Lecture 10 Chp14 Student

14 - *Copyright 2014 Pearson Education, Inc. Chapter ObjectivesExplain the impact globalization is having on international marketing activitiesDescribe the types of things managers must consider when developing international product strategiesDiscuss the factors that influence international promotional strategies and the blending of product and promotional strategiesExplain the elements that managers must take into account when designing international distribution strategiesDiscuss the elements that influence international pricing strategies

Copyright 2014 Pearson Education, Inc.

14 - *Copyright 2014 Pearson Education, Inc. Globalization and MarketingStandardized productand promotionAdapted productand/or marketing Consistent image/message

Contain costs Respond to local needs

Exploit unique image


14 - *Copyright 2014 Pearson Education, Inc. Brand and Product NamesBrand name

Competitive advantage Consistent image Consider connotationProduct name

Select carefully Respect cultures Obey local laws


14 - *Copyright 2014 Pearson Education, Inc. Product Life CyclesNew product development efforts Result is shorter product life cyclesConsecutive market introductions Technology and travel make obsolete


14 - *Copyright 2014 Pearson Education, Inc. Push and Pull StrategiesPush StrategyPull StrategyPressure channel members to carry aproduct and promote it to final usersCreate buyer demand that will encourage channel members to stock a product


14 - *Copyright 2014 Pearson Education, Inc. Choosing Push or Pull Powerful channel members make push difficult Fewer media outlets in emerging markets makes pull difficult Brand loyalty makes pull easier


14 - *Copyright 2014 Pearson Education, Inc. Distribution StrategyPlanning, implementing, and controlling the physicalflow of a product from origin to consumptionPhysical goods

Consulting services

News providers


14 - *Copyright 2014 Pearson Education, Inc. Pricing StrategyMust match overall firm strategyLow-cost leadership

Differentiation

Focus


14 - *Copyright 2014 Pearson Education, Inc. Worldwide PricingSingle selling price for all international marketsDifficulties

Local production costExport / distribution costLocal purchasing powerExchange rates


14 - *Copyright 2014 Pearson Education, Inc. Dual PricingDifferent selling price abroad than at homePrice escalationLower local price

Separate international from domestic buyersIf not, arbitrage possible


14 - *Copyright 2014 Pearson Education, Inc. Pricing Issues Intra-company transfer Free-market price Upper or lower limits Unfairly low export price

Transfer priceArms length pricePrice controlsDumping


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Copyright 2014 Pearson Education, Inc. 15 - *

