INTERNATIONAL MARKETING QUESTIONS AND EXERCISES …gepsteam.pbworks.com/f/InterMrkeingQuestionareSinC.pdf · INTERNATIONAL MARKETING QUESTIONS AND EXERCISES 1 The selection of the

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

INTERNATIONAL MARKETING

QUESTIONS AND EXERCISES

1 The selection of the appropriate timing strategy represents an important marketing decision within the field of “going international“. Pag 110 a 119. 1.1 State and describe the two existing timing strategies. The Waterfall Strategy: This strategy let companies take a gradual advantage of the markets; it is usually convenient form small organizations that don’t have enough resources to cover several markets at the same time. The phased rollout in a waterfall strategy occurs as follows: typically introduce the new product first in the company’s home market, then in other advanced markets and finally in less advanced markets. After the introductory phase, the company must evaluate the new places that is going to use to sell its products; the introduction to each market will be done gradually, taking into account the fact that this market should have similarity to the marketplace that currently is located the product.

The main advantages of using waterfall strategy are:

• Allows companies with few resources to start their internationalization process in a phased manner and determine the best way to reach new markets based on the experience in each market.

• The level of risk is reduced because the company will address each market in a phased manner and if they notice any disapproval of the product market may decide to quit.

• The gradual introduction of the product markets, increase product life cycle: Products that are finishing their cycle in the domestic market may enter into other markets, thus generating a higher turnover and prevents product storage.

Some disadvantages with this strategy are:

• Difficulties in the first stage in case of a low success level

• Early imitation of the introduced product innovation(s) Shower strategy: This strategy is known as simultaneous strategy, contrast to the waterfall strategy it has into account that the time used to reach different markets is short, looking for the advantages offered by each country simultaneously. Some individual country groups can, none the less, be entered before others. This type of strategy is somewhat complex because it is not easy to align branches in other countries to generate a successful entry of the product in a short period of time; additionally the short cycle of the product, requires more investment in R&D, the consequence is that the company has less time to amortize these outlays.

Features of shower strategy:

• Simultaneous entry into the markets

• Entry into the markets within a relatively short time span

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

• Differentiated entry timing arising from operative problems,

• Founding subsidiaries Advantages with this strategy:

• Successful entrance into markets (“amortization”) for: o short product and technology cycles (e.g. semiconductors, computers) o long research and development (R&D) times

• Possibility to create market barriers for competitors (e.g. to establish an image profile)

The main disadvantages:

• Emerging need for co-ordination (“maximum” coordination problem)

• Necessity to develop co-ordination instruments relatively rapidly The following picture, illustrate the two existing timing strategies:

Illustration 1 Waterfall and shower approach (K. Backhaus, et al, 2005)

1.2 Are the timing strategies two strategic alternatives that are mutually exclusive?

Explain your answer briefly. No, the timing strategies are not mutually exclusive, because if company wants, it could take advantage of both strategies. For example as first step the company could apply the waterfall strategy in order to introduce their products gradually and in a longer period of time reach different markets step by step and slowly, and depending on the results or the market that the company decides to use, the company could go for the second step, so it could at the same time or after the first strategy, go inside other markets with the use of the shower strategy; allowing the company to reach many markets in short periods of time, achieved positioning the product immediately and in more countries.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

Illustration 2. Strategy implementation between countries (K. Backhaus, et al, 2005)

1.3 Assume that in a specific situation an enterprise’s selection of its timing strategy is dependent upon which strategy increases the probability that the enterprise will be able to avoid arbitrage. Which timing strategy should the enterprise choose and under which two conditions can the selected timing strategy really avoid arbitrage? In this specific situation the most convenient timing strategy selection for the enterprises is the Shower Strategy. First of all it is important to introduce fist the product in the country were the product has higher price, but after a period of time, gradually the price of the product will decrease, and when the product has a lower level of price, the company could introduce the product in a second market, in order to look for avoid as much as is possible the arbitrage between markets. The result of such a delayed introduction would be a convergence of prices in both markets. If substantial price reductions have already been planned for the individual country markets, small delays in the timing of market introductions may be sufficient to achieve a given reduction in price differences.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

Illustration 3. Strategy introduction between countries. (K. Backhaus, et al, 2005)

