International Marketing

Indirect Exporting

-Company uses home country intermediaries who, in turn, sell product overseas. -Lowest risk. -Lowest control.

Webb-Pomerene Associations of Exporters

-Competing companies that join resources and efforts to export internationally. -exempt from antitrust scrutiny. -present especially where cartels are active.

Agents and Brokers

-Could act as the manufacturer's sales representatives and are paid on commission. -Could take on the role of managing agents (also known as compradors), with an exclusive arrangement with the company, representing it in the foreign market; they are paid as a percentage of sales.

International Marketing Future Perspectives

-E-commerce -Population -Integrated Marketing Communications

The Marxist-Leninist Model

-Similar to Rostow model in first stages. -Subsequent stages depicted as a class struggle ending in revolution. -Advancement is a function of control over the means of production, production outcomes, resource allocation, and the development of a mindset devoid of materialist needs.

International Transportation

-The choice of transportation determines whether products arrive at the international destination on time and in good condition. -The cost of transportation is also essential because transportation costs can increase the product price -Important is the transportation infrastructure of the country where the company is doing business

Alternative Distribution Structures: Network Marketing

-Using acquaintance networks for the purpose of both sales and distribution -Have potential in emerging markets.

Transaction Exposure

-When the future cash transactions of a firm are affected by exchange rate fluctuations -identify the degree of transaction exposure -decide whether to hedge the exposure -choose technique for hedging

International Logistics

-account for a large percentage of GDP (more than 10 percent in the United States), making logistics the single highest operating cost.

International Retailing Defined

-all the activities involved in selling products and services to final international consumers for their personal consumption. -It involves operations of international retailers beyond home-country borders, along with operations of local retailers in different countries worldwide.

Warehouses

-are often located in free trade zones -may be customs privileged facilities -as well as facilities where product assembly and packaging may be conducted

Global Marketing

-coordinates its marketing activities across different countries without focusing primarily on national or regional segmentation. -emergence of uniform global consumer segments. -efficient global allocation of company resources. -extensive commitment to international marketing

Incoterms or international commerce terms

-international sales terms published by International Chamber of Commerce (ICC) -most commonly used terms in international trade. -reduces or removes altogether uncertainties arising from different interpretation

In most industrialized countries, distribution centers are an option for the international firm; they perform the following functions:

-receive goods from different producers. -take orders from buyers. -distribute goods promptly. -speed up warehousing and delivery by channeling distribution to a hub.

Other Tax Incentive-Based Structures for Internationalization

-setting up a Foreign Sales Corporation (FSC) has been a popular approach to allowing a portion of the firm's foreign-source income to be exempt from U.S. income tax. -It was followed by the Extra Territorial Income Act. -Both were repealed in 2004 by the U.S. Senate as a result of WTO complaints regarding what essentially were export subsidies.

Export merchants

-take title to and possession of the products they carry. -Responsible for shipping and marketing the products in the target market. -Carry competing brands. Examples: Export jobber and Norazi agent

Promotional tie-in

2 products/services within same offer (family pass to zoo, museum, park and train pass)

To avoid exchange risk

A US firm may avoid transaction exposure by insisting that the buyer pays in $US. The transaction exposure is not eliminated, but rather is shifted to the buyer. Buyer may not accept the transaction exposure.... by not buying your product.

Television Home Shopping (QVC, HSN)

A venue for selling merchandise to consumers in their homes using cable channels. Examples: infomercials and direct response advertising. Popular in North America and Europe, and becoming increasingly popular in Asian markets.

Low-income countries can maintain some control due to

Ability to allocate local resources (raw materials, labor). Have control over access to local consumers. Have the ability to lessen economic gap by imposing barriers to international corporations.

The top 100 multinationals...

Account for 7 percent of world economic activity. Control 20 percent of all foreign assets. Employ 6 million workers.

Legal issues

After a sale is closed, companies sign contracts that address the terms of the transaction, costs involved, and the term of the relationship. In many countries, a written contract does not mean much: Sellers and buyers can readily choose to ignore the agreement without any penalty. The legal systems may endorse contracts but not defend them. In many cultures, a contract may have little value, while someone's word or a handshake may be fully reliable.

Traditional Society

Agriculture is the dominant sector. Low productivity and low per-capita output. Little economic change and technological improvement.

Descriptive Research

All research methods observing or describing phenomena

Retail Formats: General Merchandise Discount Stores Types

All-purpose - offer wide variety of merchandise and limited depth. Category specialists (category killers) - carry a narrow variety of merchandise and offer a wide assortment.

Consumer protection

Allows favoring local over international firms by applying rigid standards, quality controls, and product origin requirements.

Advantages of Countertrade:

Allows firms from high-income countries to sell their products in markets that would not be accessible otherwise. Offers low-income countries an opportunity to participate in trade, while allowing their consumers access to consumer products.

globalization advantages

Allows for economies of scale Encourages global branding Global brands are more prestigious Effective in meeting the needs of global consumers Effective in meeting consumer needs of higher quality and lower price Facilitated by international travel

regional standardization advantages

Allows for economies of scale. Addresses consumer preferences for higher quality and lower price. (Mercedes A-B-C class) Facilitated by international travel within the region.

Infant industry argument:

Allows low-income countries to protect new industries from international competitors.

Internet Retailing

Also known as interactive home shopping or electronic retailing. The use of the Internet as a venue for selling merchandise is practiced both by dot-com companies, as well as traditional retailers attempting additional market penetration. Access to international markets is facilitated by the Internet.

Home-Country Legislation Affecting Multinationals Operating Overseas

Anti-corruption legislation Antitrust legislation

The World Trade Organization allows governments to regulate antidumping activity in their own national markets by imposing

Anti-dumping duties - duties that must be paid by firms as a punishment for engaging in unfair price competition. Countervailing duties - duties imposed on subsidized products imported into the country.

Multinational companies in particular experience negative publicity due to:

Antiglobalization sentiments that are often expressed by targeting a multinational company. U.S. companies may be perceived as a means to subjugate the local market economically.

Export/Import (Ex-Im) Bank

Assists export financing, guarantees loans

Issues with data

Availability Reliability (extent to which data is likely to be free from random error) Validity (the extent to which data collected is free from bias)

National defense

Can result in banning of publications or products that attempt to destabilize the government or that bring outside influence.

FINANCING

Cash in advance Open account Consignment with open account Letter of Credit / Aval Pre-export financing Int'l Factoring / Forfaiting

In some countries in the world

Certain campaigns may be illegal - for example: Buy one, get one free - Germany Sweepstakes based on pure chance - Holland Promotions may have to be printed in multiple languages. (Puerto Rico) Number of responses may overwhelm the company and the postal system. Advertisements on TV may not be available as some times of the day

Buyer-Seller Interactions

Certain selling approaches work better than others Hard sell is inappropriate in many countries in Asia. Eye-to-eye contact may be seen as aggressive. Business cards are handed with both hands and received with both hands in certain cultures to convey respect. Negotiation differs depending on culture; in many environments, it is expected that a personal relationship is established before the negotiation

The medium:

Channel of communication

Combating Parallel Imports by

Charging similar prices worldwide. Creating product for low-price markets not as attractive to up-market Complicating the repair/servicing process for gray market goods. Informing consumers. (may not have warranty) Litigating (may be legal in some countries)

Superstores

Combination stores (food and drug). Hypermarkets - combine supermarket, discount, and warehouse retailing. International examples: Tesco Extra, German Metro.

Legal Systems

Common Law Code (Civil) Law Islamic Law

Experience Transfers

Companies benefit from lessons they learn in different parts of the world and transfer their knowledge to other markets they serve.

International Publicity

Defined as any type of communication, personal or non-personal, about a company, or the company's products. It is a communication that the company does not pay for and the message can be either positive or negative. Due to its independent nature, it is considered more credible than any other component of the promotional mix. Chinese dog food, toys, seafood, prison workers The company can influence publicity through public relations.

Parallel imports (gray markets)

Defined as distribution systems that are not authorized by the manufacturer: products purchased in a low-price market are diverted to other markets. Hurt company image and bottom line.

Trade Promotion

Defined as promotions aimed at other businesses and not at the final consumer. Such promotions include trade shows and exhibitions, which are business-to-business promotions that are usually held annually in formats where companies purchase exhibit space to display and demonstrate their offerings to the target market.

