International Marketing

INTERNATIONAL MARKETING         

CHAPTER 1.MARKETING AND INTERNATIONAL MARKETING CHAPTER 2. THE INTERNATIONAL ENVIRONMENT CHAPTER 3. RESEARCHING THE WORLD MARKET CHAPTER 4. EXPORT MARKET ENTRY STRATEGIES CHAPTER 5. PRODUCT DECISIONS CHAPTER 6. PRICING DECISIONS CHAPTER 7. CHANNELS AND DISTRIBUTION STRATEGIES CHAPTER 8. PROMOTION AND MARKETING COMMUNICATIONS CHAPTER 9. MARKETING ORGANIZATION, IMPLEMENTATION, AND CONTROL

CHAPTER 1.MARKETING AND INTERNATIONAL MARKETING 1. 2. 3. 4.

INTRODUCTION THE NATURE OF INTERNATIONAL MARKETING EXPORT MARKETING PLANNING GOALS OF INDIVIDUAL BUSINESS UNITS

1. INTRODUCTION  Internationalization

and global marketer

Global Marketing Integration

International Marketing  Total

world trade volume in goods and services is around $8 trillion.  The world’s five exporting countries are the United States ($700 billion), Germany ($560 billion), Japan ($390 billion), France ($320 billion), and Britain ($260 billion), collectively accounting for 42 percent of global trade.

Global Marketing Integration Fords made in Mexico with Japanese parts, Honda, Toyota, BMW, and Mercedes Benz open USA plants, and Isuzu of America makes Troopers and Rodeos with GM engines via joint venture. Honda manufacturing cars in USA, TI manufacturing semiconductors in Japan. Macintosh’s PowerBook 100 designed and manufactured by Sony.

International Marketing - Intro 



The Triad Regions (North America, Western Europe, and Japan) of the world collectively produce more than 80% of world GDP. In the next ten to twenty years, Emerging Markets – the Chinese Economic Area (CEA: including China, Hong Kong, region, and Taiwan), India, South Korea, Mexico, Brazil, Argentina, South Africa, Poland, Turkey, and the Association of Southeast Asian Nations (ASEAN: including Indonesia, Brunei, Malaysia, Singapore, Thailand, and the Philippines, and Vietnam) will provide many opportunities in global business.

2.THE NATURE OF INTERNATIONAL MARKETING  What

is international marketing? Export marketing Foreign marketing Multinational marketing Global marketing  International marketing

Export marketing The international marketing dimension involves marketing across national borders. This is different from domestic marketing because the mere fact of crossing the border confronts with new economic, political, and legal constraints, such as floating exchange rates, boycotts, and international law. These constraints will usually force modification of the firm’s marketing program as it crosses national boundaries.

Foreign marketing The foreign marketing dimension involves marketing within foreign countries, as a U.S firm markets in Belgium or Brazil. Such marketing is unlike domestic marketing because that firm faces different kinds of competition, consumer behavior, distribution channels, and promotional possibilities in Belgium or Brazil from what it is familiar with at home. The tasks is further complicated because each country has an individual idiosyncratic marketing environment.

Multinational marketing The multinational marketing dimension emphasizes the coordination and integration of the firm’s marketing in many diverse foreign environments. The unique nature of each foreign market fragments the international marketing effort and brings diseconomies of scale. The international marketer must plan and control carefully to maximize the integration and synergy in the global marketing program while minimizing the costs of adapting to each foreign market.

International Marketing Defined

International marketing: the performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit.

The International Marketing Task 1 Foreign environment (uncontrollable)

Economic forces

Political/legal forces

Domestic environment (uncontrollable)

2

7 Cultural forces

Political/ legal forces

(controllable) Price

Competitive Competitive Forces structure

Product

3 6 Geography and Infrastructure

Country market C environment (uncontrollable)

Country market A environment (uncontrollable)

Promotion Channels of distribution

Level of Technology

Economic climate

5

4

Country market B environment (uncontrollable )

Structure of distribution

Irwin/McGraw-Hill Copyright©2002 by The McGraw-Hill Companies, Inc. All rights

Evolution of Marketing  Domestic

Marketing - ethnocentric  Export Marketing- ethnocentric  International Marketing - polycentric or multidomestic  Multinational Marketing- regiocentric  Global Marketing - geocentric Domestic

export marketing

international marketing

multinational

global

Meeting International Challenges  Be

prepared and develop active responses.  Develop new strategies.  New plans are needed.  Adaptation to the new environment and markets.

