Mb0046 Unit 15-Slm

Marketing Management Unit 15

Sikkim Manipal University Page No. 356

Unit 15 International Marketing Management

Structure: 15.1 Introduction

Objectives

15.2 Nature of International Marketing

15.3 International Marketing Concept

The strategic concept of marketing

15.4 International Market Entry Strategies

15.5 Approaches to International Marketing

15.6 International Product Policy

15.7 International Promotions Policy

Advertising

Direct mailing

Personal selling

Sales promotion

Trade fairs and exhibitions

15.8 International Branding

15.9 Country of Origin Effects

15.10 International Pricing

15.11 Summary

15.12 Glossary

15.13 Terminal Questions

15.14 Answers

15.15 Case Study

15.1 Introduction

In the previous unit we dealt with the contemporary concepts in marketing

like CRM and Internet marketing. We analysed rural and services marketing,

the definitions, forms, and significance of customer relationship

management. In this unit, we will deal with another modern concept that has

gained popularity in the last two decades-international marketing. The study

of international marketing is intended to provide marketers with a systematic

methodology and intellectual framework to understand and work in the

global marketplace. It also helps marketers to learn and harness the

fundamental integrity that exists within diverse business laws found in



different countries. International business embraces areas such as

outsourcing, third country manufacturing, and manpower deployment in

different countries. International trade covers the areas of imports and

exports, including technology transfer and international financing for

projects. International marketing includes various functions like researching

international market, selecting products, pricing, distributing channels,

advertising, and promoting in selected countries.

International marketing may be distinguished from local marketing as it is

governed by the rules and regulations of the host countries. It also deals

with the cultural diversities that exist between nations as companies attempt

to get benefited by these various cultures, by promoting ethnic products that

have remarkable value for the host-country buyers. Multinational

Corporations (MNCs) need to understand the work pattern of business in

different countries. They may opt for multi-domestic operations where each

host country has got separate and unique work system as desirable and

useful to the host country. Indian business establishments enjoy several

advantages in international markets due to low-cost labour, availability of

raw materials, and skilled manpower. International marketing has become

significant from the last decade as most countries have preferred

globalisation and encompassed the market economy. With changing

landscape, India witnessed dramatic changes since 1991 in marketing, with

the onslaught of international players, offering better brands and

comparatively better products. International marketing can be defined as

‘marketing carried on across national boundaries spanning a number of

countries’. It is the performance of business activities that direct the flow of

goods and services to consumers or users in more than one nation. It is

different from domestic marketing as the exchange takes place beyond the

frontiers, thereby involving different markets and consumers who might have

different needs, wants, and behavioural attributes in their respective

countries.

The international marketer sets up his own sales subsidiary and participates

in developing the entire marketing strategy for foreign markets. International

marketing companies need to decide how their internationalisation strategy

can be adopted within the overall marketing strategy, including their

marketing programmes of sales, advertising, and sales promotion in both

domestic and international markets. The firm also needs to understand the



different international marketing environments that the company plans to

operate in. Understanding different cultural, social, and political

environments becomes part of the internationalisation process, leading a

firm to operate in various foreign markets. International marketing helps in

understanding different marketing environments and managing the

differences across the markets in tune with its domestic operations.

Case Let

Indian Carpet Industry

In this era of globalisation, every company and every industry wants to go

global. India also wants to sell carpets to the foreign markets. This can

only be done through exports when the profits in the exports increase we

go in for International Marketing, which lead to international trade and

international business. How it happens? This happens only when our

company becomes international, multinational and transnational.

The carpet industry at present is passing through international marketing

stage.

The carpets that are exported follow the concept of Ethnocentricity. It

means they see only similarities in markets and assume the products and

practices that succeed in the home country will, due to their demonstrated

superiority, be successful anywhere In order to make the carpet industry

an MNC the export of carpets have to increase to more than $ 100 million

turnover per annum. This can only happen in case this industry is properly

organised and given more incentives by the Government being a labour

intensive industry.

The question of its becoming transnational cannot arise unless this

industry falls in the hands of MNC itself and a large number of carpet

weavers are trained on a large scale through Carpet Management

Schools which is a far of dream. However, effort should be made to give

more incentives to the carpet weavers so that the child labour in this

industry is completely abolished and the objection of the importers on the

use of child labour is removed.

(Source: International Marketing-3rd Edition, PK Vasudeva, Excel Books)



This unit provides answers to the following questions:

What is the nature and concept of international marketing?

How can companies enter the international market?

Why companies want to enter the international market?

How do companies operating in international market decide their product

mix, promotion mix and prices?

