MARKETING 566
International Marketing: Doing Business in Mexico
Winter 2011- In partnership with Universidad Tecnologica de Monterrey (EGADE)
Tom Gillpatrick, Ph.D.
Juan Young Professor of Marketing &
Executive Director, FILC
School of Business Administration
Portland State University
Spring Term 2010
www.sba.pdx.edu
Major Decisions in
Global Marketing
Deciding whether
to go abroad
Deciding which
markets to enter
Deciding how to
enter the market
Deciding on the
marketing program
Deciding on the
marketing organization
Selected Issues of Global
Marketing Strategies
I. Product Issues
- Product extension vs. adaptation
- Product Standardization vs. custom
- Multi-national diffusion
- NPD in global markets
- Global branding- more later
- Managing multinational product lines
- Product Piracy
- Country of Origin Stereotypes
- Marketing services
Selected Issues of Global
Marketing Strategies
II. Pricing Issues
- Managing price escalation
- Pricing and currency movements
- Transfer pricing
- Countertrade
- price regulation and coordination
- Understand drivers of pricing
Selected Issues of Global
Marketing Strategies
III. Distribution Issues
- Distribution logistics
- FTZ’s
- Global retailing
- Import/export issues
- Gray markets
Selected Issues of Global
Marketing Strategies
IV. Global Communication Issues
- Global advertising & culture
- Global budgeting
- Creative strategy
- Global media
- Global regulations
- Agency selection & coordination
- Global IMC and other promotion
- Marketing and the internet
Selected Issues of Global
Marketing Strategies
V. Market Opportunity Assessment
- Global market research
- Design, data collection methods
- Market size assessment
- New technologies
- Management of research
- Global Segmentation & Positioning
- Country screening
- Segmentation methods
- Positioning- std. Vs. custom
- Local vs. global positioning
- Market Entry and targeting
Levels of International Marketing
Domestic
Marketing
• Least
international
commitment
• Domestic
focus
Export
Marketing
• Limited
international
commitment
• Involves
direct or
indirect export
• Ethnocentric
International
Marketing
• Substantial
international
commitment
• Focus on
individual
countries or
regions
• Polycentric or
Regiocentric
Global
Marketing
• Extensive
international
commitment
• Focus on
segments,
rather than
countries or
regions
• Geocentric
Framework for Selecting
Target Markets
• Demographic information is a starting point but not
the decision factor
• Product-Market must be considered
– Market defined by product category
• Marketing model drivers must be considered
– Factors required for a business to take root and grow
• Are there any enabling conditions present?
– Conditions whose presence or absence will determine
success of the marketing model
Current Segment Size and Growth
• Is the market segment currently large
enough to present a company with the
opportunity to make a profit?
• If the answer is ‘no’, does it have significant
growth potential to make it attractive in
terms of a company’s long-term strategy?
Feasibility and Compatibility
• Will adaptation be required? If so, is this
economically justifiable in terms of expected
sales?
• Will import restrictions, high tariffs, or a strong
home country currency drive up the price of the
product in the target market currency and
effectively dampen demand?
• Is it advisable to source locally? Would it make
sense to source products in the country for export
elsewhere in the region?
Global Market Entry
Strategies
• Trade barriers are
falling around the
world
• Companies need to
have a strategy to
enter world markets
Five Models of Entry
Into Foreign Markets
Indirect
Exporting
Direct
exporting
Licensing
Joint
ventures
Direct
investment
Amount of commitment, risk, control, and profit potential
Market Entry Strategy
Alternatives
Cooperation
– Agents, Dealers, Distributors, Importers
• Licensing
• Franchising
• Joint Ventures
• Contract Arrangements
• Turnkey Operations
• Global Strategic Partnerships
• Direct Investment
Marketing
Product
Price
Place (Channels)
Promotion (Communication)
Manufacturing
R&D & Engineering
Criteria for Entry
•
•
•
•
•
•
•
•
•
Market Attractiveness. Size, growth
Risk
Competitive Advantage
Government regulations
Local infrastructure
Company Objectives
Need for Control
Internal Resources & capabilities
Flexibility
Which strategy should be used?
