International Marketing

By Sunil Pathak

International Marketing
International Marketing is the performance of business activities that direct the flow of a company's goods and services to consumers or users in more than one nation for a profit.

 International Marketing is the making of goods, Services and Information across Political boundaries. It Includes Planning Promoting Distributing Pricing

Global Marketing
Marketing Practices vary fro country to country Each Person is unique and Each Country is Unique Customers,Competitors,channels of Distribution and available media are different. Global Localization

Why go International?
Market Saturation Emergence of New Markets Globalization of Markets Economics of Scale Safety net during business downturns Save labor costs More Profit

Entry Strategies
How Many Markets to Enter Water Fall Approach Sprinkler Approach Deciding Which Market to Enter Developed versus Developing Markets Regional Free Trade Zones

Indirect export
The market-entry technique that offers the lowest level of risk and the least market control is indirect export, in which products are carried abroad by others. The firm is not engaging in international marketing and no special activity is carried on within the firm; the sale is handled like domestic sales.

Methods of indirect exporting

Domestic sales organization o International trading companies o Export management company

Direct export
International sales representatives local representatives Independent local distributors
Creating a fully owned commercial subsidiary to have a greater control over foreign operations. (In most cases, the commercial subsidiary will be a joint venture created with a local firm to gain access to local relationships.)

Foreign manufacturing
Transportation costs may be too high for heavy or bulky products Custom rates or quotas on imports can render products non-competitive Government preferences for local products can prevent entry in the foreign market

Deciding How to Enter the Market

Export-A Company may minimize the risk of dealing internationally by exporting domestically manufactured products either by minimal response to inquiries or by systematic development of demand in Foreign markets. A major part of the overseas involvement of large firms is through export trade.

Conti
Licensing-A variety of Contractual agreements are encompassed in licensing, whereby an MNC marketer makes available intangible assets such as Patents, Trade marks and Company name to foreign companies in return for royalties or other forms of payment.

Joint Venture
Foreign investors join with local investors to create a joint venture company in which they share ownership and control. In India Tata AIG Birla Sun life HDFCSLIC A joint venture may be necessary or desirable for economic or political reasons.

Wholly-Owned subsidiary
MNCs may also establish themselves in overseas markets by direct investment in manufacturing or assembly subsidiary. Because of the volatility of worldwide economic, social and political conditions, these wholly-owned subsidiaries are the most risky form of overseas involvement.

International market risk

Economic Risk Risk of non-acceptance Risk of Exchange rate Risk of concession in economic control Risk of insolvency of the buyer

Political risks
Risk of non- renewal of import and exports licenses Risks due to war Risk of the imposition of an import ban after the delivery of the goods Surrendering of political sovereignty Changes in the policies of the government

Others Risks
Cultural differences e.g., some cultures consider the payment of an incentive to help trading is absolutely lawful Lack of knowledge of overseas markets Language barriers Inclination to corrupt business associates Legal protection for breach of contract or nonpayment is low Natural risk due to the various kinds natural catastrophes, which cannot be controlled

Risks in International Marketing

1-The company might not understand foreign costumer preferences. 2-The company might not understand foreign countrys business culture 3-The company might underestimate foreign regulations and incur unexpected costs. 4-lack of Managers with international exp.

1)The European MNCs followed the Multinational strategies Focuses primarily on one of the different means national differences to achieve most of its strategic objectives. Focus is on revenue side, by differentiating their products & services in response to customer needs, industry characteristics & Govt. regulations. Subsidiaries depend on local-for-local innovations, a process to identify local needs and use its own resources to respond to those needs

MNCs Expansion across Borders Strategies

Conti..
Good for high local responsiveness & where cost-reduction pressures are low. Products are consumable items where taste and flavor are culture related. The weakness in this strategy is that due to the stand-alone philosophy there is little cross-fertilization of learning and innovation.

Conti..
Reebok came to India in 1995, it forged alliances with health clubs and fitness centres to create brand awareness. When the retail market matured. Reebok changed focus. Says Subhinder Sing Prem, MD, Reebok India, On the retail front, we went about opening up new markets beginning with metros and large cities, we swiftly moved into tier II and III towns. To further establish its brand, Reebok signed up Indian cricketers, while Nike continued showing its international advertisements in Indian media. Today, Reebok has a exclusive retail presence through 400 plus outlets, second only to Bata, while Nike lags behind.