As is possible to see in the graphic, if the company make a simultaneous introduction in different markets, the price difference will be bigger and them will exist more arbitrage, if the company use the water fall strategy, like is possible to see in de second graphic the differences of prices will decrease, between country A and B, and the company will avoid arbitrage in a better way. 2 The determination of the organizational form for foreign business is of major importance within the field of “going international“. 2.1 State and briefly describe the four criteria for the systematization of the organizational forms for foreign business activity. The four criteria for the systematization of the organization forms for a foreign business activity are: 1) Control: Control is based on the degree of influence that the enterprise exerts over the activities of intermediaries and business partners in the target market. Effective quality control is important yet difficult. The challenges for original supplier are referent to act as guardian of overall process. 2) Capital transfer and participation: it measures the capital that has been transferred to the country where the operation has been performed.

3) Value creation focus: Locate where the focus of value-creating activities is, that can be located at home or outside it (outsource).

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

4) Transaction costs: the transaction cost concept could be understood in the following way:

1. As all the costs entailed in initiating, securing and controlling transactions for a market entry, i.e.

2. As all costs entailed in achieving the desired market presence in the target market.

The key feature for deeply understand the transaction cost concept is the assumption that different market-entry strategies lead to different levels of transaction cost. Transaction costs should be understood in this context as all costs entailed in initiating, securing and controlling transactions for a market entry.1

As consequence, on one hand it is possible to enter markets through totally dependent institutions (integration), on the other it is possible to operate through institutions that are foreign to the company (external partners).

2.2 Describe the configuration of the four criteria for the systematization of the organizational forms for foreign business activity, as mentioned in sub-task 2.1, for independent export agents / traders on the one hand, and subsidiaries on the other hand.

The organizational forms for foreign business could be classified as follows:

1) Company with production in home country and indirect export. 2) Company with production in home country and direct export. 3) Company with production in foreign country and without direct investment. 4) Company with production in foreign country and direct investment.

The organizational form that we will explain is the one that develop a foreign business with production in home country and indirect export: their main agents and participants in this kind of business are

a) Export traders: the export traders market the products of manufacturers in foreign markets on their own account and generally in their own name. They are normally specialized in particular types of goods (e.g. red wine) or in country markets. b) Export agencies. c) Export co-operatives.

The organizational form for foreign business with production in foreign country and direct investment is:

a) Capital participation. b) Joint Venture. c) Subsidiary: some of the characteristics of the subsidiaries are:

� Establishing of independent subsidiaries. � They are legally autonomous and liable for the capital invested in foreign

countries. � ≠ Branch: parent company is liable. �

1 Williamson, 1991; Backhaus et al., 1994.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

Therefore, the configuration of the four criteria for the Systematization of the organizational forms for foreign business activity in each case will be: Export traders: 1) Control: It is necessary to establish the business boundaries. With this the intermediaries will not take control of the business, also it avoids the mismanagement of the company and a possible destruction of it change on the license, on the contract production…

2) Capital transfer and participation: In this case, the capital moved to foreign countries is the cost of the export or the intermediary fee, it will depend on where the business is located, its laws and rules.

3) Value creation focus: The value of the activity is located at the business, because the company generates the object or service and outsource the distribution and customer contact 4) Transaction costs: the main costs are distributed on the searching of export merchants and the costs of create legal documents that will control the markets where they are in.

Subsidiaries:

1) Control: In this type of organizational form, communication is essential. The production in another country involves a very high level of control, with continuous feedback on what is happening, so you know what results are obtained by the investments that have been made, with the main objective of seek solutions to problems. 2) Capital transfer and participation: As production is outside the country of origin, the capital moved because of the operation is 100%, with the crucial participation of the subsidiaries.

3) Value creation focus: The value of activity is located outside home, the participants only invest money. They see the opportunity, and search in other country the best company that can generates the object or service. 4) Transaction costs: These are comparatively higher than those obtained with the export traders, since the beginning of the business is more complicated by all the factors that are involved in the process and due to the company do not know the culture, the market and the people involved in the process. 2.3 Do independent export agents / traders represent a useful organizational form for foreign business in a situation where there is a high extent of interdependencies between different country markets? The export traders market the products of manufacturers on their own account and generally in their own name in foreign markets. On the other hand the export agencies operate under their own direction, but not on their own account.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

Therefore, even when there is interdependence between the different country markets, the strategy may not be the same; although they both should be coordinated in order to meet the needs of clients at minimum cost.

