nara and alicia final notes

8/6/2019 NARA and ALICIA Final Notes

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1. While questions may be asked from any area of International Marketing,

some key areas to focus on would be:

Standardisation versus Customisation/Adaptation, and howthese impact each of the marketing mix areas, ie.

i. Product Decisions

ii. Promotions/Marketing Communications Decisions

iii. Pricing Decisions, and

iv. Distribution/Channel decisions.

The environmental factors (both macro and micro) you need toconsider during adaptation/customisation (eg. Cultural, Political,Economic, etc.), and the manner in which these impact the

international marketing decisions in various country-contexts?

a) explain the strategy of product adaptation in international marketinghighlighting the pros and cons of the strategy and describing when firmsshould or not adapt a product to suit an international market.

b) if a products adaptation is pursued, which aspects of the product wouldnormally be first adapted and why?

c) using appropriate examples, describe how products might be adapted inorder to account for the following differences in overseas:

Cultural

Legal political

Economic

Technological

Climate

Please note that at least one example must be provided to demonstrate eachdifference

Standardization versus Adaptation of Products for International

Markets

Standardization vs. Adaptation of the marketing mix

ANSWER INTRODUCTION

When entering international markets, firms have to adapt or standardize their

marketing mix. The problem for the company either to choose standardization or

adaptation of a product depends on the culture of the country.

STANDARDIZATION of the marketing mix

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(Hollenson, 2001). When companies use this strategy, they take less risk, since as

no attempt is made to respond to local conditions, no effort is made to maximize the

profit neither (Hollenson, 2001).

For Example, when the Iphone was launched in Europe, Apple used "PREMIUM

PRICING STRATEGY" however later the company cut the price which was "the

SKIMMING and CREAMING STRATEGY" when new model came out. This

shows that Apple decides its own fixed prices in international markets.

STANDARDIZATION of PROMOTION for International Markets

Melewar and Vemmervik (2004), state that the main reason for choosing

standardization of promotion is because of different views of the world. Those in

favour for standardization are mainly concerned about reduction of advertising costs

and consistent brand image worldwide. The benefits of standardization of promotion

are cost reduction and consistent brand image. The cost reductions of

standardization of advertising mainly originate from economies of scale and scope.

This means that, there is a strong relationship between standardized advertisements

and centralized advertisement functions. Other benefits of standardization, includes

sharing of experience, effective use of advertising budget, consistency of

communication less duplication of effort, and pre-selling of the companys product.

FOR EXAMPLE: MICROSOFT advertising campaigns are standardized in all

countries.

STANDARDIZATION of DISTRIBUTION CHANNELS for International Markets

It is difficult to standardize the distribution because there is large variation of channel

distribution depending on the country. Place of distribution can be shops and

supermarkets of different size or internet for examples. Multinationals companies

operate through subsidiaries, so the implication is that headquarters not really know

the distribution channels. Indeed, it is not the headquarters that control the

distribution channels but actually, the subsidiaries in a local level.

EXAMPLE: LEVI`S distributions channels in USA varies depends of the price

strategy to different models. The cheapest can be found in supermarkets as Wal

mart. The higher end will be sold through exclusive shopping centers and boutiques.

In Europe because of the premium price strategy those jeans can be found only

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through levi`s boutiques or via internet.

INTRODUCTION ADAPTATION IN MARKETING MIX

Some elements of the marketing mix are more adaptable than others: place,

promotion and price. The product is the hardest element to adapt (Onkvisit & Shaw,

2004).

ADAPTATION PRODUCT for international markets

Product adaptation refers to the degree to which physical characteristics or attributes

of a product and its packaging differs across national markets. Even though

modifying the product for different markets increases costs, Scmidt (2004) say that

the adapted product may fit the needs and desires of consumers in different

countries better, command higher margins and generate much greater revenues.

Adaptation increases development, manufacturing, marketing, packaging, and

distribution process. Adaptation of the product is a core aspect of customizing an

export market offering. To maximize the revenue the company has to satisfy the

customer wants and needs better than their competitors and their product offerings.

Coca Cola FOR EXAMPLE, have globally standardized products sold everywhere;

nevertheless in India they have adapt the local requirement by offering much sweeter

taste to meet Indians preferences. NOKIA for instance customized its phones for

every major markets (Asian models have louder ring volumes because of the street

noise). As an example of product adaptation (however most of the time McDonald

has strandardized) can be McDonalds having same fast food places all over the

world. However after entering the Indian market McDonalds had to adapt the cultural

aspect and introduce vegetarian burgers.

ADAPTATION of PRICING for INTERNATIONAL MARKETS

To adapt the price of local conditions will lead the company to have a greater

success (Onkvisit & Shaw, 2004). Managers have to establish price depending on

the foreign market and foreign consumers revenues. It doesnt mean that the price in

one country will be coordinated to the price in another. Adapting the price is sensitive

to local conditions; but on the other hand; it gives the company the opportunity to

take advantages of price differences that can occur when a company for example

buys for lower prices and sells for a higher one (Keegan & Green, 1999). For

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example: supermarkets entering emerging markets opt for lower pricing strategies,

thus adapting to the local requirements.

