4 ps of gm
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© 2005 Prentice Hall 10-1
Product and Brand Decisions
© 2005 Prentice Hall 10-2
Basic Product Concepts
A product is a good, service, or idea– Tangible Attributes– Intangible Attributes
Product classification– Consumer goods– Industrial goods
© 2005 Prentice Hall 10-3
Product Types
Buyer orientationAmount of effort expended on purchase, Level of
risk associated and involvement in purchase.– Convenience– Preference– Shopping– Specialty
© 2005 Prentice Hall 10-4
Brands
The added value that accrues to a product as a result of investments in the marketing of the brand
An asset that represents the value created by the relationship between the brand and customer over timeBundle of images and experiences in the customer’s mindA promise made by a particular company about a particular productA quality certificationDifferentiation between competing productsThe sum of impressions about a brand is the Brand Image
© 2005 Prentice Hall 10-5
Brands
© 2005 Prentice Hall 10-6
Local, International Products and BrandsLocal Brands:
Brands that have achieved success in a single national market
Represent the lifeblood of domestic companies
Entrenched local products/brands can be a significant competitive hurdle to global companies
International Brands:Offered in several markets in a particular region
© 2005 Prentice Hall 10-7
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
© 2005 Prentice Hall 10-8
Branding Strategies
Combination or tiered branding: allows marketers to leverage a company’s reputation while developing a distinctive identity for a line of products– Sony Walkman
Co-branding features two or more company or product brands– NutraSweet and Coca-Cola– Intel Inside
© 2005 Prentice Hall 10-9
Branding Strategies
Brand acts as an umbrella for new products– Example: Crescent Group of Companies
• Cres-Bank• Crescent Bahoman• Shakarganj Foods Ltd.
© 2005 Prentice Hall 10-10
Global Brand Development
Create a compelling value proposition
Think about all elements of brand identity and select names, marks, and symbols that have the potential for globalization
Research the alternatives of extending a national brand versus adopting a new brand identity globally
Develop a company-wide communication system
Develop a consistent planning process
Assign specific responsibility for managing branding issues
Execute brand-building strategies
Harmonize, unravel confusion, and eliminate complexity
© 2005 Prentice Hall 10-11
Local versus Global Products and Brands: A Needs-Based Approach
Physiological
Safety
Social
External/Internal Esteem
Self-actualization
© 2005 Prentice Hall 10-12
Country of Origin as Brand Element
Perceptions about and attitudes toward particular countries often extend to products and brands known to originate in those countries– Japan– Germany– France– Italy
© 2005 Prentice Hall 10-13
Packaging
Consumer Packaged Goods when the packaging is designed to protect or contain the product during shippingEco-Packaging because package designers must address environmental issuesOffers communication cues that provide consumers with a basis for making a purchase decision
© 2005 Prentice Hall 10-14
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
© 2005 Prentice Hall 10-15
Aesthetics
Global marketers must understand the importance of visual aesthetics
Aesthetic Styles (degree of complexity found on a label) differ around the world
© 2005 Prentice Hall 10-16
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
© 2005 Prentice Hall 10-17
Extend, Adapt, Create: Strategic Alternatives in Global Marketing
Extension – offering product virtually unchanged in markets outside of home countryAdaptation – changing elements of design, function, and packaging according to needs of different country marketsCreation – developing new products for the world market
© 2005 Prentice Hall 10-18
Global Product Planning: Strategic Alternatives
ProductSame Different
Communication
Different
SameStrategy 1:
Dual Extension
Strategy 2:Product ExtensionCommunication
Adaptation
Strategy 4:Dual Adaptation
Strategy 3:Product Adaptation
CommunicationExtension
© 2005 Prentice Hall 10-19
How to Choose a Strategy?
Two errors that management makes in choosing a strategy– NIH (Not invented here) syndrome means managers
ignore the advancements of subsidiaries overseas– Managers impose policies upon subsidiaries because
they assume what is right for customers in one market is right in every market
Cave Dweller – new products launched internationally to dispose of excess productionNaïve Nationalist – company recognizes growth opportunities outside of home marketGlobally sensitive – company views world as competitive marketplace
© 2005 Prentice Hall 10-20
How to Choose a Strategy?
