Ib2016 - International Marketing Mix

International Business
International Marketing Mix
Global Marketing Strategic Decisions
Global marketers have to make a multitude of

decisions regarding the entry mode which
may include:
(0) The motivations for the expansion (Why?)

(1) The target product/market (Where?)
(2) The mode of entry (How?)
(3) The goals of the target markets (How much?)
(4) The time of entry (When?)
(5) A marketing-mix plan (What?)
(6) A control system to check the performance in
the entered markets (Have we?)
IB 2016: International Marketing Mix
The International Marketing Mix
Do We Standardize or Do We Localize?
The Pressure for Local Responsiveness
Product
Price
Place
Promotion
Product
What product modifications may be necessitated when

you cross borders?
Product Component
Model
SUPPORT SERVICES
COMPONENT
PACKAGING
COMPONENT
12-6
Repair and
maintenance
Brand name
Instructions
Other related
services
Irwin/McGraw-Hill
Legal
Product platform
Deliveries
Price
Quality
Warranty
Design features
Functional features
CORE
COMPONENT
Trademark
Installation
Package
Spare parts
Legal
Styling
Legal

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Adapting Products for Foreign Markets
Level of Technical Skills

Level of Labor Costs
Level of Literacy
Level of Income
Level of Interest Rates
Level of Maintenance
Level of Standards
Climatic Differences
Product Policy: Reasons for Making Alterations
Legal reasons: explicit product-related legal requirements

vary widely by country but are usually meant to protect
customers, the environment, or both. [Protective packaging laws
and product standards are very complicated legal issues.]
Cultural reasons: cultural factors affecting product demand

may or may not be easily discerned [While religious beliefs offer
clear guidelines regarding product acceptability, other factors such as
color, design, and artistic preferences are more subtle.]
Economic reasons: levels of income, differences in income distribution, and the extent and condition of available infrastructure can all
affect demand for a given product [Price-reducing alterations may be
required if a firm expects to enter an emerging market.]
Firms usually prefer to standardize basic components while altering critical
end-use characteristics.
Price
International Pricing
Cross-Country Issues
Country-of-Origin Effects
Differences in Perceived Value
Differences in Consumer Buying Habits
Differences in Consumer Usage Patterns
Example: Price-Quality relationship

Example: Haggling
Washington apples in Japan
Differences in Shared Histories and Local Customs

Differences in Distribution Systems
Differences in the Competitive Environment
Differences in Laws and Regulations
Differences in Macro-economic Policies; Fluctuating Exchange Rates
Differences in Income Levels across Countries
Pricing Complexities
Government Intervention
Every country has laws that either directly or indirectly

affect prices to the final customer.
Price controls may set either maximum or minimum
prices for designated products.
The WTO permits a government to establish restrictions against any imports that enter the country at a
price below the price charged to customers in the
exporting country (dumping).
A firm may charge different prices in different regions or
countries because of differing competitive and demand
factors.
Market diversity, i.e., country variation, leads to

many ways of segmenting the market for a given
product. Depending upon market conditions, a firm
may adopt any of the following pricing strategies:
skimming price: sets a high price for a new product aimed
at market innovators [Over time, the price will be

progressively lowered in response to demand and supply
conditions, i.e., the presence of additional competitors.]
penetration price: sets an aggressively low price (i) to
discourage competition and (ii) to attract a maximum
number of customers (some of whom will hopefully switch
from competitors brands)
cost-plus price: sets the price at a desired margin over
cost
Price Escalation in Exporting
Common reasons for price escalation in export sales are (i)

tariffs and (ii) the often greater distance to the market.
If standard markups occur within a distribution channel,
either lengthening the channel or adding expenses at
additional points within the network will increase the
delivered cost of a product.
To compete in export markets, a firm may have to sell its
products to intermediaries at reduced prices in order to
lessen the amount of price escalation.
A firm may choose to exclude fixed costs in the price calculation of

