International Marketing
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The Scope and Challenge of International Marketing Why is International Marketing Important? Canada’s Exports and Imports Elements of the (International) Marketing Mix The International Marketing Task Self-Reference Criterion (SRC) Phases of International Marketing Involvement International Marketing Concepts Being Globally Aware Why is International Marketing Important? Business environments are becoming increasingly more global Exports are the driving force behind Canada’s economic expansion Canada exports 60% of the value of all goods produced $ 1 billion in additional exports creates about 11,000 new jobs Trends in Global Business Internationalization of markets Internationalization of companies Growth of Regional Trade Areas Move toward free market system by countries in Latin America, Asia, Eastern Europe Large Emerging Markets (China, India, Argentina, Brazil, South Korea) ©Times Mirror Higher Education Group, Inc., IRWIN Canada’s Exports and Imports of Goods 1992 1993 1994 1995 1996 1997 $ millions Exports 163,463.5 190,383.4 227,892.0 264,937.9 280,566.3 301,101.1 United States 123,376.9 149,006.2 180,836.9 205,852.8 221,854.7 243,361.4 8,253.7 9,140.9 10,733.7 13,069.9 12,490.3 12,053.3 12,776.5 12,066.4 12,871.3 17,914.7 17,370.0 16,676.1 3,178.6 3,380.2 4,640.4 4,839.5 5,403.2 7,912.4 15,877.8 16,789.7 18,809.8 23,260.9 23,448.1 21,098.0 Imports 154,429.6 177,593.3 208,590.5 231,206.1 239,576.9 276,846.1 United States 110,378.5 130,714.3 156,342.0 173,725.9 181,893.1 210,802.2 8,913.3 8,477.4 8,318.0 8,429.9 7,235.7 8,703.1 13,923.2 14,026.4 16,420.3 20,349.0 20,617.2 24,152.2 4,615.8 4,683.9 7,376.6 7,939.3 8,950.7 11,339.8 16,598.7 19,691.1 20,133.5 20,762.1 20,880.2 21,848.8 9,033.9 12,790.1 19,301.5 33,731.8 40,989.4 24,255.0 12,998.4 18,291.9 24,494.9 32,126.9 39,961.6 32,559.2 -659.6 663.5 2,415.7 4,640.0 5,254.6 3,350.2 European Union -1,146.7 -1,960.0 -3,549.0 -2,434.3 -3,247.2 -7,476.1 Other OECD -1,437.2 -1,303.7 -2,736.2 -3,099.8 -3,547.5 -3,427.4 -720.9 -2,901.4 -1,323.7 2,498.8 2,567.9 -750.8 Japan European Union Other OECD Other countries Japan European Union Other OECD Other countries Balance United States Japan Other countries Source: Statistics Canada Canada’s Exports of Goods by Product Category Product Category 1993 1994 1995 1996 1997 $ millions Automotive products 48,609.0 57,608.3 62,878.5 63,357.2 70,056.8 Machinery and equipment 36,847.9 46,571.4 56,704.5 62,241.0 67,982.6 Industrial goods and materials 35,172.3 42,386.6 50,619.6 52,086.5 55,601.7 Forestry products 23,519.0 28,912.9 36,875.1 34,587.4 34,886.1 Energy products 17,789.4 19,175.6 20,296.4 25,558.3 26,819.6 Agricultural and fishing products 16,394.5 18,876.6 20,984.0 24,436.6 24,704.5 Other consumer goods 5,607.9 7,101.8 8,306.7 9,497.4 10,649.6 Other goods 6,443.4 7,258.8 8,273.1 8,801.9 10,400.2 190,383.4 227,892.0 264,937.9 280,566.3 301,101.1 Total Source: Statistics Canada Canada’s Imports of Goods by Product Category Product Category 1993 1994 1995 1996 1997 $ millions Machinery and equipment 53,095.70 65,717.30 75,646.70 76,612.80 91,202.6 Automotive products 39,943.90 47,835.10 50,100.20 51,379.20 60,630.1 Industrial goods and materials 32,162.10 39,186.70 45,574.40 46,507.70 54,369.6 Other consumer goods 21,368.00 23,441.30 25,546.80 25,838.10 29,588.1 Agricultural and fishing products 11,013.50 12,577.50 13,374.90 14,117.40 15,578.3 Energy products 6,968.60 6,959.60 7,250.30 9,581.30 10,603.3 Forestry products 1,566.30 1,810.10 2,038.20 1,913.10 2,372.9 11,475.20 11,062.90 11,674.60 13,627.30 12,501.20 177,593.30 208,590.50 231,206.10 239,576.90 276,846.1 Other goods Total Source: Statistics Canada Elements of the (International) Marketing Mix Product Price Promotion Distribution The International Marketing Task Foreign environment (uncontrollable) 1 Political/legal forces 7 Cultural forces Domestic environment (uncontrollable) Political/ legal forces (controllable) Price Promotion 6 Geography and Infrastructure 2 Competitive structure Competitive Forces Product Channels of distribution 7 4 Structure of distribution 3 Level of Technology Economic climate 5 ©Times Mirror Higher Education Group, Inc., IRWIN Economic forces Environmental uncontrollables country market A Environmental uncontrollables country market B Environmental uncontrollables country market C Self-Reference Criterion (SRC) Unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions. Impedes the ability a to assess