1. Copyright © 2014 Pearson Education FM : FM : Anis Gunawan, MBA,MM,SP Anisg @pmbs.ac.id 11. Marketing in global firm

2. International Business: Strategy, Management, and the New Realities I.Foundation concepts of International business II.The environment of International Business III.Strategy and opportunity assessment IV. Entering and operating in International Markets. V. Functional Area excellence International business 11. Marketing in global firm

3. International Business: The New Realities, Global Edition, 3 rd Edition by Cavusgil, Knight, and Riesenberger Chapter 18 Copyright © 2014 Pearson Education

4. Organizing Framework for Marketing in the International Firm Copyright © 2014 Pearson Education 3 1 2 H&MVideo\International Marketing\H&M _ Facebook.mp4Video\International Marketing\H&M _ Facebook.mp4

5. 1.Market Segmentation 1.The process of dividing the firm’s total customer base into homogeneous clusters that allows management to formulate unique marketing strategies for each group. 2.Within each market segment, customers exhibit similar characteristics regarding income level, lifestyle, demographic profile, or desired product benefits. 3.Internationally, common market segment variables include income level, culture, legal system, etc. Example Caterpillar targets its earthmoving equipment by applying distinct marketing approaches to several major market segments. What segments does Caterpillar target? Copyright © 2014 Pearson Education

6. Global Market Segment 1.A group of customers that share common characteristics across many national markets. 2.Firms target these buyers with relatively uniform marketing programs, regarding product, pricing, communications, and distribution 3.Such segments often follow global media, embrace new fashions or trends, and have much disposable income. ExamplesVideo\Marketing\MTVindia.flvVideo\Marketing\MTVindia.flv 1.Young people worldwide who are customers to MTV, Levi’s 2.The global segment of jet-setting business executivesexecutives 3.People worldwide with elevated cholesterol (e.g., Pfizer andVideo\Marketing\Lipitor Medication 2010 Commercial.mp4 Lipitor)Video\Marketing\Lipitor Medication 2010 Commercial.mp4 Copyright © 2014 Pearson Education

7. Global product positioning continum 1. Technical products 2. Special interest products 4. Product with solve commom problem 3. Demonstrable products 6. Universal theme product 5. Global village product High Tech. Product feature emphasis Technical Informative ad. Specific transnational segment High Touch Image emphasis Non technical Persuasive ad, Broad transnational segment High involvement Low Involvement Stemcell Universal Universal studio

8. Positioning Map New G iordano Specific Value for Money Up-market General GCur Bossini Giordano New Esprit Baleno Hang Ten GLadies Theme Southeast Asian Asian Operations H&MVideo\International Marketing\Summer Clothing Haul 2014! American Eagle, H&M, Nordstrom and More!.mp4Video\International Marketing\Summer Clothing Haul 2014! American Eagle, H&M, Nordstrom and More!.mp4

9. Copyright © 2014 Pearson Education 2. Environment of International marketing

10. Country Realities 1.Japan, Italy, and Germany have the world’s highest density of senior citizens, where the median age is over 43 years. 2.These countries also enjoy high per-capita income, excellent distribution channels, and well developed health care systems that support the elderly. 3.They represent the most promising target markets for firms that produce medical equipment, mobility aids, and other products that appeal to seniors. Copyright © 2014 Pearson Education

11. 3. Standardization and Adaptation 1. Adaptation: Modifying elements of the marketing program to accommodate specific customer requirements in individual foreign markets. E.g., industries in auto making, publishing, furniture. 2. Standardization: Efforts to make marketing program elements uniform so as to target entire regions of countries, or even the global marketplace, with a similar product or service. However, targeting the same product everywhere is not usually feasible. Management tries to strike some ideal balance between adaptation and standardization. Copyright © 2014 Pearson Education

12. Standardization Louis Vuitton handbags (here, in Tokyo) and Apple consumer electronics (here, in Paris) exemplify globally standardized products. Copyright © 2014 Pearson Education

13. Tradeoffs between Standardization and Adaptation Copyright © 2014 Pearson Education

14. MB

15. Standardized Marketing is Appropriate When: 1.Similar market segments exist across countries; 2.Customers seek similar features in the product or service; 3.Products have universal specifications; 4.Business customers have converging expectations or needs regarding specifications, quality, performance, and other product attributes. Copyright © 2014 Pearson Education

16. Advantages of Standardized Marketing 1. Cost reduction. Standardization reduces costs through economies of scale in design, sourcing, manufacturing, and marketing. Offering a similar marketing program globally is more efficient than adapting products and marketing for each of the numerous individual markets. 2. Improved planning and control. Fewer offerings simplify quality control and reduce the number of replacement parts. Global marketing is easier to manage than having to develop numerous campaigns. 3. Ability to portray a consistent image and build global brands. Standardized marketing increases customer interest and reduces customer confusion. Copyright © 2014 Pearson Education

