MKTG 376 Final

How large is the global luxury good market? What percent or sales of this market are in Japan. What need do these products satisfy How much of Gucci's sales are generated in Asia?

$35 billion market Japan: 20% and another 22% in the rest of the Asia-Pacific Nearly half of Gucci's sales are generated in Asia

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-The higher the priority the less likely it is that counter trade will be required -the higher the value of the transaction the greater likelihood that counter trade will be involved -if company is sole supplier of differentiated products, it can demand monetary payment

Explain the important issues of cost, control, and coverage in relation to EMC's and Trading Companies

1 Cost: Trading Companies are cheaper b/c you don't have the control over the product, thus more used in with Chinese products that are cheap and don't have brand image. Therefore EMC's are very costly b/c you control everything up to the end user getting the product 2. Control goes to EMC's 3. Coverage: EMC's gets you the coverage you want while Trading companies do not

List the environmental influences on pricing

1. Currency fluctuations 2. Government regulations and subsidies (legal issues, Ex. in Germany price competition was restricted in some industries such as service sector 3. Inflation 4. Competition

Compensation trading (buyback)

Form of counter trade that involves two separate parallel contracts. Supplier agrees to build a plant or provide plant equipment, patents, licenses, or technical, managerial or distribution expertise for hard currency. In other contract, supplier agrees to take payment in the form of the plant;s output equal to its investment for a period of as many as 20 yrs

Explain last strategy dual adaptation

changing both the product and advertising techniques to cater to different countries and cultures. Ex. Unilever

What 2 methods of transfer pricing are preferred in the US, Canada, Japan, and the UK?

market based transfer price: derived from the price required to be competitive in the market place cost-based transfer pricing: uses internal cost and then marks up after

Define parallel importing In the UK and Netherlands what percent of parallel imports account for sales of pharmaceutical brands?

occurs when a company employ a poly centric multinational pricing policy that calls for setting different prices in different country markets. 10%

What % of organized retail exist in India

only 5%., which is forecasted to grow

What percentage of Mexicans shop at small mom-and pop stores for daily consumptions

70%

What are the 4 ad objectives

1. Awareness 2. Understanding 3. Interest 4. Purchase A Company must pick one of these objectives to focus their advertising copy and creative on.

When is it better to use standardized ad campaigns?

1. Can be used more for industrial products or for technology oriented consumer products such as the iPhone. or for products that are expensive and target only a certain demographic of wealthy users who share the same values across different cultures 2. TV Commercials that use voice-overs, can have same images but just translate voice-over to reflect country

What are the top 10 most valuable brands

1. Coca-Cola: 66,667 million 2. IBM: 59,031 3. Microsoft: 59,007 4.GE: 53,086 5. Nokia: 35,942 6. Toyota: 34,050 7. Intel: 31,261 8. McDonald's: 31,049 9. Disney: 29,251 10. Google: 25,509

Explain the process of creating and relying message of an Ad

1. Marketer selects ad objective and creates budget 2. Then Ad agency develops the message (cultural encoding) and selects the media 3. Then the media carriers the message 4. Target Market receives the message and interprets content from media/peers (cultural decoding) 5. Recipients use think and feel to respond to ad 6. generate feedback on effects 7. marketing coordination and control 8. compare results vs. ad objectives 9. revisit ad objectives. Marketers follow this process from step 1 to step 8 but consumers look first at step 5 and then go backwards to determine what the ad is trying to communicate and what company it is advertising. First impact is a logical or emotional one.

List examples of some global advertising done by companies

1. McDonald's "I'm loving it" 2. IBM "Solutions for a small planet" 3. De Beers "A diamond is forever" 4. BP "Beyond Petroleum"

Explain Maslow's hierarchy of needs starting from the basic essential level to the top of they pyramid

1. Physiological 2. Safety 3. Social (Affiliation) 4. External and internal esteem (Admiration) 5. Self-actualization (Status)

What must companies consider when entering international markets in selecting local distributors

1. Select distributors, don't let them select you 2. look for distributors capable of developing markets for your products, rather then those with a few good contacts 3. Treat local distributors as long-term partners, not temporary market entry vehicles. 4. Support market entry by committing money, managers, and proven marketing ideas. 5. From the start, maintain control over marketing strategy 6. Make sure distributors provide you with detailed and financial performance data 7. Build links among national distributors at the earliest opportunity

What are the top 5 global retail stores

1. Walmart 2. Carrefour 3. Metro AG 4. Tesco PLC 5. Home Depot

What is recommended if your domestic currency is strong?

