Unit 4 - Global Marketing Mix

International Marketing
MBA473
Unit 4 - GLOBAL MARKETING MIX A J Shah ashish.shah@christuniversity.in
Unit 4 Agenda
International product decisions:
Product extension and adoption; new product development; product standardization v/s product adoption; global branding strategies; global marketing of industrial products and services.
International Pricing decisions:

Pricing strategies & Policies; price escalation; leasing in international markets; counter-trade as a pricing tool; global pricing; transfer pricing.
International promotion decisions:

Global advertising; creative challenges; global media decisions; advertising agency; sales promotion; personal selling and sales management.
International distribution decisions:

Channel structure; distribution patterns; choice of channels and channel members; logistics management-supply & demand.
International Marketing - Ashish J Shah
Assessment
Gr 3 Presentation
1. FDI and India - any sector
Marry theory with topic Advtgs, disadvtgs, critical country factors impacting FDI, aftermath of FDI increase in innovation, confidence... Does not have to be retail, can be any industry choose industry, not segment Conclude with remark on FDI as an economic factor influencing industry growth in India
2. RTBs - any one - should be substantive and current

Marry theory with topic Highlight need and origin of RTB, trace historical gains to any member country from RTB formation, RTB as a bargaining tool for members, overall economic impact of RTB in a region on non RTB members, limitations, conclude with comment on best-case scenario where RTBs can be most useful
Assessment
3. Emerging markets issues - pick any one issue, country and highlight source and solution.
Pick a country Comment on impact of global changes on country, positive and negative changes and what global factors involved Point out issues relevant to creating international confidence in emerging markets/country What should country do to resolve issues you have identified Conclude and confirm if you feel that the country you have chosen is actually a promising emerging market
International product decisions

Quality: can be defined on two dimensions Market-perceived & performance quality Customers look at market perception Maintaining quality Mars in Russia initial boom followed by decline local competitor improved quality Mars mishandled in supply chain

Physical or Mandatory requirements and adaptation
Product homologation pdt changes made to suit mandate of local requirements
e. g. Pepsi Cola name changed to Lehar-Pepsi to gain local mileage in face of govt opposition to foreign investment Frito-Lay, China 15 g packages children can afford it 1 yuan (12 cents)

Green marketing and product development
EU at forefront Green marketing: concern about environmental consequences in business
e. g. US Hummer Toyota takes advantage of increasing concern e. g. EU packaging regulations recycle, reuse Carlsberg (Dk) polymer beer bottle - reusable
Not all green mktg successful; some are e. G. P & G Lenor fabric softener sold in concentrated form reduced pckg by 85 %

Products and Culture
Products: bundle of satisfactions (or utilities) that buyer receives Product form, shape, colour, odour, texture, packaging influence customer Psychological aspects important Adoption of some products dictated by conformation to norms, values, behaviour patterns e. G. Dishwashers by Mitsubishi, Toto Japanese kitchens were small so nos pace but companies are making compact dishwashers now and Japanese are buying

E. G. Some financial services difficult to introduce in Muslim countries usury and gambling related against Koran E. G. Japanese find body jewellery repugnant E. G. Scots dont appreciate pork interpretations from Bible (p 414) E. G. US cake mix company launched icy cake mix in the UK failed as Brits relish dry tea cakes and not rich cakes with dinner

International products and adaptation
First determine degree of newness of product in market? Does target market accept products as innovative and what time required for acceptance? Diffusion US succes of PS2 after success in Japanese markets; Apple Japanese markets plunge after US market sales dip Impact of innovation on established consumption trends? E. G. UK cake mix company asked 500 UK women to bake cake introduced dry cake easy mix Harry Potter 20 % sales in Japan of English edition people wish to improve their English skills Goal of marketer is to gain max coverage in shortest time

Diffusion of innovation: Rogers crucial elements in diffusion of new ideas:
1. Innovation 2. communicated through certain channels 3. over time (differentiator from other types of communications research) 4. among the members of a social system Microwave ovens US took 20 years to diffuse Modern math 5 years; Kindergarten 50 years At least three extraneous variables impact diffusion:
Degree of newness, perceived attributes of innovation Method used to communicate idea

More innovative a product is increased difficulty in acceptance
Japanese and Dutch leaders n toilet products innovation Japanese Check BP , body weight; Dutch: urinal for women, men aim at the fly (Schiphol airport) Crossing Borders 12.4, p 419
Five characteristics of an innovation can assist in determining rate of acceptance or resistance:

