Professional Documents
Culture Documents
Today's Agenda
Initial discussion
Students form the groups and discuss the following
issues:
What are emerging markets?
Salient features of emerging markets
How emerging markets are different from developed
economies?
Which emerging markets have you visited?
Could you find any difference in terms of infrastructure,
transportation, communication (telephone & internet),
utilities, food and health services?
KEY DIFFERENCES
Dimension
Advanced
Developing
Emerging
Economies
Economies
Markets
Canada, France,
Representative Countries
Japan, United
Kingdom, United
States
Approximate Number of
Countries
Population
(% of World)
Approximate % Share of
World GDP
(PPP* basis)
Population
(Millions)
Angola, Bolivia,
Nigeria,
Bangladesh
Brazil, China,
India,
Indonesia,
Pakistan
35
130
23
14.9
26.4
56.8
37827
9010
12874
50.1
16.06
33.84
1062.80
1881.06
4045.41
Advanced Economies
Mature state of industrial development; transitioned from
manufacturing economies into service-based economies.
Home to about 15% of the worlds population, and account for
half (50.1%) of world GDP, over half of world trade in products,
and three-quarters of world trade in services.
Political systems- democratic, multiparty systems of
government.
Economic systems- typically based on capitalism, with relatively
little government intervention in business.
Serious purchasing power; few restrictions on international trade
and investment.
They host the world's largest MNEs.
Based on: Cavusgil, Knight and Riesenberger
Developing Economies
Account for only about 16 percent of world GDP, low
discretionary incomes, limited proportion of personal
income spent on purchases other than food, clothing, and
housing.
In developing economies, 17% live on less than $1 per
day; 40% live on less than $2 per day.
The combination of low income and high birth rates tends
to perpetuate poverty.
Misnomer-sometimes called underdeveloped countries or
third-world countries- these terms are imprecise because,
despite poor economic conditions, the countries tend to be
highly developed in historical and cultural terms.
Based on: Cavusgil, Knight and Riesenberger
India
1290
1489
4.2
3.2
5.6
6.7
0.5
0.7
Government Consumption
0.09
0.10
GDP Growth
(Current USD)
(Annual %)
(Ratio to GDP)
4
Democracy Index
0.2
0.8
9.7
9.3
(Annual %)
Source: 1 World Bank; 2 UN population projections; 3 Political Risk Services International Country Risk Guide; 4 Freedom
House Political Rights Index.
Rate of Growth
Size of Economy
(Bn
Rate of Growth of
Total GDP (2040-2050)
1
Rate of Growth of
Income per Capita
Pakistan
India
Normal
Fast
675
8165
5.0%
5.2%
2455
5060
4.4%
5.1%
275
1614
+80%
+45%
(2040-2050)
2
Population
(Mn)
% Change in Working
Population (Approx)
3
Source: 1 [HSBC estimates]; 2 [World Bank, UN population projections and HSBC estimates]; 3 [UN population projections]
India
106
131
99
177
122
91
Getting Credit
71
24
Protecting Investors
32
34
90
129
159
186
75
119
Enforcing Contracts
Resolving Insolvency
Source: www.doingbusiness.org/
COMPARITIVES
Target markets
Manufacturing bases
Sourcing destinations
Emerging Markets as
Manufacturing Bases
Home to low-wage, high-quality labor for manufacturing and
assembly operations.
Large reserves of raw materials and natural resources.
South Africa is a key source for industrial diamonds.
Brazil long has been a center for mining bauxite, the main
ingredient in aluminum.
Thailand has become an important manufacturing location for
Japanese MNEs such as Sony, Sharp, and Mitsubishi.
Malaysia and Taiwan- Motorola, Intel, and Philips manufacture
semiconductors there.
Mexico and China- platforms for consumer electronics and auto
assembly.
Based on: Cavusgil, Knight and Riesenberger
Off shoring
When sourcing involves foreign suppliers or production bases.