Distribution Centers

Designed to speed up warehousing and delivery by channeling distribution to a hub.

The Natural Environment of International Marketing

Determines access to markets, production and productivity capability, and trade. -Geology and the Shortage of Natural Resources -Topography and Access to Markets -Hydrology -Climate -Population -Environmental Quality -The technological environment

Percent-of-Sales Method

Determines the total budget allocated to advertising based on past or projected sales.

Socialism

Disappearance of private property; replaced with state property

International Transportation types

Distribution Centers Transportation Firms Freight Forwarders and Customs Brokers Government Agencies

Feudal society

Dominance of feudal lords, who own the land and its dwellers

Slavery-based society

Dominant tribes claiming ownership of conquered tribes and their property.

Firms in high-income countries

Dominate the world economy. Allocate resources based on market potential, rather than based on local needs

Evaluation of single export sale

If a US company is exporting/selling a product denominated in foreign currency (ex Japanese Yen), and the dollar strengthens against the Yen but weakens against all other currencies... Then........ For this export, the dollar has strengthened against the yen, so the US company will received LESS US dollars. (In evaluating this small single sale, the impact of the other currencies does not matter and will not affect the exporting company)

Currency fluctuation

If the Canadian dollar which costs US$1.00 increases price to US$1.05, (the cost of) the Canadian dollar has strengthened (vs the US$) Logic: If the Canadian dollar has strengthened vs. the US$, THEREFORE the US$ has weakened vs the Canadian dollar.

Management internationalization philosophy affects decisions such as...

Impact on resource allocation, response to global threats/opportunities

Environmental Similarity with the Home Country

In countries similar to the firm's home country, it is best to have an organization that integrates operations between the home and the host countries.

Common Regional Traits and Regional Integration

In countries that share a language, religion, or other cultural similarities, companies can organize their operations with a regional focus.

Environmental Stability

In countries with unstable political environments, companies must have an organizational structure that allows the firm to quickly adapt to new environments.

Expatriate Obstacles

Factors such as restrictions imposed on interactions with foreigners in some countries impede expatriates' immersion in the local culture and acceptance of their new environment. Gravitating toward home-country expatriates and relying extensively on expatriate groups and forums (websites that unite expatriates in a region, newspapers, etc.) will also impede immersion in the local culture.

All-you-can-afford

Firms allocate a total amount that they can afford to advertising. This strategy is used by small and medium-sized companies entering new international markets. This approach, however, ignores important strategy issues.

Organizational Design for International Operations: Firm Factors

Firms with extensive international involvement are more likely to have an organizational structure with regional divisions. Companies not dedicated to international markets are more likely to have only a small international department if they have international operations. In general, companies are likely to maintain their organizational structure when they go international.

Air

Flexibility of Area Coverage: High Cost: High Speed: Highest Product Examples: Jewelry, electronic, expensive low-volume products

Trucks

Flexibility of Area Coverage: Higher Cost: High Speed: Higher Product Examples: Consumer goods, perishable items, automobiles

Water

Flexibility of Area Coverage: Low Cost: Low Speed: Low Product Examples: Grain, gas, forestry products, cement, and fertilizer

Rail

Flexibility of Area Coverage: Medium Cost: Medium Speed: Lower Product Examples: Coal, gas, forestry products, grains, automobiles

Product user positioning

Focuses on the product user, rather than on the product, thus associating the product with a certain segment of the market. (A and F)

Disadvantages of Countertrade:

Foreign lenders may have prior claim on goods offered. Countertrade limits profit margins, creates economic inefficiency, and distorts prices. Products traded may be of inferior quality. Exchange partners can become competitors. Involves long and expensive negotiations.

Premiums:

Free product with purchase (cereal toy, burger toy, "Romance" perfume

High-Income Countries

GNI per capita of US $10,726 and above Well-developed industrial and service sectors. Markets in maturity stage Consumers with. established preferences Markets are characterized by intense competition.

Middle-Income Countries

GNI per capita of US $875 - $10,725 Developing rapidly. Many are countries with emerging markets

Low-Income Countries

GNI per capita of of less than US $875 Primarily agrarian.

nationalization

Governmental gaining of private industry for public use

expropriation

Governmental seizure of a company's assets in exchange for compensation that is generally lower than market value.

Voluntary import expansion

Governments agree to allow imports from a particular country as result of pressure from that country. Increases foreign access to a domestic market. Increases competition and reduces local prices.

Employment protection and protection of markets with excess labor

Governments erect trade barriers in markets with high levels of excess labor and underemployment to: prevent imports prevent efficient international companies from taking over local enterprises and firing excess workers.

Automatic import licenses

Granted freely. Facilitate import surveillance. Discourage import surges. Place administrative and financial burdens on importer.

Gray Market/Parallel Imports as a Competitive Threat

Gray markets, or parallel imports are distribution systems that are not authorized by the manufacturer. They are used to divert products from low-price markets to higher-price markets. The diverting party benefits from the difference in price and the manufacturer gains lower profits.

Infrastructure issues

In high-income countries, telemarketing is often used in selling products. For telemarketing to be successful, companies need access to a reliable telephone system, which may not be available in low-income countries.

Characteristics of Emerging Markets

High political stability. Sound currency, low inflation. Pro business, fiscally-conservative, transparent government policies, and sound corporate law. Guarantees for the repatriation of dividends and capital. Liquid securities market reflecting fair prices. Work ethics and a culture of integrity.

Advertising Agency Decisions Firms have the following options:

Hiring Local Advertising Agencies Hiring International Advertising Agencies

International Personnel Issues

Hiring decisions are a function of the company's involvement in the market. Market presence, entry mode and commitment to market determine: Size of the sales team. Types of sales representatives. Companies using home-country intermediaries, such as trading companies or an export management companies, rely on the sales force of the intermediary for international sales and limit sales activity to the domestic market. Personal selling becomes a very important component in international marketing communications for companies using host-country intermediaries and those companies directly involved in the international target market.

Competitive Environment

In highly competitive environments, a decentralized organization is optimal because it allows for the most rapid reactions to competitors' moves. High flexibility is essential to react to changes quickly.

Media Costs vary depending on:

Income per capita of target market. Extent of competition for media from advertisers. Firm status. Translation costs.

Vending machines

Increasing in popularity. Technology is facilitating an interactive consumer experience. Different formats worldwide, especially popular in Japan.

arbitration

Independent Third Party binding

Should be distributed to key stakeholders and media of influence on a regular basis to communicate about the company and its products to the following publics

Home-country, local, and other international consumers. Trade. Stockholders. Home-country government and other governments where the product is available. Community.

mediation

Independent Third Party non-binding

INCOTERMS

ICC 1936 Determine where ownership, title, and charges belong FOB Origin - FOB Destination FAS - DDR (Delivered duty paid)

Product testing

Identifies the extent to which the product conforms to local tastes and performs as expected in the local environment

Product Placement

Involves placing brands in movies and in regular television programming to promote the product to viewers (EU, disclaimers).

Dumping as a Competitive Threat

Involves selling products below cost to get rid of excess inventory or to undermine competition. In other examples, a foreign company may impose high prices on the products it sells in the home market, where it has a monopoly status as a result of import barriers; the company can then use those high profits to sell at much lower prices in foreign markets in order to build market share and drive out competitors.

Test Marketing

Involves testing the product's performance in a limited area to project its performance in the entire target market

Primitive society

Joint ownership of primitive means of production. Production centered on agricultural tasks.

Prices Higher in the Home Market

Justified by factors such as: Lower labor or material costs in the international market. Strong local competition in the international market A lower buying power of host-country consumers Goals to increase market share by using a penetration pricing strategy in the international market.

Prices Lower in the Home Country

Justified by such factors as: Lack of cost advantages to producing overseas. A lack of international competition. Limited market potential.

Trade Secret

Know-how, formulas, and special blends that are not registered and are thus not protected by law.

