International marketing

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MARKETING: A UNIVERSAL MARKETING: A UNIVERSAL DISCIPLINEDISCIPLINE

Marketing is a set of concepts, tools, Marketing is a set of concepts, tools, theories, practices and procedures, and theories, practices and procedures, and experience. Together, these elements experience. Together, these elements constitute a teachable and learnable body of constitute a teachable and learnable body of knowledge.knowledge.

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THE MARKETING CONCEPTTHE MARKETING CONCEPT

The New Concept of Marketing The New Concept of Marketing and the Four Psand the Four Ps

Shifted the focus of marketing from the product to the customer. The objective was still profit, but the means of achieving the objective expanded to include the entire marketing mix, or the “four Ps”.

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The Strategic Concept of The Strategic Concept of MarketingMarketing

Shifted the focus of marketing from the customer or the product Shifted the focus of marketing from the customer or the product to the customer in the context of the broader external to the customer in the context of the broader external environment.environment.

Shift to the strategic concept of marketing is in the marketing Shift to the strategic concept of marketing is in the marketing objective-from profit to stakeholder benefits.objective-from profit to stakeholder benefits.

Marketing must focus on the customer in context and deliver Marketing must focus on the customer in context and deliver value by creating stakeholder benefits for both customers and value by creating stakeholder benefits for both customers and employees.employees.

Finally, the strategic concept of marketing has shifted the focus of Finally, the strategic concept of marketing has shifted the focus of marketing form a microeconomics maximization paradigm to a marketing form a microeconomics maximization paradigm to a focus of managing strategic partnerships and positioning the firm focus of managing strategic partnerships and positioning the firm between vendors and customers in the value chain with the aim between vendors and customers in the value chain with the aim and purpose of creating value for customers. This expanded and purpose of creating value for customers. This expanded concept of marketing was termed boundary less marketing by concept of marketing was termed boundary less marketing by Jack Welch, chairperson and chief executive officer.Jack Welch, chairperson and chief executive officer.

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THE THREE PRINCIPLES OF THE THREE PRINCIPLES OF MARKETINGMARKETING

CUSTOMER VALUE AND THE VALUE CUSTOMER VALUE AND THE VALUE EQUATIONEQUATION

COMPETITIVE OR DIFFERENTIAL COMPETITIVE OR DIFFERENTIAL ADVANTAGEADVANTAGE

FOCUSFOCUS

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TABLE 1-1 Examples of Global MarketingTABLE 1-1 Examples of Global Marketing

Brand NameBrand Name Coca-Cola (U.S.), Philip Morris (U.S.), DaimlerChryslerCoca-Cola (U.S.), Philip Morris (U.S.), DaimlerChrysler

(Germany)(Germany)

Product DesignProduct Design McDonalds’s (U.S.), Toyota (Japan), Ford (U.S.), Cisco McDonalds’s (U.S.), Toyota (Japan), Ford (U.S.), Cisco SystemsSystems

(U.S.)(U.S.)

Product positioningProduct positioning Unilever (Great Britain/Netherlands), Harley-Davidson Unilever (Great Britain/Netherlands), Harley-Davidson (U.S.)(U.S.)

PackagingPackaging Gillette (U.S.)Gillette (U.S.)

DistributionDistribution Benetton (Italy)Benetton (Italy)

Customer serviceCustomer service Caterpillar (U.S.)Caterpillar (U.S.)

SourcingSourcing Toyota (Japan), Honda (Japan), Gap (U.S.)Toyota (Japan), Honda (Japan), Gap (U.S.)

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Markets and Customers are quite different

Marketing Practices vary from country to countryEach person is unique, each country is unique.Cannot always directly apply experience from one country to another.U’hv to change Marketing plans if customers, competitors, channels of distribution and available media are different.Prof Lewitt’s – 1983 – HOMOGENIOUS GLOBAL VILLAGE.—Develop standardized high quality world products and market them around globally using standard standard advertising pricing & distribution.

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“THE BORDERLESS WORLD” Kenichi

“GLOBAL LOCALISATION”

Coke Success in Japan, Malboro, Diamler-Chrysler (Merceded), BMW.

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MANAGEMENT ORIENTATIONSMANAGEMENT ORIENTATIONS

EthnocentricHome country is

superior: sees similarities in

foreign countries

PolycentricEach host country is

unique; sees differences in foreign countries

RegiocentricSees similarities and

differences in a world region; is ethnocentric or

polycentric in its view of the rest of the world

GeocentricWorldview; sees similarities and differences in home and host

countries

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BENEFITS OF INTERNATIONAL BENEFITS OF INTERNATIONAL MARKETINGMARKETING

SurvivalSurvival Growth of Overseas MarketsGrowth of Overseas Markets Sales and ProfitsSales and Profits DiversificationDiversification Inflation and Price ModerationInflation and Price Moderation EmploymentEmployment Standards of LivingStandards of Living Understanding of Marketing ProcessUnderstanding of Marketing Process

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DRIVING AND RESTRAINING FORCES AFFECTING DRIVING AND RESTRAINING FORCES AFFECTING GLOBAL INTEGRATION AND GLOBAL GLOBAL INTEGRATION AND GLOBAL

MARKETINGMARKETING

FIGURE 1 -4 Driving and Restraining Forces Affecting Global Integration GLOBAL INTEGRATION

Driving Forces Restraining Forces Technology Culture Culture Market Differences Market Needs Costs Cost National Controls Free Markets Nationalism Economic Integration War Peace Management Myopia Management Vision Organization History Strategic Intent Domestic Focus Global Strategy and Action

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Ethnocentric-DomesticEthnocentric-DomesticDomestic expansion only

I don’t care Junior. We are staying

at home.

SHAY

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You see…our wayworks best around

the world.

Ethnocentric-InternationalForeign expansion viewed as an appendage to domestic operations; same strategies are utilized in all countries.

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PolycentrismPolycentrismActivities and functions are planned and managed, often by Activities and functions are planned and managed, often by local nationals, on a country-by-country basis (e.g., HRM is local nationals, on a country-by-country basis (e.g., HRM is

decentralized by country)decentralized by country)

HQWould you look

at this? The GMsdo understand the

local markets

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RegiocentrismRegiocentrismOperations are geared towards a particular continental region Operations are geared towards a particular continental region

with similar economies and cultureswith similar economies and culturesHQ

Alphaland Betaland

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GeocentrismGeocentrismProducts are functional, reliable, and standardized low-cost Products are functional, reliable, and standardized low-cost

products (e.g., HRM managed on a global basis)products (e.g., HRM managed on a global basis)

HQ

I can see thewhole worldfrom here.

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National EconomiesSelf Contained

Entities


Entities


Entities

BARRIERS

Cross country trade& investment by time,Zones, language,National differencesIn Govt. regulations,Culture & business Systems.

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Entities


Entities


Entities

BARRIERSCross country trade& investment by time,Zones, language,National differencesIn Govt. regulations,Culture & business Systems.

BARRIERS FALLING = Cross Border trade & Investment increasingdistances shrinking due to telecommunicationand transportation technology, material, cultureis starting to look similar world over, national economies are merging into interdependentglobal economic system

G L O B A L I Z A T I O N

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Definition of International mktg.Definition of International mktg.

The American Marketing Association (AMA) defines IM as “‘The multinational process of planning and executing, the conception, pricing, promotion and distribution of ideas, goods and services, to create exchanges that satisfy individual and organizational objectives.”Essential Characteristics:- concepts and services, it applies to International nonprofit marketing – Govt, religious bodies, from product making to selling to finding out customer needs and then design a product, places means that not only exports, not using identical strategies abroad.

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Domestic vs Intl MktgDomestic vs Intl Mktg

SIMILARITIES:

1. SUCCESS DEPENDS ON SATISFYING THE BASIC DEMANDS OFCONSUMER.

2. CAVEAT EMPTOR TO CAVEAT VENDOR. (GOODWILL)

3. R & D FOR PRODUCT IMPROVEMENT AND ADAPTION FOR BOTH

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Domestic vs Intl MktgDomestic vs Intl MktgDifferences1. Sovereign Political Entities –

= Tariffs or customs duty

= Quantitative restrictions

= Exchange controls.

= Local Taxes.

2. Different Legal systems –

= UNCITRAL3. Different Monetary Systems.

4. Lower mobility of Factors of Production.

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Domestic vs Intl MktgDomestic vs Intl Mktg

Differences:-

5. Differences in Market Characteristics.

6. Differences in Procedures and Documentation.

7. Greater Degree of Risk.

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HOW TO MANAGE INTERNATIONAL BUSINESS ?Tasks & Challenges of IM.

Countries are different --- PEST Factors

Many marketing practices --- requires different skills and or approach

Greater complexicity of managing than domestic marketing

Where to produce = cost value, globally dispersed production co-ordination / control

Appropriate mode of entry into foreign markets, i.e. exports, partnerships ,jv etc

Rules governing international trade and business, Govt restrictions etc,

development strats / policies.

Foreign Currency dealings.

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Market Strategy

Where?

How?

With whom?

Strategy = Choice

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Controllable and Uncontrollable Controllable and Uncontrollable Factors.Factors.

Environmental UncontrollableElements Country Market A,B,C.

Foreign Environment ( Uncontrollable

Domestic Environment (Uncontrollable)

Controllable ( 4 P’s)

Political / Legal Forces.

Economic Climate.

Competitive structure

Political / Legal Forces, Cultural forces, Geography & Infrastructure,Structure of Distribution, Level of Technology, Competitive Forces,Economic Forces.

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ECONOMIC ENVIRONMENTECONOMIC ENVIRONMENTTHE WORLD ECONOMYTHE WORLD ECONOMY..

OVERVIEW:

CAPITAL MOVEMENTS RATHER THAN TRADE HAVE BECOME THE DRIVING FORCE OF THE WORLD ECONOMY.

PRODUCTION HAS BECOME “UNCOUPLED ‘ FROM PRODUCTION.

THE WORLD ECONOYMY DOMINATES THE SCENE.----MACROECONOMICS OF INDIVIDUAL COUNTRIES NO LONGER CONTROL ECONOMIC OUTCOMES

THE GROWTH OF COMMERCE IS VIA INTERNET.

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ECONOMIC ENVIRONMENTECONOMIC ENVIRONMENT

THE WORLD ECONOMYTHE WORLD ECONOMY..

THE ECONOMIC SYSTEMS.

CAPITALIST

SOCIALIST

MIXED.

THE CLASSIFICATION IS BASED ON THE DOMINENT

METHOD OF RESOURCE ALLOCATION MARKET ALLOCATION, COMMAND OR CENTRAL PLAN ALLOCATION AND MIXED PLAN ALLOCATION.

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ECONOMIC ENVIRONMENTECONOMIC ENVIRONMENTTHE WORLD ECONOMYTHE WORLD ECONOMY

a) MARKET ALLOCATION •Relies on consumers to allocate resources. •Consumers "write" the economic plan by deciding what will be

produced by whom. •Economic democracy--citizens have the right to vote with their

pocketbooks for the goods of their choice. •The role of the state in a market economy is to promote competition

and ensure consumer protection. •The United States, most Western European countries, and Japan-the

triad countries that account for three quarters of gross world

product-are examples of predominantly market economies. •The clear superiority of the market allocation system in delivering the

goods and services that people need and want has led to its

adoption in many formerly social.

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b) COMMAND ALLOCATION•The state has broad powers to serve the public inter est. These

include deciding which products to make and how to make them. Consumers are free to spend their money on what is available, but decisions about what is produced and, therefore, what is available are made' by state planners. •Because demand exceeds supply, the elements of the marketing

mix are not used as strategic variables. There is little reliance on product differentiation, advertising, and promotion; distribution is handled by the government to cut out "exploitation" by intermediaries. •Three of the most populous countries in the world-China, the

former USSR, and India-relied on command allocation systems for decades. All three countries are now engaged in economic reforms directed at shifting to market allocation system. By contrast, Cuba stands as one of the last bastions of the command allocation approach.

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c) MIXED SYSTEM•There are, in reality, no pure market or command allocation systems

among the world's economies. •All market systems have a command sector, 'and all command systems

have a market sector; in other words, they are "mixed." •In a market economy, the command allocation sector is the proportion

of gross domestic product (GDP) that is taxed and spent by government. For the 24 member countries of the Organization for Economic Cooperation and Development (OECD), this proportion ranges from 32.percent of GDP in the United States to 64 percent in Sweden. In Sweden, therefore, where 64 per cent of all expenditures are controlled by government, the economic system is more "command" than "market." The reverse is true in the United States.• Similarly, farmers in most socialist countries were traditionally

permitted to offer part of their production in a free market. China has given considerable freedom to businesses and individuals in the Guangdong province to operate within a market system. Still, China's private sector constitutes only 1 to 2 percent of national output.

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STAGES OF ECONOMIC DEVELOPMENT

INCOME & P.P.P. AROUND THE GLOBE.

LOCATION OF POPULATION

MARKETING & ECONOMIC DEVELOPMENT

ECONOMIC RISK

BALANCE OF PAYMENTS.

TRADE PATTERNS.MERCHANDISE TRADESERVICE TRADE.

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STAGES OF MARKET DEVELOPMENT.

Based on GNP per Capita.

LOW INCOME COUNTRIES.

LOWER-MIDDLE-INCOME COUNTRIES.

UPPER-MIDDLE-INCOME COUNTRIES.

HIGH INCOME COUNTRIES.

BASKET CASES.

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Low Income

Pre industrialized ---- agriculture and subsistence farming.< $ 78537% world pop,<3 % world GDPHigh Birth RatesLow Literary RatesHigh Reliance on foreign aid Political instability and unrestConc-In Africa, south of SaharaExceptions, Bangladesh GNP / Capita is $366, export of garments.

Middle income

LDC’s early stages of industrialization >$78639% world pop11% of world GDPLocation for the production of standard or mature products like clothing for export Market. Atheletics Shoes ( Indonesia) Cheap and highly motivated labour to serve target markets.

Upper Middle income Industrializing countries$3.165 – 9.6007% world pop7% WGNPgreater degree of urbanization eg. Malayasia, rapidly industrilysing Rising wages and higher rater of literacy and advanced education but still have lower wage cost,become formidable competitors, export driven economic growth

High Income

Advanced industrialized post industrialized Sources of Innovation and New Product development, information process & exchange, importance of service sector,ascendancy of knowledge, orientation towards future,interpersonal relationship SWP $ 9.658 16 % world pop82 of world GDP

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DEGREES OF ECONOMIC CO-OPERATION.

1. FREE TRADE AREA. NAFTA, LAFTA

2. CUSTOMS UNION EUROPEAN UNION

3. COMMON MARKET

4. ECONOMIC UNION.

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W.T.O. AND GATT.

REGIONAL ECONOMIC ORGANIZATIONS.

EUROPEAN TRADE GROUPS.

NORTH AMERICA TRADE GROUP.

ASIAN TRADE GROUP.

