INTL MKTG quiz 2

channel member COOPERATION

although difficult to assess, channel leaders attempt to assess the cooperation of potential channel members prior to the formation of a formalizes marketing channel (reputation + previous success in targeted regions)

market concentration

occurs when a company exports to a small number of markets or one key market and then slowly expands into additional countries

Internal reasons for exporting

**managers decide to export when they believe a company's product can meet a consumer demand while making a profit 1. managerial urge (individual may have experience in the foreign market being targeted - strong motive to enter foreign markets with that product - EX red bull creator from austria) 2. unique product characteristics (the possession of a unique asset that consumers want to purchase increases the potential to make a profit by exporting a product - EX in the film industry, 3D movie players are starting to become available, providing an exporting advantage to companies to manufacture them) 3. economies of scale (exporting to foreign markets increases the size and scope of the business - EOS= the decrease in per unit cost resulting from an increased number of products manufactured - using as much of a standardized marketing mix as possible best leverages advantages based on EOS) 4. extension of sales (seasonal sales often present business cycle pressures for companies. products include: textiles, sports equipment, and tourism. Ski equipment can be sold in North America during the fall and winter and then exported to markets in South America during the NA offseason) 5. lower risk (with economic downturns, govt unrest, and carious other external risks in both the domestic and foreign markets, exporting of products to multiple countries lowers risk for the firm - operating in several markets dilutes risk as opposed to depending on one market) 6. overcapacity (in some cases, a steep drop in domestic demand can lead to overcapacity or market saturation in one country that makes exporting to other countries more attractive. instead of taking a loss, firms with warehouses full of products often turn to exporting to sell excess inventory)

psychic differnce

*plays primary role in country selection under the Uppsala model* - refers to the differences between managers from different countries (language, communication styles, legal and political structures, education, and overall cultural values)

Modes of Transportation

1. Air (grown in usage. have to consider cost and size constraints) 2. Water (most extensively used method of distributing products - cost effective, slower - mississippi in US) 3. Railroad (popular in developed countries - major form of inland transportation in China, Russia, and Poland) 4. motor carrier (depends on how well-maintained the highway systems are in the area EX bad is India - primary method of domestic distribution in several developed countries France, Germany and Spain) 5. pipeline (better for liquid and gas based products - oil is transported through vast arrays of pipelines in many countries worldwide - slow - prevalent in middle east) 6. intermodal (combines various transportation modes - piggybacking- loading flatbed trailers on rail cars for delivery on part of a distribution route - birdybacking and fishbacking) *reducing shipping costs could be a method to make products more affordable in foreign markets. *choice of transportation method determines the speed at which goods will arrive in foreign destinations

4 kinds of utilities that marketing channels create for customers

1. Place (are they sold everywhere) 2. Communication (do channel members talk up and down) 3. Possession (easy to buy?) 4. Time (stores are open / buy online) * cell phones

External reasons for exporting

1. change agents (outside change agents often have the goal of increasing exports) 2. foreign market features (EX - the foreign country contains a large group of consumers clamoring for the product - Saudi Arabian market serves as an example.. wealthy oil merchants crave other luxuries found in the rest of the world) 3. domestic market features (domestic market may be stagnant, saturated or experience declining demand... ambitious companies often look to exporting to increase sales and to present new challenges) 4. unsolicited order ((most common reasons for firms to begin exporting) - companies receive requests for the product, concerns of demand and risk lessen)

B->C channel

1. direct channel: producer -> consumer 2. indirect channel: producer -> wholesaler -> retailer -> consumer

B->B channel

1. direct channel: producer -> end user 2. indirect channel: producer -> industrial agent (or merchant) -> end user

distribution intensity factors

1. market demand 2. marketing infrastructure 3. type of good 4. price 5. quality 6. competition

joint ventures

2 parties come together to take on a project - develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. EX - MillerCoors - both parties are equally invested in the project in terms of money, time and effort to build on the original concept. since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden, as well as the resulting profits.

branch offices

A location, other than the main office, where business is conducted. most B.O.'s are comprised of smaller divisions of different aspects of the company such as human resources, marketing, accounting etc. - typically has a branch manager who will report directly to, and take orders from, a management member of the main office - For example, Starbucks has branch offices so as to be able to meet closely with the stores district managers in a more cost effective manner, as well as cater to, and be informed in, the needs of specific locations

consortia

An association or "partnership" of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of pooling their resources to achieve a common goal. EX - Airbus - Instead of ordering directly from the manufacturer and waiting months or even years, Airbus Consortium pre-orders aircrafts directly from Airbus so that once they are done with production, they are ready to sell.

