-----------------------------------
CHAPTER 7:
Marketing
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Key Terms








marketing
secondary data
primary data
centralized strategy
decentralized strategy
e-distribution
sales agent
trade show
Chapter 7:
MARKETING







royalty
target market
ethnocentrism
demographic information
discretionary income
competitive advantage
economies of scale
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Chapter Objectives
By the time you finish this chapter, you should be
able to:
 Identify the activities that make up marketing
 Describe the modifications made to goods and services
to adapt to the cultures of other countries
 Identify the challenges an international company may
encounter with regard to ethics, values, language, and
business practices in the various countries in which it
operates
 Explain the importance of understanding consumer
differences when marketing globally
 Identify strategies used by companies to enter foreign
markets
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Marketing Activities
Marketing
The sum total of all the activities involved in getting goods
and services from the original producer to the ultimate
consumer.
© iStockphoto.com
These activities include market research, product
development, pricing, advertising and promotion, sales,
and logistics.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Marketing Activities
Market research finds or collects data to help solve
marketing problems.
Secondary data is collected by someone other than
the user, for example censuses and surveys.
Primary data is observed or collected by a business
and relates specifically to its needs or problems.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Write down a GOOD
primary research closeended question.
PRESSURE IS ON!
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Marketing Activities
Product Development
Most companies use market research to help
develop new products, taking consumer reaction
into account.
Market research is a major part of product
development, as companies don’t want to risk
the high costs involved without some assurance
that they will be successful.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Marketing Activities
Pricing
The price of a product must take
into account the amount of labour,
the cost of materials, and overhead
(such as electricity).
Items that are sold in stores are
marked up, as the retailer needs
to make money on the items it sells.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Marketing Activities
Advertising and Promotion
Advertising and promotion are needed to convince the
customer to buy the product.
© iStockphoto.com
Businesses must identify the best way to reach their
target market, taking into consideration the cost of
different methods. For example, an Internet ad or
brochure is much less
expensive than a
magazine ad or
television commercial.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Marketing Activities
Sales
Businesses must determine the best
way to sell their product. Sales
methods or venues may include:
 Selling products to retailers
 Opening their own retail store
 Selling online
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Marketing Activities
Logistics
Logistics consists of the flow of goods
and services both into and out of an
organization. It consists of
transportation, inventory management,
warehousing and storage, and
packaging.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
The four Ps of international
marketing are:
1. Product
2. Place
3. Price
4. Promotion
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
1. Product
Canadian products sold outside of Canada
must usually be modified to adapt to the
culture, language, or laws of the foreign
market.
These modifications usually occur in the
following areas:
 Packaging: weights; colours; and legal,
labelling, and language requirements
 Ingredients
 Style
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
2. Place
A centralized strategy is a marketing strategy in which all
of a company’s manufacturing and marketing is
performed in one location.
A decentralized strategy is a marketing strategy in which a
company sets up a manufacturing plant in another nation,
or hires a sales force there, or even licenses its brand to a
local manufacturer, rather than performing all
manufacturing and marketing in one location.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
2. Place - con’d
Used under license from Shutterstock, Inc.
E-commerce
The use of the Internet by businesses to sell products and services to
customers in a much larger areas than could be reached through a
traditional retail location; using e-distribution, any business anywhere in
the world can be an international business.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
2. Place - cont’d
Sales agent
An individual hired and paid a commission by a company
to market its product to potential buyers and distributors,
often in a foreign country.
Trade show
A collection of manufacturers and distributors of similar
products who rent space, set up display booths, and sell
to registered buyers seeking products for their retail
businesses.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
Branch plants
Building and staffing a branch plant is the most
expensive market entry strategy, but could be the
most effective.
The three major advantages to owning a branch plant
in a foreign country are:
 Shipping costs are lower
 Import regulations and tariffs are not an issue
 Product modifications are easier
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
2. Place - cont’d
A licensing agreement is a contract giving
someone the right to use a patent or trademark.
Manufacturers pay the owner of the trademark a
fee, usually a royalty, which is a percentage of
the sale of the licensed product.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
2. Place - cont’d
Three types of licensing agreements:
 Manufacturing agreements—the rights to
manufacture a product
 Distribution agreements—the rights to sell a
product
 Franchising agreements—grants the ownership of a
manufacturing or distribution company to a local
franchisee
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
Number of Subway Restaurant franchise locations worldwide
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
2. Place - cont’d
Acquisitions
The most effective way for a company to deal with
competition in a foreign or domestic market is to
buy the company it competes with, then close it or
use its marketing connections to expand its market.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
3. Price
 Companies that use a centralized market
entry strategy find that they must
increase the price of their product when
selling in foreign markets
 Sometimes the price of their product
increases to the point that it is no longer
competitive
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
3. Price - cont’d
These increases in price arise because of added expenses
in the following areas:
 Labour costs: Labour in foreign countries is often much
cheaper than in Canada.