3. The determination of the degree of standardization respectively the degree of differentiation for the instruments of the marketing mix, for example within the product policy, is a necessity in the field of “going international” as well as in the field of “being international“.

3.1 Are the strategy of standardization and the strategy of differentiation (of the instruments of the marketing mix) two strategic alternatives, which exclude each other in general? Explain your answer briefly. (2 points)

Nowadays the competition between companies is increasing, consumers demand better products and services and technology develops go very rapidly, so companies have had to change their management and operation; improving their efficiency in their processes, reducing their costs and adding value for survival. For doing this in a proper way they must know their strategies to focus on domestic markets and the international ones. Differentiation strategy: The differentiation strategy creates a product or service characteristic that is perceived throughout the industry as unique. It tries to select one or more attributes that many buyers in an industry perceive as important and are exclusive to meet those needs. Exclusivity is satisfied and paid with a higher price. Differentiation can be based on the product itself, in the delivery system by the mean which the product is sold, the product marketing approach and a wide range of factors. The strategy of differentiation should be followed only after a careful and deep study of the buyer’s needs and preferences, in order to determine the feasibility of different feature incorporation or the creation of a unique product that includes the desired attributes. A danger to follow a differentiation strategy is that customers might not appreciate the product uniqueness enough to justify its high price. When this happens, a cost leadership strategy easily exceeds a strategy of differentiation. Another risk of using a differentiation strategy is that competitors could develop ways to copy the features of differentiation quickly, so companies must find sustainable sources of exclusivity that rival firms cannot replicate rapidly or at lower cost 2 Standardization Strategy: The standardization strategies based on reducing the number of different products launched or acquired by a company in question: as first step the company should list all items that are similar or that the company acquires and as second step the experts can decide whether to cut the number of existing products. After a period of time, a company can eliminate a multitude of items that are totally unnecessary and useless, when the company is able to have one product in several countries. Unlike differentiation, standardization is very useful in consumer products, because consumer expectations are very similar if not identical. Its purpose is to reduce costs and to maintain satisfactory levels of quality and performance. Determining how the marketing mix tools should be applied in the new markets is one of the consequences that the company

2 (Michael Porter 1982)

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

must take as part of the decision to go to international markets, international companies have to do this process in order to define the tools adaptation requires that its product in different markets and different conditions. To make these decisions the company must take into account the role of the buyer, seller and competition and the relationships between new and old markets. Finally the decision of standardization / differentiation depends on the information that is related to the competition, i.e. between nearest is the company's relationship with the network of international competitors more that enables you to define your strategy will. Also, the decision between standardization and differentiation must be made in the context of: seller-related feedback, demand-related feedback, competitive feedback and / or institutional feedback. According to the selection of markets to which the company wants to determine the international strategy to be followed, an international strategy is essentially the direction that should have the management activities in international markets. You can have three types of guidelines for the possible markets according with the internationalization strategy. Those factors are clearly explained in the flowing graphic and bullets:

Illustration 4 Selection of country markets depending on the type of internationalization strategy. (K. Backhaus, et al, 2005)

1. Ethnocentric orientation

• Operation in foreign markets in a manner characterized strongly by the domestic market

• Relevance of similarity of foreign markets and domestic market (“looking for similarity”)

• In general operation only in a few selected country markets

2. Polycentric orientation

• Consideration of the particular characteristics of foreign markets (differentiation)

• Development and implementation of country-specific strategies / measures

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

• Possibility of entry in all country markets with a corresponding demand

3. Geocentric orientation

• Analysis of individual country markets as a uniform market (standardization)

• Development and implementation of standardized strategies / measures, i.e.

• No taking into account of national needs (“least common denominator”)

• In general, entry in less country markets than in case of polycentric orientation

3.2 Mention and describe the four basic types of product-core standardization (respectively differentiation), which can be considered in the field of „going international“. (8 points)

Core products are a company's products which are most directly related to their core competencies. These products are then integrated into a variety of end products, either by the company holding the core product or by a second company to which the core product is sold to, and the end products are sold to users. The aim of the product core is to complete a function requires by buyers because the buyer purchases the entire product with the objective of using it to suit some particular need. The standardization depends on the level of homogeneity of consumer needs. The more similar needs and preferences have the customers, the more able standardization of the product core become. The degree of product-core standardization can be broken down into four basic types:

1. Differentiated products: On these products -for different reasons- the consumer perceives the products as unique and therefore is willing to pay a premium for purchasing them. These products have to be somewhat different from those offered by competitors and the consumer must perceive that difference, if not the customer would not pay the surcharge. These products show a high level of adaptation in specific markets, there are products such as foods, which tend to be tailored to the needs and preferences of the market. For example: Coca Cola and McDonalds are companies that are making adaptations to local markets. The range of products, packaging and even the taste of Coca Cola varies from market to market. In the case of McDonalds is a very standardized, but the products offered vary in some markets and some products could not be offered in other markets (beef or pork).

