Selected issues on international marketing programme

Designing the marketing programme Once the firm has decided how it will enter the international market, the next issue is how to desigh the international/global marketing mix. There are different forces in the international environment that may favour either increasing globalization or increasing adaptation of the firm. Supporters of adaptation state that there are substantial differences between countries and even between regions in the same countries.

Designing the marketing programme It is relevant to discuss degree of standardization or so called „standardization potential profile“

Main decisions in product policy What kind of product? Product life cycle New product development and innovations As a product we can consider anything what can be offered to our customer.

Which products for international markets? The same as for home market Adapted products Standardized products New products Define the reasons for each option!

Factors of adaptation Consumer goods for daily use Local competition

Factors of adaptation Different conditions of use Intercultural differencies in consumer behaviour and purchasing behaviour Differences in purchasing power Different conditions in supplying with production inputs Different legislation

Factors of standardization Economics of scale High costs of adaptation process Industrial and high tech products Entering the similar markets Export Global competition Strong image of the country/producer/brand

14-10 Branding decisions Source: Source: adapted from Onkvisit and Shaw, 1993, p. 534.

14-11 Different degrees of product newness Low Newness to CompanyHigh High Newness to International Market Low Reposition Existing products Line extensions/ improvements New to company New to home country Cost reductions New to International markets Increasing risk New to regional market

Benefits of strong brand in local/regional market: Visegrad opportunities? New product in brand portfolio Repositioning the traditional product Seasonal product for larger market Brand partnership

14-13 The functions of branding To distinguish a company’s offering and differentiate one particular product from its competitors To create identification and brand awareness To guarantee a certain level of quality and satisfaction To help with promotion of the product

14-14 For discussion (3) What are the requirements that must be met so that a commodity can effectively be transformed into a branded product? Discuss the factors that need to be taken into account when making packaging decisions for international product lines. When is it appropriate to use multiple brands in (a) a single market and (b) several markets?

Four degrees of adaptation: combinations: product and promotion Non- customization Adapting the message Adapting the portfolio Custom product design Fully leverage global product and marketing Customize Marketing message and language Customize mix of product and services based on local needs Create market specific products and services

Branding for international markets Branding dimensions: –Global brands –Regional brands –Local brands –Producer´s brand –Private brands –Brand partnership –Brand portfolio

International product life cycle

The international product life cycle Macroeconomic approach: –Typically, demand first grows in the innovating country. Production, consequently, takes place first in the innovating country. As the product matures and technology is diffused production occurs in other industrialised countries and then is less developed countries. Microeconomic approach: –Due to different economic levels in different countries, a specific product can be in different PLC stages in different countries.

International pricing decisions and terms of doing business Factors influencing international pricing decisions International pricing strategies Price escalation European pricing strategies Terms of sale and delivery Pricing policy is an important strategic and tactical competitive weapon that, in contrast to the other elements of the global marketing mix, is highly contrallable and inexpensive to change and implement.

International pricing strategies Skimming Market pricing Penetration pricing Price change Experience curve pricing Demand-based pricing Pricing across products (product line pricing) Pricing across countries Total package price Psychological pricing In comparison to domestic pricing strategies, the decisions are much more complex, because they are affected by a number of additional external factors, such as fluctuations in exchange rates, accelerating inflation in certain countries and the use of alternative payment methods such as leasing and barter for instance.

What to add to general pricing strategies? Pricing across countries: –Standardization: internationalization of competition, homogenization of competitive structures, international activities of large retailers –Differentiation: differences in price segments, strengths of local competitors, retailer power, consumer preferences

International pricing taxanomy 1.Global price leader: global market leader, market and cost-oriented global prices, global competition but local differences 2.Global price follower Multilocal price setter 4.Local price follower

European pricing strategies 20 % in price differences Highest price Lowest price Future European price corridor VISEGRAD COUNTRIES?

A.Reasons for lowering prices in foreign markets Lower consumer incomes. Intense local competition. R&D costs have already been covered. Weak demand for the product. B.Reasons for increasing prices in foreign markets ????

Price escalation Price escalation affects all firms involved in cross-border transportation. All cost factors in the distribution channel add up and lead to price escalation. The longer the distribution channel, the higher the final price in the foreign market. Due to additional shipping or other kinds of transportation, insurance, tarrifs and distribution charges, the exported product costs more in the export market than at home.

Distribution policy Entry mode Physical distribution INCOTERMS Distribution channels

Distribution decision Channel decisions – external factors –Customer characteristics –Nature of product –Nature of demand (location) –Competition –Legal regulations/local business practice Channel decisions – internal factors –Decisions concerning structure of the channel –Managing and controlling distribution channels –Managing logistics

Considerations in transport and distribution policy Cost vs. speed. Nature of the product (weight, perishability, dimensions). Customer preferences. Value of the goods. Intermediate handling and storage charges. Working capital tied up in goods in transit.

International distribution channel

The Banana split model How much (in percentage of the retail value in the UK) stays with each chain actor to cover costs and margin: –Plantation workers 2 % –Plantation owners 10 % –Transnational companiers 31%(including 5 % EU tariffs) –Distributors 17 % –Retailers 40 %

International communication: Objectives of international advertising Increasing sales. Attracting new customers. Altering customer behaviour. Communicating brand values.

The case for standardization Consumer characteristics are becoming homogeneous across borders. Urbanization is increasing. Internationalization of media has led to converging lifestyle choices.

The case for customization Cultural differences between markets. Language differences. Differences in educational backgrounds. Non-availability of some media. Different attitudes towards advertising. Legal requirements in different markets.

Advantages of using a local agency Gives the foreign firm a local image. Closer links between agency and media. More commitment to the market. Local flair and creativity.