ADAPTATION of PROMOTION for INTERNATIONAL MARKETS

The purpose of adaptation is to gain differential advantages while adapting the

advertisement in order to gain maximum effectiveness in terms of response and

sales. The adaptation of advertising is usually linked with a decentralized advertising

culture. The advantage with decentralized advertising function is to allow

responsiveness, adaptation of culture, infrastructure and competition. The visual and

verbal parts of advertising are particularly sensitive to adaptation and use of local

language, models, and scenery increases the probability for the advertisement to be

effective. The major disadvantages to advertising adaptation are increased costs and

a loss of consistent brand image.

For Example: Coca Cola has used a local language in China in advertising

campaign to maximize its brand awareness.

ADAPTATION of DISTRIBUTION CHANNELS for INTERNATIONAL MARKETS

Distribution channels are the component of the international marketing mix that can

be more adapted (Onkvisit & Shaw, 2004). This depends on the differences in

disposable incomes, purchasing habits and distributions infrastructure. A company

has to adapt for others reasons like for example when it has a sales volume, a level

of involvement or a product line not ordinary. The distribution channels have a

degree of adaptation or standardization depending on which country the firm is

established (Onkvisit & Shaw, 2004).

For Example: Because Levis is fragmented nature of European retailing, the

company is working with variety of distributors, e.g. Harrods in UK.

Factors that should be take into consideration in global

expansion (PEST):

INTRODUCTION

Although firms marketing abroad face many of the same challenges as firms

marketing domestically, international environments present added uncertainties,

which must be accurately interpreted. Key aspects of any potential foreign market

include: demographic and physical environment; political environment; economic

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environment; social and cultural environment; and legal environment. The further

analysis will be show examples of issues of different countries:

POLITICAL /Legal

The political and legal features of a country have a great impact on the

standardization or adaptation decision of the promotion mix. The laws and

regulations, the use of media advertising and other promotion tools differ among

countries (Jain 1989). It is easy for a company to use a standardized approach in a

country with similar legal requirements as home country. However when the

regulations and the legal environment are putting burdens on the companies the

different elements of the marketing mix such as packaging, labeling, even product

specifications, advertising etc. the companies are obliged to make adaptation facingincreased costs. An example of legal issues faced FedEx and UPS in entering

Chinese market. According to Chinese regulations foreign logistic companies could

enter the market only through partnership or joint venture with local company. Idea

was to protect Chinese market. Legal issues differ from countries to countries and

company should keep updating with new regulations and rules (as taxes,

employments laws). EXAMPLE: cars manufactured elsewhere adapted to suit

European emission requirement

Conflict in Libya and theMiddle East has led to a sharp run-up in crude oil prices and

affected the distribution and logistics channels.

ECONOMIC

For the international companies, it is crucial to investigate thoroughly the economical

conditions of the host country in order to develop an effective marketing strategy.The international companies operating in different markets have to make a decision

about using the local (host country) talent or the home countrys people in order to

increase performance. Especially, when there is a need for adaptation, the skills of

the local managers play a very important role to design the marketing strategy.

EXAMPLE: Pepsicos Cheetos packaged in 15gm boxes in China so it could be

priced 1 YUAN.

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The most recent disaster that affected economic climate was earthquake in Japan

which disturbed the flow of products and parts used to manufacture everything

from AppleiPads to Sonytelevisions.

SOCIAL/CULTURAL/Demographics

A country with a growing population (India, China) may be a suitable indicator, but

company has to also look at the ability of the population to purchase imports.

McDonald case entrance in India (joint ventures with restaurants) saw an immense

opportunity in population size. Nevertheless cultural differences had to be taken into

consideration. The example showing the lack of marketing research in cultural

aspects was a case of Kelloggs in India. Their sales decreased due to fact that

Indian people behaviour was to eat warm bowl of vegetables, and their quick

substitute -cornflakes were not suitable for hot milk.

TECHNOLOGICAL

Technological expertise is related to every element of the marketing mix, including

product development, pricing, distribution and promotion, the kind and sophistication

of the technology that can be used plays a crucial role. Besides the existingtechnological infrastructure provided for the use of international companies, whether

the customers are able to use or are willing to use technology will make a difference

related to the standardization/ adaptation decision of the company. EXAMPLE:

Mobiles only with higher and provisions including Roaming facilities introduced in

Japan.

CLIMATE

Environmental factors such as climate can influence modifications the company must

make to its product in order to sell it in a given market. Not every product will adapt

in the market if environment factors are too extreme or unsuitable for the product.

Loreal entry strategy in Latin America was successful after meeting the customer

needs in hair products. Due to hot weather loreal adapted the colorants for different

hair types that are fading slower in the sun (reveal the game.com 2010).

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2) MARKET ENTRY STRATEGIES ANSWERS

1.What market entry strategies will you recommend in each of the followingsituations and why?

