the scope and challenge of international marketing · the international marketing task 7...

The Scope and Challenge of International Marketing

Why is International Marketing Important?

Canada’s Exports and Imports

Elements of the (International) Marketing Mix

The International Marketing Task

Self-Reference Criterion (SRC)

Phases of International Marketing Involvement

International Marketing Concepts

Being Globally Aware

Why is International Marketing Important?

Business environments are becoming increasingly more global

Exports are the driving force behind Canada’s economic expansion

Canada exports 60% of the value of all goods produced

$ 1 billion in additional exports creates about 11,000 new jobs

Trends in Global Business

Internationalization of markets

Internationalization of companies

Growth of Regional Trade Areas

Move toward free market system by countries in Latin America, Asia, Eastern Europe

Large Emerging Markets (China, India, Argentina, Brazil, South Korea)

©Times Mirror Higher Education Group, Inc., IRWIN

Canada’s Exports and Imports of Goods

Source: Statistics Canada

1992 1993 1994 1995 1996 1997$ millions

Exports 163,463.5 190,383.4 227,892.0 264,937.9 280,566.3 301,101.1United States 123,376.9 149,006.2 180,836.9 205,852.8 221,854.7 243,361.4Japan 8,253.7 9,140.9 10,733.7 13,069.9 12,490.3 12,053.3European Union 12,776.5 12,066.4 12,871.3 17,914.7 17,370.0 16,676.1Other OECD 3,178.6 3,380.2 4,640.4 4,839.5 5,403.2 7,912.4Other countries 15,877.8 16,789.7 18,809.8 23,260.9 23,448.1 21,098.0

Imports 154,429.6 177,593.3 208,590.5 231,206.1 239,576.9 276,846.1United States 110,378.5 130,714.3 156,342.0 173,725.9 181,893.1 210,802.2Japan 8,913.3 8,477.4 8,318.0 8,429.9 7,235.7 8,703.1European Union 13,923.2 14,026.4 16,420.3 20,349.0 20,617.2 24,152.2Other OECD 4,615.8 4,683.9 7,376.6 7,939.3 8,950.7 11,339.8Other countries 16,598.7 19,691.1 20,133.5 20,762.1 20,880.2 21,848.8

Balance 9,033.9 12,790.1 19,301.5 33,731.8 40,989.4 24,255.0United States 12,998.4 18,291.9 24,494.9 32,126.9 39,961.6 32,559.2Japan -659.6 663.5 2,415.7 4,640.0 5,254.6 3,350.2European Union -1,146.7 -1,960.0 -3,549.0 -2,434.3 -3,247.2 -7,476.1Other OECD -1,437.2 -1,303.7 -2,736.2 -3,099.8 -3,547.5 -3,427.4Other countries -720.9 -2,901.4 -1,323.7 2,498.8 2,567.9 -750.8

Canada’s Exports of Goods by Product Category

Product Category 1993 1994 1995 1996 1997

$ millions

Automotive products 48,609.0 57,608.3 62,878.5 63,357.2 70,056.8

Machinery and equipment 36,847.9 46,571.4 56,704.5 62,241.0 67,982.6

Industrial goods and materials 35,172.3 42,386.6 50,619.6 52,086.5 55,601.7

Forestry products 23,519.0 28,912.9 36,875.1 34,587.4 34,886.1

Energy products 17,789.4 19,175.6 20,296.4 25,558.3 26,819.6

Agricultural and fishing products 16,394.5 18,876.6 20,984.0 24,436.6 24,704.5

Other consumer goods 5,607.9 7,101.8 8,306.7 9,497.4 10,649.6

Other goods 6,443.4 7,258.8 8,273.1 8,801.9 10,400.2

Total 190,383.4 227,892.0 264,937.9 280,566.3 301,101.1


Canada’s Imports of Goods by Product Category

Product Category 1993 1994 1995 1996 1997

$ millions

Machinery and equipment 53,095.70 65,717.30 75,646.70 76,612.80 91,202.6

Automotive products 39,943.90 47,835.10 50,100.20 51,379.20 60,630.1

Industrial goods and materials 32,162.10 39,186.70 45,574.40 46,507.70 54,369.6

Other consumer goods 21,368.00 23,441.30 25,546.80 25,838.10 29,588.1

Agricultural and fishing products 11,013.50 12,577.50 13,374.90 14,117.40 15,578.3

Energy products 6,968.60 6,959.60 7,250.30 9,581.30 10,603.3

Forestry products 1,566.30 1,810.10 2,038.20 1,913.10 2,372.9

Other goods 11,475.20 11,062.90 11,674.60 13,627.30 12,501.20

Total 177,593.30 208,590.50 231,206.10 239,576.90 276,846.1


Elements of the (International) Marketing Mix

Product

Price

Promotion

Distribution

The International Marketing Task

7

Political/legalforces

Economicforces

1

2

Environmentaluncontrollablescountry market A

Environmentaluncontrollablescountrymarket B

Environmentaluncontrollablescountrymarket C

Competitivestructure Competitive

Forces

Level of Technology

Price Product

Promotion Channels of distribution

Geography and

Infrastructure

Foreign environment(uncontrollable)

Structure ofdistribution

Economic climate

Cultural forces

3

45

6

7Political/

legalforces

Domestic environment(uncontrollable)

(controllable)


Self-Reference Criterion (SRC)

Unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions.

