Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four chapter fifteen Marketing Internationally Concept Preview After reading this chapter, you should be able to: 1. understand why at times there are differences between domestic and international marketing 2. explain why international marketing managers seek to standardize the marketing mix regionally or worldwide 3. comprehend why it’s often impossible to standardize the marketing mix worldwide 4. appreciate the importance of distinguishing among the brand name, the physical product, and the total product 5. explain why consumer products generally require greater modification for international sales than industrial products or services

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four chapter fifteen Marketing Internationally Concept Preview continued After reading this chapter, you should be able to: 6. understand how environmental forces affect the marketing mix 7. discuss product strategies that can be formed from the three product alternatives and types of promotion 8. explain global advertising strategies 9. understand the intricacies of transfer pricing 10. discuss the distribution strategies of international marketers 11. describe the channel selection process of international marketers

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four 15-3 The Marketing Mix  Standardization –lower costs –easier control and coordination from headquarters –reduction of the time consumed in preparing the marketing plan  Adaptation –extent of changes depends on product (industrial vs. consumer) –environmental forces –degree of market penetration desired  Completely different

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Components of the Total Product 15-4 Figure 15.1 PackageBrand name Accessories After-sales service Warranty Instructions for use Company’s image Physical product

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four 15-5 Product  Consumer products usually require greater adaptation –some luxury products may be sold unmodified –some can be sold unchanged to certain market segments –as you go down the economic and social strata in each country find greater dissimilarities in social and cultural values –services are generally easier to market globally than consumer products  High tech products can be sold with little or no adaptation  Industrial products may need to be modified because of tendency to overload and slight maintenance

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Continuum of Sensitivity to the Foreign Environment 15-6 Figure 15.2 Insensitive Industrial products and services Highly sensitive High style and faddish consumer products Basic consumer staples

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Foreign Environmental Forces  Sociocultural  Political-legal  Economic-competitive  Physical-geographic  Technological 15-7

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four 15-8 Foreign Environmental Forces  Sociocultural –dissimilar cultural patterns mean changes in food and other consumer goods –brand name –label  instructions  language –colors –shopping habits and frequency  Political-legal –product standards laws –pollution –consumer protection –operator safety –prohibited products –product purity and labeling –labels-metric and inch –brand name  priority in use vs. first to register

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Foreign Environmental Forces  Economic- competitive –disparity in income levels –simplify the product or produce a cheaper one –reduce the package size and quantity count –lack of a constant supply of electricity –reduce the number of items in product mix 15-9  Physical-geographic –heat and high humidity –consumer goods re-packaging –poor roads require tires with thicker treads and trucks with heavy suspensions

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Promotional Strategies  Greatest worldwide similarities  Advertising is everywhere based on American practices  Global and regional brands  Global marketing and economies of scale 15-10

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Promotional Strategies  Same product—same message –targets markets vary little with respect to product use and consumer attitudes  Same product—different message –same product may satisfy a different need or be used differently elsewhere  Product adaptation—same message –product serves same function but must be adapted to different conditions  Product adaptation— message adaptation –both the product and the message must be modified  Different product—same message –customers may not be able to afford same product or too technologically advanced  Different product for same use—different message –different product requires a different message

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Advertising  Availability of media –satellite –international print  literacy –cinema and video –other methods  handbills  Type of product –industrial vs. consumer  Foreign environmental forces –position as national or foreign product –legal aspects of ‘claims’ –governments tend to control advertising –VAT tax in Europe  Globalization vs. localization –look for similarities across cultures or –separate appeals take advantage of differences across cultures and countries –neither purely global nor purely local-large regions strategy –Regional and cultural clusters –pan-American, pan-Middle East, pan-African, pan- Atlantic  Programmed management approach –middle ground strategy

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four World’s Most Valuable Brands Brand Value Brand ($billion) 1.Coca-Cola$ Marlboro IBM McDonald’s Disney Sony Kodak Intel Gillette Budweiser11.99 Brand Value Brand ($billion) 11. Nike Kellogg’s AT&T Nescafé GE Hewlett-Packard Pepsi Microsoft Frito-Lay Levi’s Source: “Shimmering Symbols of the Modern Age,” Financial Times, October 17, 1997, p. 12.

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Personal Selling  Importance of personal selling depends on –relative costs –funds available –media availability –type of product sold  International standardization –sales force organization, sales presentations and training methods similar to home country –high costs cut by telemarketing –recruitment of sales force difficult because of social stigma of selling 15-14

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Sales Promotion  Legal constraints –restrictive laws on kinds or values of premiums  Sociocultural and economic constraints –premium must be meaningful to customer –contests and raffles often successful  Hoover in the U.K.  Pepsi-Cola in the Philippines 15-15

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Public Relations  Many international firms fail to inform the public of their activities  Overseas subsidiaries support local public- service activities 15-16

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Pricing Strategies  Pricing is a controllable variable –effective price control is more than a mechanical markup –price setting is complex because of marketing mix interaction  International standardization –foreign national pricing-controls –international pricing-transfer pricing 15-17

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Interaction Between Marketing and Other Functional Areas  Finance people want products that are both profitable and conducive to a steady cash flow  Production supervisors want prices that create large sales volumes, which permit long production runs  Legal department worries about possible antitrust violations when different prices are set according to type of customer  Tax people are concerned with the effect of prices on tax loads  Domestic sales manager wants export prices to be high enough to avoid having to compete with products purchased for export and diverted back to domestic market 15-18

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Hiding Profits with Transfer Pricing Figure 15.4 Great Britain Jamaica United States An item costs $100 to produce. It is sold to a Jamaican subsidiary for $100. Tax rate: 52% Tax paid: $0 The Jamaican subsidiary resells the item for $200 to a U.S. subsidiary. Tax rate: 5% Tax paid: $0 The American subsidiary sells the item at cost for $200. No profit earned. No tax paid. Tax rate: 5% Tax paid: $0

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Distribution Strategies  Interdependence of distribution decisions –care must be taken to analyze interdependence with other marketing mix variables  International standardization –availability of channel members –foreign environmental forces-laws 15-20

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 section four Channel Selection  Direct or indirect marketing –use middlemen or market directly? –factors influencing channel selection  market characteristics  product characteristics  company characteristics  middlemen’s characteristics  legal requirements 15-21