Factors Influencing Intellectual Property Violations

Lack of appropriate legislation. Lax enforcement. Unavailability of authentic products. High prices for authentic products that limit their accessibility to local consumers. Cultural Factors

High Mass Consumption

Leading sectors shift toward durable goods Surge in per-capita income Increased allocation to social welfare Masses can afford products beyond necessities

Issues in International Retailing

Legislation and Regulation Taxation and Cross-Border Shopping Variation in Retail Practices: A Consumer Perspective Variation in Retail Practices: Salespeople and Management

Media Restrictions

Limiting the number and types of advertisements. Cultural differences (China- Fem Hygiene prod) Clustered ads (Europe, South America). Media scheduling.

Host-Country Nationals (Locals)

Local salespeople who work in the home country for an international corporation. Understand the business environment and business practices in the company's home country and have established relationships in the local business and government community. Well trained technically. Willing to return to home country to work for the multinational firm.

Controlling Marketing Operations Challenges

Local units and a regional focus add levels that complicate management. communication, and evaluation processes. External environment changing at different rates. Controls are necessary to ensure that international company operations follow the company's goals and objectives. Controlling international operations is a complex task that necessitates the use of appropriate formal and informal controls.

Organizational culture

Low context cultures use formal, direct communication that is verbally expressed. High context cultures use extensive nonverbal information to convey the message. Individual personality also comes into play.

modular adaption

Offer parts (modules) that can be assembled worldwide in different configurations, depending on market needs.

Online Sales Promotion

Online sales promotions are quickly becoming a pervasive mode of communication with potential consumers. Most of the ad agencies now serve their clients by providing to target consumers extensive interactive sales promotion that is in line with the company's other types of communications. Examples: Sweepstakes Coupons Promotional Pricing

Sales Forecasting: Jury of Expert Opinion

Opinions of different experts about future demand

Consumer Sales Promotion

Point of Sale Displays Free Samples - Food, train stations Coupons - Direct mail, on-line or handed out, cell phones Gifts - different Intl Limits Sweepstakes - Ikea Contests Loyalty programs - Frequent flyer miles, frequent hotel, credit cards

Political risk signals

Poor economic performance. Repression of ethnic groups and/or general repression by the elite. Internal diversity and incongruent interests. Radically changing government structures. Fierce nationalist sentiment.

Non-Tariff Barriers Examples

Quotas Orderly market arrangements Non-automatic import licenses Automatic import licenses

The receiver:

Receives the message and decodes it into meaning.

Transitional Society

Precondition for take-off: Manufacturing emerges, but is characterized by low productivity and low per-capita output. Increased productivity in agriculture.

Big Emerging Markets

Present the greatest potential for international trade and expansion. Set the pace for the economy in the region. Examples: China, India, Argentina, Brazil, Mexico.

Antitrust legislation

Prevent anticompetitive activities such as the creation of monopolies and cartels.

Anti-corruption legislation

Prevent multinational corporations from using unethical means to obtain competitive advantage in a particular market.

Standardization, Scale Economies, Cheap Labor

Price competition during the maturity stage of the product life cycle drives firm to new international markets in search of cheap labor.

Penetration Pricing

Price lower than competitors in order to quickly penetrate the market at competitors' expense.

Local Pricing

Prices set to meet purchase power of consumers and to account for differences in distribution systems, market position, and taxes.

Skimming

Pricing above competitors' prices when competition is minimal. Focus on quality, uniqueness and status.

The Marxist-Leninist Model Stages

Primitive society Slavery-based society Feudal society Capitalism Socialism Communism

Publicity includes:

Print articles about the company. Broadcast messages about the company. Word-of-mouth communication about the company and/or its products. The Internet increases publicity venues.

6 primary Firm-specific drivers

Product Life Cycle, High New Product Development Costs, Standardization, Economies of Scale, Cheap Labor, Experience Transfers

Ability to Keep Track of Costs

Product components are often manufactured in different countries and the final product is assembled in yet other countries. These products are then sold all over the world, making it difficult to keep track of product costs

Pricing decisions are affected by a number of factors: Internal

Production Facilities Ability to Keep Track of Costs:

Government Agencies

Promote national security. Promote international involvement of local firms. Provide financing and insurance for high risk ventures.

Global Campaigns

Promotional campaigns that are rarely attempted by companies, but that can be used effectively in markets where multiple languages are spoken by using one message delivered in one unifying language (via logos and visual brand imaging). Can be more global if emphasizing logo / well known brand (Johnny Walker Black)

Arguments for Protectionism

Protection of markets with excess productive capacity Employment protection and protection of markets with excess labor Infant industry argument Natural resources conservation and environmental protection Consumer protection National defense

Patent

Protection of the rights of the inventor or of the firm to use and sell the invention for a specified period of time.

Modular Campaigns

Provide a template that can be varied from market to market. Campaign centered around one theme. Message is customized for each market. McDonalds's in Europe: same promotion, but allowed each country to determine mix of toys, spinners or CD's giveaways

Translate and be careful about translations.

Publishers are more likely to pick up a story if they have a good translation of the information.

Using a standardized strategy worldwide:

Reduces costs. Allows for more effective coordination. Represents a better fit with the trend of shrinking product life cycles. Common profit preferences.

Fluctuating exchange rates

Represent a challenge to multinational firms. Firms can cover any possible losses in exchange rate fluctuations by including a percentage that accounts for such fluctuations.

Warehouse Clubs (Wholesale Clubs)

Require members to pay an annual fee. Operate in low-overhead, warehouse-type facilities. Offer limited lines of brand-name and dealer-brand merchandise at a substantial discount.

Non-automatic import licenses

Restrict imports of a given product or from a certain country.

Advertising Regulations

Restrictions on comparative advertising (EU). Restrictions on advertising to children (EU). Rules for advertising vice products; for example, cigarette advertising is banned in certain media and not in others - and the ban is not consistent from one country to another. (EU, US) Religious belief limits what you may or may not advertise. Religious belief limits symbols images.

Government Barriers

Restrictions placed on international corporations by imposing: Tariffs Import quotas Other limitations, such as restrictive import license awards.

Variation in Retail Practices: A Consumer Perspective

Retail practices vary from one market to another depending on culture and market preferences. Example: In the U.S. consumers purchase products in bulk and less frequently. In Japan and Europe, consumers purchase products in smaller quantities and on a daily basis.

Specialty Stores

Retailers offering a narrow product line and wide assortment.

Islamic Law

System of law based on the interpretation of the Koran, Islam's holy book, and the practices and sayings of the Prophet Muhammad. Establishes rules for business practices that can affect firm operations. Used in North Africa, the Middle East, the South Asia

Local Campaigns

Tailored to local needs. Retailer cooperation is of particular importance. Gain in importance and impact in markets not reached by other media. Bounty paper towels in Holland: point of sale displays and mailed sample paper towels to households Give free samples of Coke light in major grocery stores in Holland

Risks related to government trade policies

Tariffs and quotas. Exchange-rate controls and export/import license requirements. Other trade barriers.

Tools of Government Protectionism

Tariffs, Non-Tariff Barriers

Tariffs

Taxes imposed on goods entering a particular country to: Discourage imports of particular goods. Penalize countries that are not politically aligned with the importing country. Generate revenues. US tariffs are generally less than 10%. Other countries can impose tariffs greater than 100% for protected products.

Economic Development Model

The Rostow Modernization Model, The Marxist-Leninist Model

Fluctuations and effects (at the same time)

The US$ can strengthen against one currency (Japanese yen, (weaken against another Russian ruble), and be unchanged against a third (Euro)

However, there are barriers to standardization:

The communication infrastructure. The consumer literacy level. Legal restrictions (Comp Ads, Korea-Confucionism-criticism Other differences (purchase motivation, Anti US feelings)

The channel of communication:

The communication medium used to send the message to the target market.

Media Reliability:

The extent to which media reliably reach target consumers in the intended format and within the intended time frame. International constraints: Print lag times Poor quality Off-air television or government-controlled television and radio that does not allow advertising.

Media Availability

The extent to which the media needed for particular communication exists locally and can be used by the sponsor (TV in Africa)

International Division Structure

The firm has two main divisions: Domestic International

Employees of the International Firm

The foreign sales force of the multinational corporation is composed of: Expatriates Employees working in a foreign country. Types: Home-country nationals Third-country nationals Local employees.