The main steps in the marketing management process R – STP – MM – I – C R= research STP= Segmentation, Targeting, Positioning MM= Marketing-mix I= Implementation C=control

MARKETING-MIX 4 Ps 4Cs 1.Product Customer value 2. Price Cost to the customer 3. Place Convenience 4. Promotion Communication ------------------------------------------------------------5. Probe Customer, consumer 6. Phacilitate (Facilitate) Consumption services 7. Plan Curve 8. People Count

The activities in international marketing include: 1. 2.

3.

Detailed analysis of current markets and potential markets; Planning and development of products that the consumers want, clearly defined in suitable package; Distribution of products through channels which provide the services or conveniences demanded by purchases;

The activities in international marketing include: 4. Promotion of products to inform and educate consumers about products or services; 5. Setting of prices which reflect both a reasonable value (or utility ) of product to consumers; and 6. Technical and non-technical services given to the consumers-both before and after a sale is made.

Questions 1.How can international marketing be said to differ domestic marketing? 2. Identify and discuss the different ways firms can reach foreign markets.

3.EXPORT MARKETING PLANNING 3.1. Identifying and measuring market opportunity 3.2. Developing an export marketing strategy 3.3. Making export strategy operational

3.1. Identifying and measuring market opportunity a) b) c) d)

Preliminary screening Estimating market potentials Estimating sales potentials Segmenting the market

3.2. Developing an export marketing strategy

a) b)

Setting export objectives Planning the marketing mix Product, price, channels, promotion.

3.3. Making export strategy operational

a) b) c) d) e) f) g) h) i)

Sales forecasts Sales budget Sales quotas Production schedules Inventory control Labor requirements Promotional budgets Financial budget Profit budget

Stages in the Marketing Process

The Process Analysis:

• Collect data from sources- primary and secondary, internal and external, formal and informal. Screen data for opportunities to employ company resources for competitive advantage.

Planning: • Develop a marketing plan which includes a situation analysis, goals and objectives, long-term strategies and short-term tactics, cost and profit estimates, and anticipated changes in organizational structure.

Implementation: • Take actions to put the plan into action. Adjust implementation activities to account for environmental changes in market conditions.

Control: • Use annual planning (sales to forecast), profitability, and efficiency controls to monitor the plan’s successes and failures.

4. GOALS OF INDIVIDUAL BUSINESS UNITS

4.1 basis goals Profit or nonprofit( volume of sales, market share, serving customer…). 4.2 specific reasons  Managerial urge  Unique product/technology competence  Risk diversification  Foreign market opportunities  Change agents  Economics of scale  Foreign marketing advantages  Extend sales of seasonal product  Excess capacity of resources

GOALS OF INDIVIDUAL BUSINESS UNITS

4.2 specific reasons  Unsolicited foreign orders  Small domestic market  Stagnant or declining home market  Resources  Multinational, global, world companies  Other goals

CHAPTER 2. THE INTERNATIONAL ENVIRONMENT 1. 2. 3. 4.

ECONOMIC AND FINANCIAL FACTORS SOCIO-CULTURAL ENVIRONMENT POLITICAL/LEGAL ENVIRONMENT COMPETITION

ECONOMIC AND FINANCIAL FACTORS Population, Income (Per capita income, GNP) 2. Convertibility or possibility of effective utilization of resources; financial stability. 3. Banking facilities available and nature of credit facilities offered, short medium and long-term (conditions, terms, interest rates. etc.) a) Domestic b) foreign c) Governmental or other lending institutions and facilities. 1.

ECONOMIC AND FINANCIAL FACTORS 4. Availability of local and accounting services. 5. Currency, exchange rates and controls 6. Capital repatriation and remittance of profits, licensing and other payments. 7. Availabilities of insurance 8. Situation of the Balance of Payments 9. Communications and transports 10. Urbanization

ECONOMIC AND FINANCIAL FACTORS

11. Market prospect + Estimated size, trends, and potential of market in the country + Export markets and estimated size + Sources of market information + System of distribution of good 12. Product and product modification

2.SOCIO-CULTURAL ENVIRONMENT 1. The elements of culture Language Nonverbal language Religion Values and attitudes Manners and customs Material elements Aesthetics Education Social institutions Family

2.SOCIO-CULTURAL ENVIRONMENT 2. Adapting to cultural differences Some companies have made special efforts to adapt their products or services to various cultural environments.

Cultural factors + Never touch the head of a Thai or pass and object over it. The head is considered sacred in Thailand + Avoid using triangular shapes in Hong Kong, Korea, and Taiwan. + The number 7 is considered bad luck in Kenya and good luck in the Czech republic and Magical connotation in Benin, Africa. + The number 10 is bad luck in Korea + The number 4 means death in China + Red represents death in many African countries. + Red is a positive color in Denmark

Cultural factors + In Canada information on products is often provided in English and French. + Swiss chocolate manufactures know that US customers believe Swiss chocolate product are of high quality (value), so that companies emphasize their Swiss origin and thus generate high sales. (attitude) In short, by being aware of the value and attitudes of the people in the culture, a business firm effectively position its product.

