FTM 482 Final Exam

Company Cost

set the price at least that will cover all costs needed to make and sell its products in other countries

Price Quotation

- A contract may include specific elements affecting the price, such as credit, sales terms, and transportation - Price quotations must also specify the currency to be used, credit terms, and the type of documentation required

International Pricing Examples

- 7 for all Mankind Denim jacket in India - Levi's jeans in Vietnam

Wholesale selling international buyers via trade shows

Fashion Coterie, New York, USA. Who's Next, Paris, France.

Effective Communication mix varies by countries

Personal Selling - Person to person communication between a company representative and a prospective buyer --> focus is to inform and persuade prospect --> short term goal: make a sale --> long term goal: build a relationship - Important in countries that restrict advertising - Used frequently in countries where low wage rates allow large local sales forces to be hired Preferred and allowed social media varies by countries

Working with Distributors

Pros: - Ties up less capital - Faster - More fully capitalized on the local market knowledge Cons: - Relinquish considerable control over your brand strategy, which can hurt your brand image in the long run Distributors: - The function of a distributor is to engage wholesalers and retailers in order to sell the products to end users - The distributors are provided exclusive rights to sell products within a particular geographical location through their retail networks

Positioning

STP: Segmentation, Targeting, Positioning

Taxes

Sales tax (VAT) varies among EU countries. Therefore, even in EU, you will find different prices of the same item

Cost-Plus Pricing

per-unit product costs are the sum of all past or current direct and indirect manufacturing and overhead costs + additional costs & expense when goods cross national borders

Gray Product

products that are exactly the same that appear in different countries at widely different prices

M-Pesa in Kenya

- A mobile platform for financial services like transferring money - Small retailers register to be agents that take in and pay out cash - Launched to meet the needs of the larger number of Kenyans without bank accounts to have a secure means of remitting funds to their families

Local Brand

- Achieved success in a single national market - Represents the lifeblood of domestic companies - entrenched local products/brands can be a significant competitive hurdle to global companies

Technology Leapfrogging

- Adopting the latest technology without going through intermediary steps - Often results in an accelerated development in emerging countries - Still, basic levels of power provision and transport links remain necessary to allow these economies to function effectively

Economic Conditions (Country's Income Level)

- Advanced economies: one might think that in mature markets price would not be an important factor for consumers. However, competition in mature marketers is often so fierce that pricing discounts become very important competitive tools - Discounted prices are also used to smooth reasonable variations in demand - Emerging markets: if the unique selling proposition involves status positioning, a high price is warranted. Global brand = status symbol = high price

Legal constraints

- Advertising campaigns must comply with legal regulations around the world - Advertising on television is strictly controlled in many countries

Linguistic Limitations

- Advertising from a culture does not often translate well in another culture due to differences in languages and dialects - A company marketing tomato paste in the Middle East found that in Arabic the phrase "tomato paste" translates as "tomato glue" - In Spanish-speaking countries words have different meanings. The word ball translates in Spanish as bola, which means ball in one country, revolution in another, a lie or fabrication in another, and is an obscenity in yet another

Importance of Product Adaptation

- As competition for world market intensifies, selling what is produced for the domestic market is less effective - Some products cannot be sold at all in foreign markets without modification - Others may be sold as is, but their acceptance is greatly enhanced when tailored specifically to market needs - Products may have to change in a number of ways to meet the physical or mandatory requirements of a new market, ranging from simple changes to total redesign of product - Changes may also have to be made to accommodate climatic differences

FCCP: Foreign Consumer Culture Positioning

- Associates the brand's users, use occasions, or product origins with a foreign country or culture - Examples: IKEA, Shang Xia

Marketing Benefits

- Building a global brand awareness is key - Enhance efficiency and cost savings when introducing other products with the brand name - Economies of Scale

Country-of-Origin effect (COO) and global brands

- Can be defined as any influence that the country of manufacture, assembly, or design has a consumers positive or negative perception of a product - Varies by product category: if products are more expensive, durable or involves risk of some type (health, social), COO becomes more important