ANSWER!!!!

a) A medium-sized chocolate company in Poland who wishes to enterthe British market JOINT VENTURE (form of STRATEGICALLIANCE)

b) A small footwear manufacturing company in Italy who wishes toenter the Chinese market EXPORTING

c) A large multinational American retail company who wishes to enterinto Mexico DIRECT INVESTMENT (Ownership)

d) A medium sized Australian wine company that wishes to enter intothe Western European market LICENCING

a) As Polish company established itself in its home market as being a medium sized

chocolate company, could enter the UK market through joint venture, associating

with big UK companies such as Tesco, Asda, Sainsburys if they will opt for lowerpricing strategy or via higher profile chocolate stores such as UK Hotel

CHOCOLAT Company. This will give them the access to large consumer pool

and enlarge their brand image in the UK market. This entry strategy could be

advantageous for them because of reduction in the political and economical risks

by the amount of partners contributed to the venture. Joint ventures are a

suitable entry strategy for both developing and developed countries. The example

of recent joint venture is the Pc world and Currys digital which opened jointed

venture across UK in 2009.

b) The small Italian firm could choose an appropriate market entry strategy for

China based on the Chinese view of the Italian footwear product. The

fundamental market entry strategy best suited for the Italian manufacturer could

be exporting via a Hong Kong Distributor, which can identify appropriate users,

import-export corporations and distribution in China. This is the easiest and

quickest way to enter China because the distributor has familiarity with doing

business in China, including language skills, currency issues and shipping

considerations. The key success if Italian company chooses this market entry

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strategy is because of minimum risk of investment. Chinese import taxes and

regulations should be also taken into consideration.

c) Since the company has already considerable resources on its own and has a

great deal of experience in its multinational retail field the best way to enter intoMexico is to adopt a FOREIGN DIRECT INVESTMENT (Greenfield strategy).

This is because USA is the largest foreign investment in Mexico (cheaper

investment processes). The form of Greenfield Investment will increase the level

of competition in Mexican market by driving down prices and improving the

welfare of consumers. An increased competition in Mexico can lead to increased

productivity, growth, product and process innovation and greater economic

growth. To maximise its chance of success it may wish to start small in one or

two cities (test markets) and then learning from the lesson in the limited markets,

modify its marketing strategy and expand to the rest of the country. It may need

to adapt some of its offerings and marketing strategy to suit the Mexican market.

d) Importing wine into the Western Europe will mean that the Australian company

must be aware of, and comply with a range of legislation. Also, as the Australia

is outside of the European Union (EU), which means that may require additional

import licences and comply with TAX regulations including VAT. In this case the

best market entry strategy for the company would be forming joint ventures withUK (western Europe). The JV arrangement could be with one of the leading

vineyard in the UK the THREE CHOIRS Vineyards, which will create a new

branded wine by vineyards and marketed through Australian sales and marketing

network. For example the BRL HARDY of Australia formed JV with South Africa

vineyards). JV will enable the Australian company to enter related business and

gain new capacity and expertise. After the successful strategic alliance the firm

can start selling under their own label.

e) FRANCHISE in India

Benefits of Franchising

Franchising's primary benefit is risk minimization. Another reason to buy a franchise

is that a franchise investment can be thoroughly researched before any significant

expenditure is made. Existing franchisees offer a wealth of information about the

business so that new franchisees can try the business on before they buy to makesure it's a good fit for them. Established franchisers offer national or regional name

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recognition. While this may not be true with a new franchiser, the benefit of starting

with one is the potential to grow as its business and name recognition grow.

Franchising provides a uniform system of operation, so that consumers receive

uniform quality, efficiently and cost-effectively. A uniform system brings with it the

advantages of mass purchasing power, brand identification, and customer loyalty,

capitalizing on the proven format. Finally, franchising has found a solid economic

niche that caters to specialized needs. McDonalds is well known for franchising.

f) Tesco is looking to expand into the US. What type of Market-entry strategy

would you recommend to them, and why?

Answer Guide:

Tesco is a large company and has considerable resources on its own. Italso has a great deal of experience in its field. The US market is culturallysimilar to the UK and the barriers to entry and success would not be ashigh as going to a culturally dissimilar market. Therefore, all thingsconsidered, Tesco could adopt a Direct Investment (Greenfield strategy) toenter the market.

To maximise its chances of success, it may wish to start small in one ortwo cities (test market), and then learning from the lessons in the limitedmarkets, modify its marketing strategy and expand to the rest of the

country.

It may need to adapt some of its offerings and marketing strategy to suitthe US market. For instance, it may need to modify its package sizes (sinceAmerican consumers tend to buy larger quantities with lesser durationthan UK consumers). It may also need to modify the range of products inits stores to suit the US consumers.

RELATE the answer to the FDI above.

f) Expanding in China

EXECUTIVE SUMMARY

A foreign firm must choose an appropriate market entry strategy for Chinadepending on a number of factors including: 1) how the Chinese "view" theforeign firm's product entering the market; 2) the demand for its product; 3)the future growth of demand for its product; 4) the firm's resources; andcommitment to entering this market and 5) the timeframe to enter.

There are three fundamental strategies that can be used to enter the Chinamarket: 1) export via a Hong Kong distributor; 2) export via direct channels inChina; and 3) set up a joint venture. Each strategy has advantages and

disadvantages.

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Market entry via a Hong Kong Distributor is probably the easiest andquickest way to enter China but may be the least desirable in terms of overallmarket penetration.

