Chapter 16 - Marketing Internationally International Business by Ball, McCulloch, Frantz, Geringer, and Minor

Chapter Objectives Explain why international marketing managers may wish to standardize the marketing mix regionally or worldwide Comprehend why it is often impossible to standardize the marketing mix worldwide Explain why consumer product generally require greater modification for international sales than industrial products or services Understand how the environmental forces affect the marketing mix Discuss the distribution strategies of international marketers

The Marketing Mix Standardization, Adaptation, or Completely Different? A standardized corporate visual identity (firm name, slogan, and graphics) can help project a consistent image for a multinational with publics dispersed across geographic locales.

The Marketing Mix Standardization, Adaptation, or Completely Different? Benefits from standardization of the marketing mix include Lower costs. Easier control and coordination from headquarters. Reduction of the time spent preparing the marketing plan.

Product Strategies The product is the central focus of the marketing mix. In formulating product strategies, international marketing managers must remember that the product is more than a physical object.

Product Strategies The Total Product What the customer buys, including the physical product, brand name, accessories, after-sales service, warranty, instructions for use, company image, and package.

Product Strategies Type of Product Industrial Products Many industrial products can be sold unchanged worldwide (ie. transistors). If product changes are required, they may be cosmetic (ie. printing instructions in another language)

Product Strategies Type of Product Industrial Products (cont’d) Drastic modifications in the physical product may be necessary in developing countries because of a tendency to overload equipment. slight maintenance.

Product Strategies Type of Product Industrial Products (cont’d) Products considered obsolete in advanced countries are frequently what developing countries need. Hand-operated cash registers Occasionally adaptations are necessary to meet local legal requirements Exhaust emissions

Product Strategies Type of Product Consumer Products Generally, consumer products require greater adaptation than do industrial products. However, some can be sold unchanged to certain market segments. Large automobiles, sporting equipment, and perfumes.

Product Strategies Type of Product Services The marketing of services, is similar to the marketing of industrial products. Services are easier to market globally compared to consumer products.

Product Strategies Foreign Environmental Forces Sociocultural Forces Dissimilar cultural patterns generally necessitate changes in food and other consumer goods. A perfectly good brand name may have to be scrapped because of its unfavorable connotations in another language. Sometimes a firm will not use a perfectly good name because someone has invented a story about its impropriety in foreign markets.

Product Strategies Foreign Environmental Forces Legal Forces Laws concerning pollution, consumer protection, and operator safety are being enacted rapidly in many parts of the world. These laws limit the marketer’s freedom to standardize the product mix internationally. Food and pharmaceuticals are especially influenced by laws concerning purity and labeling.

Product Strategies Foreign Environmental Forces Legal Forces (cont’d) Legal forces may prevent a worldwide firm from employing its brand name in all its overseas markets. In code law countries, a brand belongs to the person registering it first. To avoid this predicament, the firm must register its brand names in every country where it wants to use them or where it might use them in the future.

Product Strategies Foreign Environmental Forces Economic Forces The great disparity in income throughout the world is an important obstacle to worldwide product standardization. Many products from the industrialized countries are too expensive for consumers in developing countries. The firm must either simplify the product or produce a different, less costly one.

Product Strategies Foreign Environmental Forces Physical Forces Physical forces, such as climate and terrain, weigh against international product standardization. For example, Where the heat is intense, gasoline-driven machinery and automobiles must be fitted with larger radiators. High altitudes frequently require product alteration. Mountainous terrain implies high-cost highways, and so in the poorer countries, quality roads are nonexistent.

Promotional Strategies Is communication that secures understanding between a firm and its publics to bring about a favorable buying action and achieve long-lasting confidence in the firm and the product or service it provides.

Promotional Strategies Formulation of distinct promotional strategies is based on the combination of three alternatives Marketing the same physical product everywhere. Adapting the physical product for foreign markets. Designing a different physical product with (a) the same, (b) adapted, or (c) different messages.

Promotional Strategies Six commonly used promotional strategies Same product--same message Avon, Maidenform, and A.T. Cross follow this strategy. Same product--different message Honda’s campaign in America is different than in Brazil. Product adaptation--same message In Japan, Lever Brothers puts Lux soap in fancy boxes because much of it is sold for gifts.

Promotional Strategies Six most commonly used promotional strategies (cont’d) Product adaptation--message adaptation In Latin America, Tang is especially sweetened and promoted as a mealtime drink, but is less sweetened and promoted as a breakfast drink in the U.S. Different product--same message Product is produced in low cost plastic squeeze bottle for developing countries, but advertised the same in all markets. Different product for the same use--different message Welding torches rather than automatic welding machines are sold in developing countries faced with unemployment.

