Chapter 16Chapter 16

INTERNATIONAL INTERNATIONAL

MARKETSMARKETS

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1. INTERNATIONAL 1. INTERNATIONAL MARKETING MARKETING

OPPORTUNITIES OPPORTUNITIES ---

BENEFITS and RISKSBENEFITS and RISKS---

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DefinitionDefinition

• International marketing (IM) refers to the marketing of goods and services in two or more countries

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1.1 Reasons to market overseas1.1 Reasons to market overseas

• Growth: Growth: if the domestic market is static or competition is excessively fierce , IM provides new areas to operate

• Economies of scale: level of sales increases lower-than-competitive costs

• International competition: Globalization• National necessity: Imports must be paid

for with currency, and exports provide the means of acquiring this currency

Government encourages exports

LARGER PROFITLARGER PROFIT

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BenefitsBenefits

• Global market for a

product

• Receive orders for info

from potential

overseas customers

• Higher profit margins

• Seasonal fluctuations

may be leveled out

• Excess production

• Firm’s prestige

• Stakeholder

expectations

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RisksRisks

• Exaggerate differences

in labour costs

• Profits may be affected

by factors outside the

firm’s control (social,

cultural, economic, competitive,

legal, technological factors)

Eg. Purchasing habits, business

environment…

• The necessary adaption

to the product will

diminish the effects of

economies of scale

• Difficult to sell excess

stock at marginal cost

due to anti-dumping

duties

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1.2 The analysis of international 1.2 The analysis of international marketing opportunitiesmarketing opportunities

- Country- Culture & customer

behavior- Concentration- Communication- Channels of distribution- Capacity to pay

International markets could be analyzed International markets could be analyzed

under headings described as the 12Csunder headings described as the 12Cs

- Currency- Control & co-ordination- Commitment- Choices- Contractual obligations- Caveats

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2. Market attractiveness.2. Market attractiveness.• Objectives• Orientation (Ethnocentric, Polycentric=multi domestic and Geo centric)

• Risk (ROI, Political, business, currency & 0rofit repatriation risk)

• Involvement in international markets (Domestic marketing; pre-export stage; experimental involvement; active involvement; committed involvement)

• Structure choices (Simple exporting; licensing; franchising;

trading companies; manufacturing abroad)

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3. International 3. International Marketing EnvironmentMarketing Environment

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3.1 Cultural systems3.1 Cultural systems Material cultureMaterial culture

Social institutionsSocial institutions

Belief systemsBelief systems

AestheticsAesthetics

LanguageLanguage

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Material cultureMaterial culture

• Material culture Material culture affects affects

- Level of demand

- Quality and types of products

demanded

- Functional characteristics

- Nature of products demanded)

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3.2 Social Institutions3.2 Social Institutions

a) Social organization a) Social organization

b) Political structureb) Political structure

c) Educational systemc) Educational system

d) Family or household rolesd) Family or household roles

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3.2 Social Institutions (cont’d…)3.2 Social Institutions (cont’d…)

• Belief systems Belief systems (religious, philosophical and political

ideologies)

• AestheticsAesthetics (what counts as beauty or ugliness)

• LanguageLanguage (advertising slogans need to be beware of the

pitfalls of local language and successful slogans may not work in

another language or may be unintentionally funny or offensive)

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3.3 Globalization 3.3 Globalization

• Definition: the fact that different different

cultures and economic cultures and economic

system around the world are system around the world are

becoming connected and becoming connected and

similar to each othersimilar to each other because

of the influence of large

multinational companies and of

improved communication. (Oxford Dictionary 7th edition)

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Globalization of MarketsGlobalization of MarketsSince 1945, the volume of trade has increased. There have been two routes:

• Import substitution Import substitution (a country aims to produce manufactured goods which it previously imported by protecting local producers)

• Export-led growthExport-led growth

Is an expression relates to:• Demand: tastes, preferences and price-mindedness are becoming increasingly becoming increasingly

universaluniversal

• The supply side: products and services tend to become more standardized and competition within industries reaches a world-wide scale

• The way firm, mainly multinational corporations, try to remain winners in the global try to remain winners in the global competition of global products for global customers.competition of global products for global customers.

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Global MarketsGlobal Markets• There is a proliferation (growth) of

suppliers exporting to, or trading in a wider variety of places.

• Customers have more choices goods and services.

• Global markets should not be taken for granted in term of all products, services or all territories.

• Standardise or adapt marketing mix: sell standardise products or adapt to local market.