• It depends on:
– Vision
– Attitude toward risk
– How much investment capital is available
– How much control is desired
Exporting
• Direct- Do It Yourself
– Sales to foreign
• Distributors
• Retailers
• End customers
– Large
– Small (e.g., through
eBay)
• Indirect- hire someone else
– Sales to export company
which handles sales to
foreign buyers or distributors
• “Piggy-backing”
(Complementary
Exporting)
– Two firms exchange
exporting services by
distributing the other’s
product abroad
Exporting
• Advantages:
– Limited investment;
low risk
• Disadvantages:
– Higher unit cost to
consumer
– Likely lower market
share
– Limited learning on
country market
characteristics
Possible preemption
by competitors
Export Tasks
• Transportation
– Negotiation
– Coordination between
modes and shippers
• Export licenses and
permissions
• Customs clearing
• Warehousing
• Financing
– Quotes
– Point of transfer (FOB)
– Credit
• Risk assessment/letters
of credit
– Exchange rate risk
• Repatriation/ countertrade
Potential
Export Problems
• Logistics
– transportation, rates, documents, financial info, packaging, insurance
• Servicing Exports
– Parts availability, repairs, technical advice
• Sales Promotion
– Advertising, sales effort, market info
• Legal Procedures
– liability, licensing, customs/duties, contracts
• Foreign market intelligence
– locating markets, restrictions, competition
• Price escalation
• Dumping regulations
• Finding local distribution
– Screening
– Negotiation
• After sales support
•
Imitation by importer/failure to learn local market
Sourcing Strategies:
Exporting & Importing
• Export Selling Vs. Export Marketing
• Stages of Evolution in Exporting
–
–
–
–
–
–
–
Not exporting
Fills unsolicited orders
Explores export opportunities
Exports to one or more markets
Experienced Exporter
Explores regional focus- commonalities
Scans global markets before targeting
Sourcing Decision Criteria
•
•
•
•
•
•
Factors Costs & Conditions
Logistics
Country infrastructure
Political Risk
Market Access (Tariff/non-tariff barriers)
Exchange Rate
Licensing
• A contractual agreement whereby one company
(the licensor) makes an asset available to another
company (the licensee) in exchange for royalties,
license fees, or some other form of compensation
– Patent
– Trade secret
– Brand name
– Product formulations
Advantages to Licensing
• Provides additional profitability with little
initial investment
• Provides method of circumventing tariffs,
quotas, and other export barriers
• Attractive ROI
• Low costs to implement
Disadvantages to Licensing
•
•
•
•
•
•
Limited participation
Returns may be lost
Lack of control
Licensee may become competitor
Licensee may exploit company resources
May Create a competitor
Special Licensing
Arrangements
• Contract manufacturing
– Company provides technical specifications to a
subcontractor or local manufacturer
– Allows company to specialize in product design while
contractors accept responsibility for manufacturing
facilities
• Franchising
– Contract between a parent company-franchisor and a
franchisee that allows the franchisee to operate a
business developed by the franchisor in return for a fee
and adherence to franchise-wide policies
Contract Manufacturing
• Advantages
– Faster start
– Reduced investment in
manufacturing
– Ability to take
advantage of
established
manufacturer’s
experience and cost
structure (experience
curve)
• Disadvantages
– “Training” of
competitor
– Still left with
marketing
responsibilities 
need country presence
Management Contracts
• Opportunity for firm to profit on its
technology and “know-how” in a market
where the firm does not want to enter or
face competition from contractee
• Minimal transfer of assets
• Must be able to operate in local
infrastructure, but contractee and/or
government usually has a strong interest in
the success of the project
Overseas Turnkey Projects
• Firm agrees to set up construction and/or
manufacturing project—promised to be in
operation form when completed
• Helps leverage investment made at home if
direct competition in the new market is
unlikely
• Some risk in being able to “deliver”
– Maneuvering local government regulations and
local infrastructure
Franchising Questions
• Will local consumers buy your product?
• How tough is the local competition?
• Does the government respect trademark and
franchiser rights?
• Can your profits be easily repatriated?
• Can you buy all the supplies you need locally?
• Is commercial space available and are rents
affordable?
• Are your local partners financially sound and
do they understand the basics of franchising?
Investment
• Partial or full ownership of operations
outside of home country
– Foreign Direct Investment
• Forms
– Joint ventures
– Minority or majority equity stakes
– Outright acquisition
Joint Ventures
• Entry strategy for a single target country in
which the partners share ownership of a
newly-created business entity
Joint Venture
• Licensing: Sell rights to name brand.
• Contract Manufacturing: make item in host
country; manufacturer of product only.
• Management Contracting: hired as Mgmt.
Consultant to host company
• Joint Ownership: truly partnering with a
company in host country, to share expertise and
mutual gains.
