International Marketing International Marketing Strategies and Marketing mix ESG March 2008 Jean-Philippe Javel.

International MarketingInternational Marketing

Strategies and Marketing mix

ESGMarch 2008

Jean-Philippe Javel

Size and nature of international markets

Niches Local markets Regional markets Global markets

Niche markets

Purely local niches- Limited to a specific geographical area- Often, historical roots, consumer behavior linked to old traditions

Worldwide niches- Small market but potential customers in several countries- Example: Hummer H2

» derived from the military vehicle

» Target: Wealthy « show-off » Mostly urban

Niche in some countries, mass market in others- Example : oil lamp- Decoration item (sailing style) in western countries

Local, regional and global markets

Local markets (country)- Strong cultural links- Specific market conditions- Examples :

» medias (press, radio, TV)» cheese» airlines : state regulations (ex: Morocco)

Regional, multi-country markets- Specific products and marketing mix- Example : cars

» North America, Europe, Poor African countries

Global markets- Rather undifferentiated goods, universal solutions,

not culturally related, commodities» Example : wheelbarrow» Example: vehicle gasoline

- Luxury brands» Strong global brand image» Marketing mix may be adapted locally

Chevrolet Tahoe

The Maharaja Mac is an example of an Adapted Marketing Mix

Click or press spacebar to return

Adapting or standardizing your marketing strategy and/or mix ?

Markets and consumers needs and wants can be different in each country / region

But it is not always optimal to localize the marketing strategy and radically change the whole marketing mix for each country For example : developping a new product

Mainly for cost reasons (economies of scale) and organisational reasons (simplify)

Where is the optimum ?Where is the optimum ?Adapt locally

Standardizeglobally

Consequently, a multinational company has to find out and implement the optimal approach, between global and local, depending on several factors and market screening

Customerneeds and wants

Reduce costsMaximize profits

Strategic Adaptation to Foreign Markets

High

Low

Level ofculturalgrounding

Need foradaptation

Industrial / Technology intensive

Consumer

Nature of product

Marketing : Globalization versus AdaptationFactors encouragingFactors encouraging

GlobalizationGlobalization• It’s sometimes possibleIt’s sometimes possible

Lifestyles and consumer behavior Lifestyles and consumer behavior are converging (more or less)are converging (more or less)

• Cost reductionCost reduction Economies of scale (lower Economies of scale (lower manufacturing & purchasing costs)manufacturing & purchasing costs)

No product adaptation means less No product adaptation means less R&D, Marketing, inventories costsR&D, Marketing, inventories costs

• Simplify managementSimplify management Easier control & coordinationEasier control & coordination

Centralized decisionsCentralized decisions

• Global marketing campaignsGlobal marketing campaigns Communication etc Communication etc

Possible fast worldwide launchPossible fast worldwide launch

Factors encouragingFactors encouraging

Adaptation to local marketsAdaptation to local markets• Different customer needs and wants, Different customer needs and wants, behavior patternsbehavior patterns

cultural backgroundcultural background

use conditionsuse conditions

• Different economic situationDifferent economic situation

• Legal, tax, political barriersLegal, tax, political barriers

• Different competition landscapeDifferent competition landscape

• Specific sales/retail channelsSpecific sales/retail channels

• External growth and acquisition of External growth and acquisition of

foreign local brandsforeign local brands

• Unleash local managers’ initiativeUnleash local managers’ initiative

The 4 Types of International Marketing

Global marketing strategy(same everywhere)

Local marketing strategies(specific to each country or region)

Global tacticsSome tactics

adapted locallyMix of global &

local tactics

Only local tactics &

marketing mix

Pure Global Global « Glocal » Pure Local

Bongrain : cheeses

Strategies and tactics are the same everywhere

2 conditions- Markets adequate for such globalization- Strong brand policy, with no exception

Mostly luxury brandsExamples:- Chanel n°5 perfume- Omega watches

Other examples- La Maison du Chocolat

» same product» same shops (Paris, New York, Tokyo)» same service» same positioning, highest price on the market

- Ikea» same strategy everywhere (developped countries) :

same brand, same positioning, same target» same marketing mix : products and services, pricing,

place, communication» But a flop in China !