17. Standardization and Adaptation: A Balancing Act 1.Adaptation is costly. May require substantial changes to the marketing mix, especially when many national markets are involved. 2.Thus, managers err on the side of standardization, adapting marketing mix only when necessary. 3.Or, firms pursue a regional strategy in which marketing elements are formulated across a geographic region. 4.Dell strikes a balance between standardization and adaptation. Video\International Marketing\Dell.flv The basic machines are identical worldwide, while the keyboards and software are varied to suit local conditions.Video\International Marketing\Dell.flv Copyright © 2014 Pearson Education

18. Global International Local Blending Global, International, and Local Approaches Copyright © 2014 Pearson Education

19. Global Branding 1.Well-known global brands include: electronics (Playstation), personal care products (Gillette), toys (Barbie), food (Cadbury), beverages ( Heineken ), credit cards (Visa), movies (e.g., Star Wars ), pop stars (Shakira), sports stars (David Beckham). Star 2.A strong global brand: 1.increases the effectiveness of marketing programs; 2.facilitates the ability to charge premium prices; 3.increases the firm’s leverage with resellers; 4.stimulates brand loyalty; and 5.inspires trust and confidence in the product. Copyright © 2014 Pearson Education Hein

20. International Pricing 1.Pricing is complex in international business, due to multiple currencies, trade barriers, added costs, and typically longer distribution channels. 2.Prices affect sales and profits. An inverse relationship often exists between profits and market share. 3.Firms face pressure to lower prices abroad, mainly due to lower income levels. 4.Conversely, prices can escalate due to tariffs, taxes, transportation, intermediary markups, and after-sales service. € ₤ ¥ $Video\InternationalMarketing\Walmartstrategy.flv$Video\InternationalMarketing\Walmartstrategy.flv Copyright © 2014 Pearson Education

21. Price Escalation A 20 Foot Container of agricultural Equipment from Kansas City to Yokohama Item Ex works Kansas City Container Freight Charges from Kansas City to Seatle. Terminal handling fee Ocean Freight for 20 foot container Currency adjustment factor (CAF) ( 51 % of ocean freight ) Insurance ( 110 % of C.I.F. value) Forwarding fee Total shipping charges Total C.I.F. Yokohama value VAT ( 3 % of C.I.F. value) $ 30,000 $ 1475.00 $ 350.00 $ 2280.00 $ 1162.80 $ 35.27 150.00 5453.07 $ 35,453.07 1,063.69 36,516.76 3,651.67 40,168.43 10,042.10 50,210.53 Percentage of FOB Price 100 % 18 3 12 33 166 % Distributor markup ( 10 %) Dealer markup ( 25 %) Total retail price

22. Three Pricing Strategies 1. Rigid cost-plus pricing. Set a fixed price for all export markets by adding a flat percentage to the domestic price to compensate for the added costs of doing business abroad. 2. Flexible cost-plus pricing. Set price to accommodate local market conditions, such as customer purchasing power, demand, and competitor prices. 3. Incremental pricing. Set price to cover only variable costs, not fixed costs. This assumes that fixed costs are already paid from sales in the home or other countries. Copyright © 2014 Pearson Education

23. Transfer Pricing 1.The pricing of intermediate or finished goods exchanged among the subsidiaries and affiliates of the same corporate family located in different countries. 2.May be used to repatriate profits from countries that restrict MNEs from taking their earnings out of the country. 3.May be used to shift profits out of a high corporate tax country into a low corporate tax one, thereby increasing company-wide profits. Copyright © 2014 Pearson Education

24. Gray Marketing 1.Legal importation of genuine products into a country by other than authorized intermediaries. 2.Gray marketers buy the product at a low price in one country, import it into another country, and sell it there at a higher price. 3.Causes: 4. -- Large difference in pricing of same product between two countries, often the result of company strategy. 5. -- Exchange rate differences of products priced in two different currencies. Copyright © 2014 Pearson Education

25. International Advertising Firms conduct advertising via media, which includes direct mail, radio, television, cinema, billboards, transit, print media, and the Internet. Advertising spending on major media amounted to $100 billion in each of Western Europe and Asia. In the United States, advertising expenditures totaled over $160 billion. Advertising is influenced by local factors, such as availability of media, literacy, regulations, culture, and local customs, as well as the goals of the firm. Copyright © 2014 Pearson Education

26. Standardization in International Advertising Benetton is one of many firms that uses a standardized approach to international advertising. Benetton’s standardized ‘United Colors of Benetton’ ad campaign has enjoyed much success worldwide. Copyright © 2014 Pearson Education

27. International Distribution 1.Distribution is the most inflexible of the marketing program elements – once established, it may be difficult to change. 2.The most common international distribution approaches are using independent intermediaries (for exporters) and establishing subsidiaries directly in the market ( FDI ). 3.Both types of channels must perform a range of downstream marketing activities. 4.The firm should seek to minimize channel length, to minimize final prices and decrease complexity. Copyright © 2014 Pearson Education

28. Global Account Management Under globalization, foreign customers seek uniform and consistent prices, quality, and customer service. Global account management means serving a key global customer in a consistent and standardized manner, regardless of where in the world it operates. For example, Walmart is a key global account for Procter & Gamble, purchasing many P&G products.purchasing Each global customer is assigned a global account manager, or team, which provides the customer with coordinated marketing support and service across various countries. Copyright © 2014 Pearson Education