International Marketing

 What is a Business Market? ◦ Companies that purchase products for the operation of a business or for re-sale.  Five different types of products purchased in a business market: 1.Raw Materials 2.Equipment 3.Supplies 4.Component Parts 5.Services

 Raw materials: unprocessed products used to produce other products such as chemicals, minerals or natural agricultural products  Equipment: capital equipment (land, buildings, major machinery) or operating equipment (less expensive equipment used to operate a business such as computers or telephones)  Supplies: materials consumed in the operation of the busines  Component parts: partially completed parts assembled to create a finished product such as a steering wheel or tires on a car  Services: Business markets use a large variety of services including transportation, banking, promotion, accounting, clerical, maintenance

 Total sales in business markets are larger than consumer markets  Business markets compete mostly on price.  Exporting is more common in business to business (B2B) markets.  Business markets operate on Derived demand: the demand that comes from the end purchaser

 Demand that comes from the end user ◦ Raw materials are sold to manufacturers that create component parts ◦ Component Parts are sold to assembly plants ◦ Their final products are sold to distributors ◦ Distributors then sell the product to retailers ◦ The retailer is what drives the first transaction

 Industrial markets are a type of business market  Each business market has a distinct characteristic that impacts international marketing strategies: ◦ Industrial Buyers ◦ Relationship Development ◦ International Orientation ◦ Uniformity

 Classification: markets are segmented by type of product or how products are used in a business. ◦ Automobile manufacturers use the same products regardless of brand  Industrial Buyers: Many cultural differences in motives, authority and negotiating style for industrial buyers in different countries. ◦ More complex decisions ◦ More service needs ◦ More value oriented

 Relationship Development: Strong links between businesses, strong network of relationships where sellers and buyers are dependent upon each other.  International Orientation: Most industrial relationships are global. ◦ Raw materials and component parts are shipped to countries with low labor costs ◦ Final products are shipped to consumers worldwide.  Uniformity: Industrial products have much less variation than consumer products.

 Goods that cannot be easily differentiated. ◦ Examples are petroleum, grain, minerals and chemicals. ◦ Sold in commodity markets  Use set pricing that is based off of global demand ◦ The price of oil goes up when supply goes down or demand goes up

 Business to business markets are more likely to export. ◦ Export pricing increases the cost of a product based off of:  Tariffs  Taxes  Expenses for adapting a product

 Companies often develop a dual-pricing system using the following methods: ◦ Cost-plus method: All export costs are included in the price of the product and a % markup is added to the total cost which can lead to very high prices in certain countries. ◦ Marginal-cost method: Base their pricing on the prices their competitors set.  This method is used for more competitive markets or when total sales are low.