Chapter Seventeen Marketing Internationally McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives  Explain why there are differences between domestic and international marketing  Discuss why international marketing managers may wish to standardize the marketing mix  Explain why standardizing the marketing mix globally is often impossible  Discuss the importance of distinguishing among the total product, the physical product, and the brand name

Learning Objectives  Explain why consumer products generally require greater modification for international sales than do industrial products or services  Discuss the product strategies that can be formed from three product alternatives and three kinds of promotional messages  Explain “glocal” advertising strategies  Discuss the effect of the Internet on international marketing  Discuss the distribution strategies of international marketers

International Marketing  To develop marketing strategies the international marketing manager assesses the firm’s foreign markets and analyzes the many alternative marketing mixes  Plans and controls a variety of marketing strategies rather than a single unified and standardized one  Coordinates and integrates multiple strategies into a single marketing program LO1

Standardize, Adapt, or Formulate Anew?  Global standardization of the marketing mix  Significant cost savings  Longer production runs  Standardized advertising, promotional materials, and sales training  Standardized corporate image  Standardized pricing strategies  Easier control and coordination  Reduction of preparation time  Often not possible LO2

Product Strategies  Product is central to marketing mix  The total product includes the  physical product  brand name  accessories  after-sales service  warranty  instructions for use  company image  packaging LO2

Types of Products  Industrial Products  Many can be sold unchanged worldwide  If changes are required, they may be cosmetic (language of instructions)  In developing countries problems with  overload of equipment  maintenance  Local legal requirements limit standardization LO3

Types of Products  Consumer Products  Require greater modification to meet local market requirements  Some can be sold unchanged to certain market segments  Large automobiles, sporting equipment, and perfumes  Greater dissimilarity as you go down the economic strata LO5

Types of Products  Services  Marketing similar to that of industrial products  Services easier to market globally compared to consumer products  Laws and customs may force changes LO5

Foreign Environmental Forces Sociocultural  Dissimilar cultural patterns generally require changes in food and other consumer goods  May require  Redesign of product  Different meanings of colors  Different meanings of brand name  Translation of instructions or labels LO5

Foreign Environmental Forces Legal  Laws concerning  pollution  consumer protection  operator safety  Laws prohibiting classes of imports  Food and pharmaceuticals are affected by laws concerning purity and labeling  Laws may prevent use of brand name worldwide  In some countries a brand may be registered to someone else

Foreign Environmental Forces Economic  Disparity in income throughout world  Obstacle to product standardization  Many industrialized country products are too expensive for developing country consumers  Need to simplify the product or produce a different, less costly one

Foreign Environmental Forces Physical  Climate and terrain prevent international product standardization  Heat  High humidity  Special packaging  High altitudes  Baking products and motors  Rough roads

Promotional Strategies  Promotion refers to any form of communication between a firm and its publics  Brings about a favorable buying action  Achieves long-lasting confidence in the firm and the product or service it provides

Promotional Strategies  Distinct promotional strategies based on combination of three alternatives 1. Marketing the same physical product everywhere  Same message 2. Adapting the physical product for foreign markets  Adapted message or 3. Designing a different physical product  Different message LO6

Six Common Promotional Strategies 1. Same product-same message  Avon, Maidenform 2. Same product-different message  Honda’s campaign in America is different than in Brazil 3. Product adaptation-same message  In Japan, Lever Brothers puts Lux soap in fancy boxes to encourage gift sales

Six Common Promotional Strategies 4. Product adaptation-message adaptation  In Latin America, Tang is sweetened and promoted as mealtime drink 5. Different product-same message  Customers can’t afford product in a market  Companies produce distinct product  Message similar 6. Different product for the same use-different message  Welding torches rather than automatic welding machines are sold in developing countries

The Promotional Mix Advertising  Advertising refers to the paid, non- personal presentation of ideas, goods, services  Cultural dimensions  Directness vs. indirectness  Humor  Gender roles  Explicitness  Sophistication  Popular vs. traditional culture  Information content vs. fluff