Approaches to the luxury gray market issues

- Chanel: Harmonizing prices globally - Limiting supply to wholesale partners - "Selective Distribution Systems": specify distribution requirements in the contract with distributors

Channel-of-Distribution structures

- Channel selection must be given considerable thought, because once initiated, it is difficult to change, and if it proves inappropriate, future growth of market share may be impacted - The channel process includes all activities beginning with the manufacturer and ending with the final consumer Typical International Distribution in the Fashion Industry - Fashion Brand - Direct management, franchising, wholesaling (via trade shows and showroom) - Wholesaling: department stores, specialty stores

Skimming Pricing

- Charging a premium price - May occur at the introduction stage of product life cycle - When a company is the only seller of a new or innovative product - May be used to maximize profits until competition forces a lower price

Several Factors relevant to Pricing Decision

- Company cost - Customers Demand - Competition - Taxes - Company goals - Product lifestyle stage in the host market - Economic conditions

International Pricing

- Competitive tool in international marketing - Selling and changing prices are key strategic marketing decisions - Of all the tasks facing the international marketer, determining what price to charge is one of the most difficult - An offering's price must reflect the quality and value the consumer perceives in the product - Usually more localized than product or advertising decisions

Benefits of Global Brands

- Consumer Preference - Marketing Benefits - Development costs can be saved as the same products apply to other markets - Global Brand Naming

Factors in Price Escalation

- Cost of exporting: shipping costs, insurance, packing, tariffs, longer channels of distribution, larger middlemen margins, special taxes, administrative costs, and exchange rate fluctuations - Taxes, tariffs, and administrative costs: costs that result in higher prices, which are generally passed on to the buyer of the product - Inflation: inflation causes consumer prices to escalate, and the consumer is faced with rising prices that eventually exclude many consumers from the market - Deflation: results in ever decreasing prices, creating a positive result from consumers, but both put pressure to lower costs on everyone in the supply chain - Middleman and transportation costs: longer channel length, performance of marketing functions and higher margins may make it necessary to increase prices - Exchange rate fluctuations and carrying currency values: currency values swing vis-a-vis other currencies on a daily basis, which may make it necessary to increase prices

Concerns related to gray market in luxury goods

- Dilution of exclusivity: can be available from multiple distributors - Reputation and legal liability: can compromise a manufacturer's reputation and dilute brand equity - Damage of channel relationships: authorized distributors attempt to cut costs, complain to manufacturers - Hamper a company's local pricing strategies

Developing a Product Line for Certain Markets

- Estee Lauder's whitening line for Asian consumers - Nike's hijabs for Muslim consumers

Premium Brand

- Example Brands: Brooks Brothers, Sand River, Apple - Universal need: desire for best product - Value positioning: best quality, emotional benefits, high price - Global target segments: affluent customers, customers who are highly involved with the category - Common appealing factor: perceived quality, country of origin - Challenges: continuous stream of breakthrough, R&D, recoup R&D costs, temptation to go down market

Fun Brand

- Example Brands: Zara, H&M, Swatch - Universal need: stimulation, change, excitement - Value positioning: lifestyle, enjoyment, change, low price - Global target segments: global youth - Common appealing factor: global culture - Challenges: remain relevant for a fickle segment, segment is declining in many countries, conflict with corporate social responsibility

Prestige Brand

- Example brands: Hermes, Loro Piana, Ferrari - Universal need: social distinction - Value positioning: aspirational, selective, scarcity, very high price - Global target segments: global elite, imitators of the global elite - Common appealing factor: global culture, country of origin - Challenges: maintain scarcity, global backlash against elitism, retain relevance among millennials

Mass Brand

- Examples Brands: Levi's, L'Oreal Paris - Universal need: desire for quality, risk aversion - Value positioning: high quality, price above average - Global target segments: middle class, mainstream firms - Common appealing factor: perceived quality, country of origin - Challenges: need for continuous product improvements, vulnerable to attacks from below and above, success varies with state of economy