Global sourcing
Refers to the procurement of products and services from foreign
locations. Procurement can be from either independent suppliers or
company-owned subsidiaries.
Based on: Cavusgil, Knight and Riesenberger
Today's Agenda
1. Product Strategy for emerging markets
2. Standardization and adaptation of the international
marketing program for emerging markets
3. Global branding and product development for
emerging markets
4. Strategies that fit emerging markets
5. Brand Bollywood going global
26
27
Positioning
The firms objective in pursuing global market segments is to
create a unique positioning of its offerings in the minds of target
customers.
Positioning -- the firm develops both the product and its
marketing to evoke a distinct impression in the customer's mind,
emphasizing differences from competitive offerings.
In the international food retailing McDonald has established itself
as clean, economical, organized fast food retailer available for
longer working hours worldwide.
30
Standardization and
Adaptation
Adaptation refers to firm efforts to modify elements of the
international marketing program to accommodate specific
customer requirements in a particular market.
Standardization refers to firm efforts to make the marketing
program elements uniform, with a view to targeting entire
regions of countries, or even the global marketplace, with a
similar product or service.
Achieving a balance between adaptation and standardization is
part of a broader corporate strategy that has the firm debating
its position between global integration and local
responsiveness.
32
Tradeoffs
33
34
35
36
Standardization
Representing a tendency towards global integration,
standardization is more likely to be pursued in global industries
such as aircraft manufacturing, pharmaceuticals, and credit cards.
Boeing, Pfizer, and MasterCard are examples of firms that use
standardized marketing strategy with great success.
A standardized marketing approach is appropriate when:
Similar market segments exist across countries.
Customers seek similar features in the product.
Products have universal specifications.
Business customers have converging expectations.
37
Advantages of Standardization
Cost Reduction. Standardization reduces costs by enabling
economies of scale in design, sourcing, manufacturing, and
marketing. Offering a similar marketing program to the global
marketplace or across entire regions is more efficient than having
to adapt products and their marketing for each of numerous
individual markets.
Improved Planning and Control. Standardization provides for
improved planning and control of value-adding activities. In the
case of Electrolux, for example, fewer offerings mean that
management could simplify quality control and reduce the number
of parts that it stocks for repairing defective products.
38
Advantages of Standardization
(cont.)
Adaptation
Adaptation of an international marketing program
exemplifies local responsiveness. It is a strategy multidomestic industries commonly use.
E.g., publishing and software industries, where books,
magazines, and software must be translated into the
language of the target country.
Adaptation may be as simple as translating labels and
instructions into a foreign language, or as complex as
completely modifying a product to fit the needs of very
unique market conditions.
40
Advantages of Local
Adaptation
Meeting needs of customers more precisely.
Creating unique appeal for the product.
Complying with such government regulations as health and
technical standards.
Achieving greater success in combating customer
resistance.
In addition, adaptation provides managers an opportunity
to explore alternative ways of marketing the product or
service. Such market knowledge can guide the firm in its
R&D efforts, often leading to superior products for sale
abroad and at home.
42
Standardization and
Adaptation: A Balancing Act
A decision about the degree of standardization and
adaptation is not an either/or decision, but rather a
balancing act.
There are good arguments in favor of both; it is up to the
manager to sort out the trade-offs in light of the unique
circumstances of the international environment and the
firm's chosen strategy.
The most important distinction is that standardization
helps the firm reduce its costs, while adaptation helps the
firm more precisely cater to local needs and
requirements, thereby increasing its revenues.
43
Adaptation is Costly
Adaptation may require substantial redesign of products,
modifications to manufacturing operations, lower pricing, and
overhauled distribution and communications strategies.
The costs add up when these changes multiply in numerous
national markets simultaneously.
Whenever possible, managers usually err on the side of
standardization because it is easier and less costly than
adaptation.
Others adapt marketing program elements only when necessary,
to respond to local customer preferences and mandated
regulations.