SOUTH AND CENTRAL AMERICAN TRADE GROUPS.

AFRICA AND MIDDLE EASTERN TRADE GROUPS.

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POLITICAL ENVIRONMENT.POLITICAL ENVIRONMENT.POLITICAL ENVIRONMENT.POLITICAL ENVIRONMENT.

HOMETARGET

COUNTRY

BUSINESS

ANALYSE THE SALIENTISSUES OF POLITICALENVIRONMENT

SOVERIEGNTYPOLITICAL RISK

THREAT OF EQUITY DILUTION.

EXPORTATION.,

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POLITICAL ENVIRONMENTPOLITICAL ENVIRONMENT1. SOVEREINGNTYi. Supreme and independent authority.ii. Free and independent.iii. Regulates tradeiv. managed the flow of people into and out of its boundariesv. Exercised individual jurisdiction over all persons and vi. property within its territory.

EXERCISE CONTROL BY PASSING PROTECTIONIST LAWS AND REGULATIONS.

POLITICAL RISK IS INVERSLY PROPORTIONAL TO ECONOMIC DEVELOPMENT OF A COUNTRY.

TAXES

TAXES

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POLITICAL ENVIRONMENTPOLITICAL ENVIRONMENT

DILUTION OF EQUITY CONTROL.

NATIONAL CONTROL OF FOREIGN OWNED COMPANIES

HOW TO AVOIDLOOK AT ITSELF & COUNTRY SITUATION AND DECIDE

STRATEGY.FOLLOW THE LAW OF THE LAND.ANTICIPATE GOVT POLICY CHANGES.LISTEN TO COUNTRY MANAGERS.

EXPORTATION.GOVT ACTION TO DISPOSE OFF COMPANY OR INVESTORS.

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POLITICAL ENVIRONMENTPOLITICAL ENVIRONMENT

TYPES OF GOVT: POLITICAL SYSTEM.MONARCHES AND DICTATORSHIPS.ABOVE + PARLIAMENTARY ELECTIONS ( SAUDI ARBIA & North korea)NUMBER OF POLITICAL PARTIES.

2 party UK & USA)Multiparty Germany, France Israel.Single party Egypt.Dominated one party system. Former Soviet Union, Cuba, Libya.

INDICATORS OF POLITICAL INSTABILITY.SOCIAL UNRESTATTITUDES OF THE NATIONALS.POLICIES OF THE HOST GOVT.

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POLITICAL ENVIRONMENTPOLITICAL ENVIRONMENTMEASURES TO MINIMIZE POLITICAL RISKS.

STIMULATE OF LOCAL ECONOMY

EMPLOYMENT OF NATIONALS.

SHARING OWNERSHIP

BEING CIVIC MINDED.

POLITICAL NUETRALITY.

BEHIND THE SCENES LOBBY..

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LEGAL ENVIRONMENTLEGAL ENVIRONMENT..INTERNATIONAL LAWINTERNATIONAL LAW

COMMON Vs CODE LAWCOMMON Vs CODE LAWToday majority of countries have legal systems based on Today majority of countries have legal systems based on

civil code traditions – blending concepts & hybrid civil code traditions – blending concepts & hybrid systemsystem

Statutory law – Statutory law – codified at National / State level codified at National / State levelAdministrative law – regulatory bodies and local Administrative law – regulatory bodies and local

communities. communities.Case law – product of court system.Case law – product of court system.Civil or code law – civil, commercial & criminal laws.Civil or code law – civil, commercial & criminal laws. Uses codified, written norms which Uses codified, written norms which are complemented by court decision.are complemented by court decision.

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LEGAL ENVIRONMENTLEGAL ENVIRONMENT- Act of god – unavoidable interference with Act of god – unavoidable interference with

performanceperformance- Intellectual property registerIntellectual property register

Common Law – Tradition & precedents which areCommon Law – Tradition & precedents which are

rulings from previous cases.rulings from previous cases.

-trademarks (but not patents) are-trademarks (but not patents) are

establishes by prior use.establishes by prior use.- Act of god – floods, storms, add on in contractsAct of god – floods, storms, add on in contracts

Host country’s legal system i.e. common or civil Host country’s legal system i.e. common or civil law directly effects the form a legal business law directly effects the form a legal business entity will take.entity will take.

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LEGAL ENVIRONMENTLEGAL ENVIRONMENT Common Law – Companies are granted the Common Law – Companies are granted the

ability to operate by public authority.ability to operate by public authority. Civil Law – Companies are formed by contract Civil Law – Companies are formed by contract

between two or more parties who are fully liable between two or more parties who are fully liable for the actions of the companyfor the actions of the company

CountriesCountries

Common Law – India, Pakistan, Malayasia, Common Law – India, Pakistan, Malayasia, Singapore, UK, USA, Canada, Africa.Singapore, UK, USA, Canada, Africa.

Civil Law – Japan, Korea, Thailand, Indonesia, Civil Law – Japan, Korea, Thailand, Indonesia, Taiwan, China.Taiwan, China.

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LEGAL ENVIRONMENTLEGAL ENVIRONMENTINTELLECTUAL PROPERTY: PATENTS & INTELLECTUAL PROPERTY: PATENTS &

TRADEMARKS (P&T)TRADEMARKS (P&T) P&T registered in each country where business is P&T registered in each country where business is

conducted.conducted. Exploit loop holes or unique opportunities offered by Exploit loop holes or unique opportunities offered by

P&T Laws in individual nature eg. Champange-P&T Laws in individual nature eg. Champange-perfumeperfume

Infringement – critical problem Infringement – critical problem

counterfeiting – unauthorized copying &counterfeiting – unauthorized copying &

production of a product production of a product

Imitation – close enough Imitation – close enough

Piracy – Unauthorized publication or reproductionPiracy – Unauthorized publication or reproduction

of copyright work.of copyright work.

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LEGAL ENVIRONMENTLEGAL ENVIRONMENT

ANTITRUSTANTITRUST Designed to combat restrictive business practices and Designed to combat restrictive business practices and

to encourage competition.to encourage competition. Sherman Act 1890 – Prohibits certain restrictive Sherman Act 1890 – Prohibits certain restrictive

business practices including fixing prices, limiting business practices including fixing prices, limiting production, allocating marks & any other scheme production, allocating marks & any other scheme designed to avoid competition.designed to avoid competition.

LICENSING & TRADE SECRETSLICENSING & TRADE SECRETS Licensing is a contractual agreement in which a license Licensing is a contractual agreement in which a license

or allows a licenses to use patents, trademarks, trade or allows a licenses to use patents, trademarks, trade secrets, technology, or other in tangible assets in return secrets, technology, or other in tangible assets in return for royalty payment or other form of compensation.for royalty payment or other form of compensation.

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LEGAL ENVIRONMENTLEGAL ENVIRONMENT Durations amount of royalties = commercial Durations amount of royalties = commercial

negotiationnegotiation Many countries – licensing are regulated by Govt. Many countries – licensing are regulated by Govt.

Agencies.Agencies. Important consideration = price of assets, right to Important consideration = price of assets, right to

‘make’, ‘use’ & to ‘sell’‘make’, ‘use’ & to ‘sell’ Includes competition : need to be careful.Includes competition : need to be careful. Licensing of trade secrets – use confidentiality Licensing of trade secrets – use confidentiality

clauses / contacts e.g. Uniform Trade Secrets Act clauses / contacts e.g. Uniform Trade Secrets Act (UTSA)(UTSA)

NAFTA (1994) first tool, TRIP’S (Trade Related NAFTA (1994) first tool, TRIP’S (Trade Related aspects of Intellectual Property Rightsaspects of Intellectual Property Rights

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LEGAL ENVIRONMENTLEGAL ENVIRONMENTBRIBERY & CORRUPTION : Legal & ethical issuesBRIBERY & CORRUPTION : Legal & ethical issues Foreign Corrupt Practices Act (FCPA) – legacy of Foreign Corrupt Practices Act (FCPA) – legacy of

watergatewatergate- Normal implicationsNormal implications- Difficult position vis-à-vis foreign competitors Difficult position vis-à-vis foreign competitors CONFLICT RESOLUTION, DISPUTE SETTLEMENT CONFLICT RESOLUTION, DISPUTE SETTLEMENT

& RITIGATION& RITIGATION US lawyers highest ratio per 1000 pop.US lawyers highest ratio per 1000 pop. Home court advantageHome court advantage Foreign court complex – diff. In language, legal Foreign court complex – diff. In language, legal

systems, currencies and traditional business practices & systems, currencies and traditional business practices & patterns, difference in procedures + complexitypatterns, difference in procedures + complexity

Generally resort to arbitrationGenerally resort to arbitration Extra judicial alternative approaches-faster, easier + less Extra judicial alternative approaches-faster, easier + less

expensiveexpensive

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LEGAL ENVIRONMENTLEGAL ENVIRONMENT Chambers of Comm & Trade – Arbitrator – third Chambers of Comm & Trade – Arbitrator – third

mentormentor Courts of arbitration – London & ZurichCourts of arbitration – London & Zurich International Chambers of Comm. – slow processInternational Chambers of Comm. – slow process New York conventionNew York convention American Arbitration Association (AAA)American Arbitration Association (AAA) Swedish AASwedish AA ACAS (Advising Conciliation & Arbitration ACAS (Advising Conciliation & Arbitration

Service)Service) UNCITRAL (United Nations Conference on Intt. UNCITRAL (United Nations Conference on Intt.

Trade Law)Trade Law)

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LEGAL ENVIRONMENTLEGAL ENVIRONMENTREGULATORY ENVIRONMENTREGULATORY ENVIRONMENT Govt. & Non Govt. agencies & Trade groups, Intt Govt. & Non Govt. agencies & Trade groups, Intt

Economic Orgn (IEO’s)Economic Orgn (IEO’s) Wide range of mktg issues – price control, Wide range of mktg issues – price control,

valuation of imports & exports trade practices valuation of imports & exports trade practices labeling, food & drug regulations, employment labeling, food & drug regulations, employment conditions, collective bargaining, advertising conditions, collective bargaining, advertising contents & competitive practicescontents & competitive practices

EU – EGC (European Economic Community – EU – EGC (European Economic Community – various contactsvarious contacts

WTO - GATTWTO - GATT

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Key Questions TranscendBoundariesWhere? Where?In which markets are we competing?

Key Questions Transcend Boundaries

Technology, Customer Groups, Geographic Markets, etc.How does the international expansion impact your business definition?How?How are we competing in these markets (value proposition)?Competitive Advantage, Corporate PostureHow does the international expansion impact the way you compete?With whom?Which relationships do we have to develop or do we need to nurture?Selection of Channel Members, Logistic Partners, Sourcing DecisionsHow does the international expansion impact the choice of business partners?

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BASIC ASPECTS OF SOCIETY BASIC ASPECTS OF SOCIETY AND CULTUREAND CULTURE

Define culture as “ways of living,” built up by a group of Define culture as “ways of living,” built up by a group of human beings, which are transmitted from one human beings, which are transmitted from one generation to another.generation to another.

Culture includes both conscious and unconscious values, Culture includes both conscious and unconscious values, ideas, attitudes, and symbols that shape human behavior ideas, attitudes, and symbols that shape human behavior and that are transmitted from one generation to the next.and that are transmitted from one generation to the next.

Culture is “the collective programming of the mind that Culture is “the collective programming of the mind that distinguishes the members of one category of people distinguishes the members of one category of people from those of another.from those of another.

Culture is learnedCulture is learned

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First, all facets of culture are interrelated: Influence or First, all facets of culture are interrelated: Influence or change one aspect of a culture and everything else is change one aspect of a culture and everything else is affected.affected.

Second, because it is shared by the members of a group, Second, because it is shared by the members of a group, culture defines and boundaries between different culture defines and boundaries between different groups.groups.

Culture consists of learned responses to recurring Culture consists of learned responses to recurring situations.situations.

Taste and preferences for food and drinkTaste and preferences for food and drink Preference for color is culturally influenced as well.Preference for color is culturally influenced as well. Attitudes toward whole classes of products can also be Attitudes toward whole classes of products can also be

a function of culture.a function of culture. Income levels also influence consumer behavior and Income levels also influence consumer behavior and

attitudes around the world.attitudes around the world. Consumer products have broad, almost universal, Consumer products have broad, almost universal,

appeal.appeal.

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THE SEARCH FOR CULTURAL THE SEARCH FOR CULTURAL UNIVERSALSUNIVERSALS

Discover cultural universals. A universal is a mode of Discover cultural universals. A universal is a mode of behavior existing in all cultures.behavior existing in all cultures.

Eg.: Athletic sports, body adornment, cooking, courtship, Eg.: Athletic sports, body adornment, cooking, courtship, dancing, decorative art, education, ethics, etiquette, dancing, decorative art, education, ethics, etiquette, family feasting, food taboos, language, marriage, family feasting, food taboos, language, marriage, mealtime, medicine, mourning, music, property rights, mealtime, medicine, mourning, music, property rights, religious rituals, residence rules, status differentiation, religious rituals, residence rules, status differentiation, and trade.and trade.

Apparent cultural diversity in the world turns out to be Apparent cultural diversity in the world turns out to be different ways of accomplishing the same thing.different ways of accomplishing the same thing.

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Music provides one example of how these universals Music provides one example of how these universals apply to marketing.apply to marketing.

Increasing travel and improving communications mean Increasing travel and improving communications mean that many national attitudes toward style in clothing, that many national attitudes toward style in clothing, color, music, food, and drink are converging.color, music, food, and drink are converging.

Use of credit are providing huge global opportunities Use of credit are providing huge global opportunities for financial service providers.for financial service providers.

HIGH AND LOW-CONTEXT CULTURESHIGH AND LOW-CONTEXT CULTURES Words carry most of the information in communication.Words carry most of the information in communication. In general, high-context cultures function with much In general, high-context cultures function with much

less legal paperwork than is deemed essential in low-less legal paperwork than is deemed essential in low-context cultures.context cultures.

Main obstacle is attitude.Main obstacle is attitude.