Objectives:

After studying this unit, you should be able to:

describe the nature of international marketing

realise the concept of international marketing

explain the international market entry strategies

analyse the approaches to international marketing

realise the international product policy

explain the international promotion policy

analyse the international branding policy

describe the concept of ‘country of origin effects’

realise international pricing policy

15.2 Nature of International Marketing

International marketing, with its certain distinctive characteristics, is

functionally very similar to domestic marketing. What is dissimilar in

international marketing is the scope of the product market situation and

strategies followed by players to cater to the international markets.

Marketing can be conceived as an integral part of two processes. They are:

1. Technical

2. Social

In technical process, domestic and international marketing are identical. The

technical process includes non-human factors such as product, price, cost,

brand, etc. The basic principles regarding these variables are of universal

applicability.

The social aspect of marketing is unique in any given stratum, because it

involves human elements, namely, the behavioural pattern of consumers



and the given characteristics of a society, such as customers, attitudes,

values, etc. It is obvious that international marketing, to the extent it is

visualised as a social process, will be different from domestic marketing.

International marketing has to take care of such barriers to free trade, which

may be both visible and invisible. Even when there is complete free trade,

logistics may create problems totally different from those experienced in

domestic operations.

Since human needs and wants will have different attributes in foreign

markets, perception of these needs will require an overall appreciation of the

environment, and the social and individual value systems will be prevalent in

each country.

Self Assessment Questions

1. International marketing is very similar to domestic marketing, only the

products are modified according to cultures. (True/False)

2. Price is a part of the ____________ process that forms a part of

marketing.

15.3 International Marketing Concept

During the past three decades, the concept of marketing has changed

dramatically. It has evolved by focussing on the product to make it a “better”

product, where better was based on internal standards and values. The

objective was profit, and the means to achieve that objective was selling or

persuading the potential customer to exchange his/her money for the

company’s product.

15.3.1 The strategic concept of marketing

By the 1990s, it was clear that the “new” concept of marketing was outdated

and the times demanded a strategic concept. The strategic concept of

marketing, a major evolution in the history of marketing thought, shifted the

focus of marketing from the customer or the product to the customer in the

context of the broader external environment. To succeed, marketers must

know the customer in a context including the competition, government policy

and regulation, and the broader economic, social, and political macro forces

that shape the evolution of markets. In International marketing, this may

mean working closely with home-country government trade negotiators and



other officials and industry competitors to gain access to a target-country

market.

The strategic concept of marketing focuses more on stakeholders’ benefits

than profit for the company. Stakeholders are individuals or groups who

have an interest in the activity of a company. They include the employees

and management, customers, society, and government, to mention only the

most prominent.


3. If a foreign company wants to succeed in India, it has to work closely

with the Indian government. (True/False)

4. Earlier, the objective of marketing was generating profits but the focus

has shifted to stakeholder satisfaction. (True/False)

15.4 International Market Entry Strategies

There are two methods to entry into foreign markets. They are indirect

exporting and direct exporting. In the first method, the manufacturers take

the help of merchant exporters to get products exported to foreign markets.

In direct exporting, the manufacturers decide to export themselves. Thus,

the manufacturers have to decide, whether they will go directly for exports or

take the help of merchant exporters who are very often recognised as export

houses, trading houses, etc. Some government trading organisations like

State Trading Corporation, MMTC, and National Small Industries

Corporations also act as trading houses.

There are two specific reasons for why a manufacturer may resort to direct

exporting:

1. Success in foreign markets can boost the manufacturer’s image in the

domestic market.

2. There are a number of benefits available to exporters as, for example,

exemption from income tax for export profits.

Apart from direct and indirect exporting, the other popular methods of

entering international markets are:

Joint ventures

Strategic alliances



Direct investment

Contract manufacturing

Franchising

Joint venture

A joint venture is a strategic alliance where two or more parties, usually

businesses, form a partnership to share markets, intellectual property,

assets, knowledge, and profits. A joint venture differs from a merger, in the

sense that there is no transfer of ownership in the deal.

For example, Best Price Modern Wholesale is a joint venture between Wal-

Mart and Bharti Enterprises. American retail giant Wal-Mart chose this route

to enter the Indian market.