Cultural factors Education influences many aspects of culture. Education also helps to provide infrastructure needed for developing managerial talent. For example, educationally advanced countries like England, France… are more likely to be markets for computers and other high –tech equipment than poor countries.

2.SOCIO-CULTURAL ENVIRONMENT

   

3. The authors of Managing Culture Differences (Philip R. Harris and Robert T. Moran, 1987) offer the following ten tips to deflate the stress and tension of cultural shock: Be culturally prepared. Learn local communication complexities Mix with the host and nationals. Be creative and experimental.

2.SOCIO-CULTURAL ENVIRONMENT  Be

culturally sensitive  Recognize complexities in host cultures.  Perceive oneself as a culture bearer.  Be patient, understanding, and accepting of oneself and hosts.  Be most realistic in expectations.  Accept the challenge of intercultural experiences

3. POLITICAL/LEGAL ENVIRONMENT  

    

Role of government Government controls + License requirements + Tariffs + Quotas + Extra taxes + Qualitative controls + Exchange controls Promotional activities Financial activities Information services Export facilitating activities Promotion by private organizations

4. COMPETITION

4.1.Nature of competition + The structure of competition: the number and types of competitors; + The action of competitors: the competitive tools available to marketing executives in the decision areas of product, channel, price, and promotion + Competition in international markets 4.2. Factors influencing competition (1) General business, cultural. Economics, and social conditions; (2) costs; (3) laws and regulations; and (4) The activities and policies of competitors themselves affect competition.

CHAPTER 3. RESEARCHING THE WORLD MARKET 1. 2. 3. 4.

SOURCES OF INFORMATION THE EXPORT MARKETING RESEARCH PROCESS SEGMENTATION FOREIGN MARKET PORTFOLIOS: TECHNIQUE AND ANALYSIS

INTERNATIONAL MARKETING RESEARCH The scope of research: + Market measurement studies + Competitive studies + Environmental studies International marketing research is used to make strategies and tactical decisions.

International marketing research The importance of International marketing research: Before making market entry, product position, or marketing mix decision, a marketer must have accurate information about the market size, market needs, competition, and so on. Marketing research provides the necessary information avoid the costly mistakes of poor strategies or lost opportunities.

1.SOURCES OF INFORMATION 1.1. Secondary data + Internal source + External source 1.2. Primary data

1.1. Secondary data

+ Internal source Sales and cost records, markets,… + External source UN, OECD, EU, IMF, WB, IBRD, IFC… Embassy, Consulate; Non -government agencies; Universities and other educational institutions… Internet CD-ROM The Business International Market Report. …

1.1.Secondary data

The major issues are data availability, reliability and comparability.

1.2. Primary data

Primary data can be collected in four broad ways: + Observation + Focus groups + Surveys + Experiments

Primary data Observation research: Fresh data can be gathered by observing the relevant actors and settings. EX; The American Airlines researchers might hang around airports, airline offices, and travel agencies to hear travelers talk about the different carriers and how agents handle the flight arrangement process. The researchers can fly on American and competitors’ planes to observe the quality of in-flight service and hear consumer reactions. This exploratory research might yield some useful hypotheses about how travelers choose their air carriers.

Primary data Focus groups research: A focus group is a gathering of six to ten persons who spend a few hours with a skilled interviewer to discuss a project, service, organization, or other marketing entity. The discussion is recorded through note taking or Audio or video tape and is subsequently studied to understand consumer belief, attitudes, and behavior. In American Airlines example, the group interviewer may start with a broad question, such as “ How do you feel about air travel?”

Primary data Survey research: Survey research stands midway between observational and focus group research, on the one hand. And experimental research on the other hand. Companies undertake surveys to learn about people’s knowledge, beliefs, preferences, satisfaction, and so on, and to measure these magnitudes in the population.

Primary data Experiments research: the most scientifically valid research is experimental research. Experimental research calls for selecting matched group of subjects, subjecting them to different treatments, controlling extraneous variable, and checking whether observed response differences are statistically significant. The purpose of experimental research is to capture cause-and- effect relationships by eliminating explanations of the observed findings.