Joint Ventures
• Advantages
– Allows for sharing of risk
(both financial and
political)
– Provides opportunity to
learn new environment
– Provides opportunity to
achieve synergy by
combining strengths of
partners
– May be the only way to
enter market given barriers
to entry
• Disadvantages
– Requires more investment
than a licensing agreement
– Must share rewards as well
as risks
– Requires strong
coordination
– Potential for conflict among
partners
– Partner may become a
competitor
Investment via Ownership or
Equity Stake
• Start-up of new operations
– Greenfield operations or
– Greenfield investment
• Merger with an existing enterprise
• Acquisition of an existing enterprise
Direct Entry--acquisitions or
“building from scratch”
• Advantages
– Control
– Learning about country
market
– Leverage (may be
disadvantage, though)
• Disadvantages
– Large investment; risk
– Risk of nationalization/
extortion
– May take longer to be
successful
Foreign Assembly/Mixing
• Motivations
–
–
–
–
–
Lower labor local labor costs
Ease of shipping
Local content requirement
Duties/tariffs
Locus of value addition for tax purposes
•“The purpose of any joint venture, or even a
wholly-owned investment, is to allow Chinese
companies to learn from foreign companies. We
want them to bring their technology to the soil of
the People’s Republic of China.”
- Yuan Sutai
Ministry of Electronics
Industry, China
Global Strategic Partnerships
• Possible terms:
– Collaborative agreements
– Strategic alliances
– Strategic international alliances
– Global strategic partnerships
The Nature of Global Strategic
Partnerships
The Nature of Global Strategic
Partnerships
• Participants remain independent following
formation of the alliance
• Participants share benefits of alliance as
well as control over performance of
assigned tasks
• Participants make ongoing contributions in
technology, products, and other key
strategic areas
5 Attributes of True Global
Strategic Partnerships
• Two or more companies develop a joint long-term
strategy
• Relationship is reciprocal
• Partners’ vision and efforts are global
• Relationship is organized along horizontal lines
(not vertical)
• When competing in markets not covered by
alliance, participants retain national and
ideological identities
Success Factors
• Mission. Successful GSPs create win-win
situations, where participants pursue
objectives on the basis of mutual need or
advantage.
• Strategy. A company may establish separate
GSPs with different partners; strategy must
be thought out up front to avoid conflicts.
• Governance. Discussion and consensus must
be the norms. Partners must be viewed as
equals.
Success Factors
• Culture. Personal chemistry is important, as is
the successful development of a shared set of
values.
• Organization. Innovative structures and
designs may be needed to offset the
complexity of multi-country management.
• Management. Potentially divisive issues must
be identified in advance and clear, unitary
lines of authority established that will result in
commitment by all partners.
Alliances with Asian
Competitors
• Four common problem areas
– Each partner had a different dream
– Each must contribute to the alliance and each
must depend on the other to a degree that
justifies the alliance
– Differences in management philosophy,
expectations and approaches
– No corporate memory
Cooperative Strategies in Japan:
Keiretsu
• Inter-business alliance or enterprise groups in
which business families join together to fight for
market share
• Often cemented by bank ownership of large
blocks of stock and by cross-ownership of stock
between a company and its buyers and nonfinancial suppliers
• Keiretsu executives can legally sit on each other’s
boards, share information, and coordinate prices
Cooperative Strategies in South
Korea: Chaebol
• Composed of dozens of companies,
centered around a bank or holding
company, and dominated by a founding
family
–
–
–
–
Samsung
LG
Hyundai
Daewoo
Market Expansion Strategies
• Companies must decide to expand by:
– Seeking new markets in existing countries
– Seeking new country markets for already identified and
served market segments
Modes of Entry: Introduction
PRODUCTS AND
SERVICES
• Product functions
across culture
• Standardization vs.
customization;
adaptation as a
compromise
• Communication vs.
product adaptations
• Branding
• Services
Selected Issues of Global
Marketing Strategies
I. Product Issues
- Product extension vs. adaptation
- Product Standardization vs. custom
- Multi-national diffusion
- NPD in global markets
- Global branding- more later
- Managing multinational product lines
- Product Piracy
- Country of Origin Stereotypes
- Marketing services
Elements of a Product
Augmented
Product
Installation
Tangible
Product
Packaging
Delivery
and
Credit
Brand
Name
Core
Benefit or
Service
Quality
Features
AfterSale
Service
Core
Product
Styling
Warranty
SOURCE: Czinkota & Ronkainen. Global Marketing.
