Definition

 New

Product Development  +Development of original products, product improvements, product modifications, and new brands through the firms own R & D efforts

Process
generation  Idea screening  Concept development  Market strategy development  Business analysis  Product development  Test marketing  commercialization
 Idea

Product life cycle

 The

Typical Product Life Cycle (PLC) Has Five Stages  +Product Development, Introduction, Growth, Maturity, Decline

Product issues in international marketing

 Product

and services continuum  Product need satisfaction  Approaches to Product introduction 1. Customization 2. Standardization 3. Adaptation

Contd.
 Adaptations

Mandatory 2. Discretionary  Physical product vs. communication adaptation  Branding

1.

Contd.
PLC  Diffusion of innovation
 International

What is International Marketing?

 Domestic

marketing

encompasses a firms efforts in its home country.

 International

marketing

Involves marketing goods and services outside the home country.

The Marketing Environment Uncontrollable environment - Socio-economic and demographic environment - Cultural environment - Technological environment - Political and legal environment - Financial environment Controllable environment - Product - Place - Price - Promotion

PHYSICAL/GEOGRAPHICAL ENVIRONMENT INCLUDESINCLUDES

Natural resource endowments Weather and climatic conditions Topographical factors Location aspects in the global context Port facilities

THREATS AND OPPORTUNITIES ASSOCIATED WITH PHYSICAL ENVIRONMENT

   

Shortage of raw material- can lead to cost increase materialIncreased energy costs AntiAnti-pollution pressures Changing role of governments- governments vary in governmentstheir efforts and concerns to promote a clean environment

DEMOGRAPHIC FACTORS
      

Size of the population Population growth rates Population age mix Ethnic and other markets Educational groups Household patterns Geographical shifts in population

POPULATION SIZESIZE

1.

2.

Poor countries with small population Not very attractive for business Can serve as niches for small firms

1. 2.

Advanced countries with large population Attractive markets Strong competition

POPULATION GROWTH RATERATE

1. 2.

World population growth raterateIn developing countriescountries2% per year In developed countriescountries0.6% per year

 

A growing population does not mean growing markets unless these markets have sufficient purchasing power. Falling death rate Increasing birth rate in developing countries Decreasing birth rate in developed countries

POPULATION AGE MIXMIX

1. 2. 3. 4.

5.

6.

Population can be subdivided into six age groups: Preschool SchoolSchool-age children Teens Young adults (age 25-40 25years) Middle aged adults (age 4040-65 years) Older adults (age 65 years and above) For marketers,the most populous age groups shape the marketing environment.

ETHNIC AND OTHER MARKETS



Countries vary in ethnic make-ups makeEthnic groups have certain specific wants and buying habits. Also, within each ethnic group are consumers who are quite different from each other.

EDUCATIONAL GROUPSGROUPS

Five educational groupsgroups-

1. 2.

3.

4. 5.

Illiterates High school dropouts High school diplomas College degrees Professional degrees

HOUSEHOLD PATTERNSPATTERNS

1. 2.

3.

4.

Traditional households Diverse/nonDiverse/nontraditional householdshouseholdsSingleSingle-live alones Adult live togethers Single parent families Childless married couples

GEOGRAPHICAL SHIFTS IN POPULATIONPOPULATION

Migratory movements between and within countries Within countriescountriesrural to urban Regional differences can occur within countries Marketers look at where consumers are gathering

Economic environment
  

        

Economic systems Population, Income (per capita, GNP) Possibility of effective utilization of resources, financial stability. Banking facilities available, nature of credit facilities offered, short, medium and long term (terms and interest rates) Availability of local accounting services Foreign exchange facilities Remittance of profits Availability of insurance Situation of balance of payments Communication and transport infrastructure Urbanization Market prospect Product and product modification

CLASSIFICATION OF ECONOMIES BASED ON GNI

 1)LOW

INCOME ECONOMIES:  Economies with per capita GNI of $825 or less in 2004  59 low income economies
 2)HIGH

INCOME ECONOMIES:  Economies with per capita GNI of $10,066 or above in 2004

Contd
 56

high income economies

 3)MIDDLE

INCOME ECONOMIES  Economies with per capita income between $826 and $10,065 in 2004  94 middle income economies

Low priced models for developing countries. Example: LOGAN launched by RENAULT.

Technological Environment


Technological developments have been revolutionizing the business scene. Facilitates introduction of new products.  Improves operational efficiency Some modern technological breakthroughs : 1) Biotechnology 2) Nanotechnology 3) Satellites 4) Supercomputers

Technology facilitating communications



E-mail Internet E-commerce Telecommunication s

Technological Environment


Positives: Cost of doing business worldwide has declined. Increase in productivity. Negative:

- Reduction in requirement of skilled labour.

