978-0077606121 Chapter 15 Lecture

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Solution Manual

Book Title

International Business: The Challenge of Global Competition 13th Edition

ISBN 13

978-0077606121

978-0077606121 Chapter 15 Lecture

April 7, 2019

CHAPTER 15

1 Marketing Internationally

2Learning Objectives

3LO15-1 explain why there are differences between domestic and international marketing

4LO15-2 discuss why international marketing managers may wish to standardize the marketing mix

5LO15-3 explain why it is often impossible to standardize the marketing mix worldwide

6LO15-4 discuss the importance of distinguishing among the total product, the physical product, and

the brand name

7LO15-5 explain why consumer products generally require greater modification for international

sales than do industrial products or services

8LO15-6 discuss the product strategies that can be formed from three product alternatives and three

kinds of promotional messages

9LO15-7 explain “glocal” advertising strategies

10 LO15-8 discuss some of the effects the Internet may have on international marketing

11 LO15-9 discuss the distribution strategies of international marketers.

12 Overview

Although the marketing functions are the same for marketing domestically and internationally, the

markets served vary greatly because of the differences among the environmental forces. There are

advantages in the worldwide standardization of the marketing mix but frequently environmental

differences necessitate a modification of the domestic mix or the development of a new one. The extent of

the change will depend on the type of product, the forces, and the degree of market penetration desired by

management. Product, price, distribution and promotional strategies are discussed in this context.

13 Suggestions and Comments

1. “Why do marketing managers want to standardize the marketing mix worldwide?” serves as a good

opening question for this chapter.

2. You probably will want to spend a few minutes on formulating six product strategies from three

product and message alternatives.

3. Robert F. Hartley’s Marketing Mistakes and Successes provides some interesting examples of

marketing errors, as well as David Ricks’ Blunders in International Business, although this last

resource, although useful, is dated.

Student Involvement Exercises

1. If you have foreign students, you can ask them to compare the way the same product is promoted in

their country and in the United States. This helps to reinforce the six-product strategies discussion.

Other students can research foreign magazines in the library to compare ads for the same product in

different countries. You might consider asking students to do this research using websites as well.

2. Comparisons across international borders is also a good way to get student involvement. What

differences have they observed among cultures and what might these differences evidence about

product strategies?

14 Guest Lecturers

1. A member of the advertising staff of a multinational can provide some insight as to how the firm

plans and controls its overseas advertising campaigns. If your institution markets abroad, you might

consider the admissions person who has those responsibilities.

2. A member of a headquarters marketing staff can discuss the company policy with respect to

international standardization of the marketing mix. He or she will have some good “war stories”

about campaigns that made it and those that failed because of environmental differences.

15 Lecture Outline

I. Opening Section

The opening section describes the evolution Mongolia's consumer market.

II. Added Complexities of International Marketing

The basic marketing functions are the same everywhere but marketing internationally differs from

marketing domestically because of the great variations in the uncontrollable environmental forces.

Moreover, even the controllable forces vary greatly.

III. The Marketing Mix (What and How to Sell)

The international marketing manager must decide if (1) the firm can standardize worldwide, (2) it

must make some changes, or (3) it must formulate a completely different marketing mix.

A. Standardization, Adaptation or Completely Different?

1. Management would prefer standardization for the following reasons: (1) lower costs, (2)

easier control and coordination from headquarters, (3) reduction in the time and effort

needed to prepare marketing plans.

2. In spite of these advantages, often it is necessary to modify the present mix or develop a

new one. The extent of the changes depends on the type of product (consumer or

industrial), environmental forces, and the degree of market penetration.

B. Product Strategies

1. When formulating product strategies, managers must consider the total product because a

new product may be created without changing the physical product. This will reduce

manufacturing costs and permit international standardization of the production process, a

goal of most managers.

a. Total and physical product – much of the confusion about whether a firm can have

global products is due to the fact that discussants fail to clarify whether they are

referring to the total product, the physical product, or the brand name.

b. Type of product

(1) Industrial goods can often be sold worldwide with either easy-to-make changes,

or none at all.

a. Some industrial products need to be modified, however, for use in developing

countries because of tendencies to overload equipment and slight

maintenance

(2) Consumer products often require more modification than do industrial products.

However, they can be sold unchanged to certain market segments such as the

foreign-educated and well traveled (the “jet set”), and expatriates.

a. Note that certain other products (French perfume, American hamburgers)

must be sold virtually unchanged since their “foreignness” is a critical part of

their consumer appeal.

b. Generally, the lower the economic and social strata, the greater the

dissimilarities between countries/markets with respect to cultural and social

values.

