Mkt571.Augsep09.5

Welcome

Marketing 571, Class 5

August / July 2009

Lawrence Linn

Friday, September 11, 2009

Housekeeping

• Classic Airl ines Papers

• Group project

Concept Review

TopicEntering foreign markets

•Somebody explain this to me

•Can we have some examples?Joint

ventures

Directinvestment

Indirectexporting

Licensing

Directexporting

674 PART 8 > CREATING SUCCESSFUL LONG-TERM GROWTH <

| FIG. 21.2 |Five Modes of Entry into Foreign

Markets

products and services and its attractiveness as a market to foreign firms depend on its eco-nomic, political-legal, and cultural environments.

Suppose a company has assembled a list of potential markets to enter. How does it chooseamong them? Many companies prefer to sell to neighboring countries because they under-stand these countries better and can control their costs more effectively. It is not surprisingthat the two largest U.S. export markets are Canada and Mexico, or that Swedish companiesfirst sold to their Scandinavian neighbors. As growing numbers of U.S. companies expandabroad, many are deciding the best place to start is next door.

At other times, psychic proximity determines choices. Many U.S. firms prefer to sell inCanada, England, and Australia—rather than in larger markets such as Germany and France—because they feel more comfortable with the language, laws, and culture. Companies shouldbe careful, however, in choosing markets according to cultural distance. Besides the fact thatpotentially better markets may be overlooked, it also may result in a superficial analysis ofsome very real differences among the countries. It may also lead to predictable marketingactions that would be a disadvantage from a competitive standpoint.24

Regardless of how chosen, it often makes sense to operate in fewer countries with adeeper commitment and penetration in each. In general, a company prefers to enter coun-tries (1) that rank high on market attractiveness, (2) that are low in market risk, and (3) inwhich it possesses a competitive advantage. Here is how Bechtel Corporation, the construc-tion giant, goes about evaluating overseas markets.

B E C H T E L C O R P O R A T I O N

Bechtel provides premier technical, management, and directly related services to develop, manage, engineer,build, and operate installations for customers in nearly 60 countries worldwide. Before Bechtel ventures into newmarkets, the company starts with a detailed strategic market analysis. It looks at its markets and tries to deter-mine where it should be in four or five years’ time. A management team does a cost-benefit analysis that fac-tors in the position of competitors, infrastructure, regulatory and trade barriers, and the tax situation (both cor-porate and individual). Ideally, the new market should be a country with an untapped need for its products orservices; a quality, skilled labor pool capable of manufacturing the product; and a welcoming environment (gov-ernmental and physical).

Are there countries that meet Bechtel’s requirements? Although Singapore has an edu-cated, English-speaking labor force, basks in political stability, and encourages foreigninvestment, it has a small population. Although many countries in central Europe possessan eager, hungry-to-learn labor pool, their infrastructures create difficulties. The team eval-uating a new market must determine whether the company could earn enough on its invest-ment to cover the risk factors or other negatives.25

::: Deciding How to Enter the MarketOnce a company decides to target a particular country, it has to determine the best mode ofentry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, anddirect investment. These five market-entry strategies are shown in Figure 21.2. Each suc-ceeding strategy involves more commitment, risk, control, and profit potential.

Indirect and Direct ExportThe normal way to get involved in an international market is through export. Occasionalexporting is a passive level of involvement in which the company exports from time to time,either on its own initiative or in response to unsolicited orders from abroad. Active exportingtakes place when the company makes a commitment to expand into a particular market. Ineither case, the company produces its goods in the home country and might or might notadapt them to the international market.

Companies typically start with indirect exporting—that is, they work through indepen-dent intermediaries. Domestic-based export merchants buy the manufacturer’s products andthen sell them abroad. Domestic-based export agents seek and negotiate foreign purchasesand are paid a commission. Included in this group are trading companies. Cooperative orga-nizations carry on exporting activities on behalf of several producers and are partly undertheir administrative control. They are often used by producers of primary products such as

N:0-536-91520-2

TopicChannel Strategies

Channel LevelsThe producer and the final customer are part of every channel. We will use the num-ber of intermediary levels to designate the length of a channel. Figure 13.3a illustratesseveral consumer-goods marketing channels of different lengths, while Figure 13.3billustrates industrial marketing channels.

A zero-level channel (also called a direct-marketing channel) consists of a pro-ducer selling directly to final customers through door-to-door sales, Internet selling,mail order, telemarketing, TV selling, and other methods. A one-level channel con-tains one intermediary, such as a retailer. A two-level channel contains two interme-diaries; a three-level channel contains three intermediaries. From the producer’sperspective, obtaining information about end users and exercising control becomesmore difficult as the number of channel levels increases.