Marketing Strategy : Pure global

Marketing Strategy : Global

Same brand, same positioning, same product But the marketing mix can be partially adapted

locally, depending of local market conditions and competition

Example : Air France- Same brand, same planes, same quality of service, maintenance and

security

- Pricing is adapted locally» When Air France has a quasi-monopolistic position (West Indies, some

African countries), prices are very high» When Air France is on a market with fierce competition, especially from low

cost companies such as EasyJet or RyanAir (ex: Europe), prices are much lower and special promotions are proposed

Marketing strategy : « Glocal »

« Think global, act local » Standardizes certain core elements and localizes

some marketing mix elements Example : Honda Accor Same brand and positioning

in Europe and in the USA But the product is not the same everywhere

- In Europe, Accor sales are low, and cars are imported from Japan

- In the US, sales are higher and a special product is manufactured for the US market

» Automatic gearbox» Slightly different style» Different motors» Different interior design and equipment

Since 1986, Honda has developped a new brand, Acura, on the high-end, in the US & Japan, with specific models and a dedicated retail network

Coca Cola marketing is coherent worldwide

and some elements are global Brand Colors Symbols Same major sales channels Some advertising campaigns Sponsoring of major sport events

- Olympic Games since 1928- Football World Cup

But some elements of the products are localized Example: adaptation of the Diet Coke product

« Diet » has a negative meaning in many countries.It was changed to « light »

in South Europe and Japan.(same problem with « coke » in French !)

China Thailand

Cherry flavor for the US market

Packaging, name and formulas can be different

in local markets

USA

Brands, positioning, products and marketing mix are totally specific and adapted to each country

Example: Bongrain, world leader of cheeses- Tastes, preferences and traditions are very different in each country- Presence in 150 countries- Several hundreds of brands and products, with local marketing mix

» France : Caprice des Dieux, Saint Agur, Chavroux etc (28 brands)

» Spain : Burgo de Arias etc

» Hungary: Pannonia etc

» USA : Alouette etc

» India : Le Bon

» China : Pikifou

» Japan: Gerard Selection

Marketing strategy : Pure local

Examples of product adaptation

Depending on needs and wants differences, and local constraints, there are various approaches :

Exactly the same core product worldwide - Natural goods : Evian water

- Manufactured luxury goods : Cartier watches

Partially localized product- Personal Computers : keyboard (20 different types in Europe), electrical

power, software etc

Mainly or totally localized product- Cosmetics : different ethnic skins etc

- Yoghourts :

French and American tastes

are very different

(creamy formula, flavor,

size, number of items)

- Coffee : very different tastes and preferences in the world

International pricing strategies

Main reasons to adapt pricing in local markets

Different strategic goals in each country- Market penetration / high-end

» Example : Bonne Maman jam

Different standards of living- L’Oreal mass market products are less expensive in China

- Coca-Cola prices are lower in India than in Japan

Manufacturing and/or shipping costs- Evian bottle sold in Japan or in the USA (far away from France):

the price includes a rather high transport cost

Tax, custom duties Currency rates Competition

International pricing strategiesLimits of different pricing by country May blur brand image and positioning

- example : Champagne Pommery used to be sold at different prices in Europe, which was confusing some consumers (who travel)

Foreign market price gaps may lead to “gray marketing” and “parallel imports”

- sales of authentic, legally trademarked goods through unauthorized or tolerated channels

- example : Renault cars imported from Spain and sold in France- example of a technological response : DVD zones- same issue with different tax levels :

- blank CD or DVD- cigarettes

Less and less price differences are possible in the European Union because of 2 factors easing price comparisons :

Euro common currency Internet price comparators

leguide.com, Kelkoo, Lycos etc

International pricing strategies Example : Louis Vuitton - Alma bag

Price is around 40% higher in Japan than in France (585 €)

But Louis Vuitton has toimpose purchase limits to Japanese tourists in France

Counterfeiting is also a major concern !

International communication strategiesAdvertising

Choice of medias : a localized approach is usually better- Different audience- Different regulations

» Example: alcohol

Message : a certain level of globalization is usually preferable- Economies of scale- Brand image coherence worldwide

TV commercials, press ads etc often require localization- But most multinational companies choose a advertising agency with offices

worldwide, to enable a global level of coherence in localized campaigns- There are few actual worldwide global advertising campaigns

» Example : Launch of Gillette Mach 3

» Same TV commercial in 19 European countries and in the US

» Only the soundtrack and slogan were translated

» « The best a man can get »: « La perfection au masculin »

» Choice of an international stars : David Beckham

International communication strategies When is globalization of promotion most possible?