products exported to developing countries in order to be price
competitive in those markets.
Currency Values and Inflation Rates
Currency fluctuations: affect a firms competitiveness

and, ultimately, its profitability
[Sales contracts may specify that payment be made in a given

currency.]
High inflation in a host country: negatively affects the

value of a firms foreign receipts
[A firm may need to adjust its margins downward in order to
remain competitive.]
High inflation in a home country: negatively affects the

costs of a firms foreign-sourced inputs
[A firm may need to source locally in order to remain
competitive.]
Place
Distribution
Often, geographic barriers and poor
transport infrastructure divide a country into

distinctly viable and non-viable markets.
The selling of goods through unauthorized
distributors, i.e., the gray market, causes a firms
operations in different countries to complete with
one another, thus preventing them from pricing
according to local market conditions.
Channels of Distribution International Differences
Distribution Process
Physical handling and distribution

The Transfer of Title
The buying and selling negotiations
Distribution Structure
Range from a poorly developed marketing infrastructure

to the highly complex, multilayered systems
Different Countries, Different Structures
Poland
Greece
Thousands of small retail stores, entrepreneurial spirit

Product specific distribution networks
Small family owned Momma and Poppa stores each
of which deal in a small range of goods (specialized)
Only a handful of department stores and supermarkets
Italy
Numerous small family-owned retail outlets, street

vendors, hyper-markets, shopping malls, specialized
stores, discount stores
Distribution Patterns
Middlemen Services
Line Breadth
Costs and Margins
Channel Length
Nonexistent or Blocked Channels
Stocking
Degree of Competition
Distribution: The Difficulty of Standardization
Each country has its own national distribution system that

is historically intertwined with its cultural, economic, and
legal environments.
Factors that influence the distribution of consumer
products within a country include:
citizens attitudes towards their own retailers

the ability (or inability) to pay retail workers
retailers trust in their employees
legislation affecting chain and individually-owned stores
restrictions on the size of stores and their hours of operation
the financial ability of retailers to carry large inventories
the efficacy of the national postal system
Distribution: Distributor and Channel Selection
Firms should handle the distribution function internally if:
sales volume is high

human, capital, and financial resources are sufficient
the nature of the product demands that the producer deal
directly with customers
customers are global
it is possible to gain a competitive advantage
The more complex and expensive a product, the greater

the importance of after-sales service.
Firms may need to invest in service centers, which in turn

can become important sources of revenues and profits.
[continued]
Distribution: Hidden Costs
Differences in national distribution systems

that may contribute to increased costs
include:
poor infrastructure [port, roads, warehouse facilities]

levels within a distribution system [multi-tiered
wholesale systems]
retail inefficiencies [an insistence upon counter service]

government restrictions [laws protecting small retailers
or limiting hours of operation]
lack of retail storage space [more frequent, smaller

deliveries required to prevent stock-outs]
Promotion
Promotion: The Push-Pull Mix

Push strategy: direct marketing techniques designed
to create immediate demand, i.e., personal selling
[primarily used when a product is relatively expensive and
distribution is tightly controlled]
Pull strategy: indirect marketing techniques designed

to create final demand, i.e., advertising, sales
promotion, and publicity/public relations
The cross country push-pull mix is determined by:
types of distribution systems

the cost and availability of media
customer attitudes toward sources of information
the relative price (affordability) of a product
Promotion: The Standardization of Advertising