- sell standardise products for targeted similar groups globally

- adapt to local to meet local needs

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Changes in the world market placeChanges in the world market place

• Globalization of business• Science and technology• Customer values• Scrutiny• Deregulation• Business practices• Social and business relationship

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Global driversGlobal drivers

Factors encouraging globalization:

• Financial factor Financial factor (often lenders require economic reforms as a

condition of loan)

• Country/continent alliances Country/continent alliances (e.g. UK and USA which fosters

trade)

• Legal factors Legal factors (such as patents and trade marks, which encourage the

development of technology and design)

• Stock markets Stock markets (trading in international commodities)

• Protectionist Protectionist 19

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Free trade areas: Free trade areas: have members who are agree to lower barriers to trade amongst themselves

Customer unions: Customer unions: not only provide the advantages of free trade areas, but also agree a common policy on barriers to external countries

Economic unions: Economic unions: Refer to next slide

4.1 Regional trading groups4.1 Regional trading groups

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In effect the members become one for become one for economic purposeseconomic purposes

Trade within the community will not doubt be easier and freereasier and freer

Those outside the community will find it more outside the community will find it more difficult to compete difficult to compete on event term due to the tariff barriers

4.2 Economic unions4.2 Economic unions

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The Single European Market is supposed to allow for The Single European Market is supposed to allow for the free movement of labor, goods and services the free movement of labor, goods and services

between member states of the EUbetween member states of the EU

Physical barriPhysical barriers on goods and service have have been removedbeen removed for most products

Technical standards should be harmonizedbe harmonized

Government should not discriminate should not discriminate between EU companies in awarding public works contracts

4.3 The Single European 4.3 The Single European MarketMarket

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Telecommunications should be subject to greater competition

It should be possible to provide financial services in any country

Measures are being taken to rationalize transport services

4.3 The Single European Market 4.3 The Single European Market (cont’d…)(cont’d…)

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There should be free movement of capital within the community

Professional qualifications awarded in one member state should be recognized in the others

The EU is taking a co-ordinate stand on matters related to consumer protection

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At the same time, there are many areas At the same time, there are many areas where harmonization is some way from where harmonization is some way from

being achievedbeing achieved

Company taxationIndirect taxationDifferences in prosperityDifferences in workforce skillsInfrastructureDelaysSocial differences

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Two points about the EU are worthy Two points about the EU are worthy of noteof note

The EU is much more than a single market and a free trade area

The EU is in the process of expansion

* The EU’s constitutional arrangements* The EU’s budgetary arrangements

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Company planning for the Single European Market

There are 7 key questions of business strategy which firms should face up to

- How has the market changed for our business?

- Should we shift from being a UK firm with a UK market, to a European firm with a European market?

- If we became a European firm with a European market, would this alter scale of our operation?

- In what ways will we become vulnerable in our existing markets to new or greater competition?

- Is our management structure suitable for exploiting new opportunities and taking defensive measures against new threats?

- Should we be seeking mergers or takeovers to strengthen our market position, broaden our product range, or spread our financial risk?

- Who in the firm is going to be responsibilities for making the key decisions about how to exploit the single market opportunities? 28

Some possible implications for marketing and sales related

operations

(a) Marketing:Marketing:

- What new customers can be reached?

- Is the wider market attractive?

- What market information do we need, and

how do we get it?

- Are our products and services suitable for

the wider market?

- What will competition be like? 29

(b) Sales(b) Sales

- How can we reach the potential new

customer?

- How can we sell into the new market?

- What sales literature, advertising and sales

promotions will be needed?

Some possible implications for marketing and sales related Some possible implications for marketing and sales related operationsoperations (cont’d…) (cont’d…)

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(c) Distribution Distribution such as transport,

warehousing, dealer agreements etc

(d) Product development Product development focuses on some elements: attractive products and services, resources, collaborative venture

Some possible implications for marketing and sales related Some possible implications for marketing and sales related operationsoperations (cont’d…) (cont’d…)

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Cross border mergersExamples of acquiring an overseas firm are used as a mode of entry to European markets:

-Defense industry

-Many UK water firms and rail are owned French companies.

-Operating on a large area to make advantage of scale’s

economy.

-Some major UK retailers have sought to grow by acquiring

retailers in other countries.

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Membership may bring mixed Membership may bring mixed blessingsblessings

- The development of the EU will expand such trade and make it easier.

- USA is the largest market in terms of a single country – takes some 13% of UK report

-> The EU barriers to non-menbers such as the USA may result in retaliatory action.

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5. Product 5. Product

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5.1. To standardize or to adapt ?5.1. To standardize or to adapt ?

• Products have symbolic and psychological aspect.