(3) Services are generally easier to market globally than consumer products.

Consulting firms such as Accenture (formerly Andersen Consulting) find that

they can offer similar services worldwide. The credit card industry is also largely

global. On the other hand, employment agencies may not be able to operate in

some countries because they are illegal.

(Are hotels and higher education are standardized global industries as well?)

c. Foreign environmental forces

(1) Sociocultural forces–Dissimilar cultural patterns generally necessitate changes in

foods and consumer goods. At times, a brand name, label, or the standard colors

of the package are unsuitable for cultural reasons. However, marketers must

investigate the truthfulness of the stories about these problems, because some of

them have no basis. An example is the extensively circulated Nova story. See the

photo of the Pemex Nova gas pump.

(2) Legal forces–Firms must adhere to a nation’s laws which may be a formidable

constraint in the design of product strategies. Also, brand piracy can be a

problem.

(3) Economic forces–Another obstacle to worldwide product standardization.

Products from industrialized nations may be too expensive for developing

countries or they may not withstand more difficult operating conditions. Smaller

markets may not permit as extensive a product mix as in the home country.

(4) Physical forces–Climate and difficult terrain may require product adaptations or

even different products.

C. Promotional Strategies

1. Promotion both influences and is influenced by the other marketing variables. It is

possible to formulate 9 distinct strategies by combining the three alternatives of (1)

marketing the same physical product everywhere, (2) adapting the physical product for

foreign markets, and (3) designing a different physical product with (a) the same, (b)

adapted, or (c) different promotional messages.

a. Although 9 strategies are possible, 6 are most commonly used.

b. (1) same product – same message, (2) same product – different message, (3) adapted

product – same message, (4) adapted product – adapted message, (5) different

product – same message, (6) different product – different message for the same use.

2. Advertising

Advertising is the promotional mix element with the greatest worldwide similarities.

Advertising everywhere is based on American techniques.

a. Global or regional brands – Manufacturers are increasingly using global or regional

brands because:

(1) Cost is most often cited. Producing one commercial for use across a region can

result in a saving of up to 50% of the production costs.

(2) There is a better chance of obtaining one regional source to do high-quality work

than of finding multiple sources in several countries.

(3) Some marketing managers feel their companies must have a single image

through a region.

(4) Companies are establishing regionalized organizations where many functions,

such as marketing, are centralized.

(5) Global and regional satellite, cable television and the Internet are becoming

widely available.

b. Global or national brands – National brands still retain appeal. Management has to

be careful about eliminating them simply to achieve scale economies.

c. Private brands – these also compete (often successfully) with global or national

brands. Examples include the Wal-Mart brand, and SPAR, the world’s largest food

retailer.

d. Availability of media – Many media are available.

(1) TV – Satellite and cable (Star TV, MTV, etc.) offer choices and an audience that

is increasing rapidly.

(2) International print media – again, the choices seem to continue to increase.

(3) Cinema and videocassette advertising – these reach audiences in novel ways.

Videotape ads are popular in the Middle East where other media choices may be

limited.

e. Internet advertising – The Internet offers several attractive elements as a promotional

medium:

(1) An affluent, reachable audience.

(2) Interactive contacts with potential customers.

(3) Consumers may help shape the messages they receive, that is, messages can be

customized.

(4) It may reach some groups such as teenagers for which good media alternatives

aren’t available.

f. Type of product – Buyers of industrial goods and luxury consumer goods usually act

on same motives the world over.

g. Foreign environmental forces – Basic cultural decision is whether to position product

as local or foreign. For international market segments, advertisers can formulate

global advertising campaigns. Legal forces affect product claims. Strong tendency for

governments to control advertising.

h. Globalization versus localization – one school of thought looks for similarities across

countries in order to capitalize on them by providing promotional themes with

worldwide appeal. Another school of thought believes it is preferable to develop

separate appeals to take advantage of differences among customers in different

cultures and countries.

i. Neither purely global nor purely local – for most firms, neither purely global nor

purely local is best way to handle international advertising. One ad agency head said

that 15% had a global approach, another 15% had a local approach, and the rest are

“glocal.” They develop a strategy for large regions, but not for the world.

j. Gillette’s panregional approach – Gillette has organized its advertising in regional

and cultural clusters: pan-Latin America, pan-Middle East, pan-Africa and

pan-Atlantic. Is based on the belief that the firm can identify the same needs and

buying motives in regions or countries linked by culture, consumers’ habits, and level

of market development.

k. Programmed-management approach – a middle-ground advertising strategy between

globally standardized and entirely local programs. This approach gives the home

office a chance to standardize those parts of the campaign that may be standardized

but still permits flexibility in responding to different marketing conditions.