Market entry via direct channels in China is probably more difficult and timeconsuming than entry via a Hong Kong distributor, but in time may be betteroff for a firm's overall penetration. This option may be a good mid-termstrategy.

Market entry via a joint venture of some kind may be more difficult and time-consuming than the other two export strategies just mentioned, but probablyyields the best overall penetration of China's market. Utilizing this strategy,both sides (the foreign firms and the Chinese party) could gain the mostbenefit.

China is a huge, fragmented market. Thus, firms may need to utilize morethan one of the above strategies to adequately penetrate the market.

MARKET ENTRY VIA A HONG KONG DISTRIBUTOR

Perhaps the easiest and quickest way to export your products to China is viaa Hong Kong (or possibly Taiwan) distributor. By utilizing a Hong Kongdistributor that is active in China, a firm can ship its products to Hong Kong;subsequently, the Hong Kong distributor can identify appropriate end-users,import/export corporations and distributors in China. Some Hong Kongdistributors also have liaison offices in china that provide somemaintenance, service and repair assistance. A well-established Hong Kong

distributor will have familiarity with doing business in China, (includinglanguage skills, currency issues and shipping considerations).

MARKET ENTRY VIA DIRECT CHANNELS IN CHINA

An alternative to selling to China via a Hong Kong distributor is to selldirectly to an authorized foreign trade group or an end-user group located inChina. Decentralization and reforms have led to the growth of a variety ofdirect entry points for a foreign exporter. Direct sellers today must decidewhether to try and work with -- 1) Chinese foreign trading corporations

(FTCs) 2) industrial trading corporations (ITCs), 3) independententrepreneurial third party trading companies, 4) domestic end-users or 5)domestic Chinese distribution companies. In deciding which one, orcombination of the above groups to work with, foreign manufacturers mustunderstand the current formal trade structure in China, the history of eachtrading entity, the background of the key individuals who manage thesegroups, and the advantages and disadvantages of each alternative.

1. Foreign Trading Corporations (FTCs)

FTCs were the first groups established (in the early 1980s) by the Chinese

government to assist the domestic Chinese companies with foreign trading.FTCs can be quite large (yearly turnover of approximately $25-$750 million),are often involved with multiple product lines and have both central as well

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as provincial offices. Today, these groups primarily focus on exports (whichusually accounts for about 90% of their turnover, but these groups are alsoincreasing their efforts for needed imports. Historically, FTCs have played amajor role in importing commodities into China.

The advantage of using an FTC is that you have the convenience of workingwith one, authorized, experienced, organization that has an establishedinfrastructure to deal with foreign trade. These groups normally have foreignexchange allocations and are very familiar with foreign trade issues includingletters of credit, freight logistics, etc. While national FTCs are rarely theultimate buyer of your products, they can contact other provincial or localFTCs, domestic distributors and end-users who may want to buy yourproducts. The disadvantage of working with national FTCs is that most ofthese groups are not knowledgeable about your specific product area, andoftentimes function as "order takers" for end users, and they may not be veryinterested in actively marketing your products.

2. Industrial Trading Companies (ITCs)

ITCs are usually newer and smaller than FTCs. ITCs are administered byvarious industrial ministries and bureaus (i.e. mining, chemical andpharmaceutical). In most cases, because of their industry focus, ITCs have agood understanding and knowledge of the products they are trading. On theother hand, unlike FTCs, ITCs are normally limited to their geographic focus(1 or 2 provinces is common), and although they are experienced, they areoften relatively new to the foreign trade game.

3. Independent Trading Companies

Over the last few years, a number of smaller independent trading companieshave been established to handle foreign trade. These groups, normallysubsidiaries of government trading companies or private companies, mayhave a keener financial interest than FTCs or ITCs in aggressively marketingyour product. They tend to have more motivated entrepreneurial staffmembers and oftentimes can move more quickly than FTCs or ITCs. Thedisadvantage of working with this type of company is that in some instances,Independent Trading Companies may not be authorized to engage in foreigntrade and therefore will need to link up with an authorized foreign tradecompany. In addition, given the small size and newness of these groups, thestrength and success of these groups may depend on one key individual.

Thus each group must be analyzed carefully and separately.

4. Direct End-User Sales

Directly approaching potential end user customers for your products is themost direct way to sell your products and to get good market feedback. Whilea few of the large end-users are authorized and are already dealing withforeign companies, the vast majority of end-users are not authorized to tradedirectly with foreign companies, do not have adequate foreign exchangeand/or do not have purchasing decision responsibilities. Today, most endusers can only legally consummate foreign purchases with assistance fromFTCs, ITCs or authorized independent trading companies. In the future,

however, it is expected that more end-users will be authorized to deal withforeign companies without the assistance of FTCs, ITCs or authorized

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independent independent trading companies. If a foreign firm wants toregularly make direct sales calls on a number of end-user customers, itshould consider building its own sales force with representative offices inChina.

