4.7 International Marketing 4.8 Ecommerce Chapter 29 International Marketing International Marketing – Selling products in markets other than the original domestic market. Why sell in international markets? – Saturated home markets – Increase profits through rapid sales growth and low costs in emerging markets – Spread risks between different markets – Poor trading conditions in home markets may make international markets desirable Differences in International Markets Conducting business internationally may be different: – Political differences – Economic and Social differences – Legal differences – Cultural differences – Business practices differences Political Differences Problems that occur for “political” reasons – Government structures Democracy, socialist governments, communism – Political instability Acts of terrorism, civil violence, drug wars Economic and Social Differences Problems that occur due to economic or social reasons – Average living standards around the globe range from $160 (Burundi) to $78,559 (Luxembourg) GDP per capita – Tax rates, interest rates – Aging population – Role of women and marriage Legal Differences Problems that occur due to legal reasons – Some goods illegal to sell in some countries (guns, medications) – It may be illegal to advertise (children, tobacco products, birth control) – Product labeling and safety requirements maybe stricter in some countries Cultural Differences Problems that occur due to cultural reasons and can be difficult to measure – Words have different meaning when translated – The use of male/female models may not acceptable – Colors can have different meaning Business Practices Problems that occur due to different business practices – Accounting standards may vary – Setting up a company may face different requirements and time frames Entry into International Markets Exporting – Selling a product directly to a foreign customer – Selling a product to intermediary based in a foreign country International Franchising – Using a franchise to operate your firm’s activities in a foreign market Can be owned by many individuals Can be owned by 1 company operating many locations Entry into International Markets Joint Ventures – Agreements between at least 2 companies to operate a new business venture Aera Energy operating in Southern California is a joint venture between ExxonMobil and Royal Dutch Shell combined efforts to locate oil in Southern California. Japan Nuclear Company is a joint venture between General Electric, Toshiba Corporation, and Hitachi to manufacture nuclear fuel for Japan’s nuclear energy industry. Entry into International Markets Licensing – Allows another firm in a foreign country to produce its branded or patented products under license usually under strictly controlled terms over quality. Goods do not have to be exported if produced locally Food products are fresher No capital costs of setting up production facilities NEGATIVES: Quality issues and unethical production methods may reflect badly on the company – Recent example: Apple factories in China reports mandatory overtime, factory explosions, crowded dormitories Entry into International Markets Direct Investment in Subsidiaries – Company-owned subsidiaries in foreign countries tend to be more successful than merging with locally based companies. – Why: Culture, organizational structure, and technology differences of locally acquired business can be too different to overcome. – Subsidiaries can: Be production or retail operations Management can be decentralized – Local managers make most key decisions Management can be centralized – Controlled from the head office in the home country – Example: BMW US Manufacturing Company located in Spartanburg, SC International Marketing Strategies Globalization is making differences in taste, culture, and fashion less obvious. If true, companies can take advantage of economies of scale by selling the same product to the entire world. If not true, there will always be differences at the local level that will prevent the successful global marketing of products. International Marketing Strategies Pan-global marketing Adopting a standard product across the globe as if the whole world were a single market. Selling the same goods in the same way everywhere. Global localization Adapting the marketing mix, including different products, to meet national and regional tastes and culture. “Thinking global – acting local” International Marketing Strategies Pan-global Marketing – Successful for 2 categories of products Upmarket brands with international appeal – Rolex watches, Rolls-Royce cars, Versace Dresses Mass-Appeal brands – Apple products, Levi’s jeans, Nike shoes International Marketing Strategies Global localization – Thinking global – acting local YUM – the world’s largest food organization (KFC and Pizza Hut) use this approach – China: sells products not available in other countries to suit local tastes – Price levels are varied between different countries to reflect differences in income – Advertisements contain local ethnicities Ecommerce Ecommerce: The buying and selling of goods and services on the Internet. – B2C: Selling of goods and services directly to the final customer through a website. – B2B: Selling/buying of goods and services to/from another business – Advertising by using the company’s own website or creating a banner or pop-ad on another firm’s website to reach target market – Sales leads are generated by encouraging customer t leave information – Collecting market research data by encouraging customers to answer questions Ecommerce Impact Businesses and Consumers have been impacted Music Film Banking Insurance Travel and Tourism – These were once typical retail stores. The product delivery system has drastically changed due to the Internet. Ecommerce Impact Marketing Mix has been impacted –Product Consumers can be communicated with individually Custom services can be easily created (Airline tickets, hotel reservations, rental cars) Custom products can be easily built (build your own car or computer) Larger stocking options because market potential is greater Ecommerce Impact Marketing Mix has been impacted –Price Prices can be easily compared Competitive pricing more likely than cost-plus Consumers have more control Ecommerce Impact Marketing Mix has been impacted –Promotion Banners, pop-ups, text messages, web pages are all NEW ways to promote products Promotional opportunities are greater Cost to reach potential customers is lower Ecommerce Impact Marketing Mix has been impacted –Place The Internet is transforming how we buy. Will there be a need for store-fronts? ?