Chapter Objectives

CHAPTER 14 MARKETING

Chapter Objectives

. To suggest how markets for international expansion can be selected, their demand assessed, and appropriate strategies for their development devised . To describe how environmental differences generate new challenges for the international marketing manager . To compare and contrast the merits of standardization versus localization strategies for country markets and of regional versus global marketing efforts . To discuss market-specific and global challenges facing the marketing functions: product, price, distribution, and promotion within both the traditional and e-business dimensions

Opening Case Being a Good Sport Globally Summary: This case describes how Coca-Cola spends $1 billion annually on sports sponsorships. Major events sponsored include the Olympics, World Cup (Soccer), Basketball (NBA, WNBA), NFL, NHL, and others.

Chapter Outline

I. TARGET MARKET SELECTION A. Identification and Screening (Figure 14.1, page 472) 1. Preliminary Screening a. Secondary data b. Product-specific factors c. Industry-specific factors d. Country-specific factors 2. Estimating Market potential—sales available to all firms in industry a. Income elasticity of demand—the relationship between demand and economic progress b. Market audit—adds together local production and imports with exports deducted from the total c. Analogy—uses proxy variables that correspond to demand for the product d. Longitudinal analysis—may be needed if there is a time lag between correlates e. Surveys f. Difference between potential sales and real sales detected by a gap analysis 3. Estimating Sales Potential—the share of the market potential a firm can expect considering— a. Competition b. Market—strength of barriers c. Consumers’ ability and willingness to buy d. Product—advantage, compatibility, complexity, trialability, and communicability 4. Identifying segments B. Concentration versus Diversification 1. Expansion Alternatives a. Concentration—small number of markets b. Diversification—large number of markets 2. Factors Affecting Expansion Strategy a. Market-related factors 1) Sales forecast 2) Uniqueness of offering 3) Spillover effects 4) Government constraints b. Mix-Related Factors—degree to which marketing mix can be standardized c. Company-Related Factors—objectives of company II. Marketing Management A. Standardization versus Adaptation 1. No special provisions for international marketplace 2. Adapt to local conditions in each and every target market (multidomestic) 3. Incorporate differences into a regional or global strategy allowing for local implementation differences (globalization) 4. Factors Affecting Adaptation a. Markets targeted b. The product and its characteristics c. Company characteristics B. Product Policy (Adaptation to foreign markets) 1. Factors in Product Adaptation (Figure 14.2, page 480) a. Regional, Country or Local Characteristics 1) Government regulations 2) Nontariff barriers 3) Customer characteristics, expectations, and preferences 4) Purchase patterns 5) Economic status of potential users 6) Stage of economic development 7) Competitive offerings 8) Climate and geography b. Product Characteristics 1) Product constituents 2) Brand 3) Packaging 4) Physical form or appearance 5) Functions, attributes, features 6) Method of operation or usage 7) Durability, quality 8) Ease of installation 9) Maintenance, after-sale service 10) Country of origin c. Company Characteristics 1) Profitability 2) Market opportunity 3) Cost of adapting policies 4) Organization 5) Resources 2. Product Line Management a. Must manage local, regional and global brands b. New-product ideas from domestic and other markets c. Company must be sensitive to local requirements and tastes 3. Product Counterfeiting a. Goods bearing an unauthorized representation of a trademark, patented invention, or copyrighted work b. Actions to combat counterfeiting 1) Legislation 2) Negotiations 3) Joint private sector action 4) Measures taken by individual firms C. Pricing Policy 1. Export Pricing a. Standard worldwide pricing—based on average unit costs of fixed, variable, and export-related costs b. Dual pricing—one price domestically and another for export 1) Cost-plus method 2) Marginal cost method c. Market-differentiated pricing—based on demand and competitive forces d. Price escalation occurs due to extra cost of exporting e. Dumping—selling goods overseas for less than domestically 1) Predatory dumping—to increase market share 2) Unintentional dumping—due to time lags between date of sales transactions, shipment, and arrival 2. Foreign Market Pricing—pricing within individual markets as determined by— a. Corporate objectives b. Costs c. Customer behavior and market conditions d. Market structure e. Environmental constraints 3. Price Coordination a. Define maximum and minimum prices a country organization within an economic union can charge b. Gray markets/parallel importation—brand-name imports entering a country legally but outside regular, authorized distribution channels 4. Transfer Pricing—intracompany pricing of sales to members of the corporate family a. Transfer at direct cost b. Transfer at direct cost plus additional expenses c. Transfer at a price derived from end-market prices d. Transfer at an arm’s length price—the price that unrelated parties would have reached on the same transaction D. Distribution Policy 1. Channel Design—length and width of the channel a. Customers—what they need and why, when, and how they buy b. Culture of a market c. Competition—may use only existing system and company must use it better or create new channel d. Company objectives e. Character of the good f. Capital—the financial requirements in setting up a channel system g. Cost—expenditure incurred in maintaining a channel h. Coverage—number of areas covered and quality of representation i. Control—the use of intermediaries will automatically lead to loss of some control over the marketing j. Continuity—of the relationship must be maintained k. Communication 1) About goals 2) Solve conflicts 3) Aid in marketing 2. Selection and Screening of Intermediaries a. Sources to assist include governmental agencies b. Private sources to assist 1) Trade directories 2) Telephone directories 3) Facilitating agencies c. Intermediaries can be screened 1) By performance 2) By professionalism 3) By financial standing 4) By sales 3. Managing the Channel Relationship a. Must have open communications b. Complicating factors are differences in 1) Ownership 2) Geography and culture 3) Rules of law 4. e-Commerce a. Forecast to grow b. Can use hub sites c. Need 24-hour order taking and customer service d. Can outsource services or build international networks e. Must be sensitive to governmental role in e-commerce f. Privacy issues have grown exponentially as a result of e-business

Focus on e-Business Testing Channels of the Future Summary: This case tells how U.s. auto makers cannot fully use the Internet due to franchise laws and current production facilities that cannot build cars to order. However, in foreign markets both GM and Ford are able to begin taking orders online as well as making service appointments online.

E. Promotional Policy 1. Advertising a. Media strategy—selection of media vehicles and the development of a media schedule 1) Media spending varies by market 2) Media regulations vary 3) Global media vehicles have now been developed b. Promotional message (creative strategy) must appeal to consumers’ motivations depending on— 1) The diffusion of the product, service or concept in the market 2) The criterion on which the consumer will evaluate the product 3) The product’s positioning c. Organization of the Promotional Plan has two options-- 1) To perform the full range of promotional activities 2) Rely on outside expertise 2. Personal Selling—in early stages of internationalization exporters rely heavily on personal selling at the local level 3. Sales Promotion—anything other than advertising, personal selling, or promotion to increase sales a. Campaigns planned by manufacturers or their agencies have to gain the support of the local retailer population b. Trade promotion includes trade shows, exhibits, trade discounts, and cooperative advertising 4. Public Relations—programs to earn public understanding and acceptance internally and externally a. Internal communication—to create an appropriate corporate culture b. External communication through symbols, advertising, customer relations, publicity, and the Internet

Focus on Ethics Global Corporate Philanthropy Summary: This case tells how community relations have become a strategic aspect for business. The example of IBM’s involvement in 152 countries is cited. The opportunities for corporate contributions are growing and this is seen as positive by employees, suppliers, and customers.