International Marketing

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INTERNATIONAL MARKETING

• Culture • Consumer buying power • Product strategies BUAD 307

INTERNATIONAL MARKETING

Lars Perner, Instructor

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An Effective Billboard Advertisement?

VERY DIRTY CLOTHES CLOTHES GETS WASHED WITH THE ADVERTISED DETERGENT BRAND SQUEEKY CLEAN CLOTHES

BUAD 307

INTERNATIONAL MARKETING

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

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International Marketing: Considerations and Outcomes BELIEFS INVESTMENT PARTNERSHIPS CULTURE EXPECTATIONS BEHAVIOR ENTRY STRATEGY ATTRIBUTIONS ECONOMICS INTERNATIONAL MARKETING MARKETING MIX POLITICAL/ LEGAL/ PRODUCT PROMOTION PRICE HISTORICAL DISTRIBUTION

BUAD 307

INTERNATIONAL MARKETING

Lars Perner, Instructor

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Definitions Culture

society.” : “That complex whole which includes knowledge, belief, art, morals, custom, and any other capabilities and habits acquired by man as a member of

Alternative definition

(Adapted from Peter and Olson, 1994 ) : “Meanings that are shared

by most people in a group

[at least to some extent]”.

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

Luxemburg Norway United States Japan Argentina Czech Republic Mexico China

Nominal GDP

$74,430 86,440 47,240 37,870 7,570 17,310 8,920 3,590 The U.S. figures should theoretically be equal but small differences occur because of technical issues in weighing “basket of goods” for comparison.

PPA

$57,640 56,050 46,730 33,280 14,120 23,610 14,110 6,770

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

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Nominal vs. Purchasing Power Parit y GNPs 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 0 10,000 20,000 30,000 40,000 BUAD 307

INTERNATIONAL MARKETING

PPA 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

● Customization ● Adaptation ● Localization ●Standardization Not suitable for the Middle East!

BUAD 307

INTERNATIONAL MARKETING

Lars Perner, Instructor

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Reasons for Standardization

• Avoiding high costs of customization, if applicable • Technological intensity – Reduced confusion – International compatibility among product group components – Faster spread of rapid life cycle products • Convergence of global consumer tastes/needs • Country of origin positioning BUAD 307

INTERNATIONAL MARKETING

Lars Perner, Instructor

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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

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Standardization —Disadvantages

• Unnecessary features • Vulnerability to trade barriers • Strong local competitors BUAD 307

INTERNATIONAL MARKETING

Lars Perner, Instructor

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Product Adaptations

• Mandatory – Legal requirements – Infrastructure – Physical requirements • “Discretionary” – Local tastes – Fit into cultural environment BUAD 307

INTERNATIONAL MARKETING

Lars Perner, Instructor

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Motivations for Adaptation

• Legal • Infrastructure • Consumer demographics • Culture – Religious impact – Cultural context of use • Local traditions/ customs —e.g., – Food usage occasions – Aesthetic preferences • Local usage conditions • Pricing pressures/ tradeoffs Lars Perner, Instructor

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BUAD 307

INTERNATIONAL MARKETING

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

Product adaptations not needed (extension) Communication adaptations not needed (extension) Communication adaptations needed

Some industrial equipment

Product adaptations needed

Gasoline; laundry detergent Bicycle; fast food; chewing gum Greeting cards

Domestic equivalent does not exist (product invention)

Compass-equipped prayer rug; hand powered washing machine BUAD 307

INTERNATIONAL MARKETING

Lars Perner, Instructor

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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) Lars Perner, Instructor

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BUAD 307

INTERNATIONAL MARKETING

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

“Leap frogging”Going directly from

life old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology)

Shortening

of product cycles

Lars Perner, Instructor

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BUAD 307

INTERNATIONAL MARKETING

Promotion: Strategic and Tactical Objectives

• Awareness • Trial • Attitude toward the product – Beliefs – Preference • Temporary sales increases Emerging Markets/ New Products Mature markets /established products Lars Perner, Instructor

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BUAD 307

INTERNATIONAL MARKETING

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

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