Eclectic or OLI theory

As with some of the other theories, OLI assumes that exporting will be the most efficient and preferred form of entry but that inefficiencies or problems in the market mean that in many cases the best decision is another form of entry. - These best decisions are based on 3 factors: 1. ownership advantages "why"(asset and transaction advantages) 2. location advantages "where" (local resources, natural and human; governmental activities; market potential; and lower political risk make some countries more alluring) 3. internalization advantages "how" (advantages that come from making the correct entry decision). To select the right type of entry mode, companies need to balance risk, uncertainty, the ability to exploit economies of scale, and cost.

theories of Entry Mode Selection

Internationalization theory, Internalization theory, and Eclectic or OLI theory

wholly owned subsidiary

Most control, Most risk = a company whose common stock is 100% owned by another company, called the parent company. In contrast, a regular subsidiary is 51 to 99% owned by the parent company. One situation in which a parent company might find it helpful to establish a subsidiary company is if it wants to operate in a foreign market - this arrangement is common among high-tech companies who want to retain complete control and ownership of their technology

strategic alliances

Partnerships in which two or more companies work together to achieve objectives that are mutually beneficial. To achieve a true strategic alliance, these companies share resources, information, capabilities and risks. A possible reason could be to obtain the advantage of another company's innovations without having to invest in new R&D (Moderate risk, Moderate control). An example would be Starbucks partnering with Barnes and Nobles bookstores in '93 to provide in-house coffee shops, benefitting both retailers

selective distribution

a marketing strategy that involves making a product available only in certain markets - reason for doing this includes the potential for limiting competition and minimizing distribution costs so that net profits are higher. Selective distribution process focuses on identifying specific markets where a company's products are highly likely to be favored by consumers in that area, while avoiding distribution to areas where there is less of a chance of gaining a significant market share

exclusive distribution

a marketing strategy where only certain dealers are authorized to sell a specific product within a particular region. - Usually seen with high end and luxury products - a car manufacturer might only agree to allow three dealers to sell its cars in a specific country

intensive distribution

a marketing strategy which a company sells through as many outlets as possible, so that the consumers encounter the product virtually everywhere they go: supermarkets, drug stores, gas stations and the like. Soft drinks are generally made available through intensive distribution

Internalization theory

focuses solely on the reasons a company's leader selects a specific type of entry mode. The underlying assumption is that there are specific advantages to specific modes of entry. Internalization refers to taking some degree of ownership of the process of entering a country. Typically, doing so involves opening a wholly owned subsidiary or starting a joint venture. Internalization may also be referred to as the hierarchy choice - represents internalizing the entry into the corporate hierarchy.

COORDINATION of marketing efforts

here, decisions are made as to what promotional and logistical activities each member will perform - marketing channel coordination requires an efficient international distribution process

5 Cs

international marketers consider a number of factors when selecting and motivating channel members and managing the overall distribution network 1. COST of the system 2. COORDINATION of marketing efforts 3. distribution COVERAGE 4. channel member COOPERATION 5. channel CONTROL

channel CONTROL

international marketers lose some control over the physical movement of goods when goods are shipped domestically. monitoring the movement of goods and ensuring their safe delivery brings about extra expenses

market spreading

involves growing exports in many different markets simultaneously and rapid expansion to new markets *market concentration and spreading represent 2 extreme approaches - most companies use a method that is somewhere in between. *One key consideration is the amount of first-mover advantage that is present *when barriers can be created to keep competitors from exporting to the market - market spreading may be the best approach *Market concentration would be beneficial when many competitors already exist in a market - lead to higher market share

indirect exporting

least risk - least control = when a company sells goods to markets overseas with the use of intermediaries - (an example would be your product (a zipper) is made for another product (a jacket) and the jacket is exported - the jacket company does all the work). one big advantage of indirect exporting, more for a smaller US company, is that it provides a way to enter foreign markets without the risks of direct exporting

theory of internationalization

strongly associated with the writings of Johanson, Vahle etc and with the Uppsala school - led to the internationalization theory also being known as the Uppsala Model. -model suggests that companies go through 4 stages during the move to becoming a completely global company. 1. no regular export activities 2. export via independent representatives 3. establishment of an overseas sales subsidiary and 4. foreign production * model views global entry as an incremental process

licensing

the renting or leasing of an intangible asset - Licensing is the process of creating and managing contracts between the owner of a brand and a company or individual who wants to use that brand for an agreed period of time and within an agreed territory. A company may choose to license its brand when they believe there is strong consumer acceptance for brand extensions or products. EX = Apple launching the ipod - there was an immediate need for accessories such as headphones, charging and syncing stations and carrying cases - each is made by a separate company but together offer the consumer an elegant solution - all accessories are sold by licenses

COST of the system

two types of costs are relevant when determining international marketing channel structure. 1st, some costs are incurred when establishing the channel and choosing members. 2nd, there are costs associated with maintaining the system, which typically center on encouraging channel members to remain members of the system

direct exporting

when a company exports directly to a customer interested in buying their product - that makes the company responsible for things like: market research, channel logistics and distribution. *advantages include more control over the export process, potentially higher profits, and a closer relationship to the overseas buyer/marketplace.

distribution COVERAGE

when addressing coverage, international marketers consider intensive, selective or exclusive distribution strategies. - when intensive distribution is selected.. channel members will be expected to cover a wider and more intense territory

franchising

when small business owners pay companies for the rights to use their trademarks, services and products in return for support and company guidelines on how to run their particular business. Franchising is big in the food, lodging and business services. McDonalds is a classic example - 75% of its worldwide restaurants independently owned.