Impedes the ability a to assess a foreign market appropriately.

Cultural misunderstandings: Two parties react to the values of their own SRC.

Phases of International Marketing Involvement

No direct foreign marketing

Infrequent foreign marketing

Regular foreign marketing

International marketing

Global marketing

International Marketing Concepts

Domestic Market Extension (Ethnocentric)

Multi-Domestic Market (Polycentric)

Global Marketing (Regio/Geocentric)

Concept EPRG Schema


Adaptation vs. Standardization

Product FeaturesPackagingBrand NamePricingBrand PositioningAdvertising AppealAdvertising MediaChannels of Distribution

Being Globally Aware

To be Globally Aware is to be:

Tolerant of Cultural Differences

Objective

Knowledgeable of:CulturesHistoryWorld Market PotentialsGlobal Economic and Social Trends


The Global Marketing Environment

Theory of Comparative AdvantageBalance of PaymentsForces Driving GlobalizationForces Restraining GlobalizationWorld Trade Organization (WTO)Trade BarriersInternational Strategic AlliancesInternational Mergers and Acquisitions

Theory of Comparative Advantage

Adam Smith: Principle of Absolute AdvantageDavid Ricardo: Principle of Comparative AdvantageFactors of production (factor endowment)Domestic exchange ratios (different)World market exchange ratioDifference between domestic and world market exchange ratio determines country’s patterns of specialization and international tradeInternational trade is not a “zero-sum game”.

Balance of Payments

... the system of accounts that records a nation’s international economic transactions

Double-entry bookkeeping system (credits and debits offset each other)

3 Accounts:Current Account (trade in goods and services)

Capital Account (investment, capital movements)

Official Reserves Account

Forces Driving Globalization

Global Market NeedsConvergence of TechnologyCommunications / MediaInternational Mobility Transportation InfrastructureCosts (R&D, marketing, etc.)Leverage

Experience TransferSystems TransferEconomies of ScaleResource UtilizationStrategy

Forces Restraining Globalization

Market Differences

History

Management Myopia

Organizational Culture

Barriers to Entry

World Trade Organization (WTO)

Established: January 1, 1995Successor to the GATTCreated by: Uruguay Round negotiations (1986-94)Membership: 132 countries (as of Sept. 1997)Location: Geneva

WTO Objectives:Administering WTO trade agreementsForum for trade negotiationsHandling trade disputesMonitoring national trade policiesTechnical assistance and training for developing countriesCooperation with other international organizations (UN, IMF, WB)

Trade Barriers

Tariffs (Duties)Government-imposed taxes on imported goods

Objectives:

Generate revenues

Discourage imports

Non-Tariff BarriersObjective:

Discourage imports

Types of Non-Tariff Barriers (1)

Specific Limitations on Trade:QuotasImport licensing requirementsProportion restrictions of foreign to domestic goods (local content requirements)Minimum import price limitsEmbargoes

Customs and Administrative Entry Procedures:Valuation systemsAntidumping practicesTariff classificationsDocumentation requirementsFees

Standards:Standard disparitiesIntergovernmental acceptances of testing methods and standardsPackaging, labeling, marking standards

Types of Non-Tariff Barriers (2)

Government Participation in Trade:Government procurement policiesExport subsidiesCountervailing dutiesDomestic assistance programs

Charges on imports:Prior import deposit subsidiesAdministrative feesSpecial supplementary dutiesImport credit discriminationsVariable leviesBorder taxes

Others:Voluntary export restraintsOrderly marketing agreements

SOURCE: A.D. Cao, “Nontariff Barriers to U.S. Manufactured Exports,” The Columbia Journal of World Business, Summer 1980, P.94.

