7.2: Consumer & Business Markets International Marketing

WarmUp What is a consumer market? What is a business market? The selling of goods & services to the individual buyer What is a business market? The selling of goods & services to other companies who in turn: Resell them Use them to create products Use them to support their services

Consumer Markets Consumer needs & wants vary greatly across cultures Therefore, consumer products companies more likely to use adaptation strategies Local companies often have advantage over global brands because they understand local consumer market better Consumer market promotion is moving heavily toward the internet Web sites for global companies often have the same design across countries, even when using a different language

Consumer Market Promotion in Mexico & India

Website in America

Promotion: Use of Celebrities: Television Commercials: http://www

Pricing in foreign markets Price represents what is given up in exchange for receiving a product. Sometimes bartering is used instead of money Bartering: Exchange of one product (good or service) for another product (good or service) Prices in wealthy countries tend to be higher than in poor countries. Average income in China is less than Switzerland Prices in China are cheaper than prices in Switzerland

Pricing Purchasing power parity (PPP) Global pricing depends on the ability of each market to pay. Purchasing power parity (PPP) measures how much of a product a certain country’s currency can purchase. Products are priced differently based on where they are sold Lower prices reflect lower expenses to create product in that country Higher prices reflect a higher standard of living in that country Companies have two methods of setting prices in global markets: Standard global price Difficult to establish because of added distribution costs and taxes, which are different in every market Local market price

Big Mac Exercise Use the Big Mac to determine Purchasing Power Parity Big Macs are sold at over 25,000 McDonalds restaurants in 116 countries Widely popular Allows economist to compare exchange rates & relative prices in multiple countries Purchasing Power Parity Describes why over time, the dollar price of a good in one country should equal the dollar price in all other countries Should a product sell for the same price in all countries

Cross Currency Rates See "Cross Currency Rates" at http://www.bloomberg.com/markets/currencies/

Determine PPPP 2,835 Japanese Yen (JPY) is equal to 23.625 United States Dollar (USD) 2,835 Japanese Yen (JPY) is equal to 15.8249 British Pound (GBP)

Big Mac Activity in Edmodo.

Luxury Markets Luxury market would most likely use standard global pricing since individuals with high incomes are more likely to have similar needs and wants and an equal ability to pay Otherwise, products could be purchased in cheaper markets and returned to the local market as a grey market product Students provide examples http://topics.bloomberg.com/luxury- goods/_/slideshow/?category=%2Fnews%2Fhome%2Ftopic&selected_url=http%3A%2F%2F www.bloomberg.com%2Fimage%2FiR2GR0KT1CVU.jpg&slideshow_id=1565253