Figure 15.1 depicts the first best price modern wholesale store that was

opened in Amritsar, Punjab

Fig. 15.1: Best Price Modern Wholesale Store in Amritsar

(Source: http://www.eurobrandsindia.com/blog/wp-

content/uploads/2009/08/newsmlmmd-4bd3c2be31ce8d8a514158a4166495cc-

111_india-s-bharti-wal-mart-best-price-modern-wholesb.jpg?w=300)

Establishing a joint venture with a foreign firm has long been a popular

mode for entering a new market. The most typical joint venture is a 50/50

venture, in which there are two parties, who hold a 50% ownership stake

and contribute a team of mangers to share operating control.

http://www.eurobrandsindia.com/blog/wp-content/uploads/2009/08/newsmlmmd-4bd3c2be31ce8d8a514158a4166495cc-111_india-s-bharti-wal-mart-best-price-modern-wholesb.jpg?w=300





Strategic alliance

A strategic alliance is formed when two or more businesses join together for

a set period of time. The companies, generally, are not in direct competition,

but have similar products or services that are directed towards the same

target group. For example, Tata Motors and Fiat entered into a strategic

alliance to cooperate in areas like research and development, and

marketing.

In the new economy, strategic alliances enable business to gain competitive

advantage through access to a partner's resources, including markets,

technologies, capital, and people. Choosing a strategic alliance as the entry

mode will overcome some of those problems like established competition,

hostile government regulations, and operating complexity. In the process, it

will help reduce the entry cost.

Direct investment

Through Foreign Direct Investment a firm invests directly in facilities to

produce and/or market a product in a foreign country. For example, in the

early 1980’s, Honda, a Japanese automobile company, built an assembly

plant in Ohio and began to produce cars for the North American market.

These cars were substitutes for imports from Japan. Once a firm undertakes

FDI, it becomes a Multinational Enterprise (The meaning of Multinational

being “more than one country”).

Contract manufacturing

Contract manufacturing is a process that establishes a working agreement

between two companies. As part of the agreement, one company will

custom produce parts or other materials on behalf of their client. In most

cases, the manufacturer will also handle the ordering and shipment

processes for the client. As a result, the client does not have to maintain

manufacturing facilities, purchase raw materials, or hire labour in order to

produce the finished goods.

Companies like D-Link, TVS Electronics, and WeP Peripherals offer contract

manufacturing services.

Franchising

Franchising is basically a specialised form of licensing in which the

franchiser not only sells intangible property (normally a trademark) to the



franchisee, but also insists the franchisee to abide by strict rules with

respect to how business is done. The franchiser will also often assist the

franchisee to run the business on an ongoing basis.

While licensing works well for manufacturers, franchising is often suited to

the global expansion efforts of service and retailing. McDonald’s, Tricon

Global Restaurants (the parent of Pizza Hut, Kentucky Fried Chicken, and

Taco Bell), and Hilton Hotels have all used franchising to build a presence in

foreign markets.


5. Future Generali is a joint venture between Future Group of India and

Generali of______________

(a) Germany

(b) USA

(c) Italy

(d) Japan

6. Maruti Suzuki is an example of __________________

(a) Joint venture

(b) Strategic alliance

(c) Contract manufacturing

(d) Franchising

7. In ___________method exporting, there are no merchants involved.

8. The Body Shop has entered India through the ___________route.

15.5 Approaches to International Marketing

In this section, you will learn about the various approaches to international

marketing, from domestic marketing to global marketing practice. The

following are the various approaches:

Domestic marketing

Export marketing

Multinational

Multi-regional marketing

Global marketing

Let us now study the various approaches in detail.



Domestic marketing – It is referred to as marketing aimed at a single

market in which the firm faces a single set of competitive, economic, and

market issues and must deal with customers defined by geographic

boundary. This is essentially a single country marketing strategy.

Export marketing – The definition and scope of export marketing starts

when a firm decides to undertake marketing activities beyond its

domestic market or from its base market. This is a situation when

products are shipped from one country to another country for the

purpose of marketing. The company not only concentrates on business

in the domestic market but also markets on business in different

countries.

Multinational marketing – The multinational marketing results in the

development of MNCs like Unilever, Kodak, Procter and Gamble. They

operate in many countries and have developed assets abroad and

market products and services across many geographic boundaries.

They compete by developing multi-domestic strategies for each country

to suit their business operations to that country’s marketing conditions.

Multi-regional marketing – It leads to multi-regional marketing. As you

have seen above, multinational marketing often leads to individualised

marketing strategies for host country adaptability. It is also wastage of

scarce resources leading to diseconomy of scale of operation. So

companies are looking at multi-regional marketing for achieving their

economies of scale and higher productive utilisation of resources.

Country operations are now grouped region wise, depending on the

similarity of product market situations. Strategies for multi-regional

marketing cover many similar regions like South East Asia, Pan Pacific

regions, European markets, etc. Such integrations are based on either

similar product market situations or on the basis of liberal trade pacts

between two countries.

