International Marketing Exam 3
Describe Japan's Large-Scale Retail Store Act and discuss how the Structural Impediments Initiative (SII) is bringing about change in Japanese retailing.
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Discuss how the various stages of economic development affect the demand for industrial goods.
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Give an example of how a foreign marketer can use knowledge of the characteristics of innovations in product adaptation decisions.
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In what circumstances is the use of an EMC logical?
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What are the differences between consumer and industrial goods, and what are the implications for international marketing?
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What is the importance of collaborative relationships to competition?
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Why is the EMC sometimes called an independent export department?
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Exclusive distribution
A practice in which a company restricts which retailers can carry its product; often used by companies to maintain high retail margins, to maintain the exclusive-quality image of a product and to encourage retailers to provide extra service to customers
Administered pricing
The attempt to establish prices for an entire market through the cooperation of competitors, through national, state, or local governments, or by international agreement
Price-quality relationship
The balance between a product's price and how well the product performs. Often the price-quality of a product is ideal if it meets basic expectations and no more, allowing it to be priced competitively.
Innovation
any idea perceived as new by a group of people
Product homologation
changes mandated by local product and service standards
Green marketing
concern with environmental consequences of a variety of marketing activities
Strategic planning
conducted at the highest levels of management and deals with products, capital, research, and the long and short-term goals of the company
Diffusion
the adoption or spread of products across markets by increasing numbers of consumers
Quality
the character of something; defined in two dimensions: market-perceived quality and performance quality; consumer perception of a product's quality often has more to do with market-perceived quality than performance quality
Indirect exporting
the company sells to a buyer in the home country, which in turn exports the product (customers are large retailers like Sears or Walmart)
Direct exporting
the company sells to a customer in another country
Global Brand
the worldwide use of a name, term, sign, symbol, design, or a combination thereof to identify goods or services of a seller and to differentiate them from those of competitors
Product Component Model
to identify all the possible ways a product may be adapted to a new market, its many dimensions are separated into three distinct components: core, packaging, and support services
Discuss "environmentally friendly" products and product development.
"Environmentally friendly" products have a lesser negative impact on the environment than similar products. Because of a growing consumer demand for environmentally friendly products, manufacturers are seeking eco-labels for products, like Blue Angel labels in Germany. As more EF products come onto the market, standards will become stricter on what can be classified as EF and companies will be encouraged to update their EF technology.
Gray market
(same as parallel market) When products intended to be sold in one market, exclusively at a particular low price (often a government controlled low price), are sold in a second market (usually illegally) where market prices are higher
Countervailing duty
A fee that may, under WTO rules, be imposed on foreign goods benefiting from subsidies, whether in production, export, or transportation
Forfaiting
A financing technique that may be used in an international transaction in which the seller makes a one-time arrangement with a bank or other financial institution to take over responsibility for collecting the account receivable.
Bills of exchange
A forum of international commercial payment drawn by sellers on foreign buyers; in transactions based on bills of exchange, the seller assumes all risk until the actual dollars are received, making them riskier for the seller than the letters of credit.
Penetration pricing policy
A low price policy directed at gaining market share from competitors
Full-cost pricing
A method of pricing based on the view that no unit of a similar product is different from any other unit of a similar product and that each unit must bear its full share of the total fixed and variable cost, whether sold in the home market or abroad
Variable-cost pricing
A method of pricing goods in foreign markets in which a company is concerned only with the marginal or incremental costs of producing goods for sale in those markets.
Skimming
A method of pricing, generally used for foreign markets, in which a company seeks to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received
Debate the issue of global versus adapted products for the international marketer.
A recurring debate exists relative to product planning and focuses on the question of standardized products marketed worldwide versus differentiated products adapted or even redesigned for each culturally unique market. Those with a strong production and unit cost orientation advocate standardization and others, perhaps more culturally sensitive, propose the policy of a different product for each market. The issue cannot be resolved with a simple either/or decision. Cost revenue analyses need to be done and decisions made in the hard, cold lights of profitability. There is no question that significant cost savings can be realized from having standardized products, packages, brand names, and promotional messages but this makes sense only if there is adequate demand for the standardized products: costs must be balanced with demand. On the other hand, if the cost of an individualized product when evaluated against price/demand characteristics within a market exceeds potential profit, then it is ridiculous not to consider other alternatives including not marketing the product at all. To differentiate for the sake of differentiation is no solution, and realistic business practice requires a company to strive for uniformity in its marketing mix whenever and wherever possible. Economies of production, better planning, more effective control, and better use of creative managerial personnel are all advantages of standardization.