5. Direct Sales to Domestic Chinese Distributors

Officially, it is not legal for foreigners to sell directly to domestic Chinesedistributors without the domestic distributors utilizing the assistance ofFTCs, ITCs or Authorized Independent Trading Companies. In practice,however, foreign companies may contact domestic Chinese distributors, orChinese distributors may contact foreign manufacturers directly to sell/buyproducts. By going to the distributor first before contacting an ITC or FTC,the foreign manufacturer will probably get more market feedback and betterpricing since the middle man is eliminated. While most domestic Chinesedistributors still look for new products to be introduced by an FTC or ITC,over the last few years some domestic Chinese distributors have begun to

aggresively search for products directly on their own.

6. Market Entry via Direct Channels

First, by establishing direct channels, you eliminate the middleman and theassociated mark-up of your product. For products that are price sensitive, areduced price should allow you to increase your sales and further penetratethe market. Second, by eliminating the middleman, you will be closer to yourcustomers needs and concerns. Third, if you carefully analyze where yourproducts are going through direct channels, you will have better knowledge,and hopefully control over which parts of China are covered and which partsare not covered. Many foreign manufacturers who sell to China via HongKong distributors have little knowledge of who or where the ultimate end-users in China are, or how price sensitive their products really are in themarketplace.

Developing direct channels into China, however, will be more difficult (i.e.logistically) and time-consuming than hiring a Hong Kong distributor to enterthe China market on your behalf. Determining the appropriate FTC, ITC,independent trading company, or end-user with which to develop arelationship will require research. Once the appropriate groups are identified,meaningful and trustworthy relationships will take time to develop. Inaddition, a firm that develops direct channels may also have to determine a

separate strategy to build its own service, maintenance and repair network.In short, while it may require more time and effort, developing directchannels to enter China will often be a better strategy than simply hiring aHong Kong distributor to cover China.

JOINT VENTUREAn equity joint venture (EJV) is a limited liability corporation in which theChinese and foreign partners jointly invest in and operate the corporation.Profits and risks are shared according to the percentage of equity held byeach partner. Investment contributions may be in cash or in kind. In addition,EJVs have the following advantages and disadvantages from the foreigninvestors standpoint:

Advantages

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The EJV law and implementing regulations provide a relativelycomplete structure of rules and procedures for establishing andoperating a joint venture in China. EJVs are the preferred investment vehicle of the Chinesegovernment and many incentives are offered. EJVs may provide a separate vehicle for selling to the domesticmarket. EJVs may be included in the annual plans for raw materialallocations and may procure goods at subsidized prices.Disadvantages Negotiations for an EJV may stretch out for years, generatingexcessive expenses. However, some negotiations have beenconcluded in as little as three or four months. Investors are restricted from withdrawing registered capital duringthe life of the contract. Termination and liquidation of EJVs have not been fully addressedby laws and regulations.

Wholly Foreign Owned EnterprisesA 2nd type of enterprise structure is the Wholly Foreign-Owned Enterprise(WFOE). Such an enterprise is a limited liability entity solely owned andoperated by a foreign investor. In this scenario, the foreign investor receivesall profits and bears all risks. Approvals may be obtained for a WFOE by theforeign company submitting an application detailing all aspects of the projectto the Ministry of Foreign Economic Relations and Trade or its localcounterpart. Once approved, the local company has thirty days to submit theapproval certificate to the State Administration of Industry and Commerce inorder to receive a business license. Separate contracts are drawn up for land,utilities and labor between the WFOE and the appropriate departments.

WFOEs are taxed according to the Foreign Enterprise Income Tax Law, whichhas graduated rates between 20-40%. A 10% local surcharge is also chargedon the assessed tax.In addition, WFOEs also have the following advantages and disadvantagesfrom an investor's standpoint:Advantages Foreign investor has tighter control of proprietary interests. WFOEs have exclusive management control for investors; there is noneed to compromise with partners. WFOEs are exempt from the 10% tax on dividends.Disadvantages Implementing regulations have not been promulgated.

There are few precedents to rely on during negotiations andoperations. There is no Chinese partner to tap for a trained workforce and forestablished sourcing and distribution networks. There is no Chinese partner with a stake in the success of theinvestment to assist with problems. There are stricter foreign exchange requirements for WFOEs. The corporate tax rates for WFOEs are higher than for equity jointventures.

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Market entry strategies EXAMPLES SHAHIR NOTES

When a company makes the commitment to go international, they must choose an

entry strategy. This decision should reflect an analysis of the market potential,

company capabilities, and the degree of marketing involvement and commitment

management is prepared to make. There is a variety of foreign market entry

strategies from which to choose, each has particular advantages and shortcomings,

depending on company strength and weaknesses. Below we go through these

different strategies to determine the suitability of each for developed or developing

countries.

Exporting

Exporting is the most common approach employed by companies taking their first

international step because it minimises the risk. However mature international

companies adapt this method as well. This strategy is suitable for both developing

and developed countries.