Primary data Research instrument: Questionnaires Contact methods: + The mail questionnaire + Telephone interviewing + Personal interviewing

1.2. Primary data The challenges: + Comparability of data + Willingness of potential respondent + Ability of the respondent to understand and communicate. ( Challenge in survey research involves translation from one language to another)

1.2. Primary data To avoid these translation errors, experts suggest the technique of back-translation. First, the questionnaire is translated from the home language into the language of the country where it will be used, by a bilingual who is a native speaker of the foreign country. Then this version is translated back to the home language by bilingual who is native speaker of the home language. Another translation technique is parallel translation, in which two or more translators translate the questionnaire. The results are compared, and differences are discussed and resolved.

Using the internet and e-mail data collection Some problems: + Sampling + Language + Respondent cooperation

2.THE EXPORT MARKETING RESEARCH PROCESS  Problem

formulation  Research method and design  Data collection techniques  Sample  Data collection  Analysis and interpretation  Reporting results

Research study report + Cover: topic, organization, name of author, time… + Abstract + Table of contents + List of figures + List of tables + Chapter1. Introduction Problem statement Objectives of study Scope and research method Structure of study

Research study report + Chapter 2. Literature review + Chapter 3. Introduction of the company or Sector of… + Chapter 4. Research design + Chapter 5. Presentation and critical discussion of results + Chapter 6. Conclusions and recommendations, further research + References + Appendix

3. Foreign consumers and foreign markets 3.1. Foreign consumers + How foreign consumers differ + What they buy + Why they buy + Who makes the purchase decision + How they buy + when they buy + Where they buy

3. Foreign consumers and foreign markets 3.2. Foreign industrial markets + What they buy + Why they buy + Who makes the purchase decision

3. Foreign consumers and foreign markets 3.3 Foreign government + The size of government’s role as customer, however, varies from country to country + Another variable in the economic role of government is the kind of economic activity undertaken. + Government markets differ from consumer and industrial markets in what they buy, how they buy, and why they buy- and government in different countries also vary among themselves on these dimensions.

Export market segmentation

1) It is important to note that any decision to segment on particular basis should be evaluated in term of the following: + Measurability + Accessibility + Profitability + Actionability

Export market segmentation

2) Base of segmentation + Country market level; demographic and population characteristics ; socio-economic characteristics; political characteristics; cultural characteristics. + Customer market level: Demographic characteristics: age, gender, life cycle, religion, nationality, etc; socio-economic characteristics : income, occupation, education, etc. Psychographic characteristics: personality

Export market segmentation The four strategies: + Increase penetration (existing product and markets) + Develop products (new products in existing markets) + Extend markets (existing products in new markets) + Widen activities (new products and markets)

4. Foreign market portfolios: technique and analysis Country attractiveness/ competitive strength matrix Using these variables, and some scheme for weighting them, countries are classified into one of the nine cells depicting relative market investment opportunity. + Invest/grow countries + Harvest/divest/license/combine countries + Dominant/divest countries + selective countries

4. Foreign market portfolios: technique and analysis Country attractiveness Market size (total and segments) Market growth (total and segments) Market seasons and fluctuations Competitive conditions (concentration, intensity, entry barriers, etc.) Market prohibitive conditions ( tariff, non tariff barriers, import restrictions, etc.) Economic and political stability.

4. Foreign market portfolios: technique and analysis Competitive strength Market share Marketing ability and capacity Product fit Contribution margin Image Technology position Product quality Market support Quality of distributions and service

4. Foreign market portfolios: technique and analysis Invest/grow

Invest/grow

Invest/grow

Selectivity strategies

Dominate/divest Join venture

Harvest/divest/ License/combine countries

CHAPTER 4. EXPORT MARKET ENTRY STRATEGIES 1. 2. 3. 4. 5.

ENTRY AS STRATEGY FACTORS INFLUENCING CHOICE OF ENTRY MODE EXPORT ENTRY MODES NON-EXPORT ENTRY MODES SELECTING THE ENTRY MODE

1.ENTRY AS STRATEGY  The

elements of entry strategy: + The objectives and goals in target market; + Needed policies and resource allocations; + The choice of entry modes to penetrate the market; + The control system to monitor performance in the market + A time schedule

2. FACTORS INFLUENCING CHOICE OF ENTRY MODE  Target

market  Product  Availability of marketing organization  Company considerations  Government policies

3. EXPORT ENTRY MODES 3.1. Indirect export + Export merchants + Trading company + Export commission house + Resident buyer + Broker + Export management company + Manufacturer’s export agent + Cooperative organization: Piggyback marketing; Exporting combination

3. EXPORT ENTRY MODES 3.2.Direct export + Home country based department: 1) Built-in department 2) Separate export department 3) Export sales subsidiary + Foreign sales branch + Storage or warehousing facilities + Traveling salesperson +Foreign based distributors and agents

3.2.Direct export With direct export, manufacturer of exportable goods undertakes the entire export process without any intermediaries. By becoming a direct export exporter, the firm takes responsibility for the entire range of export activities starting with identifying customers through to collecting payment.