a foreign market appropriately. Cultural misunderstandings: Two parties react to the values of their own SRC. Phases of International Marketing Involvement No direct foreign marketing Infrequent foreign marketing Regular foreign marketing International marketing Global marketing International Marketing Concepts Concept EPRG Schema Domestic Market Extension (Ethnocentric) Multi-Domestic Market (Polycentric) Global Marketing (Regio/Geocentric) ©Times Mirror Higher Education Group, Inc., IRWIN Adaptation vs. Standardization Product Features Packaging Brand Name Pricing Brand Positioning Advertising Appeal Advertising Media Channels of Distribution Being Globally Aware To be Globally Aware is to be: Tolerant of Cultural Differences Objective Knowledgeable of: Cultures History World Market Potentials Global Economic and Social Trends ©Times Mirror Higher Education Group, Inc., IRWIN The Global Marketing Environment Theory of Comparative Advantage Balance of Payments Forces Driving Globalization Forces Restraining Globalization World Trade Organization (WTO) Trade Barriers International Strategic Alliances International Mergers and Acquisitions Theory of Comparative Advantage Adam Smith: Principle of Absolute Advantage David Ricardo: Principle of Comparative Advantage Factors of production (factor endowment) Domestic exchange ratios (different) World market exchange ratio Difference between domestic and world market exchange ratio determines country’s patterns of specialization and international trade International trade is not a “zero-sum game”. Balance of Payments ... the system of accounts that records a nation’s international economic transactions Double-entry bookkeeping system (credits and debits offset each other) 3 Accounts: y Current Account (trade in goods and services) y Capital Account (investment, capital movements) y Official Reserves Account Forces Driving Globalization Global Market Needs Convergence of Technology Communications / Media International Mobility Transportation Infrastructure Costs (R&D, marketing, etc.) Leverage Experience Transfer Systems Transfer Economies of Scale Resource Utilization Strategy Forces Restraining Globalization Market Differences History Management Myopia Organizational Culture Barriers to Entry World Trade Organization (WTO) Established: January 1, 1995 Successor to the GATT Created by: Uruguay Round negotiations (1986-94) Membership: 132 countries (as of Sept. 1997) Location: Geneva WTO Objectives: y y y y y y Administering WTO trade agreements Forum for trade negotiations Handling trade disputes Monitoring national trade policies Technical assistance and training for developing countries Cooperation with other international organizations (UN, IMF, WB) Trade Barriers Tariffs (Duties) y Government-imposed taxes on imported goods y Objectives: Generate revenues Discourage imports Non-Tariff Barriers y Objective: Discourage imports Types of Non-Tariff Barriers (1) Specific Limitations on Trade: z Quotas z Import licensing requirements z Proportion restrictions of foreign to domestic goods (local content requirements) z Minimum import price limits z Embargoes Customs and Administrative Entry Procedures: z z z z z Valuation systems Antidumping practices Tariff classifications Documentation requirements Fees Standards: z Standard disparities z Intergovernmental acceptances of testing methods and standards z Packaging, labeling, marking standards Types of Non-Tariff Barriers (2) Government Participation in Trade: z z z z Government procurement policies Export subsidies Countervailing duties Domestic assistance programs Charges on imports: z z z z z z Prior import deposit subsidies Administrative fees Special supplementary duties Import credit discriminations Variable levies Border taxes Others: z z Voluntary export restraints Orderly marketing agreements SOURCE: A.D. Cao, “Nontariff Barriers to U.S. Manufactured Exports,” The Columbia Journal of World Business, Summer 1980, P.94. International Strategic Alliances Keiretsu (Japan) Chaebol (South Korea) Strategic Partnership / Joint Venture Consortium Objectives of International Strategic Alliances: Pool resources Share expertise Achieve synergies Reach “critical mass” Reduce competition International Mergers and Acquisitions Objectives: Enter foreign market rapidly Take over brand names “Buy” market share Acquire knowledge Buy into distribution networks Achieve economies of scale Reduce competition Toyota’s Keiretsu Toyota has a typical Keiretsu family with financial ties to