Introduction to Global Business
Chapter 12
Global Marketing
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After studying this chapter, you should be able to:
1. Distinguish between marketing research and marketing
intelligence systems.
2. Distinguish between standardization and adaptation.
3. Describe how new products are developed and how
existing products are managed for international
markets.
4. Explain the four different methods of promoting
international marketing products, and provide some
advantages and disadvantages of each.
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After studying this chapter, you should be able to:
5. Define channels of distribution and physical distribution,
and indicate the role of each of these for marketing
products internationally.
6. Discuss the objectives and decisions involved in
international pricing.
7. Discuss aspects of customer service required for goods
and services that are globally marketed.
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Analyzing International Markets
• To determine in which countries to conduct business and
which market segments they should target, companies
use market potentials and sales potentials.
– Market potential is the total number of units of a product that
could possibly be sold by all companies doing business in a
specific international market.
– Sales potential is the percentage of a market potential that a
specific company expects to sell in a specific international market.
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Kinds of Markets
Consumer
Markets
Industrial
Market
Government
Markets
• Food, clothing,
transportation,
banking services,
credit services,
entertainment
• Equipment and
machinery,
supplies, lubricants, consulting
services, cleaning
services, advertising, marketing
research, raw
materials, etc.
• Major infrastructure projects
such as roads,
bridges, dams,
airports, communications,
clean water;
health care
services; military
operations
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Information Required: Surveying International
Demographics
• Companies need to collect a variety of information about
foreign markets, including:
–
–
–
–
A country’s population
Income levels in proposed foreign markets
GDP per capita as a measure of a nation’s purchasing power
Comparison of the average incomes of the wealthiest 20 percent of
people in a nation to the average incomes of the poorest 20
percent
– Age of a nation’s population
– A nation’s ethnicity and religions
– Whether a market is located in a rural or an urban area
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Marketing Research vs.
Marketing Intelligence Systems
• Marketing research
– Information collected at one particular time
• Marketing intelligence system (MIS)
– Information collected regularly over time
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Examples of Information Needed from an MIS
• Packaging, marketing, and
labeling
• Psychographic information
• Socio-demographic information
• Industry data sales, trends by
product category
• Specific perceptions of products
and career opportunities
• Aspirations of customers
• Employment opportunities and
salary comparisons
• Success of competitors and
specific details about their
marketing and compensation
plans
• Usage of products by category
• Demographic profile of
customers by country
• Country market information (i.e.,
income, population, female
population)
• Daily financial information
including sales, expenses, and
so on
• Political risk analysis and its
impact upon current business
and start-up operations
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Making the Standardization
and Adaptation Decision
Standardization
Adaptation
Glocalization
• Marketing
strategies used in
international
markets that are
the same as those
used in a firm’s
domestic market
• Marketing
strategies used in
international
markets that are
different from those
used in a firm’s
domestic market
• The marketing
strategy that
involves pursuing a
standardization
strategy in foreign
markets when
possible and an
adaptation one
when necessary
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Developing the International Product Mix
• Options for marketing products overseas:
–
–
–
–
Sell the same domestic product overseas.
Modify products for different countries and regions.
Develop new products for foreign markets.
Incorporate all product differences into one design and develop a
global product suitable for most world markets.
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Developing New Products for International
Markets
• Steps in developing new products for overseas markets:
1. First, decide on the sources of new product ideas.
2. Evaluate new product ideas against a set of variables related to
product success.
3. Subject new product ideas to concept testing—presenting the
idea to a small sample of the market to gauge its reaction.
4. Move to the business analysis step, when projections of
potential revenues and profits are made.
5. Develop the physical product; product design is an important part
of this step.
6. Subject the product to market testing—development of the
marketing mix for the product.
7. The last step is commercialization of the new product, when it is
manufactured and introduced to the foreign market.
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EXHIBIT 12.3 CHARACTERISTICS AFFECTING RATE OF ADOPTION &
LEVEL OF ADOPTION FOR NEW PRODUCTS
Little
Low
Rate
Inconsistent
Relative Advantage
Compatibility
High
Consistent
of
Adoption
Rate
of
Difficult
Complexity
Simple
and
Low
Rapid
Adoption
and
Can’t
Triability
Can
High
Level
Level
of
of
Adoption
Difficult
High
Communicability
Easy
Cost
Low
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Adoption
Managing Existing Products
• Product life cycle (PLC) is a depiction of the sales and
profits for a new product over its lifetime.
– The PLC helps international markets decide when to modify their
marketing strategy.
• Product elimination (PE) is a formal, written procedure
to determine which of a firm’s products should be
dropped.
– Many companies do not have formal PE programs.
– They put together crash programs when products get into trouble.
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EXHIBIT 12.4 THE PRODUCT LIFE CYCLE
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Where to Locate Research and
Development Facilities
• Having one facility in the home country reduces R&D
costs and exerts more control and coordination over the
R&D program.
• Advantages to having one facility in the home country and
one or more additional facilities in the foreign markets:
– The MNC has access to foreign scientists and engineers.
– New products developed overseas are more likely to be attuned to
the firm’s overseas markets.
– Products developed for emerging markets can be successfully sold
in developed markets, called reverse strategy.
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Product Counterfeiting
• Problems created by counterfeiting:
–
–
–
–
Damage to brand image by inferior counterfeits
Sales revenues lost to counterfeiters
Dangers to customers from defective and hazardous counterfeits
Costs of combating counterfeit products
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Developing the International Promotion Mix
Publicity
Advertising
Sales
Promotion
Personal
Selling
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Advertising and Personal Selling
• Advertising media include television, radio, newspapers,
magazines, direct mail.