Conti..
When Hyundai, with a name prone to mispronunciation and virtually no global heritage, entered India in 1998, it signed up Shah Rukh Khan to educate the consumers about the brand. Behind the scenes, the company resorted to extensive market studies and technical camps before coming up with its first offering, Santro, a hatchback with tall boy design. And it had chosen its market well, starting with the small car. To date, Hyundai has stayed true to its strategy and played by the conventional Indian market rules tailored to suit its specific targets

Conti..
Levis chose to play it safe by using the multibrand outlet route, but Lee chose to go it alone and set up exclusive showrooms.

MNCs-Role, Strategy and Impact

The MNC is the principle instrument in the expansion of business on an international scale. The MNC Plays a decisive role in the allocation and use of the worlds resources by introducing new products and service, creating or stimulating demand for them.

Conti
Impact1.Money Flow 2.Income to Government 3.Job Opportunity to youngsters 4.Recognisation from the world community.

Michael Porters Model

Michael Poters Provided a frame work that models an industry as being influenced by five forces. The strategic business managers seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.

Michael Porter
Michael Porter's famous Five Forces of Competitive Position model provides a simple perspective for assessing and analyzing the competitive strength and position of a corporation or business organization.

Conti..
Porter's five forces Existing competitive rivalry between suppliers Threat of new market entrants Bargaining power of buyers Power of suppliers Threat of substitute products (including technology change)

Porters Model

Module 2

Global Market & Product Development

Globalization pressures have begun to have a major impact on the practice of product development across a wide range of industries. A new paradigm has emerged whereby companies are utilizing skilled engineering teams dispersed around the world to develop products in a collaborative manner. Best practice in product development (PD) is now rapidly migrating from local, cross functional collaboration to a mode of global collaboration.

Conti..
Several best practices in product development evolved through the 1980s and 1990s. By 2000, it had become widely accepted that highly effective product development included co-location of cross-functional teams to facilitate close collaboration among engineering, marketing, manufacturing and supply-chain functions.

Global Product Companies are building their Global Product Development capabilities today for any of four reasons: 1) Lower Cost Many companies strive to reduce PD operating costs by redistributing activities to take advantage of labor arbitrage or to access more affordable capabilities. There is a huge pool of engineering talent in low-cost regions such as China, the Czech Republic, India and Vietnam and in medium-cost nations including South Korea, Hungary, Poland and Taiwan.

 We consider "low-cost to be 10% to 20% of the equivalent engineers salary in the United States, and medium-cost to be 20% to 50% of U.S. wage rates.

Conti..
2) Improved Process Many engineering managers can recall the key lesson learned from both the 1980s emphasis on design for manufacturing (DFM) and the 1990s emphasis on time to market (TTM).

3)Global Growth Locating some Product Development activities in selected international locations can give companies access to critical information about markets in those regions. By using local engineers, companies make direct connections with potential new markets.

Conti..
4)Technology Access Companies are using Global Product Development to develop integrated Product Development processes that include engineers in regions where critical new technology has been developed and where technical experts reside. This move from cost to growth and innovation has been a major shift in stated Global Product Development objectives over the past two to three years.

Global Product Strategies

Global Product Strategies

Local and International Environment Firms Internal Situation

Competitive Situation

Product Strategies

Customer Needs & Price Elasticity

What Is a Product ?
Product: A bundle of attributes The Total Product
Tangible attributes: materials, size, weight, design, packaging, performance, comfort Intangibles: brand image, styling, other benefits (installation, delivery, credit, warranty, after-sale service, return policy)

Global Product Development

Standardization- developing same product for multiple countries Premise-- consumes share some common values, beliefs, and consumption patterns Advantages: economies of scale and scope, price competitiveness, uniform image

Global Product Development

Product Adaptation- modifying product to
reflect characteristics of a market Premise-- consumers are not the same Advantages: improved fit between product and consumer, expanded penetration

Global Product Development

Mandatory product adaptations
Governmental regulations Technological considerations (e.g., voltage, infrastructure) Cultural imperatives - is it acceptable to consumers Measurement standards: volume, length, weight, quantity