Obstacles to Internationalization

The primary obstacles to internationalization are the self-reference criterion, government barriers, and competitive barriers

International marketing

The processes involved in the creation, production, distribution, promotion, and pricing of products, services, ideas, and experiences for international markets; these processes require a substantial focus on international consumers in a particular country or countries. -International activities are not coordinated across different countries. -substantial commitment to international marketing

Use publicity to secure a distributor or a distribution network.

The right distributor may come along if the company signals it is looking for distributors.

Buyback Agreements

The seller pays up-front in cash, builds and provides a turnkey plant, as well as everything necessary for the production and distribution of the product. The seller agrees to purchase specific quantities of the plant's output over an extended period of time.

The sender:

The sponsor of the ad, usually represented by an advertising agency. The sender encodes the message into words and images and communicates it to the target market. The sender's goal is for the message to be received as intended.

Event Sponsorship and Presence

The sponsoring of international cultural or sports-related events has become an important venue for international marketing communication (Olympics and Coke, UPS/FEDEX, Adidas, Swatch)

Other Types of Allowances:

There are many other types of allowances. Non-compensation incentives, such as guaranteed promotion upon return are also very important. Country clubs, pool clubs, tennis clubs, chaffeurs/security

Expatriates: Home Country Nationals

They are the traditional expatriate (expat). Employees from the home country of the international company, with experience working for the company, and who are assigned by that company to work overseas. Preferred by companies whose selling function relies on highly-specialized information. However, these employees... Are expensive Tend to have difficulty adapting to new international environments. Experience high cultural barriers Lack local personal connections. Difficulty finding employees willing to take on international assignments

Taxation and Cross-Border Shopping

This practice is common in countries where consumers are charged lower duties for products they purchase from a neighboring country. Consumers' purchase decisions are driven by tax differences, rather than by differences in producer prices. Cross-border shopping may cause reduced profits for domestic retailers.

Hiring Local Advertising Agencies

This strategy is more likely to be used by a company that uses a localized marketing strategy, appropriate when knowledge of the target market and adaptation are important. (Carib/S. America) Such a relationship between the multinational corporation and the agency allows for easier interaction with local media and government. However, the quality of advertising is often not at the level provided by a large international advertising agency. Local agencies help tailor company messages to local consumers.

Trade Shows

Trade shows and exhibitions offer potential buyers and sellers a chance to meet face-to-face, as they bring many decision makers to a single location for a limited time, enabling firms to get their message to a large number of people at one time. (name the industry, there's a trade show)

The Rostow Model Stages

Traditional Society Transitional Society Take-off Drive to Maturity High Mass Consumption

Logistics Facilitators

Transportation Firms Freight Forwarders Customs Brokers Distribution Centers and Warehousing

The international distribution function is supported by a number of service providers

Transportation firms Home country freight forwarders and customs brokers Government agencies Nongovernmental organizations Logistics alliances Other firms

Counterpurchase (also known as parallel barter)

Two exchanges that are paid for in cash; involve two parallel contracts whereby the seller agrees to purchase products that are usually unrelated to its business from the buyer and sells them on international markets.

Minimizing Political Risk

Understand both ruling and opposition parties. Remain politically neutral. Be exemplary corporate citizens. Sell a quality product or service that is essential for local development. Partner with local companies and create local expertise. Use local suppliers. Obtain insurance coverage against expropriation, nationalization, confiscation, and terrorism.

Standardized Pricing

Uniform price worldwide.

Challenges to Distribution in Developing Countries

Unreliable transportation infrastructure. Limited or nonexistent containerization capabilities. Unreliable roads.

International Formats, Features, and Trends: Outdoor Umbrellas, Awnings

Used by local and multinational brands alike. Shopping bags, shirts

Corporate Advertising:

Used to promote the company itself, rather than its different brands. (Bombardier sign in Berlin train station)

International Formats, Features, and Trends: Kiosks, Fences, Billboards, and Bus Stops

Useful and inexpensive means of communicating with the target market. They offer local ads a chance to compete with those of multinational firms by being of comparable quality. Sides of homes/ high rises Billboards

Competitive Parity

Uses competitors' level of advertising spending as a benchmark for the firm's own advertising budgeting.

Cultural Factors

Values that perceive imitation as a form of flattery. Feelings of interpersonal distrust and not getting fair deal. Emphasis on material wealth. Belief that technology is common domain.

Network Marketing

Variation on direct selling. Involves signing up sales representatives to go into business for themselves with minimal start-up capital and sell more "distributorships" and merchandise. Network marketing is growing rapidly, especially in emerging markets. International examples: Amway, Herbal Life.

Culture shock is exacerbated by:

Vast company changes in expatriate employee's absence. Loss of status during absence. Lack of social circle at work and at home; relationships may have changed over time.

Catalog Retailing and Direct Mail Retailing

Venues for selling merchandise to consumers using catalogs and other types of direct mail. (Need phone and mail) It allows for the international expansion of retailers. Must be adapted to local market needs and practices

Norazi agent

deals in illegal and/or gray market products complementary exporter

In countries with ample qualified labor, companies should

delegate more control to local operations.

Logistics Facilitators (critical)

determining the number of warehouses and distribution centers needed to optimally implement the logistics function.

United States Trade and Development Agency

develops overseas business opportunities

5 Levels of international marketing

domestic, export, international, multinational, global

An important distribution decision for the company is

whether to use established channels or to build its own channels.

Corporate

-Strategic plan allocates resources and establishes objectives for the whole enterprise worldwide. -Has long-term focus. -highest levels of management. -Involves international target market selection. -Ex. - Pepsi, which countries and how

Pricing Research

-Studies projecting demand -Currency and countertrade studies -Studies of inflation rates and pricing -Studies of negotiation tactics

Promotion Research

-evaluate the extent to which the promotional mix effectively targets the market

Target Market Decisions: Concentrated

-Select only one market segment and target it with a single brand. -Note: Niching (targeting a niche market) is an example of a concentrated strategy.

Licensing Advantages

-Lower-risk entry mode. -Limits exposure to economic, financial, and political instability. -Permits the company access to markets that may be closed or that may have high entry barriers.

International Macro-Segmentation

-Market potential indicators -Political, legal and financial environment -Marketing support infrastructure -RELATIVE Strength of brand or company franchise -Degree of market fit to company

Strength of brand or company franchise relative to competing products and companies

-Markets where a brand name is already established with local consumers offers high potential to the company. -Degree of market fit with company policies, goals, and resources. (may not be worth resources)

International Segmentation Requirements

-Measurability -Substantiality -Stability over time -Accessibility -Actionability -Differential Response

Building Own Channels Disadvantages

-Necessary if there are no channels at all and if the existing channels do not conform to company needs. -Expensive. -Time-consuming.

Business Unit

-Planning involves decisions on which consumer segments to target in each country and how to target them. -Ex. - Pepsi, which target market per brand

Target Market Decisions: Undifferentiated

-Product is aimed at the market using a single strategy regardless of number of countries targeted, and regardless of the locations where it is marketed and the number of market segments.

firm-related drivers

-Product life-cycle considerations. -New product development costs. -Experience transfers. -Labor costs.

International Segmentation

-The process of identifying countries and/or consumers that are similar with regard to key traits, such as product-related needs and wants, that would respond to a product and related marketing mix -MUST BE performed at country level AND at consumer level

Concept development and testing studies

-Typically performed in developed countries -Evaluates the product/service offering in light of the divergent needs of different target markets.

International Entry Mode

-Wholly Owned Sub -Branch office -consortia -joint venture -licensing/franchising -direct exporting/indirect exporting

Division

-allocates resources to each business unit based on division goals and objectives. -Has longer-term focus. -Ex. - Pepsi, which brands in which countries

Competitor positioning

Comparing the firm's brand with that of competitors. (Airbus 4 engines vs. Boeing 2)

Private Label (Retailer) Brands

Compete effectively with multinational brands. Often, premium store brands are perceived by local markets as high-quality, on par with multinational brand. Retailer brands are also innovative and high quality. They appeal to consumers during economic downturns. They have greater appeal as consumers today demand high quality at lower prices.

Compensation

Involves payment for goods in products and in cash, usually in an agreed-upon currency.

Bonus packs:

"4 pack" for the price of two

Cooperative Export Arrangements

-AKA piggybacking and mother henning. -Involve exporters agreeing to handle export functions for unrelated companies on a contractual basis. -export complementary products on a commission basis. -title to the complementary products that they export. - agree to handle the export function of a non-competing company on a contractual basis

Merchant Middlemen

-Carry the manufacturer's product line in a particular country. -Usually carry title to and have physical possession of the products they distribute in the foreign target market.