1. engage in non price competition by improving quality, delivery and after-sale service 2. improve productivity and engage in cost reduction 3. shift manufacturing outside of home country into desired foreign market.

Explain: 1.extension strategies 2.adaptation strategy 3. product invention

1. extension strategy: offering a successful local product or brand unchanged to markets outside of home country 2. Adaptation strategy: changing elements to cater to different markets 3. Product invention: building a new product from the ground-up

Explain the 4 strategies of local and global products and brands: 1. local product/local brand 2. Global product/local brand 3. local product/global brand 4. global product/global brand

1. local product/local brand: 2. Global product/local brand: Coca-Cola does this with the customized Valpre brand bottled water in South Africa 3. Local product/global brand: Global cosmetics industry uses this and creates different formulas to create different products in different regions of the world. 4. global product/global brand: Coca-Cola

What is recommended to do when your domestic currency is weak

1. stress price benefits 2. expand product line and add more costly features 3. Use full costing approach

What 2 attributes does a product have? Explain them

A product has intangible and tangible attributes. For ex. tangible assets can be assessed in physical terms and intangible can be assessed in the status associated with owning the product. So intangible refers more to brand name and perception of perceived quality

What is a global product and brand

A product that meets the wants and needs of a global market and the brand is recognized worldwide. Same name, advertising copy and message throughout the entire world. Ex. are Nike, Gillette, GE, BMW, VISA, Harley-Davidson Sell same products and use same marketing techniques worldwide

Switch Trading (triangular trade, swap)

Arrangement where 3rd party steps into simple barter or other counter trade arrangement when one party is not willing to accept all the goods received in a transaction

What message do ads have when the product is more standardized.

Awareness and Understanding: these are lower level ads and are more standardized

What are ways to bypass the long and costly distribution channels of the east in China and Japan Give ex. of companies that have done this

By engaging in direct, door-door selling. You can market directly to them using the internet (peer-to-peer selling with ebay), mail order, or vending machines. You can also directly go to Japan and Asia set up a manufacturing plant and then build your own retail store and directly sell to consumers Ex. Avon and Tupperware, Avon did this in China and was very successful. Dell also built themselves around direct selling to the consumer

Explain the product adaptation-communication extension strategy

Changing the product to cater to local use or preferences but keep advertising message same across cultures Ex: Cadillac, Ford, Kraft

Sometimes a global company creates local brands (transnational strategy) in an effort to cater to needs and preferences of particular country markets. Give an example using Coke

Coke developed different branded products in Japan, in India they market Kinely brand bottled water. They will often do brand extensions to leverage popular brands

Explain the differences between the East and West mentality of distribution How can one maximize both core competencies

East: Is relationship based, where they pay per existence. For ex. when a wholesaler exists in the channel they still get commission no matter what even if the large wholesaler ships products directly to the retailer. They strive for effectiveness and their core competency is production of utmost quality because of the different layers the product must go thru. Have this interdependence because of lack of space and Japan is more geographically spread out. They use just-in-time inventory. West: They focus on efficiency and pay per performance. There core competency is in distribution and therefore products are much cheaper when they reach the retailer because the usually only go thru one wholesaler. Best way to maximize this is if Japan produces the product then uses the US distribution

What are the 2 sets of global distributors

East: Trading Companies: Very efficient and handle everything but take title of the product, thus once you give the product to them u lose all control over it. They also export competing products. West: Export Management Companies (EMC's) They are global distributors that handle exporting from Ex-work to DDP. They behave as your agent and don't take title of your product so you still have control over brand management and marketing

Why did Carrefour fail in the US with its opening of a hypermarket?

Consumers found the store to be too big and overwhelming and thought the product assortment was very broad.

What market is Tesco trying to penetrate in the US?

Convenicne store market at the end of the block

Define Pattern Advertising

Developing a global communication concept for which copy, artwork, or other elements can be adapted for country markets. For ex. Boeing print campaign shared basic design elements but the copy and the visual elements were different

Counter purchase

Ex. Pepsi sold Pepsi to Russia for $8 million Rubles, and purchased $8 million in Vodka and sold it on the world market.

Free on board (FOB)

Exporter/manufacturer/seller is responsible for everything up to getting the product (usually packaged) to the port and on the ship. Then after that everything else is up to buyer

What is ad objective highly determined by?