The product itself, defined in terms of the function or need it servesThe market, defined in terms of the conditions under which the product is used, preferences of potential customers, and ability to buy the productAdaptation and manufacturing costs the company will incur
© 2005 Prentice Hall 10-21
New Products in Global Marketing
Pursue opportunities in competitive arenas of global marketplaceFocus on one or only a few businessesActive involvement from senior managementAbility to recruit and retain best employeesUnderstand the importance of speed in bringing product to market
© 2005 Prentice Hall 10-22
Identifying New Product Ideas
What is a new Product?– New to those who use it or buy it– New to the organization– New to a market
© 2005 Prentice Hall 10-23
The International New Product Department
How big is the market for this product at various prices?What are the likely competitive moves in response to our activity?Can we market the product through existing structure?Can we source the product at a cost that will yield an adequate profit?Does product fit our strategic development plan
© 2005 Prentice Hall 10-24
Testing New Products
When do you test a new product?– Whenever a product interacts with human,
mechanical, or chemical elements because there is the potential for a surprising and unexpected incompatibility
Test could simply be observing the product being used within the market
© 2005 Prentice Hall 11-25
Pricing Decisions
© 2005 Prentice Hall 11-26
Basic Pricing Concepts
The Global Manager must develop systems and policies that address– Price Floors– Price Ceilings– Optimum Prices
Must be consistent with global opportunities and constraints
© 2005 Prentice Hall 11-27
Global Pricing Objectives and Strategies
Managers must determine the objectives for the pricing objectives– Unit Sales– Market Share– Return on investment
They must then develop strategies to achieve those objectives– Penetration Pricing– Market Skimming
© 2005 Prentice Hall 11-28
Market Skimming and Financial Objectives
Market Skimming– Charging a premium
price– May occur at the
introduction stage of product life cycle
Sony Ad. for camcorders
© 2005 Prentice Hall 11-29
Penetration Pricing and Non-Financial Objectives
Penetration Pricing– Charging a low price in
order to penetrate market quickly
– Appropriate to saturate market prior to imitation by competitors
1979 Sony Walkman
© 2005 Prentice Hall 11-30
Companion Products
Products whose sale is dependent upon the sale of primary product– Video games are dependent
upon the sale of the game Console
“If you make money on the blades you can give away the razors.”
X-Box Game System and Sports Game
© 2005 Prentice Hall 11-31
Target Costing – 8 Questions1. Does the price reflect the product’s quality?2. Is the price competitive given local market conditions?3. Should the firm pursue market penetration, market
skimming, or some other pricing objective?4. What type of discount (trade, cash, quantity) and
allowance (advertising, trade-off) should the firm offer its international customers?
5. Should prices differ with market segment?6. What pricing options are available if the firm’s costs
increase or decrease? Is demand in the international market elastic or inelastic?
7. Are the firm’s prices likely to be viewed by the host-country government as reasonable or exploitative?
8. Do the foreign country’s dumping laws pose a problem?
© 2005 Prentice Hall 11-32
Target Costing
Cost-Based Pricing is based on an analysis of internal and external cost
Firms using western cost accounting principles use the Full absorption cost method– Per-unit product costs are the sum of all past or
current direct and indirect manufacturing and overhead costs
© 2005 Prentice Hall 11-33
Target Costing
Rigid cost-plus pricing means that companies set prices without regard to the eight foundational pricing considerations
Flexible cost-plus pricing ensures that prices are competitive in the contest of the particular market environment
© 2005 Prentice Hall 11-34
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
© 2005 Prentice Hall 11-35
Terms of the Sale
Incoterms– Ex-works – seller places goods at the disposal of the
buyer at the time specified in the contract; buyer takes delivery at the premises of the seller and bears all risks and expenses from that point on.
– Delivery duty paid – seller agrees to deliver the goods to the buyer at the place he or she names in the country of import with all costs, including duties, paid.
