BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 1 INTERNATIONAL MARKETING Culture Consumer buying power Product strategies

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 2 An Effective Billboard Advertisement? VERY DIRTY CLOTHES CLOTHES GETS WASHED WITH THE ADVERTISED DETERGENT BRAND SQUEEKY CLEAN CLOTHES

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 3 LEARNING OUTCOME OBJECTIVES Appreciate the for forces impacting the marketer operating in varying cultural, legal, economic, and political environments Appreciate the increasingly competitive international market place Understand strategic opportunities for operating internationally Appreciating the interdependent nature of decisions made in the international context

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 4 INTERNATIONAL MARKETING CULTURE ECONOMICS POLITICAL/ LEGAL/ HISTORICAL ENTRY STRATEGY MARKETING MIX PRODUCT BELIEFS EXPECTATIONS BEHAVIOR ATTRIBUTIONS PRICEPROMOTION DISTRIBUTION INVESTMENTPARTNERSHIPS International Marketing: Considerations and Outcomes

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 5 Definitions Culture : “That complex whole which includes knowledge, belief, art, morals, custom, and any other capabilities and habits acquired by man as a member of society.” Alternative definition: “Meanings that are shared by most people in a group [at least to some extent]”. (Adapted from Peter and Olson, 1994)

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 6 Culture impacts Behavior—customs of how and when products are used Expectations Interpretation of reality Relationships between people

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 7 Cultural Lessons Diet Coke is named Light Coke in Japan--dieting was not well regarded Red circle trademark was unpopular in Asia due to its resemblance of Japanese flag Packaging of products is more important in some countries than in U.S. Advertisement featuring man and dog failed in Africa--dogs were not seem as man’s best friend

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 8 More Cultural Lessons... Cologne ad featuring a man “attacked” by women failed in Africa Food demonstration did well in Chinese stores but not in Korean ones--older women were insulted by being “taught” by younger representatives Pauses in negotiations Level of formality

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 9 Japanese consumers expect to see what the food looks like before ordering

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 10 Very Brief Review of Economics Exchange rates –Floating (supply and demand) –Fixed Trade balances and their impact on exchange rates Measuring country wealth –Gross domestic product –Nominal vs. “Purchasing power parity” Nominal: Amount of dollars that can be bought with the amount of income. Used for imported products. Purchasing power parity adjusted: The buying power—based on a weighted average of costs—in the respective country relative to U.S.

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BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 12 Demand for Currency Depends On Trade deficit (demand for foreign currency to fund this) or trade surplus (demand for country’s currency) Interest rates: Higher interest rates (real) attract foreign investors (especially for “stable” U.S. bonds and equities) Inflation: Reduces the attractiveness of holding the currency

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 13 Nominal vs. Purchase Parity Adjusted GDPs— Examples (2009) Source: World Bank International Monetary Fund The U.S. figures should theoretically be equal but small differences occur because of technical issues in weighing “basket of goods” for comparison.

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 14 GNP Per Capita by Country Source: World Bank—

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BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 16 Cautions on Interpreting Per Capita Figures Averages are not very meaningful! –Regional variations –Socio-economic differences Comparison to U.S. dollar and U.S. costs is arbitrary

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 17 Approaches to Product Introduction Not suitable for the Middle East! ● Customization ● Localization ● Adaptation ●Standardization

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 18 Reasons for Standardization Avoiding high costs of customization, if applicable Technological intensity –Reduced confusion –International compatibility among product group components –Faster spread of rapid life cycle products Convergence of global consumer tastes/needs Country of origin positioning

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 19 Standardization—Advantages Benefits –Economies of scale –More resources available for development effort Better quality –Enhanced customer preference (?) –Realistic when all cultural needs cannot be met Global customers Global segments

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 20 Standardization—Disadvantages Unnecessary features Vulnerability to trade barriers Strong local competitors

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 21 Product Adaptations Mandatory –Legal requirements –Infrastructure –Physical requirements “Discretionary” –Local tastes –Fit into cultural environment

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 22 Motivations for Adaptation Legal Infrastructure Consumer demographics Culture –Religious impact –Cultural context of use Local traditions/ customs—e.g., –Food usage occasions –Aesthetic preferences Local usage conditions Pricing pressures/ tradeoffs

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 23 Mandatory Adaptation Issues Choices in approach to mandatory conditions--examples –Power drills with noise suppression filters “Arbitrary” standards (e.g., TV, DVD players) Conflicting rules between countries—may not be possible to make product legal in all

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 24 Physical Product vs. Communication Adaptations

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 25 Country of Origin Effects Perception of product –quality (e.g., Japan, Germany) –elegance and style (e.g., France, Italy) Historical associations Positioning strategies –Emphasis on origin (e.g., French wine) –De-emphasis/obfuscation of country of origin (e.g., French beer, American products with French language labels)

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 26 Market Positioning Strategies Across Countries Häagen-Dazs—U.S. vs. Japan Corona Beer— Mexico vs. U.S. Mercedes-Benz— Europe vs. U.S. McDonald’s –U.S. –Europe –Developing countries—e.g., China

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 27 The International Life Cycle Market for older technology tends to exist in less developed countries –Manufacturing of older generation technology-- e.g., Pentium III computers –Resale of capital equipment no longer considered adequate in more developed countries—e.g., DC 8 aircraft, old three part canning machines Some countries tend to be more receptive to innovation than others and will adopt new technology more quickly “Leap frogging” –Going directly from old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology) Shortening of product life cycles

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 28 Promotion: Strategic and Tactical Objectives Awareness Trial Attitude toward the product –Beliefs –Preference Temporary sales increases Emerging Markets/ New Products Mature markets /established products

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 29 Flops in the Transplantation of Advertising Man and his dog “Follow the leader-- he’s on a Honda!” Detergent ad “Get your teeth their whitest!”

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 30 U.S. Laws of Interest to firms with U.S. Involvement Anti-trust: Standards of fair competition. Not all countries have or enforce such laws. Foreign Corrupt Influences Act: Bribery illegal for U.S. firms. Anti-boycott laws: Illegal to boycott Israel or even certify that one’s firm does not do business with Israel. Technically illegal to participate in other non-U.S. Government sanctioned boycotts but emphasis is on Israel. Trading With the Enemy: Illegal to trade at all (with few exceptions) with enemy states. Limits on technology that can be exported. Extra-territoriality: U.S. courts will often take jurisdictions of cases of violations of U.S. law occurring entirely abroad.