International Strategic Alliances

Keiretsu (Japan)Chaebol (South Korea)Strategic Partnership / Joint VentureConsortium

Objectives of International Strategic Alliances:Pool resourcesShare expertiseAchieve synergiesReach “critical mass”Reduce competition

International Mergers and Acquisitions

Objectives:

Enter foreign market rapidlyTake over brand names“Buy” market shareAcquire knowledgeBuy into distribution networksAchieve economies of scaleReduce competition

Toyota’s Keiretsu

Toyota has a typical Keiretsu family with financial ties to its most important suppliers. Some of those companies, with the percentage of each that Toyota owns:

Lighting Koito Mfg. 19.0 %Rubber Toyoda Gosel 41.4Disc Brakes Akebona 13.9Transmissions, clutches, brakes Aisin Seiki 22.0Clocks Jeco 34.0Electronics Nippondenso 23.6Seat belts, switches Tokai Rika 28.2Steel Aichi Steel Works 21.0Upholstery material Kyowa Leather 33.5Door sashes, molding Shiroki 13.2Painting Trinity 30.2Mufflers Futaba Industrial 13.2

SOURCE: Adapted from “Japan: All in the Family,” Newsweek, June 10, 1991, p 38.

Ford’s Keiretsu

VEHICLE ASSEMBLYCompany Country Percent Equity

Mazda Japan 25%Kia Motors Korea 10%Aston Martin Lagonda Britain 75%Autolatina Brazil-Argentina 49%Iveco Ford Truck Britain 48%

PARTS PRODUCTIONCompany Country Component Percent Equity

Cummins U.S. Engines 10%Excel Industries U.S. Windows 40%Decoma International Canada Body Parts, Wheels 49%

SOURCE: Adapted from “Learning from Japan,” Business Week, January 27, 1992, p. 55.

Ford’s Keiretsu

Financial Services

Through seven wholly owned units, Ford extends consumer and commercial credit. It issues car loans, mortgages, and credit cards, does industrial leases and finances dealer purchases of cars.

MarketingOwns 49 percent of Hertz.Hertz and other car rentals are among Ford’s largest customers.

Research and DevelopmentFord belongs to eight consortiums that do research into environmental issues, better engineering techniques, materials, electric car batteries, and the Chrysler and General Motors “precompetitive research” on batteries and materials.

SOURCE: Adapted from “Learning from Japan,” Business Week, January 27, 1992, p. 55.

Cultural Aspects of International Marketing

World Population Trends

International Trade Flows

Elements of Culture

Taboos

Cultural Differences in Lifestyles

Cultural Differences in Social Life

Language and Cultural Differences

World Population and Life Expectancy by Major Areas

World 2,516.0 4,855 5,479 7,204.0 63.9Africa 222.0 554 682 1,148.0 52.0Asia 1,378.0 2,842 3,233 4,240.0 62.7North America 166.0 264 283 311.0 75.6Latin America 166.0 400 458 629.0 66.7Europe (including USSR*) 573.0 770 797 843.0 72.2Oceania 13.0 25 27 34.0 71.3

1950 1985 1992 2010 Life(millions) (millions) (millions) (millions) Expectancy

1985 (years)

*Estimate includes all republics of former USSR.

SOURCE: World Population Prospects (New York: United Nations, 1990), pp. 22-28 and 1992; Demographic Yearbook (New York: United Nations, 1994), p.103.

The Triad: Trade Between the United States and Canada, the EU, and Japan ($ billions, 1995)

EUROPEANCOMMUNITY

UNITED STATES & CANADA

JAPAN

For additional figures see: “Indicators of Market Size for 115 Countries I” Crossborder Monitor, August, 1997, pp.4-8

136.9 48.9

139.3 70.8

75.9

127.2

Leading Trading Countries($ billions, 1995)

U.S.A. $582.5 $770.9 $1,353.4Germany 509.3 443.8 953.1Japan 443.0 335.9 778.9United Kingdom 239.4 262.5 501.9Italy 231.7 204.3 436.0Netherlands 58.6 138.5 197.1Canada 190.2 167.4 357.6Belgium/Luxembourg 128.3 166.3 294.6Hong Kong 173.5 192.8 366.3China 148.8 132.0 280.8Spain 91.6 114.8 206.4South Korea 125.4 135.2 260.6Taiwan 111.8 103.7 215.5Switzerland 81.4 80.1 161.5Singapore 118.2 124.4 242.6

* Order determined by total dollar value of exports and imports.

For additional trade data see: "Indicators of Market Size for 115 Countries,Part I," Crossborder Monitor, August 27, 1997, pp. 4-8.

Country* Exports Imports Total

Elements of Culture

Material CultureTechnologyEconomics

Social InstitutionsSocial OrganizationEducationPolitical Structures

Belief SystemsAesthetics

Graphic and Plastic ArtsFolkloreMusic, Drama, and Dance

Language

Examples of Taboos in Different CulturesNever touch the head of a Thai or pass an object over it.(The head is considered sacred in Thailand.)