ISO 9000s
A series of international industrial standards originally designed by the International Organization for Standardization to meet the need for product quality assurances in purchasing agreements.
Countertrade
A type of transaction in which goods are imported and sold by a company from a country in exchange for the right or ability to manufacture and/or sell goods in that country
Cartel
An arrangement in which various companies producing similar products or services work together to control markets of the goods and services they produce
Dumping
An export practice, generally prohibited by laws and subject to penalties and fines, defined by some as the selling of products in foreign markets below the cost of production and by others as the selling of products at blow the prices of the same goods in the home market
Discuss the competitive consequences of being ISO 9000 certified.
An increased desire for quality products makes ISO 9000 certification almost a necessity. Many manufacturers will not buy from suppliers if they are not ISO 9000 certified. Being ISO 9000 certified also helps to distinguish product classes and differentiate among different levels of reliability in products, especially in the high technology industry. While all of these give a product a competitive advantage, not meeting these requirements is very bad. Also, these regulations are difficult to impose and maintain.
Client followers
Companies, often providers of services, that follow companies that first moved into a foreign market
Discuss the way Japanese manufacturers control the distribution process from manufacturer to retailer.
Control is maintained through: (1) Inventory financing with credits extending for several months, (2) Cumulative rebates, (3) Merchandise returns that are allowed to the manufacturer, and (4) Promotional support to intermediaries in the form of displays, advertising layouts, and management education programs
Define the country-of-origin effect and give examples.
Country of Origin Effect (COE) can be defined as any influence that country-of-manufacturer has on a consumer's positive or negative perception of a product. Today a company competing in global markets will manufacture products worldwide and, when the customer is aware of the country of origin, there is the possibility that the place of manufacture will affect product/brand image. Some examples are French wines, German beer, Swiss watches, Cuban cigars, and Irish woolens are some positive COEs. A negative COE is an automobile from Yugoslavia (the Yugo).
Derived demand
Demand that is dependent on another source; it can be fundamental to the success of efforts to sell capital equipment and big-ticket industrial services
Letters of credit
Financing devices that, when opened by a buyer of goods, allow the seller to draw a draft against the bank issuing the credit and receive dollars by presenting proper shipping document
What ISO 9000 legal requirements are imposed on products sold in the EU? Discuss.
ISO 9000 legal requirements on products sold in the EU include products being free from defects or deficiencies, manufacturers are liable if a person is harmed by a product that fails because of a faulty component, and the company can meet published quality standards.
Explain the popularity of joint ventures
Joint ventures have become popular for a number of reasons. One important marketing reason is to gain access to markets. Nearly all of the developing countries, and many developed countries, require some degree of local participation for operating in their country. Mergers with distributor companies or companies which already have well-established local distribution may provide rapid market access and distribution to foreign companies entering a country. Sometimes companies join forces in order to broaden the line of merchandise that they have available, thereby gaining marketing efficiency and better public image. Another market reason for joining ventures is that local firms possess market information and the marketing know-how, which would take years for a foreign company to acquire. Such participation minimizes the risk of market failure and speeds the marketing effort. Joint ventures may also arise for financial and manpower reasons. Financially it is sometimes desirable to merge with foreign companies because the merger provides access to local capital markets and combines the resources and fund raising capabilities the companies have. It may also give access to a higher quality and more capable managerial manpower.