Global marketing – A global marketing strategy is the creation of a

single marketing strategy at a global scale. It involves creation of a

single strategy for a product or service or a corporation for the entire

global market, which encompasses many markets at the same time and

is aimed at leveraging the commonalities across many markets. While in

other cases, marketing strategies were tailored to the specific product



market situation in that country, global marketing strategies serve as a

guideline throughout the world market.

Activity 1

Liberalisation has helped Indian companies to go global. Conduct a study

on what policy changes in the Indian market has led to increase in global

marketing.


9. If a company sells its product only in the Indian sub-continent, it is

involved in ___________ marketing.

(a) Domestic

(b) Multinational

(c) Multi-regional

(d) Global

10. Unilever follows a global marketing strategy to sell its products and

services. (True/False)

11. In export marketing, the product is adapted as per the culture of the

recipient country. (True/False)

15.6 International Product Policy

The demand patterns and benefits sought by consumers vary across

different product markets in the context of an international market. A

marketing manager planning to go global has to:

1. Identify the need for product planning

2. Take a decision about product adaptation versus standardisation

Need for product planning

Consumers will buy only what suits them. This may not be what the

company is presently manufacturing. What is acceptable in India may not be

accepted in foreign markets. Again, what is acceptable in Germany may not

be acceptable in the UK. Tastes may differ. This may be important

especially in the case of manufactured food products. There are

100 varieties of Nescafe to suit the tastes of people in different countries.

Thus, export marketers need a different approach to product planning.



Product adaptation

A product that is perfectly good for one market may have to be adapted for

another. There can be many reasons for this. Physical conditions may be

different. Functional requirements may vary from market to market. People

in different places may use products differently or for different purposes. The

outdoor garden furniture would require a different type of finish as compared

to furniture used indoors. Again, a manufacturer of men’s suits has to take

into account that the arms of Frenchmen tend to be longer in proportion to

the rest of their bodies than those of Germans. In some cases, cultural

factors are very important. A very simple and visible example can be seen in

case of automobiles. American automobile majors like Ford and GM

manufacture left hand drive vehicles while they also manufacture right hand

drive vehicles for India. Figure 15.2 depicts a Ford car with steering on the

left side and figure 15.3 depicts a Ford car with steering on the right side-the

model that is sold in countries like India.

Fig. 15.2: Ford Car with Left Hand Drive

(Source:

http://imganuncios.mitula.net/used_2010_ford_focus_c_max_for_sale_

94982815419174805.jpg)



Fig. 15.3: Ford Car with Right Hand Drive

(Source: http://www.autoindiaforum.com/wp-content/uploads/2009/03/ford-

ikon-2.jpg)

Product standardisation

Even though product adaptation becomes inevitable in the case of certain

products, it should be realised that there is sound economic logic behind a

product policy, which suggests uniformity in all markets. There are various

factors in favour of international product standardisation as per the following:

Economies of scale in production – When only one standard version

is marketed in all the areas, it will be possible to have larger production

runs, which will result in lower manufacturing costs.

Economies in product research and development – Similarly,

product standardisation will allow recovery of the costs incurred in

product research and development from the entire sales. This will

reduce the recovery period and also lower the break-even point.

Moreover, additional expenditure on adapting product to each individual

market can be avoided.

Consumer mobility – Consumers are becoming increasingly more

mobile and transcontinental travel is now fairly common. A consumer,

who is loyal to a particular brand in his/her home market, is more likely

to remain loyal even in a foreign country when the product is the same.

Made-in-image – When the name of a country is associated with a high

standard of quality in the minds of the consumers, a product

manufactured in that country may enjoy a psychological premium in the

foreign markets.



Impact of technology – Industrial products generally tend to have

standard specifications and do not require much adaptation for foreign

markets, unless climatic and similar considerations call for it.

The basic argument in favour of uniform multinational product strategy is

that it is least costly, in terms of both manufacturing and marketing costs for

the company. Pepsi and Coca-Cola are two outstanding examples, which

offer the same product and follow identical promotional themes in all the

markets. Therefore, the question before the management would be to find

out how far uniformity would be feasible, and at the same time, a profitable

strategy.

Figure 15.4 depicts an image of Samsung 3D LED television. Samsung sells

the same product without any changes throughout the world.

Fig 15.4: Samsung Sells the Same 3D LED TV Across the Globe

(Source: http://www.samsungtvrepair.biz/wp/wp-content/uploads/home-tv-

repair-samsung.jpg)


12. Tide sells detergent jars in the western market but sachets and packets

in India. It is an example of product ________________.

