102.
Define market segmentation. What is its goal?
Market segmentation refers to identifying distinct groups of consumers
whose purchasing behavior differs from others in important ways. Markets
can be segmented in numerous ways: by geography, demography, social-
cultural factors, and psychological factors. The goal of market segmentation
is to optimize the fit between the purchasing behavior of consumers in a
given segment and the marketing mix, thereby maximizing sales to that
segment.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation
103.
What are the two main issues that managers must be aware of when
considering market segmentation in foreign countries?
There are two key issues that managers must be aware of when using
market segmentation in foreign countries. First, managers must consider
the differences between countries in the structure of market segments,
which may differ significantly from country to country. The firm may have to
develop a unique marketing mix to appeal to the purchasing behavior of a
certain segment in a given country. Second, managers must be aware of the
existence of segments that transcend national borders. Such segments
would enhance the ability of a company to view the global marketplace as a
single entity and pursue a global strategy.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation
104.
Discuss the notion of a product being a bundle of attributes. How can
approaching a product in this manner help a firm reach its target market?
A product can be viewed as a bundle of product attributes. Products sell
when their attributes match consumer needs. For example, BMW
recognizes that its consumers have a need for luxury, quality, and
performance. Accordingly, the company builds these attributes into its cars.
If consumer needs were the same across the world, the firm could simply
sell the same product worldwide. However, because consumer needs vary
by country depending on culture and the level of economic development, a
firm’s ability to sell the same product will be constrained.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes
105.
How do levels of economic development affect consumer behavior? What
are the implications for marketing strategy?
Consumers in the most advanced countries often shun globally
standardized products that have been developed with the lowest common
denominator in mind. They are willing to pay more for products that have
additional features and attributes customized to their tastes and
preferences. In response to this behavior, firms marketing to consumers in
highly developed markets tend to build a lot of extra performance attributes
into their products. In contrast, consumers in less-developed countries
typically demand a more basic product. In addition, product reliability
becomes more important as the purchase may account for a greater share
of a consumer’s income than for the advanced country consumer.
Consequently, products sold in developing countries typically lack many of
the features found in products sold in advanced countries.
AACSB: Reflective Thinking
Blooms: Understand
106.
Explain the difference between a concentrated retail system and a
fragmented one. Why is this distinction important to international
businesses?
In some countries the retail system is very concentrated, where just a few
retailers supply most of the market. Other countries have a fragmented
system in which there are many retailers, no one of which has a major share
of the market. In the U.S., for example, the retail system is a concentrated
one where there are large stores or shopping malls. In contrast, Japan’s
more fragmented retail system involves many small stores that serve local
neighborhoods.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm’s distribution strategy might vary among countries.
Topic: Distribution Strategy
107.
What are the four main differences between distribution systems across
countries?
The four main differences between distribution systems are retail
concentration, channel length, channel exclusivity, and channel quality.
Retail concentration refers to how many retailers supply most of the market.
Channel length refers to the number of intermediaries between the
producer and the consumer. Channel exclusivity refers to how difficult it is
for outsiders to access the channel. Finally, channel quality refers to the
expertise, competencies, and skills of established retailers in a nation and
their ability to sell and support the products of international businesses.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm’s distribution strategy might vary among countries.
Topic: Distribution Strategy
108.
What are the three factors that contribute to the trend toward greater retail
concentration in developed countries? How have these factors promoted
retail concentration?
There are three factors that contribute to the greater retail concentration in
developed countries. First is the increase in car ownership. Second is the
increase in the number of households with refrigerators and freezers. Third
is the increase in the number of two-income households. All of these
factors have changed shopping habits and facilitated the growth of large
retail establishments sited away from traditional shopping areas.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm’s distribution strategy might vary among countries.
Topic: Distribution Strategy
109.
What is channel length? What is the most important determinant of channel
length? Mention two factors that shorten channel length.
Channel length refers to the number of intermediaries between the
producer and the consumer. The most important determinant of channel
length is the degree to which the retail system is fragmented. Fragmented
retail systems tend to promote the growth of wholesalers to serve retailers,
which lengthens channels. However, the internet and the entry of large
discount superstores have served to shorten channel lengths.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm’s distribution strategy might vary among countries.
Topic: Distribution Strategy
110.
Describe an exclusive distribution channel. Consider the implications of
channel exclusivity for outside firms.
An exclusive distribution channel is one that is difficult for outsiders to
access. Channel exclusivity is very high in Japan, which makes the Japanese
market so difficult to penetrate effectively. In Japan, relationships between
manufacturers, wholesalers, and retailers often go back decades. Many of
these relationships are based on the understanding that distributors will not
carry the products of competing firms. Firms from other countries may find
it very difficult to break into the Japanese market as a result of this
exclusivity.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm’s distribution strategy might vary among countries.
Topic: Distribution Strategy
111.
What factors affect the success of a firm’s international communications?
The effectiveness of a firm’s international communications can be
jeopardized by three critical variables: cultural barriers, source effects, and
noise levels. Cultural barriers can make it difficult to communicate
messages across cultures. Source effects occur when the receiver of the
message evaluates the message based on the status or image of the
sender. Finally, noise refers to the amount of other messages competing for
a potential consumer’s attention.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
112.