SocioSocio-cultural Environment
Encompasses

Language Non verbal language Religion Values and attitudes Manners and customs Material elements Aesthetics Education Social institutions Family

Contd.
 Never

touch the head of a Thai as the head is considered sacred.  Red colour implies death in Africa  Number 7 is unlucky in Kenya  Triangular shapes should be avoided in Hongkong  Market for computers is more lucrative in advanced countries like US where education levels are also high.

Different cultures and different ways to greet

Contd.


India: Namaste Netherland: Goddag Sweden: pleased to meet you Tanzania : Jambo United Kingdom : how do you do

   

Intercultural socialization
 Be

culturally prepared  Learn local communication complexities  Mix with nationals  Be creative and experimental  Be culturally sensitive  Be realistic in expectations

Hofstede Dimensions


Gert Hofstede, a Dutch researcher, was able to interview a large number of IBM executives in various countries, and found that cultural differences tended to centre around four key dimensions: Individualism vs. collectivism: To what extent do people believe in individual responsibility and reward rather than having these measures aimed at the larger group? Japan actually ranks in the middle of this dimension, while Indonesia and West Africa rank toward the collectivistic side. The U.S., Britain, and the Netherlands rate toward individualism. Power distance: To what extent is there a strong separation of individuals based on rank? Power distance tends to be particularly high in some Latin American countries, while it is more modest in Northern Europe and the U.S.

Contd.


Masculinity vs. femininity . Masculine values involve competition and conquering nature by means such as large construction projects, while feminine values involve harmony and environmental protection. Japan is one of the more masculine countries, while the Netherlands rank relatively low. The U.S. is close to the middle, slightly toward the masculine side. Uncertainty avoidance involves the extent to which a structured situation with clear rules is preferred to a more ambiguous one; in general, countries with lower uncertainty avoidance tend to be more tolerant of risk. Japan ranks very high and the U.S. is in the lower range of the distribution.

Political Environment
Government stability  Incentives for international trade (low interest on loans, construction subsidies, tax breaks) eg-Walt Disney theme park in France eg Controls on international trade (tariffs, quotas, buy national) to protect domestic manufacturers 1. Tariff on US Tobacco cos. in Japan 2. Quota on number of vehicles Honda sells in US 3. Buy nationally made military uniforms in US
 

Regional Trade Agreements-Economic Agreementscommunity(EU)

Political environment
Regulations to protect purity of environment and preserve the ecological balance have assumed importance in many countries  In most countries promotional activities are subject to various controls.  Many countries have laws to educe monopolistic power and thereby give opportunity to small and new entrepreneurs.eg. MRTP in India.


Legal environment
 Laws

across borders. When laws of two countries differ, it may be possible in a contract to specify in advance which laws will apply during course of dealing among the parties in question.

Contd.


The reality of legal systems. Some legal systems, such as that of the U.S., are relatively transparentthat is, the law tends to be what its plain meaning would suggest. In some countries, however, there are laws on the books which are not enforced (e.g., although Japan has antitrust laws similar to those of the U.S., collusion is openly tolerated). Further, the amount of discretion left to government officials tends to vary. In Japan, through the doctrine of administrative guidance, great latitude is left to government officials, who effectively make up the laws.

Contd.


Legal systems of the World. approaches to law across the World, with some differences within each: Common law, the system in effect in the U.S., is based on a legal tradition of precedent. Each case that raises new issues is considered on its own merits, and then becomes a precedent for future decisions on that same issue. Code law, which is common in Europe, gives considerably shorter leeway to judges, who are charged with matching specific laws to situationsthey cannot come up with innovative solutions when new issues come up.

Contd.


Socialist law is based on the premise that the government is always right and typically has not developed a sophisticated framework of contracts (you do what the governments tells you to do) or intellectual property protection (royalties are unwarranted since the government ultimately owns everything). Former communist countries such as those of Eastern Europe and Russia are trying to advance their legal systems to accommodate issues in a free market.

Case study
U

S Ice cream co. in Korea

Def.Def.-Intl. Mkting
 International

marketing refers to marketing carried out by companies overseas. It refers to firm-level firmmarketing activities across border including market identification and targeting, entry mode selection, marketing mix and strategic decisions to compete in international markets.