The product attributes are disparate (quality, reputation, brand image, packaging, etc). So when it comes to differentiating the product, the company can choose any of these alternatives. The differentiation of these alternatives can be grouped into two classes: The first is to enhance the inherent characteristics of the product, among which are the quality and degree of innovation which has the product. The second is to use the marketing variables, among which are production, distribution and so-called extrinsic characteristics of the product, which is the brand, packaging, image, or social prestige and breadth of the range. Both alternatives for differentiating cause high costs. Enhance the inherent characteristics of the product requires a large R & D, extensive quality controls and better components. On the other hand, differentiation based on the variables of marketing requires high investments in advertising, sales channels, etc. Because differentiated products have a higher price, it was believed that these companies would Differentiating small market shares, but there are examples which show that in reality this does not have to be so.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

2 Modular design When customer in different countries has similar product requirements the modular design might to be used, this in case only certain products need to be varied country by country in order to fulfill legal systems or technical standards. The product can be designed for a new market with new specifications.

3 Built in flexibility The aim is to make sure that the product can be used in several countries; there is require of Integration of the necessary adaptation potential, the task of adaptation is frequently transferred to buyers.

4 Standardized products When the products are sold under the same conditions in different country markets, the product does not need to change its specifications to be able for selling it in different markets. Some factors that promote the standardization are:

• Economies of scale: Depending on the technology that is available for each sector, there are some economies of scale. It means that between certain margins, and increasing the quantity produced the cost per unit manufactured will be reduced,

• The homogenization of consumer tastes: To match the tastes of consumers and their buying behavior facilitates manufacture and sell the same products in multiple countries.

• The convergence of the laws: In recent years there has been a significant liberalization and harmonization of markets in many countries. Equally noteworthy is the best treatment for legal and investment products.

• The processes of economic integration: The processes of economic integration promote international trade between member countries by eliminating tariff barriers, restrictions on free trade and encourage the exchange of goods and services.

Illustration 5 Standardization sequence of product policy elements. (K. Backhaus, et al, 2005)

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

3.3 Select an instrument of the marketing mix as desired and demonstrate with this instrument the “continuum” of possibilities between complete standardization and “complete” differentiation with an example from international marketing activities of any desired enterprise. (2 points)

The instrument of marketing mix that we have chosen is the Publicity:

Complete standardization Complete standardization means that the procedures of one country should be adopted by all others, There are plenty of other obstacles to adopting a completely standardization. The fact of selling a product beyond the borders of the domestic market poses a number of difficulties which include all kinds of marketing issues (from the market structure through the positioning, pricing policies, channels of distribution and promotion), not to mention the language-culture combination that opens another wide range of international restrictions on advertising. Among the different strategies employed by multinationals seeking to sell the same product in different markets emerge as a leading solutions, especially from the cost-benefit, the standardization of advertising strategy that also seems supported by a consumer more homogeneous in terms of habits and tastes standardized advertising strategy as it relates. Today, the general consumer allows to make a run of standardized advertising style of communication, there may be global products, but consumers should be feel identify as an individual while the publicity company is using a universal message. So it is established that the publication of the same advertisements (with their respective variations verbal) means that the international publicity, especially since more standardized approach is not only possible, but it works. Ex: the worldwide advertising of brands of cosmetics. Complete differentiation The complete differentiation strategy is based on adaptation of a product or a service to the diverse needs and conditions in each market. When this type of strategy is been chosen is because the market is going to two or more countries that behave totally differently. For example, there are legal differences in each country on product, packaging that require adaptations in order to introduce and sell products. Differences in language, aesthetics, in customs, beliefs and values are important factors to be considered in international marketing and forcing the adaptation of the product to market. We must also bear in mind that consumers do not behave exactly the same in all markets, even though the media seems to consolidate. Despite of this, the differentiation in the uses of the product, how and when they are helpful to adaptation. Finally, the main reason for choosing the adaptive strategy is because the barriers become more important for the marketing of products. So as there are products for which we can standardize the communications or advertising, there are many others to whom the communication strategy should be unique according to the preferences and tastes of that particular consumer.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