In phases one and two of the international planning process, countries may be dropped from further consideration as potential markets. Discuss some of the conditions in each phase that may exist in a country that would lead a marketer to exclude a country
In phase one of the planning process, there are a host of reasons why a country would no longer be considered. On balance, those countries that do not offer sufficient potential for further consideration will be eliminated. Some of the reasons why this may occur are that product acceptance within the country could not be achieved without extensive investment and new product development, and the firm does not have sufficient resources to make that investment; the legal structure may be such that it would be impossible for the company to function within that country. Competition in the country is such that, based on the company's objectives, resources, etc., it is felt that it would not be a profitable venture. In other words, any problem that would lead to minimum market potential, minimum profit, minimum return on investment, unacceptable competitive levels, unacceptable political stability, unacceptable legal requirements, etc., may all lead to the dropping of a country. While the major reasons for dropping a country in phase one center around general environmental constraints, the reasons that a country may be dropped in phase two center around the more specific questions of what cultural environmental adaptations are necessary for successful acceptance of the company's marketing mix, and will adaptation costs allow for profitable market entry. In phase two, the marketing mix is the focal point of analysis. Still, the final determination of whether or not a country is dropped depends upon the anticipated profitability of the market after necessary adaptations are made
Formulate a general rule for deciding where international business decisions should be made.
International business decisions should reflect the culture of the country in which they will be implemented. Thus the decision should be made as close to the country where it is to be implemented as possible.
Discuss some of the more pertinent problems in pricing industrial goods.
It is difficult to price industrial goods because..................
Old products (that is, old to the U.S. market) may be innovations in a foreign market. Discuss fully.
It is important for the marketer to appreciate that a product which has gained acceptance and is now at the top or perhaps even in the declining stage of the product life cycle, may be perceived in another culture as a new and, in fact, very innovative product. The marketer must guard against assuming that an "old hat" in one market which has achieved acceptance after many years of exposure and learning and adaptation on the part of the culture toward the product can be transferred to another culture with its learned acceptance intact. In fact, the "old hat" may be so outside the experience of the new market that the marketer will have to start at the beginning of the assimilation process.
Compare the organizational implications of joint ventures versus licensing.
Joint ventures involve the partners in a new venture and usually require significant inputs of both capital and management. In licensing, the companies retain separate identity. Usually the licensor is little affected by his licensing actions.
How can knowledge of diffusion of innovations help a product manager plan international investments?
Knowledge of the diffusion of innovation provides the international marketer with several important pieces of information. For example, a knowledge of the concept may provide the marketer with an estimate of the time it will take before his innovation would be accepted by a culture and therefore help him decide whether or not to make the necessary investment. It can also give him insights into how to accelerate the rate of acceptance of his product and the steps that he as a marketer can take to eliminate some of the newness thereby gaining more rapid acceptance of his product. By analyzing the product this way, the focus is on factors that contribute to resistance. The marketer can then estimate the possible rate of adoption and make necessary changes.
Discuss the benefits to an MNC of accepting the global market concept. Explain the three points that define a global approach to international marketing.
Major objective for MNC is the discipline imposed by the process. Once you've already planned, you have the framework for analyzing marketing problems and opportunities and a basis for coordinating info from different countrys markets. Process of planning as important as the plan itself because you must take all factors into account. 1. Define companys objectives and resources. May need to change objectives for foreign market, must reconcile differences. 2. Must decide if ready for level of commitment regarding money, amount of personnel, and determination to stay in market long enough to receive return on investments 3. Planning is essential to success.
Products can be adapted physically and culturally for foreign markets. Discuss.
Products can be adapted to a new culture in a variety of ways ranging from simple package changes to total redesign in the physical product. Some need for change becomes obvious with relatively little analysis. For example, a cursory analysis of a country will uncover the need to require electrical goods if it uses a different voltage system, or to indicate product simplification when the local level of technologies is not high, or the need for a color change if the present color violates local taboos.These changes can be spotted by looking at product usage patterns, the economy, etc.
Relationship marketing
The aspect of marketing products that depends on long-term associations with customers
Define strategic planning. How is strategic planning different for international marketing than domestic marketing?
Strategic planning is a systemized way of relating to the future. It is an attempt to manage the effects of external uncontrollable factors on the firm's strengths, weaknesses, objectives, and goals to attain a desired end. In addition, strategic planning is conducted at the highest levels of management and deals with products, capital, research, and the long and short-term goals of the company. The principles of planning are not in themselves different between international and domestic marketing, but the additional details of the operating environments of the MNC (host country, home, and corporate environments), its organizational structure, and the task of controlling a multi-country operation create differences in the processes of international planning. Strategic planning on an international level allows for rapid growth of the international function, changing markets, increasing competition, and the challenges of different national markets. The plan blends the changing parameters of external country environments with corporate objectives and capabilities to develop a sound, workable marketing program.