Channels normally describe a forward movement of products. One can also talkabout reverse-flow channels, which bring products back for reuse (such as refillable bot-tles), refurbishing items for resale, recycling products, or disposal of products andpackaging. Several intermediaries play a role in these channels, including manufactur-ers’ redemption centers, community groups, traditional intermediaries such as soft-drink intermediaries, trash-collection specialists, recycling centers, trash-recyclingbrokers, and central-processing warehousing.8 Noranda is a recycling partner forHewlett-Packard, which encourages consumers and small businesses to recycle theirold computers through a low-cost recycle-by-mail program. Using this reverse-flowchannel, nearly 2 million tons of computer equipment arrive every month at the com-pany’s recycling center in California.9

244 Part V Delivering Value

(a) Consumer marketing channels

RetailerRetailerRetailer

WholesalerWholesaler

Jobber

0-level 1-level 2-level 3-level 0-level 1-level 2-level 3-level

Manufacturer Manufacturer Manufacturer Manufacturer

Consumer Consumer Consumer Consumer

(b) Industrial marketing channels

Manufacturer Manufacturer Manufacturer Manufacturer

Industrialdistributors

Industrialcustomer

Manufacturer'srepresentative

Manufacturer'ssales branch

FIGURE 13.3 Consumer and Industrial Marketing Channels

N:0-536-31467-5Friday, September 11, 2009

CHANNEL-MANAGEMENT DECISIONS

After a firm has chosen a channel alternative, individual intermediaries must beselected, trained, motivated, and evaluated. Marketers must also be ready to modifychannel arrangements over time.

Selecting Channel MembersCompanies need to select their channel members carefully because to customers, thechannels are the company. Producers should determine what characteristics distin-guish the better intermediaries and examine the number of years in business, otherlines carried, growth and profit record, financial strength, cooperativeness, and ser-vice reputation of potential channel members. If the intermediaries are sales agents,producers should evaluate the number and character of other lines carried and the sizeand quality of the sales force. If the intermediaries want exclusive distribution, theproducer should evaluate locations, future growth potential, and type of clientele.

Training Channel MembersCompanies need to plan and implement careful training programs for their intermedi-aries. The fast-growing Culver’s restaurant chain requires its Midwestern franchiseesto work 60 hours in one of the 5 restaurants Culver owns and then work 12-hour days,6 days a week for 4 months at headquarters, learning every facet of how the companyoperates logistically and financially.17 Channel training is also a good competitive tool.Kyocera Mita arranged for J.D. Power and Associates to survey its customers and certify

248 Part V Delivering Value

Value-addedpartners

Telemarketing

Internet

LowLow High

Direct marketingchannels

"Indirect" channels

Direct saleschannels

Cost per Transaction

Retail stores

Distributors

Sales force

FIGURE 13.4 The Value-Adds Versus Costs of Different Channels

Source: Oxford Associates, adapted from Dr. Rowland T. Moriarty, Cubex Corp.

N:0-536-31467-5

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videoFriday, September 11, 2009

Topicoutdoor advertising

TopicMultichannel marketing

integrated marketing communications

Chapter 15 Designing and Managing Integrated Marketing Communications 281

TABLE 15.1 Common Communication Platforms

Events/ Personal Direct Advertising Sales Promotion Experiences Public Relations Selling MarketingPrint and broadcast ads Contests, games, Sports Press kits Sales Catalogs

sweepstakes, lotteries presentationsPackaging—outer Entertainment Speeches Sales meetings MailingsPackaging—inserts Premiums and gifts Festivals Seminars Incentive Telemarketing

programsMotion pictures Sampling Arts Annual reports Samples Electronic

shoppingBrochures and booklets Fairs and trade shows Causes Charitable Fairs and TV shopping

donations trade showsPosters and leaflets Exhibits Factory tours Publications Fax mailDirectories Demonstrations Company Community relations E-mail

museumsReprints of ads Coupons Street activities Lobbying Voice mailBillboards Rebates Identity mediaDisplay signs Low-interest Company magazine

financingPoint-of-purchase EntertainmentdisplaysAudiovisual material Trade-in allowancesSymbols and logos Continuity programsVideotapes Tie-ins

SENDER Encoding Decoding

ResponseFeedback

RECEIVERMessage

FIGURE 15.2 Elements in the Communications Process

media. Four represent major communication functions—encoding, decoding, response, andfeedback. The last element in the system is noise (random and competing messages thatmay interfere with the intended communication).3

Micromodel of Consumer Responses Micromodels of marketing communica-tions concentrate on consumers’ specific responses to communications. Figure 15.3summarizes four classic response hierarchy models.

emailwebTVdirect mailradiomobile

What are channels?

data$121

$194 $242

$502 $520

$1,050

webstore

catalogcatalog+internet

internet+retailcatalog+retail

catalog+retail + internet

dataFriday, September 11, 2009

Network TV22.8%

Cable TV22.7%

National Magazines17.1%

Local TV14.8% Internet

5.9%4.5% 2.5%

Network TVCable TVNational MagazinesLocal TVInternetLocal NewspapersHispanic TVSyndicated TVOther

source: Nielsen Online, AdAcross, Marketingcharts.com

Share of Ad Spending

TopicPresentation hints

More Tips

• Look at online materials forum

• Slides support speakers

• Have hip-pocket slides

• Be prepared

• Use pictures, not clip art - www.compfight.com

• Have fun, create a story arc

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Mkt571.Augsep09.5

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