3.2.Direct export In order to export directly, the firm may have to establish an export department from domestic sale division which could be funded on the basis its requirements. Employees of the department must be trained in foreign trade affaires.

3.2.Direct export Direct exporting has several advantages such as: 2. The firm is able to control the whole process of export. 3. The firm can increase net profit because of operating without expenditure for intermediary. 4. The firm can develop closed relation with foreign partners. But, the firm is responsible for the following aspects: 7. The firm have to spent time and money to success in foreign market. 8. The firm must suffer directly risks may be occurred.

What is involved in a typical export process? An export process involves three main functions: feasibility analysis, planning foreign market entry, and implementation. These functions involve 20 steps. FEASIBILITY 3. Analyze domestic performance of the business 4. Assess the firm’s capability. 5. Research various factors of population, economy, politic and society of target markets. 6. Confer with experts of international trade concerning marketing, financial, legal problems and delivery term of goods and services. 7. Select target market

What is involved in a typical export process? PLANNING FOREIGN MARKET ENTRY 6. Conduct market research concerning section of good and specific products to be exported. 7.Make plan, strategy or entering target markets. 8. Collect knowledge about country’s requirements concerning certificates, standards and licenses of target countries. 9. Collect necessary documents concerning license, trade. Copyright protection of target countries. 10. Identify internal: import taxes, quotes or other non-tariff trade barriers of the target countries. 11. Establish pricing schedule.

What is involved in a typical export process? IMPLEMENTATION 12. Determine method of sale. 13. Establish marketing methods. 14.Choose sale representatives or sales methods. 15. Negotiate financial problems. 16. Obtain insurance of good 17. Complete the required paper work. 18. Package and label products. 19. Ship products 20. Get payment.

The most common mistakes made by exporters The following are twelve most common mistakes often made by small firm as they begin to export or expand business on foreign markets: 1. Lack of full investigation of market, lack of qualified export expert enable to make international business strategy and marketing plan before starting an export business; 2. Lack of support by administrative offices to overcome initial difficulties and financial problems of exporting; 3. Inadequate care in selecting overseas sales representatives or distributors. 4.Seeking orders from a lot corners of the world rather than concentrating on one or two main geographical areas;

The most common mistakes made by exporters 5.Neglecting export to foreign markets when domestic markets booms; 6. Lack of treating international distributors and customers on an equal basis with domestic counterparts; 7. Assuming that a particular trade technique and product will automatically be successful in many countries; 8. Unwillingness in modifying products in order to meet regulations or cultural preferences of foreign countries

The most common mistakes made by exporters 9. Lack of printing information of sale, guarantee and after-sale service in foreign language; 10. Lack of considering the use of an export development company if the firm cannot afford its own export department because of lacking financial or other conditions; 11. Worry about expenditure for investigating new markets, so that lacking of definitiveness in export; 12. Lack of providing after-sale services for the product.

4. NON-EXPORT ENTRY MODES Licensing Franchising Assembly operations Contract manufacturing Joint venture Wholly owned plant Management contracting

5.

SELECTING THE ENTRY MODE

 Naive

rule

 Pragmatic  The

rule

strategy rule

CHAPTER 5. PRODUCT DECISIONS 1. 2. 3. 4. 5.

PRODUCT PLANNING AND DEVELOPMENT PACKAGING BRANDING ISSUES PRODUCT MIX DECISIONS STANDARDIZATION VS ADAPTATION

1. PRODUCT PLANNING AND DEVELOPMENT 1.1. New product development 1.2. Changes in existing products 1.3. Finding new uses for existing products 1.4. Product elimination

1.1.New product development New product decision process:  Idea generation  Initial screening  Business analysis  Develop the product  Market testing  Commercialization

2. Standardization vs. adaptation + Standardization is common for certain agricultural products, raw materials, and processed commodities sold to industry. + Adaptation can be mandatory or voluntary. Mandatory adaptation may be required because of such things as language differences, differing electrical systems, differing measurement systems and product specifications, and government requirements.