Main steps in marketing management process

 R-STP-MM-I-C STP-MM R-Research  STP-Segmentation, STP-

Targeting,

positioning  MM-Marketing mix MM I-Implementation  C-Control

Global information systems



Information is one of the most basic ingredients of a successful marketing strategy. For achieving success in International Markets, information about buyer behaviour and the overall business environment is vital to effective managerial decision making. In order to research markets, marketers must be aware about information sources, methods of data acquisition and analysis. The global marketer must scan the world for information about opportunities and threats and make information available via a management information system in order to reduce the uncertainty around marketing decision making.

Overview of global marketing information systems



Marketing Information System (MIS) provides managers and other decision makers with continuous flow of information about markets, customers, competitors, and company operations. A MIS should provide a means of gathering, analysing, classifying, storing, retrieving and reporting relevant data about customers, channels, sales and competitors. A companys MIS should also cover important aspects of a companys external environment. Global competition intensifies the need for an effective MIS. Global companies like Toyota and Ford have sophisticated electronic data interchange (EDI) systems to improve inter company information sharing. Internet has complemented and dramatically expanded the ability to access up to date information anywhere in the world. MIS must provide relevant information in a timely, costefficient and actionable manner.

Elements of information system



             

The following constitute the elements of the global information system. Economic - rate of growth of GNP, level of inflation, incomes Social - people, demographics, culture Political - risk, instability, attitudes to "foreigners" Technology - current, rate of change, infrastructure Resources - money, manpower, materials, Fiscal - taxes, exchange rates Institutions - banks, interest rates

Tools of information systems

 Electronic

Data Interchange(EDI)  Efficient Consumer Response (ECR)  Electronic Point of Sale (EPOS)  Intranets  Data warehouses

Formal Marketing Research

 Marketing

Research is the project specific systematic gathering of data in the search scanning mode.  Marketing research can be taken up by in-house team of the global firm or outsourced to outside firms specialized in marketing research.

Steps in Market research

Problem definition: The purpose of the study, background and required information, and decision making usage of the information is detailed. Defining the research problem to be addressed is the most important step because all other steps will be based on this definition.


Developing an approach to the problem: A broad specification of how the problem will be addressed is developed to allow the researcher to break the problem into salient issues and manageable pieces. Required information is identified. This step is guided by discussions with decision makers, industry experts.


Research design formulation: Framework / blueprint for conducting the Marketing Research project are prepared


Contd.
Fieldwork or data collection: A properly selected and trained field force gathers project data through personal interviewing, telephone, mail or electronically.


Data preparation and analysis: Data collected is edited, coded, transcribed and verified to allow researchers to derive meaning from the data.


Report preparation and presentation: The research findings are documented and presented to decision makers through written reports and presentations. The report should address the specific research questions identified, describe approach, research design, adopted data collection and data analysis procedures and conclude the results and major findings.


Marketing decision and intelligence requirement

Marketing decision


Go international or remain domestic

Marketing intelligence  Assessment of global market and firms potential share in it, in view of local and international competition .

Contd.


Which markets to enter

A ranking of world markets according to market potential, local competition and political situation.

Contd.


How to enter target markets

Size of markets, intl. trade barriers, transport costs, local competition, govt. requirement, political stability.

Contd.


How to market in target markets

For each market buyer behaviour, behaviour, competitive practise, practise, distribution channel, media.

Scope of Research
 Market

measurement studies studies studies

 Competitive

 Environmental

Sources of information
 Secondary 1. 2.

data Internal source External source data

 Primary

Secondary data
 Internal

source

Sales and cost records of the organization

Secondary data
 External

source

UN, WB, EU, Embassy, Competitors annual budgets, Internet

Secondary data
 Major

issuesissues-

1. 2. 3.

Availability of data Reliability of data Comparability of data

Primary data
 Collection

methods

1. 2. 3. 4.

Observation Focus groups Surveys Experiments

Observation

 Fresh

data can be gathered by observing relevant actors and settings. A record of consumer reactions is prepared by observer.

Focus group
 Focus

group is a gathering of 6-10 6persons who spend a few hours with a skilled interviewer to discuss a project, service, organization or other marketing entity. The discussion is recorded through note taking/ audio/ videotape and is subsequently studied to understand consumer belief and behaviour. behaviour.

Survey Research
 Companies

undertake surveys to learn peoples knowledge, beliefs, preferences, satisfaction and so on and to measure magnitudes in the population.

Experiments Research
 Experimental

research calls for selecting matched group of subjects, subjecting them to different treatments, controlling extraneous variable and checking whether observed response differences are statistically significant.

Primary data
Research instrument-Questionnaires instrument Contact methods 1. Mail questionnaire 2. Telephonic interview 3. Personal interview

Primary data
 Main 1. 2. 3.

issues Comparability of data Willingness of potential respondent Ability of respondent to understand and communicate. Language problem. Use back translation.