Piggybacking

It occurs when a company (supplier) sells its product abroad using another

companys(carrier) distribution system. This method is often adopted for entering

developed countries, as distribution facilities are known and reliable. There has to be

some benefit for the exporting company as well. Some companies such as General

Electric or big retailers like Tesco, use this method to broaden their product lines that

they can offer to their foreign customers

Licensing

A means of establishing a foothold in foreign markets without large capital outlay is

licensing. It is specially good for developing countries where due to geographical

distance or political barriers, the company cannot use other entry strategies like

manufacturing or joint ventures. However this does not mean that this method is not

used in developed countries. Patent right , trademark rights and rights to use

technological processes are granted in foreign licensing. This can be used when

there is a scarcity of capital in a company. Franchising is the most common way of

foreign licensing and is among the first type of foreign retail business to open in

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emerging markets. Example of this can be seen in McDonald in Moscow or Kentucky

chicken in Beijing china.

Joint venture is another type of foreign licensing, which have accelerated sharply in

the past 20 years because it reduces the political and economical risks by theamount of partners contribution to the venture. This method provides a less risky way

of entering markets that pose legal and cultural barriers(developing countries).

However joint ventures is a suitable entry strategy for both developing and developed

countries. The example of recent joint venture is the Pc world and Currys digital

which opened jointed venture across UK in 2009.

Manufacturing

Manufacturing or wholly owned subsidiary is another entry strategy which is adopted

to benefit from low labour cost or to avoid high import taxes. This can be an ideal

entry strategy for entering developed countries as in such countries, the

cultural,economical and political issues are stable and known to a company. The risk

of sudden changes in regulation which would effect the companies performance in

the country is also low. Having said this, companies have been trying to invest in

countries such as china( Large size of market), India( resource seeking due to

number of fashion garment producers like Mexx and Marc oPolo) and Malaysia and

Singapore( efficiency seeking by electronic manufacturers like Motorola).

As discussed above, each one of these entry strategies have their own

characteristics and are suitable for a specific market (developed or developing

countries). Having said all these, it needs to be pointed out that due to globalization,

one entry strategy can no longer be linked to one type of market. Companies are

using all sort of marketing strategy (normally using more than one strategy at a time)

to find their way to new markets and more cost effective operations.

3) BRANDING

Question: What role does Branding play in an international marketing

context, and how does this interact with the country-of-origin effect (for

instance a pair of Nike shoes may have been manufactured in China, while

an Italian brand jacket may have been manufactured in East Europe)?

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Please discuss in detail, and also provide the rationale for any positions

you take, with specific illustrations and examples where appropriate.

Answer Guide:

Students should be able to critically discuss the role of Branding and its

importance in the consumer purchase context, including what a brand means

to a consumer, the trust factor, reputation and quality, and importantly the

overall brand Equity the differential effect that the brand name alone brings

to a product over and above its performance.

In a globalized era however, companies are being increasingly forced to

outsource one or more of their manufacturing or related activities, both due to

the cost factor, as well as an increasing dispersion of skills across the globe.

The country-of-origin however does have a brand-image of its own, and this

can have an interaction effect with the brand name of the company. So will an

Italian jacket made in China be perceived in the same manner as an Italian

brand made in Italy, despite the Italian brand name being retained? Students

should be able to discuss the importance of the country-of-origin effect, when

consumers make their decision to buy a product, and the trade-offs that

consumers make during buying behaviour (ie. the brand image versus the

price factor).

Students should also be able to identify some of the steps that companies

can take to minimize the country-of-origin effect, such as by standardising

their activities and quality across all their centres of manufacture, by

communicating the overwhelming superiority of their brand so strongly that

the country-of-origin effect is minimized in consumers minds irrespective of

where it is manufactured, etc.

ANSWER BRANDING!!!

A brand is a name or symbol that is commonly known to identify a company or its

products and separates them from the competition. Apple is a good example of a

brand with a large group of fans and a large community. For example: The Nike

brand name is known throughout the world, people can identify the name and logo

even if they have never bought any of their products. However, not only is the

company name a brand, but the logo (The tick symbol) is also a strong piece of

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branding in its own right. The majority of people that are aware of the company can

also identify it (or its products) from this symbol alone.

If a customer is happy with the products or services, a brand helps to build customer

loyalty across the business. If the company can create effective branding, then it canmake its business appear to be much bigger than it really is by promotion. Of

course, branding cannot replace good quality, and bad publicity will damage a brand

(and the businesses image), especially if it continues over a long period of time.

For Example: Cadburys makes a range of confectionary under many different sub-

brand names such as Dairy Milk, Boost, Flake, and Time Out. All of these are sold

under the product brand, but all feature the Cadburys brand name on the packaging.

COUNTRY- OF- ORIGIN- EFFECT

From a marketing perspective, country of origin is a way to differentiate the product

from the competitors. C-O effect also helps the consumers to form a perception

about the price, quality of the product. The country image stereotype plays an

important role in generating the Country of Origin effect.

According to C-O-O effects, positive country reputation can influence international

publics behaviors to purchase products and brands made in the country. As an

example of positive off country effect can be Japanese laptops as Japan is well

known for its technologic advancement.

Traditional research on COO concentrates on the influence of made in labels on

consumers. For example brand names like Swissair, American Express, and

Deutsche Bank refer to a particular place of origin. Although consumers do not

always know where the specific product is produced, they are usually familiar with

the COO of brands. Some famous brands such as Emporium Armani (Italian

Designer) and Diesel (American Designer) have manufactures in China, CzechRepublic and India. These top Brands choose to manufacture their production in

third world countries because the cost of production in these countries is much

cheaper than the country of origin, knowing that their brand image is well established

and manufacturing there will not have a negative effect on their profits.