its most important suppliers. Some of those companies, with the percentage of each that Toyota owns: Lighting Rubber Disc Brakes Transmissions, clutches, brakes Clocks Electronics Seat belts, switches Steel Upholstery material Door sashes, molding Painting Mufflers SOURCE: Adapted from “Japan: All in the Family,” Newsweek, June 10, 1991, p 38. Koito Mfg. Toyoda Gosel Akebona Aisin Seiki Jeco Nippondenso Tokai Rika Aichi Steel Works Kyowa Leather Shiroki Trinity Futaba Industrial 19.0 % 41.4 13.9 22.0 34.0 23.6 28.2 21.0 33.5 13.2 30.2 13.2 Ford’s Keiretsu VEHICLE ASSEMBLY Company Country Mazda Kia Motors Aston Martin Lagonda Autolatina Iveco Ford Truck Japan Korea Britain Brazil-Argentina Britain Percent Equity 25% 10% 75% 49% 48% PARTS PRODUCTION Company Country Cummins U.S. Excel Industries U.S. Decoma International Canada SOURCE: Adapted from “Learning from Japan,” Business Week, January 27, 1992, p. 55. Component Percent Equity Engines Windows Body Parts, Wheels 10% 40% 49% Ford’s Keiretsu Financial Services Through seven wholly owned units, Ford extends consumer and commercial credit. It issues car loans, mortgages, and credit cards, does industrial leases and finances dealer purchases of cars. Marketing Owns 49 percent of Hertz. Hertz and other car rentals are among Ford’s largest customers. Research and Development Ford belongs to eight consortiums that do research into environmental issues, better engineering techniques, materials, electric car batteries, and the Chrysler and General Motors “precompetitive research” on batteries and materials. SOURCE: Adapted from “Learning from Japan,” Business Week, January 27, 1992, p. 55. Cultural Aspects of International Marketing World Population Trends International Trade Flows Elements of Culture Taboos Cultural Differences in Lifestyles Cultural Differences in Social Life Language and Cultural Differences World Population and Life Expectancy by Major Areas 1950 (millions) 1985 1992 2010 (millions) (millions) (millions) Life Expectancy 1985 (years) World 2,516.0 4,855 5,479 7,204.0 63.9 Africa 222.0 554 682 1,148.0 52.0 1,378.0 2,842 3,233 4,240.0 62.7 North America 166.0 264 283 311.0 75.6 Latin America 166.0 400 458 629.0 66.7 573.0 770 797 843.0 72.2 13.0 25 27 34.0 71.3 Asia Europe (including USSR*) Oceania *Estimate includes all republics of former USSR. SOURCE: World Population Prospects (New York: United Nations, 1990), pp. 22-28 and 1992; Demographic Yearbook (New York: United Nations, 1994), p.103. The Triad: Trade Between the United States and Canada, the EU, and Japan ($ billions, 1995) EUROPEAN COMMUNITY 48.9 136.9 139.3 70.8 JAPAN UNITED STATES & CANADA 75.9 127.2 For additional figures see: “Indicators of Market Size for 115 Countries I” Crossborder Monitor, August, 1997, pp.4-8 Leading Trading Countries ($ billions, 1995) Country* U.S.A. Germany Japan United Kingdom Italy Netherlands Canada Belgium/Luxembourg Hong Kong China Spain South Korea Taiwan Switzerland Singapore Exports Imports Total $582.5 509.3 443.0 239.4 231.7 58.6 190.2 128.3 173.5 148.8 91.6 125.4 111.8 81.4 118.2 $770.9 443.8 335.9 262.5 204.3 138.5 167.4 166.3 192.8 132.0 114.8 135.2 103.7 80.1 124.4 $1,353.4 953.1 778.9 501.9 436.0 197.1 357.6 294.6 366.3 280.8 206.4 260.6 215.5 161.5 242.6 * Order determined by total dollar value of exports and imports. For additional trade data see: "Indicators of Market Size for 115 Countries, Part I," Crossborder Monitor, August 27, 1997, pp. 4-8. Elements of Culture Material Culture Technology Economics Social Institutions Social Organization Education Political Structures Belief Systems Aesthetics Graphic and Plastic Arts Folklore Music, Drama, and Dance Language Examples of Taboos in Different Cultures Never touch the head of a Thai or pass an object over it. (The head is considered sacred in Thailand.) Avoid using triangular shapes in Hong Kong, Korea, and Taiwan. (The triangle is considered a negative shape.) Red represents witchcraft and death in many African countries. Red is a positive color in Denmark. The number 7 is considered bad luck in Kenya, but good luck in the Czech Republic and has a magical connotation in Benin, Africa. The number 10 is bad luck in Korea. The number 4 means death in Japan. SOURCE: Business America, July 12, 1993 Cultural Differences between Japanese and North American Lifestyles North Americans: A Culture of Self-expression Japanese: A Culture of Self-restraint Clear expression of joy and sorrow Ambiguous expression of Joy/Sorrow Unequivocal expression of “Yes/No” Equivocal expression of “Yes/No” Strong self-assertion Weak self-assertion Strong personality Weak personality Direct and efficient negotiating Extensive and inefficient negotiating Priority of self-interest Priority of harmony with others SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone Tomorrow,” Tokyo Business, February 1995, p.50. Cultural Differences between Japanese and North Americans: Social Life North American Society: Dignity of Individuals Japanese Society: “In the Same Boat” Concept Dignity of individuals Human relations oriented Individual work ethic Dependence on the group Great individual freedom Lack of individual freedom An open and transparent society A closed society, lacking in transparency Multi-cultural society Mono-cultural society A society excelling in creativity and versatility An orderly and uniform society Individual decisions Dependence on consensus SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone Tomorrow,” Tokyo Business, February 1995, p.50. Language and Cultural Differences (1) Cracking an international market is a goal of most growing corporations. It shouldn't be that hard, yet even the big multi-nationals run into trouble because of language and cultural differences. For example... Scandinavian vacuum manufacturer Electrolux used the following in an American ad campaign: "Nothing sucks like an Electrolux." In Taiwan, the translation of the Pepsi slogan "Come alive with the Pepsi Generation" came out as "Pepsi will bring your ancestors back from the dead." Language and Cultural Differences (2) The name Coca-Cola in China was first rendered as Kekou-ke-la. Unfortunately, the company did not discover until after thousands of signs had been printed that the phrase means "bite the wax tadpole” or "female horse stuffed with wax" depending on the dialect. Coke then researched 40,000 Chinese characters and found a close phonetic equivalent, "ko-kou-ko-le," which can be loosely translated as "happiness in the mouth.” Also in Chinese, the Kentucky Fried Chicken slogan "finger-lickin’ good" came out as "eat your fingers off.” Colgate introduced a toothpaste in France called Cue, the name of a notorious porno mag. Language and Cultural Differences (3) When Parker Pen marketed a ballpoint pen in Mexico, its ads were supposed to say "It won't leak in your pocket and embarrass you.” However, the company mistakenly thought the Spanish word "embarazar” meant embarrass. Instead the ads said that "It wont leak in your pocket and make you pregnant.” Chicken-man Frank Perdue's slogan, "It takes a tough man to make a tender chicken," got terribly mangled in another Spanish translation. A photo of Perdue with one of his birds appeared on billboards all over Mexico with a caption that explained "It takes a hard man to make a chicken aroused." Language and Cultural Differences (4) The American slogan for Salem cigarettes, "Salem Feeling Free," got translated in the Japanese market into "When smoking Salem, you feel so refreshed that your mind seems to be free and empty.” In Italy, a campaign for Schweppes Tonic Water translated the name into Schweppes Toilet Water. Hunt-Wesson introduced its Big John products in French Canada as Gros Jos before finding out that the phrase, in slang, means "big breasts.” In this case, however, the name problem did not have a noticeable effect on sales. Language and Cultural Differences (5) When General Motors introduced the Chevy Nova in South America, it was apparently unaware that "no va" means "it won't go." After the company figured out why it wasn't selling any cars, it renamed the car in its Spanish markets to the Caribe. Ford had a similar problem in Brazil when the Pinto flopped. The company found out that Pinto was Brazilian slang for "tiny male genitals". Ford pried all the nameplates off and substituted Corcel, which means horse. Business Practices and Customs in International Marketing Cultural Adaptation Contextual Background of Various Countries Cultural Differences between Japanese and North American Business Ethics and International Marketing Corrupt Business Practices Cultural Adaptation Cultural CulturalImperatives Imperatives Cultural CulturalAdiaphora Adiaphora Cultural CulturalExclusives Exclusives Contextual Background of Various Countries High Context Japanese Arabian Latin American Spanish Italian English (UK) French North American (US) Scandinavian German Low Context (Explicit) Swiss (Implicit) Cultural Differences between Japanese and North American Business (1) North