2. Standardization vs. adaptation In general, however, some type of mandatory adaptation may have to be made or a voluntary change (minor or major) may be beneficial. EX: Product Adaptation + Sony TV Voltage, broadcast standard + McDonald’s Menu, decor of restaurant + Levi jeans Size mix, fabric, cut + Coca-cola Brand name (China), package

3.PACKAGING

VIEW V- visibility I- informative E- emotional impact W- workability

4. BRANDING ISSUES A

brand; a brand name; a trademark; label; logo; slogan  Brand protection  Branding decisions

Choosing a brand name

It should suggest something about the product’s benefits EX: Beautyrest mattress, Craftsman tools (2) It should suggest product qualities such as action or color. EX: Sunkist oranges, Firebird automobile (3) It should be easy to pronounce, recognize, and remember, short names help. EX: Tide, Crest (1)

Choosing a brand name

(4) It should be distinctive. EX: Kodak, Exxon. (5) It should not carry poor meaning in other countries and language. EX: Nova Is a poor name for a car to be sold in Spanish-speaking countries; it “doesn’t go”

Brand protection + The international Convention for the protection of Industrial Property (Paris Union). + The Madrid Agreement for International Registration of Trademarks.

Branding decisions + Selecting a good brand + Determining how many brands should be in the company’s product line

Branding decisions (1) (2) (3)

A single brand, or family brand Individual (local) brands Multiple brands

Tools for building the brand identity Owned word EX: Company Volvo BMW Federal Express Apple computer Kodak (1)

Word “Safety” “Driving performance” “Overnight” “graphics” “Film”

Tools for building the brand identity (2) Slogan EX: AT&T: “The Right choice” Budweiser: “The King of Beers” Fort: “ Quality is Our Number One job” General Electric: “ We bring Good Things to life” British Airways: “The Word’s Favorite Airline”

Tools for building the brand identity (3) Colors EX: Yellow is also the corporate color of Kodak firm. IBM uses blue in its publications (4) Symbols and logos Chanel No.5 used Catherine Deneuve, One of the word’s most beautiful women, as its symbol, (5) A set of stories Some brands will be associated with stories, which are benefit if favorable and interesting, about the company or brand. The stories might relate to the founder (s) and the struggle to create the company.

4. Positioning In searching for a specific positioning, the business unit should consider the following possible sources: + Attribute positioning: EX: A hotel describes itself as the city’s tallest hotel + Benefit positioning: EX: Volvo claims that its cars are safer + Use/application positioning: EX: Nike might describe one of its shoes as the best to wear for racing and another as the best to wear for playing basketball

4. positioning + User positioning EX: Apple Computer describes its computers and software as the best for graphic designers + Competitor positioning EX: 7 UP called itself the Uncola + Category positioning EX: Kodak means film; Xerox means copy machines + Quality/price positioning EX: Chanel No 5 is positioned as a very high-quality, high-price perfume.

Choosing a specific positioning Companies need to go beyond a broad positioning to express a more concrete benefit and reason to buy:  Best quality  Best performance  Most reliable  Most durable  Safest  Fastest  Best value of the money

Choosing a specific positioning  Least

expensive  Most prestigious  Best designed or style  Easiest to use  Most convenient.

CHAPTER 6. PRICING DECISIONS 1. 2. 3. 4. 5. 6.

DETERMINANTS OF AN EXPORT PRICE FUNDAMENTAL EXPORT PRICING STRATEGY RELATION OF EXPORT TO DOMESTIC POLICIES CURRENCY ISSUES SETTING UP EXPORT PRICE? TRANFER PRICING

1. DETERMINANTS OF AN EXPORT PRICE  Costs  Market

conditions (demand)  Competition  Legal/political influence  Environmental factors ( Exchange rate fluctuations, inflation rates, price controls)  Company policies  Marketing-mix

2. FUNDAMENTAL EXPORT PRICING STRATEGY  Skimming

pricing  Penetration pricing  Extinction pricing  Marginal cost pricing

3.RELATION OF EXPORT TO DOMESTIC POLICIES  Export

prices lower than domestic

 Export

prices higher than domestic

 Export

prices on a par with domestic prices

EXPORT PRICE ESCALATION



Factory Price Domestic Freight

Domestic Sale $ 7.50 .70 8.20

Export Documentation

Export sale $ 7.50 .70 8.20 .50 8.70 1.20 9.90

Ocean Freight & Insurance Import Duty (12% of landed cost)

1.19 11.09

Wholesale Markup (15%)

1.23 9.43

Importer/Distributor Markup (22%) Retail Markup 50 %

4.72 14.15

Final consumer Price

$14.15

2.44 13.53 6.77 20.30 $20.30

4. The price quotation There are two systems of definition that are used by exporters throughout the world: + INCOTERMS 2000 + The revised American Foreign Trade definitions -1941

Selection of trade terms In deciding when to use each term exporters should consider the following factors:  Whether shipment will be made on domestic or foreign carries.  Availability of insurance coverage  Availability of information on costs  Exporter’s need for cash ( reason against C&F and CFR/CPT)  Needs of importers to have quotes from several suppliers that can be readily compared ( reason for CIF and CIP)  Currency convertibility problems. FOB vessel is often desirable so that the buyer pays freight in his own currency. Of course, the carrier still has the convertibility problem, unless it is the buyer’s country.  Requirements of the government of the importing nation.