How will entry into a developed foreign market differ from entry into a relatively untapped market?
The differences between entering a fully developed market and an untapped foreign market are many and extremely varied. Some of these differences are channels of distribution that may or may not be developed. Governmental attitudes toward business, foreigners, and industry may be very liberal in a growing economy, while an established market may be very restrictive. Communication and transportation may be highly limited in untapped markets and highly developed in successful countries. The amount of capital, banks, and exchange-rate systems will vary according to the market's development. Finally, the degree and amount of competition will vary accordingly. To this list, endless factors could be added such as cost of entering the market, social customs, laws, etc.
Barter
The direct exchange of goods between two parties in a transaction
Discuss the distinguishing features of the Japanese distribution system.
The distinguishing features of the Japanese distribution system are: (1) a structure dominated by many small middlemen dealing with many small retailers—high density of middlemen, (2) channel control by manufacturers, (3) a business philosophy shaped by a unique culture, and (4) laws that protect the foundation of the system—the small retailer
Discuss how the characteristics that define the uniqueness of industrial products lead naturally to relationship marketing.
The long-term relationships with customers that define relationship marketing fit the characteristics inherent in industrial products. The first characteristic of industrial goods markets is the motive of the buyer: to make a profit. Secondly, the need for the latest technology means that it is not a matter of selling the right product the first time but rather of continuously changing the product to keep it right over time. The objective of relationship marketing is to make the relationship an important attribute fo the transaction, differentiating oneself from competitors. Thirdly, the Internet facilitates relationship building in ways such as website design, multilingual access, cultural considerations, etc. These characteristics of industrial products relate directly to relationship marketing.
Licensing
a means of establishing a foothold in foreign markets without large capital outlays; patent rights, trademark rights, and rights to use technological processes are granted in foreign licensing
Discuss product alternatives and the three marketing strategies: domestic market extension, multidomestic markets, and global market strategies.
The marketer has at least three viable alternatives when entering a new market: (1) sell the same product presently sold in the home market (Domestic Market Extension Strategy); (2) adapt existing products to the tastes and specific needs in each new country market (Multi Domestic Market Strategy); or (3) develop a standardized product for all markets (Global Market Strategy.) An important issue in choosing which alternative to use is whether or not a company is starting from scratch (i.e., no existing products to market abroad), or whether it has products already established in various country markets. For a company starting fresh, the prudent alternative is to develop a global product. If the company has several products that have evolved over time in various foreign markets, then the task is one of repositioning the existing products into a global product.
Price escalation
The pricing disparity in which goods are priced higher in a foreign market than in the home market (caused by added costs in exporting)
What are the three major components of a product? Discuss their importance to product adaptation.
The three major components of a product are: (1) its core, the physical product and all its functional features; (2) the packaging component that includes the physical package in which the product is presented, as well as the brand name, trademark, styling and design features, price and quality levels; (3) the support services component, which completes the product buyers receive and from which the bundle of satisfactions received are derived. This support services component includes repair and maintenance services, installation, delivery, warranty, spare parts, training and instructions, credit, and any other services related to the use and purchase of the product. The importance of each component, as well as the perceived component attributes are functions of culture. What may be desirable in one culture may be unimportant in another. A product is, in a large part, a cultural phenomenon; that is, culture determines the individual's perception of what a product is and what satisfaction that product provides. Therefore, in developing products for international markets, adaptation of that bundle of utilities or satisfaction received may be necessary to bring the product in line with the culture's needs. Such adaptation may require changes of any one or all of the product components as defined above.
Joint Venture
a partnership of two or more participating companies that have joined forces to create a separate legal entity; partnerships between legally incorporated entities
Parallel market
When products intended to be sold in one market, exclusively at a particular low price (often a government controlled low price), are sold in a second market (usually illegally) where market prices are higher
Strategic International Alliance
a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective
Franchising
a form of licensing in which the franchiser provides a standard package of products, systems, and management services, and the franchise provides market knowledge, capital, and personal involvement in management.
Corporate planning
long term, incorporating generalized goals for the enterprise as a whole
Tactical planning
pertains to specific actions and to the allocation of resources used to implement strategic planning foals in specific markets