Highly determined by macroeconomic environment of satisfied, unsatisfied, or emerging needs with the product being new, modified, or common. The PLC is also very important

Explain market holding strategy?

It uses flexible cost-plus pricing method to reduce prices in response to unfavorable currency swings in an attempt to not lose market share if they keep the same price and it becomes to expensive in foreign markets because of appreciation of home currency compared to foreign currency

What message do ads have when the product is more customized to reflect cultural needs.

Interest and Purchase: more customized to reflect cultural needs.

What are the 2 types of target markets International advertisers look to market to. What ad campaign works better for each

International sophisticates: people who are globally aware about the world. For them standard ad campaign works the best Provincials: International ignorance, they may be ethnocentric or xenophobic. Here localization needs to be used to approach culture by culture

Explain discontinuous innovations -Dynamically continuous innovations -continuous innovation

Inventions that create new markets and new consumption patterns that represent a break with the past. Ex. invention of VCR Dynamically continuous innovations: give substantial improvement in performance or greater convenience. Provide small disruptions of previously existing consumption patterns Continuous innovation: least disrupting influence on consumption patterns usually are line extensions.

Under currency fluctuations what will a 1-yeh shift in the yen/dollar exchange rate have on the Sony's profits?

It can raise or lower Sony's annual operating profit by eight billion yen.

Define cost based pricing. is this the closest to global pricing?

It is when you account for all costs incurred to produce product then use a slight mark-up to gain a profit. Yes, it is the closest you get to global pricing and is a consistent and uniform method of pricing where you don't maximize profits. One end of the extreme of pricing strategies and provides for a fixed margin because no matter what you will get a return

What does the extension strategy reflect?

It may reflect ethnocentrism and the assumption that all markets are alike so a global product/brand will suffice. however, global companies that take advantage of similarities in world markets that have use this strategy are companies like Gillette.

Explain market skimming (competitive pricing), what part of the PLC does relate to? and what business level strategy use this? Whats another name for this and give an ex.

Market skimming is a pricing strategy used to reach a market segment that is willing to pay a premium price for a particular brand. Companies that pursue a differentiation business strategy use this pricing method. It also relates to the introductory phase of the PLC where production capacity and competition are limited because of the newness of the product. However, when the product enters the growth stage of the PLC and competition increases, prices start to be cut. Skimming can also be called competitive pricing where you price based on competitors. Ex. Consumer electronic goods

Explain the three characteristics consumers associate global brands with? 1. Quality Signal 2. Global myth 3. Social responsibility

Quality signal: global brands at times provide world-class quality Global myth: global brands are symbols of cultural ideals Social responsibility: evaluate brands in terms of how they address social problems

Super centers

Offer wide range of aggressively priced grocery items plus general merchandise about half the size of hyper marts. Wal-mart has opened these

Explain the 4 retail market expansion strategies 1. organic growth 2. Franchising 3. Acquisition 4. Joint ventures and licensing

Organic growth: occurs when country is culturally close and easy to enter Franchise: occurs when foreign market is easy to enter but culturally distant Chain acquisition: when market is culturally close but difficult to enter joint venture, licensing: occurs when market is both difficult to enter and culturally distant

What Moscow's Bread Company reusable gift that was successful

Plastic Bags

Explain pricing based on country of origin

Price based on perceived quality of product determined by what country it was produced from

Explain Price Floor, Price ceiling, and optimum price

Price floor: the absolute minimum price depending on how much the product costs to make Price ceiling: the maximum price usually depends on how substitute and competitor products are priced. Optimum price: the function of the demand of the product determined by the willingness to pay

What was Tulsi Tanti's problem with creating Indian wind turbine generators and trying to market them in the US?

Publicity caused there downfall because headline hit of one of their wind turbines breaking

What is Rabattegestez or Discount Law and Zugabeverordung or Free Gift Act

Rabattegesetz: limited discounts on products to 3% of the list price Zugabeverordung: banned companies from giving away free merchandise such as shopping bags.

What is red and white symbolize in China

Red=luck white=negative

Define Transfer pricing

Refers to the pricing of goods, services, and intangible property bought and sold by operating units or divisions of the same company. When goods cross borders even tho they belong to the same company it is still recorded as a sale therefore pricing of the sale is of interest to tax authorities. Transfer pricing face issues of taxes, duties, tariffs For ex. Toyota subsidiaries both sell to and from each other.