Value Brand

- Examples Brands: Uniqlo, IKEA - Universal need: best possible value for money - Value positioning: acceptable quality, lowest price - Global target segments: cash-strapped customers, smart shoppers, routine purchases of low risk - Common appealing factor: economies of scale, frugal innovation - Challenges: segment of price-oriented buyers is limited, low customer loyalty, low price position may not travel well globally

Color Localization

- Fashion firms localize color for the needs of local customers (red items in China) - Piece dye is one way in color localization

Global Brand

- Have the same name and similar image and positioning throughout the world - Luxury brands are mostly global brands targeting the same segment with same positioning and pricing strategies across the world

Luxury Good and Outshopping

- Hefty Chinese import duties have made the price differential so large that it has prompted Chinese shoppers to buy their luxury goods, especially handbags, while traveling in Europe - In 2015, the price gap was large enough for a Chinese shopper to justify the trip to Europe - Chanel increased prices in Europe on some of its handbags while decreasing them in China to eliminate a growing price gap between Europe and China

GCCP: Global Consumer Culture Positioning

- Identifies the brand as a symbol of a particular global culture or segment - High-touch and high-tech products - Examples: Nike, Benetton

LCCP: Local Consumer Culture Positioning

- Identifies with local cultural meanings - Uses local culture and history in brand naming and positioning - Uses local ingredient in product development - Examples: L'Occitane en Provence Aqua Parma

NIEs (emerging countries) & Less Developed Economies

- In new growth markets, it is easy to observe the attention given to well-known brand names. Many people from these countries are aware of foreign products, either through travel or through global communication network - Unlike more mature markets, domestic products tend to be seen as less desirable, even through their functional performance may be superior - Foreign brands are preferred and viewed as a status symbol - In less developed economies, consumer needs tend to be basic and easy to identify - The less economically developed a market is, the greater degree of change a product may need for acceptance

Approaches to Lessening Price Escalation

- Lowering cost of goods: by eliminating costly features in products or by manufacturing products in countries where labor costs are cheaper - Lowering tariffs: forms can lower prices by categorizing products in classifications where the tariffs are lower - Lowering distribution costs: firms can design channels that are shorter, have fewer middlemen, and by reducing or eliminating middleman makeup - Using foreign trade zones: firms can manufacture products in free trade zones where the incentive offered is the elimination of local taxes, which keep prices down

Company Goals

- Maximizing current profit vs. penetrating the market vs. projecting a premium image - Varies from market to market. Positioning could be different by countries

Size Localization

- Most Common - The Gap has altered clothing sizes to adapt the physique of the Chinese population

Global Brand Naming

- Often use the same name unless there is legal and meaning issues - Legally: if the same name exists in the host country, it needs to be changed considering the nuance in local language (E.g., T.J. Maxx --> T.K. Maxx in UK) - However, in some markets, new brand name is developed with local language

Maximizing profits in a country depends on:

- Price sensitivity of local consumers - Prices of competing products and services

E-commerce & mobile shopping in emerging markets

- Shopping on smartphones and tablets will be a major driver of online sales in emerging markets - In many markets, online shopping is mobile shopping - Technology Leapfrogging

Consumer Preference

- Signal of quality and global culture - Status and prestige

4 Generic Situations in Positioning

- Similar segments and similar positioning (Nike) - Similar segments but different positioning (Levi's, Lee, Wrangler) - Different segments but similar positioning (IKEA) - Different segments and different positioning = True Localization (Levi's Denizen in Asia)