American Business Japanese Business Game concept: Business is a game in pursuit of profits under the rules of laws and contracts Mutual trust-oriented business: business is based on trusting relationship among people rather than the rules of game Efficiency-oriented Highly precision-oriented Approximate accuracy, simplicity, and quickness Perfectionism Quantity-oriented Quality-oriented Short-term performance evaluation Mid- to long-term evaluation SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,” Tokyo Business, February 1995, p.51. Cultural Differences between Japanese and North American Business (2) North American Business Japanese Business Top-down management Bottom-up management Low mutual dependence between employers and employees High mutual dependence between employers and employees Control of business by stockholders and management Joint management of business by employers and employees Easy layoffs and dismissals of employees, and selling of businesses High job security Limited loyalty and incentive-oriented work ethics Strong loyalty and fewer incentives SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,” Tokyo Business, February 1995, p.51 Three Ethical Principles Principle Question Utilitarian ethics Does the action optimize the "common good" or benefits of all constituencies? Rights of the parties Does the action respect the rights of the individuals involved? Justice or fairness Does the action respect the canons of justice or fairness to all parties involved? Incorporating Ethical and Social Responsibility Issues into Multinational Business Decisions Does the decision efficiently optimize the common good or benefits of: The Business firm? Stockholders Management Profits Growth Other The Economy? Economic growth Allocation of resources Production and distribution of goods and services Other Society? Culture Order Justice “The good life” Other The Individual? Freedom Health and welfare Self-realization Human dignity Opportunity Other NO YES YES Are there critical factors that justify suboptimizing these goals and satisfactions? NO Does the decision respect the rights of individuals involved. NO Are there critical factors that justify the abrogation of a right. YES YES Does the corporate decision respect the canons of justice or fairness to all parties involved? YES YES Reject decision NO NO Reject decision Are there critical factors that justify the violation of a canon of justice? NO Accept decision Reject decision Corrupt Business Practices Bribery ... money voluntarily offered by someone seeking an unlawful advantage Subornation ... large sum of money designed to entice an official to commit an illegal act Lubrication ... small sum of money or other gift presented to a low-ranking official for the purpose of facilitating or expediting the normal, lawful performance of a duty Extortion ... payments extracted by someone in authority from a company seeking only what it is lawfully entitled to Globalization & Market Entry Strategies Multinational vs. Global Orientation Benefits of Global Orientation Organizational Structure for Global Marketing The International Marketing Planning Process Alternative Market Entry Strategies Timing of Multiple Market Entries Multinational vs. Global Orientation Multinational Product Design Product Life Cycle View of Customer Market Segmentation Production Pricing Distribution Promotion Global Benefits of Global Orientation Economies of Scale Transfer of Experience and Know-How Uniform Global Image Control and Coordination Sample Organizational Structure for Global Marketing Company President Vice President Marketing Director: Passenger car marketing Director: Truck marketing Research Manager N. American distribution Adv. Sales Research Manager European distribution Adv. Sales Manager Asian distribution Adv. Sales Manager N. American distribution Manager S.American distribution Manager Asian distribution Adv. Adv. Adv. Sales Sales Sales The International Marketing Planning Process (1) Information derived from each phase, market research, and evaluation of program performance Phase 1 Preliminary analysis and screening: Matching company/country needs Environmental uncontrollables, company character, and screening criteria Phase 2 Adapting the marketing mix to target markets Phase 3 Developing the marketing plan Phase 4 Implementation and control Matching mix requirements Marketing plan development Implementation, evaluation, and control The International Marketing Planning Process (2) Phase 1 Company Character