13. Increasing globalisation can be one of the reasons of opting for product

standardisation. (True/False)

15.7 International Promotions Policy

In case a firm wants to export directly, it will have to bring its product to the

notice of potential buyers. But this is a more difficult task than the



corresponding task in domestic marketing for three main reasons. They are:

The exporter does not have sufficient information as a basis for making

promotional decisions

Customer abroad has no previous knowledge of the firm and its

products

Only limited effort is possible because of resource constraint

Various elements of the promotion mix used in international marketing are

discussed in the following subsections.

15.7.1 Advertising

The basic difference between domestic and international advertising and

promotion is essentially a cross cultural communication and, therefore,

international promotion will have to take into account the social customs,

attitudes, beliefs, and other similar factors. Of the various means of

promotion, such as advertising, direct mailing, point of purchase displays,

trade fairs and exhibitions, advertising is the most susceptible to such

sociological differences.

Figure 15.5 depicts a Volkswagen Jetta’s print ad published in India. It has

been made keeping the Indian audience in mind.

Fig. 15.5: Volkswagen Jetta Ad

(Source:

http://files.coloribus.com/files/adsarchive/part_1482/14820905/file/volkswagen

-jetta-ravan-small-61179.jpg)

In the case of designing a campaign for the international market, the

advertiser will have to closely work with the advertising agency appointed to



do the job. Three specific questions are to be answered in this connection.

They are:

1. What to communicate?

2. Whom to communicate?

3. How to communicate?

What to communicate depends on the corporate objective related to the

advertising campaign. The objective may be to increase sales, establish the

brand name, indicate market presence, etc.

Market segment identification is what is meant by the question of target

audience. The segmentation base for consumer products may be age, sex,

income, and other relevant marketing variables.

How to communicate concerns the choice of media. There are various

media available, especially in the developed countries, such as TV, radio,

specialised journals, and cinemas.

15.7.2 Direct mailing

One of the most cost effective methods of promotion is the direct mailing

method. Two distinctive features of direct mailing method are:

1. It is selective

2. It is personal

It is selective because the approaches are made directly to only those who

have been identified as the target audience.

It is personal because the letter and other publicity materials are mailed

either by name or by designation to the identified receiver.

The cost involved in direct mailing is the lump sum cost of producing the

publicity material, plus the cost of each letter, envelope, and the postage.

Considering that all letters will not be responded to, the real cost should be

calculated on cost per response.

15.7.3 Personal selling

Though the oldest method, it continues to be the most widely used and

effective means of reaching the buyers. This involves an alive, immediate,

and interactive relationship between two or more persons.

Personal selling can also cultivate long-term personal relationship with the

customer. Personal selling can also be used mainly in industrial markets for

selling technical goods, such as machinery and equipment.



15.7.4 Sales promotion

Another increasingly popular method is stores promotion where a country’s

merchandise is promoted by a chain or a department store. India had earlier

arranged such promotion in association with Bloomingdales in U.S.A. and

Gallerie Laffaitte in Paris. The most important event in the category of stores

promotion for Indian products, however, was the ‘Expedition India’

organised by one of the largest US Chain Stores, J.C. Penny, along with

their Indian associate Banaras House. Air India and Government of India

Tourist Office also collaborated in this venture.

15.7.5 Trade fairs and exhibitions

Fairs and exhibitions constitute the means of presenting goods and services

in an attractive manner with the aid of colour, light, and motion, in order to

catch the imagination of the visitors, attract their attention, and get them

interested in the objects displayed. They help reach the public which may

not be reached in any other way or which by nature would disregard other

media of publicity. Fairs are more useful for industrial products where

demonstration is very effective.

The India Trade Promotion Organisation participates in nearly 40

international fairs and encourages participation by Indian parties. ITPO

organises India International Trade Fair that is held in New Delhi every year.

Businesses from different countries display their products in the event.

Figure 15.6 depicts a snapshot of India International Trade Fair.

Fig. 15.6: A Snapshot of Indian International Trade Fair, New Delhi

(Source:

http://2.bp.blogspot.com/_BJSXUuHCCvM/SwOdY9ZV8XI/AAAAAAAAANk/

Z4kB_Lf_gUM/s1600/Pragati_Maidan,_inside_hall_18_(3).JPG)



Activity 2

What are the various export promotion councils in India and how do they

help in promoting opportunities for Indian marketers across the globe?

Prepare a report on this.


