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Class # 22

Concepts of International

Rodrigo Wagner
Is your main export a differentiated good?
There is always some differentiation
International Marketing: A Definition

International marketing is defined as the

performance of business activities designed
to plan, price, promote, and direct the flow of
a companys goods and services to consumers
or users in more than one nation for a profit

So International marketing
is just marketing
but international

Marketing concepts, processes, and principles are universally applicable all over the
International Marketing
Foreign Environment
7. Structure of 1. Competition
Distribution Domestic environment Environmental
(Uncontrollables) uncontrollables
country market A
(Controllables) 1. Competition
Price Product 2. Technology
5. Political- Target Environmental
Market 7
6. Geography and Legal uncontrollables
Infrastructure Promotion Place or 2 .Technology country
Distribution market B
3. Economy Environmental
5. Political- 3. Economy uncontrollables
Legal country
market C
Adaptation Needed
Adaptation needed
You need to adapt de 4Ps to the international
environment that you cannot control!

Like proximity-concentration, you can choose

how much to adapt to customers. Different
optimums for different firms and contexts
Adaptation Standardization
(of Marketing Mix) (of Marketing Mix)
Stages of International Marketing
In general, firms go through five different phases in going

No Direct Foreign Marketing

Infrequent Foreign Marketing

Regular Foreign Marketing

International Marketing

Global Marketing
Nikes big jump!

Michael Jordan.
The market
Marketing as one one part of the means needed for Pursuing an International Strategy
Marketing Strategies also relevant
in international context
Marketing strategy depends on marketing
Production max(x) q(x)
Sales max(x) p(x) q(x)
Customer e.g. Customer lifetime value
Strategic marketing max(x) NPV(p(x) q(x)-cost(x))
Social marketing.

Strategies to be adapted to international context.

(e.g. price depends on exchange rates!)
Marketing Strategies:
Firms can segment and target markets
By country ; by global segment; with multiple criteria

When segmenting try to look for common

attributes that are relevant in purchase behavior

Ideally variance within segment should be lower

than variance between segments not always
Why do firms Alter Products?
Firms alter products for
Legal reasons
Cultural reasons
Economic reasons

-- > Product Customization

The Product Line:
Extent and Mix
Product line decisions depend on
Sales and cost considerations
Product life cycle considerations
Pricing Strategies
Potential obstacles in international pricing
Government intervention
Set minimum or maximum pricing
Prohibit certain pricing practices

Market diversity
Consumers may be willing to pay higher prices

Exchange rate differences that change the

relative price between you and your competitors.
Pricing Strategies
Pricing tactics
Skimming strategy
Penetration strategy
Cost-plus strategy

Export price escalation.

Fluctuations in currency value

Pricing Strategies: Cost Plus
Why Cost-Plus Pricing Pushes Up Prices
Exchange Rate Passthrough:
Firms set different prices when the exchange rate moves!
Can I change prices when there is a currency
devaluation? It depends on
what your competitors do.
the invoicing currency.
Other industry characteristics.
The share of imported inputs.
If you get historical data you can calculate a regression:
p = + e
Where p is how much prices change (in %) and e is hown
much the exchange rate moved (in % also). So the
parameter means how many % points firm adjust
prices on average when the exchange rate depreciates in
Which currency should I use for
invocing exports?

Source: Ankar and Samiee (1998) J of Marketing

The currency that your competitors
use also matters for your decision

You do not want to have a price that is too far from the one of your competitors.
See Benguria & Wagner ; 2012
Pricing Strategies: product diversion
Gray market or product diversion
the selling and handling of goods through unofficial distributors

The costs of arbitrage put a limit to the differential pricing

strategies you could follow in different countries.
Starbucks can price different in different countries because you cant
efficiently transport a hot coffee from NYC to Santiago.

If product is easier to transport you have to be aware of it and
adapt your pricing strategy.

In Computers, many firms use some attributes to gerenate additional

costs to arbitrage. For example in Lat Am official dealers tend to sell
mostly keyboards in Spanish and dealers in the US are reluctant to
sell keyboards in Spanish.
Promotion Strategies
the presentation of messages intended to help sell a
product or service
Push-pull mix
uses direct selling techniques
relies on mass media

Factors in Push-Pull Decisions:

Type of distribution system
Cost and availability of media to reach target markets
Consumer attitudes toward sources of information
Price of the product compared to incomes
Promotion Strategies:
Standardized vs Customized
(again the proximity vs concentration trade-off applied to advertising)
Advantages of standardized advertising
lower cost
better quality at local level
common global image
rapid entry into multiple countries
However, firms could have problems with
market needs
Branding Strategies
Brand: an identifying mark for a product or service.

Advantages of a worldwide brand

global image
global player identification

Problems with global brands

brand acquisition
generic and near-generic names
Distribution Strategies I
the course physical path or legal title that goods take
between production and consumption
Deciding whether to standardize
Distribution can vary substantially among countries
Distribution can be difficult to change
When choosing distributors / channels consider
whether internal handling is feasible
which distributors are qualified
the reliability of after-sales service
Distribution Strategies II
Distributors choose which products to handle
To get a distributor to work for them,
companies may have to
give incentives
use successful products as bait for new ones
convince distributors that their product and
company are viable
Distribution Strategies III
Factors that can contribute to distribution cost
differences among countries include
Infrastructure conditions
The number of levels in the distribution system
Retail inefficiencies
Size and operating hour restrictions
Inventory stock-outs
Distribution Strategies IV
E-commerce and the Internet
can replace traditional sales methods
faster customer service
cannot differentiate sales programs between countries
(not impossible but more difficult)
still must comply with local laws
Managing the Marketing Mix
Gap analysis
a method for estimating a companys potential
sales by identifying prospective customers it is not
serving adequately
Product line
Managing the Marketing Mix
Gap Analysis
Evolving Challenges
to Segment Markets
Disparities between haves and have-nots
will increase
Companies will have conflicting opportunities to
serve both haves and have-nots
Attitudinal differences will continue to affect
Materialism, cosmopolitanism, and consumer
New Research on
International Marketing
Exporters associations are a way to
reduce some marketing costs

Exporters participate more than non-exporters in Business

Associations (Wagner, 2012)
Exporting a new products is risky
and there are copycats

Examples of
new export
products in
Wagner &
Zahler (2014)

When to enter? Followers may copy you although might not be for you
Summing up
Marketing needs adaptation for Intl Bus.
Price: exchange rate, willingness to pay, currency
Product: adaptation vs standardization.
Promotion: standardize vs adapt, cultural differen.
Distribution: central piece of value chain.

The are some industry-specific public goods:

e.g. country brand for wines; discovery of a new
export product
Coordination challenges