International Marketing Exam Ch. 10-13

Continuous Innovation and example

"New and improved" versions of existing products and require less to develop than dynamically continuous innovations. They cause minimal disruption and require the least amount of learning. Ex. First time PC users getting a new PC.

CFR

(cost and freight) seller is not responsible at any point outside of factory

CIF

(cost, insurance, freight) named port of destination - risk of loss or damage of goods is transferred to buyer once goods have been passed the ship's rail

FOB

(free aboard ship) - seller's responsibility does not end until goods have actually been placed aboard the ship

FAS

(free alongside ship) -named port of destination - seller places goods alongside the ship and pays all charges up to that point

Market Penetration Pricing Strategy and example

-charging a low price in order to penetrate market quickly -appropriate to saturate market prior to imitation by competitors Calls for setting price levels that are low enough to quickly build market share. Many companies used this type of pricing in the Pacific Rim. Ex. Packaged food product makers, with products that do not merit patents, may use this strategy to get market saturation before competitors copy the product.

Deliver duty paid

-seller agrees to deliver the goods to the buyer at the place her or she names in the country of import with all cost, including duties, paid.

Ex-Works

-seller places goods at the disposal of the buyer at the time specified in the contract; buyer takes delivery at the premises of the seller and bears all risks and expenses from that point on.

3 Alternatives to Global Pricing:

1) Extension or Ethnocentric 2) Adaptation or Polycentric 3) Geocentric

4 Categories of Incoterms:

1) Origin Terms: Ex-works 2) "F-Terms"/"Pre-Main-Carriage Terms"- International Transportation Not Paid by the Seller: FCA | FCA | FAS | FOB 3) "C-Terms"/"Main-Carriage Terms" - International Transportation PAID by Seller: CFR | CIF | CPT | CIP 4) Delivered at Named Port or Named Place at Destination: DAF | DES | DEQ | DDU | DDP

Industrial Products 3 basic elements:

1) The manufacturers sales force 2) Distributers or agents 3) Wholesalers

Brands perform 2 functions:

1) They represent a promise by a particular company regarding a particular product, this is quality certification. 2) They enable customers to better organize their shopping experience by helping them seek out and find a particular product.

Maslow's Needs Hierarchy

5 Needs: Self-Actualization (Personal) External and Internal Esteem (Social) Social Safety (Physical) Physiological

Buyer Orientation

A composite measure of the amount of effort a customer expends, the level of risk associated with a purchase, and buyer involvement in the purchase.

Barter and example

A direct exchange of goods or services between 2 parties. No money is involved. * Pepsi barters soft drink syrup for Stolichnaya Vodka from the Soviets. * Cuba sends doctors to Venezuela in exchange for oil.

SwichTrading

A mechanism that can be applied to barter and countertrade. A third party steps into a simple barter or other countertrade arrangement when one of the parties is not willing to accept all the goods received in a transaction.

Offset and example

A reciprocal arrangement where the government in the importing country seeks to recover large sums of hard currency spent on expensive purchases such as military aircraft or telecommunications systems. * Lockheed Martin Corp. sold F016 fighters to the United Arab Emerates for $6.4 billion. In return, Lockheed agreed to invest $160 million in the petroleum-related UAE Offsets Group.

Co-Branding

A variation on combination branding in which two or more different company or product brands are featured prominently on product packaging or in advertising. Co-Branding can also diffuse brand equity.

Distributer

A wholesale intermediary that typically carries product lines or brands on a selective basis.

Examples of "experiential packaging":

Absolut Vodka Altoids breath mints Godiva chocolates

Product Adaptation-Communication Extension and example

Adapting the product to local use or preference conditions while extending, with minimal change, the basic home-market communications strategy or brand name. Ex. When Kraft Foods launched Oreos in China, Oreos were too sweet for them and the price was too high. Oreos were then reformulated as a less-sweet, chocolate-covered, 4-level wafer filled with vanilla and chocolate cream. Packages contain fewer cookies but are now cheaper. Today, Oreo is the best-selling cookie brand in China.

Law of one price and example of this and contrast

All customers in the market get the best product for the best price. Ex. A Boeing 787 costs the same worldwide. In contrast- Fragmented beer market: Budweiser, the leading global brand , has less than 4% of market share. The nature of the beer market explains why, for example, a 6-pack of Heineken varies in price by as much as 50%.

Negotiated Transfer Prices

Allowing the organization's affiliates determine the price amongst themselves.

