BUS 305

INTERNATIONAL MARKETINGInternational Business Operations:- International Marketing - International Management

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INTERNATIONAL MARKETINGMARKETING MIX:Four elements constitutes an IB marketing mix

Product attributes (Product) Distribution strategy (Place)Communication strategy (Promotion)Pricing Strategy (Price)

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INTERNATIONAL MARKETINGProduct Attributes:A product can be viewed as a bundle of attributesEg: the attributes that make up a car include:

design, quality, performance, fuel consumption, comfort, power, etc

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INTERNATIONAL MARKETING- Products sell well when their attributes match

consumer needs and only the marketing department can define those needs for R&D.

- Also, marketing is supposed tell R&D when to globally standardized products or locally customized products.

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INTERNATIONAL MARKETINGEg;BMW cars sell well to people who have high needs for luxury, quality and performance.(high income earners)

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INTERNATIONAL MARKETINGDistribution Channels:The means or channel used by a firm for delivering

its product to the customer

A firm that manufactures its products in a particular country can sell:

- Directly to the customer- To the retailer- To the wholesaler

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INTERNATIONAL MARKETINGA firm that manufactures its products in its home country and sells in a foreign country:-Directly to the customer-To the retailer-To the wholesaler-To an Import agent

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INTERNATIONAL MARKETINGWhich channel to use is based on:

- Retail Concentration:Concentrated Retail System: Is one in which only few

retailors supply most of the markets.

Developed countries have a concentrated retail system, consisting of large retail stores or shopping malls eg: Tesco, Wal-Mart etc

Firms are able to sell directly to retailors

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INTERNATIONAL MARKETINGFragmented Retail system: Is one in which there exist many retailors.

Developing countries have a more fragmented retail system with many retail stores serving local neighborhood.

Firms sell to wholesalers or import agents, who then sell to retailors.

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INTERNATIONAL MARKETINGImplications for IB:

Concentrated Retail System:In countries where the retail system is very

concentrated, firms deal directly with retailors cutting out wholesalers. (developed countries).

In US, large companies may sell directly to supermarkets rather than going through wholesale distributors.

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INTERNATIONAL MARKETING- Fragmented Retail System: firms should sell to

import agents or wholesalers (longer channel)

Channel length:The number of intermediaries between the

producer and the consumer.

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INTERNATIONAL MARKETING- Channel Exclusivity:An exclusive distribution channel is one that is difficult for new firms to access.

It is often difficult for new firms to get access to shelf space in supermarkets.

Retailers prefer to carry products of established firms rather than unknown firms

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INTERNATIONAL MARKETINGThe exclusivity of a distribution channel varies between countries.

Eg: Japan has a very exclusive system. Relationship between firms, wholesalers and retailers is often based on the understanding that distributors will not carry products of competing firms. Distributors in return receive an attractive mark-up by the manufacturer.This makes access to Japanese market difficult.

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INTERNATIONAL MARKETINGOvercoming Channel Exclusivity:To overcome channel exclusivity, IB should use a long distribution channel by going through either the wholesalers or import agents.

Import agents and wholesalers may have long-term retailers or important customers, hence would be able to get access to a distribution channel or sell directly to customers.

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INTERNATIONAL MARKETING- Channel quality:Refers to the expertise, competencies and skills of

established retailers in a nation and their ability to sell and support the products of IB.

Although the quality of retailers in most developed nations is good, in emerging markets and less developed nations channel quality is poor.

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INTERNATIONAL MARKETINGImplications for International Businesses:Poor channel quality may require an IB-devote considerable time upgrading the channel by providing extensive education and support to retailers

-By establishing its own retail channelEg: Apple is opening up retail stores in several nations, in order to provide point-of-sale education, service and support for its popular iPod and computer products.

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INTERNATIONAL MARKETINGCommunication Strategy

Communicating the attributes of the product to prospective customers.

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INTERNATIONAL MARKETINGA communicating strategy is either a push strategy or a pull strategy

-Push strategy: uses personal selling (direct marketing) to communicate the marketing message to consumers

-Pull strategy: uses mass media advertising to communicate the marketing message to consumers

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INTERNATIONAL MARKETINGPush vrs Pull Strategy

Push Strategy is used:-For industrial products or complex products-When distribution channels are short-When few print or electronic media are available

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INTERNATIONAL MARKETINGPull Strategy is used:-For consumer goods-When distribution channels are long- When sufficient print or electronic media are available

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INTERNATIONAL MARKETINGPricing Strategy:

- Price Discrimination: when consumers in different countries are charged different prices for the same product.

For Successful Price Discrimination:- The firm must be able to keep its markets

separate or else individuals may engage in arbitrage

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INTERNATIONAL MARKETINGArbitrage: buying from countries where prices are lower and re-selling in countries where prices are higher.Eg:Ford practices price discrimination between Great Britain and Belgium. A Ford car can cost up to $3,000 more in Great Britain than in Belguim

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INTERNATIONAL MARKETINGFord has been able to keep the 2 markets separate because:-Left-hand-drive cars are sold in Belgium-Right-hand-drive cars are sold in Great Britain

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INTERNATIONAL MARKETING

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- Different Price Elasticity of Demand in different countries

Price elasticity of demand: is a measure of the responsiveness of demand for

a product to a change in price.

INTERNATIONAL MARKETINGElastic: when a small change in price causes a large change in demand.

Eg:In countries where income levels are low, consumers with limited income tend to be very price conscious

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INTERNATIONAL MARKETINGInelastic: when a large change in price causes only a small change in demandEg:In countries where income levels are high, consumers are not sensitive to changes in price.

NB:Generally, a firm can charge a higher price in a country where demand is inelastic.

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INTERNATIONAL MARKETINGStrategic Pricing:

- Predatory Pricing: when price is used as a competitive weapon to drive other competitors out of the market.

- Once the competitors have left the market, the firm can raise prices and enjoy high profits

- For such a strategy to work, a firm must have a profitable position in another national market

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INTERNATIONAL MARKETINGExample:Matsushita, a Japanese firm, was accused of using this strategy to enter the US TV market.

-As one of the major TV producers in Japan, Matsushita earned high profits at home.

-It then used those profits to subsidize the loses it made in the US during its early years

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INTERNATIONAL MARKETING- Multipoint Pricing: when a firms pricing strategy

in one market has an impact on its rival’s pricing strategy in another market

- This normally happens when two or more IB compete against themselves in 2 or more national markets.

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INTERNATIONAL MARKETINGExample:Fuji launched an aggressive competitive attack

against Kodak in the US company’s home market in Jan. 1997, cutting prices by 50%.

- Kodak’s response was to aggressively cut prices in Fuji’s largest market, Japan.

- Fuji responded to Kodak’s counterattack by pulling back from its aggressive stance in US

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EXAMSExamsSection A 10 questions (answer all)

Section B2 case studies (answer 1)

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