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4) Emerging markets: pricing strategies, brand building

Question: When it comes to pricing strategies in emerging markets, there havebeen two points of view. Some like P&G and Unilever have adopted marketpenetration strategies by pricing their products very low and generating hugesales volumes in the emerging markets. Others maintain that it is possible touse a market skimming strategy, and price their products high, and still makeprofits. Louis Vuitton is one example of a company that has maintained apremium strategy and enjoyed success in the Asian markets.

Critically evaluate the two pricing strategies of market penetration and marketskimming in the context of emerging markets, highlighting the pros and consof these strategies and explaining the circumstances in which these pricingstrategies will be appropriate.

Version 2

When it comes to pricing strategies in emerging markets, there are generally 2approaches. Some like Proctle and Gamble (P&B) and Unilever have adoptedmarket penetration strategies by pricing their products low and generatingsales volumes. Others price their products high, and make profits by marketskimming strategy.

Louis Vuitton is one example of a company that has maintained a premiumstrategy and enjoyed success in the Asian markets. Analysis also point out tothe fact that premium cars like Maybach and Rolls Royce now sell more cars inChina than anywhere else, despite the rich still being in only a very smallproportion of China.

Critically evaluate the two pricing strategies of market penetration and marketskimming in the context of emerging markets, highlighting the pros and consof these strategies and explaining the circumstances in which these pricingstrategies will be appropriate.

Answer Guide:

Students should be able to point out that both Market Penetration as well asMarketing Skimming can be effective strategies and whether to take oneapproach or the other will depend on the particular international businesscontext. Although often there is a skew towards taking a Market Penetrationapproach due to the lower average purchasing power of consumers in

emerging markets, ultimately the decision will depend on a number of factorsincluding the product category, the company situation, as also the country thatis being considered. Students should be able to point out that somecompanies (like P&G and Unilever) mostly sell low-priced everyday useproducts, and by their very nature these products will require a high volume ofsale for them to become worthwhile for the concerned companies. In suchinstances, the companies would be better off adopting Market Penetrationstrategies while considering emerging markets, because they need to generatesubstantial volumes over the longer run, although the per units margins maybe low. On the other hand, premium brand companies like Louis Vuitton do notdepend on high volumes it is more important for them to protect their brandimage, which in turn enables them to charge high margins on their products. It

should be possible to use Market Skimming strategies even in emergingmarkets and make money, provided the countries have large populations,

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because in those instances what matters is the number of people who are ableto buy your product, although they may be only a very small percentage of thelocal population. There are also other factors that come into play whiledetermining the pricing strategy. For instance, is the company there for thelong haul, and are they optimistic about the future about the country? If so,and if the company has deep pockets, it may be more appropriate to adopt aMarket Penetration strategy and develop the market, because you expect toget your payoffs in the long run. So the pricing strategy in an internationalmarketing context would be a function of a number of factors including thecompanies own objectives, the companies resources, the nature of theproduct and its positioning strategy, the foreign countrys economic situationand the purchasing power of the customers in the market, and of course thecosts of production (which could be lower in an emerging market). Specificexamples should be presented to support your arguments and demonstratesome of these points.

ANSWER!!!

INTRODUCTION

Emerging markets refers to countries were markets are not as developed as in US,

market segmentation is not clearly defined and, where the middle class differs from

US and Europe.

The key emerging markets are BRIC countries: Brazil, Russia, India and China. The

companies wanting to enter one of those markets must investigate the differencesthose countries such as:

a) SEGMENTATION. Market Segmentation is based on income level (usually weak

buying power because of the income level). However this should not be

confused for lower inspiration on quality and performance. Consumers in those

countries with high income know about quality and brands and companies can

upscale the premium positioning. This approach was pursuit by Luis Vuitton

Chinese market penetration, their pricing strategy was directed to upper medium

price customers and had a successful profit return. Premium positioning

approach is more likely limited to large urban cities in developing countries.

b) PRODUCT POSITIONING: On the other hand the needs of mass-marke in

emerging markets, are price sensitive. Therefore when choosing PRICING

STRATEGY companies should offer LOWER penetration price which will offer

profitability but required large volume of sale. Some companies adapt to local

requirements to increase affordability: eg, in China Pepsicos Cheetos are packaged

in 15 gr boxes so it could be priced 1 Yuan.

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On the other hand MNC multinational companies tend to adapt SKIMMIMG PRICE

= to ensure quick payback. (This involves charging a relatively high price for a short

time where a new, innovative, or much-improved product is launched onto a market.

Prices are lowered later when demand from the early adopters falls.) Luis Vitton in

Chinese market is an example.

a) The challenge to enter the emerging markets could be DISTRIBUTION and

its constraint such as large geographical distances, lack of storage facilities

and transportation. Companies however could choose for PIggyBacking and

use logistic systems of another company that are already established in

emergent countries.

b) PROMOTION. Because of the technological advancement the promotions is

not anymore too limited and are mostly the same as in developed countries: print,

radio, mass communication channels. (Some companies may opt for local

promotional adaptation, such as DHL's courier service to Asia changed its speed

image by placing meditating monk which symbolised peace of mind when dealing

with the company).

