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MGT520 - International Business - Lecture Handout 43

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INTERNATIONAL MARKETING

Product strategies:

  1. Product strategies depend on the specific goods and customers. Some products can be manufactured and sold successfully both in the home market and abroad by using the same strategies. Other products must be modified or adapted and sold according to a specially designed strategy.
  2. Industrial goods and technical services are good examples of products that need little or no modification. Other products, because of economics, culture, local laws, level of technology, or the product’s life cycle, require a moderate to high level of modification.
  3. There are many examples of how economic considerations affect the decision to modify a product. As a very simple example, in the United States, packets of chewing gum often contain 10 to 20 sticks, but in many other countries the weaker purchasing power of the customers necessitates packaging the gum with only five sticks. Economics is also important when the cost of a product is either too high or too low to make it attractive in another country.
  4. In some cases a product must be adapted to the different ways people are accustomed to doing things. For example, the French prefer washing machines that load from the top, while the British like front-loading units. In fast-food franchises such as McDonald’s, parts of the menu are similar throughout the world, but some items are designed to cater specifically to local tastes. Culture also influences purchasing decisions made on the basis of style or aesthetics. Convenience and comfort are other culturally driven factors that help explain the need for product modification. Others include color and language.
  5. Local laws can require the modification of products to meet environmental and safety requirements. For example, US emission-control laws have required Japanese and European car importers to make significant model changes before their vehicles can be sold in the United States.
  6. Another reason for modifying a product is to cope with the limited product life cycle of the good. Ford Motor, for example, was extremely profitable in Europe during the 1980s, but these earnings disappeared by the early 1990s because it did not develop new, competitive products.

PROMOTION:

Promotion is the presentation of messages intended to help sell a product or service. The types and direction of messages and the method of presentation may be extremely diverse, depending on the company, product, and country of operation.

The Push-Pull Mix:

Promotion may be characterized as push, which uses direct selling techniques, or pull, which relies on mass media. To what degree a company should rely on push or pull depends in part on:

  1. Type of distribution system
  2. Cost and availability of media to reach target markets
  3. Consumer attitudes toward sources of information
  4. Price of the product compared to incomes

Standardization of Advertising Programs:

The savings from using the same advertising programs as much as possible, such as on a global basis or among countries with shared consumer attributes, are not as great as those from product standardization, but can be significant.

  • Translation: On the surface, translating a message would seem to be easy. However, some messages, particularly plays on words, simply cannot be translated.
  • Legality: What is legal advertising in one country may be illegal elsewhere. The differences result mainly from varying national views on consumer protection, competitive protection, promotion of civil rights, standards of morality, and nationalism.
  • Message needs: An advertising theme may not be appropriate everywhere because of national differences.
  1. Promotion is the process of stimulating demand for a company’s goods and services. In promoting a product, a variety of approaches can be used, including identical product and identical message, identical product but different message, modified product but same message, and modified product and different message.
  2. Advertising is a no personal form of promotion in which a firm attempts to persuade consumers to a particular point of view. In many cases, multinational enterprises (MNEs) use the same advertising message worldwide. However, there are times when the advertising must be adapted to the local market. Two of the most common reasons include: (a) the way in which the product is used is different from that in the home country; and (b) the advertising message does not make sense if translated directly.
  3. MNEs use a number of media to carry their advertising messages. The three most popular are television, radio, and newspapers. In particular, the use of television advertising has been increasing in Europe, while in other regions, such as South America and the Middle East, newspapers remain the major media for promotion efforts. However, there are restrictions regarding what can be presented. Examples include: (a) some countries prohibit comparative advertising, in which companies compare their products against those of the competition; (b) some countries do not allow certain products to be advertised because they want to discourage their use (alcoholic
    beverages and cigarettes, for example) or because they want to protect national industries from multinational enterprise (MNE) competition; and (c) some countries, such as most Islamic countries, censor the use of any messages that are regarded as erotic.
  4. Personal selling is a direct form of promotion used to persuade customers to a particular point of view. Some goods, such as industrial products or goods that require explanation or description, rely heavily on personal selling. Personal selling is also widely used in marketing products such as pharmaceuticals and sophisticated electronic equipment.
  5. Because many international markets are so large, some multinational enterprises (MNEs) have also turned to telemarketing. Multinational enterprises (MNEs) have also focused their attention on recruiting salespeople on an international basis.