Products / brands that can use a primarily visual appeal

Products / brands that can use images associated with rather “universal” appeals

such as sex or wealth

Products / brands that appeal to a market segment with universally similar tastes, interests, needs, and values

Products with a nationalistic flavor if the country has a reputation in that field

High tech products free of cultural bounds

Example : Apple iPodWorldwide advertising campaign

Same campaigns worldwide- Different music soundtracks : Rock, electro / house, hip hop, jazz etc- Characters are presented in shadow style to avoid ethnic issues and to focus

more on the product (contrast effect)

Apple is now a dominant leader on the MP3 player market- 32 million iPods sold in 2005, more than 60% of market share- 900 million songs sold through iTunes Music Stores, nearly 85% of the legal market

International communication issues

In which countries can’t you launch such a campaign ?

A low budget ?

Why not try viral marketing ?

Be creative !

Market entry strategies

Market entry strategies Exporting

Direct- Domestic base

- Overseas sales branch

- Traveling sales representative

- Foreign-based distributors/agent

Indirect-occasional, or active exporting- Domestic-based export merchant

- Domestic-based export agent

- Cooperative organizations

- Export-management company

- Franchising: A contractual arrangement where a wholesaler or retailer (the Franchisee) agrees to make some payment and to meet the operating requirements of a manufacturer or other franchiser in exchange for the right to use the firm’s name and to market its goods or services

- Foreign Licensing: an agreement that grants foreign marketers the right to distribute a firm’s merchandise or to use its trademark, patent, or process in a specified geographic area.

- Subcontracting: a contractual agreement where a firm hires a local company to produce goods or services in a specific geographic area.

Market entry strategiesContractual Agreements

Market entry strategies International Direct Investment

An additional strategy for entering global markets Requires direct investment in foreign firms,

production, and/or marketing facilities Advantages

- cheaper labor cost in some countries

- government incentives

- creates better image

- deeper relationships with government, customers, suppliers and distributors

- full control of operations and marketing

Risks involved:- economic difficulties of the host country

- political instability and negative perception

Comparison of Market Entry Strategies

Form Control Risk Advantage

Export Very limited Low Low cost

Ownership Total High Control

Joint Ventures Shared Moderate Local

expertise

Licensing Limited Moderate Low cost

Internet Total High No physical

presence required

Market Screening

Economic Size and Structure Social and Cultural Factors

LivingStandards

GrowthProspects

Nature ofThe Society

DistinctiveFeatures

Distribution PromotionConsumerBehaviour

Extent ofCompetition

ConsumerGroups

GeographicalFactors

EnvironmentalFactors

MarketingSystems

Segmentation ofThe Market

ImportRestrictions

LegalFramework

PoliticalStability

After International Marketing, Bennett & Blythe, 2002

The 12C framework to analyse international markets

Country - What are the political, legal and economic issues of your potential overseas market, as well as its current market potential and your knowledge and experience of it?

Currency - If foreign currencies fluctuate a lot against your home currency, you may have difficulties in pricing your goods or making a profit. Some countries, like China don’t allow their currency to leave the country, so you may have to work in $

Culture - Every culture is different - even from one European country to another. Your product, advertising and even brand may need to be adapted to suit your new market.

Control & Co-ordination - Trading abroad is not only about selling, but also after sales service. All these people will have to be hired, trained, managed and controled.

Concentration (of markets) – some countries are vast (China, India etc). It may not be so easy or cost effective to sell to different groups in isolated areas. However, there may be opportunities to sell cross-countries to different nationalities with similar cultural/language attitudes

Commitment - Selling abroad seriously requires long term planning, significant financial investment, time and skills of your staff. There are risks and the return on investment may be long to come.

Communication - You need to consider the language skills of you,your staff and your contacts abroad, and what media or information technology they have (advertising, telecommunications, e-mail etc). If it is difficult to communicate, it will slow up and complicate matters. It may also prevent you from developing your business properly.

Choices (of consumers) - It is possible that there are perfectly good products or services available from local suppliers. Yours are likely to be more expensive, so consider what would make your product better or more desirable.

Channels of distribution - Getting goods and services to overseas markets can be difficult. Building an efficient retail network is usually hard and long.

Contractual obligations - Make sure that the contract meets everyone’s needs and that you and your customer are fully aware of the commitments listed. Failure to meet the exact requirements of the contract, can result in non-payment.

Capacity to pay - You should take a look at the customer and their ability to pay as well as the country itself. This will include not only financial health, but also political issues, and currency and banking regulations.

Caveats (laws) Some countries have laws that are very protective of their local traders and do not readily accept imports. There may be restrictions or differences between your country and the foreign market about what can be sold and under what circumstances.

The 12C framework to analyse international markets