Relative advtg (marginal advtg of new pdt to old) Compatibility (with accepted behaviour norms..) Complexity Trialability (degree of economic/social risk associated with pdt) Observability (ease of communicating pdt benefits)
More congruent pdt perceptions with cultural values = less resistance, rapid diffusion, easier acceptance

Production of innovations
US leader on the net 160 millions vs. Japan, 60 million; US R & D exp. Leader 2 to 3 % of GDP twice in value as Japan Some Japanese firms set up centres in the US to benefit from US trends Korea Leveraging their vertical integration strengths at lower end of mkt. Samsung in semiconductors, telecom, digital applainces

Analysing product components for adaptation
Fig. 12.1, p 421 product component model 1. Core component
a. Product platform b. Design features c. Functional features
2. Packaging component TM, brand name, price quality package, styling 3. Support services component repair and maintnnce., installtn., warranty, spares...
International product & service decisions

Marketing consumer services globally
Services are intangible thus inseparable, heterogeneous (individually produced), perishable Services opportunities in global markets
Tourism largest US services export Orlando Others transportation, financial services, education, telecommunications, entertainment, information and health care E. G. :
airlines after Latin America, financial services in China, Merill Lynch in Japan,

foreign students in the US, UK, phone rates in EU are high US companies cannot maintain free hotlines! cable TV explosion in Latin America, gaming business, sporting events football in the EU, baseball in Japan, US offers heart transplant option to Swedes, Japanese
Barriers to entering global markets for consumer services

Protectionism Restriction on trans-border data flows e. G. Motive to protect local industry

Protection of IP US loses $ US 60 billion annually to piracy Cultural barriers and adaptation McDonalds Polish workers find artificial smiling uncomfortable those that do not wish to do so can be assigned to the kitchen instead of the front desk; Four Seasons Hotel kimonos, slippers for Japanese guests; GM adapts to Indian market with Spark p 432 - 434
Brands in International Markets

Global brand: worldwide use of a name, term, sign, symbol, design, or combination intended to identify goods or services of one seller and to differentiate them from those of competitors

Global brands
Fig. 12.5, p 435 Brands convey different meanings in different countries Brand values fluctuate with time Some brands do no translate proxy branding required Some brands truly global Mars
National brands
Nestle global and country-specific brands two pronged approach Unilever, Caterpillar (Norwegians like industrial strength of brand)

Country of origin effect and global brands
CoE effect influence of country of mfr, origin on others e. G. Darjeeling tea, Cuban cigars, Scotch, French wine; products (silk scarves) sold by Versace, Gucci carry Made in China label impacts consumer buying behaviour US strong nationalism automobile industry parts advertised as made in the USA Russians country of origin more important than brand
Private brands
Retail - Aldi
Products and services for business

P 444 Intel Demand in global B2B markets Chinas bullet train a result of Sino-German partnership
Volatility of industrial demand Derived Demand to be considered: demand dependent on another source e. G. Industrial products, passenger aircraft Stages of economic development: 5-stage Rostow model Technology and market demand: 3 interrelated trends spur demand for technologically advanced products:
1. 2. 3. Expanding eco and ind. Growth in Asia China, India USSR disintegration Privatisation of govt.-owned industries wordwide

Quality and Global Standards
Quality is defined by the buyer Case 13.2, p 453; case 13.3, p 454 ISO 9000 certification: international std of qlty
Business Services
Case 13.4, p 458 After-sales services: McDonalds University for hamburger training, Cisco and Intel established ebusiness solution centres in EU

Trade Shows: crucial part of B2B mktg
EU 22 % of annual advtg budget on trade shows + 2000 major trade shows organised each year around the world BIEC, Messe Munchen Case 13.5, p 464
Relationship mktg in B2B contexts: Cisco, Solar equipment mfrs

International Marketing Channels (Distribution)

P 473 Doublemint Channel-of-distribution structures
The distribution process Imported-oriented/traditional distribution structure Japanese distribution structure: serves as source of non-tariff barrier 4 distinguishing features:
1. Numerous, small middlemen dealing with small retailers 2. Channel control by manufacturers
a. b. c. d. Inventory financing: consignment sales with credit for months Cummulative rebates Merchandise returns accepted Promotional support

3. Business philosophy shaped by unique culture 4. Laws that protect the foundation of the system the small retailer Daitenho large scale retail store law controls large formats to protect small retailers One of Japans large formats had to wait 10 years for clearance
Changes in the Japanese Distribution System Case 14.1, p 480