Advanced Economies

- Since the customers at the mature stage tend to be fickle, advanced design, fancy packaging, customer service, and other value-adding features play a minor role in consumer choice - In these markets new product innovation tends to play a major competitive role - The lower end of the market is typically attractive only to large-scale, low-cost producers with standardized products who compete on price - Managers should not assume that perfect functioning alone will lead customer satisfaction - In mature markets, the real satisfaction - which creates repeat business, customer loyalty, and positive word of mouth - comes from emotional factors (hedonic), which add more values - In countries with more mature markets and intense global competition, customers expectations continue to rise, and they demand even higher quality products and improved service - at competitive prices

Cultural Requirement

- Some products need to be developed or modified to address the needs of certain cultures - Examples: Nike's hijabs, Alcohol-free perfumes in Saudi Arabia - Failure Examples: 1. Nike's mishap in product development in 1997 - the shoes had the word air spelt on the back in flames which looked like the symbol for Allah 2. Nike's mishap in product development in 2013 - Nike's pro tattoo collection provoked controversy in Australia and New Zealand 3. Puma's mishap in product development in 2011 - Puma printed shoes with the sacred flag of the UAE

Developing Limited Edition for Special Occasions

- To meet the needs of Chinese consumers gift giving culture on New Year's Day, many brands develop limited edition for occasions - Limited edition Air Jordan - "Year of the Rabbit" shoe

Cash On Delivery (COD)

- Used in most emerging countries where credit card penetration and trust are low while internet penetration is relatively high - A payment method that allows customers to pay cash when order is delivered - Can incur highly logistics costs for sellers (often times the consumer is not available, which means that multiple delivery attempts are made for one order, Higher cancellation rates - sellers need to bear all shipping costs)

Digital Distribution

- World Retail Distribution by Channel - Major e-tailers in selected markets - E-Commerce & mobile shopping in emerging markets (Technology Leapfrogging) - Three Digital Distribution options for global fashion brands (own brand website, selling through e-tailers, setting up a brand store on an online marketplace)

Low Context Culture

- direct, informative, logical - text heavy layout

Feminine Cultures

- favor caring, softness, small - use of understatement (probably the best beer in the world) - showing off is negative - modesty and harmony are valued

Comparative Advertising

- heavily regulated in other parts of the world - one brand is compared to another - typical in the U.S. - ineffective in collectivist, feminist cultures

High Context Culture

- images promoting values characteristic of collectivist cultures - more animation and images of moving people - visual layout

Across cultures, there is a variation in

- the way information is presented - the amount of data used - the sue of extreme claims - rhetorical style - the use of visuals or animation - the degree to which information is explicit, precise, and direct - the option to contact people

Collectivist Culture

- to build relationships and trust between sellers and buyers - focuses on inducing positive feeling rather than providing information - the first identification of a brand, company name, or products occurs later than a typical U.S. TV commercial - soft sell approach: using a hard sell or directly addressing consumers turn them off

Individualistic Culture

- to persuade - rational claims - focus on brand's attributes and advantages - direct addressing of the public - hard sell approach, information driven

Masculine Cultures

- winning, competitiveness, mastery, bigness, great expectations are the most frequently used theme - being first - the one and only in the world - be the best - a world without limits - use of a hyperbole (all the cosmetics in the world can't do what we can)

Three Challenges to Operating Own Website in Foreign Countries

1. Adaptation Level 2. Payment infrastructure: do not assume that credit cards is popular as in the U.S. 3. Delivery Logistics

Standardization vs. Adaptation Examples

1. H&M 2. L'Oreal - "I am worth it" (US) vs. "We are worth it" (China)

Seven Steps of International Advertising Framework

1. Perform Marketing Research 2. Specify the goals of the communication 3. Develop the most effective messages for the market segments selected 4. Selective effective media 5. Compose and secure a budget based on what is required to meet goals 6. Evaluate the campaign 7. Evaluate the campaign relative to the goals specified

Media Decisions

Arab Countries - Women-free catalogue in Saudi Arabia - Censorship in Saudi Arabia - H&M ads in Dubai

International Communication Process

reconciling an international advertising campaign with the cultural uniqueness of markets is the challenge confronting the global marketer