Avoid using triangular shapes in Hong Kong, Korea, and Taiwan. (The triangle is considered a negative shape.)

Red represents witchcraft and death in many African countries. Red is a positive color in Denmark.

The number 7 is considered bad luck in Kenya, but good luck in the Czech Republic and has a magical connotation in Benin, Africa.

The number 10 is bad luck in Korea.

The number 4 means death in Japan.SOURCE: Business America, July 12, 1993

Cultural Differences between Japanese and North American Lifestyles

Clear expression of joy and sorrow

Unequivocal expression of “Yes/No”

Strong self-assertion

Strong personality

Direct and efficient negotiating

Priority of self-interest

Ambiguous expression of Joy/Sorrow

Equivocal expression of “Yes/No”

Weak self-assertion

Weak personality

Extensive and inefficient negotiating

Priority of harmony with others

Japanese:A Culture of Self-restraint

North Americans:A Culture of Self-expression

SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone Tomorrow,” Tokyo Business, February 1995, p.50.

Cultural Differences between Japanese and North Americans: Social Life

Japanese Society:“In the Same Boat” Concept

North American Society:Dignity of Individuals

Dignity of individuals

Individual work ethic

Great individual freedom

An open and transparent society

Multi-cultural society

A society excelling in creativity and versatility

Individual decisions

Human relations oriented

Dependence on the group

Lack of individual freedom

A closed society, lacking in transparency

Mono-cultural society

An orderly and uniform society

Dependence on consensus

SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone Tomorrow,” Tokyo Business, February 1995, p.50.

Language and Cultural Differences (1)

Cracking an international market is a goal of most growing corporations. It shouldn't be that hard, yet even the big multi-nationals run into trouble because of language and cultural differences. For example...

Scandinavian vacuum manufacturer Electrolux used the following in an American ad campaign: "Nothing sucks like an Electrolux."

In Taiwan, the translation of the Pepsi slogan "Come alive with the Pepsi Generation" came out as "Pepsi will bring your ancestors back from the dead."


The name Coca-Cola in China was first rendered as Ke-kou-ke-la. Unfortunately, the company did not discover until after thousands of signs had been printed that the phrase means "bite the wax tadpole” or "female horse stuffed with wax" depending on the dialect. Coke then researched 40,000 Chinese characters and found a close phonetic equivalent, "ko-kou-ko-le," which can be loosely translated as "happiness in the mouth.”

Also in Chinese, the Kentucky Fried Chicken slogan "finger-lickin’ good" came out as "eat your fingers off.”

Colgate introduced a toothpaste in France called Cue, the name of a notorious porno mag.


When Parker Pen marketed a ballpoint pen in Mexico, its ads were supposed to say "It won't leak in your pocket and embarrass you.” However, the company mistakenly thought the Spanish word "embarazar” meant embarrass. Instead the ads said that "It wont leak in your pocket and make you pregnant.”

Chicken-man Frank Perdue's slogan, "It takes a tough man to make a tender chicken," got terribly mangled in another Spanish translation. A photo of Perdue with one of his birds appeared on billboards all over Mexico with a caption that explained "It takes a hard man to make a chicken aroused."


The American slogan for Salem cigarettes, "Salem -Feeling Free," got translated in the Japanese market into "When smoking Salem, you feel so refreshed that your mind seems to be free and empty.”

In Italy, a campaign for Schweppes Tonic Water translated the name into Schweppes Toilet Water.

Hunt-Wesson introduced its Big John products in French Canada as Gros Jos before finding out that the phrase, in slang, means "big breasts.” In this case, however, the name problem did not have a noticeable effect on sales.


When General Motors introduced the Chevy Nova in South America, it was apparently unaware that "no va" means "it won't go." After the company figured out why it wasn't selling any cars, it renamed the car in its Spanish markets to the Caribe.

Ford had a similar problem in Brazil when the Pinto flopped. The company found out that Pinto was Brazilian slang for "tiny male genitals". Ford pried all the nameplates off and substituted Corcel, which means horse.

Business Practices and Customs in International Marketing

Cultural Adaptation

Contextual Background of Various Countries

Cultural Differences between Japanese and North American Business

Ethics and International Marketing

Corrupt Business Practices

Cultural Adaptation

Cultural ImperativesCultural Imperatives

Cultural AdiaphoraCultural Adiaphora

Cultural ExclusivesCultural Exclusives

Contextual Background of Various Countries

High Context

(Implicit)Japanese

Arabian

Latin American

Spanish

Italian

English (UK)French

North American (US)

Scandinavian

German

SwissLow Context

(Explicit)

Cultural Differences between Japanese and North American Business (1)

Game concept: Business is a game in pursuit of profits under the rules of laws and contracts

Efficiency-oriented

Approximate accuracy, simplicity, and quickness

Quantity-oriented

Short-term performance evaluation

Japanese BusinessNorth American Business

Mutual trust-oriented business: business is based on trusting relationship among people rather than the rules of game

Highly precision-oriented

Perfectionism

Quality-oriented

Mid- to long-term evaluation

SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,” Tokyo Business, February 1995, p.51.