4. Arbitrage is playing a major role concerning the coordination task within the field of international marketing.

4.1 Describe the difference between complete arbitrage and incomplete arbitrage in the field of arbitrage-tendency functions. Additionally you have to show within the following illustration, which functions represent functions of complete arbitrage and which represent functions of incomplete arbitrage. (4 points)

Arbitrage is the simultaneous purchase and sale of the same securities, commodities, or foreign exchange in different markets to profit from unequal prices. Tendency towards arbitrage is the tendency of buyers, with a sure profit level, to have a preference for acquiring a particular product through the “grey market” beyond the regular distribution channels (Arbitrage profit: price difference – transactions costs).The arbitrage tendency of buyers depends not only on their general price sensitivity, but depends on factors like product complexity or credence attributes as well.

The complete arbitrage is the scenery where the buyer, who is in a high price country, satisfies completely his demand through reimports and has not negative arbitrage profits; the incomplete arbitrage is when the share of buyers are willing to undertake arbitrage rises monotonously with increasing profits.

Illustration 6 Alternative arbitrage-tendency functions. K. Backhaus, et al, 2005)

4.1 Two different strategic business units are related with the two different arbitrage-tendency functions (c) and (d). In which case of those two functions do you already have to be careful in case of a small degree of country-specific price differentiation? Explain your answer briefly. (2 points)

The ideal function for all the strategic business units is the function “e”, as is the ideal movement market, price vs. quantity, step by step.

The strategic business unit “c” is a product which is increasing rapidly its price trying to get the complete arbitrage state, its product can has a high attributes, at the begging is putting in risk his profit but to the long term can get good ones. On the other hand the strategic business unit “d” is a product whit high complexity and low attributes which is increasing the

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

quantity despite the profits but on the long term they can raise the prices and get good profits.

The both function’s work in opposite way, trying to get the same ideal state, good profit.

5 The field of “being international “represents the dynamic decision problem within the field of international marketing. 5.1 State and describe in detail the two key problem areas in “being international“. (4 points) The two main problematic areas in being international are related with the market dynamics. The first of them is the level of the market dynamics associated with the form that the market has and the second is the one linked to the nature or the direction that drives the market. The following paragraphs will explain and describe in detail those problems. It’s important to bear in mind that those problems have so many involved variables and that each variable has a pretty important role in the market dynamics, also is important to keep in mind that each country is correlated with other countries and depending on those variables, that relation creates independencies in terms of other countries markets. Fist able, the levels of market dynamics problem is divided in two basic issues: The fist is the change in institutional related to environmental conditions, so depending on the national borders (natural, economical, or cultural regions) the institutional environmental conditions could change: if a homogenization is happening its central characteristics is that the rules are unify, not only in the political aspects but also in the social and economical factors. On the other hand if heterogenization is taking place those aspects are not unique. The second issue is related with the change in the behavior of transactional partners. Some factors as Demand, Sales level and environmental condition could change in relative the competitive position that make all the chain components (competitors, buyers, the company and in general the market) change. That is why the companies should be prepared to those changes with the objective of going according with the market dynamic. The second problem area is the one that is trying to avoid the problems related to the nature or the direction that drives the market. This problem is explained and can be supervised by a big number of variables mostly related with the coordination of the problems. The most important variables are: The variety of coordination problems: the selection, extension and the all coordination of the coordination strategy is pretty important to acquire the desired coordination. That could be explained by two strategies: The standardization is a strategy that could be applied if the country markets are becoming homogeneous: on the other hand the differentiation strategy could be applied in the case where the markets are becoming heterogeneous. Other aspects about coordination problem: it is important to keep in mind other factors that could make a successful coordination. Fist able the extremes should be controlled, the market should avoid the complete homogeneity and the complete heterogeneity. The following graphic summarized what it has been exposed at this section:

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

Ilustración 7 Detailed description of the two key problem areas of being international. (Own made)