44
Pricing
Only area of global marketing mix where policy
can be changed rapidly without large direct
cost implications
Decisions in global markets are affected by
complexity of influential factors
15-48
International
pricing framework
Firm-level factors
Environmental
factors
Product factors
Market factors
Pricing strategies
Terms
15-49
Other
elements
Firm performance
PRODUCT FACTORS
STAGE IN PLC
PLACE IN PRODUCT
LINE
MOST IMPORTANT
PRODUCT FEATURES
PRODUCT POSITIONING
PRODUCT COST
STRUCTURE
15-50
MARKET FACTORS
CUSTOMERS
PERCEPTIONS
CUSTOMERS ABILITY
TO PAY
NATURE OF
COMPETITION
COMPETITORS
OBJECTIVES,
STRATEGIES,
STRENGTHS AND
WEAKNESSES
GRAY MARKET APPEAL
15-51
What is this?
What price-related phenomenon is
caused by the summation of all cost
factors in the distribution channel
including ex-works price, shipping
costs, tariffs, and distributor markup?
Price escalation
15-52
15-53
15-54
Factors influencing
customer sensitivity to price
(1)
More distinctive product
Greater perceived quality of products
Consumers less aware of substitutes in the
market
Difficulty in making comparisons
Proportion price represents of total expenditure
of the customer
15-55
Factors influencing
customer sensitivity to price
(2)
Perceived benefit for customer increases
Product is used in association with a product
bought previously, such that components and
replacements are highly priced
Costs are shared with other parties
Product or service cannot be stored
15-56
What is this?
What price strategy involves
charging a high price at the top end
of the market with the objective of
achieving the highest possible
contribution in a short time?
Skimming
15-57
Problems with
skimming
Having a small market share makes the firm
vulnerable to aggressive local competition
Maintenance of a high-quality product requires
a lot of resources
If product is sold more cheaply at home or in
another country gray marketing is likely
15-58
What is this?
What price strategy involves
charging a final price based on
competitive prices?
Market pricing
15-59
What is this?
What price strategy involves
charging a low price with the
objective of achieving the highest
possible sales?
Penetration pricing
15-60
Motives for
penetration pricing
Intensive local competition
Lower income levels of locals
View of exporting as marginal activity
15-61
What is this?
What term is used to describe the
prices charged for intracompany
movement of goods and services?
Transfer pricing
15-62
What is this?
What price strategy is based on
grouping products and services in a
system-solution product in order to
overcome possible customer price
concerns?
Bundle pricing
15-63
Basic Approaches To
Pricing Across Countries
Price
standardization
15-64
Price
differentiation
Source: Reprinted from European Management Journal, Vol. 12, No. 2, Diller. H. and Bukhari, I. (1994) Pricing conditions in the European Common Market, p. 168, Copyright 1994, with permission from Elsevier.
15-65
Figure 15.6
A taxonomy of international
pricing practices
Preparedness for
internationalization
High
Low
3 Multilocal
price setter
4 Global
price leader
1 Local
price follower
2 Global
price follower
Multilocal markets
Global markets
Industry globalism
Source: Adapted from Solberg et al., 2006, p. 31. In the original article Solberg has used the concept Globality instead of Globalism.
15-66
International
pricing practices (1)
Prototype 1: Local price
follower
Limited resources and
leverage
Dependent on local
export intermediary
Cost-oriented, standard
prices
Unexposed to global
forces
PROTOTYPE 2: GLOBAL
PRICE FOLLOWER
NEWCOMERS TO
GLOBAL MARKETS
MARKET-ORIENTED,
STANDARD PRICES
GLOBAL
COMPETITION BUT
LOCAL DIFFERENCES
15-67
International
pricing practices (2)
Prototype 3: Multilocal price
setter
Local market leaders in
selected markets
Market-oriented, adapted
prices
Local competition
PROTOTYPE 4: GLOBAL
PRICE LEADER
GLOBAL MARKET
LEADERS
MARKET AND COSTORIENTED GLOBAL
PRICES
GLOBAL COMPETITION
BUT LOCAL
DIFFERENCES
15-68
What is this?