3. Personal Selling

The importance of personal selling in the promotional mix depends on relative costs,

funds available, media availability, and type of product sold.

a. Personal Selling and the Internet. The Internet won’t eliminate the need for personal

selling. Personal selling depends on trust. The Internet makes communication easier,

but trust-building harder. Computer-mediated communication transmits much less

nonverbal information, including emotions, expressions of cooperation and

trustworthiness. Also, feedback during message delivery is lost. However, Ebay’s

“reputation system” may offer a method that can increase trust over the Internet.

b. International standardization

(1) Sales force organization, sales presentations and training methods similar to those

in home country.

(2) Because of the high costs of sales calls, many firms in Europe are using

telemarketing and direct mail to qualify prospects. Since 1992, Dell Computers

has been employing both methods to sell computers in Japan and Europe.

c. Recruitment of sales force difficult in some markets because of social stigma attached

to selling.

4. Sales Promotion: Sociocultural and economic constraints

(1) The premium must be meaningful to the consumer

(2) Contests and raffles are often successful

5. Public Relations

a. Many international firms fail to inform the public of their activities.

b. Overseas subsidiaries of American firms support public-service activities locally; in

Japan, Coke spends $5 million on programs for children and the handicapped, IBM

Japan puts 1% of its profits into good works. Warner-Lambert pharmaceuticals began

a program, Tropicare, to train local health care providers in preventive medicine. This

has been successful in Africa and Latin America.

c. McDonald’s sued two people who were distributing leaflets in London accusing the

company of destroying rain forests, exploiting children in its advertising, starving the

third world, and cruelty to animals.

D. Pricing Strategies

1. Pricing, a Controllable Variable

a. Effective price setting is more than a mechanical markup, price is a controllable

variable.

b. Price setting is complex because of its interaction with other elements of marketing

mix.

2. International Standardization

Managements must be concerned with (1) foreign national pricing and (2) international

pricing for exports.

a. Foreign national pricing–Government price controls, cost differentials of different

markets, diverse competition, product in different stage of product life cycle.

b. International pricing (transfer pricing)–special kind of exporting (intracorporate

sales). Management may order an affiliate to sell another affiliate at less or more than

market price for tax reasons.

E. Distribution Strategies

1. Marketers must concern themselves with getting the goods to foreign markets and

distributing the goods within each market.

2. Interdependence of Distributive Decisions–Care must be taken when making distribution

decisions to analyze their interdependence with other marketing mix variables.

3. International standardization–Two constraints to international standardization–variations

in the availability of channel members and inconsistent influence of environmental

forces.

a. Availability of channel members.

b. Foreign environmental forces–legal, economic and sociocultural—make

standardization of distribution channels difficult. French and Japanese laws have

slowed the growth of large retailers althugh the Japanese law has been scrapped.

4. Disintermediation. This refers to unraveling of traditional distribution structures.

Primary reasons for the change are the combination of the Internet for ordering combined

with fast delivery services – FedEx, UPS. Increasingly can offer rapid delivery without

specialized or dedicated distribution channels.

F. Channel Selection

1. Direct or Indirect Marketing

Will management use middlemen or sell directly?

2. Factors influencing channel selection

a. Market characteristics

b. Product characteristics

c. Company characteristics

d. Middlemen’s characteristics

G. Foreign Environmental Forces and Marketing Mix. See Table 15.3, Environmental

Constraints to International Standardization of Marketing Mix

16 Worldview

WORLDview: Integrating Functions for New Product Development

This Worldview explores the changes globalization is bringing to new product development. As the pace

of innovation continues to expand, the R&D function of the firm needs to expand in two directions. One

is within the firm, by cooperating more closely both with production, which is where R&D meets the

“rest of the firm” in terms of translating their ideas into products, and with marketing, which is the firm’s

transition point with the outside environment, especially customers. The other direction of expansion is

into new markets.

Global Debate

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This Global Debate explores India as a market for Lady Gaga and whether she will localize to

tap into the massive potential of Indian film and music fans.

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978-0077606121 Chapter 15 Lecture

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International Business: The Challenge of Global Competition 13th Edition