Direct Exporting

-Firm handles its exporting function usually using its own in-house export department. -Provides more control over the marketing mix than indirect exporting.

Export Management Companies

-Highly specialized in certain industries -Typically represent smaller companies in a region of the country. -Typically work as a company's export department.

Trading Companies

-Large companies that provide intermediary services, risk reduction, and significant financial assistance -In the U.S., they are consortia of smaller suppliers, service-oriented firms, multinational corporations and public and quasi-public entities; -created by the Export Trading Company Act to encourage and promote exports. (avoid anti-trust laws)

Home-Country Brokers and Agents

-Middlemen who bring international buyers and sellers together in the company's home country. -Do not carry title to the product. Ex: Manufacturer's export agent and Buying offices

Cost of living/post adjustment:

A compensation incentive whereby the company adjust expatriate salaries to reflect the costs of living in the new environment at standards in the expatriate's home country.

Education allowance

A compensation incentive whereby the company agrees to cover the cost of children's education at an international private school in the country of assignment. May include covering costs of attending a boarding school in the expatriate's home country. (or private school)

Housing allowance:

A compensation incentive whereby the company covers part or the entire cost of housing for the expatriate employee while abroad. May include covering for the cost of household help and security.

Home-leave allowance

A compensation incentive whereby the company pays for employee and family to vacation in the home country.

Moving allowance

A compensation incentive whereby the company pays for relocation expenses for moving the family household abroad and back to the home country.

Clearing Agreement

A complex form of countertrade whereby countries trade products up to a certain amount stated in a mutually-agreed-upon hard currency and within a given time frame, and when an imbalance occurs, wing credits are paid in the clearing currency.

The ideal expatriate has...

A high cultural sensitivity and awareness. The ability to adapt behavior in cross-national settings. A high level of resiliency. Extensive international knowledge and willingness to gain it. A strong desire to work overseas Support of the family

Repatriation allowance

A large sum paid for the successful completion of the international assignment.

Letter of credit

A letter of credit is a bank's written promise that it will make a customer's (the holder) payment to a vendor (called the beneficiary) if the customer does not. Transfers the RISK of non-payment The risk to the seller is therefore an international bank, or the seller's bank, rather than an unknown foreign buyer The bank usually requires a pledge of securities or assets from the buyer and charges a fee. The ICC governs LC's.

When expatriates return to the home country, they often experience reverse culture shock, or a feeling of anxiety attributed to:

A longing for the international environment left behind. Difficulty readjusting to the home country. Difficulty readjusting to the corporate culture at one's own firm.

Advertising

A nonpersonal communication by an identified sponsor across international borders, using broadcast, print, or interactive media.

Multinational firms counter local government actions using transfer pricing:

A pricing strategy used in intra-firm sales for commercial transactions between units of the same corporation, within or beyond the national borders of the parent company. In transfer pricing, the parent company charges the subsidiary or the joint venture a sales price established at market level or at cost, where cost reflects the opportunity cost of the product. Transfer pricing helps multinationals underreport profits and thus decrease tax burden in countries where the company has foreign direct investment. Price of Protectionism: Protectionism adds to the final price paid by consumers in the form of subsidies, tariffs, and other restrictions that force the foreign firm to raise prices.

domestication

A process by which a host country gradually transfers foreign investments to national control and ownership through a series of government decrees mandating local owner- ship and greater national involvement in company management.

Direct Selling (Avon, Mary Kay)

A retailing venue whereby a salesperson, typically an independent distributor, contacts a consumer, demonstrates product use and benefits, takes orders and delivers the merchandise. Direct selling firms are most active in the growth markets of Southeast Asia, Central and Eastern Europe, and Latin America. Due to the negative publicity surrounding direct selling practices, China first banned, but, subsequently reconsidered allowing direct selling operations, but with tight regulations.

creeping expropriation

A situation characterized bureaucratic red tape and corruption, and unreliable judical system, and shifting regulations, where foreign government actions discourage foreign investment, especially investment in nonessential sectors.

Types of Countertrade

Barter Clearing Agreement Switch Trading Compensation Counterpurchase (also known as parallel barter) Offset Purchase Buyback Agreements

Common Law

Based on prior court rulings (legal precedent); used by many of the former Great Britain colonies.

Historical Method

Bases advertising budget on past expenditures, usually giving more weight to more recent expenditures.

competitive barriers international companies commonly encounter

Blocked channels of distribution Exclusive retailer agreements Price cutting Advertising blitzes

Dominance of Global Media

Both television shows and magazines are gaining popularity around the world, allowing for easier global advertising.

Trademark

Brand name, mark, symbol, motto, or slogan that identifies a brand and distinguishes it from competitors' brands

Open account

Buyer has an agreed to upper limit to order goods or services. Similar to the limit on your credit card. Buyer pays balance upon receipt of goods.

Consignment with open account

Buyer has possession of goods valued up to the limit of the open account. Think intl car dealership. When dealer sells a car, dealer orders another car.

Informal Controls

Companies can also use informal controls to ensure that there is a fit between standards and actual performance. Among examples of informal controls are: Establishing frequent contact and a close relationship between the home-country headquarters and respective regional office. Rotating managers to different assignments to obtain the maximum benefit. Training the employees and inculcating a management culture that is consistent with company goals and objectives.

Technology issues

Companies often rely on electronic data interchange (EDI), whereby buying and selling firms are able to share important data on production, inventory, shipping, and purchasing. EDI relationships are possible primarily if the firms have the appropriate resources and trust their local partner with the information.

Managing International Employees

Companies that attempt to transplant personnel policies proven successful in the home country will run against obstacles in different international environments. Issues related to culture come into play.

Use publicity as a sales lead.

Company may obtain leads if it has detailed information and contact information in the press release.

Public Appearances by Company Representatives:

Company representatives speaking publicly on behalf of the firm and its products. (Phamaceutical CEO's and Bill Gates speaking at Intl Health forums)

Drivers in the business environment

Competition, Regional Economic and Political Integration, Technology, Improvements in Transportation and Telecommunication, Economic Growth, Transition to a Market Economy, and Converging Consumer Needs

Environmental-Related Challenges and Pricing Decisions: The Competitive Environment

Competition. Political and legal environment. Economic and financial environment.

Organizational Design for International Operations: External Factors

Competitive Environment Environmental Stability Environmental Similarity with the Home Country Common Regional Traits and Regional Integration Availability of Local Qualified Labor

Code (Civil) Law

Comprehensive written laws that specify what constitutes legal behavior; used by most countries.

Countertrade Brokers

Conducted with the help of brokers who match the exchanges

Self-reference Criterion

Conscious and unconscious reference to own national culture and home-country norms while operating in the host country, which can prevent firms from adapting to local business environments and serving the needs of local consumers.

Converging Consumer Needs

Consumers' exposure (through media, travel) to global brands created demand for global products and worldwide loyalty to international brands. The emergence of uniform consumer segments facilitates marketing strategies worldwide.

Risks related to government economic policy

Controlling foreign investment through taxes or transfer of assets from company to local ownership: Confiscation. Expropriation. Creeping expropriation Nationalization. Domestication

Some compensation incentives include:

Cost of living/post adjustment Housing allowance Education allowance Spouse employment Round trip tickets Home-leave allowance Moving allowance Repatriation allowance

Countertrade

Countertrade involves selling a product to a buyer and agreeing to accept products from the buyer's firm in return for payment. A typical countertrade exchange today would involve a seller from a high-income, industrialized country and a buyer from a low-income country where hard currency is scarce and tightly controlled by national institutions. U.S. Government: Against it, if government mandated.

Aggressive Export Pricing

Dynamic Incremental Pricing: Assumes certain fixed costs. Does not factor in international promotion costs for domestic distribution or full overhead. Product cost reflects only variable costs.

Matrix Structure

Each operational unit reports to both region/country managers and product managers. Takes into account the multiple dimensions involved in international business. This format works best for firms with global, as well as local brands, allowing coordination of worldwide marketing activities with focus on the local market for local brands.