*Welcome to Chapter 14, Developing and Marketing Products.*In this chapter, you will learn how globalization affects international marketing activities.You will also:Explore how firms develop their international product strategies.Understand how companies blend product and promotional strategies for international markets.And examine the elements that influence international distribution and pricing strategies.*Red Bull is identical in every market in which it is sold. Each slender red, blue, and silver can contains caffeine, carbohydrates, vitamins, and the amino acid taurine.Around the world, Red Bull recruits brand ambassadors, who hand out free samples at events, and hires student managers, who spread the word about the beverage and drink it on campuses.And Red Bull sponsors top athletes in racing and sporting events, including snowboarding, hang-gliding, skateboarding, and daredevil stunts.*Some companies market an identical product worldwide, whereas others adjust marketing strategies to national markets. But how do managers know which course to follow?One approach says technology is causing needs and preferences to converge worldwide. Companies should, therefore, market the same products in the same way in all countries. This strategy helps contain costs because modifying products and marketing strategies is expensive.Another perspective says that companies should adapt products and/or strategies to target markets to better satisfy local needs. A company can exploit its unique international image to take market share from local competitors.*Many aspects of nations business environment influence international marketing strategies.A company can adapt its product to suit local buyers tastes and product preferences that are rooted in culture. Or, it can search for a different cultural need that its product satisfies.Likewise, a firm can adapt its product to satisfy a target markets laws and regulations, or seek out target markets where a standardized product will sell.National image can alter buyer perception of product quality and reliability. A company may either emphasize or downplay a products national image when it is a prominent product feature.And buyers expect a certain level of craftsmanship and satisfaction from a particular brand. When a product fails to deliver on those expectations because it is a counterfeit, the companys reputation is tarnished.*A brand name is legal property that can become so valuable as to become a firms competitive advantage. A consistent worldwide brand image is increasingly important as more people travel internationally. When selecting a brand name, a company should consider the connotations the name carries in the global marketplace.Managers must also pay close attention to the names given to products in international markets. A product name that is not carefully researched can offend people for cultural reasons. Product names also may need to be changed to comply with the law in a target market, or to abide by a legal judgment that says a name is misleading.*Companies traditionally extended a products life cycle by introducing it first in industrialized countries and later exporting it to emerging markets. But advances in global communications now alert consumers worldwide to the latest product introductions. Firms now undertake new product development at a more rapid pace, which is shortening the life cycles of products.*A company reaches distribution channels and potential buyers through its promotion mix, which includes personal selling, advertising, public relations, and direct marketing. Firms can use two basic strategies to execute promotional strategy.A push strategy is used when a firm pressures channel members to carry a product and promote it to final users. Manufacturers of products sold in department and grocery stores often use a push strategy.A pull strategy is used when a company creates buyer demand that will encourage channel members to stock a companys product. Buyer demand is generated and pulls products through distribution channels to end-users.*Whether a firm uses a push or pull strategy depends on the type of distribution system present, the firms access to mass media, and the type of product it is selling.Implementing a push strategy is difficult when channel members, not producers, wield power. It can also be ineffective when distribution channels are lengthy, in which case a pull strategy might be better.Increasing consumer awareness and generating demand can be difficult in emerging markets with few forms of mass media. Billboards and radio may be needed when consumers have little or no access to the Internet or to cable or satellite TV.Finally, a pull strategy may be best when buyers display brand loyalty because they know the product they want. A push strategy can be more appropriate for inexpensive consumer goods and when buyers are not brand loyal because they may seek the least expensive brand that a retailer carries.*A company may need to make only slight modifications to its advertising in a culturally similar target market. Yet, significant cultural differences can force the creation of entirely new ads.Companies that advertise in multiple markets must determine those aspects of their advertising campaign that can be standardized and those that cannot.A firm pursuing a global marketing strategy may choose to exploit the global reach of the World Wide Web and the global reach of sporting events such as the Olympics, World Cup Soccer, and Formula One auto racing.Standardized advertising in Europe may fail by overlooking cultural differences. Successful pan-European ads focus on the product, contain lots of visuals and few spoken and written words, and pay very close attention to language translation.*Marketing communication is a circular process.Translating promotional messages from one language to another can cause misinterpretations or incorrect translations. Language differences can also disrupt the feedback a company receives from buyers in a target market.When a company develops its communication strategy for international markets, it either extends or adapts its product and its promotional strategies in five possible ways.*The first option is for a firm to use the same home-market product and promotional strategies in target markets.This is often the simplest and most profitable strategy because the firm does not adapt its product or marketing.This method is well-suited to companies that use a global strategy to sell upscale luxury items with global brand names.An industrys low-cost leader can use this approach successfully because one product and one promotional message reduces costs.*The second option is for a firm to sell the same product into new target markets but alters its promotion.The promotional message needs adaptation because the product appeals to a different buyer, satisfies a different need, or serves a different function.This strategy helps contain costs because the product does not undergo any alterations.It may also work well in a market with a low level of economic development. Door-to-door personal selling and regional product shows or fairs may be better options when TV and radio coverage are limited and the Internet is years behind.