PRICING:

Within the marketing mix, companies place much importance on price. Pricing is more complex internationally because of the following factors:

Governmental Intervention:

Every country has laws that affect the prices of goods at the consumer level. A governmental price control may set either maximum or minimum prices. The WTO permits countries to establish restrictions against any import that comes in at a price below that charged to consumers in the exporting country. A company may also charge different prices in different countries because of competitive and demand factors.

Greater Market Diversity:

Country-to-country variations create many ways of segmenting the market for a product. For example, companies can sell few tuna eyeballs in the United States at any price, but when exported to Japan they are considered delicacies. When a firm has a near monopoly in a foreign market, it can adopt any of the following pricing strategies:

  1. Skimming—charging a high price for a new product by aiming it first at consumers willing to pay the price, then progressively lowering the price.
  2. Penetration—introducing a product at a low price to induce a maximum number of consumers to try it.
  3. Cost-plus—pricing at a desired margin over cost.

Price Escalation in Exporting:

If standard markups occur within international distribution channels, or there are other added expenses within the system, the price to the consumer will escalate. Common reasons for price escalation in export sales are the distance to the market and tariffs.

Currency Value and Price Changes:

Pricing in highly volatile currencies can be extremely troublesome—especially under conditions of high inflation. This may result in the need for frequent price readjustments, and the firm may find that the funds it receives in the foreign currency, when converted, buy less of the company’s own currency than expected.

Fixed versus Variable Pricing:

The extent to which manufacturers can or must set prices at the retail level varies substantially by country. In many cultures, retail prices are simply the starting point in a bargaining process. Local laws and customs often limit companies’ abilities to price as they choose.

Retailers’ Strength with Suppliers:

Dominant retailers with clout can get suppliers to offer them low prices and then compete on the basis of being the lowest cost retailer. This clout in the domestic market (e.g., Wal-Mart, Carrefour) may not exist for the retailer in foreign markets.

  1. Every nation has government regulations that influence pricing practices. In some countries, for example, there are minimum and maximum prices that can be charged to customers. Governments also prohibit dumping or the selling of imported goods at a price below cost or below that of the home country.
  2. Consumer tastes and demands vary widely in the international marketplace, resulting in multinational enterprises (MNEs) having to price some of their products differently. For example, companies have found that they can charge more for goods sold overseas because of the demand. A second factor influencing market diversity is the perceived quality of the product. Another factor is the tax laws and attitudes about carrying debt.
  3. When selling products overseas, multinational enterprises (MNEs) often end up assuming the risks associated with currency fluctuations. This risk is particularly important when multinationals have a return on investment target, because this objective can become unattainable if the local currency is devalued. Price escalation forces (for example, changes in input prices) that drive up the cost of imported goods cause a similar problem.

Place:

  1. Distribution is the course that goods take between production and the final consumer. This course often differs on a country-by-country basis, and multinational enterprises (MNEs) spend much time examining the different systems that are in place, the criteria to use in choosing distributors and channels, and how the distribution segmentation will be employed.
  2. It is often difficult to standardize the distribution system and use the same approach in every country, because there are many individual differences to be considered. Consumer spending habits can negate attempts to standardize distribution. The location where consumers are used to buying will also influence distribution.
  3. There are a number of criteria that multinational enterprises (MNEs) use in creating the most efficient distribution system. One is to get the best possible distributors to carry their products. Depending on the nature of the market and the competition, a multinational may give exclusive geographic distribution to one local seller or may arrange to have a number of sellers jointly selling the product.

Strategic management and marketing strategy:

  1. Marketing strategies play a key role in helping multinational enterprises (MNEs) to formulate an overall plan of action. These include ongoing market assessment, new product development, and the use of effective pricing.
  2. One of the major areas multinational enterprises (MNEs) are continuing to pay attention to is data collection and analysis for the purpose of developing and updating market assessments. In some cases, this causes multinationals to change their market approach, while in other cases it supports the maintenance of a current strategy.
  3. Another marketing area that is a critical part of the management plan of many multinational enterprises (MNEs) is new product development. The introduction of new products is helping these firms maintain market share and is positioning them for future growth.
  4. Some multinational enterprises (MNEs) use high pricing with high quality to skim the cream off the market.

BRANDING:

A brand is an identifying mark for products or services. An MNE must make four major branding decisions:

  • Brand versus no brand
  • Manufacturer’s brand versus private brand
  • One brand versus multiple brands
  • Worldwide brand versus local brands

Language Factors:

Brand names may carry a different association in another language. Pronunciation may also be a problem.

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