5.2 The description of the two key problem areas gives the possibility to categorize incidents, which change the extent of interdependencies between country markets systematically. Draw an illustration of the two key problem areas in „being international“, mentioned in subtask 5.1, with its four quadrants. (1 point)

The two main problem areas in being international could be drawn in a two dimensions Cartesian plane. As is seen in the graphic as each of the axis get a higher position the situation could be classify as follows: On the y axis, it will be find the level of the market dynamics related with the form that the market has, so when this axis is in its higher level it means that the market dynamics are mostly dominated by the government or state institutions and at the lowest level it is say that the market dynamics levels are dominated by the behavior of the people and the companies. On the x axis it will be find the nature or the direction that drives for the market dynamic, so the minimum point of the x axis means a complete homogenization and that analyzed markets converges. When the maximum point at the x axis is reached it means a complete grade of heterogenization where the markets are completely fragmentized.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

Illustration 8 Two key problem areas of being international. K. Backhaus, et al, 2005)

5.3 Classify the following incidents according to the four quadrants within the two key problem areas in „being international “as illustrated in subtask 5.2. Therefore, just write the number of each incident into the adequate quadrant. (4 points) INCIDENTS:

1) Private consumers in Iran refuse to buy products from Denmark. The reason therefore is the illustration of caricatures about the prophet Mohammed in Danish newspapers, about which the people in Iran were informed via information exchange through modern mass media.

2) The United States of America reduce the import quota for textiles from China. Therefore less textiles

from China can be imported into the United States

3) A manufacturer of consumer goods in the branch of food receives interesting information due to his activities in the field of market research. According to this information the needs of private consumers in the European country markets the manufacturer already entered are becoming more and more similar. Especially products like Tiramisu and Panacotta, which have their origin in Italy, are becoming more and more popular in all of these European country markets.

4) A couple of country markets decide on the way to a common market the realization of unlimited

mobility of factors of production. In connection with this they eliminate all customs duties between the country markets.

If we clasiffy the further incendents in the problem cuadrant the result will be seen in braquets:

Level of market

dynamics

Nature of market

dynamics Homogenization

(Converging markets)

Heterogenization

(fragmenting markets)

Homogeny (Converging

markets) with a high level of

market dynamics of institutions

Complete homogenization and heterogenization of

operational country (theoretical extremes) markets

Homogeny (Converging

markets) with a high level of

market dynamics made by

companies and people

Heterogeneity (fragmenting

markets) with a high level of

market dynamics made by

companies and people

Heterogeneity (fragmenting

markets) with a high level of

market dynamics of institutions

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

Illustration 9 Exercise Development. Incidents Causes Classification of being international.

5.4 State and explain briefly four further examples from reality for each of the four quadrants within the two key problem areas in “being international” as demonstrated in the illustration in sub-task 5.2. (4 points) Homogeny (Converging markets) with a high level of market dynamics of institutions

1. The European Union is a huge example of a institution working for homogeneity. Even though each country preserve its customs and it language, what governments try to make was a homogenization of prices, coins and acquisition level between different countries.

2. English as communication language. After recognized to United States as world potency at the end of the 90´s the English language was institutionalized as trade and communication language around the world.

3. By 2009 the Venezuelan government reduces the importation quota of rice from Colombia and other countries; as a result the Colombia rice was cheaper for other countries and makes the Venezuelan market less diverse that it used to be.

4. Spanish local government has continuously tried to promote a public health care system ensuring proper attention to everyone despite their economical condition.

Homogeny (Converging markets) with a high level of market dynamics made by companies and people

1. Office programs are an example of homogeneity due to the 90% of the computers have the office program and people around the word no matters the language and the part of the world where they are use this tool when they are studding, working and they are in their free time. (this development were introduced by Microsoft)

2. The introduction of the mp3 technology where the people around the world changed its portable music device for this technology that is more flexible and it has more

Nature of market

dynamics Homogenization

(Converging markets)

Heterogenization

(fragmenting markets)

Homogeny – institutions

(2)

Homogeny dynamics made by

companies and people

(1)

Heterogeneity - dynamics made

by companies and people

(3)

Heterogeneity –institutions

(4)

Level of market

dynamics

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

capacity that the previous products had. (This development was introduced by apple and was spread around the world by common people)

3. Some years ago Renault create a different concept car (The logan), a cheap car for Easter Europe countries, as so many people was going there and was buying the car, they took the decision of produce it for the all world, avoiding arbitrage and make a profit of the homogeneous price and model.