• Based on targeting and segmentation Identify customer needs Adapt a product for a new market+ At the same time, it is necessary to

produce a standardized product.

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5.1. To standardize…. (continued)5.1. To standardize…. (continued)

PRODUCTION

PROMOTION

Extension Adaption NEW

Extension Straight Extension

Product Adaption

ProductInvention

Adaption CommunicationAdaption

DualAdaption

Approaches to the problem of adaptation

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5.1. To standardize…. (continued)

• Straight extension Straight extension of product means that no significant is

made.

• Product adaptation: Product adaptation: products can either fulfill the same

function under different conditions.

• Communications adaptation: Communications adaptation: an unchanged product to

fulfill a different needs.

• Dual adaptationDual adaptation

• Product inventionProduct invention37

5.2. Argument 5.2. Argument forfor product standardization product standardization

Economies of scaleEconomies of scale(i) Production

• To maximum capacity rather than duplicated.• Exporting rather than difficult licensing deals.

(ii) Research and development : products modification is costly and time consuming.

(iii) Marketing: same promotion strategy more cost effective.

Consumer mobility: Consumer mobility: finding a familiar brand name is important for the growing numbers of travelers moving across national boundaries.

Technological complexityTechnological complexity38

5.3. New products in international 5.3. New products in international marketsmarkets

Criteria for product screening:Criteria for product screening:• Producing the product: involve existing resources

or diversification.

• Marketing the product: formulating a new system could involve substantial outlay and disruption.

• Researching the new market

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5.3. New products…(continued) 5.3. New products…(continued)

• Marketing internationally: focus on economy of scale, and product line system.

• Motivation to introduce and market the new product effectively

• Organizational suitability to marketing the new product.

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6. PlaceOne of the elements of 4Ps

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What is PLACEWhat is PLACE

A range of factors affect the selection, establishment, and running of international distribution systems:international distribution systems:

• Using an Export Management Company (EMC)

• Export agents

• Direct exporting

• Import middlemen

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6.1 Developing an international 6.1 Developing an international distribution strategydistribution strategy

Some key strategic areas are involved:

• Distribution density Distribution density (exposure or coverage desired)

• Channel length Channel length (number, structure and hierarchy

relationships of the channel members)

• Distribution logistics Distribution logistics (physical flow or product)

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6.2 Retailing6.2 Retailing

• This international process international process is prompted by

improved data communications, new form of

international financing, more open international

markets and lower barriers to entry.

• Direct marketingDirect marketing

• Information technologyInformation technology

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6.3 Communications6.3 Communications

Marketing communications face additional barriers internationally

• Pull-oriented strategy Pull-oriented strategy

• Push-oriented strategyPush-oriented strategy

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7. Price 7. Price

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Price in foreign market are likely to determined by local conditions, local conditions, with each market separate.

IRISH COCACOLA

Price: US $11.95

Vietnamese Coca-Cola

Price : 6.000 VNĐ (US $ 0.3)

http://cgi.ebay.com.my http://www.vatgia.com

7.1Getting the price right7.1Getting the price right

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Local condition

• Cost of production and expenses

• Pricing policy

• Local strategy

• Competitiveness

• Etc.

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The organization degree of control over pricing is :

- Higher, if it has wholly owned subsidiaries in each of markets,

– Lower if it conducts business through licensees franchisees or distributors

Organization

subsidiaries subsidiaries Customer

Organization distributor Customer

Set price

Set price Set price

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• The Diversity of markets within a region is important. If market are unrelated, the seller can successfully charge different price

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Company can control price in several ways :

– Direct distribution to customer

– Resale price maintenance

– Recommended prices

– Agreed margin between parent and subsidiary

company

– Centralized control over prices within several

subsidiary companies

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8. Promotion Sales promotion

Sponsorship

Advertising

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Sales promotionSales promotion

• May be affected by different retailing norms and government regulations

• Eg: Coupons, much used in the UK and the USA,

are prohibited in Germany and Greece

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Sports promotion and Sports promotion and sponsorshipsponsorship

• Are widely used, used depends on the countries involved, circumstance and regulations which apply

• Eg: Advertising during sports programming on TV,

stadium, arena sign and sponsorship of individuals, teams or events

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AdvertisingAdvertising

• Sources of media problems:– Availability: May be lack of specific

• Newspapers: may not be widely available because of low levels of literacy, specific policies

• Magazines: may be very restricted for specialist product

• TV commercial: are restricted, or banned in many countries

• Billboards, directed mail and the form of promotion may be unfamiliar or ineffective

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– Financial aspects: High cost– Coverage of media: The forms of media

employed as well as the physical characteristics of the country

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