z z z z z z z Philosophy Objectives Resources Management style Organization Financial limitations Management and marketing skills z Products z Other Home Country Constraints z z z z Political Legal Economic Other Host Country(s) Constraints z z z z z z z Phase 2 Product z z z z z z z Adaptation Brand name Features Packaging Service Warranty Style Price z Credit z Discounts Promotion z z z z z Advertising Personal selling Media Message Sales promotion Economic Distribution Political/legal z Logistics Competitive z Channels Level of technology Culture Structures of distribution Geography Phase 3 z Situation analysis z Objectives and goals z Strategy and tactics z Budgets z Action programs Phase 4 z Objectives z Standards z Assign responsibility z Measure performance z Correct for error Alternative Market Entry Strategies Exporting Licensing Franchising Joint Ventures Consortia Manufacturing in Target Markets Timing of Multiple Market Entries “Waterfall” Approach “Shower” Approach Product Product Per Capita GNP HighIncome Countries MiddleIncome Countries LowIncome Countries Time HighIncome Countries MiddleIncome Countries LowIncome Countries International Marketing Research Steps in the Marketing Research Process Units of Analysis in Marketing Research Use of Secondary Data Collection of Primary Data Methods of Primary Data Collection Problems in International Survey Research Steps in the Marketing Research Process Define the research problem and establish research objectives Determine the sources of information to fulfill the research objectives Gather the relevant data from secondary and/or primary sources Analyze, interpret, and present the results Units of Analysis in Marketing Research Customer (preferences, price sensitivity, ...) Product Concept (acceptance, ease of use, ...) Brand (image, competitive position , ...) Distributor (retailer performance, ...) Medium (reach, audience characteristics, ...) Ad (Campaign) (associations, message retention, ...) Use of Secondary Data Availability of Data Recency of Data Reliability of Data Comparability of Data Validating Secondary Data Collection of Primary Data Quantitative vs. Qualitative Research Sampling Reliability & Validity Incentives for Respondents Cross-Sectional vs. Longitudinal (Panel) Methods of Primary Data Collection Survey y y y y y Face-to-Face Mail Telephone E-mail or WWW Combinations Observation y Behavioral (Field or Lab) y Scanner Data Experiment y Lab y Field Semi-Structured Interviews y Depth Interview (Individual) y Focus Group Problems in International Survey Research Ability to Communicate Opinions Unwillingness to Respond Sampling in Field Surveys Language and Comprehension y Back Translation y Parallel Translation y Decentering International Product Management Product Innovation The Product Development Process Product Components Types of Product Quality Cues Country-of-Origin Effects on Product Quality Judgments and Preferences Current Research Findings Characteristics of an Innovation Relative RelativeAdvantage Advantage Compatibility Compatibility Complexity Complexity Trialability Trialability Observability Observability Innovations: Degree of Newness Line Extension (new flavors, sizes, packages, ...) Minor Product Modification Continuous (annual new car models, new fashions) Major Product Modifications (first compact cars, color television) New Technology (inventions of computer, jet aircraft) Discontinuous The Product Development Process: North America vs. Japan NORTH AMERICA JAPAN Market Research Market Research Product Characteristics Product Characteristics Design Planned selling price less desired profit Engineering TARGET COST Supplier Pricing Design Engineering Supplier Price Cost If cost too high return to design phase Target costs for each component forces marketers, designers, and engineers from all departments and suppliers to negotiate tradeoffs Manufacturing Manufacturing Periodic cost reduction Continuous Cost Reduction SOURCE: Adapted from Ford S.Worthy, “Japan’s Smart Secret Weapon,” Fortune, August 12, 1991, p.73. Product Component Model SUPPORT SERVICES COMPONENT PACKAGING COMPONENT Repair and maintenance z z z z Installation z z Brand name z z Other related services z z Instructions Legal z CORE COMPONENT Trademark z Product platform Deliveries Price z z Quality Warranty Design features Functional features z z Package z Legal z Spare parts Styling z Legal Types of Product Quality Cues PRODUCT QUALITY CUES INTRINSIC CUES EXTRINSIC CUES (PHYSICAL ATTRIBUTES) (NON-PHYSICAL