A Testable Framework of Product and Promotion Adaptation

Product and Industry

Technology Orientation of Industry Cultural Specificity of Product

Product Uniqueness

Type of Product

EXPORT MARKET COMPANY

Firms International Experience Product Adaptation - Upon Entry - After Entry Product Adaptation - Upon Entry Promotion Adaptation - After Entry - Positioning Promotion Adaptation - Packaging/Labeling Positioning - Promotional Approachh Packaging/Labeling

Similarity of Legal Regulations

Export Sales Goal for the Venture

Competitiveness Of Export Market

Entry Scope

Product Familiarity Of Export Customers

Source: S.T. Cavusgil, Shaoming Zou, and G.M. Naidu. Product and Promotion Adaptation in Export Venturs: An Empirical Investigation, Journal of International Business Studies 24, no 3, (1993,485.

Globalizing Palmolive Soap

Combination of competitive packages fragrances shapes

25 20 15 10 5 0

After Before

Shapes

Fragrances

Packages

The View from Toyota

Our global strategy used to center on world cars, which we would modify slightly to accommodate demand in different markets. Today our focus is shifting to models that we develop and manufacture especially for selected regional markets.

The View from Honda

We are the most international of the Japanese companies. At the moment we are the most diversified, and we will be more diversified in the future. Still, I think it would be very hard to build a one-type world car. In the end, I dont think it would be very efficient.
---Nobuhiko Kawamoto President and CEO, Honda Motor Company

Basic Product Concepts

Local Products Regional Products Global Products

Global Product Issues

Country Customer Needs Competition Marketing Infrastructure Internal Resources Region Global

Global Product Issues

Country Segmenting Region Global

Targeting Positioning

Brands
Global brand Tiered branding Cobranding Brand extensions

Brand Positioning
Perceived fit between a particular product offering and the needs of target market Positioning is defined relative to:
competitive offerings consumer needs

Positioning Strategy
Attribute or Benefit Quality and Price Use or User

Benefits of Standardization
The main criteria for international standardization are: Improvement in universal technical communication and mutual understanding; Facilitation of international exchange of goods and services; Removal of technical barriers to trade; Transfer of technology.

Benefits of Standardization

Uniform terminology is created

Sizes and dimensions are co-ordinated and adapted Variety is reduced Function requirements and characteristics are specified Unambiguous testing methods are established

Product standardization
Although there is increasing demand for local variety as economic growth takes place and as anti-globalization sentiment spreads, global products and brands are usually standardized in some ways. Global product examples Gillette razor blades Sony television sets Benetton sweaters Regional products and brands are unique to a particular trading region Hondas European car model Concerto P& Gs Ariel and Vizir in Europe

The Pros and Cons of Standardization

The Advantages of Standardization
Cost Reduction
Scale economies (input and process) Scope economies (synergy, brand equity)

Improved Quality (reliability)

Better equipment, more experience

Enhanced Customer Preference (no surprises) Global Customers (mobility) Global Segments (convergence) Time to Market
Centralized R & D

The Pros and Cons of Standardization

The Drawbacks of Standardization
Lack of Uniqueness
Is uniqueness an important attribute?

Vulnerability to Trade Barriers

More barriers, less standardization

Strong Local Competitors

Can we afford the handicap of standardization?

Global Brands
GLOBAL BRANDS ARE BRANDS ASSOCIATED WITH GLOBAL PRODUCTS WHICH ARE WELL KNOWN IN ALL MAJOR MARKETS OF THE WORLD. Ex's: SONY, MERCEDES-BENZ, MICROSOFT, COCA-COLA. THE TYPICAL MULTINATIONAL FIRM HAS A PORTFOLIO OF BRANDS, SOME OF WHICH ARE GLOBAL, SOME ARE REGIONAL, AND SOME LOCAL ONLY.

Global Brand Equity

Brand Equity is the value of the positive associations that consumers have with a products brand name. These associations often involve emotional attachments, affinity, positive brand image, and brand identity. They also involve cognitive factors such as familiarity, knowledge and perceived quality, as well as social factors including peer group acceptance. When these associations turn negative (as in antiglobalization sentiments against global brands) the brand equity can go down very quickly.

 Any Question?