4. Mac Donald’s is a good example of homogeneity in food. Although they try to adapt to local market, their methodology and strategy are based on have the same flavor, smell, and taste without care where the person is.

Heterogeneity (fragmenting markets) with a high level of market dynamics of institutions

1. The antimonopoly policies of certain governments are currently trying to prevent

Microsoft of installing internet explorer by default by all of its operational systems. That means heterogeneity in this kind of explorers

2. In Colombia the government has pretty bad eyes to waste collection companies in order to improve the service, several different companies try to be the best in this business.

3. China is trying to increase its local regions development giving some taxes reduction and some advantages to new inversion factories and companies that will invest in those regions.

4. Governments try to have several different phone companies operating. With this prices are regulated by the market and better service are given to the customers

Heterogeneity (fragmenting markets) with a high level of market dynamics made by companies and people

1. In Colombia people from Medellin and the regions near to there used to buy alcohol (Aguardiente) made by an specific brand, if a bar doesn’t have that brand they will not drink that kind of alcohol. People from other regions try to buy their own made region alcohol.

2. In Spain, people from Valencia prefers to buy food with Valencia made brands even if those brands are more expensive due to the fact that they want to promote their owns brands, factories and region. In the other hand people from Cataluña also used to buy products from its own region avoiding and hating products from other regions as Valencia.

3. The electronic companies that manufacture digital cameras are used to differentiate their models in different regions, offering different accessories and models depending on the preferences, electricity levels of the region and seasons that the region has.

4. DVD is one of the concepts that tries to differentiate its market by regions even if the regions where not existing before, therefore they have 4 main zones where people can not easily watch other zones DVDs in its DVD device.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

5.5 Being responsible for international marketing you determined the optimal degree of standardization for all instruments of the marketing mix within the strategy of instrumental adaptation right now. According to your observations now a longer period without any change concerning the relationship between those countries markets starts. Are in this period without any change in the extent of any interdependency coordination efforts necessary from your side? Explain your answer briefly. (2 points) Yes, the efforts are necessary. Maybe the efforts should not be focus on the same aspects that if the market weren’t as stable as its supposed to be at the moment but its clear that the company should care of other aspects. The reason why company should care about these aspects is because some difficult factors as the marketing mix and the strategy are not stable factors, they can vary and that variation depends in different factors and decisions. People from the company should be aware of those factors that in any moment could change the marketing mix or the strategy that the company is following. The only way to be aware of that issue is managing and coordinating, because coordination problems can arise in any moment, therefore the coordination efforts must be continuous. It is important to bear in mind that the coordination problem solver should be aware of so many factors and actors inside and outside of the country, due to if some of the environment actors change even a small rule, despite constant buyer behaviour, stable environmental conditions and unchanged market operations and company should be prepared for that changed. 6 In the field of “being international “the application of strategies covering the need for co-ordination and optimizing their market operation with respect to the new market conditions strategies for reducing the need for co-ordination is of major importance. 6.1 Can co-ordination strategies change the extent of interdependencies on converging markets? Answer this question separately for strategies covering the need for co-ordination and for strategies for reducing the need for co-ordination. Taking into a count that the co-ordination strategies are used for adapt markets operations and optimize international process, if is known that the interdependence of country markets are increasing; it is possible to say that the use of strategy to covering the need for co-ordination, will not change the extent of interdependencies. If a company decides to make an instrumental adaptation (for example in the pricing policy), it does not mean that the interdependency in the involved countries will change, maybe it could give benefits for the company, but the interdependencies level will be the same. The reason why it happened is because they are following a common policy. In the case of the strategies that could reduce the need for co-ordination, if a company implement a policy for the reduction of seller related feedback, reduction of buyer related feedback or the reduction of competition related feedback, it is obviously that the interdependence decrease, because these are strategies to reduce the control of the market and continue operating but with less intervention.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