ATTRIBUTES) PRODUCTSPECIFIC - BRAND - COUNTRY OF ORIGIN - PRICE PHYSICAL ATTRIBUTES - STORE IMAGE - WARRANTY Country-of-Origin Effects Types Cognitive Affective Normative Relevant Theories Simplified Information Processing Information Integration Attitude Stereotyping Schemas Categorization Inference Factors Moderating Country-of-Origin Effects Product Familiarity Involvement Ethnocentrism Variability of Competence Technological Complexity Availability of Other Product Information Communicating a Product’s Country-of-Origin “Made in” Label Company Name Brand Name Brand Logo Package Design Advertising Foreign Manufacturing Binational (“hybrid”) products .... products for which the country of production (COP) is different from the brand’s country of origin. Selected Empirical Findings Alpine Ski Study CD-Player Experiment Mercedes-Benz Study Alpine Ski Study Experimental Design Brands Tyrolia Elan Rossignol Voelkl Austria y1 y5 y9 y13 Slovenia y2 y6 y10 y14 France y3 y7 y11 y15 Germany y4 y8 y12 y16 Countries Alpine Ski Study: Strength of Brand-Country Association Häubl and Elrod (1999) Scale: 1 = very weak association , 6 = very strong association Tyrolia-Austria 4.82 Rossignol-France 5.25 4.43 Voelkl-Germany Elan-Slovenia Sample: 284 Austrian skiers 5.05 4 4.2 4.4 4.6 4.8 5 5.2 5.4 Alpine Ski Study: Mean Quality Ratings Häubl and Elrod (1999) Scale: 1 = very low quality , 6 = very high quality Voelkl Elan Tyrolia Rossignol COP Austria Germany France Slovenia 3 5 3 5 3 Mean Quality Rating Sample: 284 Austrian skiers 5 3 5 Alpine Ski Study: Mean Quality Ratings Controlling for COP Effects Häubl and Elrod (1999) Scale: 1 = very low quality , 6 = very high quality Voelkl Elan Tyrolia Rossignol COP Austria Germany France Slovenia 4 5 4 5 4 5 4 5 Mean Quality Rating Controlling for COP Effects Sample: 284 Austrian skiers Alpine Ski Study: Effects on Quality Judgments Mean Standard Deviation Häubl and Elrod (1999) Brand Main Effects: Tyrolia Rossignol Voelkl Estimates obtained from Random Coefficient Model. Elan COP Main Effects: Austria France Germany Sample: 284 Austrian skiers Slovenia Congruity Effects: Tyrolia-Austria Rossignol-France Voelkl-Germany Elan-Slovenia -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 CD-Player Experiment “Made in Japan” vs. “Made in Singapore” Brands: Aiwa Denon JVC Pioneer Sony Technics CD-Player Experiment JVC made in Japan JVC made in Singapore Pioneer made in Singapore Pioneer made in Japan Denon made in Japan Sony made in Singapore Denon made in Singapore Sony made in Japan Aiwa made in Singapore Technics made in Japan Aiwa made in Japan Technics made in Singapore CD-Player Experiment: Impact of Country of Production on Perceived Sound Quality Häubl and Otter (1999) “Made in Japan” vs. “Made in Singapore” 120 * Aiwa 130 140 150 130.2 129.7 not significant at p = .05. 152.7 148.9 146 144.6 Japan Singapore 151.6 149.2 Pioneer 159.9 Sony Technics 170 * Difference Denon * JVC 160 154.6 149.5 142.4 Scale: 0 = extremely poor , 200 = extremely high Sample: 219 Austrian Consumers CD-Player Experiment: Impact of Country of Production on Expected Durability Häubl and Otter (1999) “Made in Japan” vs. “Made in Singapore” 120 Aiwa 130 140 150 170 126.3 * Difference 123.1 not significant at p = .05. 149.5 Denon 141.1 143.1 140.3 * JVC Japan Singapore 152.8 Pioneer 146.4 159.6 Sony Technics 160 150.6 141.2 134.2 Scale: 0 = extremely poor , 200 = extremely high Sample: 219 Austrian Consumers Mercedes-Benz Study Samples: 1,640 German New-Car Buyers 1,264 French New-Car Buyers Countries of Production: Germany USA Great Britain Czech Republic South Korea Mercedes-Benz Study: Constructs Häubl (1996) 1 1 COGNITIVE EVALUATION OF COUNTRY 3 AFFECTIVE EVALUATION OF OF COUNTRY COUNTRY 4 2 EVALUATION OF COUNTRY'S CAR INDUSTRY 6 ATTITUDE TOWARD THE MODEL EVALUATION OF THE MODEL'S APPEARANCE BRAND 2 EVALUATION OF CARS MADE IN THE COUNTRY IMAGE 5 EVALUATION OF THE MODEL'S FEATURES BEHAVIORAL 7 INTENTION Mercedes-Benz Study: Path Coefficients Häubl (1996) 0.730 1 1 COGNITIVE EVALUATION OF COUNTRY 3 AFFECTIVE EVALUATION OF OF COUNTRY COUNTRY EVALUATION OF CARS MADE IN THE COUNTRY 0.868 0.691 2 0.104 EVALUATION OF COUNTRY'S CAR INDUSTRY 0.329 0.130 0.327 4 0.015 EVALUATION OF THE MODEL'S APPEARANCE 0.132 0.533 0.218 0.457 BRAND 2 0.065 6 IMAGE 0.322 CFI = 0.951 NFI = 0.930 5 EVALUATION OF THE MODEL'S FEATURES ATTITUDE TOWARD THE MODEL BEHAVIORAL 0.228 0.393 0.033 7 INTENTION International Distribution Strategy • Distribution Issues • Functions Performed by