors/income levels - Competition
-Changing exchange rates
STANDARDIZATION vs. CUSTOMIZATION
A firms marketers usually choose from 3 basic approaches in deciding
whether to standardize or customize the firms marketing mix:
1. ETHNOCENTRIC APPROACH: do firms market products/services
internationally the same way it does domestically?
2. POLYCENTRIC APPROACH: do firms customize the marketing mix to
meet specific needs of each foreign market?
3. GEOCENTRIC APPROACH: do firms analyze the needs of customers
worldwide & then adopt a standardized marketing mix for all the
markets it serves?
STANDARDIZATION vs. CUSTOMIZATION
STANDARDIZED INTERNATIONAL MARKETING
ADVANTAGES DISADVANTAGES
1. Reduced marketing costs
2. Facilitates centralized control in marketing
3. Promotes efficiency in R&D
4. Results in economies of scale in production
5. Reflects the trend toward a single global
marketplace
1. Ignores different conditions of product use
2. Ignores local legal differences
3. Ignores differences in buyer behavior
patterns
4. Inhibits local marketing initiatives
5. Ignores other differences in individual
markets
CUSTOMIZED INTERNATIONAL MARKETING
ADVANTAGES DISADVANTAGES
1. Reflects different conditions of product use
2. Acknowledge local legal differences
3. Accounts for differences in buyer behavior
patterns
4. Promotes local marketing initiatives
5. Accounts for other differences in individual
markets
1. Increases marketing costs
2. Inhibits centralized control of marketing
3. Creates inefficiency in R&D
4. Reduces economies of scale in production
5. Ignores the trend toward a single global
marketplace
PRODUCT POLICY
Product comprises BOTH the set of tangible factors (physical product &
packaging) and intangible factors (image, installation, credit terms,
warranties).
To compete internationally, the firm should develop products with
tangible & intangible features that meet the needs & wants of customers
in diverse markets.
Example: TOYOTA
Design & produce mechanically reliable vehicles
Offering competitive warranties
Building a solid brand name
Provide spare parts & repair manuals
Furnishing financing to dealers & retail customers
PRODUCT POLICY
FACTORS TO CONSIDER IN PRODUCT POLICY
Standardized products vs.
customized products
TOYOTA: standardized its corporate commitment to building high
quality, mechanically reliable automobiles & to maintain the prestige of
Toyota brand name.
Yet it customizes its products & product mix to meet the needs of local
markets, e.g. left-hand-drive vs. right-hand-drive motor vehicles.
Legal forces
CORONA BEER: reduce nitrosamine levels of the beer it sells in
Germany, Austria & Switzerland to meet the countries health
standards.
ELECTRIC PLUGS in Europe vs. USA
Cultural influences
FRITO-LAY: snack differentiation: paprika-flavor in Poland & Hungary,
vinegar & salt flavor in South Africa, shrimp flavor in Korea.
Economic factors
Rich countries: extra performance features vs. poor countries: price-
sensitive.
The quality of infrastructure also affects the customization. Availability
& cost of repair: automobiles sold in poorer countries often use simpler
technology that allows repairs to be done by backyard mechanics.
Brand names
Involves: packaging, design, advertising production costs.
COCA-COLA: the low calorie soft drink is called Diet Coke in North
America but Coca-Cola Light in other markets.
PRICING POLICY
Developing effective pricing policies is a critical element in a firms
success.
Pricing policies directly affect the size of revenues earned by a firm.
Pricing policies also the firm to shape the competitive environment in
business.
In international business, differences in transportation charges & tariffs
cause the prices to be different in each country.
Differences in distribution practices also affect the final price of the
goods/service.
Exchange rate fluctuations also create different prices.
Example: Toys R Us, Wal-Mart
Low-priced products
Warehouse settings
Change distribution systems
PRICING POLICY
International firms usually adopt one of 3 pricing policies:








POLICY DEFINITION EXAMPLE
Standard price policy The firm charges the same price for its
products/services regardless of where
they are sold or the nationality of the
customer
Oil prices,
agricultural goods,
coal, commodities
Two-tiered pricing
policy
The firm sets one price for domestic
sales & a second price for international
sales; usually in ethnocentric approach
Cars, e.g. Toyota
Market pricing Usually in polycentric approach, market
pricing is the most complex but most
commonly adopted. Prices are
customized on a market-to-market basis
to maximize profits in each market
Luxury goods,
consumer goods,
electronic goods
PROMOTION POLICY
Promotion is used to enhance the desirability of its products/services
among potential buyers.
Promotion relies on COMMUNICATION with the host country audiences,
so it is the most culture-bound of the 4Ps.
A firm must take special care to ensure that the message is received by
the host countrys audience.
Promotion mix:
Advertising
Personal selling
Sales promotion
Public relations
The firm usually uses a blend of promotion mix; not only one element.
ADVERTISING
When a firm wants to develop an advertising strategy, it must consider 3
factors:
The message it wants to convey
The media available for conveying the message
The extent to which the firm wants to globalize its advertising effort
ADVERTISING
FACTORS DEFINITION EXAMPLES
Message The facts or impressions the advertiser wants to
convey to potential customers.