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High and Low-Context CulturesHigh and Low-Context Cultures

Factors / DimensionsFactors / Dimensions High ContextHigh Context Low ContextLow Context

LawyersLawyers Less importantLess important Very importantVery important

A person’s wordA person’s word Is his or her bondIs his or her bond Is not to be relied on; “get it Is not to be relied on; “get it in writing”in writing”

Responsibility forResponsibility for Taken by highest levelTaken by highest level Pushed to lowest levelPushed to lowest level

organizational errororganizational error

SpaceSpace People breathe on each otherPeople breathe on each other People maintain a bubble of People maintain a bubble of private space and resent private space and resent intrusionsintrusions

TimeTime Polychronic – everything in life Polychronic – everything in life must be dealt with in its own must be dealt with in its own timetime

Monochronic – time is Monochronic – time is money. Linear – one thing at money. Linear – one thing at a timea time

NegotiationsNegotiations Are lengthy – a major purpose Are lengthy – a major purpose is to allow the parties to get to is to allow the parties to get to know each otherknow each other

Proceed quicklyProceed quickly

Competitive biddingCompetitive bidding InfrequentInfrequent CommonCommon

Country/regional Country/regional examplesexamples

Japan, Middle EastJapan, Middle East United States, Northern United States, Northern EuropeEurope

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COMMUNICATION AND NEGOTIATIONCOMMUNICATION AND NEGOTIATION A MATTER OF CULTURE: GETTING LOST A MATTER OF CULTURE: GETTING LOST

IN TRANSLATIONIN TRANSLATION

British VersionBritish Version American VersionAmerican Version

chemistchemist pharmacistpharmacist

lorrylorry trucktruck

nappiesnappies diapersdiapers

looloo bathroombathroom

biscuitsbiscuits cookiescookies

crispscrisps potato chipspotato chips

shandyshandy beer with lemonadebeer with lemonade

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English: Paris: “Please leave your values at the English: Paris: “Please leave your values at the front desk”; Japan: “You are invited to take front desk”; Japan: “You are invited to take advantage of the chamber-maid”;advantage of the chamber-maid”;

Romania: “The lift is being fixed for the next Romania: “The lift is being fixed for the next day. During that time we regret that you will be day. During that time we regret that you will be unbearable.”unbearable.”

Japan English, French, or German on the labels Japan English, French, or German on the labels to suggest a stylish image.to suggest a stylish image.

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ANALYTICAL APPROACHES TO ANALYTICAL APPROACHES TO CULTURAL FACTORSCULTURAL FACTORS

MASLOW’S HIERARCHY OF NEEDSMASLOW’S HIERARCHY OF NEEDS

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Maslow’s Hierarchy: The Asian Equivalent

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ENVIRONMENTAL SENSITIVITYENVIRONMENTAL SENSITIVITY

FIGURE 3-3 Environmental Sensitivity Product AdaptationFIGURE 3-3 Environmental Sensitivity Product Adaptation

MatrixMatrix

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Social Behavior•Social Behavior documents that have different meaning under different cultures.Eg. American – Impolite – would food, make noises and belch Chinese – Polite – take a portion of every food served – belch (evidence of satisfaction) Saudi Arabia – insult to ? health of spouse, Show the soles of one’s shoes or touch or deliver goods with left hand.

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Korea – both hands are used, impolite to discuss politics, communism or japan. Formal introduction very imp, rank and files are imp (in Japan also) used in addressing hosts. (in USA – no clear rule) Indonesia – rude to point finger (thumb or chin) Greetings shake hands ++ Japan – bow as low as senior Brazil, Korea, Indonesia, China & Taiwan – Slight bow Venezuela – full embrace + hearty pat Indonesia – social kiss is in vogue, touching firstthe right cheek and left check as one shakes hand.

Malaysia friends grasp with hands

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South Africa black shake hands followed by clench of each others thumbs and another handshake. Mr, Mrs, Miss or Ms, Madame, Mensieur, Madamciselle, Sener, Senora, Sanonta, “Goddag” (Switzerland). Netherlands- Pleased to meet you How do you do? (UK) Jumbo (Tanzania) Shalom (Israel)

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SOCIAL & CULTURAL ENVIRONMENT ON MKTG. CONSUMER PRODUCTS

•Consumer products are more sensitive to culture differences. - CPC – Knorr (Swiss) dehydrated soup – failed in USA - it has major share in Europe 80%.

BUT achieved success in Sauce and gravy product in USA sales outside USA = 63% of food revenues.

Campbell – 63% generated in USA, 27% global Mkts.

Campbell canned soups – 90% in USA

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•Cooking habits and customs vary from country to country

- Italian housewife 4.5 hrs / day in kitchen (80% men have not meal at home)USA housewife 1 hr / day

•Beverages influenced by culture

- UK – Instant Coffee – 90% of total coffee mkt (not beverage (tea), more milk, masked)- Sweden – Instant Coffee – 15% (Not beverage of choice, w/o milk, not masked and brewed)

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•SSoft drink - Coco-Cola – 376 ounces servings in USA per capita in USA- 203 servings in Germany- 95 servings in Italy

- 88 servings in France -

- H2O – (in France) Europe – Wine 30 to 40 x

C = f ( A, B, C, D, E, F, G) C = Consumption of soft drinksf = function ofA = Influences of other beverages related price, quality and taste.B = Adv. Expenditure and effectiveness, all beverages categoriesC = availability of products in distribution channelsD = Culture habit, elements, tradition, customE = availability of raw materials (particularly H2O)

F = Climate conditions, temperatures and RIAG = Income level.

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•Culture is an influencing rather than a determining factor.•Indian society is at least as ethnically and culturally diverse as that in Europe and business practices are probably can more varied than in Europe.•Training in cross culture competency --Samsung.

•Penetration of the US beverage market by bottled H2O producers =

effective creative strategy an a firmly entrenched culture tradition, (Change in price ( ), promotion and place (to soft drink section) Result 80% of US bottled H2O Mkt.) (restraining force of culture

changed by creative Mktg Strategy)

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Barriers to IMBarriers to IM

TRADE BARRIERS:-“: government laws, regulations, policies, or proactive that either protect domestic producers from foreign competition or artificially stimulate exports of particular domestic products. Restrictive businesses practices and government regulations designed to protect public health and national security are not considered as trade barriers.

The report classifies the trade barriers into eight categories. (1) Import policies (e.g., tariffs, quotas, licensing, and customs barriers); (2) standards, testing, labeling, and certification; (3) government procurement; (4) export subsidies; (5) lack of intellectual property protection; (6) services barriers (e.g., restrictions on the use of foreign data processing); (7) investment barriers; and (8) other barriers.

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Barriers to IMBarriers to IMWhy ?

1. PROTECTION OF LOCAL INDUSTRIES

(1) keeping money at home,

(2) reducing unemployment,

(3) equalizing cost and price,

(4) enhancing national security,

(5) protecting infant industry.

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2. MARKETING BARRIERS: TARIFFS.

Tariff, derived from a French word-meaning rate, price, or list of charges, is a customs duty or a tax on products that move across borders.

1. Direction: import and Export Tariffs

2. Purpose: protective and Revenue Tariffs

3. Length: Tariff Surcharge versus Countervailing Duty.

4. Rates: specific, ad Valorem, and Combined.


5. Distribution point: Distribution and consumption taxes

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Barriers to IMBarriers to IMMARKETING BARRIERS: NONTARIFF BARRIERS

1. Government participation in tradeAdministrative Guidance .

Government procurement and state trading

Subsidies .2. Customs and Entry Procedures

Classification Valuation- Regardless Documentation License or permit Inspection Health & Safety Regulations

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Product Requirements


1. Product standards 2. Packaging, Labeling, and marking3. Product Testing 4. Product specifications

Quotas 1. Quotas2. Absolute Quotas-3. Tariff Quotas 4. Voluntary Quotas

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Financial control

1. Exchange control2. Multiple exchange Rates multiple rates 3. Prior import Deposits and credit Restrictions 4. Profit Remittance Restrictions


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BUSINESS CUSTOMS IN BUSINESS CUSTOMS IN GLOBAL MARKETINGGLOBAL MARKETING..

Business customs are as much a cultural element of a society as is the language. Not "just like us." Knowledge of the business culture, management attitudes, and business methods existing in a country and a willingness to accommodate the differences are important to success in an international market

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REQUIRED ADAPTATION Adaptation is a key concept willingness to adapt is a crucial attitude. Ten basic criteria They are: (1) open tolerance, (2) flexibility, (3) humility, (4) justice/fairness, (5) ability to adjust to varying tempos, (6) curiosity/interest, (7) knowledge of the country, (8) liking for others, (9) ability to command respect, and (10) ability to integrate oneself into the environment.

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Degree of Adaptation Adaptation require business executives be aware of local customs and be willing to accommodate those differences that can cause misunderstanding. The self-reference criterion (SRC) is especially operative in business customs.

Imperatives, Adiaphora, and Exclusives Business customs can be grouped into imperatives, customs that must be recognized and accommodated; adiaphora, customs to which adaptation is optional; and exclusives, customs in which an outsider must not participate.

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METHODS OF DOING BUSINESSMETHODS OF DOING BUSINESSIndividualism/Collectivism (IDV) and Power Distance (PDI) are Individualism/Collectivism (IDV) and Power Distance (PDI) are especially relevant especially relevant in examining methods of doing business among in examining methods of doing business among

countriescountries..

Sources and Level of AuthoritySources and Level of AuthorityBusiness size, ownership, public accountability, and cultural Business size, ownership, public accountability, and cultural

values that determine the prominence of status and position (PDI) values that determine the prominence of status and position (PDI)

Combine to influence the authority structure of businessCombine to influence the authority structure of business..HIGH PDIHIGH PDI

countries like Mexico and Malaysia, understanding the rank and countries like Mexico and Malaysia, understanding the rank and status is more importantstatus is more important

subordinates are not likely to contradict bosses,subordinates are not likely to contradict bosses,LOW PDILOW PDI

societies like Denmark and Israel not necessarysocieties like Denmark and Israel not necessaryIn few countries they are likely to contradictIn few countries they are likely to contradict

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The authority patterns, most are a variation of three typical patterns: top-level management decisions; decentralized decisions; and committee or group decisions

Management Objectives and Aspirations. 1. Personal Goals. 2. Security and Mobility 3. Personal Life. 4. Social Acceptance 5. Power

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Communications Emphasis

HIGH CONTEXT

Communication depends heavily on the context or nonverbal aspects of communicationculture it takes considerably longer to conduct business because of the need to know more about a businessperson before a relationship develops.

LOW CONTEXT

Communication depends more on explicit, verbally expressed Communications. one-gets down to business quickly

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BUSINESS CUSTOMS IN GLOBAL BUSINESS CUSTOMS IN GLOBAL

MARKETINGMARKETING..Formality and Tempo

P-Time versus M-Time "they are always late," "you are always prompt." we are a very time-oriented society-time is money to us-whereas in other cultures time is to be savoured, not spent.

Edward Hall defines two time systems in the world: monochromic and polyphonic time

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BUSINESS CUSTOMS IN GLOBAL BUSINESS CUSTOMS IN GLOBAL MARKETINGMARKETING..

m-timeNorth Americans, Swiss, Germans, and Scandinavians.-- tend to concentrate on one thing at a time. They divide time into small units and are concerned with promptness.M-time is used in a linear way and it is experienced as being almost tangible in that we save time, waste time, bide time, spend time, and lose time. Most low-context cultures operate on M- timeThe American desire to get straight to the point, to get down to business, and other indications of directness are all manifestations of M-time cultures.

p-timeP-time, or polychronic time, is more dominant in high-context cultures where the completion of a human transaction is emphasized more than holding to schedules.P -time is characterized by the simultaneous occurrence of many things and by "a great involvement with people." P-time allows for relationships to build and context to be absorbed as parts of high-context cultures. The P-time system gives rise to looser time schedules, deeper involvement with individuals, and a wait-and see-what-develops attitudeGender Bias in International Business 101

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GLOBAL MKTG INFO SYSTEM & GLOBAL MKTG INFO SYSTEM & RESEARCHRESEARCH

IMP TOPICS:

MIS & IT ARE STRATEGIC ASSETS.

FRAMEWORK FOR INFORMATION SCANNING AND OPPORTUNITY IDENTIFICATION

FORMAL MKT RESEARCH PROCESS.

MANAGE THE MIS & EFFORTS.

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GLOBAL MKTG INFO SYSTEM & RESEARCHGLOBAL MKTG INFO SYSTEM & RESEARCH

INFORMATION SUBJECT AGENDA

SIX SUBJECT AGENDA CATEGORIES FOR A GLOBAL BUSINESS

CATEGORY / COVERAGE

1. Markets Demand estimates, consumer behavior, products, channels, communication media availability and

cost, and market responsiveness.2. Competition Corporate, business, and functional strategies

and plans

3. Foreign Exchange Balance of payments, interest rates, attractiveness of country currency, expectations of analysts.

4. Prescriptive Information Laws, regulations, rulings concerning taxes, earnings, dividends in both host countries and home country.

5. Resource Information Availability of human, financial, information, and physical resources.

6. General conditions Overall review of socio-cultural, political, technological environments.


In the surveillance mode, the marketer engages in informal information gathering. lookout for information about potential opportunities and threats in various parts of the world. They want to know every thing about the industry, the business, the marketplace, and consumers. they keep their ears and eyes tuned for clues, rumors, nuggets of information, and insights from other people's experiences. Browsing through news papers and magazines and surfing the Internet.

Global marketers may also develop a habit of watching news programs and commercials from around the world via satellite. This type of general ex posure to information is known a_ viewing. If a particular news story has special rele vance for a company-for example, entry of a new player into a global industry, say, Samsung into automobiles-marketers in the automobile and related industries and all competitors of Samsung will pay special attention, tracking the story as it develops. This is known as monitoring.

SCANNING MODES: SURVEILLANCE AND SEARCH

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The search mode is characterized by more formal activity. Search is characterized by the deliberate seeking out of specific information. Search often involves investigation, a relatively limited arid informal type of search. Investigation often involves seek ing out books or articles in trade publications or searching the Internet on a particular topic or issue. Search may also consist of research, a formally organized effort to acquire specific information for a specific purpose.

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SOURCES OF MARKET INFORMATION 1. HUMAN SOURCES Internal, Friends, Acquaintances, Professional colleagues, Consultants, & perspective new employees.

2. DOCUMENTARY EVIDENCES. Are published information and unpublished private documents.

3. INTERNET SOURCES.

4. DIRECT PERCEPTION HLL Percil Pwdr 6wks in Indian Village, Toyato –LEXUS Car.

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FORMAL MARKETING RESEARCH

STEP 1: IDENTIFYING THE RESEARCH PROBLEM

STEP 2: DEVELOPING A RESEARCH PLAN

STEP 3: COLLECTING DATA Secondary Data,Primary Data and

Survey Research,Sampling.

STEP 4: ANALYZING RESEARCH DATA 1. Demand Analysis Patterns2. Income Elasticity Measurements.3. Market Estimation by Analogy.4. Cluster Analysis 5. Analysing

Results.

STEP 5: PRESENTING THE FINDINGS107


CERTAIN ISSUES

Analyse many National Markets.

Marketing Res Expenditure modest in in low profile markets.

Data— inflated or deflated either inadvertently or for

political expediency.

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M I S

Must be carefully designed and developed.

Development = 3 steps:- system analysis,design, and implementation

Investigation ofAll users info

Transforms the various info reqr into one or more plans that clearly specify the procedures and programs in obtaining, recording and analysing market data.

Installation & Checking

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MIS Characteristics == user-oriented, expandableComprehensive, flexible, integrated, efficient, cost effectivr, reliable, timely, controllable, systematic, and self perpetuating.

Intl MIS === Above ++ time independence, location independence, cultural & linguistic capabilities, legal compatibility, standerisation/uniformity,flexibility and integration.

