17 Marketing Internationally International Business by Ball, McCulloch, Frantz, Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill.

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2 17 Marketing Internationally International Business by Ball, McCulloch, Frantz, Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. This chapter covers: Differences between domestic and international marketing The marketing mix Distinguishing among products Product modification Product strategies Glocal advertising The effect of the internet on marketing Distribution strategies

3 Chapter Objectives  Understand why there are differences between domestic and international marketing  Explain why international marketing managers may wish to standardize the marketing mix regionally or worldwide and why it is often impossible to standardize the marketing mix worldwide  Appreciate the importance of distinguishing among the total product, the physical product, and the brand name  Explain why consumer products generally require greater modification for international sales than industrial products or services  Discuss the product strategies that can be formed from three product alternatives and three kinds of promotional messages  Explain “glocal” advertising strategies and the effect of the internet  Discuss the distribution strategies of international marketers 17-2

4 Marketing Marketers everywhere must Know their markets Develop products or services to satisfy customers’ needs Price the products or services so that they are readily available Make them available to the buyers Inform potential customers and persuade them to buy 17-3

5 Standardization, Adaptation, or Completely Different?  Management would prefer global standardization of the marketing mix, but seldom easy  Significant cost savings  Longer production runs  Standardized advertising, promotional materials, and sales training  Standardized corporate image  Standardized pricing strategies  Easier control and coordination  Reduction of preparation time 17-4

6 Product Strategies Central focus of marketing mix The total product includes Physical product Brand name Accessories After-sales service Warranty Instructions for use Company image Package 17-5

7 Types of Products Industrial Products Many can be sold unchanged worldwide (ie. transistors) If changes are required, they may be cosmetic (ie. printing instructions in another language) In developing countries problems with Overload equipment Maintenance Local legal requirements 17-6 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 Greater dissimilarity as you go down the economic strata

8 Types of Products Services The marketing of services, is similar to the marketing of industrial products. Services are easier to market globally compared to consumer products Laws and customs may force some changes 17-7

9 Foreign Environmental Forces Sociocultural Forces Dissimilar cultural patterns generally necessitate changes in food and other consumer goods May require Redesign of product Top-load versus front-load washers Change of brand names, labels, or colors Colors have different meanings Brand name has different meaning Translation of instructions or labels 17-8

10 Foreign Environmental Forces Legal Forces Laws concerning Pollution Consumer protection Operator safety Laws prohibiting classes of imports Food and pharmaceuticals influenced by laws concerning purity and labeling Legal forces may prevent use of brand name worldwide In some countries brand may be registered to someone else 17-9

11 Foreign Environmental Forces Economic Forces Great disparity in income throughout the world an obstacle to product standardization. Many products from the industrialized countries are too expensive for consumers in developing countries Must either simplify the product or produce a different, less costly one 17-10 Physical Forces Physical forces, such as climate and terrain, prevent international product standardization Heat High humidity Special packaging High altitudes Baking products and motors Rough roads

12 Promotional Strategies  Promotion 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 17-11

13 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 17-12

14 Six commonly used promotional strategies Same product--same message Avon, Maidenform 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 17-13 Product adaptation--message adaptation In Latin America, Tang is sweetened and promoted as a mealtime drink Different product--same message Product is produced in low cost plastic squeeze bottle for developing countries, but advertised the same Different product for the same use--different message Welding torches rather than automatic welding machines are sold in developing countries

15 The Promotion Mix Advertising Personal Selling Sales Promotion Public Relations Publicity 17-14

16 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 17-15

17 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 17-16

18 Top Ten Brands 2003 Coca-Cola Microsoft IBM GE Intel Nokia Disney McDonald’s Marlboro Mercedes 17-17

19 Advertising Branding Global, regional or national Managers may convert or use a combination Private brands Serious competitors Making alliances with international retailers Trend very common in Europe 17-18 Media Satellite TV expanding availability of media International print media available Reader’s digest has 48 foreign editions Cinema and billboards used heavily in Europe In developing countries, vehicles equipped with loudspeakers

20 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 17-19

21 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 17-20

22 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 17-21 The youth market The young often prefer American look and American label American fast-food also influences youth around the world Very much an international market segment MTV Europe runs unified English ads

23 Advertising Legal Forces Have pervasive influence on advertising Affect media availability Restrict kinds of products that can be advertised Some countries illegal to use comparative advertising Members of advertising industry have established self- regulatory bodies in many nations Some Middle Eastern countries restrict use of women in advertising and their style of dress 17-22

24 Advertising What should be the approach of the international advertising manager? Think globally, but act locally Neither purely global or purely local Pan regional approach Latin America Middle East Africa Atlantic 17-23

25 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 Manufacturers of industrial products rely on personal selling Consumer products overseas may use more personal selling in developing countries 17-24

26 Personal Selling  Personal Selling and the Internet  The Internet would seem to eliminate the need for personal selling, but 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 17-25 International Standardization An overseas sales force is similar to the home country in Organization Sales presentation Training methods Recruitment of salespeople in foreign countries can be difficult

27 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 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. 17-26

28 Public Relations Various methods of communicating with the firm’s publics to secure a favorable impression Marketing of the firm Improve image and overcome negative perceptions Can work through government agencies 17-27

29 Pricing Important consideration in formulating marketing strategy Major determinant of profit To obtain the maximum benefit from pricing management must see pricing is one of the marketing mix elements that can be varied to achieve the marketing objectives of the firm Pricing is made more complex by Interaction with the other functional areas Environmental forces 17-28

30 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 17-29 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 The marketer must address all these concerns and consider Legal forces Environmental forces

31 Standardizing Prices  Pricing for overseas markets is more complex because management must be concerned with  Foreign national pricing  Domestic pricing in another country  International pricing  Setting prices of goods for export for both unrelated and related firms

32 Distribution  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  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 17-31

33 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  Economic differences can also make standardization difficult 17-32

34 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 17-33  Factors Influencing Channel Selection  Market Characteristics  Best coverage  Product Characteristics  Company Characteristics  Financial and managerial resources  Middlemen’s Characteristics  After-sales servicing

35 Cultural Differences Never 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. The number 7 is considered bad luck in Kenya and good luck in Czechoslovakia, and it has magical connotations in Benin. The number 10 is bad luck in Korea, and 4 means death in Japan. Red is a positive color in Denmark, but it represents witchcraft and death in many African countries. A nod means no in Bulgaria, and shaking the head from side to side means yes. The "okay" sign commonly used in the United States and the United Kingdom (thumb and index finger forming a circle and the other fingers raised) means zero in France, is a symbol for money in Japan, and carries a vulgar connotation in Brazil.

36 Honda Japan