Nonword Mark Logo

Also known as a brand symbol, like the Nike swoosh, McDonald's arches

Agent

An intermediary who negotiates exchange transactions between two or more parties but does not take title to the goods being purchased or sold.

Place Utility and example

Availability of a product or service in a location that is convenient to a potential customer. * Coca-Cola

Time Utility

Availability of a product or service when desired by a customer.

Information Utility

Availability of answers to questions and general communication about useful product features and benefits.

Form Utility

Availability of the product processed, prepared, in proper condition and/or ready to use.

Counter-trading Options:

Barter Counter purchase or parallel trading Offset Compensation trading or buyback Switch trading

Cost-Based Pricing

Based on an analysis of internal (materials, labor, testing, etc) and external cost. Frequently use this method when selling goods outside their home-country markets.

Product-Communication Adaption (Dual Adaption) and example

Both the product and one or more promotional elements are adapted for a particular country or region. Ex. Cleaning product in Italy

Price Transparency

Buyers will be able to comparison shop easily because goods will be priced in euros as opposed to marks, francs, or lira.

Tangible and example

Can be assessed in physical terms such as weight, dimensions, or materials used. Ex. A large flat screen TV with a built-in tuner capable of receiving high-def TV signals and delivers 1080p resolution. The tangible, physical features and attributes translate into benefits that enhance the enjoyment of watching HDTV.

Product

Can be tangible or intangible

What is the quintessential global product and global brand?

Coca-Cola

Word Mark Logo

Coca-Cola written in a distinct script

Business-to-consumer marketing

Consumer channels are designed to put products in the hands of people for their own use.

Buyer Orientation Framework Categories:

Convenience Preference Shopping Specialty Goods

Countertrade

Countertrade occurs when payment is made in some form other than money.

Global marketers must deal with a number of environmental considerations when making pricing decisions:

Currency fluctuations Inflation Government controls and subsidies Competitive behavior

Inflationary Environment and Causes

Defined as a persistent upward change in price levels Can be caused by an increase in the money supply. Can be caused by currency devaluation

Market-Based Transfer Price

Derived from the price required to be competitive in the global marketplace. Represents an approximation of an arm's-length transaction.

Target Costing

Determine the segment(s) to be targeted, as well as the prices that customers in the segment will be willing to pay. Compute overall target costs with the aim of ensuring the company's future profitability. Allocate the target costs to the products's various cost and the estimated actual production cost. Calculate the gap between the target cost and the estimated actual production cost. Obey the cardinal rule: If the design team can't meet the targets, the product should not be launched.

Grey Markets impose several costs or consequences on global marketers: example

Dilution of exclusivity Free riding Damage to channel relationships Undermining segmented pricing scheme Reputation and legal liability * Selling drugs out of date leads to lawsuits.

The types of policies and regulations that affect pricing decisions are:

Dumping legislation Resale price maintenance legislation Price ceilings General reviews of price levels

Flexible Cost-Plus Pricing

Ensures that prices are competitive in the contest of the particular market environment. This approach is frequently used by experienced exporters and global marketers.

Extension Pricing and example

Ethnocentric Per-unit price of an item is the same no matter where in the world the buyer is located. Importer must absorb freight and import duties. Fails to respond to each national market. * Opel - Holden * When Mattel adapted US products for overseas markets, little consideration was given to the price levels that would result when US prices were converted to local currency prices. As a result, Holiday Barbie and some other toys were overpriced in global markets.

Benefits of strong brand equity:

Greater loyalty Less vulnerability to marketing actions Less vulnerability to marketing crises Larger margins More inelastic consumer response to price increases More elastic consumer response to price decreases Increased marketing communication effectiveness

Global Brand and exmample

Has the same name and, in some instances, a similar image and positioning throughout the world. Ex. Nestle, Gillette, BMW, Visa

Electronics are what kind of purchases according to buyer orientation?

High-involvement purchases, many shoppers compare brands before making a decision.

Intangible and example

Includes the status associated with product ownership, a manufacturer's service commitment, and a brand's overall reputation or mystique. Ex. When shopping for a new TV, many people want "the best": they want a TV loaded with features (tangible product elements), as well as one that is"cool" and makes a status statement (intangible product element)

Peer to Peer Marketing and example

Individual consumers market products to other individuals. The Internet and other related media are dramatically altering distribution * Interactive TV may become a viable direct marketing channel in the future. * eBay pioneered peer to peer marketing * Helped Disney and IBM set up auction sites for B2C auctions. * Interactive TV is coming when homes are wired for 2-way.