Benetton’s info sys, Nestle-Maggi,Chicory flavoured Coffee ‘ Sunrise’ in India, Gerber (France) database mgt natural instant cerials

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INTERNATIONAL MARKET INTERNATIONAL MARKET INTELLIGENCE.INTELLIGENCE.

WHAT INFORMATION IS NEEDED.?.

Which markets to enter

Ranking them @ attractiveness

Investigation into their mkt potential & localcompetitive situation

Decide how to serve those market – by exporting, licensing, or local prodn.

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INTERNATIONAL MARKET INTELLIGENCEINTERNATIONAL MARKET INTELLIGENCE

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INFORMATION FOR MARKETING DECISIONSMARKETING DECISION INTELLIGENCE NEEDED1.Go international or remain a domestic marketerAssessment of global market demand and firm’s potential share in it, in view of local and international competition and compared to domestic opportunities.

2. Which markets to enter ?A ranking of world markets according to market potential, local competition, and the political situation.

3. How to enter target markets ?Size of market, international trade barriers, transport costs, local competition, government requirements, and political stability.

4. How to market in target markets ?For each market: buyer behavior, competitive practice, distribution channels, promotional media and practice, company experience there and in other markets.

INTERNATIONAL MARKET INTELLIGENCEINTERNATIONAL MARKET INTELLIGENCE

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THE INFORMATION PROVIDED BYMARKETING RESEARCH

Marketing Environment Political structure and ideol ogy, National

objectives, the economic dimension of information gathering is more familiar, Government regulation

Competition.

Users of the Product

Marketing MixDistribution Channels, Comparitive Pricing Strategies ,A & P, Media Res, Service Q

issues,logistics of network capabilities.

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SEGMENTATION, TARGETING AND SEGMENTATION, TARGETING AND

POSITIONINGPOSITIONING..Market segmentation is the process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs. Each subset may conceivably be chosen as a market target to be reached

with a distinctive marketing strategy.

Global market segmentation is the process of dividing the world market into distinct subsets of customers that behave in the same way or have similar needs, or, as one author put it, it is the process of identifying specific segments-whether they be country groups or individual consumer groups-of potential customers with homogeneous attributes who are likely to exhibit similar buying behavior."

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STPSTPProf Lewit- “ Pluralization of consumption” and“Segment simultaniety.” e.g. consumers seek Variety and that same new segments show up in Multiple national markets. Like ethenic food like sushi or Greek salad

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Another e.g. desire to be beautiful, desire to be

healthy and free of pain, the love of

Mother & Child.All the above is Universal = advt around the globe.

STPSTP

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The criteria for global market segmentation is:

1.GEOGRAPHIC SEGMENTATION

2. DEMOGRAPHIC SEGMENTATION.

3. PSYCHOGRAPHIC SEGMENTATION.

4. BEHAVIOR SEGMENTATION.

5. BENEFIT SEGMENTATION.

6. VERTICAL vs HORIZONTAL SEGMENTATION.

STPSTP GLOBAL TARGETING.

Targeting is the act of evaluating and comparing the identified groups and then selecting one or more of them as the prospect(s) with the highest potential. (based on R on Sales + Max value to CustMktg Mix devised.

1. CRITERIA FOR TARGETINGThe three basic criteria for assessing opportunity in global target markets 1. Current size of the segment and anticipated growth potential; 2. Competition; and 3. Compatibility with the company's overall objectives and the feasibility of successfully reaching a designated target. 115

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STPSTPCurrent Mkt size large enough to make a profit?OR does it have a Growth potential.Narrow segment served profitably with std Production in a single country & across many countries. “MTv Gen”

China-attractive opportunities in many indust eg Fin Services 3 mn Credit Cards in Circulation, PC /1250 people

(USA 1/2people)automobile 1.2 mn passenger cars, 1 carper 20.000 growth at 33%-enormous potential.

Competition= Utilize a diff Strat, Inca Cola in Peru is as popular as Coke, India Thums Up,Siberia Crazy Cola 48%.

Compatibility= require considerable exp for dist & travelby co: personal. PepsiRussia Mkt 1972.waited 15 yrs first move, 20 yrs to decideto make investments Coke got 50% share.

STPSTP GLOBAL TARGETING.

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SELECTING A GLOBAL TARGET MARKET STRATEGY.

a)Standardized Global Marketing.analogous to mass mktg in a single countrystrategy call for extensive distribution in the max.

number of retail outlets.Coco-cola youthful fun global advert

b) Concentrated Global Marketing.strategy involves devising a mktg mixto reach a single segment of the Gl.Mkt

ChannelUpper Segment prestige.Walter Halter (Ger)-hidden Champion

dishwashers for Hotels and Restraunts.

STPSTPc) Differentiated Global Marketing.

entails targeting two or more distinct marketsegments with different market mixes.strategy allows a company to achieve widermarket coverage.

SUV (Sports Utility Vehicle)=Rover-Range Rover for High End (50K), Discovery low end 35 k;In competition with Jeep Grand Cherokee.SMH(Swiss) Watches; Unilever NV & Cosmair Inc--Perfume Mkt- high end (Calvin Klien,E.T Passion Lower End Wind Sun/ Brut.; PG does the same.

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STPSTPGLOBAL PRODUCT POSITIONING

POSTIONING IS THE LOCATION OF YOURPRODUCT IN THE MIND OF YOUR CUSTOMER(depends on many variables but controlled by the marketer)

HOW? = UNIFIED GLOBAL POSTIONING STRATFor e.g. Chase Manhattan Bank-$75 Mn Global Ad Campaign “ Profit from experience”

TYPES:- a) HIGH-TECH POSITIONING

1)Technical Products.=specialized needs+great deal of product info + common language.

computers, tires, chemicals fin services

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STPSTPb)Special Interest Products. Shared experience+high involvement amongst users+common lang+symbols. Fuji Bicycles,Adidas Sports Equip, Cannon Cameras

2.HIGH TOUCH POSITIONING

High involvement for consumers,share a common lang+ set of symbols relating to themes of wealth, materialism & romance= more emphasis on Image.

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STPSTPa)Products that solve a Common Problem “ life’s little moments”friends talking over a cup of Coffee or quenching thirst with a soft drink.b) Global Village Products.

Cosmopolitan in nature. Channel Fragrances, designer

fashions,mineral H2OAmericanness=Levis, Malboro, H-D

BikesJapan Q = Sony ++German =Benz, Mercedes

embodiment of legendary German Engg

c) Products that use Universal themes. Transnational, materialism, heroism, play,procreation (Courtship/romance) 121

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Entry and Expansion Strategies: Entry and Expansion Strategies:

Marketing and SourcingMarketing and Sourcing Going International- Host of Decisions like:- Which country & sequence?criteria to select Entry markets:- proximity, stage of development,Geographic region, cultural & linguistic criteria,the competitive situation, etc.

How to enter New Markets via Green fields Expansion, directly thru acquisition, agents,.

Should mkt be supplied with Imported Products From the home or 3rd country or locally manf prodBEM Auto makers VW,Fiat,GM ++ in Brazil

L14 108

E and E Strat: Mktg &SourcingE and E Strat: Mktg &SourcingDECISION CRITERIA FOR INTERNATIONAL

BUSINESS

POLITICAL RISK:- IS 1/ COUNTRY’S ECO DEV McDonald’s in war torn Belgrade-change in mktg Strat (since Anti American)-Serbian Cap on Golden Arch’s+free hamburgers to anti NATO Demonstrators + basement converted to air raid shelter.

MARKET ACCESS:- Limitations are laws,b-o-p,etc E.G. Japan Auto Co: investing in US.

FACTOR COSTS AND CONDITIONS: land, labor,capital costs

123

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LABOR COST LOW IN ldc, MORE IN hdcGer compensation costs are 150% USAMexico 10% USA Ger built Golf & Jetta Models in MexicoSMH did all his manf in Switzerland

FACTOR COST1.Industrialized Countries=tend to equalize.2.Industralizing Countries Singapore& pacific rim

counties =savings developed infrastructure

+political stability.3.Russia + other countries less developed infra-

structure + political instability + wages may be low.

Arrow Shirts in 1980 sourced 15% dress material from Far EastSaving $15/doz,then automation hence independent-sourcing at home-laid off 400 workers and closed 4 plants.As F.costs Production shifted to China Indonesia,Thailand Malaysia, Bangladesh and now to Costa Rica.

E and E Strat: Mktg &SourcingE and E Strat: Mktg &SourcingSHIPPING CONSIDERATIONS Time, Cost & delivery Imp Factors.For e.g. Acer Computer Co of Thailand- Non-Perishable Items-Housing, keyboards,floppy discs manf in Taiwan +Shipped to 40 RBU’s. Perishable Items- like drives(upgradeable) are manf as needed and air shipped to the RBU’s where it is assembled. ADV=eliminates the shipping time +inventory + latest products to the customers..

COUNTRIES INFRASTRUCTURE

FOREX.

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E and E Strat: Mktg &SourcingE and E Strat: Mktg &SourcingCREATING A PRODUCT MARKET MIX.

The basic questions summarized as the nine Ws:

1. Who buys our product?2. Who does not buy our product?3. What need or function does our product serve?4. What problem does our product solve?5. What are customers currently buying to satisfy the need and/or solve the problem for which our product is targeted?6. What price are they paying for the products they are currently buying?7. When is our product purchased?8. Where is our product purchased?9. Why is our product purchased?

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E and E Strat: Mktg &SourcingE and E Strat: Mktg &SourcingMARKET SELECTION CRITERIA

Six criteria should be assessed: (1) market potential, (2) market access, (3) shipping costs, (4) potential competition,(5) service requirements, (6) product fit.

Market access depends on restrictions by Home Country like export license,import duties,quotes,forex regulations,preference arrangements.

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E and E Strat: Mktg &SourcingE and E Strat: Mktg &SourcingInternational Market Entry and Expansion Decision Model1. Sourcing: Home, third, or host country? Cost, market access, country of origin factors2. In country or in-region marketing organization? Cost, market impact assessment. If choice is to establish own organization, must decide whom to appoint to key positions 3. Selection, training, and motivation of

local distributors and agents 4. Marketing mix strategy:

Goals and objectives in sales, earnings, and share of market positioning; marketing mix strategy5. Strategy implementation 128

E and E Strat: Mktg &SourcingE and E Strat: Mktg &Sourcing

EXPORTING. DECISION CRITERIA

Requires.

1. An understanding of the target market environment

2. The use of marketing research and the identification of market potential

3. Decisions concerning product design, pricing, distribution and channels, advertising, and communications-the marketing mix

129


130

Exporting has the following distinct stages.

1. The firm is unwilling to export; it will not even fill an unsolicited export order.

This may be due to perceived lack of time ("too busy to fill the order") or to apathy or ignorance.

2. The firm fills unsolicited export orders but does not pursue unsolicited orders.

Such a firm would be an export seller.

3. The firm explores the feasibility of exporting (this stage may bypass stage

E and E Strat: Mktg &SourcingE and E Strat: Mktg &Sourcing4. The firm exports to one or more markets on a trial basis.

5. The firm is an experienced exporter to one or more markets.

6. After this success, the firm pursues country- or region-focused marketing based on certain criteria (e.g., all countries where English is spoken, all countries where it is not necessary to transport by water).

7. The firm evaluates global market potential before screening for the best target markets to include in its marketing strategy and plan. 131


Equity Jt Venture

Licensing Franchising ManagementContract

Ownership & Strategic Alliances

0 CONTROL 100%

100%

0

OWNERSHIP

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Agents/Distributors

Co: owned Subsidiary

E and E Strat: Mktg &SourcingE and E Strat: Mktg &SourcingLogistics1. Arranging transportation

2. Transport rate determination

3. Handling documentation

4. Obtaining financial information

5. Distribution coordination

6. Packaging

7. Obtaining insurance

Legal Procedure

8. Government red tape

9. Product liability

10. Licensing

11. Customer/duty

Servicing Exports12. Providing parts availability

13. Providing repair service

14. Providing technical advice

15. Providing warehousing

Sales Promotion

16. Advertising

17. Sales effort

18. Marketing information

Foreign Market Intelligence

19. Locating markets

20. Trade restrictions

21. Competition overseas

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E and E Strat: Mktg &SourcingE and E Strat: Mktg &SourcingORGANISING FOR EXPORTING

1. Organizing in the Manufacturer’s Country 1. In-House Export Organization

The possible arrangements for handling exports include the following:

• As a part-time activity performed by domestic employees

• Through an export partner affiliated with the domestic marketing structure that takes possession of the goods before they leave the country

3. Through an export department that is independent of the domestic marketing structure

4. Through anexport department within an international division

5. For multidivisional companies, each of the foregoing possibilities exists within each division

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135

2. External independent Export Organizations export trading companies (ETCs), export

management companies, (EMCs), export merchants, export brokers, combination export managers, manufacturers' export representatives or commission agents, and ‘ export distributors.

2. Organizing in the Market Country 1. Direct Representation:-involves selling to wholesalers or retailers. ADV=market control and communications, feedback and information from the market are much greater


136

2. Independent Representation

3. Piggyback Marketing :-This is an arrangement whereby one manufacturer obtains

distribution of products through another's distribution channels .

ADDITIONAL INTERNATIONAL ALTERNATIVES

1. SOURCING:- e.g. Nike.SOURCING DECISION FACTORS

1Factor costs and conditions2Logistics3Country Infrastructure4Political Risk5Market Access6Exchange rate, availability, and convertibility of local money.

E and E Strat: Mktg &SourcingE and E Strat: Mktg &Sourcing2. LICENSING

Licensing can be defined as a contractual arrangement whereby one company (the licensor) makes an asset available to another company (the licensee) In exchange for royalties; license fees, or some other form of compensation. The licensed assume may be a patent, trade secret, or company name. Licensing is a form of global market entry and an expansion strategy with considerable appeal.

ADV= bottom line up for co: with good tech know how & strong brand image+ attractive ROI.

DISADV=ltd: form of participation, becomescompetitor. 137


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Sony – Masura Ibuka 1950 transistor from AT & T Bell Lab---worldwide success.Apple famed Optr SystemPower Computing Corp

then to IBM & Motorola.—lost mkt share. Pre-Windows era to Microsoft.

Pokeman- Japan success licensed to 4kids Entertainment Inc of N.Y. Great Success.

Coco-cola, Disneyland, Pierre Cardin license theirTrade mark- business is booming.

Franchising is a form of licensing. It is the practice whereby a company permits its name, logo, cultural design, and operations to be used in establishing a new firm or store.

E and E Strat: Mktg & SourcingE and E Strat: Mktg & Sourcing

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3. INVESTMENT: JOINT VENTURES A joint venture with a local partner

represents a more extensive form of participation in foreign markets than either exporting or licensing

E and E Strat: Mktg & SourcingE and E Strat: Mktg & SourcingADVANTAGESsharing of risk and the ability to combine different value chain strengths for, eg,intl mktgcapability and manf.