Traditional Japanese retailers yielding to specialty stores, other formats Konbini convenience stores revolutionising retailing internet features

Trends: from traditional to modern channel structures Case 14.2, p 482 Sears, Roebuck, Carrefour www.gnx.com Web sales challenge is delivery of goods
Distribution patterns
General patterns Middlemen services France, Japan Line Breadth Costs and margins Channel length: correlation may exist between channel length and economic development Nonexistent channels Blocked channels

Stocking Power and competition Retail patterns Size pattern: see fig 14.3 (a), p 487 Direct marketing Resistance to change
Alternative middleman choices See fig. 14.4, p 491


Home-country middlemen Manufacturers retail stores Global retailers Export management companies (EMC) see fig. 14.5, p 493 Trading companies US export trading companies Complementary markets/piggybacking: companies with contacts or marketing facilities in different countries

Manufacturers export agent Home-country brokers Buying offices Selling groups Webb-Pomerene Export Associations: US allowed companies to come together through this Act benefits:
Reduce export costs Demand expansion through promotion Trade barrier reductions Improvement of trade terms through bilateral bargaining

Foreign sales corporation: US form set up in foreign country that can get corporate tax exemption on portion of earnings generated by sale or lease of property Export merchants Export jobbers mostly deal in commodities no physical possession of goods taken Foreign country middlemen Manufacturers representatives Distributors Foreign-country brokers Managing agents and compradors (See fig 14.7, p 499) Dealers: goods direct to consumers

Import jobbers, wholesalers and retailers Govt affiliated middlemen
Factors affecting choice of channels

Cost Capital requirements Control Coverage Character channel must fit character of company and product e. G. Perishability, bulk Continuity

Locating, selecting and motivating channel members
Locating middlemen Selecting middlemen Screening The Agreement Motivating middlemen See fig 14.4, p 506 Terminating middlemen Controlling middlemen

The Internet
E-vendor must be concerned with:
1. 2. 3. 4. 5. Culture Adaptation (See p 510, 511) Payment Delivery Promotion

Exporting and Logistics The exporting process see fig 15.1, p 518
Leaving the exporting country Physical distribution Entering the importing country
Export Restrictions US: Export Administration Regulation (EAR), NLR clause: No license Required

Determining export requirements
Export licensing requirements general license, validated license,
choice of ECCN (Export Control Classification Number) determines license type Exporter must determine any end-user restrictions e. G. Weapons Exporter must determine ultimate end customer See exhibit 15.1, p 523 for examples of violations
Import Restrictions
Tariffs: US classifies customs duties as:
Ad valorem: % of determined value of goods Specific: amount per unit measure e. G. Wt, vol... Compound: combination of the above types E. G. Purchase of US trucks by Colombian buyer - $ shortfall led to series of exchange arrangements between the companies coffee traded traded for sugar in the EU sugar for pig iron pig iron for USD!

Quotas Import licesnses Standards Boycotts See case 15.1, p 527 Voluntary agreements: Japan and US restricts export of Japanese steel products to US Japan agrees in order to avoid harsher restrictions Other restrictions: labelling

Terms of Sale, Terms of Trade (ToT), Trade Terms
CIF, C & F, FAS (Free alongside), FoB, Ex See fig. 15.7, p 530
Getting Paid: Foreign Commercial Payments

Open account (Khata) monthly balances Letters of Credit: in favour of seller by buyer Bills of Exchange: made by seller and presented to buyers bank Cash in advance Forfaiting: seller assumes responsibility for debt collection offers customer time for payment - sells debt to bank for cash at discounted rate bank (forfaiter) buys debt (promissory note) once sold, forfaiter now assumes risk of collecting payments and any other political risks too

Export Docs
Certificate of origin Bill of lading: establishes ownership, contract with shipper Insurance Licenses
Packing and marking: assessed goods must be shipped out within allotted time period, else documentation may need to be done again

Customs-Privileged Facilities: special areas within countries where tariff laws apply free/foreign trade zones, free ports Offshore assembly (Maquiladoras)
In-bond companies /twin plants US and Mexico traditionally Tap low-cost labour advantage Government permits import of materials sans taxes into bonded areas for manufacturing

Logistics
Interdependence of physical distribution systems Benefits of a physical distribution system Export shipping and warehousing Foreign Freight Forwarder
Terrorism and Logistics: post 9/11 Vigilance clause added to prevent terrorist weapons entering the US The Cargo and Container Security Initiative (CSI) Customs-Trade partnership against terrorism (C-TPAT) between biz and govt Electronic Tracking (container tracking) - RFID
International Marketing Channels (Promotion)