*The third option is for a firm to adapt its product to target markets yet retain its home-market promotional strategy.A company may unintentionally adapt its product when a target market requires that local resources produce goods locally. This can cause a finished product to turn out differently than one made in the home market.Other requirements include product safety codes that differ from those in the home market, or changes needed to suit the local infrastructure.This strategy can be very costly, especially if a company must invest in production facilities in target markets to remain close to shifting buyer preferences. But it can be successful if a firm sells a differentiated product and can charge a higher price to compensate for higher production costs.*The fourth option is for a firm to adapt its product and its promotions to suit the target market.Here, product adaptation better satisfies the needs or preferences of local buyers than does the home-market version of the product.The promotional message is also adapted to explain how the product meets those needs and preferences.This method can increase costs and, therefore, tends to require a highly profitable segment in target markets.*The fifth option is for a firm to invent an entirely new product for a target market.Low purchasing power can force product invention to appeal to local buyers who cannot afford the home market product or a modified home product.It can be the only option when a target markets infrastructure is very different than that at home.Again, this strategy may be necessary when the target market and home market have widely different levels of economic development.*Distribution involves planning, implementing, and controlling the physical flow of a product from its point of origin to its point of consumption. A distribution channel, then, is the physical path that a product follows on its way to customers.Global service providers such as consulting companies and news services also require distribution channels to deliver their products to customers.*Distribution strategies involve decisions of how to get goods into a country and how to distribute them within a country.Degree of exposure refers to how widely available a product is in the marketplace.In an exclusive channel, a firm grants the right to sell its product to one or a limited number of resellers. This gives the firm greater control over sales to wholesalers and retailers and can create a barrier that is difficult or impossible for competitors to penetrate.In an intensive channel, a firm grants the right to sell its product to many resellers. This makes buying a product convenient for buyers because it is sold through many outlets. But it does not provide control over reseller decisions such as what competing brands to sell and it does not create strong barriers to channel entry.Channel length refers to the number of intermediaries in place between the producer and the buyer.This decision is governed by the fact that as the number of intermediaries grows, the more costly distribution becomes because each adds a fee for its services.*Product characteristics also are factors in distribution strategies.Value density is the value of a product relative to its weight and volume. As a rule, the lower a products value density, the more localized its distribution system.Products with high value-density ratios include emeralds, semiconductors, and premium perfumes. These products can be processed or made practically anywhere and then shipped to markets because their transportation costs are small relative to their end values.*A countrys distribution system develops over time and reflects its unique history and traditions. A firm can experience trouble if it ignores two potential distribution problems in target markets.A lack of market understanding can create significant financial losses for a company. A firm has no excuse for a lack of market research prior to entering a target market.Theft and corruption can have a major negative impact on a companys distribution strategy. While these potential problems are not always uncovered during the market research phase, a company should have a contingency plan in place if they arise.*A firms pricing strategy for target markets should match its overall international strategy.A company pursuing a low-cost leadership strategy has the lowest cost structure in its industry, which allows it to lower prices relative to rivals.A firm pursuing a differentiation strategy has developed a reputation among buyers throughout an industry as having a unique product, which allows it to charge a higher price than low-cost competitors.And a business following a focus strategy serves the needs of a very narrow market segment by being a low-cost leader, by differentiating its product, or by doing both. The company can charge more for its product because buyers place special value on how the product satisfies their needs.*A worldwide pricing strategy establishes one selling price for all international markets. This strategy can be difficult to implement for several reasons.First, production costs differ from nation to nation and selling prices may adjust to these additional costs.Second, producing in one location does not guarantee one selling price in all target markets because the cost of reaching different markets varies.Third, a company may decide to lower or raise a selling price to match the purchasing power of buyers in a target market.Fourth, fluctuating exchange rates between home and target market currencies may change the price of a firms product when sold abroad.*A dual pricing strategy means that a product has a different selling price (typically higher) in export markets than it has in the home market.Price escalation results from exporting costs and currency fluctuations.But a products export price may be lower than its price at home if a firm decides that domestic sales are to cover all production costs and exports are to cover only the added costs of exporting and selling abroad, such as shipping and tariffs.To apply dual pricing successfully, a company must keep its domestic and international buyers separate. If it cannot, buyers could undermine the policy through arbitrage, whereby they buy products in the low priced market and resell them in the higher priced market.*Several factors affect pricing strategy decisions.Transfer price is a products selling price when it is sold among a company and its subsidiaries. Transfer pricing can be used to manage global tax burdens by having subsidiaries in high-tax countries charge low prices for their output exported to affiliated parties.An arms-length price is the free-market price that unrelated parties charge one another. Governments may assign arms-length prices on intra-company transfers to reduce tax evasion with the use of transfer prices.A price control is an upper or lower limit placed on the price of a product within a country. Upper-limit price controls provide price stability when inflation is driving up prices. Lower-limit price controls can be used to help local companies compete against the less expensive imports of foreign companies or be used to ward off price wars.Dumping occurs when the price of a good is lower in export markets than in the domestic market. Charges of dumping can arise when a foreign competitor floods a target market with inexpensive imports to undercut competitors prices, or can arise when changes in exchange rates cause unintentional dumping.*

Lecture 10 Chp14 Student

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