Product-Line Length
• Line Stretching
– Downmarket
– Upmarket
– Two-way
• Line Filling
• Line Modernization
• Line Featuring & Line Pruning
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 of country of
origin (e.g., French beer, American products
with French language labels)
Services
• Scope
• Characteristics
–
–
–
–
Intangibility
Heterogeneity
Inseperability
Perishability
• The Service-Tangible Product
Continuum
Service Issues
• Country expectations
–
–
–
–
Willingness to pay
Quality
Speed
Competence of
personnel
– Courtesy/deference
– Decision making
authority of personnel
• Cost
• Availability of skilled
personnel
• Control over personnel
performance
• Overhead issues
Extend, Adapt, Create: Strategic
Alternatives in Global Marketing
• Extension – offering product virtually
unchanged in markets outside of home
country
• Adaptation – changing elements of design,
function, and packaging according to needs
of different country markets
• Creation – developing new products for the
world market
Approaches to Product
Introduction
● Adaptation
Customization
Not suitable for
the Middle East!
● Localization
●Standardization
Global Product Planning:
Strategic Alternatives
Communication
Product
Same
Different
Same
Strategy 2:
Product Extension
Communication
Adaptation
Strategy 1:
Dual Extension
Different
Strategy 4:
Dual Adaptation
Strategy 3:
Product Adaptation
Communication
Extension
Product Need Satisfaction
• Products serve different purposes in
different countries; e.g.,
– Autos: transportation in U.S.; largely status symbol
in Japan
– Toothpaste: Cavity prevention in U.S.; breath
freshener in Ireland
– Tang: convenience, low cost beverage in U.S.;
pineapple flavor as special treat in Brazil (real
oranges are cheap and plentiful)
Physical Product vs.
Communication Adaptations
Product
adaptations not
needed
(extension)
Product
adaptations
needed
Communication
adaptations not
needed
(extension)
Some industrial
equipment; some
electrical
equipment
Gasoline; laundry
detergent
Communication
adaptations
needed
Bicycle; some fast
food; chewing gum
Greeting cards;
some fast food
Domestic
Compass-equipped prayer rug; hand
equivalent does
powered washing machine; bottled
not exist (product green tea
invention)
Standardization versus
Customization
• Common Customer Needs
– Convergence in Drinking Patterns
– Comparison of Recognitions Around Car
Value Between Europe, USA, and Japan
– Differences in Car Requirements for Various
European Countries
68
Product Design Philosophies
ETHNOCENTRIC
STANDARDIZATION
GEOCENTRIC
ADAPTATION
POLYCENTRIC
CUSTOMIZATION
REGIOCENTRIC
Reasons for Standardization
• Avoiding high costs of
standardization, 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
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
Standardization-Disadvantages
• Unnecessary features
• Vulnerability to
trade barriers
• Strong local
competitors
Product Adaptations
• Mandatory
– legal requirements
– infrastructure
– physical requirements
• “Discretionary”
– local tastes
– fit into cultural
environment
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
The Reality: Continuum of
“Mandatoriness”
Legal
requirements
Completely
mandatory
Electric
Voltage
Product
labeling
Manner of use
Performance
Optimization
Strong
Cultural
Conflict
Economic
Suitability
Completely
“discretionary”
Taste
Optimization
Style, color
Mandatory Adaptation Issues
• Choices in approach to mandatory conditions-examples
– Power drills with noise suppression filters
– Non-public ear piercing in Japan
• Distribution and promotion implications
• “Arbitrary” standards (e.g., TV, DVD players)
• Conflicting rules between countries—may not be
possible to make product legal in all
Compatibility Issues
• Basic requirements
– E.g., voltage, infrastructure, plugs
• Compatibility
– Ability to be used within a local system (e.g.,
frequencies, electronic protocols)
• Multi-system compatibility
– Product can be set to operate within several
standards
Legal/Standards
Constraints
Standardization versus
Adaptation
Standardization versus
Adaptation
• Globalization (Standardization)
– Developing standardized products marketed worldwide
with a standardized marketing mix
– Essence of mass marketing
• Global localization (Adaptation)
– Mixing standardization and customization in a way that
minimizes costs while maximizing satisfaction
– Essence of segmentation
– Think globally, act locally
Factors Moderating Cultural
Footprints
•
•
•
•
•
Level of economic development
Country size & history
Geographic region within country
Urban v. rural areas
Demographic group
–
–
–
–
Rich v. poor
Male v. female
Adults v. children
Ethnic & religious group
Dimensions of the
Cultural Footprint
• Food symbols & meanings
– Food as fun, brand identity, bonding
via shared meaning
• Food consumption rituals
– Food acquisition patterns, service interactions,
food preparation
• Food & Family Life
– Children as consumers, eating alone & snacking
• Nutrition & heath
– Food safety, consumer education, over-nutrition
9 Questions
•
•
•
•
•
•
•
•
•
Who buys our product?
Who does not buy it?
What need or function does it serve?
Is there a market need that is not being met by current
product/brand offerings?