14. The most important part of international advertising is ______________

communication.

(a) Product

(b) Cross-cultural

(c) Quality

(d) Benefits

15. Direct mailing is a non-personal and secretive method of product

promotion. (True/False)

16. India International Trade Fair is organised by the _______________.

15.8 International Branding

The traditional orientation of branding suggests that brand name is a part of

the brand consisting of words or letters that form a means to identify and

distinguish a firm's offer. A brand mark is the symbol or pictorial diagram

that helps in the identification of the product.

There are generic brand names that have become a generically descriptive

term for a class of products like Nylon, Aspirin, Kerosene, and Zipper.

A trademark is a brand mark to which the owner legally claims exclusive

access. Trademark protection confers the exclusive right to use brand name

with any trademark, logo, slogan, or product name aberrations.

Branding strategies

There are four recognised branding strategies:

1. Corporate umbrella branding

2. Family branding

3. Range branding

4. Individual branding

Let us now study the four recognised branding strategies in detail.



1. Corporate umbrella branding – It is used by firms such as Heinz,

Kellogg's, and Cadbury’s. The corporate name is used as the lead name

for all their products, for example Kellogg's Healthwise, Kellogg's

Frosties, Kellogg's Corn Flakes.

2. Family umbrella – Names are used to cover a range of products in a

variety of markets. For example, Marks and Spencer use their St

Michael brand for food, household goods, and toiletries.

3. Range branding – It is used for a range of products with a particular link

in a specific market. For example, GlaxoSmithKline uses brand Horlicks

for its range of health foods.

Figure 15.7 depicts the range of Horlicks products that includes health

drinks for adults, teenagers, women, and kids, and biscuits.

Fig. 15.7: Range of Horlicks Products

(Source: http://2.bp.blogspot.com/-OdfSnK_Dnk0/TMXOQ3I_-

BI/AAAAAAAACck/txvSKr1rdv0/s1600/horlicks+megabrand.jpg)

4. Individual brand – Names are used with individual products in a

particular market, with different weights, colours, flavours, and pack

sizes. Procter & Gamble and Unilever use individual brand names such

as Clinic Plus, Ariel, and Ponds with no reference to the corporate

name.

Brand piracy

One of the most difficult challenges for brand management is dealing with

brand piracy. Research suggests that the problem of forgery of famous

brand names is increasing and many fake products have been found to

originate in developing countries, mainly the developing countries of Asia.

The issue of brand piracy is clearly costing international companies vast

revenues and the United States has led the way in insisting that



governments crack down on the companies undertaking the counterfeiting.

The music industry has particularly suffered from illegal practices. A report

published by the International Federation of the Phonographic Industry

(IFPI) in 2003 showed that the illegal music market was worth USS4.6bn

(£2.8bn) globally. The myth of music piracy was of a victimless crime but the

IFPI reported that the money was going to support criminal gangs as well as

sucking out money from the legitimate music industry.


17. BMW uses ____________ branding policy.

(a) Corporate family umbrella

(b) Family umbrella

(c) Range

(d) Individual

18. Pampers and Rejoice are individual brands of ………………………..

15.9 Country of Origin Effects

Various factors like brand image, brand personality, brand associations, and

promotional messages influence the perception of customers about the

quality of a brand. One such factor that influences an individual’s perception

towards brands is the country where it is made. This is referred to as the

country of origin effects.

For example, Italian and German cars are world renowned, Japanese

electronics products and Swiss chocolates are popular among people.

Factors that contribute to the country image are:

Economy of the country

Technology

Wealth index

Regulatory mechanisms

Government

Business history

Let us now study the factors that contribute to the image of a country in

detail.



Economy – The level of economic growth acts as a key alternate for the

country’s other activities. You can see that all the countries mentioned

above as examples are highly industrialised and developed countries.

Technology – This factor is generally, directly related to the level of

economic growth of the country. Higher the technological capability of a

country, more trusted will be its products, especially technical products.

Wealth index – This refers to the perceived or actual overall wealth of a

country as indicated by the number of millionaires and billionaires, level

of consumption, size of the luxury and leisure industries, etc.

Regulatory mechanisms – With the increasing popularity of

international marketing, the existence and competence of regulatory

mechanisms (like anti-piracy laws) have become a critical factor in

creating the image of a country.

Government – Reputation of the government and its corporate

governance – how bureaucratic, transparent, corrupt or efficient is a

country’s government is instrumental in building the image of the

country.

Business history – This refers to the development of business in a

country and what a country has specially been known for traditionally.

For example, India has always been known as agriculture based

country.