Promotional Strategies Advertising Paid, nonpersonal presentation of ideas, goods, or services by an identified sponsor. Among all the promotional mix elements, advertising is the one with the greatest similarities worldwide. Today, the major American agencies are all global, with wholly owned subsidiaries, joint ventures, and working agreements with local agencies.

Advertising Global and Regional Brands Reasons for increase in use of global or regional brands. Cost is most often cited. There is a better chance of obtaining one regional source to do high-quality work. The belief that a single image throughout the region is important. Establishment of regionalized organized organization where many functions are centralized. Global and regional satellite and cable television are becoming available.

Advertising Private Brands Private brands have become such serious competitors for manufacturers’ brands that they are responsible for a shift in power from manufacturers to retailers.

Advertising Availability of Media Satellite TV broadcasters are making it possible for programming networks to provide service to millions of households in dozens of countries. There is also more international print media available. Cinema advertising is heavily used in many parts of the world, as are billboards.

Advertising Internet Advertising Appealing factors of online advertising An affluent, reachable audience. Web contacts feature interactivity, which shrinks distance. The possibility exists of involving customers in determining which messages and information they receive. For some groups, the Internet may be among the best media choices.

Advertising Foreign Environmental Forces A basic cultural decision for the marketer is whether to position the product as foreign or local. The preferred position depends on the country, the product types, and the target market.

Advertising Foreign Environmental Forces Unfortunately for the advertiser, almost every language varies from one country to another. To avoid translation errors, the experienced advertising manager will use a back translation. plenty of illustrations with short copy.

Personal Selling Personal Selling The importance of personal selling compared to advertising depends to a great extent on The relative cost. The funds available. Media availability. The type of product sold.

Personal Selling Personal Selling and the Internet The Internet would seem to eliminate the need for personal selling, but some evidence suggests this may not be the case. Successful personal selling depends on establishing trust. Although the Internet makes communication easier, it may make building trust harder.

Sales Promotion Sales Promotion Provides the selling aids for the marketing function and includes such activities as the preparation of point-of-purchase displays, contests, premiums, trade show exhibits, cents-off offers, and coupons.

Sales Promotion Sociocultural and Economic Constraints Cultural and economic constraints make some sales promotions difficult to use. If a premium is to fulfill the objective of being a sales aid for the product, it must be meaningful to the purchaser. Sales promotion is generally not as sophisticated overseas as it is in the U.S.

Sales Promotion Sociocultural and Economic Constraints Two Unsuccessful Sales Promotions Hoover in the U.K. Pepsi-Cola in the Philippines

Public Relations Public Relations Various methods of communicating with the firm’s publics to secure a favorable impression. Positive public relations programs have been implemented by a number of major companies. Exxon, ITT International, IBM, Procter & Gamble, Warner-Lambert.

Pricing Strategies Pricing, a Controllable Variable To obtain the maximum benefits from pricing, management must regard it in the same manner as it does other controllable variables. That is, pricing is one of the marketing mix elements that can be varied to achieve the marketing objectives of the firm

Pricing Strategies Interaction between Marketing and Other Functional Areas The finance people want prices that are both profitable and conducive to a steady cash flow. Production supervisors want prices that create large sales volumes, which permit long production runs. The legal department worries about possible antitrust violations when different prices are set according to type of customer.

Pricing Strategies Interaction between Marketing and Other Functional Areas (cont’d) The tax people are concerned with the effects of prices on tax loads. The domestic sales manager wants export prices to be high enough to avoid having to company with parallel importing.

International Standardization Pricing for overseas markets is more complex because management must be concerned with two kinds of pricing. Foreign national pricing. Domestic pricing in another country. International pricing. Setting prices of goods for export for both unrelated and related firms.

Distribution Strategies In the international arena, marketing managers must concern themselves with two functions rather than one. Getting the products to foreign markets (exporting) Distributing the products within each market.

Distribution Strategies In making decisions on distribution, care must be taken to analyze the interdependence with other marketing mix variables. Channel decisions are critical These are long term decisions.

Distribution Strategies International Standardization Management would prefer to standardize distribution patterns internationally. However, two fundamental constraints exist. The variation in the availability of channel members among the firm’s markets. The inconsistency of the influence of the environmental forces.

Channel Selection Direct or Indirect Marketing The first decision that management must make is whether to use middlemen. Export sales may be consummated by local agents if Management believes this is politically expedient. The country’s laws demand it. Channel members are selected on the basis of their market coverage, cost, and susceptibility to company control.

Channel Selection Factors Influencing Channel Selection Market Characteristics Product Characteristics Company Characteristics Middlemen’s Characteristics