Cultural Differences between Japanese and North American Business (2)

Top-down management

Low mutual dependence between employers and employees

Control of business by stockholders and management

Easy layoffs and dismissals of employees, and selling of businesses

Limited loyalty and incentive-oriented work ethics

Bottom-up management

High mutual dependence between employers and employees

Joint management of business by employers and employees

High job security

Strong loyalty and fewer incentives

Japanese BusinessNorth American Business

SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,” Tokyo Business, February 1995, p.51

Three Ethical Principles

Utilitarian ethics Does the action optimize the "common good" or benefits of all constituencies?

Rights of the parties Does the action respect the rights of the individuals involved?

Justice or fairness Does the action respect the canons of justice or fairness to all parties involved?

Principle Question

Incorporating Ethical and Social Responsibility Issues into Multinational Business Decisions

Does the decision efficiently optimize the common good or benefits of:

Society?CultureOrderJustice“The good life”Other

The Individual?FreedomHealth and welfareSelf-realizationHuman dignityOpportunityOther

The Business firm?StockholdersManagementProfitsGrowthOther

The Economy?Economic growthAllocation of resourcesProduction and distribution of goods and servicesOther

Are there critical factors that justify suboptimizing these goals and satisfactions?

Does the decision respect the rights of individuals involved.

Reject decision

Are there critical factors that justify the abrogation of a right.

Does the corporate decision respect the canons of justice or fairness to all parties involved?

Rejectdecision

Are there critical factors that justify the violation of a canon of justice?

Rejectdecision

Accept decision

YESNO

YES

NO

YES YES

NO

NO

YES YES

NO

NO

Corrupt Business Practices

Bribery... money voluntarily offered by someone seeking an unlawful advantage

Subornation... large sum of money designed to entice an official to commit an illegal act

Lubrication... small sum of money or other gift presented to a low-ranking official for the purpose of facilitating or expediting the normal, lawful performance of a duty

Extortion... payments extracted by someone in authority from a company seeking only what it is lawfully entitled to

Globalization & Market Entry Strategies

Multinational vs. Global Orientation

Benefits of Global Orientation

Organizational Structure for Global Marketing

The International Marketing Planning Process

Alternative Market Entry Strategies

Timing of Multiple Market Entries

Multinational vs. Global Orientation

Multinational GlobalProduct Design

Product Life Cycle

View of Customer

Market Segmentation

Production

Pricing

Distribution

Promotion

Benefits of Global Orientation

Economies of Scale

Transfer of Experience and Know-How

Uniform Global Image

Control and Coordination

Sample Organizational Structure for Global Marketing

Company President

Director:Passenger car

marketing

Director:Truck

marketing

Research

Vice President Marketing

Research

ManagerN. Americandistribution

ManagerAsian

distribution

ManagerEuropean

distribution

ManagerAsian

distribution

ManagerS.Americandistribution

ManagerN. Americandistribution

Adv. Sales Adv. Sales Adv. Sales Adv. Sales Adv. Sales Adv. Sales

The International Marketing Planning Process (1)

Information derived from each phase, market research, and evaluation of program performance

Phase 1Preliminary analysis and

screening: Matching company/country needs

Phase 2Adapting the

marketing mix to target markets

Phase 3Developing the

marketing plan

Phase 4Implemen-tation and

control

Environmental uncontrol-lables, company character,

and screening criteria

Matching mix requirements

Marketing plandevelopment

Implementation, evaluation, and

control

The International Marketing Planning Process (2)Phase 1 Phase 2 Phase 3 Phase 4

Company CharacterPhilosophyObjectivesResourcesManagement styleOrganizationFinancial limitationsManagement and marketing skillsProductsOther

Home Country ConstraintsPoliticalLegalEconomicOther

Host Country(s) ConstraintsEconomic Political/legalCompetitiveLevel of technologyCultureStructures of distributionGeography