Global Market entry strategies

 Once

a company decides to target a particular country, it has to determine the best mode of entry.  Its broad choices are indirect exporting, direct exporting, licensing, joint ventures and direct investment.  Each succeeding strategy involves more commitment , risk, control and profit potential.

Indirect Export


Companies work through independent intermediaries to export their product.

There are 4 types of intermediariesintermediariesDomestic based export merchants-buy manufacturers merchantsproducts and sell them abroad. Domestic based export agents-seek and negotiate foreign agentspurchases and are paid a commission. They do not purchase the product on their own account like merchants. CoCo-operative organizations-carry out exporting activities organizationson behalf of several producers Export management companies-agree to manage a companiescompanys export activities for a fee. They find customers, arrange for the transportation formalities and also arrange for the receipt of payment from the customer.

 1.

2.

3.

4.

Direct Export
 Companies

may decide to handle their own export.  A co. can carry on direct exporting in several waysways1. Domestic based export department 2. Overseas sales branch 3. Travelling export sales representative 4. Foreign based agents

Licensing
The licensor licenses a foreign co. to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty.  The licensor gains entry in foreign market at little risk.  The licensee gains production expertise or a well known product or brand name.  Once contract ends the licensee may become potential competitor.  Example-KFC Example

Turnkey projects


A firm uses knowledge and expertise it has gained in one or more markets to provide a working projecte.g., a factory, building, bridge, or other structureto a buyer in a new country. The firm can take advantage of investments already made in technology and/or development and may be able to receive greater profits since these investments do not have to be started from scratch again.

Management contracts A firm agrees to manage a facility e.g., a factory, port, or airportin a foreign country, using knowledge gained in other markets.  The co. can use similar expertise it has used in similar venture earlier .  The co. may encounter difficulties to work in a new country with a different infrastructure, culture, and political/legal environment.


Contract manufacturing
 Contract

manufacturing involves having someone else manufacture products while you take on some of the marketing efforts yourself.  This saves investment, but again you may be training a competitor.

Joint ventures


Foreign investors may join with local investors to create a joint venture co. in which they share ownership and control. Forming a JV may be necessary as the foreign firm might lack the financial, physical or managerial resources to undertake the venture alone. ExampleExample-when Unilever wanted to enter iceicecream market in China it joined forces with Sumstar to deal with formidable Chinese bureaucracy

Direct Investment
The ultimate form of foreign involvement is direct ownership of foreign based assembly or manufacturing facilities.  The foreign co. can buy part or full interest in a local co. or build its own facilities.  This can be done if foreign market appears large enough.  Example-CPC Internationale Example

Topic
 Segmentation,

Targeting, and Positioning: Building the Right Relationships with the Right Customers

Objectives
 Be

able to define the three steps of target marketing: market segmentation, targeting, and market positioning.  Understand the major bases for segmenting consumer and business markets.

Definition
Market Segmentation: Dividing a Segmentation:
market into distinct groups with distinct needs, characteristics, or behaviour who might require separate products or marketing mixes.

Need for market segmentation

 Marketers

understand that they cannot be all things to all people, all of the time. Buyers and markets are too complex and diverse for one simple marketing formula to adequately address the needs of all.

Segmentation and positioning



Market segmentation Identifies markets with common traits. Market targeting Process of evaluation of the selected segments and then deciding which market segments to operate within. Market positioning Process whereby marketers position the product to occupy a clear and distinctive position relative to other competing products.

Market segmentation

 Markets

are comprised of buyers and they differ in wants, resources, locations and buying patterns.  Market segmentation is the process that marketers use to divide up the market into smaller segments that can be efficiently addressed.

Segmenting consumer markets



Geographical segmentation-Region (eg. Whole of Europe), segmentation(eg. Country size (giant, large, medium, small), density (urban, suburban, rural), climate.

Demographic segmentation- (Most popular segmentation) segmentationAge, gender, family size, income, occupation(professional, homemaker, businessman), education. - Psychographic segmentation- Lifestyle (achievers/ segmentationstrivers), strivers), and personality- based (authoritarian/ ambitious/ personalitygregarious) segmentation - Behavioural segmentation purchase occasion (regular / special), benefit sought (quality, economy, service), usage (light, medium or heavy user) , readiness state (unaware, aware, interested), loyalty status, attitude towards product.