How does an exporter prepare an accurate quote? Listed below are variables that should be considered while preparing the quote  Packaging, marking and labeling costs  Rates of interest at which export finance has been availed  Costs of direct materials and labor for the production of the goods  Factory overhead expenses  Clearing and forwarding charges  Port trust charges  Insurance premium, export duties, warfare and portage  Shipping charges  Commission  Incentive available from government such as duty drawback After calculating to above mentioned expenditures, a reasonable profit margin may be added to arrive at a final price. If there still other subsidiary expenditures, it’s necessary to add while making quotation.

STRUCTURE OF EXPORT PRICE Base cost per unit 2. Export packing, labeling, marking 3. Product inspections charges 4. Profit or mark-up 5. Inland freight to 6. Unloading at port/air port 7. Terminal charges 8. Export duty (if any) 9. Loading charges ----------------------------------1-9 FOB 10. Ocean/air freight to destination ------------------------------------------1-10 CFR 11. Insurance -------------------------------------------1-11 CIF 1.

The choice of currency for export price quotes There are two basic alternatives available: The quote in U.S dollars, or quote in customers’ currencies.

EX: In this example the goods are planned to be moved by sea and shipment is not containerized. Product charges and price ($) Product cist: $10 per unitx100 units Target mark-up: 10% of product cost Oversea agent’s commissions: 5%

Financing costs on production: 8% Export packing charges Labeling and marketing for 100 units Other direct export costs EXW price (ex factory)

1000 100 50 ------1150 80 100 50 20 1400

EX: In this example the goods are planned to be moved by sea and shipment is not containerized.

Inland freight to port of shipment Unloading, other charges at port of shipment FAS price (port of shipment) Loading charges on ship Export documentation, clearance for export FOB Price (port of shipment) Ocean freight to port of destination CFR price (product costs and freight/port of destination Insurance coverage CIF Price (product costs, insurance, freight/port of destination) 2000

100 100 1600 50 30 1680 300 1980 20

Notice how the CIF price is double the initial product cost. This shows how important it is to work through these costing carefully.

5. TRANFER PRICING

 Decentralization

and profit centers  Transfer pricing to wholly-owned foreign subsidiaries: + The factor: Competitive market price Cost Legal restrictions +Transfer pricing to partially-owned foreign enterprises

CHAPTER 7. CHANNELS AND DISTRIBUTION STRATEGIES 1. 2. 3. 4. 5.

CHANNEL STRUCTURE MANAGING THE DISTRIBUTION SYSTEM GAINING ACCESS TO DISTRIBUTION CHANNELS GLOBAL TRENDS IN DISTRIBUTION SYSTEM INTERNATIONAL PHYSICAL DITRIBUTION

1. CHANNEL STRUCTURE 1.1. Indirect export 1.2. Direct export + Home country based department: 1) Built-in department 2) separate export department 3) Export sales subsidiary + Foreign sales branch + Storage or warehousing facilities + Traveling salesperson +Foreign based distributors and agents

2. MANAGING THE DISTRIBUTION SYSTEM 2.1. Motivating channel participants 2.2.Controlling channel participants

2.1. Motivating channel participants  Financial

incentives  Annual conferences  Help to the management of distributorship  Special programs

2.2.Controlling channel participants

 Spell  The

out the specific responsibilities

awarding of exclusive distribution rights

3. GAINING ACCESS TO DISTRIBUTION CHANNELS

3.1. The “locked-up” channel 3.2. Alternative entry approaches + Piggybacking + Joint ventures + Original equipment manufacturers (OEMs) + Acquisitions + Starting your ventures

4.GLOBAL TRENDS IN DISTRIBUTION SYSTEM

Five major trends seem dominant throughout the world:  Large-scale retailers  International retailers  Direct marketing  Discounting  Information technology

5. INTERNATIONAL PHYSICAL DITRIBUTION

 Export

restrictions  Foreign market import restrictions  Export documentation  The foreign freight forwarder  Export packing

CHAPTER 8. PROMOTION AND MARKETING COMMUNICATIONS 1.INTRODUCTION 2.INTERNATIONAL ADVERTISING 3. PUBLICITY AND PUBLIC RELATIONS 4. PERSONAL SELLING 5. SALES PROMOTION 6. PROMOTIONAL PROGRAM AND STRATEGY 7. DIRECT MARKETING

1.Introduction 1.1. Promotion -mix 1.2. Communication barriers 1.3. Export marketing promotion and communication decisions

1.Introduction 1.1. PROMOTION-MIX Advertising Sales promotion Publicity Personal selling

1.2. Communication barriers

Communication barriers + Language differences + Government regulations + Media availability + Economic differences + Tastes and attitudes + Buying process

1.3. Export marketing promotion and communication decisions What message? What communications media? How much effort or money to spend?