EMERGING markets offers huge potential, the market potential is different to

developed countries and marketing research should be conducted before

entering specific country. Upper ends markets in emerging countries are similar

to developed countries and offers big opportunity to higher brands. And middle

class also is interested in new products and innovation.

GLOBALISATION

INTERNATIONAL MARKETING TOPICS

1. Is GLOBALISATION Good or Bad?

To understand a concept such as this one, I think the explanation of globalization is

in order. Globalization is the integration of economies, societies and cultures of

varied worlds through the process of technology and trade.

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Advantages of Globalization

There are many overt advantages of globalization that we can speak of:

Provides Wide Choices

Globalization is responsible for the wide range of choices that are available in the

market today. We see varieties and varieties of goods from groceries to beauty

products to other consumer goods in all sections of the market and they've just made

a home for themselves into our lives. So what this does is that it gives us a wide

choice to make for ourselves.

Improves Quality

The secondary advantage of this same point is that because there is so much choice

in the market, the competition increases.. Which in turn ensures that the consumers

get only the best quality products.

Boosts Economy

Globalization makes it possible to not only export and import goods, but it also allows

for outsourcing services and jobsMany American companies set up branches in the

Indian subcontinent because the labor is relatively cheap there as compared to their

country. So that results in a direct increase in their net profits. And as for India, they

get a sudden burst of jobs which again is nothing but helpful for their economy.

Spreads Knowledge

due to important tools of globalization like the Internet, it is possible today to know

what is happening in Ghana, to know their culture and food habits as well. And not

just cultures, but even as far as education and world knowledge and current eventsare concerned. The world shares films, serials, books, recipes and so much more! All

this is possible only due to globalization.

Promotes Progressive Thinking

Globalization is not merely limited to exchanging food, recipes, and the likes, but

runs deeper in the way of bringing about a change in the attitudes and thoughts of

people. It makes people tolerant of varied views from different parts of the world and

thereby promotes progressive thinking and to bring about social reforms in society. Italso helps in the political field by making different governments aware of the varied

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ways in which governments are run.

Disadvantages of Globalization

Promotes Commercialism Traits

as the result of globalization there is nothing local anymore. This results in the same

type of lifestyles. It does not leave any room for local products.

Destroys Ethnic Cultures

With so much emphasis on being global, people are forgetting what is local. They are

disregarding their culture, ethnicity, and local traits in preference for foreign practices.

Affects Local Markets

When foreign goods flood the market and people begin to buy them, it is done at the

cost of the local goods, especially in developing countries. For example small time

businessmen who do not have the resources to export their goods and only depend

on the locals to buy them, go through varied degrees of losses because their goods

are not sold

Wastage of Resources

To import and export products, a country makes use of its precious resources even

when the product is manufactured in its own country. Instead, if that same money

was utilized in improving the product we could promote business for our own country

and save on resources.

TARANA`S NOTES.

Why globalize? Several benefits are derived from globalization of the marketing mix.

Economies of scale in production and marketing are the most frequently cited

benefits. Black and Decker (electrical hand tools, appliances and other consumer

products) realized significant production cost savings when it adopted a global

strategy. It was able to reduce not only the number of motor sized for the European

market from 260 to eight, but also 15 different models to eight. The savings in the

standardization of advertising can be substantial. Colgate-Palmolive introduced its

Colgate tartar-control toothpaste in over 40 countries, each of which could choose

one of two ads. The company estimates that for every country where the

standardized commercial runs, its saves $1-2 million in production costs. However, it

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soon realized that the standardized ads were not suitable for many countries and

were not working. It had to change its strategy and went back to more versions and

adaptations of the ads.

Transfer of experience and know=how across countries through improvedcoordination and integration of marketing activities is also cited as a benefit of

globalization. Unilever NV, successfully introduced two global brands originally

developed by two subsidiaries. Its South African subsidiary developed impulse body

spray and a European branch developed a detergent that cleaned effectively in

European hard water. These are examples of how coordination and transfer of know-

how from a local market to a world market can be achieved.

The most important benefit derived from globalization is a uniform international

image. Global recognition of brand accelerates new product introductions and

increases the efficiency and effectiveness of advertising. Uniform global images are

increasingly important as satellite communications spread throughout the world.

Brands such as Sony, Volvo, Shell, IBM and Ericsson are good examples. Philips

International, an electronics manufacturer, had enormous impact with a global

product image when it sponsored the soccer World Cup; the same advertisement

was seen in 44 countries with voice-over translations in sic languages. Another

example is Microsofts Windows Vista, which was launches simultaneously all over

the world, from Chicago to Singapore.

Without doubt, market differences seldom permit complete standardization.

Government and trade restrictions, differences in the availability of the media,

differences in customer interests and response patterns, and the whole host of

cultural differences presented in earlier chapters preclude complete standardization

of a global marketing mix.

nara and alicia final notes

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