Programs
Advertising: any paid form of media (nonpersonal)

presentation
The advantages of standardized advertising include:
substantial cost savings

improved quality (effectiveness) at the local level
rapid entry into new country markets
The challenges of standardized advertising include:
translation [content, meaning, images]

legality [differing views on consumer protection, competitive protection, standards of morality, and nationalism]
message needs [national differences in perceptions and
product demand]
Branding
Brand: a name, term, symbol, and/or design

intended to identify a product or product line and
differentiate it in the marketplace
Trademark: a brand, or part of a brand, i.e., a mark,
that is granted legal protection because it is capable
of legal appropriation
MNEs must consider the following branding options:
brand vs. no brand

manufacturers brand vs. private brand
one brand vs. multiple brands
worldwide brands vs. local brands
Overall, the portion of local brands to international (regional or
global) brands is decreasing.
[continued]
Challenges to regional and global brands include:
language factors [the translation and pronunciation of
brand names; the cultural sensitivity of shapes, symbols,

and colors]
brand acquisitions [local brands may be well-known but
expensive and strategically difficult to maintain]
country-of-origin images [products from particular
countries may be perceived as being particularly desirable
and of relatively high quality]
generic and near-generic names [generic names may
either stimulate or frustrate the sales of the firm from whom
a name is expropriated]
Sales Promotions
Cultural Preferences
Coupon usage in US correlated with socioeconomic status while

sweepstakes and contests etc preferred by lower income segment
Money back guarantees may not work in Hispanic markets
British consumers have traditionally responded better to x
percents extra rather than coupons
Newspapers and magazines most popular ways of distributing
coupons in UK. Spain and Italy?
Legal Restrictions
Legal restrictions on special offers and cents-off deals in Mexico

Fair trade regulations in Japan limit value of premiums to a
maximum of 10 percent of retail price
Germany?
Public Relations
Gift Giving
In some countries gifts are expected and failure to give them is

considered an insult.
In other countries gift-giving can be considered offensive or certain gifts

can be inappropriate
Japan
Clocks in China
Cutlery in Latin America
Handmade Dolls in Brazil
Chrysanthemums in Europe
Alcohol in the Middle East
Roses to subordinate in Latin America
The primary gift giving seasons differ by country/ culture.
Personal Selling
An American in Saudi Arabia
An introductory meeting for a new product sale
The offer of coffee is politely refused. Sits down on the

chair crossing legs, exposing soles of shoe; briefly
enquires about wife and family, and gets down to
pursuing the deal; has come with pre-prepared
documents which are passed on to the Sheik with the
left hand. Follows up with a series of official letters.
How is he doing?!
The Wages of Culture
Blunders
Pepsi and Pepsi will bring your ancestors back from

the dead
KFC and eat your fingers off
Parker Pens and it wont leak in your pockets and
make you pregnant
Even bigger Blunders
Euro-Disney
Walmart in Germany & Korea
Cultural Sensitivity
The X-Factor in Global Marketing
Cultural sensitivity is perhaps the one soft skill that

distinguishes the pros from the babies in the global
marketing arena
In understanding market opportunity
Including the way market research is conducted
In the STP choices

In the Marketing Mix decisions
As important as an understanding of Consumer Culture is

the understanding of Business Culture
The way business is conducted in different countries
Attitudes to time, to authority, to collective decision making

Critical influence on deals, negotiations, on the very conducting of
business in the country: Understand that the operating cultures in
different countries may be very different.
the end
IB2016 Rewind
The Topics
Globalization
Economic Globalization
National Differences
The Globalization of Production & of Marketing
The CAGE Model
Trade Theory
Free Trade Theories
Absolute Advantage, Comparative Advantage, Factor

Proportions
Government Can Intervene
Mercantilism, Competitive Advantage of Nations, New Trade

Theory
Trade Policy
Tariff Barriers
Non Tariff Barriers
Quotas, Anti Dumping Duties, Administrative Barriers
Neo Mercantilism
Specific & Ad Valorem, Tariff Lines, Bound Tariffs
Export Policy; The SEZ Debate
FDI
FDI & FII

FDI Trends
The Political Economy of FDI
WTO
Bretton Woods: The Path to the WTO

Free Trade Principles: MFN & National Treatment
The Power of WTO: Trade Policy Reviews
The Powerlessness of WTO: The Doha Debacle
Regional Trading Agreements
RTAs: An Exception to the Core WTO Principles