What problem does our product solve?
What are customers buying to satisfy the need for which
our product is targeted?
What price are they paying?
When is the product purchased?
Where is it purchased?
To Adopt or Not to Adopt: How Will
Consumers Answer the Question?
• Some causes of resistance to
adoption
– perceived risk--financial and social
– self image
– effort to implement and/or learn to
use the product
– incompatibility
– inertia
Entry Timing Strategy
• Waterfall
– Initial introduction
in selected market(s)
with “trickle down”
to markets of later
entry
• Market readiness
• Concentration of
resources
• Sprinkler
– Immediate entry
into all targeted
markets
– Preemption of
early entry
advantage
– Fewer resources
available for
each market
The International Life Cycle
• Market for older
technology tends to
exist in less developed
countries
– Manufacturing of older
generation technology—
e.g., Pentium I
computers
– Resale of capital
equipment—e.g., DC 8
aircraft, old three part
canning machines
• Some countries tend
to be more receptive
to innovation than
others
• “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
Local Market Branding
Expectations
• Asian consumers
typically have more
concern with brands
– conglomerates have
brands encompassing
large range of goods
(e.g., Mitsubishi food
products)
Counterfeit Products
• Impact
–
–
–
–
Loss of sales
Loss of exclusivity/price pressure
Possible lack of confidence in quality
Warranty issues
• Approaches
– Legal
– “Search and destroy”
New Product Ideas:
More Companies Look Globally
• Foreign Markets as source grows
– Haagen Daz: “dulce de leche”- Argentina,
Next from (Japan) green tea flavor
– Altoids (UK) past Cert’s US share
– “Air Rift” (Japan) Nike
– Nestle & partner General Mills are bringing
European chocolate breakfast to Canada
Business Week
9/7/ 1998
Packaging
• Consumer Packaged Goods when the
packaging is designed to protect or contain
the product during shipping
• Eco-Packaging because package designers
must address environmental issues
• Offers communication cues that provide
consumers with a basis for making a
purchase decision
Labeling
• Provides consumers with various types of
information
• Regulations differ by country regarding various
products
– Health warnings on tobacco products
– American Automobile Labeling Act clarifies the
country of origin, and final assembly point
– European Union requires labels on all food products
that include ingredients from genetically modified crops
Aesthetics
• Global marketers must understand the
importance of visual aesthetics
• Aesthetic Styles (degree of complexity
found on a label) differ around the world
Product Warranties
• Express Warranty is a written guarantee that
assures the buyer is getting what they paid for or
provides a remedy in case of a product failure
• Warranties can be used as a competitive tool
How to Choose a Strategy?
• Cave Dweller – new products launched
internationally to dispose of excess
production
• Naïve Nationalist – company recognizes
growth opportunities outside of home
market
• Globally sensitive – company views world
as competitive marketplace
How to Choose a Strategy?
• The product itself, defined in terms of the
function or need it serves
• The market, defined in terms of the
conditions under which the product is used,
preferences of potential customers, and
ability to buy the product
• Adaptation and manufacturing costs the
company will incur
What is a Brand?
“ A brand can be defined as a name,
term, sign, symbol, or
combination of them which is
intended to identify the goods or
seller and to differentiate them
from the competition.”
Strategic Role of Branding
Brands are part of a differentiation strategy
- Brands provide points of differentiation.
- A strong brand has the power to mobilize
internally and to attract externally.
- Brands can provide value to the company, the
channel and for customers.
An Overview of
Branding Decisions
Branding
Decision
•Brand
•No brand
BrandSponsor
Decision
BrandName
Decision
BrandBrandStrategy Repositioning
Decision
Decision
•Manufacturer
brand
•Individual
brand
names
•Blanket
family
name
•Separate
family
names
•Companyindividual
names
•Line
extension
•Brand
extension
•Multibrands
•New
brands
•Cobrands
•Distributor
(private)
brand
•Licensed
brand
•Repositioning
•No
repositioning
Global Brand Development
• Questions to ask when management seeks to
build a global brand:
– Will anticipated scale economies materialize?
– How difficult will it be to develop a global brand
team?
– Can a single brand be imposed on all markets
successfully?
Examples of
Global Brands
Global Brand
• Nescafe
• Coca-Cola
• Canon
• Rolex
• Toyota
• Seiko
Global Products and Brands
• Global products meet the wants and needs
of a global market and is offered in all
world regions
• Global brands have the same name and
similar image and positioning throughout
the world
Brand Strategies
Global Brands
National Brands
Global/National Brand Mix
Private Brand
Irwin/McGraw-Hill
ISSUES IN GLOBAL
BRANDING
• Which brands should be global,
which local?