Companies that lack sufficient capital resources might seek 'partners to jointly finance a project.

A joint venture may be the only way to enter a country or region if government bid award practices routinely favour local companies or if laws prohibit foreign control but permit joint ventures. A joint venture as a source of supply for third-country markets

DISADVANTAGESJoint venture partners must share rewards as well as risks.

A company incurs very significant costs associated with control and coordination issues that arise when working with a partner. A dynamic joint venture partner can evolve into a stronger competitor. In some instances, country-specific restrictions limit the share of capital help by foreign companies. Cross-cultural differences in managerial attitudes and behaviour can present formidable challenges as well.

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E and E Strat: Mktg & SourcingE and E Strat: Mktg & Sourcing4. INVESTMENT: OWNERSHIP AND CONTROL Another key variable in the location decision is the vision and values of company lead ership. Some chief executives are obsessed with manufacturing in their home country. Swiss Corporation for Microelectronics and Watch making (SMH), the company best known for its line of inexpensive Swatch watches-popCulture phenomenonsales 1 bn watches, high end Omega.SWATCH- triumph of Engg + triumph of

Imagination141

E and E Strat: Mktg & SourcingE and E Strat: Mktg & SourcingThe sourcing decision highlights three roles for marketing in a global competitive strategy 1. configuration of marketing2. the coordination of marketing activities across countries to leverage a company's know-how.3. tapping opportunities in product development and R&D. As for the form of cooperation and control, there are many, ranging from the management contract to wholly owned subsidiaries and global strategic partnerships?

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E and E Strat: Mktg & SourcingE and E Strat: Mktg & Sourcing5. OWNERSHIP/INVESTMENT

The desire for control and ownership of operations outside the home country drives the decision to invest. Foreign direct investment (FDI) figures record investment flows as companies invest in or acquire plant, equipment, or other assets outside the home country.The operational definition of direct investment is ownership of 20 percent or more of the equity of a company. The most extensive form of participation in global markets is 100 percent owner ship, which may be achieved by start-up or acquisition.

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Market Entry and Expansion by Acquisition PRODUCT CATEGORY/INDUSTRY ACQUIRING COMPANY TARGET1. Automotive Daimler Benz Chrysler2. Pharmaceutical Rhone-Poulenc Hoechst3. Tobacco British American Tobacco Zurich4. Oil BP Amoco Arco5. Communications Vodafone Mannesmann

Air Touch

The alternatives discussed earlier licensing, joint ventures, and ownership-are in fact points along a continuum of alternative strategies or tools for global market entry and expansion.

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E and E Strat: Mktg & SourcingE and E Strat: Mktg & Sourcing6. INVESTMENT IN DEVELOPING COUNTRIES Foreign investments may take the form of minority or majority shares in joint ventures, minority or majority equity stakes in another company, or, as in the case of Sandoz and Gerber, outright acquisition.

7. AGENTS / DISTRIBUTOR. Requires little investment, pay-as-you-go, No presence of Co: in mkt,no co: control,

In many companies combine the company-owned marketing subsidiary with agents and distributors. This option gives the company local presence- and control of the marketing effort and, where cost-effective, takes advantage of distributor and agent capabilities. provide a much better communications link with the regional and world headquarters. 155


With a local subsidiary presence, a company can focus on formulating and executing marketing strategies and plans that work

In China, Procter & Gamble (P&G) operates with a combination of joint venture-s and its own company presence, Head & Shoulders, P&G's brand, is China's fastest growing hair care brand. P&G has invested heavily in market research, advertising, and distribution, and in creating its own command presence in the market.

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E and E Strat: Mktg & SourcingE and E Strat: Mktg & SourcingFIVE MARKET EXPANSION STRATEGIES

MARKET Concentration Diversification

Concentration 1. Narrow Focus 2. Country Focus

Few segments in

COUNTRY few countries

3. Country 4. Global Diversification Diversification

Segment diversifMany mkts in few countries.

World Mkt forA product Matshushita

1,2 majority American’s Follow.

157 Reminder OHP Slide 114

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Stage & Company

1 Domestic

2

International

3 Multinati

onal

4 Global 5

Transnational

Strategy Domestic International Multidomestic Global Global

Model NA CoordinatedFederation

DecentralizedFederation

CentralizedHub

IntegratedNetwork

View of World

Home Country

Extension Markets

National Markets

Global Markets or Resources

Global markets and resources

Orientation

Ethnocentric Ethnocentric Polycentric Mixed Geocentric

Stages of Development I

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Home country is superior; sees similarities in foreign countries

Each host country is unique; sees differences in foreign countries

Sees similarities and differences in a world region; is ethnocentric or polycentric in its view of the rest of the world

Worldview; sees similarities and differences in home and host countries.

Ethnocentric Polycentric

Regiocentric Geocentric

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Stage & Company

1

Domestic2

International

3

Multinational

4 Global 5

Transnational

Key Assets

Located in home country

Core centralized others dispersed

Decentralized and self-sufficient

All in home country except marketing or sourcing

Dispersed interdependent and specialized

Role of country units

Single country

Adapting and leveraging competencies

Exploiting local opportunities

Marketing or sourcing

Contributions to company worldwide

Knowledge

Home Country

Created at center and transferred

Retained within operating units

Marketing or sourcing developed jointly and shared

All functions developed jointly and shared

Stages of Development II

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CO-OPERATIVE STRATEGIES AND GLOBAL CO-OPERATIVE STRATEGIES AND GLOBAL STRATEGIC PARTNERSHIPS.STRATEGIC PARTNERSHIPS.

Mkt Alliance Brand Name “WILL” Toyata(car) +Matsushita(PC) +Asahi(Beer)+Kao (Travel & Deo).

THE NATURE OF GLOBAL STRATEGIC PARTNERSHIPS

Exhibit three characteristics1. The participants remain independent

subsequent to the formation of the alliance.

2. The participants share the benefits of the alliance as well as control over the

performance of assigned tasks. 33. The participants make ongoing contributions

in technology, products, and other key strategic areas.

CS & GSPCS & GSPGSP:"A partnership is one of the quickest and cheapest ways to develop a global strategy.ADVANTAGES

high product development costs may force a company to seek partners; this was part of the rationale for Boeing's part nership with a Japanese consortium to develop a new jet aircraft

the technology requirements of many contemporary products mean that an individual com pany may lack the skills, capital, or know-how to go it alone.

partnerships may be the best means of securing access to national and regional markets.

partnerships provide important learning opportunities; in fact, one expert regards GSPs as a "race to learn."

DISADVANTAGESEach partner must be willing to sacrifice some control,there are potential risks associated with strengthening a competitor from another country.

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CS & GSPCS & GSP

GSP is distinguished by the following six attributes: 1. Two or more companies develop a joint long-term strategy aimed at achieving world leadership by pursuing cost leadership, differentiation, or a combination of the two and by creating a variety, needs, or access-based position or a combina tion of the three. 2. The relationship is reciprocal. Each partner possesses specific strengths that it shares with the others; learning must take place on all sides.

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3. The partners' vision and efforts are truly global, extending beyond home countries and home regions to the rest of the world.

4. If the relationship is organized along horizontal

lines, continual transfer of resources laterally between partners is required, with technology sharing and resource pooling representing norms.5. When competing in markets excluded from the partnership, the participants retain their national and ideological identities.

CS & GSPCS & GSP

Iridium program(Anywhere Anytime, Irid+ium+Motorola-alliance based on skills,know-how,& techdoes not offer unique value,overcome by cellular + satellite project.Nike, the largest producer of athletic footwear in the world, does not manufacture a single shoe; Gallo, the largest wine company on earth, does not grow a single grape; and Boeing, the pre-eminent aircraft manufacturer, makes little more than cockpits and wings.

university that contracts with a hos pitality company to provide management services for lodging and meal service at a training centre.

5. If the relationship is along vertical lines, both parties to the relationship must understand their core strengths and be able to defend their competitive position against the possibility of either a forward or backward integration move by their vertical partner, and they must work together to create a unique value for the customers of the downstream partner in the value chain.

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SUCCESS FACTORS 1. Mission. Successful GSPs create win-win situations, in which participants pursue objectives on the basis of mutual need or advantage. 2. Strategy. A company may establish separate GSPs with different partners strategy must be thought out up front to avoid conflicts.

3. Governance. Discussion and consensus must be the norms. Partners must be viewed as equals.

4.Organization. Innovative structures and designs may be needed to offset the complexity of

multi country management.

CS & GSPCS & GSP5.Culture. Personal chemistry is important, as is the successful development of a shared set of values. The failure of a partnership between Britain's General Electric Company and Siemens A. G. was blamed in part on the fact that the former was run by finance-oriented executives and the latter by engineers.

6.Management GSPs invariably involve a different type of decision-making. Potentially divisive issues must be identified in advance and clear, unitary lines of authority established that would result in commitment by all partners.

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CS & GSPCS & GSPALLIANCES BETWEEN MANUFACTURERS AND

MARKETERS

Many companies contract out the manufacturing or service activities in the value chain to companies that can supply product at a lower cost than is possible with manufacturing in-house. Dis=supplier good quality co: suffers.

Report by McKinsy & Co: Alliances between Western & Japanese Firms:

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CS & GSPCS & GSP

CriteriaCriteria WesternWestern JapanJapan

Diff Diff DreamsDreams

Relatively Quick and risk Relatively Quick and risk free returnsfree returns

Emerging from Emerging from the alliance as a the alliance as a leader.leader.

Balance Balance between between PartnersPartners..

Attractive partner in short run already competent Attractive partner in short run already competent and established with a need to master certain and established with a need to master certain skills.skills.

The best long run partner, is less likely to be The best long run partner, is less likely to be competent or even from outside the industrycompetent or even from outside the industry

Diff in Mngt Philosophies , expectations and approaches Diff in Mngt Philosophies , expectations and approaches and HR allocation.and HR allocation.

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CORPORATE STRATEGIES IN JAPAN; KEIRETSU

Japan's keiretsu represent a special category of cooperative strategy. A keiretsu is an inter business alliance or enterprise group that, in the words of one observer, "resembles a fighting clan in which business families join together to vie for market share.

Keiretsu exist in a broad spectrum of markets, including the capital market primary goods markets, and component parts markets. Keiretsu are essentially cartels that have the government's blessing

Global competition in the era of keiretsu means competition exists not only among products but also between different systems of corporate governance and industrial organization.

Mitsui Group and Mitsubishi Group are organized around big trading companies. These two, together with the I Sumitomo, FuYo, Sanwa, and DKB groups, make up the "big six" keiretsu.

accounted for an astonishing 78 percent of the market valuation of shares on the Tokyo Stock Ex change, a third of Japan's business capital, and approximately one quarter of its sales. 167

CS & GSPCS & GSPseveral other keiretsu have formed, bringing new configurations to the basic forms. Vertical supply and distribution keiretsu are alliances

between manufacturers and retailers. Matsushita controls a chain of 25,000 National stores in Japan, through which it sells its Panasonic, Techniques, and Quasar brands. Toshiba and Hitachi, have similar alliances (Sony's chain of stores is much smaller and weaker by

comparison). vertical hierarchical alliances between assembly companies and suppliers and component manufacturersToyota, for example, has a network of about 175 primary and 4,000 secondary suppliers. One supplier is Koit’s Toyota owns about one fifth of Koito's shares and buys about half of its production. The net result of this arrangement is that Toyota produces about 25 percent of the sales value of its cars, compared with 50 percent for GM.

The practices described here lead to the question of whether or not keiretsu violate antitrust laws.

Today, Japan's Fair Trade Com mission appears to favor harmony rather than pursuing anticompetitive behaviourAs result, the U.S. Federal Trade Commission has launched several investigations of price fixing, price discrimination, and exclusive supply arrangements. Hitachi, Canon, and other Japanese companies have also been accused of restricting the availability of high-tech products in the U.S. market. 168

CS & GSPCS & GSP

BEYOND STRATEGIC ALLIANCES

The relationship enterprise is said to be the next stage of evolution of the strategic al liance. Groupings of firms in different industries and countries will be held together by common goals that encourage them to act almost as a single firm.

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COMPETITIVE ANALYSIS AND COMPETITIVE ANALYSIS AND STRATEGYSTRATEGY

The essence of global marketing strategy is in successfully relating the strengths of an organization to its environment..

Threat of new entrants

Bargaining Power of Suppliers

Rivalry among existing competitors

Bargaining power of Buyers

Threat of substitute products or services

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THREATS OF NEW ENTRANTS

THEY bring new capacity, a desire to gain market share and position, and, very often, new approaches to serving customer needs, major commitment of resources. New players push prices downward and squeeze margins, = reduced industry profitability.

Porter describes eight major sources of barriers to entry, the presence or absence of which determines the extent of the threat of new industry entrants. economies of scale, refers to the decline in per unit product costs as the absolute volume of production per period increases.e.g Honda Engine R&D. also to R&D, general admin, mktg.1.

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CA & SCA & S12. product differentiation, is the extent of a product's perceived uniqueness-in other words, whether or not it is a commodity.---high product differentiation “raises the bar”= difficult to enter.

Monsanto’s GD Swearle—subs—achieved differentiation & erected a barrier in the artificial sweet industry by insisting that Nutrosweet logo & brand mark– a red & white swirl-appear on the diet soft drinks & bottles.

3. Capital requirements:- fixed, fin r&d,adv,field,sales & service,customer credit, & wc.

4. one-time switching costs caused by the need to change suppliers and products.Microsoft PC Opt Systems entry barriers.

5. access to distribution channels:- If channels are full,expensive to enter, unavailable,the cost of entry will be high because new entrant must create and establish new channels.

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6. expected competitor response can be a major entry barrier.BrinkmanshipGDSwearle cuts price to deter competitors entering the low calorie artificial sweetner mkt (>Nutrasweet patent expires)

7. Govt Policy is frequently a major entry barrier.e.g.Japan Govt protection post war industrialization

8. Established Firms:- cost adv independent of scale of Ecoaccess to r.m.,favorable locations,& subsides.

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2. THREAT OF SUBSTITUTE PRODUCTS

e.g. Amazona new product on-line bookstore vs Barnes& Noble Traditional Bookstore.(1995-169% growth vs 16%

CA & SCA & S

3. BARGAINING POWER OF SUPPLIERS opec

Several factors influence supplier bargaining power:1. Suppliers will have the advantage if they are large and relatively few in number.

2. When the suppliers' products or services are important inputs to user firms, are highly differentiated, or carry switching costs, the suppliers will have considerable leverage over buyers.

3. Suppliers will also enjoy bargaining power if their business is not threatened by alternative products.

4. The willingness and ability of suppliers to develop their own products and brand names if they are unable to get satisfactory terms from industry buyers will influence their power. 174

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4. BARGAINING POWER OF BUYERS The following are conditions under which buyers can exert power over suppliers:1. When they purchase in such large quantities that supplier firms depend on the buyers' business for survival.2. When the supplier's products are viewed as commodities that is, as standard or undifferentiated-buyers are likely to bargain hard for low prices because many supplier firms can meet their needs.3. When the supplier industry's products or services represent a significant portion of the buying firms' costs. When the buyer is willing to achieve backward vertical integration.