Talk about how the pricing strategy for a product may vary from country to country using Stella Artois?

Stella Artois is positioned as a low-price mass-market product in Belgium and in export markets a premium-priced, niche product.

With media selection what is more of global channel and what is more of a local channel

TV is more of a local channel that needs to be customized to reflect cultural needs Print and billboards are more global because they are easier to standardize

Define Barter

The direct exchange of goods or services between two parties

Define Dumping

The sale of an imported product at a price lower than that normally charged in a domestic market or country of origin

Define Hard Discounters. what percent of grocery sales do these comprise in Europe

These are retail stores that tightly focus on a selection of goods at very low prices. They account for 10% of grocery sales in Europe

What is Nokia doing to capture market share in the 1billion global cell phone market?

They are attempting to market cell phones as status symbols in emerging economies such as China and India b/c since they are having rapid economic growth they can afford cell phones now.

What are hyper marts

They combine the discounter, supermarket, and warehouse club under a single roof

Even though Coke is the quintessential global product what do they do slightly different to cater to cultural needs?

They slightly alter their products, for ex. in the Middle East consumers like sweeter drinks so they increased the sweetness of coke in that market. They also change prices to appeal to different markets where purchasing power is lower or higher. They also must switch slogans such as "The Coke side of life," so that they make sense when translated

Explain same price everywhere (extension or ethnocentric pricing)

This is not global pricing and. If market is homogenous makes sense, if market is heterogeneous then doesn't make sense b/c price will be different based on high income and low income countries. For ex. Starbucks is perceived cheap in Switzerland b/c coffee is expensive but perceived expensive in China b/c local coffee is not as expensive. Does not make sense and needs to be adjusted and priced based on demand pricing and target costing

Delivered Duty Paid (DDP)

This is the highest cost of exporting and involves the seller/exporter to deliver the product to the buyer at the place he or she names in the country of import with all costs paid. Therefore responsible for taking the product off the ship, paying the tariffs, getting it through customs and taking it to buyer. have to obtain import license at times.

Explain the product-communication dual extension strategy.

This is when communication and product are the same across all markets. This works for companies pursuing a completely global market opportunity. Sell same product and use same advertising techniques worldwide. Used more frequently with B2B products then with consumer goods and more successful with high tech products like Apples iPhone.

Define Free Alongside Ship (FAS)

This is when the seller is responsible legally and financially for places the product alongside or available to the vessel upon which the good will be transported. The seller pays all charges up to that point and then all responsibility switch to buyer who is responsible for loading the shipment and getting it to its destination. often used with break bulk cargo which is non-containerized such as iron, steel, or machinery.

Explain Demand based pricing

This is where you maximize profits in each market. You price based on willingness to pay. For ex. the iPhone is priced at $1000 in china b/c the high end business people are willing to pay that much.

Explain Target (affordability pricing) Costing. Give an example of a company that does this also refered to as geocentric pricing

This strategy bases prices of goods off customers willingness to pay and studies their PPP based on economic factors of average Income per capita. Prices based on consumer affordability. For ex. McDonalds does this by using per capita income to price their food which is how the Big Mac Index was created.

Superstores, give examples

Toys R Us, Home Depot, IKEA. Selling vast amounts of a particular good

Explain the supplier base and logistics of the US, Brazil, Russia, India, and China

US: companies use national and international suppliers. They move manufacturing offshore and develop relationships with local distributors instead of vertical integrating Brazil: good network of transporttion for logistics but port congestion is a problem. Customs take 8 days Russia: customs takes 8 days, Russia is not as developed in logistics China: transportation/distribution costs are high. Lacks network of refrigerated and containerized trucks and warehouses

Explain the difference between upstream and downstream in terms of the value chain

Upstream is when a company is removed from the final customer Downstream is when the company is relatively close to the customer in the value chain

When does counter trade flourish? How did is start?

When hard currency is scarce Because of the decreasing ability of developing countries to finance imports through bank loans, which resulted in debt free governments

What is combination or tiered branding? Give examples

When a corporate name is combined with a product name and is usually used to describe the product. For example: Sony Walkman: now the product is referred to Walkman even with other competitor companies that produce the same thing even though Sony first developed the name. Sony PlayStation Q-Tip is another example

When do gray markets tend to happen What is the main medium for this

When a product is in short supply -when skimming strategies are used to undercut them -when goods are subject to substantial markups The main medium is the internet.