2.SALES PROMOTION + Foreign catalogs + Samples + House organ and company-published magazines + Films, slides, and personal computers + Trade fairs and exhibitions + Point-of-purchase materials + Consumer promotion materials

3. PUBLICITY AND PUBLIC RELATIONS 3.1.PR PR consists of a set of tools that can be classified under the acronym of PENCILS, namely: + Events (sponsoring athletic or art events or trade shows) + Publication (company magazines, annual reports, helpful customers brochures, etc.) + News (favorable stories about the company, its people, and products) + Community involvement activities (contributions of time and money to local community needs) + Identity media( stationery, business cards, corporate dress codes) + Lobbying activity (efforts to influence favorable or dissuade unfavorable legislation and ruling) + Social responsibility (building a good reputation for corporate social responsibility)

3. PUBLICITY AND PUBLIC RELATIONS 3.2. Publicity: Any form of nonpaid, commercially significant news or editorial comment about ideas, products, or institution.

4. INTERNATIONAL ADVERTISING

4.1.Advertising involves making decisions on the five Ms

+ + + + +

Mission Message Media Money Measurement

4. INTERNATIONAL ADVERTISING

4.2.International advertising strategies + Uniform approach to advertising + Adapting domestic advertising to foreign markets

Uniform approach to advertising + There are no notable differences on customer’s product awareness. + Buying motives, purchase behaviour, and product usage are identical or nearly so. + Copy translation does not lead to obvious misunderstanding, negative connotations or undesirable associations. + Product quality, design and package variations between markets are non-existent or insignificant. + In general, it appears that successful standardization is dependent on a similarly of the motivations for purchase and a similarity of use conditions

Adapting domestic advertising to foreign markets Modification may be requires a company to adapt adverting strategy to current culture variations and trends. Literacy rates and standards of education will have a direct bearing on the amount of adaptation needed in advertising methods.

5. PERSONAL SELLING One of the most expensive marketing communication tools is the company’s sales force, especially when out in the field, traveling a lot, and spending considerable time hunting for prospects and keeping existing customers satisfied. The salesperson sees the customer and can take him to lunch, gauge his interest, answer questions and objections, and close the sale. The more complex the product or service, the more necessary it is to use salespeople.

PERSONAL SELLING Today’s salespeople needs a laptop computer, printer, copy machine, fax machine, cellular phone, electronic mail, software, and so on. With their laptop, they can access industry, product, and customer data, download brochures, and print contracts.

PERSONAL SELLING KEY ACCOUNT MANAGEMENT SYSTEM An increasing number of company are setting up key account management system. Companies know that a few customers account for large share of their sales and profits. The company appoints key account managers to manage their more important accounts, thus increasing the likelihood that important customers will be better served and will remain loyal.

6. Promotional program and strategy This involves the following: + Setting promotional objectives; + Deciding on types of advertising and promotional messages; + Selecting media; + determining how much time, effort, and money to spend.

7.DIRECT MARKETING

Direct marketing includes a number of marketing approaches that involve direct access to the customer. Direct mail, door-todoor selling and telemarketing are the primary direct marketing tools used in some countries.

7.DIRECT MARKETING Many companies posses proprietary databases comprising profiles on thousands or millions of customers and prospects. Consider the following: + General Motors has a database of 12,000,000 names showing everything that these customers charged to their GM credit cards. + Land’s End has a database of more than2,000,000 names of people who bought one or more clothing items from Land’s End.

CHAPTER 9. ORGANIZATION OF INTERNATIONAL MARKETING ACTIVITIES 1. 2.

Main considerations of being organized internationally Organizational structures

1. Main considerations of being organized internationally  Definition

of organizational subunits  Centralization vs. decentralization  Communication and control systems

2. Organizational structures

2.1.Functional export department ( built-in or separate export unit ) 2.2.International division structure 2.3.International organization structure based on product 2.4.International organization structure based on geographic area or customer groupings 2.5.International mixed structure; the matrix organization

Questions for discussion