© 2005 Prentice Hall 11-36
Environmental Influences on Pricing Decisions
Currency Fluctuations
Inflationary Environment
Government Controls, Subsidies, Regulations
Competitive Behavior
Sourcing
© 2005 Prentice Hall 11-37
Global Pricing: Three Policy Alternatives
Extension
Adaptation
Geocentric
© 2005 Prentice Hall 11-38
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
© 2005 Prentice Hall 11-39
Dumping
Sale of an imported product at a price lower than that normally charged in a domestic market or country of origin.Occurs when imports sold in the US market are priced at either levels that represent less than the cost of production plus an 8% profit margin or at levels below those prevailing in the producing countriesTo prove, both price discrimination and injury must be shown
© 2005 Prentice Hall 11-40
Price Fixing
Representatives of two or more companies secretly set similar prices for their products– Illegal act because it is anticompetitive
Horizontal price fixing occurs when competitor within an industry that make and market the same product conspire to keep prices highVertical price fixing occurs when a manufacture conspires with wholesalers/retailers to ensure certain retail prices are maintained
© 2005 Prentice Hall 11-41
Transfer Pricing
Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdictionIntra-corporate exchanges– Cost-based transfer pricing– Market-based transfer pricing– Negotiated transfer pricing
© 2005 Prentice Hall 11-42
Countertrade
Countertrade occurs when payment is made in some form other than money
Options– Barter– Counter-purchase– Offset– Compensation trading– Cooperation agreements– Switch trading
© 2005 Prentice Hall 11-43
Barter
The least complex and oldest form of bilateral, non-monetary counter-trade
A direct exchange of goods or services between two parties
© 2005 Prentice Hall 11-44
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
Return
© 2005 Prentice Hall 11-45
Extension
Ethnocentric
Per-unit price of an item is the same no matter where in the world the buyer is located
Importer must absorb freight and import duties
Fails to respond to each national market
Return
© 2005 Prentice Hall 11-46
Adaptation
Polycentric
Permits affiliate managers or independent distributors to establish price as they feel is most desirable in their circumstances
Sensitive to market conditions but creates potential for gray marketing
Return
© 2005 Prentice Hall 11-47
Geocentric
Intermediate course of action
Recognizes that several factors are relevant to pricing decision– Local costs– Income levels– Competition– Local marketing strategy
Return
© 2005 Prentice Hall 11-48
Currency Fluctuations
Return
© 2005 Prentice Hall 11-49
Inflationary Environment
Defined as a persistent upward change in price levels– Can be caused by an increase in the money
supply– Can be caused by currency devaluation
Essential requirement for pricing is the maintenance of operating margins
Return
© 2005 Prentice Hall 11-50
Government Controls, Subsidies, and Regulations
The types of policies and regulations that affect pricing decisions are:– Dumping legislation– Resale price maintenance legislation– Price ceilings– General reviews of price levels
© 2005 Prentice Hall 11-51
Competitive Behavior
If competitors do not adjust their prices in response to rising costs it is difficult to adjust your pricing to maintain operating margins
If competitors are manufacturing or sourcing I a lower-cost country, it may be necessary to cut prices to stay competitive
Return
© 2005 Prentice Hall 11-52
Using Sourcing as a Strategic Pricing Tool
Marketers of domestically manufactured finished products may move to offshore sourcing of certain components to keep costs down and prices competitive
Return
Can you stay competitive while staying local?