19. Technical products from India might not sell in U.S.A. as compared to

those from South Korea. (True/False)

20. Watches from Switzerland are considered to be one of the finest across

the globe. (True/False)

15.10 International Pricing

Pricing is a critical issue in international marketing, as the value of the

product will vary from market to market. For fixing export prices, the

minimum to be charged for exports is provided by direct costs and the

maximum is determined by ‘what the traffic will bear’. The following sources

may be utilised for finding out the level, which the traffic can bear.



Previous files, if the firm has exported in the past, with suitable

adjustment for the possible inflation in the target market.

Average unit price realised for exports made to different markets from

the Monthly Bulletin of Foreign Trade Statistics – Exports.

Average unit price paid by importers in the target market to the various

suppliers from its import statistics.

A visit to trade fairs.

A reference to the departmental store catalogues which give the retail

prices of the various goods sold by them.

Another point to be noted while pricing for exports is that like domestic

marketing, price is only one element of international marketing mix. Some

non-price factors to be considered in international marketing include the

following:

Very often, importers do not have adequate confidence in the quality of

goods produced in India and other developing countries. For example,

Indians had to sell their storage batteries 10% cheaper in Saudi Arabia

than U.S. and European batteries, even though the quality was

comparable.

If products are well differentiated and they have built up a brand image

for themselves, manufacturers are in a position to charge comparatively

higher prices. Brand names like Dunlop, HMT, Bata, GKW, Lucas, L&T,

Kirloskar, etc. have already built up a good image and these products

are able to realise a much higher price.

People may be willing to pay a very high price, if the particular goods

catch their fancy. This applies particularly to handicrafts manufactured

by developing countries.

It may be useful to note that it is easier to sell in developed countries

with a higher price tag but in developing countries, a lower price may

help in increasing sales. In general, price constitutes a barrier to

demand when it is too low just as much as when it is too high.


21. As _____________ of a product will vary in different markets, pricing

decisions are important in international marketing.

22. Price of a product is often linked to the image of the brand and

___________.



15.11 Summary

Let us recapitulate the important concepts discussed in this unit:

International marketing is the process of focusing the resources and

objectives of a company on marketing opportunities at international

level.

The main approaches to international marketing include export

marketing, multinational marketing, and global marketing.

Exporting is a mode of entry into international markets. Exporting to a

foreign country can be direct or indirect. Apart from this, other entry

strategies include joint venture, strategic alliance, direct investment,

contract manufacturing, and franchising.

Multinational companies operate in different countries with a marketing

programme which can either be adaptable to a specific country’s market

situation or by standardising the offer across the globe.

The international marketing programme takes into account issues like

product planning, pricing decisions, mode of entry, and promotion mix

decisions for international market entry.

The basic difference between domestic and international promotion is

that the latter is essentially a cross cultural communication.

15.12 Glossary

Brand piracy: The act of naming a product in a manner which can result in

confusion with other better known brands.

Contract manufacturing: A firm that manufactures components or

products for another "hiring" firm.

Domestic marketing: It is a form of marketing in which the firm faces only

one set of competitive, economic, and market issues.

Global marketing: The performance of business activities that direct the

flow of goods and services to consumers or users in more than one nation.

International marketing: It is the performance of marketing across two

different countries.

Multinational marketing: It is the marketing activity of MNCs, done through

direct investment and asset creation across geographic boundaries.



Stakeholders: A person, group, or organisation that has direct or indirect

stake in an organisation because it can affect or be affected by its actions,

objectives, and policies.

15.13 Terminal Questions

1. How is international marketing different from domestic marketing?

2. List the factors that influence the product mix in international marketing.

3. “The use of media requires global adaptation.” Do you agree? Justify

your answer by giving suitable examples.

4. Will the pricing and product policy of a multinational firm be different in a

developed and an underdeveloped country? Justify your answer.

5. Design strategies for international market place for a company

marketing Indian handicrafts.

6. Describe the Country of Origin effects.

15.14 Answers


1. False

2. Technical

3. True

4. True

5. (c)

6. (b)

7. Direct

8. Franchising

9. (c)

10. False

11. False

12. Adaptation

13. True

14. (b)

15. False



16. India Trade Promotion Organisation

17. (a)

18. P&G

19. True

20. True

21. Value

22. Quality

Terminal Questions

1. Domestic marketing focuses on a single nation whereas international

marketing focuses on more than one nation. For more details, refer

section 15.2 and 15.5.

2. The target audience, their needs, government regulations, culture, etc

influence international product mix. For more details, refer section 15.6.