When a customer requires one
global price per product from the
supplier for all its foreign SBUs and
subsidiaries, a _____ has been
requested.
Source: Source: adapted from Narayandas, Quelch and Swartz, 2000, pp. 6170.
DISADVANTAGES
LESS ADAPTABILITY
TO MARKET CHANGES
POTENTIAL FOR
QUALITY
INCONSISTENCIES
DEPENDENCE UPON
SUPPLIER COULD
RESULT IN HIGHER
PRICES
RESISTANCE TO GPCS
AMONG LOCAL
MANAGERS
MONITORING COSTS
15-70
DISADVANTAGES
RESISTANCE TO
CHANGE
LOSS OF CUSTOMERS
RISK OF FAILING TO
DELIVER ON
PROMISES
INAPPROPRIATE USE
OF COST
INFORMATION
OVER DEPENDENCE
ON ONE CUSTOMER
CONFLICT IN
DISTRIBUTION
CHANNELS
15-71
Approaches to
transfer pricing
Transfer at cost
Transfer at arms length
Transfer at cost plus
15-72
Currency decisions
in export pricing
Quote price in foreign currency of buyers country
Quote price in currency of exporters country
Quote price in currency of a third country
Quote price in currency unit (euro)
15-73
15-74
Delivery terms
EXW Ex-works
FCA Free carrier
FAS Free alongside
ship
FOB Free on board
CFR Cost and freight
CIF Cost, insurance,
and freight
CPT Carriage paid to
15-76
Characteristics of
letters of credit
An arrangement by banks for settling
international commercial transactions
Provide a form of security for parties involved
Ensure payment, provided that terms and
conditions of credit have been fulfilled
Payment based on documents only and not on
merchandise or services involved
15-77
Source: Phillips et al., 1994, p. 454, with permission from ITBP Ltd.
15-78
15-79
Export financing
Commercial banks
Export credit insurance
Factoring
Forfeiting
Bonding
LEASING
COUNTER-TRADE
Barter
Compensation deal
Buy-back agreement
15-80
Communication Strategy in
Emerging Markets
Mubbsher Munawar Khan
Institute of International Marketing Management
Agenda
Comparative Statistics
88
MEDIA CONDITIONS
Media Infrastructure
Media Habits
Media Costs
Overflow
Distribution Structures in
Emerging Markets (5)
Mubbsher Munawar Khan
Institute of International Marketing Management
Manufacturer Concerns
over Gray Markets
1. The risk of a tarnished brand image when customers
realize that the product is available at a lower price
through alternative channels particularly less
prestigious outlets.
2. Manufacturer-distributor relations can be strained
because parallel imports result in lost sales to
authorized distributors.
3. Gray market activity can disrupt regional sales
forecasting, pricing strategies, merchandising plans,
and other marketing efforts.
Direct Exporting
Export Management Companies (EMC)
Export Trading Companies (ETC)
Indirect Exporting
Control over the plan, Marketing the product line, Quick feed back,
Trademark and patent protection, and earning goodwill.
Knowledge about export shipping and international payments.
Developing Distribution strategy and finding appropriate distributors.
Higher startup costs and risks (travel, communication and
personnel)
113
114
Licensing
Disadvantages
Suitable only when licensor posses distinctive
technology and trademark
May be you are preparing a competitor
Absolute size of income is comparatively smaller than
other modes
Cannot change the entry mode
115
Disadvantages
Lack of operational control
Limited profit
Governmental restrictions
116
117
Business plan
Financial considerations
Company goals
Nature of Technology/service
Countertrade
Counter purchase
Buyback
Offset
Clearing
Management Contracts
Contract Manufacturing
Turnkey projects
118
Joint Venture
Different ways of joint ownership
Shared capital and risk
Compared to marriages
119
120
Perils
Suggestions
Analyses of political, legal, economic, social, and cultural
environments
Experience through exports
121