Advertising  Among promotional mix elements, advertising  has the greatest similarities worldwide  is formulated and executed through global ad agencies that have wholly owned subsidiaries, joint ventures, and working agreements with local agencies

Global and Regional Brands  Global, regional brands  Higher cost  Allow one regional source for quality work  Suggest that a single image in the region is important  Allow for regionalized organizations with centralized functions  Are facilitated through the growth of global and regional satellite and cable television

Global Brand Values

Advertising  Branding  Global, regional or national  Managers may convert or use a combination  Private brands  Serious competitors  Alliances with international retailers  Trend common in Europe

Advertising  Media  Satellite TV expands the availability of media  International print media available  Reader’s Digest has 48 foreign editions  Cinema and billboards are used heavily in Europe  In developing countries, vehicles equipped with loudspeakers may be used

Advertising  Internet Advertising  An affluent, reachable audience  Web contacts feature interactivity, shrinks distance  Involve customers in determining which messages and information they receive  For some groups, the Internet may be among the best media choices LO8

Advertising  Foreign environmental forces  Basic cultural decision for marketer: position the product as foreign or local  Depends on the country, the product types, and the target market  Language often an issue  back translation  plenty of illustrations with short copy

Advertising  What should be the approach of the international advertising manager?  Think globally, but act locally  Neither global nor local -”glocal”  Pan regional approach  Latin America  Middle East  Africa  Atlantic LO7

Personal Selling  Firms may choose personal selling instead of advertising because of  relative cost  funds available  media availability  type of product  Manufacturers of industrial products rely on personal selling  Firms may increase personal selling for consumer products in developing countries

Personal Selling  The Internet  would seem to eliminate the need for personal selling, but perhaps not  Successful personal selling depends on establishing trust  Evolving approaches to trust building in a virtual environment LO8

Selling International Standardization  An overseas sales force is similar to the home country in  organization  sales presentation  training methods  Recruitment of salespeople in foreign countries can be difficult

Sales Promotion  Sales promotion includes any selling aids including displays, premiums, contest, and gifts  Sociocultural and economic constraints make some sales promotions difficult to use  If a premium is to fulfill the sales aid objective, it must be meaningful to the purchaser  Sales promotion is generally less sophisticated overseas than in the U.S.

Public Relations  Public relations includes various methods of communicating with the firm’s publics to secure a favorable impression  Public relations  markets the firm  improves the firm’s image and overcomes negative perceptions  may work through government agencies

Pricing  Pricing is important in formulating marketing strategy  It is the only element in the marketing mix that can be varied to achieve firm’s marketing objectives  Made more complex by  interaction with the other functional areas  environmental forces

Interaction Between Marketing and Other Functional Areas  Managers must consider how the marketing function interacts with other functional areas  Finance wants prices that are profitable and produce steady cash flow  Production supervisors want prices that create large sales volumes, which permit long production runs  The legal department worries about possible antitrust violations when different prices are set according to type of customer

Interaction between Marketing and Other Functional Areas  The tax department is concerned with the effects of prices on tax loads  The domestic sales manager wants export prices to be high enough to avoid parallel importing

Standardizing Prices Is Difficult  Foreign national pricing  Local pricing in another country  International pricing  Setting prices for unrelated and related firms  Transfer pricing  Intracorporate price -the price of a good or service sold by one affiliate to another - the home office to an affiliate, or vice versa

Distribution Strategies  Distribution decisions are often interdependent with other marketing mix variables  Standardizing distribution is not always possible  The availability of channel members varies in each market  Environmental forces present in different markets can influence distribution choices LO9

Standardizing Distribution  Disintermediation refers to the unraveling of traditional distribution structures  Most often the result of being able to combine Internet with fast delivery services

Channel Selection  Direct or indirect marketing  The first decision: use middlemen or not?  Export sales may be done by local agents if  management believes this is politically expedient  a country’s laws demand it  Factors influencing channel selection  Market  Product  Company  Middlemen