Bilateral and Regional Trade Agreements
BOP
A Double Entry System: Current; Capital & Financial

Accounts; Official Reserves
BOP Disequilibrium: Trade, Current Account, BOP
Deficits
Reading Indias BOP
Exchange Rate Regimes
Fixed Exchange Rates: Hard & Soft Pegs

Floating Exchange Rates: Managed Floats
Indias Exchange Rate Policy
Exchange Rates
The FX Markets
Exchange Rate Forecasting
Parity Conditions: Inflation, Interest Rates, Exchange Rates
Exchange Rate Risks
Global Capital Markets
Global Capital
Debt Markets: Eurocurrency, Eurobond, ECB
Equity Markets: Listing on Foreign Stock Exchanges, ADR
& GDR, FCCB
IB Strategy
The Fundamental Pressures

Bartlett-Ghoshal Model
Ghemawat: The 3A Framework
Market Entry Strategy
Where: Country Attractiveness, Costs, Risks

How, When, What Scale etc
IB2016 Rewind
The People
John Dunning
Michael Peng
Anne Kreuger
P Sainath
Joseph Stiglitz
Amartya Sen
Jagdish Bhagwati
Arvind Adiga
Pankaj Ghemawat
Michael Porter
Paul Krugman
Sumantro Ghoshal
CK Prahalad
All the Best with the Exams and Your Placements!

Thank you for being So Sweet

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International Business

International Marketing Mix

Global Marketing Strategic Decisions

Global marketers have to make a multitude of

(0) The motivations for the expansion (Why?)

IB 2016: International Marketing Mix

The International Marketing Mix

IB 2016: International Marketing Mix

IB 2016: International Marketing Mix

IB 2016: International Marketing Mix

What product modifications may be necessitated when

IB 2016: International Marketing Mix

IB 2016: International Marketing Mix

Adapting Products for Foreign Markets

Level of Technical Skills

IB 2016: International Marketing Mix

Product Policy: Reasons for Making Alterations

Legal reasons: explicit product-related legal requirements

Cultural reasons: cultural factors affecting product demand

IB 2016: International Marketing Mix

Differences in Consumer Usage Patterns

Example: Price-Quality relationship

Differences in Shared Histories and Local Customs

IB 2016: International Marketing Mix

Every country has laws that either directly or indirectly

Market diversity, i.e., country variation, leads to

skimming price: sets a high price for a new product aimed

at market innovators [Over time, the price will be

Price Escalation in Exporting

Common reasons for price escalation in export sales are (i)

A firm may choose to exclude fixed costs in the price calculation of

Currency Values and Inflation Rates

Currency fluctuations: affect a firms competitiveness

[Sales contracts may specify that payment be made in a given

High inflation in a host country: negatively affects the

High inflation in a home country: negatively affects the

IB 2016: International Marketing Mix

transport infrastructure divide a country into

IB 2016: International Marketing Mix

Channels of Distribution International Differences

Physical handling and distribution

Range from a poorly developed marketing infrastructure

IB 2016: International Marketing Mix

Different Countries, Different Structures

Thousands of small retail stores, entrepreneurial spirit

Numerous small family-owned retail outlets, street

IB 2016: International Marketing Mix

IB 2016: International Marketing Mix

Distribution: The Difficulty of Standardization

Each country has its own national distribution system that

citizens attitudes towards their own retailers

Distribution: Distributor and Channel Selection

Firms should handle the distribution function internally if:

sales volume is high

The more complex and expensive a product, the greater

Firms may need to invest in service centers, which in turn

IB 2016: International Marketing Mix

Distribution: Hidden Costs

Differences in national distribution systems

poor infrastructure [port, roads, warehouse facilities]

retail inefficiencies [an insistence upon counter service]

lack of retail storage space [more frequent, smaller

IB 2016: International Marketing Mix