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5.RIVALRY AMONG COMPETITORS

Rivalry forces=Co: to innovate/and or rationalize cost=+ve

Prices Profitability instability= -ve

Actions taken by firm in the industry to improve their position & gain advantage over each other, Price competition,adv battles, product positioning,attempts at differentiation.

Several factors can create intense rivalry:

1. Once an industry becomes mature, firms focus on market share and how it can be gained at the expense of others.

2. Industries characterized by high fixed costs are always under pressure to keep production at full capacity to cover the fixed costs. Once the industry accumulates excess capacity, the drive to fill capacity will push prices-and profitability-down.

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3. A lack of differentiation or an absence of switching costs encourages buyers to treat the products or services as commodities and shop for the best prices. Again, there is downward pressure on prices and profitability.4. Firms with high strategic stakes in achieving success in an industry generally are destabilizing because they may be willing to accept unreasonably low profit margins to establish themselves, hold position, or expand.

CA & SCA & S

GLOBAL COMPETITION AND NATIONAL COMPETITIVE ADVANTAGE

Expansion of Global mktg activity is the growth of competition on a global basis. In some industries, global co: have virtually excluded all other co: from their market.e.g. Detergent Industry= Colgate, Unilever, P & G dominate all over the world.=Q detergent global brand name muscle and mktg skills=global comp adv that overwhelm local competition in mkt after mkt.

Automobile Industry: fierce competition on a global basisUS– reluctant to design and manf high ‘Q’, inexpensive small cars(bigger the car , higher list price small car=small profit= ethnocentrism and mktg myopia.European / Jap Manf=small car ( less space, high taxes on engine displacement & on fuel & greater mkt interest in func design& engg innovations(air bag,radial tires,antilock brakes,fueling )

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CA & SCA & SVolkswagen,Nissan,Toyota= Increased demand in USA. Toyota=replaced mass production (replaced craft)+ lean manf systems== Cost & ‘Q’.

Global competition adv to consumers around the worldIn two e.g. Prices down, ‘Q’ up, auto co: provided with products,performances that customers wanted.Disadv=impact on producers of goods & services.When a company offers consumers in other countries a better product at a lower price, this company takes customers away from domestic suppliers. Unless the domestic supplier can create new values and find new customers, the jobs and livelihoods of the domestic supplier's employees are threatened. The social effects of these influences often prompt political responses that destabilize the business environment.

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According to Michael E. Porter, the presence or absence of particular attributes in individual countries influences industry development. Porter describes these attributes factor conditions, demand conditions, related and supporting industry, and firm structure and rivalry-in terms of a national diamond. The diamond shapes the environment in which firms compete in their global industries.

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Firm Strategy, Structure, and Rivalry

Demand Conditions

Factor conditions

Related and Supporting

Industries

DETERMINANTS OF NATIONAL ADV

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FACTOR CONDITIONS:-Human Res:- Quantity,Skills, Wage level,Work ethic.Physical Res:- Qnty,Qlty,,cost of land, water, minerals other natural resKnowledge Res:- Scientific, technical & inter-related knowlCapital Res:-Infrastructure Res:-banking system, healthcare,transport, communication.BASIC FACTORS:-nat res & lab=do not lead to sustainable international competitive advantage.ADVANCED:- highly educated personnel,+modern data comm system= lead to sustainable competitive advantage.GENERAL:- highway systems=precedents of comp adv.SPECIALISED:- focused educational system=sustainable comp adv, reqn is development e.g. Japan Robotronics_> auto Indus requires Robots Tech courses in Univ, scarcity of r.m= other res = tiles ceramics

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DEMAND CONDITIONS The nature of home-market demand conditions for the firm's or industry's products and services is important because it determines the rate and nature of improvement and innovation by the firms in the nation. These are the factors that either train firms for world-class competition or fail to adequately prepare them to compete in the global marketplace. Three characteristics of home demand are particularly important to the creation of competitive advantage: (1) the composition of home demand, (2) the size and pattern of growth of home demand, and (3) the means by which a nation’s home demand pulls the nation's products and services into foreign markets.

CA & SCA & S

The composition of home demand determines how firms perceive, interpret, and respond to buyer needs. Competitive advantage can be achieved when the home demand sets the quality standard and gives local firms a better picture of buyer needs, at an earlier time, than is available to foreign rivals .

If the growth pattern is good, then foreign demand can be good, hence investment in R & D,economics of scale is possible+adopt new tech faster+ built larger efficient facilities e.g. Japan.The means by which a nation's products and services are pushed or pulled into foreign countries is the third aspect of demand conditions. The issue here is whether a nation's people and businesses go abroad and then demand the nation's products and services in those second countries.

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For example, when the U.S. auto companies set up operations in foreign countries, the U.S. auto parts industry followed. The same is true for the Japanese auto industry. When the Japanese auto companies set up operations in the United States, Japanese parts suppliers followed their customers. Similarly, when overseas demand for the services of U.S. engineering firms skyrocketed after World War II, those firms in turn established demand for U.S. heavy construction equipment. This provided an impetus for Caterpillar to establish foreign operations.

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CA & SCA & SRELATED AND SUPPORTING INDUSTRIESA nation has an advantage when it is home to internationally competitive industries in fields that are related to, or in direct support of, other industries. Internationally competitive supplier industries provide inputs to downstream industries that are likely to be internationally competitive in terms of technological innovation, price, and quality.CLUSTERS=geographic concentrations of interconnected companies and institutions in a particular field, which constitute a critical mass, are internationally competitive and related industries in a nation that coordinate and share value chain activitiesEXAMPLE:-Computer hardware + software developers US Comp sales abroad have created demand from Microsoft & other US co: Dev of Swiss Pharma Industry =Swiss large Dye Industry ( discovery of therapeutic effects of dye );leather fashion in Italy, Wood products in Portugal & Flower growing in Netherlands.Nestle moved bottled water plant to France,Rowntree Mackintosh Confectionaery div to York, UK.

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CA & SCA & SFIRM STRATEGY, STRUCTURE, AND RIVALRY

Differences in management styles, organizational skills, and strategic perspectives create advantages and disadvantages for firms competing in different types of industries, as do differences in the intensity of domestic rivalry. In Germany, for example, company structure and management style tend to be hierarchical. Managers tend to come from technical backgrounds and to be most successful when dealing with industries that demand highly disciplined structures, such as chemicals and precision machinery. Italian firms, however, tend to look like, and be run like, small family businesses that stress customized rather than standardized products, niche markets, and substantial flexibility in meeting market demands.

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CA & SCA & SCapital markets and attitudes toward investments are important components of national environments.

For example, the majority of shares of U.S. publicly held companies are owned by institutional investors such as mutual funds and pension plans. These investors will buy and sell shares to reduce risk and increase return rather than get involved in an individual company's operations. These very mobile investors drive managers to operate with a short-term focus on quarterly and annual results.

For example, in Japan, banks are allowed to take equity stakes in the companies to which they loan money and provide other profitable banking services. These banks take a longer-term view than stock markets and are less concerned about short-term results.Domestic Rivalry good for improvement and innovation, develops new products,improve existing ones, brings down cost/price,develop new tech & improve “Q” & service.

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OTHER FORCES ACTING ON THE DIAMOND

CHANCE:-Chance events are occurrences that are beyond the control of firms, industries, and usually governments. Included in this category are such things as wars and their aftermath, major technological breakthroughs, sudden dramatic shifts in factor or input cost (e.g the oil crises), dramatic swings in exchange rates,and so on.

Chance events are important because they create major discontinuities in technologies that allow nations and firms that were not competitive to leapfrog over old competitors and become competitive--even leaders-in the changed industry.

For example, the development of microelectronics allowed many Japanese firms to overtake American and German firms in industries that had been based on electromechanical technologies-areas traditionally dominated by the Americans and Germans.

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The nation with the most favorable diamond, however, will be the one most likely to take advantage of these events and con vert them into competitive advantage.

For example, Canadian researchers were the first to isolate insulin, but they could not convert this breakthrough into an internationally competitive product. Firms in the United States and Denmark were able to do that because of their respective national diamonds.

GOVERNMENT:-Government influences determinants by virtue of its role as a buyer of products and services and by its role as a maker of policies on labor, education, capital formation, natural resources, and product standards. It also influences determinants by its role as a regulator of commerce, for example, by telling banks and telephone companies what they can and cannot do.

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COMPETITIVE ADVANTAGE AND STRATEGIC MODELS

Two different models of competitive advantage have received considerable attention: The first offers generic strategies, which are four alternative positions that organizations can seek in order to offer superior value and achieve competitive advantage. The second model, the generic strategies alone do not explain the astonishing success of many Japanese companies in recent years. A more recent model, based on the concept of strategic intent, proposes four different sources of competitive advantage.

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Porter developed a frame work of so-called generic business strategies based on two sources of competitive ad vantage: low cost and differentiation.

COST COST LEADERSHIPLEADERSHIP

DIFFERENTIADIFFERENTIATIONTION

COST FOCUSCOST FOCUS FOCUSED FOCUSED DIFFERENTIADIFFERENTIATIONTION

CO

MP

ETIT

IVE S

CO

PE

Broad Target

Narrow Target

Lower Cost Differentiation

COMPETITIVE ADVANTAGE.

GENERIC COMPETITIVE STRATEGIES.

Learned curve experience

Japan 35mm Cameras,Consumer electronics,entertainment equip, motorcycles automobiles.

Unique Value,may tag in home appl

Nike’s Athletic Shoes, H-D.

More Cust. Value

Germany—Mittlestand

STRATEGIC POSITIONING AND INTENTSTRATEGIC POSITIONING AND INTENT

Strategic positions that provide competitive advantage are based on the activities that a firm chooses to perform and on where it chooses to perform them.

Porter has identified three classifications for strategic positions.

1.VARIETY-BASED POSITIONING. 2. NEEDS-BASED POSITIONING

3. ACCESS-BASED POSITIONING.

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S. P & IS. P & I1.VARIETY-BASED POSITIONING. (COST LDRSHP)

is based on a firm's decision to carry out a limited number of activities related to delivering a limited product or service.

For e.g.Southwest Airlines--pt 2 pt service, no luggage transfer service,, no seat reservation, no meals etc.

GIVI Italian-luggage for motorcycles only,premium price, unique design & Q”.

2. NEEDS-BASED POSITIONING ( DIFFERENTIATION)Needs-based positioning occurs when a company attempts to deliver value to a specific customer segment by carrying out activities to satisfy a comparatively broad set of needs.For e.g. IKEA Furniture for young at heart,budget conscious, apartment or home.Pordue Pharma=need to alleviate pain, narcotic analgesic for severe pain,best trained field salesman,tested on formulatory in Hospitals.

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3.ACCESS-BASED POSITIONING. (SEGMENTATION)The ability of a firm to uniquely or preferentially reach a specific market is an access based position.

For e.g. Korn Perry International=Intl Mngt Recruitment Firm- establishes relationship with customer/executives & track them throughout their careers.They know their location, help clients get to them.

Firms must develop ability to carry out activities that deal with barriers to access(often created by Govt Policies).

For e.g. Renault tried to enter US mkt but failed & retreated to Europe (regional player in a global industry). FedEx regrouped restrategized & entered Europe successfully.

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WHICH POSITION TO TAKE? All real strategies are a combination of all three positions: Every winning strategy is based on a combination of doing the right thing (activity based), meeting a need (needs based), and on access.

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COMPETITIVE INNOVATION AND STRATEGIC INTENT

An alternate framework focuses on competitiveness as a function of the pace at which a company implants new advantages deep within its organization. This framework identifies strategic intent, growing out of ambi tion and obsession with winning, the means for achieving competitive advantage.

S. P & IS. P & I

This approach is founded on the principles of W. E. Deming, who stressed that a company must commit itself to continuing improvement in order to be a winner in a competitive struggle. The significance of this framework becomes evident when com paring Caterpillar and Komatsu.

CATERPILLARa classic example of differentiation

ecame the largest manufacturer of earth-moving equipment in the world

fanatic about quality and service.

KOMATSU

Komatsu was the world's number-two construction equipment company and had been competing with Caterpillar in the Japanese market for years.

a lower level of quality

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S. P & IS. P & Iachieve a 35 percent share of the worldwide market for earth-moving equipment, more than half of which represents sales to developing countries

The differentiation advantage was achieved with product durability, global spare parts service (including guaranteed parts delivery anywhere in the world within 48 hours), and a strong network of loyal dealers.

adopted the slogan Maru-c, meaning, "encircle Caterpillar."

Emphasizing quality and taking advantage of low labour costs and the strong dollar, Komatsu surpassed Caterpillar in earth-moving equipment sales in Japan and made serious inroads in the United States and other markets.

faced a very challenging set of environmental forces

Many of Cater pillar's plants were closed by a lengthy strike in the early 1980s; a worldwide recession at the same time caused a downturn in the construction industry.

company continued to develop new sources of competitive advantage even after it achieved world-class quality. For example, new-product development cycles were shortened, and manufacturing was rationalized.

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Hamel and Prahalad identified FOUR successful approaches utilized by Japanese competitors:

1. Building layers of advantage, 2. Searching for loose bricks, 3. Changing the rules of engagement, and 4. Collaborating.

1. Building layers of advantage. Is wide portfolio of adv e.g. Komatsu. TV industry in

Japan 1970 B&W World largest producer + started color sets=why=lower labor costs ( not permanent) so added “Q” & Reliability. Build larger plants,no brand name (sold other products like Matsushita sold RCA products(USA) ‘A product sold is a product sold no matter whose label it carried’

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Next layer of AdvantageMktg Channel + Branding (late 1970, then New Products like VCR’s & Photocopying M/c’s.then Regional Manf, differentiation & better adopted to customer needs.

MOVING ALONG THE VALUE CHAIN TO STRENGHTEN COMPETITIVE ADVANTAGE.

[Upstream, Downstream, back to R & D.]

2. Searching for loose bricks, In the defense wall of competitors whose attention is

narrowly focused or a geographic area.For e.g. Caterpillar’s attention was focused else where when Kamatsu

made its 1st entry into Eastern European Mkt.For e.g. H-D Focused on large motorcycles. Honda entered USA with

50cc engines(1st gained experience in large displacement engines then designed & tech), H-D offguard, 1983 Honda 50% share with 700cc or >,then restrictions by US Govt on Imports, Honda used its expertise on large engines & made “Honda Civic”. Today it has, lawn-movers,outboard marine boards,welders, generators.

H-D Improved Product “Q” & slightly increased Mkt Share.