The message can be value (price), reliability
(quality) or style (image/prestige).
Coca-Cola: enjoy life,
Honda motorcycles: fun
& excitement
Medium The communication channel used by the
advertiser to convey a message.

Based on economic developments, availability,
legal restrictions, standards of living, literacy
rates, the cultural homogeneity of the national
market, etc.

In multilingual countries, the advertisements
should adapt.
Nestl ads for French-
speaking Swiss audiences
vs. the German-speaking

Colgate-Palmolive ads in
rural India: video vans &
samples

Cigarette or alcoholic
beverages ads banned in
certain countries
Global vs. local
advertising
A firm must decide whether advertising should
be the same everywhere or tailored for each
local market
Coca-Cola, McD, Levis
jeans: advertise globally
vs. credit cards, cars,
airline services: advertise
locally
PERSONAL SELLING
Making sales on the basis of personal contacts.
The most common approach: using sales representatives, who call on
potential customers & try to sell them a firms products/services.
Usually sellers are likely to rely on host country nationals to serve as their
representatives.
The importance of personal selling as an element of promotion mix differs
for industrial products and for consumer products.
For industrial products (machinery, electronic equipment, computer
software) , customers need technical information about product
characteristics, usage, maintenance requirements, after-sales support.
For consumer products, examples:
Avon, Amway, AIG Insurance, Tupperware, etc.
PERSONAL SELLING
ADVANTAGES DISADVANTAGES
Local sales representatives can be reasonably
confident that they understand the local
culture, norms, and customs.
High-cost strategy
Personal selling promotes close, personal
contact with customers.
Personal selling makes it easier for the firm to
obtain market-value information to
develop/improve products/services.
SALES PROMOTION
Specialized marketing efforts, e.g.:
Coupons
In-store promotions
Sampling
Cooperative advertising
Direct-mail campaigns
Trade fair attendance
Sales promotion activities focused on wholesalers or retailers are
designed to increase the number and commitment of these
intermediaries working with the firm, e.g. Paris Air Show, Tokyo Auto
Mart.
PUBLIC RELATIONS
Efforts aimed at enhancing a firms reputation & image with the general
public.
The consequence of effective public relations is a general belief that the
firm is a good corporate citizen that has good reputation & can be
trusted.
Example: CSR programs in Toyota, Unilever, etc.
DISTRIBUTION POLICY
Place is more commonly referred to as DISTRIBUTION.
Distribution is the process of getting products/services from the firm to
the hands of customers.
Issues of distribution in international business:
1. Physically transporting its goods & services from where they are created to
the various markets in which they are to be sold. Modes of transportation:
trade-off between TIME and MONEY.
2. Selecting the means by which to merchandise its goods/services in the
markets it wants to serve. Example: goods that are perishable because of
physical or cultural forces (flowers, fashionable dresses) are typically shipped
by air freight because of their short shelf life.


ADVANTAGES & DISADVANTAGES OF DIFFERENT
MODES OF TRANSPORTATION FOR EXPORTS
TRANSPORTATION
MODE
ADVANTAGES DISADVANTAGES SAMPLE
PRODUCTS
Train Safe
Reliable
Inexpensive
Limited to rail
routes
Slow
Automobiles
Grains
Airplane Safe
Reliable
Expensive
Limited access
Jewelry
Medicine
Truck Versatile
Inexpensive
Small size Consumer goods
Ship Inexpensive
Good for large
products
Slow
Indirect
Automobiles
Furniture
Electronic media Fast Unusable for many
products
Information
CHANNELS OF DISTRIBUTION
A distribution channel can consist of 4 basic parts:
1. The manufacturer that creates the goods/services
2. A wholesaler that buys products/services from the manufacturer & then
resells them to retailers
3. The retailer, who buys from wholesalers & then sells to customers
4. The actual customer who buys the product/service for final consumption

Another important factor is the CHANNEL LENGTH: the number of stages
in the distribution channel.


DISTRIBUTION CHANNEL OPTIONS
MANUFACTURER MANUFACTURER MANUFACTURER
IMPORT
AGENT
IMPORT
AGENT
IMPORT
AGENT
CUSTOMER RETAILER
WHOLESALER
CUSTOMER RETAILER
CUSTOMER
HOW TO MARKET THIS PRODUCT
INTERNATIONALLY?