The Rostow Modernization Model

Each stage is a function of productivity, economic exchange, technological improvements and income. Growth requires advancing from one stage to the next.

Take-off

Economic growth and increase in per-capita income. Production improvements. Emergence of leading sectors, and a new class of entrepreneurs.

Firms lowers cost and prices as it takes advantage of

Economies of scale Standardization, and Cheap labor

Successful expatriate management requires:

Effective screening and recruitment. Appropriate training and development strategies. Motivating for peak performance. (Money vs opportunity) Ensuring successful repatriation.

Capitalism

Emerging bourgeoisie Shift of production from the agrarian sector to the industrial sector Imperialism: Last stage, where capital loses its national identity.

Expatriates: Third-Country Nationals

Employees working temporarily in the assignment country who are NOT nationals of that country OR of country in which headquarters is located. Speak numerous languages. Familiar with customs and business practices in different environments. Have learned, through experience, to adapt optimally for international assignments. Cost less than home-country nationals.

English in Local Advertising

English is used more and more, not just by international firms, but also by local firms communicating with local consumers to endow the product with status. It takes less space than other languages

Image Advertising:

Enhances perceptions of a company in a given market, especially if the image of the company is suffering. (to make McDonalds more "French/European")

Natural resources conservation and environmental protection

Environmental protection is frequently used as an argument to allow governments to impose trade restrictions aimed at conserving national natural resources..

Steps Involved in Forming Logistics Alliances (customer and provider)

Establish objectives Identify providers Express needs/wants Evaluate and select bidder Develop integration plan Create win-win relationship Measure and analyze performance Redefine goals and objectives

Supplement ad campaigns with publicity campaigns.

Establish third-party editorial credibility for products; convey more information in greater detail about products.

4 Philosophies on international involvement (EPRG Framework)

Ethnocentric, Polycentric, Regiocentric, Geocentric

Executive-judgment method

Executive opinion determines the advertising budget. A third of international firms rely heavily on executive judgment.

Infomercials and Television Shopping Networks

Exist in much of the industrialized world; growing business in emerging markets and low-income countries.

Types of research

Exploratory Research Descriptive Research Causal Research

International Trade Administration

Export assistance and trng

Bureau of Export Administration

Export control

Order getter

Individual who actively generates potential leads. Persuades customers to purchase the firm's products. Can be local or international staff. Highly skilled technically, as well as trained in conducting negotiations. More highly trained, more highly paid than order taker In international marketing, most order getters work in the business-to-business area as field salespeople, going to customers to solicit business. Order getters selling to other businesses would go to their clients' places of business. Order getters selling to consumers directly would go to consumers' homes.

Order taker

Individual who processes routine orders from the customer. Likely to be a local employee who is familiar with the local customs and culture.

National character:

Individualism Power Distance Uncertainty Avoidance Masculinity/Femininity

Inflationary pressures on price

Inflationary environment places strong pressures on companies to lower prices. Often, pricing competitively, a strategy used by companies during the downside of an economic cycle, means that companies are not making a profit.

Environmental-Related Challenges and Pricing Decisions: The Economic and Financial Environment

Inflationary pressures on price Fluctuating exchange rates Shortage of hard currency Countertrade U.S. Government Countertrade Brokers

Formal Controls

Instituting formal company controls involves the following procedure Establishing Performance Standards Measuring Performance Addressing Discrepancies

Regional Economic and Political Integration

Integration facilitates international trade for companies in member countries, and for companies from countries outside of the area. (promotion of trade)

Noise:

Interference in the communication process. Often, cultural differences and multiple languages increase the level of noise

Transportation Firms

Intermodal transportation firm. Containerization.

International firms are affected by three bodies of law

International Laws Host Country Laws Home Country Laws International firms must adhere to all three.

International Promotional Mix

International advertising. International sales force management. International sales promotion. International public relations. Publicity.

Hiring International Advertising Agencies

International agencies are generally used by multinational companies. There are many firms that use the same agency for all their international communication (Coke). Firms often hire international agencies for their global strategy, but then work with local agencies to tailor the message for the local market.

Competition:

International and local competition can create serious problems for the international firm. Competition can lower prices by manufacturing in a low-labor-cost country. In addition, local competitors can offer legal copycat products at a much lower price.

Orderly market arrangements

Intricate approach to establishing, in essence, a quota

Export marketing

Involvement in international marketing, limited to the exporting function; all thought the firm seeks international clients, it considered the international market and extension of the domestic market and does not give it special consideration. -limited commitment to international marketing

Offset Purchase

Involves a large hard currency purchase; the seller agrees, in return for the sale of its offer, to purchase products that are valued at a certain percentage of the sale.

Barter

Involves a simple, non-monetized exchange of goods or services between two parties.

Switch Trading

Involves buying a party's position in a countertrade in exchange for hard currency and then selling it to another customer.

Objective-and-Task Method

Involves first identifying advertising goals in terms of communication goals, then conducting research to determine the cost of achieving these goals. Based on this research, firms allocate the necessary sum for advertising expenditures. This is the most popular method for multinational firms deciding on their advertising budgets.

Multinational marketing

Marketing in different countries without coordinating across operations. -more countries involved than international maketing

AXIOM

Marketing people want to go global Sales people want to stay local

Specialized Markets

Markets that house stores specializing in a particular product category.

Protection of markets with excess productive capacity

Markets with excess productive capacity only need a fraction of the resources they allocate to production for optimal performance. To protect state-owned enterprises, national governments limit foreign investment and entrance of foreign competing products.

Non-Tariff Barriers

Measures, other than traditional tariffs, that are used to distort international trade flows. Raise prices of both imports and import-competing goods. Favor domestic over foreign supply sources by causing importers to charge higher prices and to restrict import volumes.

Foreign-Country Middlemen

Merchant Middlemen Agents and Brokers Alternative Distribution Structures

Feedback:

Message feedback is offered through purchase of the product promoted. Product awareness or other measures are also used to evaluate the effectiveness of the message.

International competitors are particularly aggressive:

Metro is expanding worldwide. Membership requirements are more stringent than in the U.S., however, membership cards have a high "pass-along rate."

Drive to Maturity

Modern technology is adopted in all economic activity New leading sectors emerge Economy looks beyond borders for development

Adjusting Invoice Policy

Modifying invoicing policy to reduce transaction exposure; e.g., invoicing in the same currency that will be needed to pay for imports. Difficulties: precise matching of the amounts and timing of cash flows.

types of global localization

Modular Adaptation Core product strategy

Environmental-Related Challenges and Pricing Decisions: The Political and Legal Environment

National governments interfere in the pricing strategies of multinational firms by imposing regulations and restrictions. National governments also use numerous strategies to restrict the repatriation of profits and to tax and/or encourage the reinvestment of profits. Local governments have the right to set high tariffs on imports that challenge emerging local producers, as stated in the infant-industry argument.

High New Product Development Costs

New-product-development costs are rapidly increasing and product life cycles are decreasing. As a result, firms must look beyond the home-country market to fully recover the high product development costs and to make a profit.

Types of media:

Nonpersonal print media: Magazines, billboards, pamphlets, or point-of-purchase displays. Nonpersonal broadcast media: Television and radio. Personal media: Salespeople, telemarketers, or individuals involved in a tradeshow. Interactive media: Web pages, computer terminals on retailer premises.

Retail Formats: Department Stores

Offer a broad variety of goods and wide assortments.

Retail Formats: Catalog Showrooms

Offer high-turnover, brand name goods at discount prices. Internationally, however, goods sold through this venue tend not to be brand name, but, rather, goods that have not sold the previous season through the catalog.

Copyright

Rights of owner of original work of art to reproduce, sell, perform, or film the work.

political risk

Risk of drastic changes in a country's business enviroment which is caused by political instability

Types of Political Risks

Risks related to government trade policies: Risks related to government economic policy Risks related to labor and action groups. Risks related to terrorism.

Variation in Retail Practices: Salespeople and Management

Sales service differs from market to market, ranging from extremely friendly to curt salespeople. Some stores can charge an entrance fee for people shopping there, while other stores require a particular dress code of their customers. Movie "Pretty Woman". If shortages exist, may bribe salespeople

To counter the impact of the self-reference criterion, the corporation must...

Select adaptable personnel for international assignments. Sensitize expatriates to the local culture.