S. P & IS. P & I3. Changing the rules of engagement,

i.e refuse to play by the rules set by industry leadersFor e.g. IBM & Kodak imitated Mktg strategy set by Xerox,

Canon set new rules.

XEROXXEROX CANONCANON

Wide range of copiersWide range of copiers Std M/cs & Components =low Std M/cs & Components =low cost.cost.

Hugh direct sales forceHugh direct sales force Dealer networkDealer network also deals also deals with serviceability+ reliabilitywith serviceability+ reliability

LeaseLease SellSell

Heads of Corporate, duplicating Heads of Corporate, duplicating opts.opts.

Secretaries, Dept MngrsSecretaries, Dept Mngrs

Full color copiers + connectivity Full color copiers + connectivity with video camcorder& with video camcorder& computers,64 % share,+US Patcomputers,64 % share,+US Pat

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4. Collaborating.:- i.e. know how developed by other co: like licensing, JV,

partnership

HYPERCOMPETITION Professor Richard D’Aveni suggests that the Porter strategy frameworks fail to adequately address the dynamics of competition in the 21st century.

D’Aveni notes that, in today’s business environment, market stability is undermined by short product life cycles, short product design cycles, new technologies, and globalisation. The result is an escalation and acceleration of competitive forces. In light of these changes.

D’Aveni believes the goal of strategy has shifted from sustaining to disrupting advantages.

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The limitation of the Porter models, D’Aveni argues, is that they provide a snapshot of competition at a given point in time. In other

words, they are static models. D’Aveni aims to build on the work of Hamel and Prahalad to shape “ a truly dynamic approach to the creation and destruction of traditional advantages.”

D’Aveni uses the term hypercompetition to describe a dynamic, competitive world in which no action or advantage can be sustained for long. According to D’Aveni’s model, competition unfolds in a series of dynamic strategic interactions in four arenas: cost versus quality, timing and know-how, entry barriers, and deep pockets.

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Each of these arenas is “continuously destroyed and recreated by the dynamic manoeuvring of hypercompetitive firms D’Aveni is in agreement with Peter Drucker, who has long counselled that the role of marketing is innovation and the creation of new markets. Innovation begins with abandonment of the old and obsolete.

PRODUCT DECISIONSPRODUCT DECISIONS

DEFINITIONS:-

A product, the, can be defined as a collection of physical, psychological, service, and symbolic attributes that collectively yield satisfaction. or benefits, to a buyer or user.

consumer and industrial goods.

can be further classified on the basis of other criteria, such as how they are purchased (convenience, preference, shopping, and specialty goods) and their life span (durable, non durable, and disposable). These and other classification frameworks developed for domestic marketing are fully applicable to global marketing.

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PRODUCTS: LOCAL, NATIONAL, INTERNATIONAL, AND GLOBAL

Many companies find that, as a result of expanding existing businesses or acquiring a new business, they have products for sale in a single national market.

The four product categories in the local-to-global continuum:-

1. LOCAL PRODUCTS

A local product is available in a portion of a national marketFor e.g In US local product is synonymous with local product. Cape Cod Potato Chips (local mkt in New England purchased by Frito-Lay and distrubution was expanded to other regions of USA.

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NATIONAL PRODUCTS

A national product is one that, in the context of a particular company, is offered in a single national market.

For example, Coca-Cola developed a no carbonated, ginseng-flavored beverage for sale only in Japan and a yellow, carbonated flavored drink called Pasturing to compete with Peru’s favorite soft drink, Inca Cola. After years of failing to dislodge Inca Cola, Coke followed the old strategic maxim. “ If you can’t beat them, buy them,” and acquired Inca Cola.

Similarly, Sony and other Japanese consumer electronics companies produce a variety of products that are not sold outside of Japan. The reason: Japanese consumers have a seemingly insatiable appetite for electronic gadgets.

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3. INTERNATIONAL PRODUCTS International products are offered in multinational, regional markets.

The classic inter national product is the Euro product, offered throughout Europe but not in the rest of the world. Renault was for many years a Euro product When Renault entered the Brazilian market, it became a multiregional company. Most recently, Renault invested, in Nissan and has taken control of the company. The combination of Renault in Europe: and Latin America, and Nissan in Asia, the Americas, Europe, the Middle East and! Africa, has catapulted Renault from a multiregional to a global position. Renault is an example of how a company can move overnight through investment or acquisition from an international to a global position.

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4. GLOBAL PRODUCTS AND GLOBAL BRANDS Global products are offered in global markets. A truly global product is offered in the Triad, in every world region, and in counties at every stage of development.

A global brand like a National or International Brand is a symbol about which customers have belief or perceptions.

Note that a product is not a brand. For example, portable personal sound systems or personal stereos are a category of global product; Sony is a global brand. Although Sony, as noted previously, markets a number of local products, the company also has a stellar track record both as a global brand and "a manufacturer of global products.

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A global brand has a similar image, similar positioning, and is guided by the same strategic principles. However, the marketing mix for a global brand may vary from country to country. That means that the product, price, promotion, and place (channels of distribution) may vary from coun try to country .

E.g. Malboro, Coke, Sony, Mercedes(Luxury car—USA, Taxi Mkt in Europe), Avon-1 (Premium Price & PKg in Japan, popularly priced rest of world)- Mkt mix varies from country to country.

Global Product does not carry the same name and image from one country to another like global brand are guided by same strategic principles, is similarly positioned and may have a mkt mix that varies from one country to another country.

G.PRODUCT G.BRAND HOW?= STANDERISATIONSTANDERISATION

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For e.g. shift from Standard Oils many different local brands to EXXON and Nissan’s decision to drop the Datsun marque in USA and adopt various model names from Nissan’s world wide product line.

Coke– a g.product and global brand. Positioning and strategy are the same all the countries, it projects a global image of Fun, Good Times & Enjoyment “ the real thing” unique product differentiation. Positioning = low/no tech product, flavored,carbonated, sweetened water in plastic bottles, glass or metallic container—product is within arm’s reach. ( more sweetened in Middle East)

P.DP.DPRODUCT POSITIONING (“ MENTAL SPACE”

positioning refers to the act of locating a brand in customers' minds over and against other products in terms of product attributes and benefits that the brand does and does not offer

Several general strategies have been suggested for positioning products:

1. ATTRIBUTE OR BENEFIT.2. QUALITY/PRICE3. USE/USER4. HIGH-TECH POSITIONING . 5. HIGH-TOUCH POSITIONING

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Attribute / Benefit:- Volvo car—Safety,VISA card worldwide merchandise acceptance

‘Q” / Price:- American Express Card– Upscale Card with higher Annual fee VS Discover Card with no annual fee.+ cash rebate

Use/User:- Positioning can also be achieved by describing how a product is used or associating a product with a user or class of users the same way in every market. For example, Benetton user s the same positioning for it’s clothing when it targets the global youth market. Marlboro’s extraordinary success as a global brand is due in part to the product’s association with cowboys—the archetypal symbol of rugged independence, freedom, space, and Americana—and transformation advertising that targets urban smokers.

4. High-tech positioning Personal computers, video and stereo equipment, and automobiles are product categories for which high-tech positioning has proven effective.

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Such products are frequently purchased on the basis of physical product features, although image may also be important. Buyers typically already possess--- or wish to acquire--- considerable technical information.

Computers, chemicals, tires, and financial services are technical products in the sense that buyers have specialized needs, require a great deal of product information, and share a common language Special-interest products also are characterized by a shared experience and high involvement among users, although they are less technical and mote leisure or recreation oriented. Again, the common language and symbols associated with such products can transcend language and cultural barriers. Fuji bicycles, Adidas and Nike sports equip ment, Canon cameras, and Sega video game players are examples of successful global special-interest products.

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Marketing of high-touch products requires less emphasis on specialized information and more emphasis on image.--involving for consumers share a common language and set of symbols relating to themes of wealth, materialism, and romance. There are three categories of high-touch products: products that solve a common problem, 'global village products, and products with a universal theme.--provide benefits linked to "life's little moments." Fragrances and fashions have traveled as a result of growing worldwide interest in high-quality, highly visible, high-priced products that often 'enhance social status.

5. HIGH-TOUCH POSITIONING

Products may have a global appeal by virtue of their country of origin. The Americanness of Levi's, Marlboro, McDonald's, and Harley-Davidson enhances their appeal to cosmopolitans around the world and offers opportunities for benefit positioning. In consumer electronics, Sony is a name synonymous with Japanese quality; in automobiles, Mercedes is the embodiment of legendary German engineering.

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PRODUCT DESIGN CONSIDERATIONS

Product design is a key factor in determining success in global marketing. Should a company adapt product design for various national markets or offer a single design to the global market?

Global marketers need to consider four factors:

1. PREFERENCES• 2. COST• 3. LAWS AND REGULATION• 4. COMPATIBILITY• 5. LABELING AND INSTRUCTIONS

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Preference :- Color & Taste. E.g. Italy’s Olivetti Corp gained considerable distinction in Europe for its award winning winning modern consumer typewriter designs; Olivetti typewriters had been displayed at the Museum of Modern Art in New York City. Although critically acclaimed, Olivetti's designs did not enjoy commercial success in the United States. The U.S. consumer wanted a heavy, bulky typewriter that was ugly by modern European design standards. American consumers considered bulk and weight prima facie evidence of quality, and Olivetti was, therefore, forced to adapt its award-winning design in the United States. Sometimes, a product design that is successful in one world region does meet with success in the rest of the world. BMW and Mercedes dominate the luxury car market in Europe and are strong competitors in the rest of the world, with exactly the same design. In effect, these companies have a world design. The other global luxury car manufacturers are Japanese, and they have expressed their flattery and appreciation for the appeal of the BMW and Mercedes look by styling cars that are influenced by the BMW and Mercedes line and design philosophy. If imitation is the most sincere form of flattery, BMW and Mercedes have been honored by their competition.

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4. COMPATIBILITY :- product compatibility with the environment in which it is used E.g Users Manual in various languages,Electtric Systems 50 –230 V, 50~60 cycles,US---NSTC, French---SECAM, Germany----PAL.

5. LABELING AND INSTRUCTIONS :- Precise labeling required for Drugs & Poisons, Valuable consumer info, products optrs & Labeling instructions,Multiple languages (helps inventory control)

GEOGRAPHIC EXPANSION – STRATEGIC ALTERNATIVES Companies can grow in three different waysThe traditional methods of market expansion-further penetration of existing markets to increase market share and extension of the product line into new-product market areas in a single national market are both available in domestic operations. In addition, a company can expand by extending its existing operations into new countries and areas of the world. The latter method, geographic expansion, is one of the major opportunities of global marketing.

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Strategy 2 :-Product Strategy 2 :-Product extension Comm extension Comm AdaptationAdaptatione.g. Bicycles & e.g. Bicycles & MotorcyclesMotorcycles

Strategy 4 Dual Strategy 4 Dual AdaptationAdaptation

e.g. Greeting Cards.e.g. Greeting Cards.

Strategy 1 Dual Strategy 1 Dual extensionextension

e.g. Appliances, e.g. Appliances, Software.Software.

Strategy 3 :-Product Strategy 3 :-Product Adaptation Comm Adaptation Comm ExtensionExtension

e.g.Electrical e.g.Electrical Products.Products.

Same Different

PRODUCT

Different

Same

GLOBAL PRODUCT PLANNING STRATEGY ALTERNATIVESC

OM

MU

NIC

ATIO

N

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STRATEGY 1. PRODUCT/COMMUNICATION EXTENSION (DUAL EXTENSION) Companies pursuing this strategy sell exactly the same product, with the same advertising and promotional appeals as used in the home country, in some or all world-market countries or segments. The critical difference is one of execution and mind-setcost savings associated with this approach -- are manufacturing economies of scale and elimination of duplicate product R&D costs.

STRATEGY 2. .

Bi cycles and motor scooters are examples of products that have been marketed with this approach. They satisfy recreational needs in the United States but serve as basic or urban transportation in many other countries. Similarly, outboard marine motors are usually sold to a recreation market in the high-income countries, whereas the same motors in lower-income countries are mainly sold to fishing and transportation fleets.

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its relative y low cost of implementation. Because the product in this strategy is unchanged" R&D, tooling, manufacturing setup, and inventory costs associated with additions to the product line are avoided. The only costs of this approach are hi identifying different product functions and revising marketing communications (including advertising, sales promotion, and point of-sale material) around the newly identified function. STRATEGY 3: PRODUCT ADAPTATION/COMMUNICATION EXTN

Exxon adheres to this third strategy: It adapts its gasoline formulations to meet the weather conditions prevailing in different markets while extending the basic communications appeal, "Put a tiger in your tank," without change. Soap and detergent manufacturers have adjusted their product formulations to meet local water and washing equipment conditions with no change in their basic communications approach. Household appliances have been scaled to sizes appropriate to different use environments, and clothing has been adapted to meet fashion criteria. Also, food products, by virtue of their potentially high degree of environmental sensitivity, are often adapted.

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STRATEGY 4: DUAL ADAPTATIONSometimes, when comparing a new geographic market to the home market, marketers discover that environmental conditions or consumer preferences differ; the same may be true of the function a product serves or consumer receptivity to advertising appeals

Unilever’s experience with fabric softener in Europe exemplifies the classic multinational road to adaptation. For years, the product was sold in 10 countries under seven different brand names, with different bottles and marketing strategies. Unilever's de centralized structure meant that product and marketing decisions were left to country managers. They chose names that had local-language appeal and selected 'package designs to fit local tastes. Today, rival Procter & Gamble is introducing competitive prod ucts with a pan-European strategy of standardized product$ with single names, suggesting that the European market is more similar than Unilever assumed. In response, Unilever’s European brand managers are attempting to move gradually toward standardization

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Sometimes, a company will draw on all four of these strategies simultaneously when marketing a given product in different parts of the world. For example, Heinz utilizes a mix of strategies in its ketchup marketing. Whereas a dual extension strategy works in England, spicier, hotter formulations are also popular in Central Europe and Sweden. Recent ads in France featured a cowboy lassoing a bottle of ketchup and, thus, reminded consumers of 'the product's American heritage. Swedish ads conveyed a more cosmopolitan message; by promoting Heinz as "the taste of the big world" and featuring well known landmarks such as the Eiffel Tower, the ads disguised the product's origin.

INTERNATIONAL INTERNATIONAL PRODUCT STRATEGIESPRODUCT STRATEGIES

The international product life cycle (IPLC) theory, developed and verified by economists to explain trade in a context of comparative advantage, describes the diffusion process of an innovation across national boundaries. The life cycle begins when a developed country, having a new product to satisfy consumer needs, wants to exploit its technological breakthrough by selling abroad. Other advanced nations soon start up their own production facilities, and before long LDCs do the same Efficiency/comparative advantage shifts from developed countries to developing nations. Finally, advanced nations, no longer cost-effective, import products from their former customers. The moral of this process could be that an advanced nation becomes a victim of its own creation.