Sales promotion in International markets
P & G Ariel Road Show in Egypt a puppet show in rural Egypt Latin America Coca Cola and Pepsi spend on carnival trucks Nestle Baby Food new to France introduced product sampling and special Nestlre rest centres on summer vacation routes f or mothers to change their babies Le Relais Bebes 64 hostesses welcome 120,000 baby visits (free diapers!)and dispense 600,000 samples of baby food each year

International Public Relations
Bridgestone/Firestone tyres 100 deaths in the US Japanese CEO of American subsidiary apologised and accepted full responsibility good practice in Japan but US not interested in apologies tyre company also blamed customer Ford for recommending under-inflation of tyres for smooth ride Nike sweatshops in Asia Apple Foxconn, China McDs and Sydney 2000 Olympics campaign included interviews and chats with players sold 1.5 million burgers in 3 weeks See case 16.1, p 557

International Advertising
See p 558 - 560 for ad budgets Basic framework and concepts of int advtg:
1. Perform mkt research 2. Specify goals of communication 3. Develop most effective message for selected market segments 4. Select effective media 5. Compose and secure a budget 6. Execute the campaign 7. Evaluate campaign relative to goals specified

Advertising Strategy and Goals
Umbrella bands Gillette Variable - Unilever: Vif cleaning liquid in Switzld., Viss in Germany, Jif in the UK, Cif in France Microsoft spends a billion $ on advtg see 562, 563 Product attribute and benefit segmentation
E. G. Expectations from a camera in the US (neat pictures), EU (Pictures + style), Africa (20 % penetration concept of the camera must be sold!)

E. G. Blue Diamond Growers Association Almonds
almonds ads in the US (change perception from once-in-awhile to daily snack) ad featured farmers knee-deep in almonds A can a week, thats all we ask, Canada (found the ad silly, also why buy from US farmers?), Japan not almonds alone, Almond tofu almond miso soup. Korea lin kwith the west ad featured swaying palms, beach scenes, guitar-playing
Regional Segmentation
IBM pan EU strategy Mars Raider to Twix across the EU

The Message: Creative Challenges
Global Advertising and the communication process
Information source Encoding Message channel Decoding Receiver Feedback Noise Fig 16.4, p 567

If it sells in one country, it will sell in another?
E. G. Cavity reducing fluoridated toothpaste sells in the US, not in Canada (toothpaste is for fresh breadth) Decoding issues: Chevrolets Nova model No Va in Spanish it doesnt go; Pepsis Come Alive as Come out of the grave
Legal Constraints
Indian court ordered Pepsodent to withdraw ad claiming 102 % better than Colgate (comparative advertising) Restricted advertising of toys, tobacco and liquor Violence in ads With rare exceptions, Malaysian ads must be made in Malaysia Tax on advertisements Austria varies region wise and channel dependant

Linguistic Limitations
Scotland (Glaswegian), Irish accent France: language is a matter of pride Bacardi Pavane fruity bitter drink French Chic, close to baboon (Pavian) in German Middle East: Tomato Paste translates to Tomato Glue Ball in Spanish is Bola revolution!

Cultural Diversity
General Mills launched cake mix in the US, UK problem was to overcome homemakers guilt feelings (what if it did not work?); In Japan, cake consumption limited and no guilt feelings however, when cake prep from cake mix (General Mills) advertised as being as easy as making rice, Japanese offended as rice prep requires skill! P & G diapers Pampers ad fails in Japan carrying message with Storks delivering product! Storks do not deliver babies in Japan, giant peaches floating on rivers do to deserving parents. Hong Kong 10 different patterns of eating breakfast

Media Limitations: France, Italy, India Production and Cost Limitations: reducing use of print media (cost)
Media Planning and Analysis

Tactical considerations: which channel to choose, how to package message, when to air? Availability of media channels: some countries have too few options Cost Coverage

Lack of market data Newspapers Magazines Radio and TV (See table 16.5, p 580 for media penetration figs) Satellite and cable TV Al Jazeera The Arabic CNN Direct Mail Internet

Campaign execution and ad agencies
See table 16.6 for top ten ad agencies Do ad agencies do the job? Can ad agencies get it wrong? Your budget?
International control of advtg: Broader Issues

Authenticity of information consumers are not gullible overrated figs misleading Cultural aspects On the wrong foot with the govt.
International Marketing Channels (Price)