ProductAdaptationBrand nameFeaturesPackagingServiceWarrantyStyle

PriceCreditDiscounts

PromotionAdvertisingPersonal sellingMediaMessageSales promotion

DistributionLogisticsChannels

Situation analysisObjectives and goalsStrategy and tacticsBudgetsAction programs

ObjectivesStandardsAssign responsibilityMeasure performanceCorrect for error

Alternative Market Entry Strategies

Exporting

Licensing

Franchising

Joint Ventures

Consortia

Manufacturing in Target Markets

Timing of Multiple Market Entries

“Waterfall” Approach “Shower” Approach

High-Income Countries

Middle-Income Countries

Low-Income Countries

Time

Per

Cap

ita G

NP

Product

High-Income Countries

Middle-Income Countries

Low-Income Countries

Product

International Marketing Research

Steps in the Marketing Research Process

Units of Analysis in Marketing Research

Use of Secondary Data

Collection of Primary Data

Methods of Primary Data Collection

Problems in International Survey Research

Steps in the Marketing Research Process

Define the research problem and establish research objectives

Determine the sources of information to fulfill the research objectives

Gather the relevant data from secondary and/or primary sources

Analyze, interpret, and present the results

Units of Analysis in Marketing Research

Customer (preferences, price sensitivity, ...)

Product Concept (acceptance, ease of use, ...)

Brand (image, competitive position , ...)

Distributor (retailer performance, ...)

Medium (reach, audience characteristics, ...)

Ad (Campaign) (associations, message retention, ...)

Use of Secondary Data

Availability of Data

Recency of Data

Reliability of Data

Comparability of Data

Validating Secondary Data

Collection of Primary Data

Quantitative vs. Qualitative Research

Sampling

Reliability & Validity

Incentives for Respondents

Cross-Sectional vs. Longitudinal (Panel)

Methods of Primary Data Collection Survey

Face-to-FaceMailTelephoneE-mail or WWWCombinations

ObservationBehavioral (Field or Lab)Scanner Data

ExperimentLabField

Semi-Structured InterviewsDepth Interview (Individual)Focus Group

Problems in International Survey Research

Ability to Communicate Opinions

Unwillingness to Respond

Sampling in Field Surveys

Language and ComprehensionBack Translation

Parallel Translation

Decentering

International Product Management

Product Innovation

The Product Development Process

Product Components

Types of Product Quality Cues

Country-of-Origin Effects on Product Quality Judgments and Preferences

Current Research Findings

Characteristics of an Innovation

Relative AdvantageRelative Advantage

CompatibilityCompatibility

ComplexityComplexity

TrialabilityTrialability

ObservabilityObservability

Innovations: Degree of NewnessC

ontinuous

Line Extension (new flavors, sizes, packages, ...)

Minor Product Modification (annual new car models, new fashions)

Major Product Modifications (first compact cars, color television)

New Technology (inventions of computer, jet aircraft)

Discontinuous

The Product Development Process:North America vs. Japan

Market Research

Engineering

Supplier Pricing

If cost too high return to design phase

Manufacturing

Periodic cost reduction

Cost

Product Characteristics

Design

NORTH AMERICA

Product Characteristics

Planned selling price less desired profit

Market Research

TARGET COST

Design Engineering Supplier Price

Target costs for each component forces marketers, designers, and engineers from all departments and suppliers to negotiate tradeoffs

Manufacturing

Continuous Cost Reduction

JAPAN

SOURCE: Adapted from Ford S.Worthy, “Japan’s Smart Secret Weapon,” Fortune, August 12, 1991, p.73.

Product Component Model

Repair and maintenance

SUPPORT SERVICESCOMPONENT

CORECOMPONENT

Installation

Instructions

Other relatedservices

Deliveries

Warranty

Spare parts

Legal

Trademark

Brand name

Legal

Product platform

Design features

Functional features

Legal

PACKAGINGCOMPONENT

Price

Quality

Package

Styling

Types of Product Quality Cues

PRODUCT QUALITY CUES

INTRINSIC CUES EXTRINSIC CUES(PHYSICAL ATTRIBUTES) (NON-PHYSICAL ATTRIBUTES)

- BRAND- COUNTRY OF ORIGIN- PRICE- STORE IMAGE

PRODUCT-

SPECIFIC

PHYSICAL

ATTRIBUTES - WARRANTY

Country-of-Origin Effects

Types

Cognitive

Affective

Normative

Relevant Theories

Simplified Information Processing

Information Integration

Attitude

Stereotyping

Schemas

Categorization

Inference

Factors Moderating Country-of-Origin Effects

Product Familiarity

Involvement

Ethnocentrism

Variability of Competence

Technological Complexity

Availability of Other Product Information

Communicating a Product’s Country-of-Origin

“Made in” Label

Company Name

Brand Name

Brand Logo

Package Design

Advertising

Foreign Manufacturing

Binational (“hybrid”) products

.... products for which the country of production (COP) is different from the brand’s country of origin.

