International Business Chapter 14

Product/Communications Adaptation (Dual Adaptation)

-This method adapts both the product and its marketing communication to suit the target market. The product itself is adapted to match the needs or preferences of local buyers. The promotional message is adapted to explain how the product meets those needs and preferences. -Because both production and marketing efforts must be altered, this strategy can be expensive; therefore, it is not very common. -It can be implemented successfully, however, if a sufficiently large and profitable market segment exists.

Companies develop their international distribution strategies based on two related decisions:

(1) how to get goods into a country and (2) how to distribute goods within a country.

Managers consider two overriding concerns when establishing channels of distribution:

(1) the amount of market exposure a product needs and (2) the cost of distributing a product.

Theft and corruption

A high incidence of __________ can present obstacles to distribution.

Shortened product life cycle

Advances in telecommunications have alerted consumers around the world to the latest product introductions. Consequently, consumers in developing and emerging markets also demand the latest products and are not happy with receiving what is yesterday's fad in the highly developed nations. Also, the rapid pace with which technological innovation occurs today is ________________ of products.

channel members or intermediaries

Companies along this channel that work together in delivering products to customers

cultural differences

Companies also adapt their products to suit local buyers' product preferences, which are rooted in culture. Not all companies need to modify their product to the culture; instead, they may need to identify a different cultural need that it satisfies.

lack of market understanding

Companies can experience a great deal of frustration and financial loss simply by not fully understanding the local market in which they operate.

laws and regulations

Companies must often adapt their products to satisfy ___________ in a target market.

distribution system

Implementing a push strategy can be difficult when distribution channel members (such as distributors) wield a great deal of power relative to that of producers. It can also be ineffective when distribution channels are lengthy.

Degree of exposure

In promoting its product to the greatest number of potential customers, a marketer must determine the amount of ______needed. (1) Exclusive Channel, and (2) Intensive Channel

standardizing or adapting

Marketing activities that span time zones and cultures can test the most seasoned marketing managers. When a company decides to "go international," managers have many options at their disposal when it comes to ______________ their products.

distribution channel

The physical path that a product follows on its way to customers

Pricing policies

The pricing strategy that a company adopts must match its overall international strategy.

price escalation

When a product has a higher selling price in the target market than it does in the home market (or the country where production takes place). It is commonly the result of exporting costs and currency fluctuations.

communication strategies

When companies extend their marketing efforts internationally, they develop ____________ that blend product and promotional strategies. A company's ____________ for a particular market takes into account the nature of the product being marketed and the promotion mix to market it.

-Distribution System -Access to Mass Media -Type of Product

Whether the push or pull strategy is most appropriate in a given marketing environment depends on several factors:

International advertising

___________________ differs a great deal from advertising in domestic markets. Managers must rely on their knowledge of a market to decide whether an ad is suitable for the company's international promotional efforts.

Counterfeit Goods and Black Markets

can damage buyers' image of a brand when the counterfeits are of inferior quality—which is nearly always the case.

Promotion mix

comprises a company's efforts to reach distribution channels and target customers through communications, such as personal selling, advertising, public relations, and direct marketing.

transfer price

is a product's selling price when it is sold among a company and its subsidiaries. Transfer pricing was used to manage global tax burdens by having subsidiaries in high-tax countries charge low prices for their output exported to affiliated parties.

Price control

is an upper or lower limit placed on the price of a product within a country. Upper-limit price controls provide price stability when inflation is driving up prices. Lower-limit price controls can be used to help local companies compete against the less expensive imports of international companies or be used to ward off price wars.

exclusive channel

is one in which a manufacturer grants the right to sell its product to only one or a limited number of resellers.

An arm's-length price

is the free-market price that unrelated parties charge one another. Many governments now regulate internal company pricing practices by assigning products approximate transfer prices based on their free-market price.

Dumping

occurs when the price of a good is lower in export markets than in the domestic market. Charges of dumping can arise when a foreign competitor floods a target market with inexpensive imports to undercut competitors' prices, or can arise when changes in exchange rates cause unintentional dumping.

one-level channel

places only one intermediary between the producer and the buyer

dual pricing

policy in which a product has a different selling price (typically higher) in export markets than it has in the home market

worldwide pricing

policy in which one selling price is established for all international markets

Channel Length and Cost

refers to the number of intermediaries between the producer and the buyer. (1)number of intermediaries, and (2) cost implications

costly

the greater the number of intermediaries in a channel, the more ______ it becomes.

-Pull Strategy -Push Strategy

two general promotional strategies that companies can use to get their marketing message across to buyers. Companies can rely completely on just one of these strategies or use them in combination.

Two-Level Channel

two intermediaries are between the producer and the customer

Marketing Communication

process of sending promotional messages about products to target markets. is typically considered a circular process. See Figure 14.1

Zero-Level Channel (aka Direct Marketing)

producers sell directly to final buyers

push strategy

promotional strategy designed to pressure distribution channel members to carry a product and promote it to final users.

A worldwide pricing policy can be difficult to achieve.

-First, production costs differ from nation to nation and selling prices may adjust to these different costs. -Second, producing in one location does not guarantee one selling price in all target markets because the cost of reaching different markets varies. -Third, a company may decide to lower or raise a selling price to match the purchasing power of buyers in a target market. -Fourth, fluctuating currency values also must be taken into account. When the value of the currency in a country where production takes place rises against a target market's currency, the product will become more expensive in the target market.

