Selected issues on international marketing

programme

Focused on Product and Services

• The opportunities for international marketers of consumer goods and services today have never been greater

• New consumers are springing up in many emerging markets, which promise to be huge markets in the future

• In the more mature markets consumers´ tastes become more sophisticated and complex due to increase in purchasing power

• The difference between tangible products and services

• The difference between business-to-consurmer and business-to-business markets

Product policy: Analyzing Product Components

• A product is multidimensional, and the sum of all its features determines the bundle of satisfaction (utilities) received by the customer

• The many dimensions of products can be divided into three distinct components:

– Core components– Packaging components– Support services components

• These components include all a product´s tanglible and intangible elements and provide the bundle of utilities the market receives from use of the product.

Which products for international markets?

• The same as for home market

• Adapted products

• Standardized products

• New products Define the reasons for each option!

Four degrees of adaptation:

combinations: product and promotion

Non-customization

Adapting the message

Adapting the portfolio

Custom product design

Fully leverage global product and marketing

Customize Marketing

message and language

Customize mixof product and

services based on

local needs

Create market specific products

and services

Branding for international markets

• Branding dimensions:– Global brands– Regional brands– Local brands– Producer´s brand– Private brands– Brand partnership– Brand portfolio

International

product

life cycle

The international product life cycle

• Macroeconomic approach: – Typically, demand first grows in the innovating country.

Production, consequently, takes place first in the innovating country. As the product matures and technology is diffused production occurs in other industrialised countries and then is less developed countries.

• Microeconomic approach: – Due to different economic levels in different countries, a

specific product can be in different PLC stages in different countries.

International pricing strategies

• Cost-plus.• Strategic pricing: penetration pricing, skimming (including

strategies for pricing a new product)• Experience curve pricing• Demand-based pricing• Pricing across products (product line pricing)• Total package price• Psychological pricing.

In comparison to domestic pricing strategies, the decisions are much more complex, because they are affected by a number of additional external factors, such as fluctuations in exchange rates, accelerating inflation in certain countries and the use of alternative payment methods such as leasing and barter for instance.

Influences on international pricing

Desired brand position

Government price controls

Responsiveness of sales to price changes

Local credit periods

Stability of exchange rates

Consumer response to promotional activities

Local inflation rates

Distributors’ markups

Rate of market growth

Nature of local competition

Selling points of the product

Supply costs

Consumer characteristics

Overall corporate strategy

Price

Factors affecting the price setting in international marketing

External factors???

Internal factors???

• Environmental factors• Market factors

• Firm-level factors• Product factors

What to add to general pricing strategies?

• Pricing across countries:– Standardization: internationalization of

competition, homogenization of competitive structures, international activities of large retailers

– Differentiation: differences in price segments, strengths of local competitors, retailer power,

consumer preferences

International pricing taxanomy

1. Global price leader: global market leader, market and cost-oriented global prices, global competition but local differences

2. Global price follower .....

3. Multilocal price setter

4. Local price follower

European pricing strategies

20 % in price differences

Highest price

Lowest price

Future European price corridor

A. Reasons for lowering prices in foreign markets

• Lower consumer incomes.

• Intense local competition.

• R&D costs have already been covered.

• Weak demand for the product.

B. Reasons for increasing prices in

foreign markets ????

Price escalation

• Price escalation affects all firms involved in cross-border transportation.

• Due to additional shipping or other kinds of transportation, insurance, tarrifs and distribution charges, the exported product costs more in the export market than at home.

Distribution policy

• Entry mode

• Physical distribution

• INCOTERMS

• Distribution channels

Distribution and external environment

Distribution decision

Channel decisions – external factors– Customer characteristics– Nature of product– Nature of demand (location)– Competition– Legal regulations/local business practice

Channel decisions – internal factors– Decisions concerning structure of the channel– Managing and controlling distribution channels– Managing logistics

Considerations in transport and distribution policy

• Cost vs. speed.• Nature of the product (weight, perishability,

dimensions).• Customer preferences.• Value of the goods.• Intermediate handling and storage charges.• Working capital tied up in goods in transit.

International distribution

channel

• It may be that no other US product, save perhaps Coca-Cola, is as widely available and in China as Doublemint gum. The company has extended its reach into almost every corner of the country.

• In fact, Wrigley has probably the widest distribution and sales network of any food manufacturing and consumer packaging company in China, with a staggering one million sales outlets - 30,000 in Shanghai alone.

• Wrigley's share of China's chewing gum market is an astounding 60 percent. Although the company has competitors - primarily South Korea's Lotte and Italian company Perfetti Van Melle - no other gum company, foreign or domestic, comes close to Wrigley's market share or sales volume.

• Since 1999, China has become Wrigley's second-largest market, behind only the United States. If ever there was a US company that has actually cashed in on the mythic slogan, ``if every one of China's billion people bought just one ...,'' it is Wrigley's.

• As a matter of fact, they buy more than one: Chinese, on average, buy 10 sticks of gum a year. That's far behind the American average of 160 or Taiwan's 70-80. But with China's population five times that of the United States, there is a lot of room for growth.

• The Doublemint brand is the top-selling gum in China, and Wrigley's has enjoyed consistent double-digit sales growth there.

• Wrigley entered China in a big way in 1989, when it built its first wholly owned chewing gum factory in Guangzhou. Last October, Wrigley opened a 50,000 square-foot factory to make gum base - the material that gives gum its chewiness - in Shanghai.

