INTERNATIONAL MARKETING
• Culture
• Consumer buying power
• Product strategies
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
1
An Effective Billboard Advertisement?
VERY
DIRTY
CLOTHES
BUAD 307
CLOTHES GETS
WASHED WITH
THE
ADVERTISED
DETERGENT
BRAND
INTERNATIONAL MARKETING
SQUEEKY
CLEAN
CLOTHES
Lars Perner, Instructor
2
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
3
International Marketing: Considerations and
Outcomes
BELIEFS
CULTURE
INVESTMENT
EXPECTATIONS
ENTRY
STRATEGY
BEHAVIOR
ATTRIBUTIONS
ECONOMICS
POLITICAL/
LEGAL/
HISTORICAL
PARTNERSHIPS
INTERNATIONAL
MARKETING
PRODUCT
MARKETING
MIX
PROMOTION
PRICE
DISTRIBUTION
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
4
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
5
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
6
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
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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
8
Japanese
consumers expect to
see what the food
looks like before
ordering
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
9
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.
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
10
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
11
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
12
Nominal vs. Purchase Parity Adjusted GDPs—
Examples (2009)
Country
Nominal GDP
PPA
$74,430
$57,640
Norway
86,440
56,050
United States
47,240
46,730
Japan
37,870
33,280
7,570
14,120
17,310
23,610
Mexico
8,920
14,110
China
3,590
6,770
Luxemburg
Argentina
Czech Republic
The U.S. figures should theoretically
be equal but small differences occur
because of technical issues in
weighing “basket of goods” for
comparison.
Source: World Bank
International Monetary Fund
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
13
GNP Per Capita by Country
Source: World Bank— http://datafinder.worldbank.org/gni-per-capita-ppp
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
14
Nominal vs. Purchasing Power Parity GNPs
40,000
35,000
30,000
25,000
20,000
15,000
10,000
PPA
5,000
0
0
BUAD 307
10,000
20,000
30,000
INTERNATIONAL MARKETING
40,000
Lars Perner, Instructor
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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
16
Approaches to Product Introduction
● Adaptation
● Customization
●Standardization
● Localization
Not suitable for
the Middle East!
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
17
Reasons for Standardization
• Avoiding high costs of
customization, if
applicable
• Technological intensity
• Convergence of global
consumer tastes/needs
• Country of origin
positioning
– Reduced confusion
– International
compatibility among
product group
components
– Faster spread of rapid
life cycle products
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
18
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
19
Standardization—Disadvantages
• Unnecessary
features
• Vulnerability
to trade
barriers
• Strong local
competitors
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
20
Product Adaptations
• Mandatory
– Legal requirements
– Infrastructure
– Physical
requirements
• “Discretionary”
– Local tastes
– Fit into cultural
environment
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
21
Motivations for Adaptation
• Legal
• Infrastructure
• Consumer
demographics
• Culture
– Religious impact
– Cultural context of
use
BUAD 307
• Local traditions/
customs—e.g.,
– Food usage
occasions
– Aesthetic
preferences
• Local usage
conditions
• Pricing pressures/
tradeoffs
INTERNATIONAL MARKETING
Lars Perner, Instructor
22
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
23
Physical Product vs.
Communication Adaptations
Communication
adaptations not
needed (extension)
Communication
adaptations needed
Product adaptations Some industrial
not needed
equipment
(extension)
Bicycle; fast food;
chewing gum
Product adaptations Gasoline; laundry
needed
detergent
Greeting cards
Domestic equivalent Compass-equipped prayer rug; hand
does not exist
powered washing machine
(product invention)
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
24
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
25
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
26
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
BUAD 307
• “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
INTERNATIONAL MARKETING
Lars Perner, Instructor
27
Promotion: Strategic and Tactical
Objectives
• Awareness
• Trial
• Attitude toward the product
Emerging
Markets/
New Products
– Beliefs
– Preference
• Temporary sales
increases
BUAD 307
INTERNATIONAL MARKETING
Mature markets
/established
products
Lars Perner, Instructor
28
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
29
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.
BUAD 307
INTERNATIONAL MARKETING
Lars Perner, Instructor
30