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Stage Import/Export

Target Market Competitors Production Costs

(0) Local Innovation

None USA Few: Local Firms

Initially High

(1) Overseas Innovation

Increasing Export

USA & advanced nations

Few: Local firms

Decline owing to economies of scale stable

(2) Maturity Stable Export

Advanced nations & LDCs

Advanced Nations

Stable

(3) Worldwide Imitation

Declining Export

LDCs Advanced Nations

Increase owing to lower economies of scale

(4) Reversal

Increasing Import

USA Advanced nations & LDCs

Increase owing to comparative disadvantage

STAGES AND CHARACTERISTICS ( for the initiating country)

I.P.S.I.P.S.

Importing

Time

USA (Initiating Country)

Other Advanced CountriesExporting

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VALIDITY OF IPLC Curves:-Several products have conformed to the characteristics described by the IPLC .Semiconductors started in USA diffused to UK, France, Germany, & Japan. H.K. & Taiwan have set up Prodn facilities.Typewriters, adding m/c’s & cash registers– all manual now imported by USA but sophisticated electronic m/c’s are exported.Synthetic Fibers,petrochemicals,leather goods, rubber products & paper completed IPLC Curve.Electronic & Communication sector in USA turned from +ve trade balance to –ve trade balance.IPLC applicable for products related thru an emerging technology= provide more functional utility (to satisfy basic needs) rather than aesthetic value.Washers rather than dyers will fit this theory, but Dishwashers will not fit, because of cheap and plenty labor and the diffusion of this kind of innovation as described in IPLC is not likely to occur. 222

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MARKETING STRATEGIES

Product Policy: Pricing Policy Promotion Policy Place (Distribution) Policy

Product Policy:IPLC emphasis on Cost advantage for e.g it is difficult for USA to match labor costs say with Japan 8 cents/min, S.Korea 2c/min, 0.5c/min in China. SOLn= Still keep innovating + product cost competitive.

I.P.S.I.P.S. HOW?

{1} Automation + Robotronics e.g IBM, Japan VCR to beat S.Korea competition I.e. eliminate non-value added work critical for low end price products. - std product & std package with options(increases inefficiency and complexity) included.e.g. Chrysler Neon(small car) = no power windows, 4speed 3speed saved 300mn.

{2}Use local manf in other countries as an entry strat.ADV=Lower tranp costs, avoid entry barriers, slow down potential local competition, springboard for further expansion in the region

{3}sourcing to bring labor costs down e.g Ford Tracer built in Taiwan for Canadian Mkt,in Mexico for USA mkt,Stereo from Japan,

Taiwan & S.Korea.

{4}Outsourcing = practice of buying parts or whole products from other manf while allowing buyer to maintain its own brand name.g Ford Festiva from Kao Motors, Mitshubshi Precis by Hyundai,Pontiac Lemans by Suzuki.

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{5} Outsourcing Modification:- procuring various components or having them produced under contract in diff countries.= adv of prodn before assembling for worldwide distribution. E.g. IBM PC System=components made in low cost countries like monochrome monitors in S.Korea,floppy disc drive in Singapore, graphic printers, keyboard, power supply and semiconductors in Japan, semiconductor case & final assembly in USA.

Once in Maturity Stage, the innovators comparative advantage is gone, and the firm should switch from low/simple versions to produce sophisticated models or new techno to remove itself from cut throat competition.Japan VCR (99% sold in USA and 75% worldwide cannot compete with cheap labor S.Korean products, made 8mm camcorders to retain mkt share.

Worst scenarioanother system supplants the innovators product altogether to become industry standard. Sony's strategic blunder in guarding its Betamax video system is a good case to study. Matshushita & Victor co took the world leadership position from Sony by licensing VHS to competitors. Philips & Grundig made Video 2000– did not introduce until VHS became Standard, Vidio 2000 failed.Philips own N.America subsidy failed to buy its parents system. Ultimately Sony made VHS.

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Recent case DVD (store audio+comp data & software). Toshiba 5 mn bytes /side, Sony & Philips 3.7 giga bytes/each side, Toshiba contacted with moviemakers + open licensing Matsushita, Thompson & Pioneer allied with Toshiba.Sony also fell in line almost similar to Toshiba.

PRICING POLICY:- Initially Premium prize to charge for innovation. In the 2/3 stage of IPLCbring down price to discourage new comers to maintain mkt share. E.g. Japan brought down the prices of VCR’s by 25% to thrawt S.Korean Brands in USA.IBM computer DID NOT DO suffered Pvt brands + it got copied by Asians. Commodity price dominate the Mkt.Last stage IPLC = top ‘Q’ or sophisticated product & high standards of excellence.

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PROMOTION POLICY:-

Promotion and pricing in the IPLC are highly related. The innovating firm's initial competitive edge is its unique product, which allows it to command a premium price. To maintain this price in the face of subsequent challenges from imitators, uniqueness can only be retained in the form of superior quality, style, or services.

The innovating marketer must plan for a non price promotional policy at the out set of production diffusion.For e.g. Timken is able to compete effectively against the Japanese by offering more services and meeting customers' needs at all times. For instance, it offers technological support by sending engineers to help customers design bearings in gearboxes.

Implication = New product promotion as Premium Product + high “Q” Image starting with high ’Q’ reputation latter on tone down to simpler version still maintaining in high priced most profitable segment NEVER ALLOW TO BECOME A COMMODITY PRODUCT, otherwise duplication will result.

I.P.SI.P.Se.g APRICA created status symbol for stroller ( using top artists + designer for mothers who are concerned with style rather price) Stroller promo = “anatomically correct” for babies to avoid hip dislocation, snob appeal + comfort to distinguish from Taiwanese & Korean imitators I.e. PRODUCT DIFFERENTIATION.

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PLACE ( DISTRIBUTION) POLICY :-A strong dealer network can provide the U.S. innovating firm with a good defensive strategy. Initial Monopoly situation able to select good/qualified/dealers/agents and then expand when production is diffused.For e.g Caterpillar network of loyal dealers causd difficulty to Kamatsu to line their own dealers. GM’s old policy to limiting its dealing to carry GM brands inadvertently encouraged those dealers to start carrying imports.Watch for new Channel that may threaten old channel “When it is too late or futile to keep the enemy out, the enemy should be invited” so US firm manf’s+ agents/distributors can survive by becoming agents for their former competitors.

I.P.SI.P.SThe tactic involves providing a distribution network and marketing expertise at a profit to competitors who in all likelihood would welcome an easier entry into the marketplace. American automakers and their deal ers seem to have accepted. The reality of the marketplace and have become partners with their Japanese and foreign competitors, as evidenced by General Motors' ventures with Toyota, Suzuki, and Isuzu (to produce Nova, Sprint, and Spectrum, respectively), American Motors' with France's Renault (before the subsequent sale to Chrysler), Chrysler's with Mitsubishi and Maserati, and Ford's with Mazda and the Korean Kia Motors Once a product is in the final stage of its life cycle, the innovating firm should strive to become a specialist, not a generalist, HOW? by concentrating its efforts in carefully selected market segments, where it can distinguish itself from foreign competitors add features and / or services. THERE ARE WARNING SIGNALS 1. It may become STD product manf in many LDC’c 2. Declining exports due to loss of narrowing of Tech gap.=DO MKT SEGMENTATION & PRODUCT DIFFERENTIATION IS RECOMMENDED. E.g Consumer electronics Maraantz + Scott (both US->good sound + top’Q’) got gobbled up by Japs & Europeans still US bominate high end sterio system( precision req+ short prodn runs + hand made)

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PRODUCT, STANDARDIZATION VS ADAPTATION

Product standardization means that a product originally designed for a local market is exported to other countries with virtually no change, except perhaps for the translation of words and other cosmetic changes. Revlon, e.g., used to ship successful products abroad without changes in product formulation, packaging (without any translation, in some cases), and advertising

ARGUMENTS FOR STANDARDIZATION 1. The strength of standardization in the production and distribution of products and ser vices is in its simplicity and cost, easy process for executives to understand and implement, and it also is cost-effective. (economies of scale

can operate to reduce production costs) Cost reductions do not automatically lead to profit improvements, but by trying to control production costs through standardization, the product involved may become unsuitable for a1temtive market.

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2. Appropriate standardization is good approach e.gMcDonald’s=std“Q”

3. Some products cannot be modified. E.g. Music, Art, Books,Motion pictures( some films do well in US fail in Japan also in France (Jerry Lewis films failed US but hit in France SO IN SUCH CASES THEY RISE AND FALL ACCORDING TO THEIR MERIT.

4. High-tech products= users & manf use industrial specs leading to Std Jap P.T asked to use Value added Network VAN in X.75 band( used in Europe and approved by Intl Commn Union ) but Pvt parties in US do not comply but lamely excuse Japan of utilizing the std to hurt the sales of their products.

5. Association with Cultural Universals Consumers from different countries share similar need characteristics want identical products. E.g. Watch’s tell time=std, Diamond, Levi Strauss's attempt to penetrate the European market with lighter-weight jeans failed because European consumers wanted the standard heavy-duty American type after all.

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6. One study confirms that the degree of strategic standardization is low. Three factors corporate orientation, nature of ownership, and consumer characteristics and behavior-underlie the degree of strategic standardization.

7. another study finds that the majority (81 percent) of the U.S. respondents exported their products without any modifications because it focused on industrial products, which are less likely to be affected by users' tastes.

8. A study of U.S. multinationals operating in Latin America reveals that their standardization and adaptation practices differed from those of U.S. multinationals operating in Europe. In terms of the type of product, consumer non-durable goods demonstrated the greatest degree of adaptation to local conditions. Understandably, such products are most subject to differences in consumer preference. Consumer durables and industrial goods, on the other hand, were situated at the less-adapted end of the spectrum .

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ARGUMENTS FOR ADAPTATIONBest explained by means of example known as “Big car” & “Left Hand Drive” Syndromes. Base being that US firms are reluctant or unwilling to modify their products to suit customer needs.According to the big-car syndrome, U.S. marketers assume that products de signed for Americans are superior and will be preferred by foreign consumers. U.S. automakers believe (or used to believe) that the American desire for big cars means that only big cars should be exported to overseas markets. The left-hand drive syndrome is a corollary to the big-car syndrome.

US Strg Wheel on LHS of Automobile & drive on RHS of Road.Asia/Europe Strg Wheel on RHS and drive on LHS of Road.US will not modify because they feel that small volume of exports does not justify change sales ,they do not follow the maxim that “be a Roman while in Rome” Japs follow it and adapted to US customs.However there are exceptions because they (US) understand the maxim DuPont Customizedmktg & manf to Jap MKts, Spirite clear Soft drink Lemon flavour instead of lime(US).

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Firms must choose the time when a product is to be modified to better suit its market. According to the Conference Board, important factors for product modification mentioned by more than 70 percent of firms surveyed are long-term profitability, long term market potential, product-market fit, short-term profitability, cost of altering or adapting (e.g, retooling), desire for consistency (e.g, maintaining a world image), and short-term market potential. These factors apply to consumer non-durable and durable products as well as to industrial products. MANFATORY PRODUCT MODIFICATIONThe mandatory factors affecting product

modification are the following:1. Government’s mandatory standards (i.e,

country’s regulations)2. Electrical current standards3. Measurement standards4. Product standards and systems

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GOVT MANDATORY:- Specifications when imported.For.e.g. Switzerland banned the use phosphates in detergents,substitute by Zeolites & nitroacetates (max 5%) to avoid harmful effects in drinking water; Labels / Pkg Display; Avon’s Shampoo’s reformulated to remove formaldehyde preservatives(violation in Foreign countries); Adding Vitamens in Margerineforbidden in Italy, compulsory in UK & Holland.

ELECTRICAL:- phase, frequency, and voltage & manuals.

MEASUREMENT STD:- Imperial system vs Metric system, USA & Yemen still Non-metric.(US lose mn of dollars due to this)US Firms often cite NTB”s cause of failure in Jap Mkt.some NTB’s intentionally designed to discourage imports. Yet Japs point out that US Firms refuse to modigy products. caused loss of order to Jap NIT –Commn Industry.

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3 TV systems=US NTSC, French SECAM, Germany PAL.USA 525 scanning lines/frame in TV, others 625 sharper picture.

OPTIONAL PRODUCT MODIFICATION: a) Mandatory Modification:- follow it or leave it.

E.g Italy's Piaggio withdrew its Vespa scooters from the U.S. market in 1983, choosing not to meet U.S. pollution control standards for its few exports.

b) Optional Modification:- Mktr’s discretion in taking action e.g Nescafe in Swiss taste is different from Nescafe in France (just across the border).

Attractiveness of optional Modification is related to physical distribution and this involves the facilitation of product transportation at the lowest cost. Products assembled & shipped=delivery at lower cost ; slight modification helpful like narrow roads, stairways or elevator and when goods are larger.

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Local / Climatic conditions:- e.g.Avon modified for not/humid climate “Candid”(lipstick line). Gas formulations in Brazil & USA are different. Brazil temp high –gasoline requires higher flash pt to avoid vapor lock and engine stalling.Space constraint e.g Sears for Jap Mkt– Friz small & tallJap Plywood req 3x6ft (no studs) USA supply 4x8ft +

studs.Consumer Demographics related to physical appearances effects how products are used & suitability, Habitat Mothercare PLC (British) products not consistent with American Customs, Comforters are not long enough ( American Beds), Tumblers not long enough to hold ice, Philips downsized its shaver to fit smaller Jap Hands, dolls modified to resemble the physical appearance of local people ( Barbie)

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Local use conditions include users habits, Japs prefer to use pencils(typed business corrosp common in US)—copiers require special characteristics that allow the copying of light pencil lines, Microsoft programs in different languages like Czech Republic, Polish, Hungarian, Russian.Environmental conditions– Detergents to suit/fit local water conditions,IBM modified design to include Japs word processing capabilities, Kodak changes in graphic art products for Japs 9 no darkroom, diff light environment) Product size,color, speed, grade, & source redesigned to suit locals – Kodak altered its film to cater to Jap Idea of attractive skin tones, Kraft’s cream cheese tastes different in USA, UK, GER, Canada.Asians /Europeans daily shopping---. Small Friz’s– save cost & electrical consumption.

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- Products clash with Culture --- products loose out.e.g Campbell used in emergency) VS Knorr/Maggi (dehydrated) ( Make it own way, flair & style), Middle East—Halalled Chicken.

- US palate VS Jap Palate.US palate= sweet, too large, too spicy. Totino’s Pizza (made by Pilsbury) had to be modified to capture the Jap Mkt by not adding any preservative or dyes, changing the ingredients,reducing the size from 12oz to 6.5oz to suit Jap Ovens.In conclusion, marketers should not waste time resisting product modification. The reluctance to change a product may be the result of insensitivity to cultural differences in foreign markets. INCREMENTAL COST >> INCREMENTAL PROFIT DROP MODREVERSE GO FOR MODIFICATION.

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International marketing

Documents

international

major entry

global village

global strategic

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single national

global market

world economy