Wholesale selling international buyers via a brand's own showroom

selling to specialty store buyers

Major e-tailers in selected markets

China: Alibaba, JD.com India: Flipkart, Myntra, Snapdeal, eBay, Ajio Latin America: MercadoLibre, Saraiva Africa: Jumia

COO vs. Country Image

Country image is overall beliefs held by consumers toward a particular country's various features such as economies, society, people, and products

Barriers to Advertising Standardization

Differences between countries might render standardization a challenge. Barriers: 1. Cultural diversity: values and purchase motivations differ 2. Legal constraints: e.g., comparative advertising is not permitted in any countries 3. Linguistic limitations 4. Media limitations: the communication infrastructure varies. A particular medium might be inappropriate or not available for advertising

Wholesale selling international buyers via online wholesale buying platform

JOOR.com

Developing a New Brand for Certain Markets

Levi's Denizen for Chinese consumers

Luxury grey market issues

More severe in luxury sectors because - Price differentials can be high - Moving products is relatively easy The grey market accounts for 5-10% of luxury goods sales

Localization Approach

Multiple Levels of Localization - Some elements in all markets - Modest variations of a few elements - Localization of more elements - Localization of all elements - within global brand framework - Localization of all elements - without reference to global branding framework

Integrated Marketing Communications

Once a marketing offering is developed to meet target market needs, intended customers must be informed of the offering IMC compromises: - Advertising - Sales promotions - Personal selling - Direct selling - Public relations

Three Digital Distribution Options for Global Fashion Brands

Own Brand Website - Can preserve margin by eliminating middlemen - Full control over marketing mix - Threat of commoditization is relatively lower - Generate fewer visitors than other options but these are not a problem for prestige brands and established brands Setting Through E-Trailers (Macy's.com) - High traffic - E-tailers command 30% margin easily and handle order fulfillment - Lose considerable control over the marketing mix - Threat of commoditization is high - Channel conflict is high if brands sell through different channels Setting up a brand store on an online marketing (Tmall) - Sell directly to consumers - The platform does not take ownership of the products - Cost vary substantially between marketplaces (Amazon takes 15% and Tmall 5% or less) - May entrust marketplace to fulfill orders - The design of webstore limited by the format dictated by the marketplace, little room to convey unique brand image - B2B marketplaces are growing: this is an attractive option for lesser-known - B2C brands that desire to go global

Consumer Culture Positioning (CCP) Strategy

The positioning of a brand as a symbol of a global, foreign, or local culture

Dumping

Two approaches toward the definition of dumping 1. If the products are sold below their costs of production 2. Selling goods in a foreign market below the price of the same goods in the home market Wold Trade Organization (WTO) rules allow for the imposition of a duty when goods are dumped

The difference between FOB and CIF

agreement on the point at which responsibility and liability of goods transfer from the seller to the buyer

Flexible Cost-Plus Pricing

ensures that prices are competitive in the particular market environment

Competition

if competition is high in a host country, competitors pricing should be considered

Import Duties

levied on imported goods

International Advertising Framework

the basic framework and concepts of international advertising are essentially the same wherever employed

Customers Demand

the consumers' willingness to pay for your products set a ceiling to the price

Product lifecycle stage in the host market

the firm entering a market in the early growth stage could possibly maintain a relatively high skimming price, charging what the market will bear

Export Price Escalation

the increase in the final settings price of goods traded across borders

FOB (free on board)

the responsibility transfer occurs when the shipment reaches the port or other facility designated at the point of origin

CIF (cost, insurance, and freight)

the seller pays the cost of insurance and freight and assumes liability until the goods reach the port of destination chosen by the buyer

Parallel Imports

unauthorized middlemen importing the identical products and brands from countries whose prices are lower

Penetration Pricing

used to stimulate market growth and capture market share by deliberately, offering products at low prices

VAT or sales tax

value added tax - also called GST (goods and services tax)