• How to condense and manage
brand portfolio?
• How to build global brands?
GLOBAL PRICING
• Price is the only marketing mix element that
captures revenue: everything else is costs.
Thus pricing is critical for profitability.
• Pricing decisions tend to be x-functional
involving finance, manufacturing, legal, tax,
accounting AND marketing.
• Multinational have need to coordinate
pricing across markets.
Selected Issues of Global
Marketing Strategies
II. Pricing Issues
- Managing price escalation
- Pricing and currency movements
- Transfer pricing
- Countertrade
- price regulation and coordination
- Understand drivers of pricing
Pricing Outside
Your Home Market
•
•
•
•
•
•
•
•
Does price reflect quality?
Is price competitive?
What price objective should be pursued?
What type of discount should be offered?
Should price be varied by segment?
Is demand elastic or inelastic?
Will host country view prices as exploitative?
Are anti-dumping laws an issue?
Foreign Price Drivers
•
•
•
•
•
Company- costs, goals
Demand- elasticity, segments
Competition- nature, intensity
Channels- gray markets, brands
Government influences- tax,
interest rates,inflation, controls
Terms of the Sale
•
•
•
•
•
•
•
•
•
Obtain export license if required
Obtain currency permit
Pack goods for export
Transport goods to place of departure
Prepare a land bill of lading
Complete necessary customs export papers
Prepare customs or consular invoices
Arrange for ocean freight and preparation
Obtain marine insurance and certificate of the policy
Incoterms
• FAS (free alongside ship) named port of destination –
seller places goods alongside the vessel or other mode of
transport and pays all charges up to that point
• FOB (free on board) – seller’s responsibility does not end
until goods have actually been placed aboard ship
• CIF (cost, insurance, freight) named port of destination –
risk of loss or damage of goods is transferred to buyer once
goods have passed the ship’s rail
• CFR (cost and freight) – seller is not responsible at any
point outside of factory
Export Strategies Under Varying
Currency Conditions
When Domestic Currency is
WEAK...
When Domestic Currency is
STRONG...
Stress, price benefits
Engage in nonprice competition by
improving quality, delivery, and aftersale service
Expand product line and add more
costly features
Improve productivity and engage in
vigorous cost reduction
Shift sourcing and manufacturing to
domestic market
Shift sourcing and manufacturing
overseas
Exploit export opportunities in all
markets
Give priority to exports to relatively
strong-currency countries
Conduct conventional cash-forgoods trade
Deal in countertrade with weakcurrency countries
Use full-costing approach, but use
marginal-cost pricing to penetrate
new/competitive markets
Trim profit margins and use marginalcost pricing
Export Strategies Under
Varying Currency Conditions
When Domestic Currency is
WEAK...
When Domestic Currency is
STRONG...
Speed repatriation of foreign-earned
income and collections
Keep the foreign-earned income in
host country, slow collections
Minimize expenditures in local, host
country currency
Maximize expenditures in local, host
country currency
Buy needed services (advertising,
insurance, transportation, etc.) in
domestic market
Buy needed services abroad and pay
for them in local currencies
Minimize local borrowing
Borrow money needed for expansion
in local market
Bill foreign customers in domestic
currency
Bill foreign customers in their own
currency
Currency Fluctuations
Countertrade
• Countertrade occurs when payment is made in some form
other than money
• Options
– Barter
– Counter-purchase
– Offset
– Compensation trading
– Cooperation agreements
– Switch trading
Why Purchasers Impose
Countertrade Obligations
To Preserve Hard Currency
To Improve Balance of Trade
To Gain Access to New Markets
To Upgrade Manufacturing Capabilities
To Maintain Prices of Export Goods
Global Distribution
Overview & Channels
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•
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Channel Mapping-Who are Players?
Channel Strategy & Objectives
Channel design
Global Retailing
Comparison U.S. vs. Japan
Logistics & exports
Gray markets
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122
International Channel-ofDistribution Alternatives
Home Country
Foreign Country
The foreign marketer or producer
sells to or through
Foreign
consumer
Domestic producer
or marketer sells to
or through
Open distribution via
domestic wholesale
middlemen
Export management
company or company
sales force
Exporter
Importer
Foreign agent
or merchant
wholesalers
Foreign
retailers
Home Country Middlemen
 Export Management Company
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Trading Companies (Foreign)
U.S. Export Trading Companies
Complementary Marketers
Manufacturer's Export Agent
Broker
Buying Offices
Selling Groups
 WPEA
 FSC
 DISC
 Norazi Agent
 Export Merchants
 Export Jobbers
Foreign Country Middlemen

Manufacturer's Representatives

Distributors

Brokers

Managing Agents

Dealers

Import Jobbers

Wholesalers and Retailers
Gray Market Goods
• Trademarked products are exported from
one country to another where they are sold
by unauthorized persons or organizations
• Occurs when product is in short supply,
when producers use skimming strategies in
some markets, and when goods are subject
to substantial mark-ups
Gray Markets
• Why Gray Markets Develop
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–
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Currency Fluctuations
Differences in Market Demand
Segmentation Strategy
How to Combat Gray Market Activity
John Wiley & Sons, Inc c 1998
127
STRATEGIES: GRAY MARKETS
I.