– Media can reach large audiences at low cost per contact.
– Radio is effective where television ownership is low.
– Newspapers may have different editions for different parts of the
world.
– Magazines may be targeted to specific industries (vertical
publications) or to specific jobs in industries (horizontal
publications).
– Direct mail is the most focused medium.
• Personal selling is considered very effective in
international markets, but there is a high cost per contact.
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Sales Promotion
• Sales promotions include contests and sweepstakes,
coupons, end-aisle displays in stores, sponsorships, and
trade shows.
– Can produce tangible benefits in short periods of time.
– Sponsorships are increasingly important.
– Trade shows are extremely popular for marketing products in
foreign countries.
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Publicity
• Publicity refers to unpaid stories about a firm, its products
or services, and its executives that appear in the media.
• Large companies have public relations departments that
attempt to influence media to report about them.
• Benefits of publicity:
– Helps firms to prospect for new customers
– Paves the way for sales calls when a favorable press release is
sent to prospects ahead of a sales call
– Helps sell minor products and stretches the promotional budget
– Favorable stories provide objective, unbiased, third-party
endorsement for a firm
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Developing the International Distribution Mix
• International distribution includes two major aspects:
– Channels of distribution
– Physical distribution
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Channels of Distribution
Indirect Strategy
Direct Strategy
• Uses existing distribution
channels to market products
and services
• Requires no up-front investment
• Market knowledge can assist in
introducing products more
quickly
• Channels may also carry
competitive products
• Channel controls marketing
efforts
• Bypasses existing channels of
distribution by using marketing
and sales offices located in
foreign countries
• Requires upfront investment in
recruiting and training a sales
force
• Maintains control over
marketing efforts
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Channels of Distribution (continued)
• Two major kinds of channels of distribution are
agents and distributors.
– Agent—a channel of distribution that represents a firm in a
foreign market and is paid by commission
– Distributor—a channel of distribution that purchases
products from a firm doing business in a foreign market and
then resells them to other buyers
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Physical Distribution
• Physical distribution
– Storage and transportation operations that are used in moving
products to a foreign market
• Distribution issues in overseas markets:
– Access to layers of in-country distribution systems
– Poor logistical infrastructures and security in developing nations
create difficulty in delivering orders in complete, accurate, and
good condition
– Greater shipping distance requires more emphasis on package
design and increases logistics costs
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Physical Distribution (continued)
• Companies selling products overseas often use freight
forwarders—agents who are chiefly involved with
physical distribution activities and documentation.
• Containerization is shipping products to overseas
markets in trailer-sized containers—by truck, train,
airplane, oceangoing vessel.
• Intermodal transport
– International shipments using different modes of land, sea, and air
transportation
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Developing the International Pricing Mix
• Major aspects of a company’s international pricing
strategies:
–
–
–
–
Developing pricing objectives for international markets
Setting prices in international markets
Addressing the issue of dumping
Setting transfer prices
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Pricing Objectives
• Determining international pricing mix involves four major
objectives:
– Performance objectives—bottom-line goals
– Prevention objectives—used to keep competitors out of a foreign
market
– Maintenance pricing objectives—designed to keep the status quo
– Survival objective—pricing strategy used to allow a company to
survive in an international market
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EXHIBIT 12.5 PRICING OBJECTIVES FOR INTERNATIONAL PRODUCTS
AND SERVICES
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Setting Prices in International Markets
• Price-setting factors:
–
–
–
–
Costs of product
Attractiveness of competitive products and their prices
How competitive the product is
How much marketing support (promotion budget, level of customer
service, number of salespeople selling the product, etc.) the
product will get
– What the demand for the product will likely be
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Setting Prices in International Markets
(continued)
• Approaches to setting prices:
– Charging the same price in the foreign market as in the domestic
market:
• Recognizes a product’s fixed and variable costs and includes costs of
transportation, storage, and promotion required to market the product
overseas
– Using a market differentiation approach:
• Recognizes product costs, but places a greater emphasis upon the
demand that exists for products at various prices
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Gray Marketing and Dumping
• Gray marketing (“parallel importation”)
– Unauthorized importers selling a product in the manufacturer’s
domestic market for less than what the manufacturer sells the
product in that market
• Dumping
– Selling at a price in a foreign market that undercuts the prices of
competing local firms by:
• Setting the foreign market price below what is charged in the seller’s
home-country (domestic) market
• Setting a price above what is charged domestically, but below the
marginal cost to move and sell the product overseas
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Transfer Pricing
Transfer Price
• A price a firm charges
its overseas
subsidiaries when
selling them products
they will resell
• Can be used to
minimize taxes
Arms Length Price
• A price that an
overseas market is
willing to pay or the
price that is
customarily paid for
the transferred
products in the
overseas market
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Developing the International
Customer Service Mix
• Share of wallet
– The percentage of purchases in a category a buyer gives to one
vendor
• Reliability
– The performance of various aspects of customer service that
meets customer expectations
• Empowerment
– The aspect of customer service that allows employees to take care
of customer problems immediately, without having to consult
superiors
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Key Terms
market potential
sales potential
marketing research
marketing intelligence
system (MIS)
standardization
adaptation
glocalization
global product
concept testing
business analysis
market testing
commercialization
product life cycle (PLC)
product elimination
reverse strategy
vertical publication
horizontal publication
indirect strategy
direct strategy
agent
distributor
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Key Terms (continued)
physical distribution
freight forwarder
containerization
intermodal transport
dumping
gray marketing
transfer price
arms length price
share of wallet
reliability
empowerment
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