Sovereignty

Self determination and independence from external interference. At the basis of international law and international relations

Voluntary export restraints

Self-imposed export quotas-imposed to avoid a greater penalty. Used by the importing country to protect local industries

Conventional Supermarkets

Self-service retailers with annual sales higher than $2 million and less than 20,000 square feet of store space. Conventional supermarkets abound worldwide.

Retail Formats: Off-Price Retailers

Sell brand name and designer merchandise at below regular retail prices. Overruns, irregular products, previous seasons' products. Examples: Factory outlet stores.

Retail Formats: General Merchandise Discount Stores

Sell high volumes of merchandise Offer limited service Charge lower prices

Cash in advance

Seller has no risk Buyer has all risk Somewhat insulting to buyer Either the insult or the lack of cash may prevent the sale

Long Distance International Selling

Selling via the Internet or mail is likely an important venue used in approaching new international customers. Costs of distance selling are lower, allowing for greater market coverage. However: The selling infrastructure (mail, Internet accessibility) lags behind in low-income countries and emerging markets. It is difficult to coordinate internationally due to cultural differences.

Setting Prices

Setting prices is often based on experience and intuition. The skill lies in assessing differences in consumers' willingness to pay. Currency fluctuations are important determinants of the final price of items. Additionally, prices paid down the chain of distribution in business-to-business transactions are also important.

Shortage of hard currency

Shortage of hard currency can be addressed using countertrade.

Convenience Stores

Small residential retailers or retail chains consisting of small neighborhood stores. Open long hours. One-stop shopping. Carry limited lines of higher-turnover necessities. The merchandise mix varies from country to country, as necessities differ.

Retail Formats: Specialty

Specialty Stores Specialized Markets

Quotas

Specify maximum quantity (unit limit) or value of a product that may be imported during a specified period.

globalization

Standardization of products across markets and of the marketing mix worldwide

Communism

State and cooperative ownership of all means of production and property.

Currency strengthen/weaken

Strengthen = Currency increases price Weaken - = Currency decreases price

Advocacy Advertising

Stresses a particular position or point of view held by the company. (Benetton and climate change)

Worldwide Regional Division Structure

Subsidiaries report directly to single division responsible for operations. Operations of the firm are separated by: Geographical region, or by Country Better equipped to respond to country-specific information and conditions.

Product Division Structure

Subsidiaries report to product division (strategic business unit) with responsibility for particular products. This format was common for multinational companies with diversified portfolios, but has recently been replaced by the matrix structure.

Strategies for Maximizing Positive Publicity in a Foreign Market

Supplement ad campaigns with publicity campaigns. Translate and be careful about translations. Inform the managers in the home country about publicity efforts. Use publicity to secure a distributor or a distribution network. Use publicity as a sales lead.

Licensing with the name

When licensors have greater confidence in the capability of the licensee, they are likely to allow the licensee to use their brand name when marketing the product.

Licensing without the name

When the quality of the licensee's product cannot be guaranteed, it is preferable for the products produced under license not to carry the licensor's brand name.

Reduction of trade barriers

a main concern of multinational firms and governments of the multinational firms.

Culture Shock

a pervasive feeling of anxiety resulting from one's presence in an unfamiliar culture.

monopolistic capitalism

a stage of economic and political development, which according to Marxist-Leninist theory, multinational companies establish monopolies and expand internationally with the goal of subjugating developing countries

Globalization has led to

a unified international economy: the international economy performs as a single unit.

Ethnocentric Orientation

when a company believes that domestic strategies, techniques, and personnel are superior to foreign countries

The transportation Functions

adds value to a marketing strategy

Management internationalization philosophy...

affects all functional areas of the corporation.

Trade related aspects of Intellectual Property Rights

agreement administered by the WTO that sets down minimum standards for many forms of intellectual property regulation

nationalism

an expression of fierce nationalist sentiment

Governments can invoke sovereignty

and jeopardize firm's operations.

Cluster advertisements are

when ads are presented at the beginning or end of TV show, rather than every 8-12 minutes

Negative publicity can

be harmful to the company; the company needs to address it promptly.

Intellectual property issues are also addressed by

bilateral and multilateral conventions.

Buying offices

buyers located in the firm's home country, representing different international firms.

Culture shock is lessened

by adequately training the employees; this is done with: Short courses in cross-cultural communications. Cultural immersion.

Export jobber

carries commodity goods, but does not take physical possession of the goods.

Companies use the promotional mix to

communicate with international consumers about their products and services.

To keep up with competition...

companies must reach for new international consumers.

Polycentric Orientation

company strategies predicated on the assumption that each country's market is unique and should be addressed individually, with a country-specific marketing mix.

Comparative advertising

compares 2 brands by name in an advertisement

Companies must be careful in

considering the income level of consumers in target markets when offering promotions. (bad image, wasted money)

Geocentric Orientation

consistent with belief that the entire world constitutes a potential market with identifiable, homogeneous segments that need to be addressed differently ex McDonald

Transition to a Market Economy

created important new markets and opportunities to transform inefficient government-owned companies into successful enterprises.

Technology has...

created opportunities for firms involved in international business

Trend: worldwide, companies are attempting to address

customer demand while reducing inventory costs, using just-in-time inventory systems, creating product flow rather than stock.

Multinational corporations offer incentives

upon repatriation in order to attenuate culture shock. Reverse culture shock can be avoided by maintaining connection to company headquarters.

Culture shock is also lessened by creating appropriate

expectations for the employees. Employers should help them anticipate their physical and social environment.

Keiretsus

families of firms with interlocking stakes in one another

Retailers are rapidly expanding internationally in order to:

gain competitive advantage. increase sales. increase profits. improve overall firm performance.

U.S. Commercial Service

helps small and medium size

Positive publicity is

valuable to the company. It is difficult to measure its impact, but it is substantial since the source is perceived as credible. Has high impact on consumer purchase decisions. (Ben and Jerry) Positive publicity is difficult to come by. Computer companies donate computers to schools

An international presence...

is essential to a company's success.

the market share game

is played increasingly on a world scale

Intellectual Property Protection

law protecting the right of the inventor, firm employing the inventor, to use and sell an invention for a specific period of time

International trade

limits sovereignty

Production Facilities:

location determines the extent to which a company can control costs and price their products competitively Large multinational corporations use a strategy whereby they shift their production facilities to optimal locations in order to take advantage of lower costs and exchange rates. Smaller firms are often limited to exporting.

Foreign Corrupt Practices Act

makes it illegal to engage in bribing to gain competitive advantage or market access.

Firm will most likely move manufacturing operations and facilities abroad

maturity stage

Emic instruments

measure phenomena specific to each culture.

TRIPS agreement (Trade-Related Aspects of Intellectual Property Rights

member countries of the World Trade Organization, must sign the TRIPS agreement.

Outcomes of Polycentric Orientation

no economies of scale duplicated functions higher final product costs

Most popular and effective method of determining advertising budgeting

objective to task

Regiocentric Orientation

views world regions as distinct markets that share economic, political and cultural traits that will respond to a region wide marketing approach

National and local governments erect barriers to

protect small and medium enterprises from multinationals.

Arguments for protectionism of home markets include

protection of markets with excess production capacity, with excess labor, infant industry argument, protection of environment, consumers, and national defense arguments.

The media infrastructure

provides challenges for sponsoring firms in low-income or middle-income countries.

Upper middle income countries

rapidly developing economies important opportunity for firms operating in the areas of infrastructure development

Price offs

reductions in listed price (store openings, Black Friday)

Manufacturer's export agent

represents a manufacturer.

As they expand internationally

retailers can take advantage of cost savings and learn from experiences in a way that could further enhance home-country operations.

China is in the

socialist stage, where state ownership and private ownership coexist. It may take China more than 100 years to advance to the next stage.

In order for the international assignment to be successful,

the employee must be highly motivated by both intrinsic aspects of motivation and by extrinsic factors.

confiscation

the government simply takes over a company, making no payment to the owners

Violation of intellectual property rights is

the most significant threat to the competitiveness of international corporations.