MAINTENANCE/FIELD SERVICE
II. DISTRIBUTOR TRAINING
III. WARRANTY/GUARANTY AGREEMENTS
IV. CUMULATIVE DISCOUNTS & YEAR END BONUSES
V. OFFER DISCOUNTS DIRECTLY TO CONSUMER
VI. CONFUSE THE BUYER WITH "BUNDLED" GOODS
VII. DELETE CHANNEL MEMBERS WHO Don’t Cooperate
VIII. GO AFTER GREY MARKETERS
IX. OWN YOUR OWN CHANNEL
X.
ONE PRICE FOR ALL
The Evolution of International
Marketing Strategy
Initial
Market
Entry
Local
Market
Expansion
Key Objective
Assessment and testing of
new market opportunities
Achieve economies of scope
Economies of scale to
to leverage local operating unit leverage presence
Managing
Focus
Corporate center driving
international expansion
Local management seeking
local performance
improvement
Regional and corporate
managers seeking
consolidation of multidomestic network
Marketing
Objective
Seek new geographical
opportunities for existing
marketing assets
Develop new market-specific
marketing assets to maximize
local market share
Identify marketing assets with
global potential and seek
consistent management
Marketing
Organization
Partnerships with
independent local
marketing firms
Delegation to local marketing
management
Seek opportunities for
knowledge and personnel
transfer around network
Adapted from D. Arnold “The Mirage of Global Markets”
Global
Rationalization
The International
Distributor Life Cycle
Independent Local
Distributor
Sales
Revenues
Slowing Sales Growth
Directly Controlled Distribution
Subsidiary
Sales Growth improves
after MNC takes control
and Disagreements
over Marketing Strategy
The “Plateau”: MNC decides
to switch to Marketing
High Distributor Energy
and Distribution Subsidiary
and Sales Growth
Time
Adapted from D. Arnold “The Mirage of Global Markets”
The Evolving Challenge of
International Distribution
Independent National
Distributor
Direct
National Distributor
Direct Regional/International
Marketing Organization
Required
Capabilities
Local operating capability;
access to platform customers
Strategic marketing capability
at management level; resources
and willingness to invest in
growth
Competence in working
internationally across MNC
national units; efficiency in
implementation
Required
Functions
Sales generation, physical
distribution, and customer
management
Marketing strategy negotiated
between MNC and national
distributor; implementation
allocated to national distributor
Regional and or international
responsibility for marketing
strategy; implementation
negotiated between international
and local management
MNC Marketing
Objectives
Penetration of local markets
Business development to
maximize performance in local
markets
Leverage of synergies and
economies across international
organization
MNC Strategy
Avoidance
Commitment:
Existence ofof
local
distribution
infrastructure
test country-market
Dissatisfaction
national
Investment
forwith
Growth:
distributor’s capability
maximize local market share
Cadre of MNC managers
Multinational
Marketing:
experienced international
maximize
operations global market share
Conditions
Associated with
Transition
Uncertainty regarding local
capabilities
Country-market exceeds
threshold levels of potential and
stability
Adapted from D. Arnold “The Mirage of Global Markets”
Globalized competition
The International
Promotional Mix
and Advertising
Strategies
Selected Issues of Global
Marketing Strategies
IV. Global Communication Issues
- Global advertising & culture
- Global budgeting
- Creative strategy
- Global media
- Global regulations
- Agency selection & coordination
- Global IMC and other promotion
- Marketing and the internet
Global Marketing
Communications
• The primary purpose of marketing
communications is to tell customers abut
the benefits and values that a company,
product, or service offers
• Integrated Marketing Communications
(IMC) is becoming more popular because of
the challenges of communicating across
national borders
Nestle in China
What global market-entry strategy and why?
Our Brand
B - Best Prices, Always.
R - Ready to Serve.
A - Associates Helping Associates.
N - Never Out of Stock.
D - Do the Right Thing.