 Shipping costs: The cost to ship goods long distances must
be factored into their price.
 Duties and tariffs: Some countries charge a tax on imports
to protect local industries.
 Legal costs: Modifications to conform to standards in a
foreign market can be expensive.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Four Ps of International Marketing
4. Promotion
There are three ways to promote and advertise
products when selling in a foreign market:
 Use existing ads: Saves money, but markets must
be similar.
 Translate ads: Replicating an ad campaign in
another language is difficult.
 Create new ads: Expensive, but the Internet has
made customizing promotions much easier.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
PROMOTION
 Promotion = any attempt to sell a product
Includes:
 Coupons – money off the price
 Contests – exciting prizes (i.e. roll up the rim!)
 Premiums – giveaways with purchase, sometimes with
loyalty cards (i.e. SDM Optimum Card)
 Samples – free trial of product, high cost, but very
effective
 Special Events – book signing, concerts, maybe linked
with contest
 Advertising – to be covered later
The Two Cs of International Marketing
After a company has decided on its
product, price, place, and promotion, it
must ensure that there is enough
demand for its product.
© iStockphoto.com
Demand involves two factors (often
referred to as the two Cs of
international marketing):
Chapter 7:
MARKETING
1. Consumers
2. Competition
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Two Cs of International Marketing
1. Consumers
A business must determine its target market. This is the
segment of the consumer market to which a particular
good is targeted.
Target markets are typically defined by demographic
information, which is statistical data about various
aspects (age, gender, etc.) of the population.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Consumer Demographics
 Demographics is the study of obvious characteristics
that categorize human beings. Examples:
 Age – targeting kids, teens or adults?
 Gender – talk differently to different genders
 Family Life Cycle – Single?, Married?, Kids?, Retired?
 Income Level – Average income products or premium
products targeted to high income professionals
 Ethnicity & Culture – importing from country of origin or
recognizing differences by culture/religion (i.e. kosher)
Consumer Lifestyle
 Lifestyle is the way people live, which includes
values, beliefs, & motivations
 Study of lifestyles is called psychographics
 i.e. an environmentally conscious person would
not buy a Hummer or SUV
The Two Cs of International Marketing
Canadian businesses wanting to sell abroad must
avoid ethnocentrism, the belief that your own
culture, values, beliefs, and customs represent
the right way of doing things, and that other
value systems are not important.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Two Cs of International Marketing
Used under license from Shutterstock, Inc.
Ways to avoid ethnocentric thinking:
Chapter 7:
MARKETING
 Visit the country you want to
include in your marketing plan.
 Read country profiles, especially
information provided by the
Department of Foreign Affairs
and International Trade.
 Offer your product on the
Internet in the language of the
target nation to determine if
there is demand for it.
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Two Cs of International Marketing
Used under license from Shutterstock, Inc.
A business entering a foreign market must
determine whether consumers will be able to
afford to buy its product.
Discretionary income is the money remaining
from an individual’s salary or
wages after all essential living
expenses, including rent and
groceries, have been paid.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Two Cs of International Marketing
2. Competition
Similar products that already exist in a foreign market are
a major marketing problem. There are two types of
competition:
 Direct: Businesses that provide products or services that are
almost identical to those offered by the company are direct
competitors.
 Indirect: Consumers in every country have a certain amount
of discretionary income, and regular spending habits. Any
product that vies for consumers’ spending money is
competition.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Two Cs of International Marketing
Competitive advantage
In marketing, the ability of one company to produce a
product more cheaply than another company.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
The Two Cs of International Marketing
Typical competitive advantages are:
 Lower production costs: According to the theory of economies of
scale, the more products you can make in one factory, using the
same labour and sharing overhead costs, the cheaper each
individual unit is to make.
 Lower distribution costs: Companies with factories in their target
market have lower costs.
 Product differentiation: Difference in flavour, quality, packaging,
scent, etc.
 Brand equity: The number of consumers that can identify the
brand.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.
Foreign Marketing and Canadian Shopping Habits
 Canadian businesses must stock goods from around the
world to compete with online retailers.
 Retailers must guarantee a unique selection of products
by visiting international trade shows or accessing online
distributors.
 Increase in foreign ownership of Canadian manufacturers
means it is more difficult to buy Canadian-made goods.
 Canadian businesses must remind shoppers that they sell
and produce Canadian goods.
Chapter 7:
MARKETING
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.