Explain the Product transformation. Talk about Jagermeister

When a product serves different needs in different cultures. For ex jagermesiter in the US is a alcohol used to party with, in Italy used for digestive purposes and in Europe a remedy for coughs or morning after elixir.

What is cherry picking

When distributors try and maximize their own profits by selecting manufacturers with already established demand for products or brands or selecting a to distribute a few choice items from a distributors line

Cost insurance freight (CIF)

When exporter/seller is responsible for getting the product packaged on the ship and delivered to the port of destination, including the expenses of insurance until it reaches the port of destination. After it gets there seller picks it up and the rest is their responsibility.

What is Ex-works and Ex-Factory? What country uses this inco-term the most

When the exporter or seller is responsible for mark up of production within the factory. Therefore the buyer takes delivery at premise of seller and bears all risks and expenses from that point on. Therefore the buyer gets maximum control over the cost of transporting the good. China uses this a lot and solely manufactures a good marks it up to get their profit then pass it along to seller who takes on all the responsibilities of exporting the product. This is the cheapest part of exporting

Explain export price escalation

When the total cost of good factors in the costs associated with the mode of transport, tariffs, and various handling charges and documentations costs. Thus export price escalation is the final selling price of the good traded across borders that reflects these factors.

Explain product extension communication adaptation. Give ex. of companies that do this

When you sell the same product across international markets but alter the advertising message to cater to cultural differences. For ex. MGD in Europe position beer as international lifestyle instead of American lifestyle. Ben and Jerry, Intel, Sony, Deere

Does international trade lower prices for goods? In a true global market would law of one price prevail?

Yes and Yes, a global market exists for certain products such as crude oil, commercial aircraft, diamonds, etc. However products such as beer are offered in rather national markets instead of global markets where pricing needs to be changed. For ex. Budweiser is the leading beer global brand but has only less then 4 percent of the total market.

Have coke and McDonald's created local products and brands for particular country markets because of cultural differences in basic needs.

Yes they both have. They market their product targeting the bottom of the pyramid and marketing their product as a physiological need Bottom of they pyramid which are basic needs are usually customized products while global products target higher levels of needs because more homogenous occurs where products target a smaller more affluent group of buyers

Are all of Porshce's production held in Germany?

Yes, 100% of Porsche production is in Germany and then porsches are exported to the rest of the world so currency fluctuation has a major impact on them.

Define horizontal and vertical price fixing

horizontal price fixing: competitors within an industry that make and market the same product conspire to keep prices high Vertical price fixing: a manufacturer conspires with a wholesaler to ensure certain retail prices are maintained

What must you take into consideration with labeling?

legal guidelines of countries. For Ex. in the EU you must provide a label for foods containing genetically modified ingredients in the US you must present info regarding nutrition and serving size. use of terms "light" and "natural" are restricted

What 4 types of channel utility that help firms focus their channel strategy on in distribution

place utility: availability of a product or service in a location that is convenient time utility: availability of a product or service when desired Form utility: product processed, prepared in proper condition, ready to use Information utility: availability of answers to questions and general communication about useful product features and benefits

Adaptation or poly centric pricing (competitive pricing)

price higher or lower to compete with competitors

Explain ethnocentric or extension pricing policy

price of item to be the same no matter where in the world. This is same price everywhere and the disadvantage is that it does not respond to competitive and market conditions and does not maximize profits

Offset. How does this differ from counter purchase?

recipricol arrangement where government will only spend money on imports from another country if that country agrees to import products from them. Differs from counter purchase because is usually smaller deals over shorter periods of time. Another difference is that agreement is not contractual. Also, no penalty on supplier for nonperformance. Typically requests range from 20-50 percent of the value of the suppliers product

In terms of dollars, what is the brand equity of Coca-Cola and Marlboro? What are the benefits of strong brand equity

tens of billions of dollars -Greater loyalty -less vulnerability to marketing crisis -more inelastic consumer responses to price increases -more elastic consumer response to price decreases -Increased marketing communication effectiveness

Explain a penetration pricing strategy? What business level strategy uses this?

this is used in a non financial objective and involves setting prices that are low enough to quickly build market share. companies that use cost leadership business strategies do this. At times this will product no profit for the firm and therefore is hard to implement especially for small companies that are new to exporting cannot absorb such a loss

What is co-branding

when two or more different companies or product brands are featured on product packaging. Can allow complementary companies to achieve synergy. Ex: Credit Card companies usually use this model and so does Intel with computers saying Intel is inside them