Wal-Mart Global Fashion
Simply Basic Tee Shirt
(S. Korea) $1.15
Simply Basic Underwear
(Germany) $1.43
Gian Franco Duna Pants
(Mexico Suburbia) $39.00
Creative Challenges of
Global Advertising
Legal and Tax Considerations
Language Limitations
Cultural Diversity
Media Limitations
Production and Cost Limitations
Advertising Regulations
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Comparative Advertising
Advertising to Children
Advertising Vice Products
Other Regulations:
– Vary by country; examples:
- France: Requirement to keep the French language pure
- Islamic countries: Ban the use of sex in advertising
Cultural Considerations – Japanese
and American Differences
• Indirect rather than direct forms of expression are preferred in
the messages
• There is often little relationship between ad content and the
advertised product
• Only brief dialogue or narration is used in television commercials,
with minimal explanatory content
• Humor is used to create a bond of mutual feelings
• Famous celebrities appear as close acquaintances or everyday
people
• Priority is placed on company trust rather than product quality
• The product name is impressed on the viewer with short, 15second commercials
Cultural Considerations
Eiffel Tower (Paris) and Parthenon (Athens)
What cultural lesson did Coca-Cola learn?
Diet Pepsi
What is global competition?
Media Decisions – Saudi
Arabia
• Use of comparative advertising claims is
prohibited
• Non-censored films cannot be advertised
• Women may only appear in those commercials
that relate to family affairs, and their appearance
must be in a decent manner that ensures
feminine dignity
• Women must wear a long suitable dress which
fully covers her body except face and palms
SALES MANAGEMENT
John Wiley & Sons, Inc c 1998
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Cultural Considerations
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Personal Selling
Cultural Generalization
Organization (Corporate) Culture
Relationship Marketing
Myers-Briggs Type Indicator – MBTI
-Popular tool for characterizing people
1. Extrovert vs. Introvert
2. Sensing vs. Intuitive
3. Thinking vs. Feeling
4. Judging vs. Perceiving
Impact of Culture on Sales
Management and Personal Selling
Process
• Salesforce Objectives
– What the salesforce will be asked to do
• Salesforce Strategy
– Sales structures: Territorial salesforce, product
salesforce, and customer salesforce
• Recruiting and Selecting
• Training
Impact of Culture on Sales Management
and Personal Selling Process
• Supervising
– Motivation and Compensation
– Management Style
– Ethical Perceptions
• Evaluating
– Quantitative evaluations
– Qualitative evaluations
Cross-Cultural Negotiations
• Conducting successful cross-cultural negotiations
is a key ingredient for many international business
transactions.
• Stages of the Negotiation Process:
– Non-task surroundings
– Task-related information exchange
– Persuasion
– Concessions and agreement
Cross Cultural Negotiation
FOUR STAGES OF BUSINESS NEGOTIATIONS
Japanese
Americans
Nontask Sounding
Considerable time
and expense devoted
to such efforts is the
practice in Japan.
Relatively shorter
period are typical.
Task-related
Exchange of
Information
This is the most
important step - high
first offers with long
explanations and indepth clarifications.
Information is given
briefly and directly.
"Fair" First offers are
more typical.
Cross Cultural Negotiation
Japanese
Americans
Persuasion
Persuasion is accomplished primarily
behind the scenes.
Vertical status
relations dictate
bargaining outcomes.
The most important
minds are changed at
the negotiation table
and aggressive
persuasive tactics
used.
Concessions and
Agreement
Concessions are
made only toward the
end of negotiations a holistic approach to
decision making.
Progress is difficult to
measure for
Americans.
Concessions and
commitments are
made throughout - a
sequential approach
to decision making.
Expatriates
• Expatriates are home-country personnel sent
overseas to manage local operations in the foreign
market.
• Advantages of Expatriates
– Better Communications
– Development of Talent
• Difficulties of Sending Expatriates Abroad
– Cross-Cultural Training
– Motivation
– Compensation
Expatriates (contd.)
– Family Discord
– Security Risk
• The Return of the Expatriate – Repatriation
– Repatriation is the return of the expatriate
employee from overseas.
– GMAC Relocation Services’ 2001 Survey
reported a number of effective ways to reduce
attrition rates. These include the following:
Expatriates (contd.)
– 1. Chances to use international experience
– 2. A choice of positions upon return
– 3. Recognition
– 4. Repatriation career support
• Generalizations About When Expatriates are Good/Bad
– Expatriates are important whenever communication
with the home country office is at a premium.
– Expatriates are especially important in complex
operating environments, or when elevated political risk
requires constant monitoring.