Compare and contrast push strategies and pull strategies.
When developing its communications strategy, a firm must decide between
a push and a pull strategy. A push strategy emphasizes personal selling
rather than mass media advertising in the promotional mix. This type of
strategy requires intensive use of a sales force and is relatively costly. In
contrast, a pull strategy depends more on mass media advertising to
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
113.
What are the arguments for standardized advertising across international
markets?
There are three main arguments supporting the notion of standardized
advertising across markets. First, such a campaign has significant economic
advantages because it lowers the cost of value creation by spreading the
fixed costs of developing the advertisements across many countries.
Second, because of concerns about the scarcity of creative talent, one large
effort to develop a campaign will produce better results than 40 or 50
smaller efforts. Finally, many brand names are global.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
114.
Explain the concept of price elasticity of demand. What are its determining
factors?
The price elasticity of demand is a measure of the responsiveness of
demand for a product to change in price. Demand is said to be elastic when
a small change in price produces a large change in demand; it is said to be
inelastic when a large change in price produces only a small change in
demand.
The elasticity of demand for a product in a given country is determined by a
number of factors, of which income level and competitive conditions are the
two most important. Price elasticity tends to be greater in countries with
low income levels. Consumers with limited incomes tend to be very price
conscious; they have less to spend, so they look much more closely at price.
In general, the more competitors there are, the greater consumers’
bargaining power will be and the more likely consumers will be to buy from
the firm that charges the lowest price. Thus, many competitors cause high
elasticity of demand. In such circumstances, if a firm raises its prices above
Learning Objective: 18-04 Explain why and how a firm’s pricing strategy might vary among countries.
Topic: Pricing Strategy
115.
What is predatory pricing? Describe how a firm might use predatory pricing.
Predatory pricing is the use of price as a competitive weapon to drive
weaker competitors out of a national market. Once the competitors have
left the market, the firm can raise prices and enjoy high profits. For such a
pricing strategy to work the firm must normally have a profitable position in
another national market, which it can use to subsidize aggressive pricing in
the market it is trying to monopolize.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm’s pricing strategy might vary among countries.
Topic: Pricing Strategy
116.
Differentiate between multipoint pricing and experience curve pricing
strategies.
Multipoint pricing refers to the fact a firm’s pricing strategy in one market
may have an impact on its rivals’ pricing strategy in another market.
Aggressive pricing in one market may elicit a competitive response from a
rival in another market. Many firms pursuing an experience curve pricing
strategy on an international scale will price low worldwide in attempting to
build global sales volume as rapidly as possible, even if this means taking
large losses initially. Such a firm believes that in several years, when it has
moved down the experience curve, it will be making substantial profits and
have a cost advantage over its less-aggressive competitors.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm’s pricing strategy might vary among countries.
Topic: Pricing Strategy
117.
Explain briefly the regulatory influences on pricing.
The ability to engage in either price discrimination or strategic pricing may
be limited by national or international regulations. Most important, a firm’s
freedom to set its own prices is constrained by antidumping regulations and
competition policy.
Antidumping Regulations: Both predatory pricing and experience curve
pricing can run afoul of antidumping regulations. Dumping occurs whenever
a firm sells a product for a price that is less than the cost of producing it.
Antidumping rules set a floor under export prices and limit firms’ ability to
pursue strategic pricing. The rather vague terminology used in most
antidumping actions suggests that a firm’s ability to engage in price
discrimination also may be challenged under antidumping legislation.
Competition Policy: Most developed nations have regulations designed to
promote competition and to restrict monopoly practices. These regulations
can be used to limit the prices a firm can charge in a given country.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 18-04 Explain why and how a firm’s pricing strategy might vary among countries.
Topic: Pricing Strategy
118.
What factors affect the rate of new-product development in countries?
Ideas for new products are stimulated by the interactions of scientific
research, demand conditions, and competitive conditions. Other things
being equal, the rate of new product development seems to be greater in
countries where
• More money is spent on basic and applied research and development.
• Underlying demand is strong.
• Consumers are affluent.
• Competition is intense.
Basic and applied research and development discovers new technologies
and then commercializes them. Strong demand and affluent consumers
create a potential market for new products. Intense competition between
firms stimulates innovation as the firms try to beat their competitors and
reap potentially enormous first-mover advantages that result from
119.
Discuss the notion of cross-functional teams and their role in cross-
functional integration. What are the attributes that make a product
development team successful?
A firm can achieve cross-functional integration by establishing cross-
functional product development teams comprised of representatives from
R&D, marketing, and production. The objective of the team should be to
take a product development project from the initial concept development to
market introduction. The success of such teams is dependent on three
attributes. First, the team should be led by “heavyweight” managers who
have high status within the organization, and who have the power and
authority required to get the financial and human resources the team needs
to succeed. Second, the team should be comprised of at least one member
from each key function. Finally, the team should physically be in one
location if possible to create a sense of camaraderie and to facilitate
communication.