International Marketing Research

the systematic design, collection, recording, analysis, interpretation, and reporting of information important to a particular marketing decision an international company

International marketing helps companies reach __________ and ______________.

their full potential; the maximum return for their stockholders

Many small businesses can attribute

their success and even survival to international markets

International Target Marketing is used to

-Identify consumer segments with similar traits -Select segments company can serve efficiently -Develop products tailored to each segment -involves offering products to the target market, and communicating, through the marketing mix, product traits and benefits that differentiate it

Franchising Advantages

-Lower-risk entry mode, as it limits exposure to economic, financial, and political instability. -Higher level of control. -Very rapid market penetration.

Positioning

-Identify competitors -Determine how they are perceived by consumers -Determine positioning in consumer's minds -Analyze customers -Select positioning -Monitor position

Product Level

-A marketing plan is developed at product level, product line level, or at brand level. -Has shorter-term focus. -Involves the marketing department. -Ex. - Pepsi, mktg mix per brand

Licensing

-A more risky entry mode, offers more control than exporting, and it involves a licensor and a licensee.

Buyer Behavior Research

-Brand preferences -Brand attitudes -Brands awareness studies -Purchase behavior studies -Consumer segmentation

Franchising Disadvantages

-Can be problematic if franchisee cannot guarantee quality. -Can produce a new competitor, especially if the concept can be easily copied.

Licensing Disadvantages

-Can produce a new competitor: the licensee. -Can be problematic if licensee cannot guarantee quality - it affects the brand's overall reputation.

Target Market Decisions: Differentiated

-Companies identify or create market segments that want different benefits from a product and target them with different brands

Control vs. Risk in International Expansion

-Companies need to decide whether to use middlemen in the process of taking their products internationally or to market directly to the international market: -Using middlemen requires a company to relinquish control: distributors or agents sell the product. -Direct international involvement exposes the company to substantial risk, but it also affords the company significant control of the marketing mix.

Secondary Data Restraints

-Conceptual Equivalence (concepts mean different things in different cultures) -Functional Equivalence (products themselves may be used for different purposes in different country environments)

Franchising

-Constitutes a principal mode of entry for the service industry and it is the service industry's equivalent to licensing.

Product packaging design studies evaluates

-Consumers' reaction to the package -The extent to which the package adequately communicates information -The distribution implications of the packaging decisions

Using Established Channels Disadvantages

-Could charge high prices. -Could be blocked by competition. -Channel partnership is a long-term decision

International Strategic Plan

-Creates a link between company resources and its international goals and objectives. -corporate -division -business unit -product level

Bases for Micro-Segmentation

-Demographics -Psychographic -Benefit Segementation -Geographic -Usage and usage status segmentation

Developing the International Marketing Plan

-Develop strategies for the target market -Plan international marketing programs -Manage the international marketing effort: Organize, Implement, Control

Market potential - indicators

-Gross domestic product (GDP) per capita. -Industrial and agricultural sector statistics. -Market size and potential. -Consumer buying power. -Investment figures (FDI, other trade statistics).

Developing an International Marketing Strategy

-developing and maintaining a strategic fit -plan forges a link b/t the company's resources and its international goals and objectives -the company's commitment to its international markets.

Domestic marketing

-focused solely on domestic consumers and on the home-country environment. -low to no commitment to international marketing

Country Screening and Selection Critersa

-market potential -political and financial stability -the availability of the appropriate marketing infrastructure -the degree of brand and company franchise in the local market -the degree of market fit with company goals, policies, and resources.

Quantitative Research

-more structured, involving either descriptive research approaches, such as survey research, or causal research approaches Examples: content analysis, survey research, experimental research -constraints: respondent factors, infrastructure factors

Primary Data disadvantages

-time consuming -expensive -not used as often as it should be

Qualitative Research

-useful as a first step in studying international marketing phenomena Example: Focus Groups, Observation -Constraints: responses can be affected by culture, individuals may act differently if they know they are being observed

Secondary Data

Collected to address a problem other than the specific international marketing problem that the company is currently facing.Collected before the primary data

Global standardization continuum

1. Global standardization 2. Regional standardization 3. Global localization 4. Mandatory adaptation 5. Local, non mandatory adaptation

Primary Data

Collected to address the specific international marketing problem

Non-Mandatory Adaptation

Adapting a product to better meet the needs of the local market, or developing new brands for individual local markets, even though such adaptation is not required. Sometimes easier to buy the local brand company

globalization disadvantages

Cannot perfectly meet the needs of all target consumers

regional standardization disadvantages

Cannot perfectly meet the needs of all target consumers in the region.

International Marketing Research Process: Step 7

Collect, Analyze, and Interpret Data

International Marketing Research Process: Step 6

Decide on the Sampling Plan -The sampling plan involves deciding: --The sampling unit (who will be included in the study). --The sample size (how many individuals or groups, such as households, will be surveyed). --The sampling procedure (how the sampling units will be selected).

International Marketing Research Process: Step 3

Decide on the information sources

International Marketing Research Process: Step 1

Define the international marketing research problem and research objectives

International Marketing Research Process: Step 5

Design Data Collection Instrument

International Marketing Research Process: Step 4

Determining Research Approach -quantitative and qualitative

International Marketing Research Process: Step 2

Develop the international research plan

Product class positioning

Differentiating the company as a leader in a particular product category. Company defines the product. (Disney magic, not entertainment)

Brand name generation and testing

Ensures that the brand name has appropriate meaning in the different languages of the target markets

Sales Forecasting: Analogy Methods

Estimation method that relies on developments and findings in markets with similar levels of economic development, or where the product is in the same market development stage, or in markets which share similar cultural characteristics

Sales Forecasting: The Delphi Method

Experts to estimate market performance; findings are aggregated, and experts are queried again with the purpose of arriving at consensus.

Exploratory Research

Research conducted early in the research process that helps further define a problem or identify additional problems that need to be investigated

franchisor

Gives franchisee right to use brand name, trademarks and business know-how in return for royalties.

global localization

Global branding with localized marketing adaptation to differences in local culture, production capabilities, governmental restrictions, etc.

Causal Research

Research that examines cause-and-effect relationships

Mandatory Adaptation

Involves adapting products to local requirements so that they can legally and physically operate in the respective countries.

Marketing support infrastructure

Involves assessing the following: -Availability and reliability of distribution and logistics providers. -Availability of competent partners for strategic alliances. -Quality of telecommunication and transportation infrastructure. (cell towers) -Availability of other service providers: - Marketing research firms. -Financial firms. -Management consulting firms.

Political, legal and financial environment of country

Involves assessing: -Ethnic conflict. -History of war engagement. -Antiforeigner sentiment. -Recent nationalization activities. -Legal ambiguity. -Trade barriers. -Exchange rate controls.

core product strategy

Involves using a standardized strategy for the core product worldwide, but varying certain aspects of the offering (product ingredients, advertising, for example) from market to market. (Maharaja Mac)

Sales Forecasting: Point of Sale Projections

Made with the help of store scanners or retail reports, in markets where scanners are not available. -Weekly or biweekly store audits are needed in order to reveal the movement of goods within the store and from warehouses. -Involve comprehensive store audits.

franchisee

Pays royalties for the right to use licensor's know-how, trademarks, and brand name.

Sales Forecasting: Sales Force Composite Estimates

Personal observations and expectations of the local sales force and the international sales manager.

Use or applications positioning

Positioning a product as having a precise application, thus differentiating it in the consumers' minds from similar products with a more general use. (Bicycles)

Price/quality positioning

Products are positioned as either offering the best value for the money (especially useful when marketing in developing countries) or as being the best product that money can buy, stressing its high price and quality. (Mercedes, Mont Blanc)

regional standardization

Standardization of products across regions and of the marketing mix within the region. (EU and NAFTA)

Calculating the country attractiveness score

The importance score is multiplied by performance. The attractiveness score is the total score for each country calculated by adding the resulting scores.

Attribute/benefit positioning

Uses product attributes and benefits to position it in the consumers' mind relative to competitors' products and services. (Detergent)

T/F: the most accurate secondary data is available on industrialized countries

True

Sales Forecasting: Time Series and Econometric Models

Use data of past performance to predict future market demand

Etic instruments

measure the same phenomenon in different cultures.

licensor

owner

International Target Marketing

the process of identifying and focusing on those international market segments that the company can serve most effectively and designing products, services, and marketing programs with these segments in mind.

licensee

wee people- pays royalties for the rights to licensor's tech