Segmenting business markets



Demographic segmentation -which Industries , company size, location. Operating variables- Technology, usage status (heavy, variables- Technology, medium or light users). Purchasing approaches-should we focus on cos. seeking approachesquality, service, or price ? Situational factors- Urgency (should we focus on cos. factorsWanting fast delivery or not), size of order. Personal characteristics- Buyer-seller similarity (should we characteristics- Buyerfocus on clients having same values as us or not), loyalty.

Segmenting international markets

Geographic segmentation Location or region Economic factors Population income or level of economic development Political and legal factors Type / stability of government, monetary regulations, amount of bureaucracy, etc. Cultural factors Language, religion, values, attitudes, Language, customs, behavioural patterns

Requirements for effective segmentation

Measurable Size-to have estimate of sales Sizeturnover possible from serving the segment. Accessible - Can be reached and served . Substantially Large and profitable enough to serve. Actionable - Effective programs can be developed to serve the segment.

Market segmentation

Segmenting business markets

Targeting
 Evaluating

Market Segments

- Segment size and growth and segment structural attractiveness. Level of competition and availability of substitute products. Power of buyers and power of suppliers

 Company

objectives and resources

Target marketing strategies

Undifferentiated (mass) marketing  Differentiated (segmented) marketing  Concentrated (niche) marketing-targeting marketingsegments where there are no competitors  Micromarketing-tailor made products for Micromarketingindividuals. Eg.insurance policies


 Positioning

Positioning: The place the product Positioning:

occupies in consumers minds relative to competing products. Typically defined by consumers on the basis of important attributes.

A range of positioning alternatives based on the value an offering delivers and its price. price.  More for more Premium product and premium price, supported by a premium image. E.g. Mont image. E.g. Blanc pens  More for the same Brand offering comparable quality at a lower price. price.


The same for less Value proposition

Less for much less Trade off between luxury and necessity. E.g. Five star hotel versus a budget hotel. Lower performance for much lower cost. cost.  More for less No-name house brands versus the big Nobrands.


Essential criteria to accomplish a good positioning strategy

Features and benefits must be important to the consumer.  Must be distinctive from the competition.  Must deliver superior quality or service.  Difference must be communicable and visible to buyers.  Pre-emptive and competitors unable to Prereplicate.  Affordable  Profitable  -------------------------------------------

Common positioning errors



UnderUnder-positioning A positioning error referring to failure to position a company, its product or brand. OverOver-positioning A positioning error referring to too narrow a picture of the company, its products or a brand being communicated to target customers. Confused positioning Leaves consumers with a confused image of the company, its product or brand. Implausible positioning Making claims that stretch the perception of the buyers too far to be believed

By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. You can think of a niche market as a narrowly defined group of potential customers. For instance, instead of offering cleaning services, a business might establish a niche market by specializing in blind cleaning services. Why should you bother to establish a niche market? Because of the great advantage of being alone there; other small businesses may not be aware of your particular niche market, and large businesses won't want to bother with it. The trick to capitalizing on a niche market is to find or develop a market niche that has customers who are accessible, that is growing fast enough, and that is not owned by one established vendor already. See How to Find and Master a Niche Market for more information.

Micromarketing can be defined as tailoring products and programs or services to the needs and wants of individuals and groups, including local marketing and individual marketing. The term local marketing refers to tailoring brands and promotions to the needs and want of local groups, such as cities and neighborhoods. Individual neighborhoods. marketing is tailoring the product or service to one individual, also known as "one-to-one marketing". "one-toInsurance policies must be changed according the customer. A policy for a male differs from a female, smoker and nonsmoker, age and many other factors in day-to-day nonsmoker, day-toliving.

Micromarketing is the practice of tailoring products and marketing strategies locally within a smaller region such as city and/or county. This practice of marketing is common with mom and pop restaurants, grocers, and other small business establishments that cater to a local audience. Micromarketing includes the practice of individual marketing where a marketing message is crafted more personally to a buyer.

International marketing-Product decisions marketingWhat is a product?  Put simply, a product is a bundle of utilities. To be more concise, a product can be defined as a collection of physical, service and symbolic attributes which yield satisfaction or benefits to a user or buyer. A product is a combination of physical attributes say, size and shape, and subjective attributes say image or quality. A customer purchases on both dimensions.


International PLC
 Stages  Export

strength is evident by innovator country  Foreign production starts  Foreign production becomes competitive in export market  Import competition starts

International Product policy

 Product

communications extension  Extended product-communications productadaptation  Product adaptation communications extension  Product adaptation-communications adaptationadaptation  Product invention

Standardization vs adaptation
 Customer

orientation  Stage of market development  Legal considerations  Climatic conditions

Other points of discussion

 Branding  Labelling  Packaging  Warranties

and services