Product/Communications Extension (Dual Extension)

-This method extends the same home-market product and marketing promotion into target markets. Under certain conditions, it can be the simplest and most profitable strategy. -As the information age continues to knit the world more tightly together, this dual extension method will probably grow more popular. -This strategy appears to be better suited for certain groups of buyers, including brand-conscious teenagers, business executives, and wealthy individuals. -The strategy also tends to be better suited for companies that use a global strategy with their products. -It can also be appropriate for global brands that have mass appeal and that cut across all age groups and social classes. -The strategy also is useful to companies that are the low-cost leaders in their industries: One product and one promotional message keep costs down.

Product Invention

-This method requires that an entirely new product be developed for the target market. -Product invention is often necessary when many important differences exist between the home and target markets. -One reason for product invention is that local buyers cannot afford a company's current product because of low purchasing power. -Product inventions can also arise because of a lack of adequate infrastructure needed to operate certain products.

Many factors have an important influence on managers' pricing decisions:

-Transfer price -an arm's-length price -a price control -dumping

Product Extension/Communications Adaptation

-Under this method, a company extends the same product into target markets but alters its promotion. -Communications require adaptation because the product satisfies a different need, serves a different function, or appeals to a different type of buyer. -Companies can adjust their marketing communication to inform potential buyers that the product either satisfies their needs or serves a distinct function. -This approach helps companies contain costs because the good itself requires no alteration. -Marketers in developing countries must use alternative techniques, including door-to-door personal selling and regional product shows or fairs. -On the other hand, companies in Europe and North America and certain Asian countries can rely on a modern telecommunications system to reach millions of consumers through TV, radio, and the World Wide Web. In these markets it is common for companies to adapt their websites to each national market.

Product Extension/Communications Extension

-Using this method, a company adapts its product to the requirements of the international market while retaining the product's original marketing communication. -There are many reasons why companies need to adapt their products. One might be to meet legal requirements in the local market. Moreover, governments can require that firms use a certain amount of local materials, labor, or some other resource in their local production process. -If the exact same materials or components are not available locally, the result can be a modified product. -This method can be costly because appropriately modifying a product to suit the needs of local buyers often means the company must invest in production facilities in the local market. If each national market requires its own production facility, cost savings provided by economies of scale in production can be elusive. -Still, a company can implement this strategy successfully if it sells a differentiated product for which it can charge a higher price to offset the greater production costs.

Special problems that can affect a company's international distribution activities:

-lack of market understanding -Theft and corruption

Product/Promotional methods companies use

1. Product/Communications Extension (Dual Extension) 2. Product Extension/Communications Adaptation 3. Product Adaptation/Communications Extension 4. Product/Communications Adaptation (Dual Adaptation) 5. Product Invention

pull strategy

A promotional strategy designed to create buyer demand that will encourage distribution channel members to stock a company's product

type of product

A pull strategy is most appropriate when buyers display a great deal of brand loyalty toward one particular brand name. On the other hand, push strategies tend to be appropriate for inexpensive consumer goods characterized by buyers who are not brand loyal. A push strategy is also suited to industrial products because potential buyers usually need to be informed about a product's special features and benefits.

cultural nuances

By ignoring important ___________, companies can inadvertently increase the potential for noise that can cloud the audience's understanding of their promotional message.

Access to mass media

Developing and emerging markets typically have fewer available forms of _______ for use in implementing a pull strategy. Accordingly, it is difficult to increase consumer awareness of a product and to generate product demand.

Distribution

Planning, implementing, and controlling the physical flow of a product from its point of origin to its point of consumption

Brand and Product Names

Several issues related to a company's _________ are important concerns for the day-to-day activities of international managers. A ________ is the name of one or more items in a product line that identifies the source or character of the items. __________ help consumers to select, recommend, or reject products. -A strong ________ can become a company's most valuable asset and primary source of competitive advantage. A consistent worldwide brand image is increasingly important as more consumers and businesspeople travel internationally than ever before.

But sometimes a product's export price is lower than the price in the home market. Under what circumstances does this occur?

Some companies determine that domestic market sales are intended to cover all product costs. They then require exports to cover only the additional costs associated with exporting and selling in a target market (such as tariffs). In this sense, exports are considered a sort of "bonus."

Euro-consumer

The continuing integration of nations belonging to the European Union is causing many marketers to dream of a day when they can standardize their advertising to appeal to a so-called _______. But the _________ remains a rare, mythical creature that eludes even the world's most clever advertisers. -Some well-known international advertising agencies have tried a pan-European advertising approach only to fail because of national differences. -Europe's many languages certainly create thorny translation issues for marketers.

standardized across

The vast majority of advertising that occurs in any one nation is produced solely for that domestic audience. But companies that advertise in multiple markets must determine the aspects of the advertising campaign that can be _________ markets and those that cannot.

intensive channel

When a producer wants its product to be made available through as many distribution outlets as possible, it prefers to use an ______________—one in which a producer grants the right to sell its product to many resellers.

National Image

the value customers obtain from a product is heavily influenced by the image of the country in which it is designed, manufactured, or assembled

value density

value of a product relative to its weight and volume -is an important variable in formulating distribution strategies. As a rule, the lower a product's _________, the more localized the distribution system. -Products with high ________ ratios include emeralds, semiconductors, and premium perfumes. These products can be processed or made practically anywhere and then shipped to markets because their transportation costs are small relative to their end values.