Selected Empirical Findings

Alpine Ski Study

CD-Player Experiment

Mercedes-Benz Study

Alpine Ski Study

Experimental Design

Brands

Tyrolia Elan Rossignol Voelkl

Austria y1 y5 y9 y13

Slovenia y2 y6 y10 y14

CountriesFrance y3 y7 y11 y15

Germany y4 y8 y12 y16

Alpine Ski Study: Strength of Brand-Country Association

Scale: 1 = very weak association , 6 = very strong association

Sample: 284 Austrian skiers

Häubl and Elrod (1999)

5.05

4.43

5.25

4.82

4 4.2 4.4 4.6 4.8 5 5.2 5.4

Elan-Slovenia

Voelkl-Germany

Rossignol-France

Tyrolia-Austria

Alpine Ski Study: Mean Quality Ratings


Scale: 1 = very low quality , 6 = very high quality

Mean Quality Rating

3 5 3 5

Slovenia

France

Germany

Austria

CO

P

Voelkl Elan Tyrolia Rossignol

3 5 3 5


Alpine Ski Study: Mean Quality Ratings Controlling for COP Effects


Scale: 1 = very low quality , 6 = very high quality

4 5

Mean Quality Rating Controlling for COP Effects

Slovenia

France

Germany

Austria

CO

P

Voelkl Elan Tyrolia Rossignol

4 5 4 54 5


Alpine Ski Study: Effects on Quality Judgments

Elan-Slovenia

Voelkl-Germany

Rossignol-France

Tyrolia-Austria

Congruity Effects:

Slovenia

Germany

France

Austria

COP Main Effects:

Elan

Voelkl

Rossignol

Tyrolia

Brand Main Effects:

Standard Deviation

0.2 0.6 1.00.4 0.80.0

Mean

-0.6 -0.2 0.2 0.6 1.0-0.4 0.4 0.80.0


Estimates obtained from Random Coefficient Model.


AiwaDenonJVCPioneerSonyTechnics

“Made in Japan” vs. “Made in Singapore”

Brands:



Technicsmade inJapan

Technicsmade in

Singapore

Aiwamade in

Singapore

Aiwamade inJapan

JVCmade in

Singapore

JVCmade inJapan

Denonmade inJapan

Denonmade in

Singapore

Pioneermade inJapan

Pioneermade in

Singapore

Sonymade in

Singapore

Sonymade inJapan

CD-Player Experiment: Impact of Country of Production on Perceived Sound Quality

Scale: 0 = extremely poor , 200 = extremely high

130.2

152.7

146

151.6

159.9

149.5

129.7

148.9

144.6

149.2

154.6

142.4

120 130 140 150 160 170

Aiwa

Denon

JVC

Pioneer

Sony

Technics

JapanSingapore


*

*

Difference not significant at p = .05.

*

Sample: 219 Austrian Consumers

Häubl and Otter (1999)

CD-Player Experiment: Impact of Country of Production on Expected Durability

126.3

149.5

143.1

152.8

159.6

141.2

123.1

141.1

140.3

146.4

150.6

134.2

120 130 140 150 160 170

Aiwa

Denon

JVC

Pioneer

Sony

Technics

JapanSingapore


Scale: 0 = extremely poor , 200 = extremely high

*

Difference not significant at p = .05.

*

Sample: 219 Austrian Consumers

Häubl and Otter (1999)

Mercedes-Benz Study

Samples: 1,640 German New-Car Buyers1,264 French New-Car Buyers

Countries of Production:

GermanyUSAGreat BritainCzech RepublicSouth Korea

Mercedes-Benz Study: ConstructsHäubl (1996)

1

EVALUATION OFCARS MADE INTHE COUNTRY

COGNITIVEEVALUATIONOF COUNTRY 3

OF COUNTRY

AFFECTIVEEVALUATION

1 OF COUNTRY

EVALUATION OFCOUNTRY'S

CAR INDUSTRY2

4

EVALUATION OFTHE MODEL'SAPPEARANCE

2BRAND

IMAGE 6

ATTITUDE

THE MODELTOWARD

7BEHAVIORAL

INTENTION

5

EVALUATION OFTHE MODEL'S

FEATURES

Mercedes-Benz Study: Path Coefficients

OF COUNTRY

1

2

3

AFFECTIVEEVALUATION

1

2

COGNITIVE

EVALUATION OF

EVALUATION OFEVALUATION

COUNTRY'S

CARS MADE INOF COUNTRY

CAR INDUSTRY

THE COUNTRY

BRAND

IMAGE

4

5

6 7

EVALUATION OF

EVALUATION OF

ATTITUDE

THE MODEL'S

THE MODEL'S

THE MODEL

BEHAVIORAL

INTENTION

APPEARANCE

FEATURES

TOWARD

CFI = 0.951

NFI = 0.930

0.730

0.691 0.868

0.104

0.065

0.033

0.130

0.015

0.2180.132

0.329

0.228

0.533

0.327

0.322 0.393

OF COUNTRY

0.457

Häubl (1996)