Geocentric Pricing

Intermediate course of action Recognizes that several factors are relevant to pricing decision: - Local costs - Income levels - Competition - Local marketing strategy * Watch Strategy In A Can - Pricing Made Easy (about pricing Coke) the change is location and the usage/utility, the reason you need it.

Incoterms

International Commercial Terms

Business-to-business marketing

Involves industrial channels that deliver products to manufacturers or other organizations that then use them as inputs in the production process or in day-to-day operations.

Compensation Trading or Buyback

Involves two separate and parallel contracts. - In one contract, the supplier agrees to build a plant or provide plant equipment, patents or licenses, or technical, managerial, or distribution expertise for a hard-currency down payment at the time of delivery. - In the other contract, the supplier company agrees to take payment in the form of the plant's output equal to its investment (minus interest) for a period of as many as 20 years.

Packaging aesthetics are particularly important to the?

Japanese In Japan, "a book is judged by its cover"

Dynamically Continuous Innovations and example

Less disruptive. An intermediate category of newness that requires less learning on the part of the consumers because they share certain features with earlier generations while incorporating new features that offer added value, such as improvement in performance or greater convenience. Ex. The invention of the CD improved music listening but didn't require significant behavioral changes.

3 Major Alternative Approaches can be applied to transfer pricing decisions:

Market-based transfer price Cost-based transfer pricing Negotiated transfer prices

Door to Door Selling

Mature form in the US Growing popularity in China * AIG insurance, Mary Kay, Avon, Tupperware, Amway. * 1/2 of all cars in Japan are sold door to door.

Rigid Cost-Plus Pricing

Means that companies set prices without regard to the eight pricing considerations. They make no adjustments to reflect market conditions outside the home country. The advantage of this is its simplicity. The disadvantage is that this approach ignores demand and competitive conditions in target markets; the risk is that prices will be set either too high or too low. This is attractive to inexperienced exporters.

Global Product

Meets the wants and needs of a global market. A true global product is offered in all world regions, including the Triad and in countries at every stage of development.

Vertical Price Fixing

Occurs when a manufacturer conspires with wholesalers/retailers to ensure certain retail prices are maintained.

Horizontal Price Fixing and example

Occurs when competitors within an industry that make and market the same product conspire to keep prices high. * Gas prices

Parallel Importing

Occurs when product is in short supply, when producers use skimming strategies in some markets, and when goods are subject to substantial mark-ups.

International Products and International Brands and example

Offered in several markets in a particular region. Ex. A number of "Euro Products" and "Euro Brands" such as Daimler's two-seat Smart car are available in Europe and have been recently launched in the United States.

Extension Strategy

Offering a product virtually unchanged in markets outside the home country.

Skimming and example

Often part of a deliberate attempt to reach a market segment that is willing to pay premium price for a particular brand or for a specialized or unique product. May occur at the introduction stage of product life cycle Luxury goods marketers use price to differentiate products Ex. This strategy is used consistently in the consumer electronics industry.

Local Product or Local Brand

One that has achieved success in a single national market. Local products and brands represent the lifeblood of domestic companies.

Brand Image and example

Perceptions about a brand as reflected by brand associations that consumers hold in their memories. Apple is a good one. Apple and Nokia both offer smart phones. Apple CEO Steve Jobs was a constant media presence and a master at generating buzz. The products receive stellar reviews and reinforce the brand's cool and hip image. By contrast, Nokia's brand image is more heavily skewed toward technology; few Nokia users are likely to know the name of the Nokia CEO.

Country-of-origin effect and examples

Perceptions about and attitudes toward particular countries often extend to products and brands known to originate in those countries contribute to the country-of-origin effect. They become a part of a brand's image and contribute to brand equity. Germans = quality engineering, Italian = style, French = chic

At the most basic level of human existence, what needs need to be met?

Physiological and safety needs must be met. People need food, clothing, and shelter, and a product that meets these basic needs has potential for globalization.

Major Categories of Channel Utility:

Place utility Time utility Form utility Information utility

Adaptation Pricing and good/problem example

Polycentric Permits affiliate managers of independent distributors to establish price as they feel is most desirable in their circumstances. Sensitive to market conditions but creates potential for gray marketing. * AIDS drugs meant for Africa are smuggled into Europe because they are priced lower in Africa. * IKEA policy is to have the lowest price on comparable products in every market, managers in each country set their own prices. IKEA prices are lowest in the US. Prices are higher in Italy.