© 2005 Prentice Hall 12-53
Channels and Physical Distribution
© 2005 Prentice Hall 12-54
Channel Objectives
Marketing channels exist to create utility for customers– Place utility - availability of a product or service in a
location that is convenient to a potential customer – Time utility - availability of a product or service when
desired by a customer – Form utility - availability of the product processed,
prepared, in proper condition and/or ready to use– information utility - availability of answers to
questions and general communication about useful product features and benefits
© 2005 Prentice Hall 12-55
Distribution Channels: Terminology and Structure
Distribution is the physical flow of goods through channels
Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service
© 2005 Prentice Hall 12-56
Distribution Channels: Terminology and Structure
Distributor – wholesale intermediary that typically carries product lines or brands on a selective basis
Agent – an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold
© 2005 Prentice Hall 12-57
Consumer Products
© 2005 Prentice Hall 12-58
Consumer Products
Piggyback Marketing – channel innovation that has grown in popularity– One manufacture distributes product by
utilizing another company’s distribution channel
– Requires that the combined product lines be complementary and appeal to the same customer
© 2005 Prentice Hall 12-59
Industrial Products
© 2005 Prentice Hall 12-60
Establishing Channels
Direct involvement – the company establishes its own sales force or operates its own retail stores
Indirect involvement – the company utilizes independent agents, distributors, and/or wholesalers
Channel strategy must fit the company’s competitive position and marketing objectives with in each national market
© 2005 Prentice Hall 12-61
Working with Channel Intermediaries
Select distributors – don’t let them select youLook for distributors capable of developing markets, rather than those with a few good customer contactsTreat local distributors as long-term partners, not temporary market-entry vehicles
© 2005 Prentice Hall 12-62
Working with Channel Intermediaries
Support market entry by committing money, managers, and proven marketing ideas
From the start, maintain control over marketing strategy
Make sure distributors provide you with detailed market and financial performance data
Build links among national distributors at the earliest opportunity
© 2005 Prentice Hall 12-63
Global Retailing
Department stores
Specialty retailers
Supermarkets
Convenience stores
Discount stores and warehouse clubs
Hypermarkets
Supercenters
Category killers
Outlet stores
© 2005 Prentice Hall 12-64
Global Retailing
Top 25 Global Retailers in
2002, sales in Millions
© 2005 Prentice Hall 12-65
Global Retailing
Environmental Factors – Saturation in the home country market– Recession or other economic factors– Strict regulation on store development– High operating costs
Critical Question– What advantages do we have relative to the
local competition?
© 2005 Prentice Hall 12-66
Classifying Global Retailers
© 2005 Prentice Hall 12-67
Global Retailing Strategies
Organic– Company uses its own resources to open a store
on a green field site or acquire one or more existing retail facilities
Franchise– Appropriate strategy when barriers to entry are
low yet the market is culturally distant in terms of consumer behavior or retailing structures
© 2005 Prentice Hall 12-68
Global Retailing Strategies
Chain Acquisition– A market entry strategy that entails purchasing
a company with multiple existing outlets in a foreign country
Joint Venture– This strategy is advisable when culturally
distant, difficult-to-enter markets are targeted
© 2005 Prentice Hall 12-69
Global Retailing Strategies
© 2005 Prentice Hall 12-70
Innovation in Global Retailing
Innovation takes place only in the most highly developed systemsThe ability of a system to successfully adapt innovations is directly related to its level of economic developmentEven when the economic environment is conducive to change, the process of adaptation may be either hindered or helped by local demographic factors, geographic factors, social mores, government action, and competitive pressuresThe process of adaptation can be greatly accelerated by the actions of aggressive individual firms
© 2005 Prentice Hall 12-71
Supply Chain Definitions
Supply Chain – Includes all the firms that perform support activities by
generating raw materials, converting them into components or finished products and making them available to customers
Logistics– The management process that integrates the activities
of all companies to ensure tan efficient flow of goods through the supply chain
© 2005 Prentice Hall 12-72
Physical Distribution, Supply Chains, and Logistics Management
Order Processing– includes order entry in which the order is actually
entered into a company’s information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery
Warehousing– Warehouses are used to store goods until they are sold– Distribution centers are designed to efficiently receive
goods from suppliers and then fill orders for individual stores or customers
© 2005 Prentice Hall 12-73
Physical Distribution, Supply Chains, and Logistics Management
Inventory Management– Ensures that a company neither runs out of
manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks of these items.