• Since the opening of the Shanghai plant, the company has been able to produce all the ingredients for chewing gum on the mainland.

• In recognition of Wrigley's unassailable position in China, Spanish food conglomerate Agrolimen last year sold its Joyco confectionery division's operations in China and India and several other countries to Wrigley for 220 million euros (HK$2.1 billion).

Wrigley and distribution channel in China

Wrigley Brand China versus SR

• Cool Air • Doublemint • Extra Juicy Fruit •Pim Pom • Sugus • TaTa • Wrigley's Coffee • Wrigley's Spearmint

• Airwaves • Doublemint • Hubba Bubba • Juicy Fruit Orbit • Solano • Winterfresh • Wrigley's Spearmint

Distribution channel and local market: Wrigley Doublemint v Číne

• Výrobný závod GUANGZHOU – juhovýchodné pobrežie Číny• Cieľ: 10-ročný chlapec na ulici v meste Shanghai• Podmienka: trvanlivosť 8 mesiacovDistribučný kanál:• Guangzhou – výrobný závod• Pobrežná nákladná loď: náklad 960 000 balíčkov žuvačiek• Námorná hliadka nakladá na loď pašované autá• Colná kontrola v prístave• Nákladné auto v prístave Shanghai

Distribučný kanál a lokálny trh: Wrigley Doublemint v Číne

• Nútené zastávky (banditi, provinční úradníci)

• Veľkoobchodník Mr. Chen Tuping (štátny obchodný podnik)

• Obchodní zástupcovia firmy Wrigley hľadajú odberateľov – veľko a maloobchodníkov (osobné kontakty, podpora predaja, pozitívne referencie)

Distribution channel and local market: Wrigley Doublemint v Číne

• Mr. Meili – veľkoobchodník (Beautiful&Rich Wholesale Market) na trojkolke si dovezie žuvačky do svojho veľkoobchodu)

• Malý obchod na ulici v meste Shanghai (dopravný prostriedok bycikel)

• Spotrebiteľ Zhang Xiaomei

Wrigley a Singapur• Wrigley's is slowly working its way back into Singapore after having

been shut out, along with every other gum maker, after the island country famously banned the import and sale of chewing gum for sanitary reasons in 1992. The company was deeply involved in negotiations leading to the city-state's 2003 Free Trade Agreement with the United States. Two issues dominated the negotiations: Singapore's participation in the Iraq coalition, and chewing gum. Of the two, gum was the stickiest.

• Singapore finally compromised, agreeing to allow the importation and sale of what it called ``therapeutic'' gum. The deal opened the way for sales of Wrigley's Orbit brand of sugar-free gum, which contains calcium lactate, intended to strengthen tooth enamel.

• But Wrigley's gum can only be bought through a licensed pharmacist, and the buyer must provide his name and identity card number.

International communication:Objectives of international

advertising

• Increasing sales.

• Attracting new customers.

• Altering customer behaviour.

• Communicating brand values.

The case for standardization

• Consumer characteristics are becoming homogeneous across borders.

• Urbanization is increasing.

• Internationalization of media has led to converging lifestyle choices.

The case for customization

• Cultural differences between markets.

• Language differences.

• Differences in educational backgrounds.

• Non-availability of some media.

• Different attitudes towards advertising.

• Legal requirements in different markets.

Advantages of using a local agency

• Gives the foreign firm a local image.

• Closer links between agency and media.

• More commitment to the market.

• Local flair and creativity.

Objectives of international advertising

• Increasing sales.

• Attracting new customers.

• Altering customer behaviour.

• Communicating brand values.

The case for standardization

• Consumer characteristics are becoming homogeneous across borders.

• Urbanization is increasing.

• Internationalization of media has led to converging lifestyle choices.

The case for customization

• Cultural differences between markets.

• Language differences.

• Differences in educational backgrounds.

• Non-availability of some media.

• Different attitudes towards advertising.

• Legal requirements in different markets.

International media planning problems

• Differing definitions of terms such as circulation and readership.

• Differing segmentation of media.

• Large number of possible media to screen.

• Absence of reliable information on ‘pass-alongs’ of magazines.

Advantages of using a local agency

• Gives the foreign firm a local image.

• Closer links between agency and media.

• More commitment to the market.

• Local knowledge and creativity.

International media planning problems

• Differing definitions of terms such as circulation and readership.

• Differing segmentation of media.

• Large number of possible media to screen.

• Absence of reliable information on ‘pass-alongs’ of magazines.

Objectives of international PR

• Establish a brand image. • Create awareness of the enterprise.

TOOLS OF PR• Sponsorship.• Press releases.• Publicity stunts.• Brochures and reports.• Media events.

Factors contributing to the growth of Public Relation

• Ability to contact opinion leaders.

• Large-scale privatizations.

• Escalating costs of advertising.

• General increase in promotion.

• Rising interest in corporate image.

• Wider share ownership.

• High cost of bad publicity.

Drivers for growth in direct marketing

• New technology.

• Escalating costs of mass media.

• Availability of good-quality lists.

• Developments in IT.

• Improved mail infrastructure.

• Improved telecomms infrastructure.

Elements in the export plan versus fundamental decisions

• Reasons for exporting.• Markets to be entered.• Competitive situation in the target markets.• Products to be offered.• Research methods.• Promotional methods.• Export formalities.• Organization.• Human resource requirements.• Transport and distribution.• Objectives and budgets.• Contingency plans.