The Global Manager must develop systems and policies that address:

Price floor (minimum price), Price ceiling (maximum price), Optimum prices (function of demand)

Transfer Pricing and example

Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction. * Toyota subsidiaries both sell to, and buy from, each other.

Companion Products

Products whose sale is dependent upon the sale of primary product -Video games are dependent upon the sale of the game console "if you make money on the blades, you can give away the razors" Cellular service providers subsidize the phone and make money on calling plans.

Worldwide, consumers, corporate buyers, governments, activists, and other groups associate global brands with 3 characteristics:

Quality signal Quality myth Social responsibility

Companion Products aka:

Razors and Blades Pricing

Price Fixing

Representatives of two or more companies secretly set similar prices for their products. This is an Illegal act because it is anticompetitive.

Brand Equity and example

Represents the total value that accrues to a product as a result of a company's cumulative investments in the marketing of the brand. The value of megabrands such as Coca-Cola and Marlboro runs in the tens of billions of dollars.

Dumping

Sale of an imported product at a price lower than that normally charged in a a domestic market or country of origin. Occurs when imports sold in the US market are priced at either levels that represent less than the cost of production plus 8% profit margin or at levels below those prevailing in the producing countries Have to prove discrimination and injury.

Mid-level needs include:

Self-respect, self-esteem, and the esteem of others. Ex. Luxury goods

Product-Communication Extension (Dual Extension) and example

Selling the same product with virtually no adaptation, using the same advertising and promotional appeals used domestically, in two or more country markets or segments. Ex. Apple launched its iPhone in the US. In the following months, it was gradually rolled out in several more markets, including France and the UK. When Apple brought its second-generation iPhone to market 1 year later, it was launched in 21 countries simultaneously.

Combination or Tiered Branding

Sony Walkman is an example where a corporate name (Sony) is combined with a product brand name (Walkman).

Product Extension-Communication Adaption and example

The appeal is that it is relatively low cost. Because the product itself is unchanged, expenditures for research and development, manufacturing setup, and inventory are avoided. Ex. In Hungary, Slovakia, and other Central European countries, SABMiller positions Miller Genuine Draft as an international lifestyle brand rather than an American brand. The communication adaptation strategy was chosen after focus group research showed that many Europeans have a low regard for american beer.

Innovation and example

The process of endowing resources with a new capacity to create value. Ex. Low cost eye-glasses that can be assembled in minutes, Eye glasses with transparent membrane lenses filed with clear silicone fluid. Using manual adjusters, users can increase or decrease the power of the lenses by regulating the amount of fluid in them.

Market Holding Strategy

The use of the flexible cost-plus method to reduce prices in response to unfavorable currency swings.

Adaption Strategy

This involved changing elements of design, function, or packaging in response to needs or conditions in particular country markets.

Brand Extensions and example

This strategy entails using an established brand name as an umbrella when entering new businesses or developing new product lines that represent new categories to the company. Ex. The Virgin brand has been attached to a wide range of businesses and products. Virgin is a global brand, and the company's businesses include an airline, a railroad franchise, retail stores, movie theaters, financial services, and health clubs.

Grey Market Goods

Trademarked products that are exported from one country to another and sold by unauthorized persons or organizations.

Counter Purchase or Parallel Trading

Two separate contracts are signed. - In one contract, the supplier agrees to sell products for a cash settlement. - In the other, the supplier agrees to purchase and market unrelated products from the buyer. A separate, parallel contract. Each delivery in an exchange is paid for in cash.

Cost-Based Transfer Pricing

Uses an internal cost as the starting point in determining price.

New Product Development and example

When such products are successful, they create new markets and new consumption patterns, and have a disruptive impact on industry structures. A product's newness can be assessed in terms of its relation to those who buy or use it. Newness may also be organizational, as when a company acquires an already existing product with which it has no previous experience. Ex. VCR's impact in the 70s, when the first personal computer was invented, Apple is amazing at new product introductions.

Express Waranty

Written guarantee that assures the buyer that he or she is getting what he or she has paid for or that provides recourse in case a product's performance falls short of expectations.

Visual aesthetics

color or shape of a product, label, or package

Global markets

diamonds, crude oil, commercial aircraft, integrated circuits

Aesthetic style

the degree of complexity found on a label