Transportation– the method or mode a company should utilize when
moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water
© 2005 Prentice Hall 12-74
Transportation
Channel Strategy – analyzing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation
© 2005 Prentice Hall 13-75
Communications Decisions: Advertising and Public Relations
© 2005 Prentice Hall 13-76
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
© 2005 Prentice Hall 13-77
Global Advertising
Advertising is any sponsored, paid message that is communicated in a non-personal way– Single country– Regional– Global
Global advertising is the use of the same advertising appeals, messages, art, copy, photographs, stories, and video segments in multiple country markets
© 2005 Prentice Hall 13-78
Standardization vs. Adaptation
Primary Question–Must the specific advertising message
and media strategy be changed from region to region or country to country?
© 2005 Prentice Hall 13-79
Standardization vs. Adaptation
Four difficulties that compromise an organization’s communication efforts– The message may not get through to the intended
recipient. – The message may reach the target audience but may not
be understood or may even be misunderstood. – The message may reach the target audience and may be
understood but still may not induce the recipient to take the action desired by the sender.
– The effectiveness of the message can be impaired by noise.
© 2005 Prentice Hall 13-80
Advertising Agencies: Organizations and Brands
Understanding the term organization is key– Umbrella corporations/holding companies have one or
more ‘core’ advertising agencies– Each ‘organization’ has unites specializing in direct
marketing, marketing services, public relations, or research
Individual agencies are considered brands– Full service brands create advertising, and provide
services such as market research, media buying, and direct marketing
© 2005 Prentice Hall 13-81
Selecting an Advertising Agency
Company organization– Companies that are decentralized ma want to leave the
choice to the local subsidiaryNational responsiveness– Is the global agency familiar with local culture and
buying habits of a particular country?Area coverage– Does the agency cover all relevant markets
Buyer perception– What kind of brand awareness does the company want
to project?
© 2005 Prentice Hall 13-82
Creating Global Advertising
Creative strategyBig ideaAdvertising appeal– Rational approach– Emotional approach
Selling propositionCreative execution– Art & Copy
© 2005 Prentice Hall 13-83
Art Directors and Art Direction
Art Directors– Advertising professional who has the general
responsibility for the overall look of an ad– Will choose graphics, pictures, type styles, and
other visual elements that appear in an ad
Art Direction– The visional presentation of an advertisement
© 2005 Prentice Hall 13-84
Cultural Considerations – Japanese and American Differences
Indirect rather than direct forms of expression are preferred in the messagesThere is often little relationship between ad content and the advertised productOnly brief dialogue or narration is used in television commercials, with minimal explanatory contentHumor is used to create a bond of mutual feelingsFamous celebrities appear as close acquaintances or everyday peoplePriority is placed on company trust rather than product qualityThe product name is impressed on the viewer with short, 15-second commercials
© 2005 Prentice Hall 13-85
Cultural Considerations
© 2005 Prentice Hall 13-86
Global Media Decisions
Prepare new copy for foreign markets in host country’s language
Translate the original copy into target language
Leave some or all copy elements in home country language
© 2005 Prentice Hall 13-87
Media Decisions – Saudi Arabia
Use of comparative advertising claims is prohibitedNon-censored films cannot be advertisedWomen may only appear in those commercials that relate to family affairs, and their appearance must be in a decent manner that ensures feminine dignityWomen must wear a long suitable dress which fully covers her body except face and palms
© 2005 Prentice Hall 13-88
Public Relations and Publicity
Fosters goodwill and understanding
Generates favorable publicity
Tools– News releases– Media kits– Press conferences– Tours– Articles in trade and professional journals– TV and radio talk show appearances– Special events
© 2005 Prentice Hall 13-89
The Growing Role of Public Relations in Global Marketing
Public Relations expenditures are growing at an average of 20% per year
In India they are reported to be growing by 200% annually
Reasons for the growth– Increased governmental relations between countries– Technology– Societal issues like the environment
© 2005 Prentice Hall 13-90
Public Relations Practices around the World
Public relations practices can be affected by:– Cultural traditions– Social and political contexts– Economic environments
Public relations professionals must understand these differences and tailor the message appropriately