Pricing Policy
Pricing Objectives
Profit taking is at core
Parallel Imports:
product bought from one country and sold in another through unauthorised distributors at lower or disparate prices pharmaceutical industry US drugs sold at lower price in one country, bought by another to be sold in another country at prices lower than receiving countrys competitor products creates unfair competition (see fig 18.1, p 623 gray market) Exclusive Distribution arrangements create issues e. g. Gucci and Cartier prices different in different countries unauthorised dealers can transfer stocks amongst countries and undersell

Approaches to International Pricing
Full-cost (FC + VC loaded) vs. variable-cost pricing (margin above variable cost is acceptable bonus capacity utilisation, but issue of dumping charges) Skimming (market relatively insensitive to price Tata Photon initially) vs. Penetration Pricing (stimulation of market and sales growth) Price Escalation: tariffs make prices variable e. G. VW Beetle 28 Lacs in India, Kindle around USD 240 landed in India
Costs of exporting Taxes, tariffs, admin costs

Inflation price rise Deflation price drop Exchange rate fluctuations Varying currency values PC mfrs have a tough time (see table 18.2, p 631)
Sample effects of price escalation

See table 18.3, p 633 causes and effects of price escalation Freight, tariffs, middlemen exporters would have to cut costs in international markets to maintain parity $ 20 can opener is $ 70 in Milan

Approaches to reduce price escalation
Lowering cost of goods
E. G. Eliminate sophisticated functions in a microwave, do away withal shirt pocket (Zara), source wood from Eastern Europe IKEA, wood from Indonesia, Malaysia - Home Depot Lowering Tariffs India from 3 digits to single and double digits (10 %, 14 %) Lowering distribution costs Using foreign trade zones to lessen price escalation (see table 18.4, p 638) Dumping: countervailing duties/Minimum access volume (MAV) applied when cost of imported good lower than local market product of similar type to balance prices

Leasing in International Markets Countertrade (barter) as a pricing tool Pepsi and Stolichnaya Vodka (Russia) and Premiat wines (Romania) financed bottling plants in these countries through such arrangement Types of countertrade
1. 2. 3. 4. Barter Compensation deals GM $ 12 million defence deal Yugoslavia paid $ 4 million and rest in cutting tools Counterpurchase /offset trade Lockheed Martin invests in gas pipeline from Qatar to Pak law requires reinvesting some profits in middle east Product buyback agreement

Problems with countertrading
Not an established method though growing Barter Houses
Internet and countertrading TradeBanc Proactive countertrade strategy Transfer Pricing
Transfer Pricing Strategy intra-company pricing


Administered Pricing attempt to establish prices for a market tor educe impact of price competition or eliminate it
Cartels OPEC best known international cartel Govt influenced pricing

Unit 4 - Global Marketing Mix

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Unit 4 - Global Marketing Mix

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International Marketing

Unit 4 - GLOBAL MARKETING MIX A J Shah ashish.shah@christuniversity.in

International Pricing decisions:

International promotion decisions:

International distribution decisions:

2. RTBs - any one - should be substantive and current

International product decisions

International Marketing - Ashish J Shah

International product decisions

International Marketing - Ashish J Shah

International product decisions

International product decisions

International product decisions

International product decisions

International product decisions

International product decisions

Five characteristics of an innovation can assist in determining rate of acceptance or resistance:

International Marketing - Ashish J Shah

International product decisions

International product decisions

International product & service decisions

International product & service decisions

Barriers to entering global markets for consumer services

International product & service decisions

Brands in International Markets

International product & service decisions

International Marketing - Ashish J Shah

International product & service decisions

International Marketing - Ashish J Shah

Products and services for business

Products and services for business

Products and services for business

Relationship mktg in B2B contexts: Cisco, Solar equipment mfrs

International Marketing Channels (Distribution)

International Marketing - Ashish J Shah

International Marketing Channels (Distribution)

Changes in the Japanese Distribution System Case 14.1, p 480

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

Alternative middleman choices See fig. 14.4, p 491

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

Factors affecting choice of channels

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

International Marketing - Ashish J Shah

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

Getting Paid: Foreign Commercial Payments

International Marketing - Ashish J Shah

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

International Marketing Channels (Distribution)

International Marketing Channels (Promotion)

International Marketing Channels (Promotion)

International Marketing Channels (Promotion)

International Marketing Channels (Promotion)

International Marketing Channels (Promotion)

International Marketing Channels (Promotion)