6.2 Is the strategy of product modification a strategy covering the need for co-ordination or a strategy for reducing the need for co-ordination and– if applicable – for which type of interdependency the extent will be reduced? (2 points). Pag 348 -349 The strategy of product modification is used for reduce the necessity of co-ordination and to reduce of the buyer feedback, as consequence it will be reduced the demand feedback. A good example for understand the context is the Dacia case where a product modification strategy could be applied by factory guaranties; it only works in a specific country market. The idea of Renault resides in oriented the whole process of conception in the direction of trustworthiness and economic actions by using some cautiously checked solutions, the use of the same elements on several models by a manufacturer is a guaranty of reliability for customers and a source of savings and the job of acting as a highly incorporated, low-cost production base, skilled of producing entry-level cars that are modern, high quality and robust and of meeting the needs of customers in countries where car ownership is still a remote dream. Logan was a successful project in all ways; Renault could conquer markets in diverse parts of the world, giving a solution from people how need a good transport solution with low cost. 6.3 Mention and describe the two types of product modification, which can be used within the strategy of product modification. (4 points) It is possible to differentiate two types of product modification:

1) Actual product modification (Material functional qualities): a. Modification of physical product elements or supplementary services b. Primarily packaging and / or services (functional qualities) c. Product-core modification playing a lesser role (advantages of

standardization) 2) Informational product modification (Product appearance):

a. Communication-policy differentiation in general b. Primarily labeling, (packaging)

They will be explained and an example of the modification will be enounced: Material functional qualities:

• Packaging: the whiskey in Spain is sold in a litter bottle, in Venezuela is sold in bottles of 0.75 liters.

• Product core: DVD in Spain are sold with a region specification “Zone 3” in France it has gotten different specifications and features and its named “Zone 2” that is why the costumer could only buy the product and the movies from the country that he is from.

• Service: one example is the refrigerator or electronic devices where the company must give specific guaranties to the costumer from each country. This technique helps to acquire the product in the country.

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

Another example is the alcohol that is sell at the supermarket with other product as a give (a glass or some souvenirs) it will get the customer attention.

Product appearance:

• Labeling: Leonisa is a lingerie Colombian company that sells its products with one label in its country, and sells with another different label in Mexico.

7 In the field of “being international” the co-ordination task can be executed using the strategy of instrumental adaptation. pag301- 302 7.1 Will the extent of existent interdependencies be changed through the application of the strategy of instrumental adaptation? Explain your answer briefly. (2 points) With the application of this strategy the company could change their own environmental conditions but I will not changed or influence the extent of existent interdependencies, because the interdependency depends on a special agreements between countries, no for the individual company strategies. The meaning of an instrumental adaptation is that the company should use instruments for correctly adapting itself to the environment and avoid coordination problems at its internalization process. 7.2 Describe the tendency of change concerning the international marketing mix through the application of the instrumental adaptation strategy. Describe the changes that would be present in converging markets and those which would be present in diverging markets. (2 points) The meaning of an instrumental adaptation is that the company should use instruments for correctly adapting itself to the environment and avoid coordination problems at its internalization process. The marketing mix definition is an important instrument of decision due to the fact that depending on the company strategy (standardization /differentiation) the marketing mix should be identified, so the decision takers will set the way that the product policy, price policy, communication policy and distribution policy should be mixed and applied. In addition, it is fundamental the feedback received from the different actors (demand, competence and institutions) for improve the marketing mix and the communication levels around the company. Another instrument it’s the interdependency of the actors, which means that it is important to analyze the interdependency of the actors and to increase it (if it exists).

The tendency of change concerning the international marketing mix through the application of the instrumental adaptation strategy is different if it is presented in diverging markets or in converging markets. The changes of diverging markets are set according with the heterogenization of different factors, they could be increased or decreased according with the company situation, the increase or the decrease will have an effect in the company and in the company environment. The first of the factors is the analysis of the heterogenization of the institutional conditions; another factor is the heterogenization of the behavior of market partners (differentiation of market operations according with the heterogenization of actors (buyers/competence/partners) preferences. On the other hand the changes of converging markets need another changes for avoid the coordination problems. Problems could be independent or dependent and according to it

Marcela Gómez

Paola González

Iván Ponsoda

Marisol Londoño

company must set its strategy. In the definition of the problems it is important to include the market participants and the institutional condition. An additional factor to keep in mind is that the adaptation process should increase standardization. Here is important to point out that the fundamental decision-making problem in would be independent from the orientation of market changes (homogenization and heterogenization). The following graphic would summarize the key factors of the changes on converging markets.

Illustration 10 Coordination problems in converging markets. (K. Backhaus, et al, 2005)