3. The social and cultural system of every country is different, hence

adaptation is required. For more details, refer section 15.7.

4. Yes, the strategies will differ because of the differences in purchasing

power. For more details, refer section 15.6 and 15.10.

5. Product needs to be standard, priced, and promoted as per the country.

For more details, refer section 15.6, 15.7 and 15.10.

6. Consumer’s perception towards a brand is influenced by its country of

origin. For more details, refer section 15.9.

15.15 Case Study

Microsoft Re-Thinks its Unified Pricing Strategy

Microsoft is studying ways to offer its software at different price points

around the world, signaling a possible departure from its unified global

pricing practice.

Although it has already made pricing concessions in some isolated cases,

such as Thailand, where competitive pressure from open source products

had been mounting, the Redmond, Washington-based vendor has generally

stuck to a system where its products are priced the same around the world.



Now, facing pressure for change from some customers, particularly in

emerging markets, Microsoft is working with governments in those countries

to price its software in a way that is relevant to that market, Martin Taylor,

general manager of platform strategy at Microsoft, said in a conference call

with financial analysts on Friday.

"From a pricing perspective, I think one of the most difficult challenges that

we work on is to really understand, let's call it this 'Big Mac' index, in terms

of how much does a Big Mac cost in India versus in New York versus in

Taipei, and how do you map a similar Big Mac index to software? It's a very

difficult problem," Taylor said, according to a transcript of the call.

Fig. 15.8: One of Microsoft’s Most Popular Products

(Source: http://pimisc.priceindia.in/software/wp

content/uploads/2008/10/microsoft-office-2007.jpg )

The Big Mac index is an annual listing of prices for Big Mac hamburgers in

several countries compiled by The Economist magazine.

One problem for Microsoft is that, unlike hamburgers, software doesn't spoil,

which makes it easier for buyers to shop around for a better deal and buy

their software from another country. To address this, Taylor suggested that

Microsoft could offer different prices for the different language editions of its

products.

"English speaking is an area that we have to really think about," he said.

"When you have markets where you have specific languages then it's a little

bit easier to do."

Microsoft is working with several unspecified governments to tailor its

offerings, Taylor said. "We've got quite a few different initiatives that we're



beginning to work on that we'll be announcing in the coming months," he

said. Taylor didn't provide specifics.

The problem Taylor and his company are facing is a tough one, said Laura

DiDio, a senior analyst at Boston-based The Yankee Group.

"I can absolutely see and sympathise with what he is grappling with. What

can you do? You want to make your products affordable, particularly to

companies in the Pacific Rim, because they just don't have the money, and

then what do you say to your customers in established markets such as

North America and Western Europe?" DiDio said.

DiDio expects Microsoft to come up with a solution for its woes. Not only will

it negotiate on pricing or offer tailored version of its software for various

countries, it will also talk to governments about jobs the company has

created in their region, bring in Chairman and Chief Software Architect Bill

Gates for some star power, and the Bill and Melinda Gates Foundation may

even contribute to a local cause, she said.

"I don't want to suggest that Bill Gates is using his charity as leverage to get

Windows in anywhere, but it certainly does help," she said.

Paul DeGroot, an analyst at Directions on Microsoft Inc. in Kirkland,

Washington, doesn't expect Microsoft to change its global pricing strategy

overnight, but does see some changes happening at the local level.

Discussion Question:

1. Why does Microsoft want to rethink its unified pricing strategy?

(Hint: Due to increasing pressure from environmental conditions in

different countries, Microsoft wants to do away with its unified strategy.)

(Source: infoworld.com)

References:

Tapan, P. K. (2010). Marketing Management: Excel Books, New Delhi.

Vasudeva, P.K. (2006). International Marketing, 3rd Edition, Excel Books,

New Delhi.

Cateora and Graham (2007). International Marketing, McGraw Hill.



E-References:

http://worldacademyonline.com/article/23/111/nature_of_international_m

arketing.html – Retrieved on February 18, 2012

http://en.reingex.com/Product-Policy.shtml – Retrieved on February 18,

2012

http://en.reingex.com/Export-Prices.shtml – Retrieved on February 18,

2012

_________________

http://worldacademyonline.com/article/23/111/nature_of_international_marketing.html

http://worldacademyonline.com/article/23/111/nature_of_international_marketing.html

http://en.reingex.com/Product-Policy.shtml

http://en.reingex.com/Export-Prices.shtml

Mb0046 Unit 15-Slm

Documents

international trade

international pricing

international branding

international markets

international financing

services marketing

internet marketing

local marketing