Intermediaries • International Channel-of-Distribution Alternatives • International Retail Patterns • Factors Affecting Channel Choice: The 6 Cs of International Channel Strategy Distribution Issues • Intermediaries • Stages in the Channel of Distribution • Control over Retail Price • Channel Power • Agent Middlemen vs. Merchant Middlemen • Disintermediation Functions Performed by Intermediaries • Inventory Financing • Storage • Assistance with Sales Promotions • Merchandise Returns • Provide Product Information and Assistance to Buyers • Collect Data about Buyers International Channel-ofDistribution Alternatives Home Country Foreign Country 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 International Retail Patterns Country Argentina Canada South Korea Australia India Malaysia Mexico Philippines U.S.A. Japan Retail Outlets (000) Population per Outlet 787.0 134.5 716.8 160.2 3,140.0 148.3 825.0 118.5 1,872.5 1,821.0 40 185 60 100 259 124 109 531 228 68 Employees per Outlet 3 9 2 6 -9 3 29 11 3 SOURCES: International Marketing Data and Statistics, 18th ed. (London: Euromonitor Publications, 1994), and "Indicators of Market Size for 117 Countries," Crossborder Monitor, August 31, 1994. Factors Affecting Channel Choice: The “6 Cs” of International Channel Strategy • Cost • Capital Requirement • Control • Coverage • Character • Continuity International Business-to-Business Marketing and Personal Selling • Characteristics of Business-to-Business Markets • Business-to-Business Marketing: Product Quality • International Personal Selling: Cultural Skills Characteristics of Business-to-Business Markets • Small Number of Buyers • Group Decision Making • Small Number of Transactions • Relationship Marketing • Service • Importance of Personal Selling • Importance of Trade Shows Business-to-Business Marketing: Product Quality • Conformance to Standards (e.g., ISO 9000) • Market Perceived Quality • Quality and Competition • Quality Improvements: Incremental Improvements Technological Improvements International Personal Selling: Cultural Skills • Communicate Respect for People and their Culture • Tolerate Ambiguity • Display Empathy • Be Nonjudgmental • Recognize and Control Your SRC International Advertising and The Internet & International Marketing • Creative Challenges of International Advertising • Standardization vs. Adaptation in International Advertising • Internet & International Marketing: Facets of Interactivity • Internet & International Marketing: Advantages & Disadvantages Creative Challenges of International Advertising Legal Legaland andTax TaxConsiderations Considerations Language LanguageLimitations Limitations Cultural CulturalDiversity Diversity Media MediaLimitations Limitations Production Productionand andCost CostLimitations Limitations Standardization vs. Adaptation in International Advertising • Creative Strategy • Message Appeal • Ad Execution • Media Mix • Agency Interactive Media & International Marketing • Rapid growth of the Internet (WWW) • International adoption of the WWW • Corporate sites • WWW advertising • Online shopping • Common media platform for all countries • Netcasting • Convergence of media Internet & International Marketing: Facets of Interactivity (1) • Initiation of information exchange • Control over the sequence, pacing, and presentation format of communication process • Degree to which the information content may be customized for individual customers • Receiver’s ability to organize information content • Quantity of information available • Quality / richness of information cues Internet & International Marketing: Facets of Interactivity (2) • Level of sophistication of information agents • Degree to which the environment facilitates feedback • Ability to simulate consumption or usage • Degree of playfulness • Amount of socialization among (potential) customers • Ease of access to other relevant information sources Internet & International Marketing: Advantages • Instant world-wide presence • Low barriers to entry • Market segmentation • Information on demand / audience self-selection • Convenience for customers (24 hrs. a day) • Ability to provide vast amounts of information • Customer feedback / measuring ad effectiveness • “Level playing field” Internet & International Marketing: Disadvantages • Source credibility • Limited access to certain segments • Language • Presentation of product information (e.g., prices) • No physical interaction • Security of transactions • Accountability • Possibility of technical problems