International Distribution Strategy

• Distribution Issues

• Functions Performed by Intermediaries

• International Channel-of-Distribution Alternatives

• International Retail Patterns

• Factors Affecting Channel Choice: The 6 Cs of International Channel Strategy

Distribution Issues

• Intermediaries

• Stages in the Channel of Distribution

• Control over Retail Price

• Channel Power

• Agent Middlemen vs. Merchant Middlemen

• Disintermediation

Functions Performed by Intermediaries

• Inventory Financing

• Storage

• Assistance with Sales Promotions

• Merchandise Returns

• Provide Product Information and Assistance to Buyers

• Collect Data about Buyers

International Channel-of-Distribution Alternatives

Home Country

Domestic producer or marketer sells to or through

Open distribution via domestic wholesale middlemen

Export management company or company sales force

Exporter ImporterForeign agent or merchant wholesalers

Foreign retailers

Foreign consumer

Foreign Country

International Retail Patterns

Retail Outlets Population EmployeesCountry (000) per Outlet per OutletArgentina 787.0 40 3Canada 134.5 185 9South Korea 716.8 60 2Australia 160.2 100 6India 3,140.0 259 --Malaysia 148.3 124 9Mexico 825.0 109 3Philippines 118.5 531 29U.S.A. 1,872.5 228 11Japan 1,821.0 68 3

SOURCES: International Marketing Data and Statistics, 18th ed. (London: Euromonitor Publications, 1994), and "Indicators of Market Size for 117 Countries," Crossborder Monitor, August 31, 1994.

Factors Affecting Channel Choice: The “6 Cs” of International Channel Strategy

• Cost

• Capital Requirement

• Control

• Coverage

• Character

• Continuity

International Business-to-Business Marketing and Personal Selling

• Characteristics of Business-to-Business Markets

• Business-to-Business Marketing: Product Quality

• International Personal Selling: Cultural Skills

Characteristics of Business-to-Business Markets

• Small Number of Buyers

• Group Decision Making

• Small Number of Transactions

• Relationship Marketing

• Service

• Importance of Personal Selling

• Importance of Trade Shows

Business-to-Business Marketing:Product Quality

• Conformance to Standards (e.g., ISO 9000)

• Market Perceived Quality

• Quality and Competition

• Quality Improvements:

Incremental Improvements

Technological Improvements

International Personal Selling:Cultural Skills

• Communicate Respect for People and their Culture

• Tolerate Ambiguity

• Display Empathy

• Be Nonjudgmental

• Recognize and Control Your SRC

International Advertising andThe Internet & International Marketing

• Creative Challenges of International Advertising

• Standardization vs. Adaptation in International Advertising

• Internet & International Marketing: Facets of Interactivity

• Internet & International Marketing: Advantages & Disadvantages

Creative Challenges of International Advertising

Legal and Tax ConsiderationsLegal and Tax Considerations

Language LimitationsLanguage Limitations

Cultural DiversityCultural Diversity

Media LimitationsMedia Limitations

Production and Cost LimitationsProduction and Cost Limitations

Standardization vs. Adaptation in International Advertising

• Creative Strategy

• Message Appeal

• Ad Execution

• Media Mix

• Agency

Interactive Media & International Marketing

• Rapid growth of the Internet (WWW)

• International adoption of the WWW

• Corporate sites

• WWW advertising

• Online shopping

• Common media platform for all countries

• Netcasting

• Convergence of media

Internet & International Marketing: Facets of Interactivity (1)

• Initiation of information exchange

• Control over the sequence, pacing, and presentation format of communication process

• Degree to which the information content may be customized for individual customers

• Receiver’s ability to organize information content

• Quantity of information available

• Quality / richness of information cues

Internet & International Marketing: Facets of Interactivity (2)

• Level of sophistication of information agents

• Degree to which the environment facilitates feedback

• Ability to simulate consumption or usage

• Degree of playfulness

• Amount of socialization among (potential) customers

• Ease of access to other relevant information sources

Internet & International Marketing: Advantages

• Instant world-wide presence

• Low barriers to entry

• Market segmentation

• Information on demand / audience self-selection

• Convenience for customers (24 hrs. a day)

• Ability to provide vast amounts of information

• Customer feedback / measuring ad effectiveness

• “Level playing field”

Internet & International Marketing: Disadvantages

• Source credibility

• Limited access to certain segments

• Language

• Presentation of product information (e.g., prices)

• No physical interaction

• Security of transactions

• Accountability

• Possibility of technical problems

the scope and challenge of international marketing · the international marketing task 7...

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